Budget Transparency Accountability and Service Delivery Parminder Brar Lead Financial Management Specialist World Bank East African Budget Transparency and Accountability Conference Dar es Salaam May 23, 2010

2 1. Background 2. Economic Environment 3. Budget Transparency Assessments A.World Bank B.PEFA C.IMF D.OECD E.IBP F.Others 4. Service Delivery 5. Key Issues Overview

3 Background Our message to our clients, whatever their political system, is that you cannot have successful development without good governance and without the participation of your citizens. We will encourage governments to publish information, enact Freedom of Information Acts, open up their budget and procurement processes, build independent audit functions, and sponsor reform of justice systems. We will not lend directly to finance budgets in countries that do not publish their budgets or, in exceptional cases, at least commit to publish their budgets within twelve months. Robert B. Zoellick President, The World Bank Group The Peterson Institute April 6, 2011

4 Background The new Access To Information policy has greatly increased sharing of documentation.

5 Open and easy access to the entire World Bank dataset. Foregone revenue of around $ 2 mn. p.a. Background

6 Partnered with Google and Microsoft for expanding access. Background

7 Geo-coding: makes project data more accessible Visualize project locations and MDGs at country level Information available, but not easy to visualize Background

8 Regions Countries Sectors Projects Background

9 Economic Environment Between , average GDP growth was 5% p.a.

10 Economic Environment The recovery is underway.

11 Economic Environment Poverty reduction is lower than expected.

12 Assessment Criteria: World Bank

13 Assessment Criteria: World Bank Several East African countries have the highest CPIA ratings.

14 However their performance in recent years has been mixed. Assessment Criteria: World Bank

15 Assessment Criteria: World Bank Improvement in Public Sector Management, including PFM has been weak.

16 Question 13 of CPIA: Budget and Financial Management. It has three criteria. It assesses the extent to which there is: –(a) a comprehensive and credible budget, linked to policy priorities; –(b) effective financial management systems to ensure that the budget is implemented as intended in a controlled and predictable way; and –(c) timely and accurate accounting and fiscal reporting, including timely and audited public accounts and effective arrangements for follow up. Assessment Criteria: World Bank

17 Assessment Criteria: World Bank The methodology for Q.13 is under revision.

18 Asset / Inventory Mgmt Procurement/ Purchasing Mgmt of Budget Authorizations Commitment of Funds Payments and Receipts Mgmt Cash Management Debt and Aid Management Fiscal Reports & Budget Review Audit and Evaluation Budget Preparation Policy Development and Review Payroll Calcs HR Mgmt Assessment Criteria: PEFA

19 A.PFM Out-turns Credibility of the budget Indicators 1- 4 Deviations from aggregate budgeted expenditure and revenue as well as expenditure composition. Level of expenditure arrears. B.Key Cross-cutting issues Comprehensiveness and transparency Indicators 5-10 Coverage of budget classification, budget documentation, reporting on extra-budgetary operations, inter-governmental fiscal relations, fiscal risk oversight and public access to information. C.Budget Cycle i. Policy-based budgeting Indicators Annual budget preparation process, multi-year perspective in fiscal planning, expenditure policy and budgeting Assessment Criteria: PEFA

20 C.Budget Cycle ii. Predictability & control in budget execution Indicators Revenue administration, predictability in availability of funds, cash balances, debt & guarantee management, payroll controls, procurement, internal controls and internal audit iii. Accounting, recording and reporting Indicators Accounts reconciliation, reporting on resources at service outlet level, in-year budget execution reports, financial statements iv. External scrutiny and audit Indicators Scope, nature and follow-up on external audit; legislative scrutiny of annual budget law and external audit reports D.Donor Practices Indicators D1- D3 Predictability of direct budget support; donor information for budgeting and reporting; use of national procedures Assessment Criteria: PEFA

21 Around 200 assessments have been completed. Assessment Criteria: PEFA

22 Overall PEFA ratings provide a good indicator of PFM performance. Assessment Criteria: PEFA

23 Overall PEFA ratings provide a good indicator of PFM performance. Assessment Criteria: PEFA

24 Assessment Criteria: PEFA Budget Transparency Ratings are possible to calculate using the PEFA dataset (PI 6/8/10/23/24/25).

25 Assessment Criteria: IMF The IMF has issued a guideline on resource transparency.

26 It has also issued a Code of Good Practices on Fiscal Transparency in This is based on four pillars: Clarity of roles and responsibilities: Structure and functions of government, responsibilities within government, relations between government and the rest of the economy Open budget processes: Budget preparation, execution, and monitoring; timetable for legislature; realism of estimates and medium-term framework; fiscal sustainability. Public availability of information: Specification of the coverage, detail and timing of fiscal information to be provided to the public. Assurance of integrity: Quality of fiscal data, internal oversight, and external scrutiny. Assessment Criteria: IMF

27 Assessment Criteria: IMF There is a manual that accompanies the code.

28 Almost 90 Fiscal Transparency ROSC reports have been completed – around a third in developing countries. Assessment Criteria: IMF

29 The reports show major weaknesses in fiscal risks, internal audit and other PFM areas. Assessment Criteria: IMF

30 The situation in resource rich countries is worse than the overall average. Assessment Criteria: IMF

31 The IMF has also specified the SDDS. Assessment Criteria: IMF

32 Assessment Criteria: IMF Of the 68 countries that subscribe to the SDDS – there are only two countries from Africa (South Africa and Egypt).

33 Assessment Criteria: OECD The OECD specified Best Practices for Budget Transparency in 2002.

34 Assessment Criteria: OECD This covered: Budget Reports The Budget Pre Budget Reports Monthly Reports Mid year Reports Year end Reports Pre-election Reports Long Term Reports Specific Disclosures Economic Assumptions Tax expenditures Financial liabilities and financial assets Non financial assets Employee pension obligations Contingent liabilities Integrity, control and accountability Accounting Policies Systems and Responsibility Audit Public and Parliamentary Scrutiny

35 Assessment Criteria: OECD Several OECD countries are below the standard.

36 Assessment Criteria: OECD For some the time is particularly challenging given their debt to GDP ratios.

37 Assessment Criteria: OECD + CABRI CABRI has applied the OECD methodology to Africa.

38 Assessment Criteria: OECD + CABRI The budget formulation and approval process is rushed in many countries.

39 The information provided in the budget documentation by different countries is variable. In several cases it is grossly inadequate. Assessment Criteria: OECD + CABRI

40 There is also wide variability in the quality and timeliness of budget reporting. Assessment Criteria: OECD + CABRI

41 Assessment Criteria: OECD + CABRI Off budget spending remains a major challenge across Africa.

42 Assessment Criteria: OECD + CABRI The composite index for fiscal transparency is below:

43 Assessment Criteria: IBP The Open Budget Index assesses performance on the basis of eight criteria. Budget documentation for citizens remains weak.

44 The OBI index is widely reported. Assessment Criteria: IBP

45 The OBI index is widely reported. Assessment Criteria: IBP

46 Countries have made good progress in improving their OBI scores. Tanzania Uganda Yemen Rwanda Liberia Assessment Criteria: IBP

47 Assessment Criteria: EITI There are 11 countries that are EITI compliant.

48 Assessment Criteria: EITI Tanzania has completed its first Reconciliation Report under EITI:

49 Assessment Criteria: EITI This report covers payments received from twelve operations. It assesses that during the period July 1, 2008 to June 30, 2009, the government received a total of $99,457,000 from the mining companies, while the mining companies paid a total of $135,504,000. The total discrepancy between all company payments and all government revenues is $36,000,000. Some of the reasons for the discrepancy are: poor definition of payment flows, particularly production sharing agreements, payment through third parties, particularly those relating to excise duty on imports and fuel levy, and poor government record keeping.

50 Assessment Criteria: Fiduciary The TI index is widely reported every year.

51 Assessment Criteria: Fiduciary The first comprehensive baseline survey has just been released in Tanzania.

52 Assessment Criteria: Fiduciary The key messages from this report are that: Corruption in Tanzania is a serious governance and developmental challenge Service delivery is crippled by corruption and institutional inefficiency Tackling greed and poverty, the root cause of corruption is paramount in the fight against corruption The business environment is undermined by corruption and excessive bureaucracy Improvement in public administration is needed Intensive public awareness campaign is needed

53 Assessment Criteria: Fiduciary The results of the three surveys on corruption are the following:

54 Assessment Criteria: Fiduciary The issue of funding of elections has also recently been in the news. There are good practices emerging on this across Africa.

55 Assessment Criteria: Standards Moving to international standards is part of the move towards improving budget transparency. (e.g. GFS 2001)

56 Moving to international standards is part of the move towards improving budget transparency. (e.g. IPSAS) Assessment Criteria: Standards

57 Assessment Criteria: Standards Moving to international standards is part of the move towards improving budget transparency. (e.g. PBB)

58

59 High PEFA ratings do not automatically translate into efficient service delivery. Comment from the SA National Treasury was: South Africa has been undergoing major PFM reforms since the 1990s. It now has a world class PFM system. There is a budget surplus, reduced debt, and increased public spending – up by 9% p.a. in real terms. The 1990s also saw a service-delivery disaster for half of the population with a dysfunctional schooling system, poor public health and limited housing. Public Financial Management system reforms are not an end in themselves and although a necessary condition, they are not a sufficient condition for better service delivery. Service Delivery

60 Service Delivery Service delivery seems to have worsened while overall PFM scores have improved in SA. IDASA survey in March 2011 showed that one out of 10 individuals was dissatisfied with service delivery compared to four out of ten around five years ago.

61 Service delivery remains severely constrained in East Africa. Primary Health Centers without medicines. Service Delivery

62 Health facilities without staff. Service Delivery

63 Vehicles without maintenance budget. Service Delivery

64 Fund flows across multiple levels of government remain constrained. Service Delivery

65 Rather than talk about what we do know, we should worry about what we do not know. Rather than focus on what we got right, we should worry about what we got wrong. What we missed; when we did not speak loudly enough; where we self censored – citizens voices yes, but also our own. Robert B. Zoellick President, The World Bank Group The Peterson Institute April 6, 2011 Service Delivery

66 The world is a different place. Service Delivery

67 Service Delivery

68 Water point mapping has shown that there is a big difference between the theory and the reality. Service Delivery

69 Only 54% of water points are functional in Tanzania. Service Delivery

70 An NGO has set up a SMS based citizens feedback mechanism. Service Delivery

71 The program expects 2.5 million additional people to benefit from this program. Service Delivery

72 Third party monitoring of secondary school releases is underway. Service Delivery

73 School attendance is being tracked in Uganda. Service Delivery

74 DSM water kiosk survey results released –Twaweza visited water kiosks to ask price of water and to collect telephone numbers of kiosk owners and clients –Follow up during second round through telephone –Results used by regulator and for Bank supervision Service Delivery

75 Dar es Salaam Mobile Phone Survey Phase 1 –550 households in baseline survey –Weekly follow up (8-10 questions) using new or existing questions –Respondent remuneration –Call centre (flexible; works with illiterate respondents and low-end phones; cheap) –Response rate > 70%, requiring ex-post reweighting of the sample –Part of non-response due to intra-household dynamics and could be reduced further Phase 2 (May 2011 onwards) –Use survey for CAS and project monitoring (and welfare monitoring?) –Requires close collaboration between independent monitor and TTLs to identify relevant indicators Service Delivery

76 Many good practice examples in Kenya that are having an impact. Service Delivery

77 Many good practice examples in Kenya that are having an impact. Service Delivery

78 Service Delivery Many good practice examples in Kenya that are having an impact.

79 Service Delivery There are also several good examples from Nigeria.

80 UNECA report on budget transparency states: In the case of Africa, the best and most suitable lessons on fiscal transparency are those generated on the continent itself. It has been demonstrated that the wholesale adoption of guidelines on transparency from abroad are generally ineffective. Key Issues

81 Key Issues PFM improvements have to be based on the reality on the ground.

82 Key Issue 1: EAC Guidelines There are major reforms underway in PFM laws, budget classification, internal audit, external audit and oversight.

83 Key Issue 1: EAC Guidelines Issuing a EAC guideline on budget transparency needs to be considered. Countries in the region need to implement minimum standards regarding release of budget books on the web and adequate and timely reporting. In 2010 WEAMU issued guidelines on the : -PFM Act directive -Accounting Regulatory Order directive -Budget Classification directive -Chart of Accounts directive -Table of Financial Operations of the State directive

84 Key Issue 2: Citizens involvement There is need to fully support increased citizens involvement in the budget execution and service delivery. There are guides available for supporting citizens monitoring of procurement.

85 Key Issue 3: Simplified in year budget reports Simplified in year budget reports needs to be produced that facilitates oversight by local communities and oversight committees.

86 Key Issue 4: EITI Countries in East Africa need to move to EITI compliant status.

87 Key Issue 5: SDDS There is need to provide data in accordance with SDDS timelines.

88 Key Issue 6: Parliamentary Review Parliamentary Committees need to be strengthened and provided the capacity for undertaking the review function effectively.

89 Thank You