1. Parliamentary Oversight of the Budget: Evolving Good Practice for PACs Mitchell O’Brien Team Lead – Parliamentary Strengthening Program World Bank

2. Outline 1.Development Challenge 2.The budget cycle and accountability 3.The Old Story 4.The New Story 5.Evolving Trends 6.Observations

3. Development Challenge: Translating Improved PFM into enhanced Service Delivery Governance is the manner in which state power is exercised—as distinct from how state power is acquired or the purposes for which it is exercised. Public Financial Management (PFM) refers to the set of rules, systems and practices by which the government manages its financial resources.  Evidence suggests that better PFM leads to stronger economic outcomes  Better PFM does not automatically result in good service delivery WHAT CAN PARLIAMENT DO?

4. What is the Budget?  “…budgeting is concerned with the translation of financial resources into human purposes.” (Aaron Wildavsky)  The most powerful tool at parliament’s disposal  Definition - An itemized summary of estimated or intended expenditures for a given period along with proposals for financing them.  Budget Equation = Revenue + Expenditure  Output versus Outcome Budgeting

5. Principles of Good Budgeting o Comprehensiveness: The budget must cover all the fiscal operations of government. o Predictability: Spending agencies should have certainty about their allocations in the medium term to enable them to plan ahead. o Contestability: No item in the budget should have an automatic claim to funding. o Transparency: Accurate, timely, reliable and comprehensive information. o Periodicity: The budget should cover a fixed period of time, and follow a clear schedule. However, should seek to achieve medium term objectives

6. Objectives of Budgeting Fiscal discipline: Budget totals should be the result of explicit, enforced decisions; they should not merely accommodate spending demands (MTEF). Allocative efficiency: Expenditures should be based on government priorities and on effectiveness of public programs (need to listen to the recommendations of the PAC). Operational efficiency: Agencies should produce goods and services at a cost that achieves ongoing efficiency gains. These objectives are interrelated!

7. Key actors in the Budget Process The Finance Ministry or treasury is to coordinate and drive the budget process in accordance with schedule. Spending departments are ultimately responsible for expenditures within their jurisdiction. President/Prime Minister and Cabinet make fundamentally political decisions about tradeoffs. The role of the Legislature (ex post and ex ante) is to scrutinize and authorize revenues and expenditures. Independent Supreme Audit Institutions audit government accounts for compliance and performance. Other actors may include the Media, Civil Society Organizations, donors and international financial institutions.

8. The Budget Cycle

9. The Budget Cycle and Accountability How does Parliament hold the executive to account through the budget process:  Answerability  Enforceability Which institution is primarily responsible for this PAC

10. What do we know about PACs: Evolving Good Practice for PACs  CPA-WBI Study Group (Toronto, 1999)  McGee “The Overseers” (2002)  Various additional studies (2002-2011)  WBI survey 2008-13 & research  Kerry-Pelizzo-Stapenhurst revision of “The Overseers” (to be published this month)

11. The Old story – What did the Overseers say? o State of the art o Ecology of the PAC o Committee’s purpose, scope and functions o Structure of PAC o Relationship between PAC and Auditor General o Special problems of PACs in small parliaments o Methods of PAC operations o Position of PAC in overall committee structure o The future of the PAC

12. “The Overseers” – Conclusions (1) o First PAC: UK House of Commons, 1862 o Copied by most countries with a “Westminster” tradition o Considerable variation in modus operandi across the Commonwealth

13. “The Overseers” – Conclusions (2) o Most effective when bipartisan o Chaired by the senior Opposition (67%) o Copied by most countries with a “Westminster” tradition o Considerable variation in modus operandi across the Commonwealth

14. “The Overseers” – Conclusions (3) o Need to build capacity of Parliaments, PACs and AGs o Critical: independence of AG from political, and legal constraints o PACs need to develop the means to exchange information on developments, standards and best practice

15. More Specifically: Auditor-General o Professional relationship with government o Working relationship with all parliamentary committees o Historically, focus on probity o Increasing emphasis on VFM, performance audits o Choose any item w/in mandate, but open to suggestions from PAC o Adequate funding & resourcing

16. More Specifically: PACs (1) o Bipartisan o Terms of reference (wide vs. narrow) o Work based on AG report, but free to undertake own inquiries o McGee: sole focus on ex-post budget cycle o Focus on policy implementation, not policy o Some members reluctant to serve on committee o Average size: 11 members; “adequate” representation of opposition (av: 30%) o Need for training & adequate staff

17. More Specifically: PACs (2) o Historically, PACs have not sought publicity – more recently, public hearings (55%) o Use of sub-committees o Do not examine individual complaints (refer to Minister or Ombuds) o Divergence of reporting practices o Deal with individual public servants? o Problems with government implementation/PAC follow-up

18. The New Story Size: 2 (Anguilla) to 25 (Ghana); av: 11.6 Opposition: 0 (Singapore) to 12 (Ghana); av: 42% Staff: 0 (Fiji, Maldives) to 20 (India); av: 3.45 Opposition Chair: 70% Emerging problem: political fragmentation

19. Impact of Political Fragmentation

20. Ratio: Number of Staff to Size of Committee

21. Measuring PAC Effectiveness McGee: Number of meetings and reports Add: Number of inquiries, hearings Key findings:  PACs make a positive contribution to reducing corruption & hence, development  What works in some settings does not work on others -> one size does not fit all  Opposition chair, # of staff are important variables

22. Emerging Factors for Success 1.PAC right of access 2.PAC Powers

23. Changing World of PACs Yesterday’s PAC Model Associated with Westminster/Commonwealth Reactive/Ex-post institutions Many PACs have retained these features, but ….

24. Today’s PAC Model (1) New and Non-Commonwealth PACs Afghanistan Bhutan Denmark Ethiopia Federated States of Micronesia Finland Israel Indonesia Kosovo Liberia Nepal Rwanda Southern Sudan Thailand Turkey Vietnam

25. Today’s PAC Model (2) Powers of New PACs

26. Today’s PAC Model (3) Ad Hoc PACs: Bangladesh Pakistan Fiji Nigeria

27. Trends in Good Practice (1)  The Committee is small (Committees seem to work well with 5-11 members - none of whom should be government Ministers)  Senior opposition figures are associated with the PAC’s work (and probably, but not exclusively, Chair of the Committee)  The Chair is a senior parliamentarian, fair minded and respected by parliament  The Committee is appointed for the full term of the parliament  The Committee is adequately resourced, with an experienced Clerk and a competent researcher(s)  There is clarity on the Committee’s role and responsibilities

28. Trends in Good Practice (2)  The Committee meets frequently and regularly  Hearings are open to the public (A full verbatim transcript and/or summary minutes are quickly available for public distribution)  A steering committee plans the PAC’s work in advance and prepares and circulates an agenda for each meeting to the full Committee  The typical witness is a senior public servant (the “accounting officer”) accompanied by the officials that have detailed understanding of the issues under examination  The A-G’s Report is automatically referred to the PAC and the Auditor meets with the Committee to go over the highlights of the report

29. Trends in Good Practice (3) In addition to issues raised by the Auditor, the Committee occasionally decides to investigate other matters:  In addition to issues raised by the Auditor, the PAC has the power to investigate other matters  The PAC strives for some consensus in their reports  The PAC issues formal substantive reports to parliament at least annually  The PAC has established a procedure with the government for following up its recommendations and is informed about what, if any, action has been taken  In all its deliberations, the PAC uses the Auditor as an expert advisor  Parliaments hold an annual debate on the work of the PAC

30. Observations (1) A.A Committee should asses its performance annually B.Committees should be involved in determining their own budgets. Such budgets should provide financial resources for Member allowances, site visits and costs related to public hearings C.Specialized training (including orientation and mentoring) should be provided to new PAC members

31. Observations (2) D.The PAC should have unconditional access to all government agencies and have the power to “follow” government money provided to non-government service providers E.In smaller jurisdictions, there may be benefit in combining ex-post and ex-ante budget review within the remit of the PAC or like committee F.Committee membership should provide for adequate participation by opposition MPs; their proportion of PAC membership should at least represent their proportion of seats in Parliament

32. Don’t Forget Zambia Joint Accountability Conference (May 2014) is just around the corner! Each EAAPAC & SADCOPAC Member should be:  Taking stock of how they’re progressing in implementing the JAC Resolutions & JAC Action Plans  What accountability outcomes has your PACs achieved (what you did and what impact has it had)?