International perspectives on the role of the legislature in public financial oversight

Associate Professor Joanne KellyAustralia & New Zealand School of Government

12 April 2013

• Discuss international perspectives on the role of legislature in public financial oversight (budgeting)...

• Understand the possible scope of that role – and the limitations imposed by current practices and system

• Use as the basis for assessing possible reforms and changes to that role being discussed here.

Why do governments budget?

Planning&

Accountability

Accounting & Controlling

Foundation of the democratic compact

Compact between the rulers and the ruled

Relationship between the executive and the legislature

Posner P & Park C K (2007 ), Role of legislature in public budgeting OECD Journal of Budgeting

S81: Consolidated Revenue Fund:

All revenues raised…. shall form one Consolidated Revenue Fund….

S.83: Money to be Appropriated by Law:

No money shall be drawn from the Treasury…except under

appropriation made by law.

Posner P & Park C K (2007 ), Role of legislature in public budgeting OECD Journal of Budgeting

Translate public resources into human activities…

http://www.auspost.com.au/

…a government’s resources are limited;

its ambitions seldom are.

Weller & Cutt 1976:1

Private sector allocates resources through the market

Public sector allocations resources through the budget process

…to govern is to choose…

….the annual budget expresses most clearly the government’s priorities

So, the key questions in understanding a budgetary system are this:

who are the key players in budgeting? where lies the power to choose? what limitations are placed on that power?

Two key players in public budgeting...

Executive Legislature

Traditional budgetary relationship in Westminster system

Executive:Ministers

individually & collectively

Public Service CBO & line agencies

Seeks approval for spending via Appropriation Bills Legislature

: Members of legislature;

Committee/s; Supreme Audit

Office;

Gives approval for Spending via Appropriation Act

Is held to account for spending (by providing reports on actual spending as requested by legislature;

answering questions)

Holds to account by requesting reports on spending, examining reports, asking questions, verifying content

of reports, undertaking reviews and inquiries

Westminster

Executive

Legislature

PresidentialExecutive

Legislature

Traditional budgetary relationship in Presidential system

Executive:Ministers

individually & collectively

Public Service CBO & line agencies

Seeks approval for spending via Appropriation Bills Legislature

: Members of legislature;

Committee/s; Supreme Audit

Office;

Develops and approval Spending bills via Appropriation Act

Is held to account for spending (by providing reports on actual spending as requested by legislature;

answering questions)

Holds to account by requesting reports on spending, examining reports, asking questions, verifying content

of reports, undertaking reviews and inquiries

Scoping the role of legislatures in public budgeting

Sovereign?

Reforming the role of legislature in PFO: the case of the PBO

IMF advice

OECD finding

R4: Establish Independent Fiscal Forecasting institutions

• Aim to strengthen, disclose and verify the information base to enhance the role of legislatures in budgetary and financial oversight.

• Description of tasks: – Medium term fiscal and budgetary forecasting– Costing: new policy initiatives or reform options, electoral platform;– Independent policy analysis;

 

Netherlands Central

Planning Bureau (1945)

US Congression

al Budget Office (1975)

Sweden Fiscal Policy

Council (2007)

United Kingdom Office for

Budget Responsibilit

y (2010)

CanadaParliamentary Budget Office

(2011)

Australia Parliamentary Budget Office

(2011)

Agency ofMinistry of Economic Affairs

Congress Ministry of Finance

Ministry of the Treasury Parliament

Short and medium term macro-economic forecasting

Yes,unique Yes

 No, only scrutiny

Yes,(in principle) unique

No

Long term macro-economic forecasting

Yesunique Yes

 No, only scrutiny

Yes,unique No

Costing Yes,unique Yes

NoNo, only scrutiny

Yes, but not leading to duplication

Costing of electoral platforms

Yes,unique Yes

 No No

Yes, but not leading to duplication

Monitoring of fiscal policy against rules and objectives

Yes Yes Yes Yes Yes

Policy research on own initiative

Yes YesYes

Yes Yes

• WRITE THIS UP ON BUTCHERS PAPER OR JUST REPORT BACK TO THE GROUP AS BASIS OF DISCUSSION

– What is the impact of PBO on the role of legislature in public financial oversight?

– Draw conclusion from the perspective of your current system...

–

who are the key players in budgeting? where lies the power to choose? what limitations are placed on that power?

Does

stronger =

better?

Understanding the budget game

A simplified model of budget roles & actors...

Two key role in budgeting...

Guardians Spenders

guardians of the public purse

advocates of public expenditures

The Guardians

Seek to keep expenditures within hailing distance of revenues….

1. Control the aggregates

2. Allocative efficiency

3. Operational efficiency

The Spenders

…seek to protect and expand their resource base to advance policy and program aims…

Guardians or

spenders??

Aggregates Allocation Efficiency

Guardians

Spenders

Spenders and Guardians each employ strategies, practices and processes

to further their objectives in budgetary negotiations, and these

‘techniques of competition’ are knowable.…

…spenders can push because the guardians push back….

…the complexity of budget decision-making requires areas of stability

and techniques of conflict limitation or confinement.