"Piggy Bank" by free pictures of money is licensed under CC BY 2.0
Sally Torbert

A Call to Action on Open Budgets during the COVID-19 Response

Guest post by Sally Torbert of the International Budget Partnership, who has a very different take on how to tackle Covid Corruption from yesterday’s post by Mushtaq Khan and Pallavi Roy

Vast sums of public money are being mobilized and diverted to fund COVID-19 emergency measures. Governments need to identify, approve, and implement emergency funding urgently. While speed does not need to come at the expense of accountability, the risk of misused and wasted public resources looms large. As Mushtaq Khan and Pallavi Roy explained yesterday, rapid procurement that sidesteps normal controls often leads to both increased corruption and higher costs for services. The World Bank has also highlighted corruption risks in cash transfers, food distribution, emergency subsidies and public safety enforcement.

How effectively governments use public resources, and where those resources go, will determine how many lives are saved, how many people fall into poverty, and the shape of the society that emerges. These choices are too important to be made opaquely and without public input, especially when inequality and perceived corruption have already undermined public trust in many governments. Yet, history shows that crises can also be times of political renewal, and stronger transparency and accountability can strengthen the social contract.

The IMF summarized their advice for a rapid and accountable response in a single sentence: “Do whatever it takes but keep the receipts.”

But people would be right to begin asking – and sooner, rather than later, as those receipts start piling up: Can we see those receipts?

Source: IBP

Most countries’ budget accountability systems have gaps even when they operate under less extreme conditions. The latest Open Budget Survey (OBS) finds that some of the weakest aspects of budget transparency and oversight are the ones that will be most critical for monitoring public resources during this emergency. These include:

Disconnects between policies and budgets. As governments announce new emergency policies, they should also explain how these policies will be funded. Even before this crisis, a third of the 117 countries assessed in the OBS were not showing how new proposed policies translated into budget allocations. Now, many governments are channeling emergency funding through extra-budgetary funds which sit outside the budget process and have their own reporting and management systems.  This carries risks, as, once created, separately managed funding streams may not be used in accord with government priorities. Moreover, fewer than one in four countries in the OBS disclose complete information on extra-budgetary funds in their budget proposals.

Weaker transparency and oversight of budget execution. Where emergency funding is approved with expedited or curtailed legislative oversight, this increases the importance of ‘keeping the receipts’ to strengthen the oversight of budget execution. Yet, the OBS finds that one out of every four surveyed countries do not release timely reports on budget execution. As governments adjust spending through supplementary budgets, reallocations, and virements, two out of three surveyed countries do not publish a timely Mid-Year Review, which shows changes in planned spending due to revised revenue and expenditure projections. Legislative oversight of budget execution is limited: fewer than one in five legislatures publish reports on their findings about budget implementation. Audit oversight also has gaps: one out of three surveyed countries does not publicly release the audit report of the government’s finances within 18 months of the end of budget year, and three out of four surveyed countries do not audit all public spending in extra-budgetary funds.

Missing information on debt and new liabilities. Governments are taking on additional debt to finance spending amid lost revenues and many are also guaranteeing debt for businesses and financial markets. Yet, higher debt repayments, especially in emerging markets, can crowd out spending on critical services, and debt guarantees can be particularly risky during financial crises. These risks should be part of budget debates, but the OBS finds that in budget proposals, only one-fourth of the countries surveyed disclose their total debt obligations and the composition of that debt, and just 13 percent of countries fully disclose contingent liabilities.

A Call to Action to Strengthen Openness of Budgets during the COVID-19 Response

Despite these challenges, the misuse of emergency funds is not a given. Governments that commit to transparency at the outset of their crisis response set a precedent for stronger accountability throughout their recovery.

As part of the launch of the OBS 2019, the International Budget Partnership issued a joint Call to Action for governments to achieve four open budgeting targets within the next five years. Governments cannot wait until after this crisis is over to make progress on these targets – they should start now to safeguard our public resources. Expanding on the four targets in the Call to Action, here is how governments can not only ‘keep the receipts’, but also publish and use these receipts to promote accountability:

  1. Start with full transparency: Increase the frequency and comprehensiveness of budget execution information, including procurement transactions and reporting on extra-budgetary funds. Information should be released either through existing websites or portals, or when these do not yet exist, using available tools and resources to publish data. This information should also explain budget adjustments, including increases and reductions in planned spending, sources of financing, details on total debt obligations, and new contingent liabilities. Governments should also publish the guidelines and policies that will direct spending, such as beneficiary criteria for relief packages, adjusted rules for government spending, and changes to procurement procedures.
  2. Seek input and engage the public: Expand collaboration with civil society on monitoring the implementation of emergency and stimulus measures. Civil society can help governments conduct spot-checks to ensure that funding and services are reaching intended beneficiaries, track the implementation of policies, and monitor procurement risks. For example, social audits have been used to monitor employment guarantee schemes in India and are currently used by IBP’s South Africa office to track services in informal settlements. Governments can actively solicit public feedback on tax and budget policies, as well as challenges in accessing emergency and economic support programs.
  3. Strengthen oversight during budget execution: Commit to having expedited auditing of emergency and stimulus funding, including extra-budgetary funding. Supreme audit institutions can remind governments about the rules that should be followed, and release reports and audit findings to the public and to legislatures as rapidly as possible so they can address government implementation issues during the response.
  4. Sustain improvements toward better accountability practices: Progress toward more open budgets is possible, even during this crisis, using tools that already exist and data that governments already produce, but governments should not just stop there.Governments should commit to emerging from this crisis with more accountability for their use of public resources than before.

Countries now have a choice about where their response to this crisis will lead — either to less transparency and trust or to more openness and accountability. Along with over 100 organizations who have already signed the Call to Action,  we urge governments to choose the more open path.

Top picture credit: “Piggy Bank” by free pictures of money is licensed under CC BY 2.0

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