Parliamentary Budget Offices as Vehicles for Citizen Oversight in the Budget Process

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By Sruti Bandyopadhyay of the World Bank Parliamentary Strengthening Programme

We parliamentarians need help in understanding the underlying factors affecting fiscal forecasting and the reasons the executive is moving in a particular direction. Can we set up an unit that would focus on higher-level analysis that would improve parliamentarians’ understanding of alternative public policy options that might influence future government expenditures……We need a facilitator who can help us interpret what Ministry of Finance is doing….”…Participant during Joint Accountability Conference, Finland 2012, organized by Parliamentary Strengthening Program, the World Bank. 

Parliaments perform an integral and clearly defined role in public financial management (PFM) systems.  It is the institution that enacts the budget, monitors its implementation, and holds the government to account for achieving the objectives outlined in the budget document. PFM systems encompass more than just the budget process; however, by using the “power of the purse” parliaments are able to exert their influence over the collection, allocation, and use of public resources for public purposes.    

Over the last decade, many legislatures in our client countries are rethinking their role in the budget process and reasserting themselves as more active players.  The question is no longer whether parliaments have a role to play in the budget process; rather, how can PFM systems be designed in order to facilitate the constructive inclusion of parliaments in the budget process in order to maximize transparency, responsiveness, and accountability. However, to full its oversight function and effectively analyze and evaluate the increasingly complex reforms and policies, it is important for parliaments to have the institutional, technical, and analytical capacity to take on the magnitude of their budgetary responsibilities. Various indicators, such as the Public Expenditure and Financial Accountability (PEFA) framework, the Open Budget Index (OBI), and the Global Integrity Index (GII), reveal substantial weaknesses in these capacities.

The creation of parliamentary budget offices (PBOs) within parliaments is an institutional innovation that enables the legislature to engage in the budget process in a more objective, effective, and responsible manner. PBOs can contribute in three ways. 

Analyze the budget presented by executive: First, effective legislative budget offices can simplify complex budget information provided by executives so that legislators can understand and use it. Budget information is presented in terms of governmental accounting codes, expenditure classifications, and other financial administration requirements. This is not always understandable to legislators and citizens, so it must be adjusted and synthesized. In addition, the simpler, more transparent and accountable budget resulting through the work of a legislative budget unit makes the budget process more straightforward and easier to follow. For Example, Moroccan Parliament expanded its participation in the formation of the national budget by proposing 24% more amendments to the annual budget bill in Fiscal year 2008, after the creation of its Parliamentary Budget office in 2007. Hon. Beatrice Kiraso, for example, stated that because of the work of the Uganda PBO, Ugandan ministries now produce yearly spending reports to Parliament in a standardized, easy-to-use, and more understandable format. 

Cost Estimate: PBOs can analyze and estimate the financial impact of any proposal that relates to a matter over which Parliament has jurisdiction, on request of any member or any Parliamentary committee. Requests can range from specific costs of an expenditure proposal to changes in tax or other revenue policies. PBOs can become a permanent source of information and analysis for Parliamentarians regarding the fiscal impact of public policies. For example, Canadian PBO estimated the cost to buy and maintain fighter jet close to $29.3 billion — as oppose to $17.6 billion estimates given by the Department of National Defense. The realization that their assumptions and figures will be carefully reviewed by budget experts from a separate branch of government encourages executive budgeters to be more careful and precise.

Fiscal Forecasts: A key concern of Parliamentarians over many years has been the divergence between the fiscal forecasts of the Department of Finance contained in the annual budgets and the actual outcome when the public accounts were finalized several months (in some countries few years) after the fiscal year ended. PBO forecasts not only provide an independent data point on the health of nation’s finances for parliamentarians, Think Tanks and economic journalists, but  in many cases, PBOs publish their method of calculation and projections, encouraging simplification and transparency and making budget forecasts easier to understand and more credible.

The functions of the PBOs may change over time, depending on the extent of institutional development and the demand for their services. In order to effectively function, the PBO should receive sufficient financial, technological, and human resources.  More fundamentally, they should be anchored on guaranteed independence and impartiality, that is, they should not be party organizations comprised of officials nominated because of their capacity and technical credibility.

In recognition of the importance of PBOs for Parliaments to effectively execute their “power of the purse” function, World Bank’s Parliamentary Strengthening Program is supporting a “Global Network of Parliamentary Budget Office” (GN-PBO). The overall development goal of the GNPBO Community of Practice is to convene and share knowledge around the design, functions, and practices of PBOs and help members to successfully implement tools, methods and practices that have been implemented successfully in other countries in their own jurisdiction.

To fulfill its objective The World Bank Governance Global Practice’s Parliamentary Program is proud to launch the e-PBO platform, an online community space for information sharing, learning, collaboration and support for the network the community engages a variety of learning activities (e.g. annual face to face meetings, webinars, online discussions, blog, community newsletters, sharing stories/ tips etc.). Additionally, GNPBO facilitate building relationships among PBO staff members and organizations involved in setting up new PBOs in other jurisdictions. It also establishes linkages with other existing PBO community such as OECD community of Parliamentary Budget Officials by inviting their members as speakers during webinars and as expert reviewers for GNPBO’s country case study peer review meetings.

Currently, the GNPBO members are consisted of established PBOs (Uganda, Canada, Kenya), newly established PBOs (Liberia, Nigeria, Philippines, Seychelles and Dominican Republic), or jurisdictions in which PBOs are being considered (Ghana, Thailand, Zambia and Zimbabwe) and finally Secretariats or Parliamentary Training Institutes that perform the functions of a PBO (Vietnam and Cambodia).

The GNPBO has all the potential to forge a highly interactive and cooperative community that can bolster inter-Commonwealth and international efforts to improve legislative transparency through independent and diligent Parliamentary Budget Offices and enhance citizen oversight in the budget process in years to come.