Corruption in the health sector

Budget transparency

Opportunities for Corruption in the Allocation and Management of
Health Budgets

CONTENT ON THIS PAGE:

•  The budget cycle
•  Opportunities for corruption in the budget formulation process
•  Opportunities for corruption in budget execution and evaluation

The budget cycle

Breaking down the budget process into consecutive stages is a helpful way to understand the various steps of the budget cycle. The cycle starts with governmental policy inception, which involves an analysis of the previous fiscal year, the setting of priorities, and estimates of income. It is followed by the government's budget formulation, including setting the resource framework, objectives and priorities. Upon enactment through the legislature, the budget is actually executed (or implemented) during the fiscal year: Revenues are collected, funds released, personnel are deployed, and planned activities are carried out. The budget cycle ends with the monitoring and evaluation of achievements: Expenditures are accounted for, the achievement of targets is measured, and the audit institutions provide their feedback to the legislature. Their information is used to analyse and formulate the next year's budget. Figure 1 illustrates the various stages of the budget cycle.

The Budget Cycle

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Opportunities for corruption in the budget formulation process

The budget is the main policy instrument of the government. However, policy objectives and priorities often do not find expression in annual budgets. For example, even though government policy documents may pledge commitment to social goals, sectors like defence and large infrastructure projects often receive a disproportionate share of the budget, because they provide more opportunity for kickbacks and pay-offs to politicians.

Budgets are frequently built on unrealistic estimates, either over- or underestimating tax income, which makes it difficult to understand and act on a budget proposal. A comprehensive budget analysis therefore needs to look at both the revenue and the expenditure side of the budget. These distortions and manipulations of the budget can constitute acts of corruption in that they favour the political and economic elite of a country. Analyses of the health sector indicate that public expenditure tends to disproportionately benefit the rich in a majority of nations. It is common that priority is given to tertiary hospitals using costly equipment while smaller primary care clinics may be left without both staffing and equipment. This could be the result of officials being influenced to allocate funds to benefit a supplier or to benefit a particular group. Officials could also be influenced to insert specific subsidies or tax exemptions in the budget.

A problem in the budget formulation process is that significant portions of resources may not appear in the budget: they are off budget. This is often a consequence of donors who do not trust a country's financial management system, and that often compete for projects. As a consequence, substantial expenditures may simply not appear in the government's budget. Ministries may also prefer not to disclose donors' project grants and internally generated funds because they fear that this may decrease their share of government funds. The lack of information is common in the health sector judging from studies in Uganda. The fact that the private sector is a major player in health care in many low-income countries may contribute to the poor data collection. Off-budget activities create non-transparent, parallel systems that make comprehensive budget analysis and monitoring of expenditures difficult. Delays in donor disbursements also cause difficulties in estimating the full resource envelope.

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Opportunities for corruption in budget execution and evaluation

Once the budget has been approved by the legislature, the executive has to ensure that it is implemented in line with what was enacted into law. However, in many countries, budget management systems are so poor that it is difficult for the executive to monitor how resources are spent. Financial information on expenditures is frequently late, often incomprehensive and inaccurate. Crucial data are often non-existent, and the data that are available are plagued by problems of timeliness, accessibility and frequency.

In practice, therefore, budgets are not always implemented in the exact form in which they were approved. Funding levels in the budget are not adhered to and authorised funds are not spent for the intended purposes. These practices are not necessarily corrupt. However, if for example trips abroad for high level public officials are well over budget, whereas the budget allocated for recurrent charges, such as medical supplies, is not spent, then corrupt behaviour of public officials may have played a role.

Once the fiscal year is over, the public (and the legislature who represents them) should be able to measure whether public resources have been spent effectively. Again, this is often hampered by delays in providing information and a lack of access. Even when data and statistics are accessible in time, they may be inappropriate, faulty and organised (e.g. aggregated) in a way that readers cannot draw any conclusions from them.

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