Budget process and corruption:
5. How to reduce corruption in the budget process
5.4 What can donors do?
The emphasis on effective public expenditure management and financial accountability systems have led donors to introduce new diagnostic instruments and reports which describe and assess public expenditure and financial accountability laws, systems, and procedures. While the interest for accountability is largely driven by the donor agencies' own needs to ensure officials and the electorate at home that aid money is not wasted, they have a common interest with the civil society in recipient countries to stamp out corruption. There are two main areas where donors may appropriately support developing countries in getting rid of budgetary corruption:
- By helping to detect and describe corruption, and
- by supporting anti-corruption efforts through sustainable reforms
in public expenditure and budgeting, as well as in building institutional
capacity.
Box 3 lists the key analytical tools now in use by various multilateral
organisations to measure accountability and transparency in developing
countries:
Box 3: Accountability and transparency tools:
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Country Financial Accountability Assessment (World Bank) is a diagnostic tool designed to enhance knowledge of public financial management and accountability arrangements in client countries. Public Expenditure Review (World Bank) analyses the recipient country's fiscal position, its expenditure policies, and public expenditure management systems. Country Procurement Assessment Review (World Bank) examines public procurement institutions and practices in borrower countries. HIPC Expenditure Tracking Assessment (World Bank and IMF) assesses the ability of the public financial management systems in highly indebted poor countries to track poverty-reducing expenditures. Fiscal Transparency Review (IMF) (fiscal ROSC) examines to what degree the Code of Good Practices on Fiscal Transparency adopted by the IMF in 1998 is being observed. Diagnostic Study of Accounting and Auditing (Asian Development Bank) examines financial management and governance practices in the public and private sectors of borrower countries. Ex ante assessment of country financial management (European Commission) has traditionally carried out audits of its targeted budgetary support with a view to determining expenditures as eligible or ineligible. For future budget support the EC, uses ex ante PFM assessments based on a mix of diagnostic work completed by other donors/governments and a compliance test to provide empirical evidence of the performances of PFM systems. Country Assessment in Accountability and Transparency (UNDP) - CONTACT is a toolkit to assist governments and consultants in conducting missions to assess public financial accountability systems. |
In addition, the World Bank is piloting a Fiduciary Review that focuses on corruption in Bank-financed projects, but which also overlaps with CFAAs, CPARs, and Institutional and Governance Reviews (IGRs).
The list below gives the distribution of anti-corruption projects for
the Utstein agencies - as listed in the U4 project database as of late
august 2005 - and gives an indication on what these donors are doing to
fight corruption. Both looking at the main headings, the number of projects
under each heading, and the character of the project, it is quite clear
that rather than focusing on the technicalities within the budget process
where a better set of rules, better operation, and tightening up could
deter the perpetrators and reduce the opportunities, this group of donors
focus more on the broad governance and democracy issues, as well as and
general public service reform and management.
Cooperation projects registered on the U4 project database as of late
August 2005 (number of projects):
- Public (civil) service reform and management (196)
- National anti-corruption strategies and policies (120)
- Government oversight and control bodies (114)
- Non-governmental insight, participation and control (96)
- Donor strategies and policies (27)
- International crime and crime prevention (14)
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Public Financial
Management and Procurement |
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Budget process |
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Revenue administration |
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Fiscal decentralisation |
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Direct budget support |
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Public Expenditure Tracking |
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Procurement |
Query the U4 helpdesk about PFM |
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U4 welcomes any | CONTACT |
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Hannes Hechler
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| RECOMMENDED READING |
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“It is our money. Where is it gone?” is a short documentary, released by the International Budget Partnership, on an initiative, in Mombasa (Kenya) to involve communities directly in monitoring the Constituency Development Fund, a fund managed by Kenyan parliamentarians. Through social audits, communities monitored budgets and held their government accountable for managing the public’s money and meeting the needs of the poor.
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| RELATED U4 PUBLICATIONS |
This U4 Brief assesses how banks facilitate illicit capital flows from developing countries. The shortcomings of the existing regulatory frameworks are discussed, and recommendations are made for donor governments on what can be done to curb the flow of corrupt money out of the developing world. |
