A government’s budget is its most important policy document, where policy objectives are reconciled and implemented in concrete terms. Public budgets should therefore be as comprehensive, informative, and timely as possible. The transparency and accountability of financial information in budget reports is supported by specific disclosures of methodologies and assumptions, as well as classifications that allow the user to get the bigger picture. Transparent and comparable methodologies and both internal and external accountability are required in order to ensure the quality and integrity of budget reports.
Improving transparency of the budget process and documents is crucial for several reasons. A transparent public finance system helps illuminate the relationship between desired public objectives and the availability, affordability or constraint of public resources to pursue policies that support those objectives. In that regard, it is equally important to be transparent with regard to budget indicators and underlying assumptions, such as fiscal projections and macro-economic outlooks over the medium- and long-term, and to foster dialogues on how policy choices will impact fiscal sustainability. In the light of the recent economic crisis, public demand for transparent governance of public resources is on the rise.
A credible and open budget process based on realistic projections and clear policy choices helps increase trust of the business community and citizens at large in government institutions and decisions. Publishing information in an accessible, timely and comprehensible manner helps to support public engagement in and understanding of budgetary decision-making and choices.
Based on the OECD Best Practices for Budget Transparency, this guidance addresses questions to policy makers looking to improve the transparency of the budget process.
1. Is the budget comprehensive, encompassing all government revenue and expenditure, along with detailed commentary and non-financial performance data, including targets, where practicable?
2. Does the budget provide comparative information on revenues and expenditures for the immediate past and future (e.g. actual expenditures and forecasts as well as the budget request)?
3. Is expenditure classification done by major function, economic and administrative units, with description as appropriate? Are the total amounts of contingent liabilities disclosed and classified by major category, where feasible, or listed and described where they cannot be quantified?
4. Are key financial data and economic assumptions disclosed explicitly, and are financial assets -- including assets belonging to employee pension plans -- valued at market value?
5. Is a sensitivity analysis made of the impact of changes in the key economic assumptions, as well as interest rates and foreign exchange rate assumptions? Are the economic assumptions accurately presented in the budget documentation?
6. To ensure transparency, are the same accounting policies used for all fiscal reports, with a summary of relevant policies, disclosure of deviations from generally accepted practices, and comparable data between reporting periods?
7. Is the government’s draft budget submitted for parliamentary scrutiny and approved in a timely fashion, and does the executive budget proposal contain all necessary supporting documents for the legislature to take an informed decision? Do additional budget reports provide information on the government’s long-term objectives, assumptions, compliance with the level of revenue and expenditure authorised by the Parliament, and long-term sustainability?
8. Is a dynamic system of internal financial controls in place to ensure the integrity of fiscal reports? Does each report contain a statement of responsibility by the finance minister and the senior official responsible for producing the report?
9. Is public scrutiny facilitated by making relevant fiscal reports publicly available, free and online? Does the ministry of finance actively promote an understanding of the budget process?
10. Is the accountability ensured through year-end fiscal report and an external audit by the Supreme Audit Institution? Are the audit reports scrutinised by Parliament, and does it have the opportunity and resources to effectively examine any fiscal report that it deems necessary?
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INSTRUMENTS AND STANDARDS
OECD Best Practices for Budget Transparency
IMF Code and Manual on Fiscal Transparency
Open Government Partnership
Manila Consensus on Public Financial Management
TOOLS, GUIDANCE, MANUALS
Producing a Citizens’ Guide to the Budget: Why, What and How?
World Bank public finance tools
Collaborative Africa Budget Reform Initiative (CABRI)
International Budget Partnership (IBP)
IBP Open Budget Initiative
REVIEWS, CASE STUDIES
Country reviews of budgeting systems
OECD Journal on Budgeting
Tax Expenditures in OECD Countries (2010)
Budget Transparency around the World: Results from the 2008 Open Budget Survey