BUDGET LEGISLATION: WHAT DO THE INITIATIVES ABOUT TO CHANGES PROMISE?
16.12.2016 / Public Participation
National Assembly of Azerbaijan is currently discussing the changes regarding the law on the Budget System.
The changes being discussed have two directions. The first direction is related to increasing budget transparency. The new provisions here are enlarging the scope of information included in the report about the implementation of the state budget. After the bill is approved, it will be possible to collect information about the public debt, debt taken during the year, the issued government securities and the state guarantees through budget reports. At the same time, expenditures within the State Budget Reserves Fund, the Reserves Fund of the President and the purposely budget funds will be reflected in the report about the budget implementation, as well as the information regarding the disclosure of balance of payments of new revenues. The second direction is adding to the budget control tools for the Chamber of Accounts. After enforcement of the proposed new legal mechanisms, the state budget and the consolidated budget projects for this budget year will be presented to the Chamber of Accounts along with the Cabinet of Ministers by September 15 of the current year.
On top of this, monthly, quarterly and annual reports on the revenue execution, reports on the use of budget funds of organizations, which get financial aid from the state budget, will also be presented to the Chamber of Accounts. Information about changes in the distribution of costs in accordance with the functional, economic and administrative classification of budget revenues and expenses in the execution process of the state budget will also be included here.
“Increasing budget transparency, as well as increasing the authority of foreign audit on the budget should be praised in any case. Especially in a situation when big resource revenues are severely shrinking and the resources are limited. In a situation like this, it is extremely important to increase transparency and accountability initiatives in terms of using every manat of the budget as efficiently as possible. However, the changes proposed now are not likely to make any huge pushes in fundamental transformations in the management of the budget system. Firstly, the organization and regulation of budget procedures require establishing solid mechanisms of the provision of efficient budget expenditures. The current budget formulation does not allow assessing the efficiency of the expenditures in terms of format and creating budget documents.”
The notion of “efficiency” regarding the expenditure of public funds assumes achieving the best possible results from using these funds. According to those results, it becomes possible to define the precise responsibility and accountability. There should be several important mechanisms for assessing the efficiency of forecasted expenditures. The norms mentioned below can be prepared as such mechanisms:
- Frameworks of medium term strategic plans and medium term expenditures for government and various other organizations;
- Clearly defined and well-grounded priorities of the government on every functional direction of the allocated budget expenditures;
- Detailed political (measure) directions for all sectors, goals about every direction, indicators capable of measuring whether these goals are met, quantitative indicators targeted at the base period of the indicators and the forthcoming years during which the budget documents will be in force;
- The main expected reforms and changes on the medium term period that the budget is covering are included.
If these mechanisms are not applied as legal norms and the budget formulation is not carried out by these documents, it is impossible to ensure the provision of the efficiency of budget expenditures.
As for increasing the budget transparency, there are more effective mechanisms available besides the changes proposed by the legislation. First of all, in a situation when there are no mechanisms for providing the participation of civil society and stakeholders, even the most effective mechanisms of ensuring transparency might not work successfully. For participation, we need to carry uninterrupted dialogues between the government and the parliament and civil society about budgeting, conduct joint budget hearings, take the comments about the budget prepared by independent expert societies in account in budgeting projects, carry out joint discussions and consultations with the experts of the Ministry of Finance and ministries of various other disciplines with the representatives of different interest groups to find out about the budget requirements of these groups. At present, mechanisms of this kind do not exist in Azerbaijan altogether.
On the other hand, transparency in budgeting expenditures assumes that information about the volume, structure, destination and direction of all expenditures are disclosed to the community and that all presented indicators are completely comprehensible. It is vital to make several important steps as transparency mechanisms. The following steps are important as such mechanisms:
- Including the functional, organizational and economic classification of local expenditures of regions and cities in the budget envelope. This information will allow the community to accurately track the level of local tax obligations and the status of implementation of fees in all administrative regions of the country, as well as the structure and the priorities of local budget expenditures;
- Detailed explanation on each region and city taken separately, by showing the functional directions of centralized expenditures regarding the city and the region. This information will allow to precisely track the structure and priorities of all centralized administrative budget expenditures of the country by the community;
- Including all the information about every project to be implemented by the means of foreign loans in the budget envelope. Some projects are implemented only with loans and a number of others are implemented by the means of both budget funds and loans. The list of the projects need to be disclosed, the amount of loan and budget funds need to be indicated separately about each project.
- Presenting well-grounded and explanatory comments about the causes of the serious changes in the classification of functional and economic expenditures of the following year in comparison to the current report year in the budget envelope. Sometimes serious changes happen in the structure and amount of expenditures, but the civil society, who deal with the public examination of the budget and the parliamentarians, who are supposed to discuss and confirm the budget cannot accurately explain such changes;
- Disclosing investment spending in accordance with the planned projects. Detailed information about these projects is not included in the budget envelope, but this is very important from the transparency perspective;
- Budget implementation report must be presented to the Parliament in accordance with the functional, organizational and economic classification of budget expenditures. At the moment, budget implementation report is compiled only in accordance with functional classification.
In addition to the public should be given the opportunity to become familiar with the budget envelope that in electronic form the government presents to all parliamentarians online in order to provide the accessibility of budget-related information. For providing the openness of budget information, all information related to the budget envelope can be spread through the website of the Ministry of Finance.