Unlimited Possibilities for Fiscal Transparency Improvement
European Financial and Accounting Journal
Dear readers,this special issue of the European Financial and Accounting Journal is aresult of a joint initiative of the Faculty of Finance and Accounting atUniversity of Economics, Prague and the Network of Institutes and Schoolsof Public Administration in Central and Eastern Europe (NISPAcee). Thepapers included in this volume were selected from the papers prepared inthe framework of the NISPAcee Working Group on Fiscal Policy andpresented in May 2011 at the 19th NISPAcee Annual
... nnual Conference.NISPAcee is a non-government, non-profit, international membershiporganization. It was established in 1994 with the aim to serve as aclearinghouse for information for the newly established schools andprograms of public administration in post communist countries and topromote the development of public administration education and trainingin these countries. At present the membership of the organization includes106 institutional members and 26 associate members. The ExecutiveSecretariat of the organization is located in Bratislava, Slovakia. Mainactivities of the organization includes annual conferences, trainingprograms, summer schools, high level meetings, specialized conferencesand workshops, tailor-made seminars and study-tours, databases ofinstitutions and experts, research programs, publication program,technical assistance and development programs.During this autumn dozens of researchers around the world, includingmyself, compile the Open Budget Survey 2012, which is a biennialcomparative research of budget transparency and accountabilityundertaken in more than 90 countries. The search of information andfilling of the questionnaire make me think about many simple steps whichwould improve transparency. At the same time I am aware that there areunlimited possibilities for improvement in this area.Fiscal or budget transparency gained increasing attention frominternational institutions, national governments and nongovernmentalorganizations in the last twenty years. This attention presented itself first in the specifications how transparent budgets and public finances shouldlook like and second in the attempts to measure and compare transparencyacross countries.Fiscal transparency is often viewed as a tool promoting fiscaldiscipline which is accompanied with more credibility for financialmarkets and lower costs of debt. Frequently approved fiscal rules or fiscalcaps can only lead to fiscal discipline if they are backed by transparentreporting. Otherwise they create various "perverse" incentives. Fiscaltransparency is important to reduce incentives to be fiscally irresponsible.Improved fiscal transparency is also important for engagement ofcitizens and civil society organizations in the decision-making process.Government fiscal activities should be subject to public scrutiny, which isimpossible without timely disclosure of all relevant documents andinformation.At the moment there are two major international norms of budgettransparency: the IMF Code of Good Practices on Fiscal Transparencywhich was for the first time approved in April 1998 and the OECD BestPractices for Budget Transparency published in 2000.The IMF Code of Good Practices on Fiscal Transparency states thatthere should be a clear legal and administrative framework for fiscalmanagement. It is divided into four sections: (1) clarity of roles andresponsibilities, (2) public availability of information, (3) open budgetpreparation, execution, and reporting and (4) assurance of integrity. TheOECD Best Practices for Budget Transparency are narrower and aredivided in three parts: part I lists the principal budget reports and theircontent; part II describes specific disclosures to be contained in thereports and part III highlights practices for ensuring the quality andintegrity of the reports. These two international standards are of coursenot binding but can provide guidance for development of national budgetlaws.At the same time we can observe attempts to measure budgettransparency. In order to cover the entire spectrum of issues related totransparency construction of a transparency index seems appropriate. Sofar there have been developed several transparency indexes both inacademic papers and by private nonprofit organizations, such asInternational Budget Partnership. The International Budget Partnership undertakes since 2004 the OpenBudget Survey, which is compiled from a questionnaire completed foreach country by researchers who are not associated with the government.Each country's questionnaire is then independently reviewed by twoanonymous experts and a government official. Based on the survey theOpen Budget Index is computed.Together with a few other researchers I have been involved in theelaboration of the Czech part of the survey since the very beginning andnow it has been already the sixth time. While in 2004 I had to browsethrough the extensive budget documentation in the library of the Ministryof Finance which at that time was one of the very few places where it wasavailable for general public. Today I can answer the questions from myhome, as all the documents are on the web. This is definitely animprovement. The work with the budget documentation became over theyears quite easy. I know the structure well now, so I can find the answerseasily. Of course, only if the particular information is presented. Thedifferences between the years are negligible, which means that we do notsucceed to add the missing but required information into the budgetdocumentation.Budget transparency is defined as the full disclosure of all relevantfiscal information in a timely and systematic manner, thus there are threeaspects of the disclosure: complete, timely and systematic.Evaluating the complexity, we have to admit that all the budgetdocuments which are produced in the Czech Republic appear also on theweb. However, a few documents required by the OECD Best Practices,such as Pre-election report, Long term report or Citizens budget are notproduced at all. Especially the preparation and publication of the Citizensbudget would show interest of the government in the budget transparencyissue.The time, which passes between completion of a particular documentand its publication, differs significantly for the different documents.While the executive's budget proposal is available within a few days afterits approval, the mid-year report is published with a significant delay,which is caused by the regulation in the law on budget rules. The law onbudget rules requires that the quarterly and mid-year reports are publishedonly after their acceptance by the budget committee or the Chamber of Deputies, respectively. Doe to this regulation the mid-year report for theyear 2010 was published as late as in March 2011.Disclosure in a systematic manner means for me publication at oneplace, most likely the web pages of the Ministry of Finance. The currentpractice, when some of the budget documents are published on the webpages of the Ministry of Finance and the rest on the web pages of theChamber of Deputies is quite confusing.Even when the Czech Republic is characterized as a country whichprovides significant information to the public in its budget documents,there are still many simple and cheap ways to improve budget transparency.