235.Sound budgeting and financial management must be based on a broad set of
comprehensive and transparent information. Providing timely and accurate report- ing on budget revenues and expenditures, including donors’ annual and multi- annual aid flows, is important to underpin sound planning and budgeting as well as to allow governments to be fully accountable to their parliaments and citizens on the use of domestic and external resources. Transparencyrules include norms and regulations that establish the conditions under which budgets are prepared and presented to civil society.
236.Key dimensions of sound budgeting include: policy-based budgeting, comprehen-
siveness of budget coverage, transparency of fiscal and budget information, budget credibility (i.e., being realistic and implemented as planned), predictability and control of the use of public funds (internal audit) and external audit (for ex- ample, by the legislature).
237.One of the most important budget documents is the government’s budget proposal (other documents include the pre-budget statement, enacted budget, mid-year re- ports, end-of-year report, audit reports). This document is a government’s declara- tion of the policies that are to be pursued during the upcoming budget year. The parliament’s approval of the government’s proposal suggests its concurrence with the executive’s chosen priorities (OBI, 2006).
238.According to OBI (2006), Croatia and Russia are the lead countries in the region in informing the public on the budget proposal, with 59 and 58 out of 100 scores. They are followed closely by Ukraine, Macedonia, Georgia, Serbia, and Bosnia and Herzegovina. In these countries, citizens are informed through the media and press on budget proposals. In Montenegro, Albania, Armenia, Azerbaijan, Moldova, Kazakhstan and Kyrgyzstan, “some” information on the budget pro- posal is released to the public. In Tajikistan, Uzbekistan, Turkmenistan and Bela- rus, only minimal budget information is provided to citizens and these countries perform rather poorly in terms of budget transparency. Data is not available for Kosovo.
239.Furthermore, governments often fail to give systematic budget information to the legislature. In most countries, even in top performing ones like Croatia, Russia and Ukraine, the proposal (or series of proposals forming the document) did not provide a comprehensive picture of the government’s fiscal position during the forthcoming year(s). The documents do not lay out the government’s policy goals and explain how the planned spending will assist in achieving them. Also the gov- ernments do not disclose detailed information on the expected revenues, plans to borrow, payments arrears, etc. (OBI, 2006). Summing up, the budget process is still not satisfactory enough throughout the region. Russia and Croatia are the top performers in the region, followed by Ukraine and the Western Balkan countries. Moldova. Georgia, Armenia, Kazakhstan and Azerbaijan are next in line. Kyr- gyzstan lags behind. For countries like Tajikistan, Uzbekistan, Turkmenistan, Bel- arus, government accountability scores are very low while the data are not avail- able for Kosovo (GIR, 2007, OBI, 2006).
240.The governments of Armenia, Croatia, Bosnia and Herzegovina, Georgia, Russia,
Serbia, Montenegro and Ukraine issued pre-budget statements to disclose the overall spending and revenue levels during the budget formulation, prior to sub- mission to the parliament. The pre-budget statement is presented and approved by the legislature, strengthening legislative oversight (OBI, 2006).
241.Mid-year reports on the budget execution are provided regularly to the parlia- ments of Armenia, Albania, Croatia, Russia, Kazakhstan, Ukraine, Macedonia, Serbia, Bosnia & Herzegovina, and Moldova but even there they are usually ap- proved without sufficient parliamentary discussion. Their timely availability al- lows CSO and parliaments to raise important questions on the divergence from
the policies approved in the budget. None of the analyzed countries provides a
mid-year report to public (OBI, 2006).
242.An annual budget report should be issued by the government at the end of the
year and it should be more then a mere financial statement. Rather it should serve as the government’s principle accountability report to its citizens providing an
update on progress in achieving policy goals and improvements in outcomes that were laid out at the beginning of the year. Most countries provide only partial in- formation in their annual reports, while reporting in Croatia, Bosnia and Herzego- vina, and Russia is more detailed (OBI, 2006). There is no data on Tajikistan, Uz- bekistan, Turkmenistan, Belarus and Kosovo.
243.In most countries, governments do not make information publicly available that is already produced for its internal use or for donors (OBI, 2006).Only in Georgia and Ukraine are attempts made to provide budget information in a form that a non-expert could easily grasp. Itemized budget spending is not usually accessible to the wider public (GIR, 2007).
244.In a few countries only, namely in Georgia, Albania, and Kazakhstan, parliaments hold public hearings regarding budget formulation. In Armenia, Bosnia & Herze- govina, Kyrgyzstan, Moldova, Montenegro, Ukraine, Russia, and Croatia, citizens and CSO submit their proposals to their respective parliaments but these initia- tives yield no results. In the remaining countries, the public has a very limited role in providing input to the budget formulation process.
245.Unless there is a strong demand for accountability, most PFM reforms will not be sustainable in the long run. Parliaments can play a critical role here as they ap- prove budget allocations, oversee budget execution and control budget perform- ance. They can mitigate the risk of excessive budgetary discretion by the execu- tive power by reinforcing the countervailing mechanisms of government account- ability and legislative scrutiny. They can also exert pressure on the executive to improve fiscal performance (Ackerman, 2005). In most countries, the legislature has formal power to amend the budget and oversee its implementation (GIR, 2007).
246.The amount of time that the government gives legislature to work on a budget
proposal determines the parliament’s ability to conduct the oversight function. Experience suggests that three months is the minimum time for a meaningful par- liamentary budget process. In fact, many countries do not meet this criterion, ex- cept for Russia and Kazakhstan (OBI, 2006).