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17. South Africa 1

    TRANSPARENCY

    1. Introduction
    Transparency of government activities at all levels is particularly important because it
    differentiates countries with established democracies from others that relatively recently
    started their democratic transformation. In Russia the budget is the main tool to
    accomplish socio-economic policies. Therefore, the study of transparency of the budget
    process is of vital importance.

    2. History
    Budget transparency has its origin in the history of parliamentary systems. However,
    modern budget practices in many countries do not meet transparency requirements when
    the executive dominates the budget process, the legislature has limited power during
    budget debates or during amendment recommendations; when there is limited availability
    of budget related information for the effective assessment of budget execution; or when
    the public has little participation in the budget process. Hence, budget transparency
    receives considerable attention in the advancement of budget

    Globalization and the growing interdependence of national economies draw attention to
    the role of international financial institutions to improve financial transparency. The Asian
    financial crisis showed that with broad access to information on the Asian financial market
    and fiscal policies, it might have been possible to “turn on the appropriate regulatory
    mechanisms” and alleviate the crisis. As a result, first steps were taken in order to
    formalize transparency requirements.

    On April 16th, 1998, the International Monetary Fund (IMF) published the Code of Good
    Practices in Tax and Budget System and called on its member-countries to implement it.

    The principles and practices of the Code are based on the experience of tax and budget
    administration in member-countries. The IMF Code offers recommendations, is limited to
    finance and credit policies, and is addressed to the IMF member-country governments.
    Increasing transparency of the budget process can be initiated not only by financial
    institutions or governments to improve the budget

    3. Why do we need budget process transparency?
    Representatives of the legislative and executive branches, as well as civil society groups,
    share an interest in budget transparency.
    Although the motives for promoting transparency can be different (elections, investments,
    control on budget expenditure, receiving
    budget allocations, etc.), budget transparency is always a necessary condition to good
    governance due to the following reasons:
    • Transparency enables every member in society to understand the budget language and
    its figures. Since taxes
    constitute the major source of revenue, it also allows seeing where tax money is spent.
    • Transparency creates opportunities for public debates and enables realization of citizen
    rights to budget information,
    and participation in budget decision making.
    • Transparency increases oversight from legislators and citizens over quality budget
    decisions at the formulation and
    execution stages.
    • Transparency is a prerequisite for control on budget allocations and is an instrument
    against corruption.
    • Transparency promotes greater trust between the government and civil society groups.
    • Transparency and public participation can increase the effectiveness of budget
    expenditure.
    • Transparency is a precondition for macroeconomic stability in a country. In a crisis
    situation necessary changes can
    be made more quickly and efficiently.
    • Transparency opens regional and national government policies to other countries, which
    increases investment
    opportunities.

    4. Transparency and public participation
    Budget process transparency is not only about availability of information to the public.
    Transparency is a necessary, but not sufficient
    condition for public participation. Budget transparency being an instrument for the
    development of democracy depends on the level of
    development of democracy, i.e. the readiness and ability of civil society to ensure public
    control over budget transparency and
    participation in budget policy decision-making process, protecting the interests of
    communities.
    The Transparent Budget Program is seen as social technology, or as a set of methodically
    valid actions, rules, and procedures,
    which enable independent experts and NGOs to ensure public participation in the budget
    process, aiming at increasing its efficiency.
    In addition to applied budget analysis, public participation and the technology of legislative
    initiatives, budget transparency
    evaluations are a key component of social technology.

    5. “Me” and transparency:  I can, I want, I know how
    During the Program to evaluate the budget process, data was collected regarding the
    willingness, readiness, and capability of
    participation in the budget process. Motivation was rated very high, whereas only 1% of the
    participants said they Know How to
    apply transparency tools, 95% of the participants said their Know How abilities would
    improve with adequate access to
    methodological instruments.

    6. Transparency assessment: methodological toolkit
    The methodological toolkit that was developed in the framework of the project consists of
    the questionnaire and methodological recommendations regarding the organization of
    surveys to assess public participation. The IMF Code became the first international
    experience to design standards (minimum requirements) applicable to every budget
    system.

    It is based on clarity of roles and function of government bodies; public availability of
    information on activities of government; openness of budget preparation process and its
    execution, and accountability; and independent guarantee of tax and budget-related
    information reliability. However, being limited within the financial policy, the code pays
    insufficient attention to the role of civil society institutions, and it is not oriented towards
    improvement of budget process through enhancement of public and legislators
    participation.

    The transparency assessment and participation scorecard (questionnaire) - which is
    mainly based on the IMF Code of Good
    Practices but was developed and broadened to consider factors of public participation -
    was used in South Africa by the experts of the Budget Information Service of Idasa and the
    IBP.

    The scorecard originally served as a basis for the Russian version of transparency
    assessment within the framework of a budget program. International experience and
    standards are undoubtedly of interest for Russia as a first attempt to apply the
    questionnaire to the project’s seminar attendees. However, collaboration with regional
    experts, as well as consultation with the representatives of the Committee of Finance
    demonstrated that for practical use we need to adapt the questionnaire.

    The following circumstances require adapting the scorecard to the Russian context:

    • In the framework of Strategy’s budget project the questionnaire was intended for the
    budget at the sub-national and
    municipal levels, while the IMF Code and the scorecard used in South Africa are designed
    for the national budget.

    • Specific characteristics of tax and budget system in Russia, including constitutional and
    legislative terminology, make
    it impossible to directly copy the scorecard, which was also confirmed by the results of
    surveys conducted by the
    experts and participants of the seminars.

    • The budget process at the municipal units and sub-national divisions of the Russian
    Federation also differ due to legal
    frameworks, which need to be adapted.

    A questionnaire was developed in the participating regions of St. Petersburg, Pskov,
    Samara, Petrozavodsk, Novosibirsk, and Velikie Luki for the sub-national and municipal
    divisions of the Russian Federation. The questionnaire to assess budget process
    transparency for municipalities includes 58 questions. The one for the Russian
    Federation has 55 questions. The questions are grouped under the following sections:


    • Legislative aspect of transparency.
    • Budget expenditure responsibility.
    • Budget information and budget documentation.
    • Analysis of budget execution.
    • Public participation in the budget process.

    The instructions for regional coordinators, who organized the pilot survey for the
    transparency and participation assessment, included the following sections: purpose,
    goals, tasks, and responsibilities of regional coordinators; organizing and technology of
    pilot survey, including selecting expert-respondents, processing the results, and the
    format of results presentation. The main goal was to ensure a uniform methodological
    approach for conducting the assessment, which is the underlying condition for inter-
    regional and intermunicipal comparison of the obtained assessment results and
    development of recommendations for increasing budget transparency and participation in
    the budget process.

    The main goal of the methodological recommendations was to ensure uniform principles
    of:

    • Selecting expert-respondents.
    • Organizing and technology of conducting expert survey.
    • Processing the results and presenting them to Strategy.

    7. Transparency and participation assessment
    Transparency and participation assessment was conducted in 8 regions on the basis of
    surveys at the municipal level in Murmansk city, Petrozovodsk, and Velikie Luki, and at the
    sub-national level in St. Petersburg, Novosibirsk, Samara, Pskov, and Ujno- Sakhalinsk
    oblasts (“Oblasts” is the Russian term for “region”). Eighty experts took part in the pilot
    survey, 32% of the experts were legislators, 26% were part of the executive branch, 23%
    NGOs, 11% were media representatives and 8% were scholars and academics (see.
    Annex 1). The experts self-evaluated their experience in budget work in the following way:

    • 13% have no experience.
    • 11% 3 years of experience.
    • 23% 3 to 5 years of experience.
    • 53% more than 5 years of budget-related experience.

    Distribution of the expert self-appraisal was in the range of 4 to 9 points on the 10 points
    scale.

    Experts were selected according to a basic knowledge of budget processes and public
    participation at the municipal level for the regions of Murmansk, Velikie Luki, Ujno
    Sakhalinsk (basic scheme of selection). For St. Petersburg, Pskov, Novosibirsk, Samara
    region, and Petrozavodsk experts required an in-depth knowledge of budget processes
    and public participation (full scheme of selection).

    Based on the generalized results of pilot experts survey, the following conclusions can be
    drawn:

    • It was proved that the developed methodological toolkit for transparency and participation
    is usable.
    • Assessment can be expressed both qualitatively (high, moderate, weak) and
    quantitatively (from 0 to 1 or on a 10
    points scale) and presented in tabular and graphical form (see, for example, Annex 2, 3).•
    Qualitatively transparency was assessed as “moderate”. However, quantitative
    assessment in each section substantially differs from region to region. This shows that
    the experts gave different conceptual weight to “moderate”.
    • Agreement among the experts on particular questions is not significant, because the
    respondents’ opinions vary
    widely and require additional analysis.
    • Interpretation of obtained results should consider individual characteristics, such as
    professional expertise in the field,
    since the questionnaire includes a broad range of questions and in some of these a
    respondent may not be prepared
    to answer.
    • If the assessment results for two regions are close there may still be substantial
    differences, since each region’s
    results reflect a different range of factors (See Annex 5.4).
    • The results enable us to highlight some specific aspects of transparency and
    participation, also based on comparative
    analysis of Russian cities’ characteristics.
    • All of the regions obtained a low grade in the section of “participation in the budget
    process” (See Annex 6), which
    shows weak civil society participation in the budget process.
    • Including government officials in the surveys increased their interest in public
    participation, which will influence
    executive, legislative, and civil society cooperation.
    • The experience suggests that the technology of transparency and participation
    assessment can be used in other
    regions, which are not yet participating in the budget program. This can be achieved
    through minor methodological adjustments and appropriate consultation.

    8. Public participation and budget transparency: experience and problems
    The problems faced during the development of the toolkit, can be divided into general and
    specific, like shortage of qualified specialists. In addition, the origin of the problems can
    be classified as follows:

    Methodological, derived from the development of this toolkit.
    • Organizational, as a result of the organization of the survey.
    The problem of expert selection and assessment of opinion agreement.
    Methodological problems to analyze obtained results.