III.IS THERE AN OPTIMUM LEGAL FRAMEWORK FOR THE BUDGET SYSTEM?

their public finance acts, although remnants of the long-standing British legislation is still evident.3

2.3. International organisations as standard setters

International organisations that include public financial management as part of their mandates provide a third source of standard setters for budget systems and laws associated with them. Such organisations include the International Monetary Fund (IMF), the OECD and the World Bank. Any standards issued by such organisations are clearly not legally binding. The normative impact of standards of international organisations does not depend on their legal status, but on their substance and the authoritativeness of the organisation issuing the standards.

Well-known non-binding multilateral instruments, such as the 1948 Universal Declaration of Human Rights (Brownlie, 2003, p. 534), have had a strong indirect influence on United Nations member countries, in part because of their constitutional status and in part because of the extensive debates that took place before issuing them. Although budget-related standards do not have the same influence as high-level United Nations declarations, to the extent that an international organisation’s published standards are known and the organisation is respected for its integrity, such norms can provide firm guidance to national authorities formulating budget system law.

In this context, the IMF and the OECD have issued standards for “good” and “best” standards respectively (IMF, 2001b and 2001c; OECD, 2002a). These standards cover many aspects of budget systems and budget actors. They recommend guidelines, to be adopted voluntarily by member countries. The norms were influenced by the perceived need for greater budgetary transparency and good governance, which were themes cherished in the 1990s in Anglo-Saxon countries,4 perhaps in part because the executives of these countries were perceived to have too much discretionary power.

The codes of the international economic organisations do not recommend which standards should be embodied in law. The IMF Code of Good Practices on Fiscal Transparency (IMF, 2001b) states that there should be a clear legal and administrative framework for fiscal management. It does not elaborate on the criteria for ensuring that primary laws are clear, although it does refer to the clarity of secondary law.5 There are only three areas where the IMF code provides guidance for incorporating budgetary transparency in law, notably:

●Any commitment or expenditure of public funds should be governed by comprehensive budget laws and openly available administrative rules.

●Taxes, duties, fees and charges should have an explicit legal basis, with tax laws and regulations being easily accessible and understandable.

III.IS THERE AN OPTIMUM LEGAL FRAMEWORK FOR THE BUDGET SYSTEM?

●The publication of fiscal information should be a legal obligation of government.

The OECD Best Practices for Budget Transparency (OECD, 2002a) is more narrowly focused on budgetary standards (see Box III.1). The OECD does not take a view as to whether these standards should be embodied in law.

Box III.1. The OECD Best Practices for Budget Transparency

Budget reports

●Budget report.

●Pre-budget report.

●Monthly (quarterly) reports.

●Mid-year report.

●Year-end report.

●Pre-election report.

●Long-term report.

Specific disclosures

●Economic assumptions.

●Tax expenditures.

●Financial liabilities and financial assets.

●Non-financial assets.

●Employee pension obligations.

●Contingent liabilities.

●Accounting policies.

Source: OECD, 2002a.

The International Organization of Supreme Audit Institutions (INTOSAI) and the Public Sector Committee of the International Federation of Accountants (IFAC) have issued standards for public sector external audit and government accounting respectively (see INTOSAI, 1977, and IFAC, 2004). INTOSAI has also issued an international code of ethics for auditors of the public sector and formed working groups for establishing international standards for internal audit and government accounting. The INTOSAI standards are relevant mainly for its members, i.e. for national supreme audit institutions (SAIs). However, SAIs do not directly implement the standards – they can only exert a degree of influence on the government(s) and parliament(s) of its country. Only a country’s parliament can adopt the laws necessary to make the INTOSAI standards (or those of any international body) legally binding.