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

In its 1977 “Lima Declaration”, INTOSAI issued four constitutional standards relating to public sector external auditing (Box III.2).

Box III.2. Constitutional norms for external audit: Extracts from the INTOSAI “Lima Declaration”

●Independence. The establishment of SAIs and the necessary degree of independence shall be laid down in the constitution. Details may be set out in legislation.

●Appointment and removal. The independence of members shall be guaranteed by the constitution. The procedures for removal (of members) from office shall be embodied in the constitution and may not impair their independence.

●Relationship with parliament. The relationship between the SAI and parliament shall be laid down in the constitution according to the conditions and requirements of each country.

●Annual reports. The SAI shall be empowered and required by the constitution to report its findings annually and independently to parliament or any other responsible public body; this report shall be published.

Source: INTOSAI, 1977.

Cultural and functional differences may partly explain why INTOSAI has taken a strong position on desirable features to include in law. Codes of international organisations for budget systems have generally been developed by economists without legal training. In contrast, the standards for external audit have been formulated by external auditors, who may well have received some legal training and are involved in questions of legality in their work on traditional compliance audits. This would be particularly the case if continental European representatives on INTOSAI – magistrates from courts of accounts – influenced the formulation of the INTOSAI guidelines for external audit. Also, external auditors are aware that SAIs are bodies typically established in constitutions and that their effective independence is enhanced if certain desirable features are embodied in constitutional or ordinary law.

2.4. Monitoring standards

If international standards for budget system laws were to be set, an independent body of standard keepers would need to be established to ensure, with objectivity, that the standards are adopted and maintained. This is unlikely to happen – national governments are unlikely to set up an external “rating agency of budget system laws”. Apart from the specialised nature of such a hypothetical body, it is unlikely that countries would provide an independent standard keeper with the necessary juridical powers to enforce