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

3.7.4.The powers, roles and responsibilities of the supreme audit institution

Since the supreme audit body should be established in the constitution (see Box III.2), it would be desirable to follow INTOSAI guidelines, including a constitutional requirement for the deposit of the audit report to the legislature, possibly by a specified date. An external audit law should elaborate on the powers, roles and responsibilities of the external audit body. External audit law(s) should mainly elaborate on INTOSAI constitutional norms. The INTOSAI auditing standards consist of four parts: basic postulates, general standards, field standards, and reporting standards (see summary in IMF, 2001c, Box 24). Possible minimum norms for an external audit law are shown in Box III.5.

3.8. Transparency

Besides accountability, which is linked to transparency, there may be other aspects of fiscal transparency that should be incorporated into law, especially those related to the clarity of the role of the State.

3.8.1. Clarity of roles in the public sector

The IMF Code of Good Practices on Fiscal Transparency (IMF, 2001b) requires that the government sector should be distinguished from the rest of the public sector and the rest of the economy. In making this distinction clear in law, both budget laws and specific laws relating to the organisation of government, quasi-government and non-government entities are required, including for:

●State involvement in commercial activity. New law(s), or amendments to existing law, are needed should the State nationalise enterprises or withdraw from activities better performed by the private sector. Government-owned enterprises are outside the scope of “general government” as defined in national accounts. It is beyond the scope of this study to elaborate on norms for the establishment of public enterprises or the desirable contents of privatisation laws.

●Clarity in the status of government agencies. There are different types of semi-autonomous entities within “general government”. Some such entities may be established by law, whereas others may not be required to have their own legal identities. Either way, a framework law is desirable for defining various classes of government entities (Box III.6).

●Explicit and hidden subsidies. A law should require government functions that are performed off-budget by public enterprises in a non-transparent way to be reported comprehensively to the legislature, preferably in the

context of the annual budget discussions. Similarly, the reporting of tax expenditures16 and quasi-fiscal activities17 to the legislature should be a

legal requirement.