Strengthening Legislative Financial Scrutiny in Developing Countries

Joachim Wehner
2007

Summary

How can the UK’s Department for International Development (DFID) improve its work in strengthening legislative financial oversight? This study from the London School of Economics and Political Science suggests that robust oversight at the country level is crucial for effective direct budget support. DFID’s projects involving legislative financial scrutiny are vulnerable to political risks and achievements are fragile. Nonetheless, where the approach is comprehensive, long-term and builds on local, broad-based support, this work can deliver substantial and cost-effective governance improvements.

Legislative strengthening work focusing on financial scrutiny is not widespread. Donors employ a variety of strategies to enhance legislative capacity, but their activities tend to focus on the approval stage and parliamentary audit. The impact of these capacity-building activities is often hard to assess. DFID’s own work in the area of legislative financial scrutiny is not extensive. Some projects involve it as part of a broader set of activities, such as parliamentary reform or public financial management, but most lack a comprehensive approach to this work.

The promise of effective financial scrutiny is that it enhances accountability, participation and transparency and it deepens democracy. On the other hand, there is evidence that powerful legislatures can undermine fiscal discipline. However, institutional safeguards can reduce the risk of legislative financial indiscipline. Safeguards include disallowing amendments that lead to higher spending or deficits.

Legislative financial scrutiny and oversight should be continuous and should cover all stages of the budget process: drafting, approval, implementation and audit. It should be underpinned by the provision of comprehensive, accurate, appropriate and timely information. Legislatures can become more involved in the formulation stage by debating medium-term priorities, and they should closely monitor in-year information on budget execution. Legislative bodies in developing countries frequently encounter obstacles to fiscal oversight, however, such as:

  • Limited formal authority and organisational capacity to review the annual budget.
  • Large deviations from approved budgets during implementation and ineffective audit processes that undermine parliamentary authority.
  • Low levels of fiscal transparency.
  • Political dynamics that are not conducive to independent parliamentary scrutiny.

DFID should significantly scale up its work to strengthen parliamentary financial scrutiny. In doing so, it should:

  • Avoid simplistic institutional replication of the Westminster model, which limits parliamentary involvement in setting budget priorities and may not be suitable in other contexts.
  • Consider the wider political context and build on indigenous demand and broad-based support for greater parliamentary oversight of the budget.
  • Develop an approach that considers the requirements for legislative scrutiny throughout the budget process, acknowledges linkages to other actors, complements other reforms and is prioritised and sequenced.
  • Develop a long-term approach in priority countries that allows for temporary setbacks and learns from experience.
  • Invest in analytic work on legislative budgeting to assess the effectiveness of fiscal oversight and donor support and pool information on legislative strengthening to maintain an up-to-date picture of its activities.
  • Enhance coordination on the overall approach to this work and exchange experiences with other main actors at regular intervals.

Source

Wehner, J., 2007, 'Strengthening Legislative Financial Scrutiny in Developing Countries: Report prepared for the UK Department for International Development', London School of Economics and Political Science, London