X hits on this document





7 / 70

persistent deficits and implement fiscal adjustments more promptly’ (Alesina and Perotti 1996:7). 5

However, excessive executive discretion in public budgeting carries important risks (Santiso 2006a, 2006b, 2005a). Weak separation of powers, concentration of budgetary powers and legislative delegation of fiscal prerogatives have broadened the scope for government discretion in public finances. This difficult combination tends to leave executive discretion unchecked. It hampers the development of robust oversight agencies and ‘horizontal accountability’ institutions capable of restraining the state (O’Donnell 1998; Schedler et. al. 1999; Mainwaring and Welna 2003). Latin American expeditious modes of economic governance are particularly harmful to the management of public finances, undermining the credibility of the budget as a strategic planning instrument. As a result of this new knowledge, financial governance reforms now involve a broader set of fiscal institutions beyond the executive, in particular legislatures, oversight agencies (Santiso 2007, 2006e; Dove 2002) and mechanisms of accountability within the state (Santiso 2004b).

Conceptualizing government auditing

By overseeing public spending and checking government finances, government auditing (internal and external) is a form of control and oversight designed to restrain executive discretion in public budgeting and mitigate the risks of legislative delegation in public finances. The contribution of AAAs to public sector governance is defined both in positive (improving government financial management) and negative terms (preventing corruption and minimizing mismanagement). Depending on their approach to fiscal control, AAAs have preventive, corrective or repressive functions (Barra 2002). They control compliance with fiscal rules and financial regulations. Their deterrence effect on future misconduct or impropriety depends on the credibility of their control.

AAAs generally act as auxiliary institutions to legislatures, assisting the latter in the performance of their oversight functions in budget and financial matters. While each external audit agency is unique and grounded in the country’s trajectory of state building, AAAs participate in the cycle of legislative accountability. They perform routine oversight of government finances corresponding to what McCubbins and Schwartz (1984) refer to as ‘police patrol’ oversight. This form of external control is distinct from the ‘fire alarm’ oversight undertaken by special legislative inquiry commissions, often set-up to investigate allegation of corruption.

The agency model of delegation and accountability, most commonly used in the literature of public sector governance (Przeworski 1999; Kettl 1999), provides a useful framework to decipher the dynamics of executive-legislative relations and legislative oversight of the executive (Mainwaring and Welna 2003). In general, AAAs act as ‘agents’ of the legislatures in the oversight of government. Legislatures delegate some of their oversight functions to specialized agencies in order to oversee government more effectively. This delegation of legislative oversight powers is different from the delegation of legislative budget powers to the executive, whereby legislatures delegate their powers to tax and spend to the executive. It is also distinct from the more traditional delegation of bureaucratic powers to specialized agencies, whereby governments delegate executive functions to autonomous executing agencies. Internal auditing systems insert themselves into the government-bureaucracy principal-agent relationships. They provide

5 Alesina et al. (1999) identify three main institutional arrangements conducive to fiscal discipline: numerical rules that establish ex-ante fiscal constraints on government spending and budget deficits; top-down or ‘hierarchical’ procedural rules that concentrate budgetary powers in the executive vis-à-vis the legislature, and, within the executive, in the finance ministry vis-à-vis spending ministries; and transparency requirements that ensure the comprehensiveness of the budget and the integrity of the budget process.


Document info
Document views93
Page views93
Page last viewedSun Oct 23 09:59:59 UTC 2016