Auditing, accountability and anticorruption: multilateral lending to legislative budget oversight and external auditing of public finances in Latin America

Abstract

Reforming budgetary institutions is a critical task for emerging economies seeking to strengthen economic governance and curb corruption. There is heightened recognition that the rule of law in public finance management requires improving transparency, integrity and accountability. Consequently, the role of parliaments and oversight institutions in the governance of the budget is being reconsidered, in particular in presidential systems of government. Legislative budget oversight and external auditing of public accounts are key institutions of public finance accountability, whose full potential is yet to be realised. This chapter reviews IDB lending to two critical, yet often overlooked budgetary institutions in Latin America, national parliaments and supreme audit institutions. By lending credibility to the institutions of budget oversight and public finance accountability, the IDB aims to enhance their contribution to the budget process. This chapter nevertheless argues that there exists unexplored potential to improve the effectiveness of multilateral lending to budget oversight institutions. Beyond increasing technical capacity and operational efficiency, second-stage reforms require strengthening the incentives of budgetary institutions to oversee public finances effectively and responsibly. This would entail enhancing legislative capacities for independent budget analysis, securing the political independence and ensuring the financial autonomy of supreme audit institutions, and promoting more efficacious links between supreme audit institutions and parliamentary public accounts committees. The core challenge remains to simultaneously strengthen the capacities and the incentives of legislators to hold government to account.