Role of the House of Representative in Budget making in Somaliland

LICUS

Training Module:The Role of the

House ofRepresentatives inBudgetary Process

Dr. Scek9/12/2011

Training Module: The Role of the House ofRepresentatives in Budgetary Process

Contents1. Introduction...................................................51.1 Objectives of the Module....................................6

2.0 Unit 1: Introducing the Budget................................72.1 What is the Budget?.........................................72.2 Importance of Understanding the Budget......................82.3 Budgeting Principles........................................82.4 Budgeting Functions.........................................92.5 Objectives of budgeting....................................102.6 Remarks....................................................10

Selected Bibliography.............................................113.0 Unit 2: The Budget Process...................................133.1 Stages in the Budget Process...............................133.2 Budget Process.............................................133.3 Stage I: Budget Planning and Preparation...................153.4 Stage II: Budget Enactment.................................163.5 Stage III: Budget Execution, Monitoring and Control........173.6 Stage IV: Budget Auditing and Assessment...................183.7 Actors/Institutions in the Budget Process..................183.8 The Executive..............................................183.9 The House of Representatives...............................183.10 Auditor General............................................193.11 Other Budget Stakeholders..................................193.12 The Citizens...............................................193.13 Non-state Actors...........................................193.14 Development Partners.......................................203.15 Budgeting and Medium Term Perspectives.....................203.16 Remarks....................................................21

Selected References...............................................214.0 Unit 3: House of Representatives Approval of the Budget......234.1 The Constitutional Basis of the Power of the House.........234.2 Timing of the Budget.......................................23

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4.3 The House Committees in the Budget Making..................244.4 Approval of the Appropriation Bill.........................254.5 Access to Technical Expertise..............................254.6 Budget Information.........................................264.7 Importance of Information..................................264.8 Where to find the information..............................264.9 Political Dynamics........................................264.10 Remarks..................................................27

Selected References...............................................275.0 Unit 4: House of Representative Role in Auditing.............295.1 Auditing Institutions......................................295.2 Type of Audits.............................................305.3 Interaction between the House of Representatives and theAuditor General.................................................305.4 Role of the House of Representatives Committees in Audit. . .315.5 Follow-up..................................................325.6 Remarks....................................................32

Selected References...............................................326 Unit 5: Conclusive Remarks and Recommendations...............346.1 Legal Framework............................................356.2 Clarity of Roles and Responsibilities......................356.3 Degree and Quality of Information..........................356.4 Improving Capacity.........................................366.5 Participation in the Budget Process........................36

Annexes...........................................................38Annex 1: GLOSSARY.................................................39Annex 2: Summary of the Issues Related to Stakeholders Involvementin the Budget Process.............................................43

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LIST of ACRONYMS

AG Auditor General

AuG Accountant General

CSO Civil Society Organizations

FAPs Financial and Accounting Procedures of the State

NGOs Non- governmental Organizations

NSAs Non-state Actors

PFMAA Public Financial Management and Accountability Act

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1.IntroductionThe Somaliland authorities recognize that an effective,efficient, inclusive and participatory budgetary process is amajor factor in enhancing timely and cost-effective servicedelivery to the citizens. In order for the Budget to play thisrole effectively, training and capacity building are a highpriority in the Governments’ human resource development andreform agenda. To this end, this Training Module is beingdeveloped to facilitate that process. The module among otherinitiatives underscores the importance of the training notonly for the members of the House of Representatives but alsoto senior government officials, civil society groups, localauthorities, and other groups or citizens who desire tounderstand the budgeting process and the role of the membersof House of Representatives in budget process.

Parliamentary budget approval, scrutiny and oversight arelittle known in the state of Somaliland and thus it remainsweak. This is due to the fact that members of the House ofRepresentatives have little knowledge and experience regardingthe budgetary processes and more specifically the oversightfunctions.

This “training module” provides a simplified overview of theroles and responsibilities of the Somaliland House ofRepresentatives in budgetary processes. This module is not onlymeant for the members of House of Representatives, but alsofor government officials, civil society groups, think tanks,academics and any other groups or individual citizens who wishto better understand the budget process in Somaliland.

In implementing Public Finance Management and State CapacityBuilding programs, the World Bank LICUS project in cooperationwith the Somali authorities intends to develop a series ofModules to be used as guiding instruments to assistMinistries/Departments in their capacity building process forPFM. The Modules will harmonize all previously traininginitiatives and serves as a useful reference point for new andold members of the House and Government officials. This module

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aims at equipping members of the House, staff and GovernmentOfficials with a broad spectrum of understanding of Governmentorganization and operations, work procedures, rules andregulations and in particular on budgeting process.

The Module is organized in six units:

Unit one Introduction to the Budget: This unit exploresthe meaning of the budget and assesses its rationaleand importance. It looks at the definition of thebudget and its components, including revenues,expenditure and the deficit, as well as some objectivesof budgeting.

Unit two the Budget Process: Unit two deals with corediscussion of the various stakeholders involved in thebudget process and the potential ones that could orshould be involved to improve and modernize the budgetcycle. The unit introduces the key stakeholders of thebudget process and presents a simplified andgeneralized outline budget preparation, approval,implementation and auditing expenditure.

Unit three Budget Approval: This unit provides anoverview of some key issues that introduce effectivescrutiny of the executive submitted budget includingthe House of Representatives Constitutional powers,its various committees (the Economy, Trade and Industryand Public Accounts, etc.), the timing of the budgetprocess, and access to relevant information.

Unit four on Audit of Public Accounts: The unitexplores at different approaches to the House ofRepresentatives audit. It devolves into the functionsof auditor general (magistrate of accounts), House ofRepresentatives Committees, Civil Society Organizationsand the role they play in budgetary control.

Unit five on General Remarks: provides recommendationsand conclusions.

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1.1 Objectives of the Module

The Module or the Guideline has four key objectives:

Objective I: Assist in strengthening knowledge and capacity ofthe members of the House of Representatives regarding theirrole in the budgetary process;

Objective II: Encouraging active participation of the members(committees) in exercising their role of scrutinizing,approving and overseeing the budget process;

Objective III: Promoting good governance, accountability andtransparency by strengthening the House of Representatives’role in overseeing the executive;

Objective IV: Contributing to state development and povertyreduction through policymakers (members of the House)surveillance that requires budget allocations to reflectattainable priority choices designed for the development ofthe state of Somaliland.

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2.0 Unit 1: Introducing the Budget

In this unit the learning objectives are: What is thebudget and what are the components of the Budget?

Define the budget and its components Understand the budget principles Budgeting functions Objectives of public expenditure management

2.1 What is the Budget?The budget can be defined as financial plan of the state. Itis prepared at regular interval (annual) by the Ministry ofFinance and tabled to the House of Representatives for reviewand approval before the beginning of the fiscal year, which isfrom the first of January to the 31st of December each year.The budget includes all Government’s expenditure during afiscal year. Ex-ante, it shows what the government proposes toundertake during that period and it plans to finances theproposed activities. Ex post, it explains what thegovernment actually did and who had to foot the bill and inwhat form.

The budget outlines both the spending and revenue raisingmeasures of the Government. This involves taxation ofindividuals and institutions. Somaliland public expenditure isdivided into recurrent and development. The budget outlines therecurrent and development expenditure on the one hand, anddifferent possible sources of financing on the other. Recurrentexpenditure comprises the costs of running the services of theGovernment such salaries, wages for the public service.Development expenditure on the other hand, involves the costs ofimplementing long-term projects, such construction of roads,bridges, schools, hospitals and alike.

On the expenditure side of the budget, Government allocatesfunds to various functions, such as health, education,

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security, agriculture, justices and so on. This is called thefunctional classification of expenditures. The share of totalexpenditures allocated to each sector is a key indicator ofspending priorities for a given year and of shift inpriorities over a period of time. In order to finance the expenditures, the Government mobilizesrevenue from wide ranges of sources. These include moniesgenerated from taxation (today mostly from duties), and feesaccrued from user charges on Government services, such ascosts for acquiring passports, issuing visas, drivinglicenses, and different kinds of certificates and otherrelated Government services. Other sources include resourcesraised from the public or borrowed on behalf of the public bythe government, loans and grants from bilateral andmultilateral agencies. Within this context, one can say thatthe budget forms the rationale for a clear and well-outlinedframework for raising and spending the monies that are thusraised.When the Government spends more money than the availableresources, it can raise taxes or budget for deficit and coverthe shortfall with borrowing money.

Deficit is when the government is unable to raise sufficientresources to cover it is recurrent and developmentexpenditures. The Government may resort to borrowing eitherdomestically or/and from external sources. Balancing thebudget becomes necessary that’s ensuring that the total sum ofrevenue and receipts from borrowing are equivalent to the sumof expenditure and annual debt repayments.

2.2 Importance of Understanding the Budget Many people in Somaliland still consider the budget a distantdocument and the budget process a preserve of a group of elite ofsenior Government officials in the Ministry of Finance. Yet, ifthere is any government document that has a great impact on the day– to – day life of every citizen of Somaliland, it is the budget.

The impact of budget on the welfare of the citizens usually becomesevident in the period after the budget day when new measures andpolicies outlined in the budget enter into effect. For instance,

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taxation measures proposed in the budget determine, in a significantmanner the level of consumption and investment behavior of everycitizen, as it affects the price of commodities and services.

The budget thus affects the citizens by determining whether or notone is able to enjoy the benefits of goods and services provided bythe Government. This is notwithstanding the fact that the moniesused to provide the goods and services are generated from taxescollected from all citizens through taxation as well as loansborrowed and grants received from various institutions to be repaidwith public resources.

The budget is a too important document to be left to individualpoliticians of government bureaucrats and a few interest groups thathave privileged access. The citizens’ at large, non-state actors,private sector, and other actors may and should be actively involvedin the budgetary process in Somaliland. However, in order for thesestakeholders to participate in a meaningful manner in the budgetaryprocess, they would first need to understand the dynamics of theprocess.

Available resources are limited, the need for proper and efficientutilization is therefore of great concern to the citizens. This ismore so with the knowledge that elected representatives in thegovernment can, and often do, set budgetary priorities that do notnecessarily reflect the desires of those who elected them. And yet,through the media, academic institutions, think tanks, NGOs andother interest groups, citizens ought to be involved in the debateabout setting of the budget priorities and the subsequent allocationof budgetary resources.

2.3 Budgeting PrinciplesStandard acceptable principles of good budgeting include:

Credibility of the budget - The budget is realistic and isimplemented as intended.

Comprehensiveness - The budget and fiscal risk oversight arecomprehensive and fiscal and budget information is accessibleto the public. The budget must cover all the fiscal operationsof Government, encompassing all public expenditures andrevenues, to enable full and informed debate on the tradeoffsbetween and among alternative policy options.

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Predictability – Spending agencies should have certainty abouttheir allocations in the medium term to enable them to planahead. Stable funding flows to support departmental planningand efficient and effective delivery of services. As aresult, the budget is implemented in an orderly andpredictable manner and there are arrangements for the exerciseof control and stewardship in the use of public funds.

Transparency – All relevant information required for soundbudgetary decision making should be available in accessibleformat, and in a timely and systematic fashion. Budgetinformation needs to be accurate, reliable and comprehensive.

Contestability – Under no circumstances should an item in thebudget have an automatic claim to funding. All policy andattached funding should be regularly reviewed and evaluated inorder to ensure prioritization and optimal performance ofspending agencies.

Periodicity – Budget should cover a fixed period of time,which is typically a year in the case of Somaliland (Januaryto December) and the process of the budget follow a clear andreliable schedule as set in the Public Financial Managementand Accountability Act. 2.4 Budgeting FunctionsThe budget is not only concerned with raising and spendingrevenues. It also performs other vital functions, such asallocation, distribution, stabilization and ensuring fiscaltransparency.

Allocation function – the Government is the criticalagent in realizing the national development objectives.It is through the budget that the Government directs,through policy and financial allocations, the developmentprocess in the country. Resources allocated in the budgetare used to finance projects (policy priorities) aimed atfostering national priorities in various regions andsectors of the economy. Therefore, budget preparationensures that sectors, regions, districts receive

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allocations based on the national set policies andpriorities.

Stabilization function – the government can use thebudget to attain and maintain a desired level ofperformance in the economy if need arises. In some caseand particularly during economic crises, stabilizationcould be desired in certain key economic variables, suchas growth, unemployment, inflation and stability inprices of goods and services.

Distribution function – equitable distribution ofresources if needed could be achieved through variousmeasures or instruments among them poverty reductionstrategy and measures to bridge or reduce the gap betweenthe poor and rich are put into practices.

Ensuring fiscal transparency – information contained inthe budget provides a more explicit reflection of thegovernment’s expenditure priorities. It is therefore onthe basis of the budget that citizens and otherstakeholders are able to challenge the government overits state policies and public pronouncement.

2.5 Objectives of budgetingIf resources were unlimited, there would be no need to budgetand we could all get whatever we need from the Government. Inreality, spending needs are much higher than the availableresources. All over the World governments have to make choicesabout allocation of available resources to meet competingneeds of their citizens.

The basic key elements of public expenditure management are:

1. Aggregated fiscal discipline2. Allocative efficiency, and 3. Operational efficiency.

Aggregate fiscal discipline – refers to the control of fiscalperformance of the budget, these include total spending, totalrevenue, the financial balance and the public debt. Fiscal

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discipline requires that budget totals are the results ofexplicit and enforced decisions.

Allocative efficiency – requires government capacity toallocate resources and select programs and projects inconformity with the Government priorities and objectives. Thisprocess is supported where policy basis of the budget isstated clearly on the basis of medium term strategy.

Operational efficiency – is the ratio of the resourcesexpended by government agencies to the outputs produced orpurchased by them. Spending agencies should strive toeliminate waste and produce goods and services at a cost thatachieves ongoing efficiency gains.

The objectives of the aggregate fiscal discipline, allocativeefficiency and operational efficiency are interrelated. Inmany ways fiscal discipline comes first. For example,politicians often promise improving economic conditions suchas high growth, lower unemployment and inflation, all of whichimpact on the amount of revenues government expect to collect.

2.6 Remarks Budgets are regularly produced financial plans of theGovernment comprising all revenues and expenditures of thestate. They should be comprehensive, transparent and ensurefunding predictability of the spending agencies. Publicresources are limited and as a result they fall short ofmeeting the societal needs. For this reason the budget processis used to assess competing claims on the budget and tofacilitate difficult tradeoffs. Meeting this challengesuccessfully requires that budgeting achieves and maintainsfiscal discipline, the strategic prioritization of publicfunds, as well as sound operational management.

Unit 1: Questions/Discussion issuesAnswer of discuss the following questions:

What are the main sources of revenue in Somaliland?Are these sources adequate to cover both recurrent and development expenditures?

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Does Somaliland apply all the principles of good budgeting in the budget process?

What are the key functions of budgeting applied in Somaliland?

How does the Government address the budget deficit?

Selected Bibliography

Allan, William. 1994. Public Expenditure Management and Budget Law:Towards aFramework for a Budget law for Economies in Transition. Washington D.C.:International Monetary Fund.

——-, 1994. Toward a Framework for a Budget Law for Economies in Transition.Washington, D.C.: IMF.

Government of Somaliland (1996). Financial and Accounting Procedures of the State. Hargeisa, Somaliland.

Allan, William. 1998. Budget Structure and the Changing Role of theGovernment. Workshop in United Nation Budget Reforms inDeveloping Countries Overview. New York: UnitedNations.

Barnhart, G. (1999). Parliamentary Committees: Enhancing Democratic Governance in the Commonwealth. London, CPA/Cavendish Publications.

Wijesekera, P. (2002). Parliamentary Practice in Sri Lanka.Sri Lanka, Parliamentary Secretariat.

Parliament of the Republic of South Africa (2004). NationalAssembly Guide to Procedure. Cape Town, Parliament of theRepublic of South Africa.

Foelscher, Alta, and Nei Cole (2004). South Africa: Transitionto Democracy Offer Opportunity for Whole Sale System Reform.

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In Budget reform Seminar Country studies, ed. Alta Foelscher,Pretoria South Africa.

National Treasury of South Africa (2004b). MTEF Guidelines2006. Pretoria, South Africa

Juergen Von Hagen (2007). Budgeting Institutions for Betterfiscal Performance. Ed. Anwar Shah in Budgeting and BudgetaryInstitutions.

Government of Somaliland (2011). Public Financial Managementand Accountability Act of 2011, Hargeisa, Somaliland.

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3.0 Unit 2: The Budget Process

In this unit the learning objectives are:What are the components of the budget process and the actorsinvolved in the budget process?

Stages in the budget process Roles of different actors Budgeting and Medium Term Perspectives.

3.1 Stages in the Budget ProcessCitizens in Somaliland perceive the budget process as a simpleevent that consists of a document or a budget speech read bythe Minister of Finance sometimes between November/Decemberevery year at the House of Representatives. Yet the budgetspeech (document) is the culmination of a yearlong (most ofthe time it could take up to 18 months) exercise involving across-section of actors from both within and outside of theGovernment.

It is important for the citizens and other stakeholders tounderstand the way budget is put together for them to be ableto influence in the process of decision making. Budget processis not a single event or just a document, but rather anongoing process from planning, to resource allocation, toapproval (enactment), to reporting on implementation, tomonitoring of implementation and results and independentauditing. The priorities and choices embodied in the budgetreflect the power of a variety of actors in this process.

The Somaliland budget cycle passes through three major phasesas follows:

The budget planning, proposals and negotiations Budget enactment Budget execution (implementation), and Supervision and audit.

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This unit will examine the stakeholders in the budget process,stages of the budget process and how the annual budgeting canbe guided by a medium term expenditure framework.

3.2 Budget ProcessBudget process could be divided into several steps, and ineach step it is clearly established who does what, and when.The flow of information is regulated among the various actorsinteracting with each others in the process. In doing so,involved institutions distribute strategic influence andcreate or destroy opportunities for collusion and for holdingindividual agents accountable for their actions.

The budgeting processes can be divided into four separatestages; each involving different actors with it is ownspecified roles and responsibilities. In the first stage,which is the planning stage, involves the drafting of thebudget by the executive more specifically by the Ministry ofFinance. The approval stage or enactment of the budgetinvolves the passage of the budget law through the legislativeprocess, including the process of parliamentary amendments tothe budget proposal, which may involve the House ofRepresentatives. The implementation stage covers the fiscalyear to which the budget law applies. The auditing andassessment stage or ex post accountability stage, thegovernment provides reports on fiscal activities to theauditor general and the House of Representatives (Economy,Trade and Industry and the Public Account Committees of theHouse), checking the consistency of such reports with thelegal authorization.

Budget process is not a single event or just a document, butrather an ongoing process from planning, to resourceallocation, to approval (enactment), to reporting onimplementation, to monitoring of implementation and resultsand independent auditing. In general, there are four stages inthe budget cycle and these are:

1) Budget Preparation: The Ministry of Finance is responsiblefor preparing the draft budget on behalf of theexecutive. Once the budget is endorsed by the Cabinet,

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the Minister of Finance forwards the draft budget tothe House of Representatives.

2) Budget Enactment: The House of Representatives discussesand debates on the proposed budget, modifies or emendsit, if necessary and consequently adopts it into law.This means the budget is approved by the legislativearm of government and spending units, such asministries, departments, agencies, etc., are authorizedto spend money through properly developed procedures,which include Ministry of Finance warrants, decree orany other measures.

3) Budget Execution, Monitoring and Control: The budget isexecuted by the Government (ministries, departments,agencies and alike). The weaknesses in budget executionare said to be caused not by the budget systemsthemselves but by the way they operate. Therefore,actions should be directed toward enhancing budgetdiscipline and improving accountability of all thoseresponsible for budget execution and reporting. Infact, to ensure efficient implementation of plannedactivities and keep expenditure under control there isa need to strengthen reporting and accounting measures.Budget execution reports should be regularly producedand on time.

4) Budget Auditing and Assessment: The Ministry of Finance andthe line ministries and agencies provide reports ontheir fiscal activities to the Auditor General and theHouse of Representatives. These reports are reviewed bythe Auditor General Office and the findings aresubmitted to House of Representatives. The House ofRepresentatives conclude the Audit by makerecommendations for action to the Ministry of Financeor any other appropriate authority that has toimplement the recommendations.

Stages of Annual Budget Process

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3.3 Stage I: Budget Planning and PreparationAccording the Somaliland Constitution Article 55(4) specifiesthat “The procedures for the preparation of the general Budgetand the financial year shall be determined by law”. This lawis the Public Financial Management and Accountability Act of2011 and the Financial and Accounting Procedures of the Statethey specify the details of the budget process. Accordingthese laws the budget preparation process starts with acircular issued by the Ministry of Finance to all lineministries, agencies and local authorities. The circulardefines the broad parameters of the budget and setsexpenditure “ceilings” (due to lack of a macroeconomicframework the ceiling is not yet applied) to be adhered(incremental budget approach) to the various budgetbeneficiaries. The circular requests the public institutionsto forward their estimates of expenditure requirementsoutlining the proposed projects in the subsequent financial

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Planning Stage

Legislative StageExecution Stage

Audit

MoF issues budget cicular to the spending agenceiesSpending agencies submit their budget proposalsNegotiations between the MoF and line ministries takes placeConsolidation of the draft budget by MoF & endorsement by the Council of Ministers.

Draft budget submitted to the House of Representatives Consideration of the Budget the House Committee House accepts , amends or reject the budgetAppropriation Bill

Funds apportioned to spending agenciesMoF monitors spending (internal audit) Auditor General assess spending agencies accounts and performanceAuditor General report to the HousePublic Account Committee review the accounts and perfomance


year. Once the institutions submit their proposals to theMinistry of Finance (Budget Department), the departmentsubjects the proposals to intensive scrutiny and harmonizesall the proposals in accordance with the state developmentpriorities.

This is then followed by negotiations between the institutionsand the Ministry of Finance on the budget allocations to bemade. During the negotiation sessions various sectorcommittees’ present detailed bids, justifying their resourceneeds in line with the state development priorities. After thenegotiations the Budget Department of the MoF consolidate thebudget and presents it to the Council of Ministers for reviewand endorsement.

At this stage of budget planning and preparation the House ofRepresentatives has no role to play. This stage is the soleresponsibility of the executive. This process is completedonce the Minister of Finance submit the consolidate budget toCouncil of Minister for discussion and endorsement. After theCouncil of Ministers endorsement the draft budget is submittedto the House of Representatives.

3.4 Stage II: Budget EnactmentIn this stage the Minister of Finance is required by law topresent the budget to the House of Representatives. In fact,the financial and accounting environment in which theSomaliland government operates is governed by a set oflegislations, which include:

The constitution, Article 55 provides the following powers to House of Representatives in the Budget related matters:

Box 1: Article 55 of the constitution:

1) The House of Representatives may debate and amend the Budget, and approve it by a resolution of the House.

2) If the new Budget is not approved before the start of the new financial year, the old Budget shall continue to be in force until such time the new one is approved.

3) The House of Representatives shall approve any expenditure

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which was not included in the Budget.4) The procedures for the preparation of the general Budget and

the financial year shall be determined by law.5) The budgets and the annual accounts of the state organs,

agencies, companies and other partly owned entities of the state and their presentation to the House of Representatives shall be determined by law.

6) The annual accounts shall be presented to the House of Representatives within six months of the end of the financial year to which they relate, and the House shall debate them andreach a resolution thereof.

7) The Auditor General shall have responsibility for the presentation of the annual accounts.

The Public Financial Management and Accountability Act of2011, the Minister of Finance shall prepare and presentthe budget to the House of Representatives not laterthan the first day of October in each financial andprovide the following:

Estimates of revenues and financialrequirements

Estimates of expenditures and otherrelated information.

The Financial and Accounting Procedures of the State is

the formal Act assented by the President on the 15th May,1996. It constitutes the basic underlying legal frameworkgoverning procurement; budget preparation; revenues ofthe state; expenditure; annual accounts; administrativeand accounting control; the duties of the auditor general(AG) and accounting responsibility. The FAPS spells outthe duties and functions of the Accountant General(Article 30) and the Auditor General (AG) (Article 32)while the Minister for Finance is mentioned by his/herofficial title and his/her duties are spelt out broadly.Under the Somaliland law the Accountant general and AGare mandated to exercise control over the accounts of thegovernment.

The Somaliland Government budgetary process is a deliberateand systemic attempt to allocate public resources to

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ministries, departments and agencies in order to financeprograms, projects and activities within their respectivemandates. The principle law of public finance is theconstitution and the accompanying Financial and AccountingProcedures of the State of 1996 (in the process of beingupdated). The FAPS specifies modalities for managingexpenditure and raising revenue. The FAPS also specifiesprocedures for releasing funds from the Consolidated Fund tothe ministries and agencies. Under these laws and thefinancial procedures the Minister of Finance has an obligationto provide the House of Representatives with the draft budgetfor approval before end of financial year.

3.5 Stage III: Budget Execution, Monitoring andControl

This is the stage of the budgeting process where the executivehas received the legislative authorization to raise revenuethrough taxes and to spend them in accordance with approvedbudget estimates. In some exceptional cases ministries mayexceed the approved allocations as could happen during naturaldisasters and other unpredictable calamities. In such asituation, the Minister of Finance may authorize thewithdrawals but presents the Supplementary Estimates for theHouse of Representatives approval before end of financialyear.

Budgetary resources in Somaliland are disbursed to lineministries, departments and agencies through appropriate andwell designed procedures as described below.

Somaliland has been preparing, executing budgets for over adecade and half. The basic financial and accountingenvironment in which the Somaliland government operates withis governed by a set of legislations, namely:

1. The Public Financial Management and Accountability Act of2011,

2. The Financial and Accounting Procedures of the State; and3. Regulations for the accounts of the State.

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The second is the formal Act assented by the President on the15th May, 1996 while the later is the accompanying Regulations.The Financial and Accounting Procedures with the draft PFMMAconstitute the basic underlying legal framework governingbudget preparation; revenues of the state; budget execution;expenditure; annual accounts; administrative and accountingcontrol; the duties of the auditor general (AG) and accountingresponsibility.

3.6 Stage IV: Budget Auditing and AssessmentTheoretically there are a number of organizations that havethe legal and institutional responsibility for holding thegovernment to account for its performance. These include theHouse of Representatives and its number of committees, such asthe Public Account Committee, Economy, Finance, Trade andIndustry, the Auditor General and many more. The Media, CivilSocieties and the public at large also have a critical role inoverseeing and scrutinizing the activities of the government,whilst professional accounting bodies have also an importantrole to play in ensuring the integrity of the public service,even though they are not yet well established in Somaliland.

The Auditor General approves all expenditure warrants beforethey are forwarded to the ministries and receives monthly aswell as annual financial reports from the Accountant General.He/she is required to conduct independent audits of thecentral Government and Districts accounts, and issue an auditreport within six months of the closed of the year.

3.7 Actors/Institutions in the Budget Process The budget process in Somaliland is initiated by the Ministryof Finance with the issuance of the budget circular. The Houseof Representatives adopts the budget and supervise (oversight)its implementation. The central authorities (ministries andpublic agencies), local Government and the Bank of Somalilandare responsible for the budget implementation. Otherstakeholders, such as NGOs, private sector, academics, thinktanks, media and development partners also play an importantrole in this process, these include providing recommendationson how public resources should be allocated, disbursedaccording the parliamentary approval.

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3.8 The ExecutiveWithin the Executive branch of the Government of Somalilandthe role of the Ministry of Finance is to coordinate and drivethe budget process in accordance with the pre-specified budgetcycle (schedule of events). The Ministry of Finance incooperation with other relevant government institutionsprepare a macroeconomic projections, which estimates basicmacroeconomic indicators, such revenue, targeted expenditure,overall budget and sectoral ceilings, inflection and much morethat are required in budget formulation. These indicators areimportant in assessing the amount of money that will beavailable for allocations to various sectors. The Ministry ofFinance also prepares fiscal and monetary policies in linewith the broad national development objectives.

3.9 The House of Representatives As the representative body of the citizens, the House ofRepresentatives keeps check on the Executive according to theprinciples of separation of power. The House ofRepresentatives is also called legislature because its otherfunction is to make and change laws. The House ofRepresentatives does not have much of a role in the planningof the budget; planning stage of the budget is theresponsibility of the executive branch of Government. However,the House of Representatives plays a role once the budget ispresented to the House by the Minister of Finance. Given thetime constraints for the House of Representatives to discussand approve the budget, it would be a good idea for the Houseto be prepared in advance and have the overall knowledge andneeded information of the budget without waiting for officialsubmission of the draft budget by the Minister of Finance.

3.10 Auditor GeneralThe auditor general roles include carrying out audit of governmentaccounts in order to determine whether the executive did in factimplement the budget as approved by the House of Representative(Appropriation Bill). The roles of the auditor general also includeconsidering whether the allocated resources are used efficiently andeffectively.

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3.11 Other Budget Stakeholders Among the beneficiaries of the budget include all institutions(local, regional and international), line ministries, publicinstitutions and local authorities, that’s all institutionsthat are financed through the budget. Benefits may also accrueeither in the form of direct allocation, tax relief/incentivesor policies prescription. All stakeholders/actors are expectedto use budget resources for the purposes approved by the Houseof Representatives.

3.12 The Citizens The ultimate beneficiaries of all budgetary resources are thecitizens. They have a direct duty either through theirrepresentatives or through any other groups to ensure that allother actors in the budget act in the interest of thecitizens.

Civil society in Somaliland plays an important role in thesocio-economic development by closely assisting and workingwith the citizens. In the context of the budget a limitednumbers of the CSOs are showing interests in working towardsensuring that public revenues and expenditures are effectivelyand efficiently collected and spent. The Ministry of Financeand the House of Representatives should promote consultationswith CSOs that are working at grass-root level who can provideaccurate information about the financial needs of publicschools, health centers and others.

3.13 Non-state ActorsSomaliland Non-state Actors (NSAs) in recent time haveincreased their role and influence in public policy. Theirwork has expanded the space for the popular participation inpolitical governance and the expression of freedom in ademocratic Somaliland society. More recently, the attention ofthe non-state actors, the government and development partnershas turned to the need to strengthen non-state actors and morein general communities’ at large through participation on theissues of economic governance.

The essence of Planning and budgeting is to plan and todemonstrate how a government proposes to generate and spendAues Scek


national resources in a given fiscal year and how theseprocesses are intended to support the whole society andassisting in improving their well being. In this context, itis believed that it is right and proper that the generalpublic and more organized groups (such as NSAs) to activelyparticipate not only during the consultation process ofdevelopment strategies but also in the budgeting process, inissues of governance, right and responsibilities and issues ofequity and power as designed in the Somaliland Reconstructionand Development Programs. At this point in time there are noclear mechanisms on how to accommodate this in planning andbudgeting framework, but the Government is in the process ofestablishing such a framework.

3.14 Development PartnersIn Somaliland where economic decision-making is dominated byexternal actors – the UNDP, the EC, World Bank, and bilateraldonors – it is crucial to understand the mechanisms that theseinstitutions use for their engagement, how theyenforce/promote their interests and the government role inthese relationships.

There are no clear mechanisms or transparent systems ofmanaging Government- development partners’ relations in place,but rather some formal and informal ways. The roles andresponsibilities are not clearly defined amongst the variousarms of Government that engage with development partners,especially the multilaterals agencies. Most if not all thedevelopment partners’ funds are off budget and disbursedthrough UN system and actual disbursements of these fundsremain low and disruptive to the budget. Often suspensions ofdisbursements lead to delay in project implementation and mostimportantly this creating a climate of uncertainty inbudgeting system.

The Ministry Planning has established a division on AidManagement, which is trying to establish a database managementand coordinate aid within and outside of the government andtry to link with the budget process.

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3.15 Budgeting and Medium Term PerspectivesWith budgeting on annual basis as practiced in Somaliland, newpolicy initiatives stand little chance of being sufficientlyaccommodated in the budget as there is a bias towards existingprograms/projects. The fact of the matter is that particularprograms need can shift over time; superfluous expendituresmay be carried over year after year, leaving inadequate fundsto address more pressing new needs and priorities. Manyaspects of the budget require more than a year. For instance,when planning for large scale capital expenditure projects forreconstruction and development the planning period stretchesover a number of years. In this context, Somaliland is in theprocess of introducing a medium – term expenditure framework(MTEF) to support strategic prioritization for reconstructionand development and sustainable fiscal planning beyond thehorizon of annual budget.

The purpose of an MTEF is to indicate the size of thefinancial resources needed during the medium term, usuallybetween three to five years, in order to carry out existingpolicy. In the MTEF process only the first year is approved bythe House as part of the annual budget, whereas the outeryears are nonbinding projections of the future cost ofexisting policy. The firmer these projections become, the morethey move to the center stage of the budget process and formthe basis for the annual negotiation of allocations, resultingin a system of “rolling budget”

3.16 RemarksBudgeting processes go through drafting, enactment, executionand auditing stages involving several actors and institutions.The medium – term budgeting framework guides annual budgetingand provides a broader planning horizon that is necessary formany tasks in budgeting. The MTEF requires politicalcommitment to work successfully and not just technical ortechnocratic add-on to the budget process.

Unit 2: Questions

1. What does the constitution in your country say about

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parliament’s powers over budgets?

2. How would you describe the budget approval process in your country’s parliament? Is it effective?

3. Who are the actors in the budget process in Somaliland?

4. Should the MTEF be part of the Budgeting system in Somaliland?

Selected References

Caiden, N. and A. Wildavsky. 1990. Planning and Budgeting in PoorCountries. NewYork: Wiley-interscience.

Chu, Ke-Yung and Richard Hemming, eds. 1991. Public Expenditure Handbook: AGuide to Public Policy Issues in Developing Countries. Washington: IMF.

Carter, N., R.E. Klein, and P. Day. 1992. How Organizations Measure Success: TheUse of Performance Indicators in Government. London: Routledge.

Campos, J. Edgardo and S. Pradhan. 1996. The Impact of BudgetaryInstitutions onExpenditure Outcomes: Binding Governments to Fiscal Performance.Washington:World Bank.

Codd, Michael. 1996. “Better Government Through Redrawing ofBoundaries andFunctions” in Patrick Weller and Glyn Davis, eds., New Ideas,Better Government.

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Australia: St. Leonards. Australia: St. Leonards.

Government of Somaliland (1996). Financial and AccountingProcedures of the State.

Hallerberg, M. (1999). The Role of Parliamentary Committees inthe Budgetary Process within Europe. Institutions, Politics,and Fiscal Policy. R. R. Strauch and J. Von Hagen. Boston,Kluwer: 87-106.

Hansard Society Commission on Parliamentary Scrutiny (2001).The Challenge for Parliament: Making Government Accountable.London, Vacher Dod.

Harden, I. (1993). ‘Money and the Constitution: Financialcontrol, Reporting and Audit.’ Legal Studies 13: 16-37.

Wehner, J. (2002). ‘Parliament and the Power of the Purse: TheNigerian Constitution of 1999 in Comparative Perspective.’Journal of African Law 46(2):

216-231. Harris, I.C. (2003). Promoting the Work ofParliament. Geneva, Association of Secretaries General ofParliament.http://www.asgp.info/reports/promoting_final_report.pdf

Government of Somaliland (2011). Public Financial Managementand Accountability Act of 2011. Hargeisa, Somaliland

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4.0 Unit 3: House of Representatives Approval ofthe Budget

Learning objectives

What’s the House of Representatives’ role in budget approval?

In this unit you should learn to: Explain how the Constitution and PFMA act impact on the

House of Representatives’ role in budgeting Understand the roles of the House committees in scrutinizing

the budget, and Assess the provision of relevant budgetary information in

Somaliland

This unit examines some of the factors that shape the role ofthe House of Representatives in the approval stage of thebudget process. It considers the House of Representativespowers to initiate financial measures and to amend the budgettabled by the Ministry of Finance. The timing of the budgetand what happens if the budget is not approved in time for thebeginning of the fiscal year. The role of the committees ofthe House in scrutinizing the executive budget proposal;access to information and analysis capacity as a basis forHouse of Representatives decision making dynamics.

4.1 The Constitutional Basis of the Power of theHouse

Somaliland Constitution set the tone to the extent to whichthe budget processes and budget responsibilities are to beembodied in law(s) and regulations. There are several piecesof legislations that grant the “power to purse” to the Houseof Representatives. The Public Financial Management andAccountability Act of 2011, the Financial and AccountingProcedures of the State of 1996, and the regulations of theaccounts of the state require that the Minister of Financesubmits to the House of Representatives annually a proposed

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budget of the state. It also established Economic and FinanceCommittee and other Committees in the House ofRepresentatives. These and other pieces of legislations spellout the formal budgetary power of the House ofRepresentatives, which include: the authority to approve thebudget, supervise the implementation and oversight.Unfortunately due the lack of capacity of the House and thecommittees make it very difficult for the House to use thepower vested in them.

The House of Representatives has legislative’s legal powers toemend the budget if need arise.

4.2 Timing of the BudgetBudget preparation process in Somaliland takes approximatelyabout six months, starting in August with the Ministry ofFinance issuing a budget circular to all ministries,departments and agencies to prepare their budget proposals.However, when the budget comes to the House ofRepresentatives, there seems to be expectation that it shouldtake just a few days to be discussed and approved.

The practice in Somaliland is that the budget is table at theHouse of Representatives with little time available to ensureadequate for review before the commencement of the financialyear. Good practices, suggests that a detailed budget to belaid in parliament at least three months before thecommencement of the financial year, this gives the parliamentadequate time for scrutiny and review before approval.

Under normal circumstance the House of Representativesrequires both sufficient time and a properly budget process tofacilitate meaningful decision making. Experience in manycountries suggests that a minimum of four months is requiredfor approval of the budget by the House on the basis ofmeaningful analysis and scrutiny. However, sufficient byitself is not enough. The budget should also be tabledsufficiently in advance of the fiscal year to which it relatesin order to enable the House to make decisions that matter,when they matter.

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In certain circumstances, the timely passage of the budgetmay not be possible. They can be specific reasons for delays,such as political instability, wars, natural disasters andother unpredictable events. It is important for the governmentto be able to function and provide essential services. In thiscase the budget has not been approved at the commencement ofthe financial year the President (according to the PFMA of2011) may, by warrant under his or her hand, addressed to theMinister of Finance authorize a withdrawal from the Generalrevenue Fund for the purpose of meeting the expenditurenecessary to carry on the services of the government until theexpiration of three months from the beginning of the financialyear, or the coming into operation of the Appropriation Bill,whichever is earlier. The sum authorized shall not exceed theamount shown as required on account in respect of thatservices in the vote on account approved by the House ofRepresentatives by resolution for the previous financial year.

4.3 The House Committees in the Budget MakingThe capacity for the House of Representatives to utilize thepower either vested by the constitution, the Public FinancialManagement and Accountability Act and any other legislation isnormally typified by the work of the committees. In fact, allcommittees one way or another are required to review thebudget before the budget is submitted to the whole House.However, it must be said that Economic, Finance, Trade andIndustry committee take the lead role and coordinate theprocess.

However, the major issues facing the committees in theirendeavor to adequately participate in the budget process isthe fact of the time allocated to the committee and access toindependent research analysis. In addition, it is alsonecessary that there is a coordinating body in the wholeprocess that is properly recognized by law.

In Somaliland the budget goes through several stages in theHouse in a process that usually involves several readings anddebates on the floor of the House. These debates have mostlypublicity functions for both the government and oppositiongroups. In this context the government might use occasion to

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promote its policies and the opposition has the opportunity topoint out the perceived shortcomings and highlight alternativepolicies.

Detailed discussions of the contents of the budget take placein smaller forum at the various committees’ level. It is underthese committees that an in - depth and more technical debatestake place

4.4 Approval of the Appropriation Bill This is one of the critical roles the House of Representativesplays in the budgeting process. On the basis of the analysisbased on the set priorities in the national development plansthe House of Representatives first “decides” on behalf of theSomaliland citizens, on policy priority choices. The Houseassesses whether the proposed budget priorities are coherentwith the State development priorities and whether specificresults can be achieved.

Currently the budget is formulated in view of institutionalneeds, rather than overall government policies, there could bea mismatch between resource allocations and the governmentdevelopment objectives and priorities. Therefore, there is aneed to align the annual budget with the developmentobjectives.

The House of Representatives has to consider and make surethat the proposed priorities in the budget are consistent andallocations also match with the government’s priority plans.If that is not the case then the House is constitutionallyentitle to exercise its constitutional power to makeamendments to the proposed budget.

Article 55(1) of the constitution empowers the House ofRepresentatives: to debate and amend the Budget, andapprove it by a resolution of the House.

Following approval by the House of Representatives, thePresident signs and promulgates the adopted bill

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4.5 Access to Technical ExpertiseThe ability of the House of Representatives to scrutinize thebudget depends highly on their access and support of atechnical and professional team supporting them. Theprovisions of say the PFMA Act, the Constitutions, theFinancial and Accounting Procedures and the existence of theHouse committees does not mean they will be able to produce athorough scrutiny of the budget if there is no adequatecapacity of the needed technical experts to analyze thebudget. Experience in a few African countries; suggest that many ofthe countries that are successful engaging in budget makingare the one that have access to independent analysis andresearch capacity. These are teams of budget experts whoassist members of parliament to analyze budget’s documents andprepare responses to the budget. These countries include SouthAfrica, Uganda, Kenya, etc.

4.6 Budget InformationThe House of Representatives under current Somalilandconstitution and laws does not have a role in the planning ofthe budget. It is the responsibility of the executive branchof government. However, the House of Representatives plays arole once the budget is presented to the House. As we haveseen earlier, given the time constraints for the House ofRepresentatives has to discuss and approve the budget, it isimperative that the House should attempt to gather informationfrom independent sources, such as research institutes, thinktanks, media, etc. The collected information can be used toanalyze the budget and ensure that the information provided bythe Minister of Finance regarding the budget is accurate.

4.7 Importance of InformationEfforts at obtaining budget information on regular basis is auseful habit for the House of Representatives, citizens andalike, if they are to critically and effectively participatein the budget making process. Members of the House ofRepresentatives, NGOs, Individual citizens and interest groupsshould take the initiative and have the opportunity to studyand examine budget documents soon after the Minister ofAues Scek


Finance table them to the House. In this way the process canbenefit from diverse views and proposals. In the absence ofaccurate and timely information on the budget process, it isimpossible to contribute meaningfully to public debates onimportant policy issues. Worse still, a poorly informed Housecannot challenge the executive on its non-performance.

Vital budget documents include the Budget Speech, BudgetEstimates, Estimates of Revenue and Expenditure Proposals bothrecurrent and Development, as well as related documents. Itis only by examining these documents and understanding theircontents that one can, with confidence, participate indiscussion and monitoring of the implementation of the budget,therefore influence its outcomes.

4.8 Where to find the informationIt is unfortunate that budget documents are not easilyaccessible in Somaliland as the budget process still remainsthe domain of a few technocrats within the Ministry ofFinance. The process can be described as secretive andinformation poorly accessible. However, most of theinformation can be obtained from the following sources amongothers:

Ministry of Finance (budget department) Ministry of Planning on Development Expenditure Proposals Ministry of Interior on District budgets, and Central Statistical Department and the State Bank of

Somaliland on the performance of the economy.

4.9 Political DynamicsBudget in Somaliland takes place in a broader political andtechnical context. It is an expression of power relations ofpolitical and institutional actors involved in the budgetingprocess. How much de facto rather than theoretical influencethe House has will depend on the majorities a political partymight have in the House. The existent of a dominant politicalmajority in the House enhances the predictability of votingoutcomes. On the other hand, if the House features severalparties without one of them having an outright majority ofseats, the executive will have to accommodate and assemble

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support from several parties to have the budget passed. Thismeans bargaining and making concessions during the approvalprocess.

4.10 RemarksSeveral factors combined determine the role and impact of theHouse in the budget approval stage of the budget process.These include among others that the House requires sufficientconstitutional and legislative powers over the budget in orderto influence decision making, notable powers to emend thebudget proposal tabled by the executive. The House ofRepresentatives in Somaliland does have the constitutionalpowers to do so. Unfortunately, constitutional powers aloneare not enough. A thorough review of financial proposalrequires time for scrutiny and proper timed budget process,where the budget is tabled sufficiently in advance of thebeginning of the fiscal year.

Even though the House of Representatives does have theconstitutional powers to emend the budget it lack technicalcapacity and has limited political independence from theexecutive.

Unit 3: Questions

1. Describe the responsibilities that devolve on an MP and summarize the roles he or she plays in discharging these responsibilities in budget approval.

2. Do you consider that MPs are sufficiently active in performing the duties associated with parliamentary budget approval?

3. What training should be given to the various members of parliamentary staff to enable them to carry out their functions better?

Selected References

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Fenno, R. F. (1966). The Power of the Purse: AppropriationPolitics in Congress. Boston, Little Brown.

Flegmann, V. (1986) Public Expenditure and the SelectedCommittees of the Commons, Aldershot, Gower.


Hrafchik, W, an J. Wehner (1998). The role of Parliament inthe Budgetary Process. South Africn Jourtnal of Economic66(4): 512 -541.

Hallerberg, M. (1999). The Role of Parliamentary Committeesin the Budgetary Process within Europe. Institutions, Politicsand Fiscal Policy. R. R. Strauch and J. Von Hagen. Boston,Kluwer: 87-106.

Wehner, J. (2002). Parliament and Power of the Purse: TheNigerian constitution of 1999 in Comparative Perspective.Journal of African law 46 (2): 216 – 231.

Joachim Wehner (2010). Legislature and the Budget Process: TheMyth of Fiscal control. Palgrave Macmillan, London.

Government of Somaliland (2011). The Public FinancialManagement and Accountability Act 2011

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5.0 Unit 4: House of Representative Role inAuditing

Learning ObjectivesWhat is the House of Representatives role in auditing public

account?

Assess country’s procedures against accepted norms for national audits

Examine various approaches of the House of Representatives engagement with the audit process

Understand the importance of effective fellow-up procedures to ensure that audit recommendation are implemented.

The purpose of this unit is to introduce the basic functionsof the Auditor General and the way in which the House ofRepresentatives engages with the process. The role ofparliamentary committees in reviewing audit findings; as wellas follow-up mechanisms to ensure that action is taken toaddress issues raised in audit reports.

5.1 Auditing InstitutionsSome of the main problems that Somaliland institutions facesince their creation the early 1990s and until today arecorruption, misusage and mismanagement of public resources. Inorder to oversee the spending of public funds, in the mid1990s the Office of the Auditor General was established, whosemain task is to audit all public institutions whose funds comefrom the public budget. While in the House of Representativesalso play an important role of overseeing that all publicspending are done in accordance with the law, that’s asapproved by the House of Representatives.

The principle behind legislative oversight of Executiveactivities is to ensure that public policy is administered inaccordance with the legislative intents, and inference, thecitizens’ aspirations. In this context, the legislativefunction does not cease with the approval of the budget. It is

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therefore, only by monitoring the implementation process thatthe members of the House of Representatives uncover anydefects and act upon to correct misinterpretation andmaladministration.

Somaliland has two Houses, namely House of Elders (Guurti),and the House of Representatives (the Parliament). Issuesconcerning budget audit are deliberated by the House ofRepresentatives. In case of disagreement between the House ofRepresentatives and the Executive the House of Elders couldintervenes1. The House of Representatives oversees governmentactivities through select committees. The committeeresponsible for the budget and financial management issues isthe Economic, Finance, Trade and Industry and the PublicAccount Committees.

The work of the Auditor General may be used by variousParliamentary committees in substantiating findings of theirown reports to the House. This is specifically so if theoffice of the Auditor General makes follow-up ofimplementation of its own audit findings, thus addingcredibility to reliance by members of the House ofRepresentatives. It is therefore important for the office tomeet the expectations of the House and the committeeresponsible for public accounts in its audit work. This canonly happen if the office of the Auditor General adheres tothe principle of impartiality and also arranges for regularsessions with the committee responsible for public accounts todiscuss in greater details the plans for the audit andoversight issues.

5.2 Type of AuditsThere are two types of audits carried out by the auditorgeneral, namely the audit of financial transactions and theaudit of performance or “value for money. The practice used inSomaliland is that of financial transactions audit only.

1 The 2006 budget was passed by the House of Representatives aftermediation by the House of Elders (Guurti) following the government’sreluctance to effect amendments passed through resolution by the House.

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The Financial Audit focuses on the accounts of governmentagencies and departments in order to present a judgment aboutthe accuracy and fairness of an organization’s financialstatements. Because it is impossible to check every singletransaction, auditors use strategies such as samplingtechniques or the examination of the auditee’s financialsystem to arrive at their judgment. The main skill needed forfinancial audit in the auditor general tradition is knowledgeof accountancy.

While the second type of audit called “value for money”focuses on the economy, efficiency and effectiveness. Economyis concerned with minimizing the monetary cost of inputs (suchas staff and buildings). Efficiency is concerned with theoutput (a particular good or service) achieved for a set ofinputs. Effectiveness considers whether outputs deliver thedesired outcomes.

5.3 Interaction between the House of Representativesand the Auditor General

The House of Representatives is the principal audience of theauditor general work. All audit reports are addressed to theHouse, and the latter might also request advice or comments onspecific issues under consideration. While the House dependson high quality audit reporting to exercise effectivescrutiny, the auditor general in turn requires an effectiveHouse to ensure that public agencies take audit outcomesseriously. The power of the auditor general is to issueindependent reports, but s/he cannot force government to adoptany recommendations.

The House of Representatives is the forum in which thesereports receive public attention, which creates pressure ongovernment to respond to and address issues of concern. Themutual dependency of the House and the audit institutions isunderlined where the auditor general has been made, bystatute, an officer of parliament.

In a number of countries the auditor general offices haveestablished parliamentary liaison offices and accompany auditAues Scek


related work of the House on an ongoing basis. Such supportmay involve answering questions from the members of the Houseand the provision of requested information. Some publicaccounts committees draw on the auditor general’s office forsecretariat assistance either on an ad hoc basis or through aprogram of regular secondments.

In Somaliland the interaction between the House ofRepresentatives and the auditor general office is still weak,this is due to the lack of needed capacity and skills in thetwo institutions.

Currently, the Auditor General plays a vital part in themonitoring of the budget and its implementation. Its workstrengthens the legislative oversight. The Auditor Generalissues a report to the House of Representatives, to theMinistry of Finance, the Office of the President and theCabinet in regard to any irregularities in accounting records,as well as monetary and asset management within thegovernment entities. In addition, the Auditor general makesremarks on matters related to accounting reports, money,assets and long term liabilities in accordance with theprovisions of the law.

With the auditor general report, the House of Representativescan exercise its budgetary oversight functions effectively.However, this requires that the report be delivered intimely and in reliable manner. Ideally the auditor generalreport should be submitted to the House of Representativesbefore the end of the financial year. Unfortunately theauditor general is not able to send the report on time tohouse. This is due to the fact, that the Ministry of Finance(government) fails to submit to the auditor general its reporton budget performance on time as required by the law.

5.4 Role of the House of Representatives Committees inAuditThe House of Representatives should deliberate on publicaccounts for all ministries, local councils, and autonomous

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agencies. Audited reports for these institutions should bepresented before the House. The Committee should then takeover and conduct hearings on each audited report particularlyon the audit recommendations that have not been implemented.The committee’s report to House of Representatives shouldindicate the extent to which it has been able to make use ofthe findings of the Auditor General’s report. This should helpstrengthen working relationships between the Auditor Generaland the House of Representatives. In this regard, both theoffice of the Auditor General and the Public Account Committeeof the House require assistance to raise their capacity in thepreparation and presentation of good quality reports.

The actual work of the committee starts when the auditorgeneral submits an audited report to the House. Afterreceiving an audit report, the committee organizes hearings bywhich officials from ministries and public agencies answer tocommittee. The summoned officials appear in front of thecommittee during the hearing. Interrogation focuses on theaccounting officers, who are responsible and accountable tothe House of Representatives for financial management.

5.5 Follow-up With the completion of a report on audit findings by the Housecommittee, it cannot be said to be the end of the ex postscrutiny process. It is crucial to follow the reports up andmost important would the kind of action that the governmenttakes or provides as a formal response to the recommendations.Some countries go even further in their follow-up through theuse of a formal tracking report produced regularly by theaudit institutions. This report provides detailed informationon the implementation of the recommendations developed by theauditor general and the House Committee.

5.6 RemarksThe auditor general office in Somaliland has focused onfinancial audit and in recent time initiatives are beingdeveloped to complement with performance and value for moneyaudits. The auditor general office interacts in several wayswith the House of Representatives, the interaction is not yet

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optimal but it is improving slowly. The close cooperation thatcan be observed between the office of the Auditor general andthe House is the submission of the audit report to the Houseand the provision of advice and additional information to thecommittees as demanded the various parliamentary committees.

Unit 4: Questions What is the difference between financial audit and value

for money? What type of reports are produce by the auditor general

in Somaliland? Suggest how to improve the interaction and cooperation

between the auditor general office and the House Committee.

Selected References

Degeling, P., J. Anderson, et al. (1996). ‘Accounting forPublic Accounts Committees.’ Accounting, Auditing andAccountability Journal 9(2): 30-49.

Degeling, P., J. Anderson, et al. (1996). ‘Accounting forPublic Accounts Committees.’ Accounting, Auditing andAccountability Journal 9(2): 30-49.


Grasso, P. G. and A. Sharkansky (2001). ‘The Auditing ofPublic Policy and the Politics Auditing: The U.S. GAO andIsrael's State Comptroller.’ Governance 14(1): 1-21.

Burnell, P. (2001). ‘Financial Indiscipline in Zambia's ThirdRepublic: The Role of Parliamentary Scrutiny.’ Journal ofLegislative Studies 7(3): 34-64.

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McGee, D. G. (2002). The Overseers: Public Accounts Committeesand Public Spending. London, Commonwealth ParliamentaryAssociation and Pluto Press.

SIGMA (2002). Relations Between Supreme Audit Institutions andParliamentary Committees. Paris, Organisation for Economic Co-operation and Development.http://www.oecd.org/dataoecd/18/39/2493225.pdf

Government of Somaliland (2011). Public Financial managementand Accountability Act of 2011,

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6 Unit 5: Conclusive Remarks and Recommendations From the descriptions and discussions in the previoussections, the following observations can be made:

First of all, there is somehow a legal framework in placefor transparency and accountability in the budget process.But this framework is inadequate while compliance with lawsand regulations by institutions is low due to lack ofknowledge or somewhat divergent interpretations of theframework by key institutions. The Public FinancialManagement and Accountability Act of 2011 once implementedwill provide clear idea on fiscal transparency andaccountability of all involved budget institutions.

There is not only overlap of responsibilities between thespheres, arms and level of government in the budget process,but the basis for division of resources is also not clear.The executive (particularly the MOF) has more influence thanthe legislative in the budget process. Participation in thebudget process is mainly an executive affair. It hasexclusive power (even though the constitution say otherwise)and privilege to determine what to spend, for whom and howwith insignificant involvement of the legislative and thecitizens at large. The situation place considerablerestrictions on the legislative’s role in the budget processjust as it alienates the public from participating in theprocess. The budget process is also closed by theexceptional concentration of decision making in the hands afew officers at the Ministry of Finance who are notaccessible to the public.

In terms of back up resources and powers to effectivelyperform in the budget process, all public institutions areoperating below capacity. For instance, the legislative(finance committee), the auditor and the accountantgenerals, which play vital roles at various stages of thebudget process lack the required resources, offices,equipment and personnel to make them effective.

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Due to poor information and accounting systems andprocedures, the little information available to the publicon the budget process is not reliable and useful for budgetanalysis.

Based on the above observations one can infer that there is adirect linkage between the level of transparency,accountability and participation in the budget process andbudgetary outcomes. Because appropriate disclosure by theexecutive and scrutiny by external stakeholders in the budgetprocess is low, budget policies and priorities are not orrarely challenged. In fact, low participation of thestakeholders in the budget process results in lack of pressureto move funding to strategic and priority areas that wouldmeet the people’s interest and expectation.

The fiscal indiscipline is the result of inadequateinformation and lack of transparency in key aspect of fiscalmanagement. Finally, the wastage and corruption in theimplementation of the budget is due to low levels of publicaccountability. Therefore enhancing transparency,accountability and participation in the budget process is sinequa non to budgetary outcomes that would improve the livingstandard of the population.

6.1 Legal FrameworkThere is an urgent need for the repeal of all obsolete andambiguous laws, procedures, which confuse the division ofresponsibilities between functions, arms and levels ofgovernment. It is suggested that with the implementation ofthe Public Financial Management and Accountability Act, whereclear institutional responsibilities and functions are definedthe issues of overlapping and conflicting institutional roleswill be solved. In addition, the Act clearly spells out thefiscal requirements of the executive and the legislature inthe budget process, including the timing of budgetpreparation, approval and the type of information shouldaccompany budget documentation. The legal requirements onreporting could be tightened to compel amongst other thingsgovernment ministries and agencies to report on expenditures.

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The legal framework should also take into account someprovisions for the scope, timing and formats of budgetaryinformation made available, including estimates, actualspending and results achieved from spending.

6.2 Clarity of Roles and ResponsibilitiesIt is very important in the first place to clarify the shadowyroles and responsibilities of the budget management within theexecutive and between the executive and legislative. Theprocesses and the instruments to divide and channel revenuesbetween institutions or tiers of government (state, regionsand districts) should be cleared, given a base in the legalframework and kept watch over by the legislative.

The government should do away with those institutions andpractices created during the transition period and in theirplace strengthen the existing mechanisms in terms of the legalframework that will ensure efficiency of budgetary outcomesand promote inter-institutional relations. If the existinginstitutions are not adequately equipped to undertakeenvisaged roles then new ones should be established. Forinstance, there is a need to establish an appropriatemonitoring strategy that will ensure that the budgetaryoutcomes are in line with national objectives. In this regard,those who implement the budget should not be the only one tomonitor and evaluate the outcomes of the budget, as ispresently the case. While holding the executive to account forbudget implementation remains a constitutional function of theHouse of Representatives, there is scope for civil society andother stakeholders to organize themselves as an independentbody to do budget monitoring.

6.3 Degree and Quality of InformationInformation is the key element in the transparency of thebudget process. Therefore, there is a need to overhaul thepresent information management system so that information willnot only be made available to the public by the involvedinstitutions at every stage of the budget process, but also sothat such information will be comprehensive, reliable anduseful and most important accessible without restrictions.

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The legal framework should establish minimum requirements thatwill ensure that adequate information is published to enablepublic participation and accountability.

6.4 Improving CapacityTransparency failure in Somaliland public finance is morecomplex than just a failure of disclosure; it is a case ofexcessive but ineffective disclosure combined with limited,uncoordinated and ineffective scrutiny. For the efforts onbudget transparency and accountability to succeed on asustainable basis, all players and institutions concerned needto build and improve their existing capacity. To improvetransparency and accountability a system of sustainable checkand balances will have to be put in place. In some ways thesystem would need to depart from the past practices to breakthe existing culture of poor preparation and implementationand noncompliance with the regulatory framework. This mightrequire:

More authority on the part of the legislative and theauditor general;

A holistic approach: all institutions involved in thebudgeting process should play their mandated roleaccording to rules;

Closing any grey areas, thereby limiting abuse. Allpublic institutions without exception whether directlyunder the government, regulatory agencies or extrabudgetary activities should be subject to adequatedisclosures and monitoring?

6.5 Participation in the Budget ProcessPublic Finances in Somaliland is enveloped in a murky ofsecrecy. As there is no legal obligation on the governmentside to allow civil society or any other group’s input in thebudget process. This implies that civil society and otherstakeholders themselves are unclear as to what their potentialroles are or should be. They can only fulfill their roles tolimited extent, due to lack of hard budget information andcontextual information. In combination these two factorsconstraints the quantity and quality of civil society andother stakeholders’ interaction with the budget, and the

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development of capacity in civil society and other non-stateactors to provide meaningful inputs.

Non-state Actors’ budget engagement is severally constrainedby lack of information. Information on the budget process isnot readily available and accessible to the public. Actualspending in the previous budget year is not sufficient toallow civil society to engage meaningfully with the currentestimates, nor is it adequate information on the estimatethemselves available.

There are no official or informal access points in the currentbudgeting process. The process is closed and decision-makingprocess is exceptionally concentrated in the hands of a fewsenior officials and other appointed public officials in theMinistry of Finance. The House of Representatives is still ina process of learning and as such remain weak. To compound thesituation, adequate information is not readily available tothe public on the budget just as such information it isdifficult to access, even by researchers. Therefore,information mechanism through which citizens could participatein the budget process is defective.

There are no public budget hearings held by the Ministry ofFinance or parliamentary committees to determine thepriorities of the citizens. Reasons for this lapse includelack of adequate time and capacity on the part of theparliamentary committees as a whole to consider the budget.Even though there is no time limit for consideration of thebudget by the House of Representatives the longest time everspent by the House of Representative was over six months in2005 and again this is repeated in 2010.

It is not difficult to postulate a relationship between thelow level of budget information and lack of access into thebudget process and low capacity for budget work in non-stateactors and other stakeholders. It is hoped that thatgovernance changes with the new administration in place willallow the development of civil society and other toeffectively engage with issues of resources management. This

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however center on the availability of sufficient, reliable anduseful information on resource allocation and use.

Most government institutions operate below the capacity toeffectively perform in the budget process. For instance thebudget department, the accountant general, the Economic,Finance, Trade and Industry committee of the House ofRepresentatives, the auditor general, etc. which play vitalroles at various stages of budget process are lackingresources, equipment, personnel to make them effective. Forthese and other reasons, budget implementation, and monitoringis poor and accountability low.

In any democratic system people should be able to participatein the budget process, therefore there is a need for therepeal of all obsolete and ambiguous laws, rules andregulations, which confuse the division of responsibilitiesbetween functions, arms and levels of government. In thisrespect, it is crucial that clear roles and responsibilitiesof each institution of government in the budget are defined inthe Public Financial Management and Accountability Act andrelated rules and procedures of financial and accounting ofthe state are implemented accordingly. At a late stageconsideration should given to emend the Constitution torequire the legislature to pass both an appropriation andfinancing bill. Currently it only requires the legislature toapprove expenditure. In addition the legal requirements onreporting should be tightened to compel, amongst other thingsall public institutions to report on expenditures and relatedissues, revenues for those collecting to the appropriateaccounting offers. The new law should also take into accountsome provisions for the scope, timing and format of budgetaryinformation made available, including estimates, actualspending and the results achieved from spending. On the extra-budgetary activity, there is a need to bring all extra-budgetary activities under a uniform regulatory umbrella.

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Annexes

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Annex 1: GLOSSARY

Appropriation: is a provision in law approved by theParliament approving the maximum amount that a budgetinstitution may incur in making commitments and payments forspecific purposes during a twelve (12) months period,running from the 1st January to the 31st December of eachyear.

Apportionment: refers to Ministry of Finance‘s authorizationto allocate approved budget amounts among the BudgetInstitutions. An apportionment of funds must be approvedbefore the funds have been committed or spent. Approvedapportionments are the basis for controlling the executionof the approved Budget through the accounting system.

Appropriation Structure and Appropriation Act: means selectedclassification of Government expenditures and other paymentsincluded in the Budget Bill Documents, which after approval ofthe Parliament, form the legal structure and annual limits forspending, accounting, and reporting by the Government.

Budget: represents an Act of the Parliament that provides aplan of financial activities of the Budget Institutions,which includes a projection of the amount of Revenues andExpenditures for a period of one fiscal year as well as theupper limit of the total debt of State, which itselfincludes the existing debt and the projection of the newdebt for that budget year.

Budget Institutions: are all institutions of SomaliGovernment including ministries, departments, agencies andother bodies of administration that are financed from theBudget. Their Annual Budget is included in the Budget Billand for which an appropriation is made by the Parliament.Head of the Budget, The Accounting Offer is the votecontroller of that institution.

Budget Bill Documentations: a collection of budgetbackground papers, including policy framework paper, budget

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speech, estimates of revenues and expenditures, and legalprovisions related to the implementation of the GovernmentBudget that need to be approved by the Parliament in supportof the Government Budget, including introduction offinancial-related amendments to the existing laws.

Cash Basis of Accounting: means that flows are recorded whencash is received or disbursed

Commitment Basis of Accounting: means that flows arerecorded when a Budget Institution has committed itself to atransaction. Such basis applies only to purchase of assets,goods and services, including compensation of employees. Thetime of recording generally is when the Budget Institutionissues a purchase order.

Departmental Self-raised Revenue: means revenue or othermoney collected and retained by a budget institution for thepurpose of defraying the expenses of that budget institutionin accordance with the provisions of the Law.

Extra-budgetary Fund: means a fund created outsideoperations of the consolidated fund by an Act of Parliamentin accordance with the provisions of Law for the payment ofparticular revenue or other money for a specific purpose.

Expenditures: represent expenses of Budget Institutions andearmarking on the level of Somaliland for particularpurposes:

Expenses of Budget Institutions are: currentexpenses (salaries and employee compensations,expenses for material and services, expensesfor insurance and banking services andcontracted services), current grants, capitalexpenses and special purpose programs;

Earmarking for particular purposes areexpenditures for external debt servicing,grants to other levels of government,subsidies, donations and investments.

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Financial Year: means a year of twelve months, starting onJanuary 1, and ending on December 31 for which a GovernmentBudget is approved, executed, reported, and audited.

Financial Instructions: means the instructions of long-termnature issued from time to time by the Ministry of Financefor regulating and facilitating the implementation of anysections of this Law. Provided that any FinancialInstruction of a like kind issued under the authority of theGovernment and in operation immediately before the date ofcoming into force of this law shall be deemed to have beenmade under this law and shall continue in force unlessreplaced by further Financial Instructions made by theMinistry of Finance. Financial Instructions shall bepublished in such a manner the Ministry of Finance maydirect

Liquidity Borrowing: means the contracting of short termsloans for a period of up to 3 months to finance temporaryshortfalls in budget liquidity resulting from fluctuationsof [unbalanced movements in] revenues and expendituresduring the execution of the budget;

Local Authorities: refer to elected/appointed institutionsthat exercise powers entrusted by law, prepare and executetheir particular plans of action and that prepare andexecute budgets relating to the plan of action. Theinstitutions are established and governed by law.

Ministry of Finance: may issue instructions to be calledFinancial Instructions for the better carrying out of theprovision of this Bill and without prejudice to thegenerality of this provision Financial Instructions mayprovide for:

The collection, receipt, custody, issue,expenditure, due accounting for, care andmanagement of, all public monies and guidanceof all persons concerned;

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The record, examination, inspection anddepartmental check of all receipts andpayments and the keeping of all necessarybooks and accounts;

The purchase, safe-custody, issue, sale orother disposal or writing off of publicstores, and other Government property;

The making advance to public officers andpersons and the rates and limits of suchadvances and the rates of interest thereon.

Medium Term Expenditure Framework (MTEF): a multiyearframework of rolling budgets where forward estimatesproduced with the annual budget, usually covering two tofour years, serve as the starting point for preparing thefollowing annual budgets. Official Bank Account: means the opening of a bank accountby the Ministry of Finance for maintaining [and depositing]government money in The Central Bank of Somalia.

Operational efficiency: the ratio of the resources expendedby the government agencies to the outputs produced orpurchased by them.

Planning and Budgeting Committee: means a committee toassess and review the budget of the fiscal year chaired bythe minister of Finance and comprised of Minister ofPlanning, and other appointed by the Prime Minister. Program: means a collection of consolidated activities of aMinistry or other administration or institution of the Statewhich has been prepared according to a pre-prepared plan,for public services.

Public Funds: include all monetary assets including withoutlimitations revenues, fees, compensations and other own-source of revenues from providing public services andactivities, credits and grants that must be deposited in anddisbursed from the Treasury Single Account.

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Public Property refers to movable and immovable property butexcludes consumable and perishable goods.

Revenues: include obligatory transfers from the entitiespursuant to the laws of Somalia, tax and non-tax revenuesand other revenues as determined by law.

Regulators: refer to each independent regulatory bodyestablished at the State level with the status of a legalperson under the laws of Somalia and which is self-funded.

Treasury Single Account (TSA): represents the system thatconsists of all bank accounts held in the name of theMinistry of Finance at the Central Bank within or morecommercial banks (when they are established, e.g.Dahaabshiil), in which all operations regarding funds of theBudget are executed and recorded. The purpose of the TSA isto centralize control of all Public Funds.

Treasury: represents the basic organizational unit withinthe Ministry of Finance. The Treasury means the Ministerresponsible for Finance. He/she shall carry out theactivities as determined by this Law and other appropriateactivities as decided by the Ministry of Finance.

Virement: means a transfer of appropriations within theexpenditure items of a budget institution, or amongexpenditure items of the budget agencies under the sameSupervising Department.

Vote: means upper spending limit appropriated by theParliament, which entitles a budget agency to makecommitments and payments.

Vote Controller: means the head of a budget institution orthe accounting officer authorized by the head to take chargeof and manage funds appropriated for that institution.

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Annex 2: Summary of the Issues Related to StakeholdersInvolvement in the Budget Process

Legal Framework for Transparency Legal framework for Somaliland’s budget process include the Somaliland

Constitution, article 55, Financial and Accounting Procedures of the Stateand the Public Financial Management and Accountability Act of 2011 yet to beimplemented;

In theory this framework provides a moderate level of transparency in thebudget process. If the framework were applied in practice, all stakeholderswould have “adequate information and sufficient access to impact on thebudget process, for example through the House of Representatives;

The framework is outdated in many respects. The degree and regulation do notadequately support the implementation of wide budget reform measures;

Official secrecy is also seen to undermine transparency in the budgetprocess

Clarity of Roles and Responsibilities The legal framework does not assign clear roles to the executive, House of

Representatives, the auditor general in the budget process; The Minister of Finance, who is accountable to the President, has overall

responsibility for financial management. Yet in practice the macroeconomic team at the Ministry of Planning has the responsibility of macro-policy formulation. There is limited communication between the macro unit and MoF;

The role of House of Representatives is not clearly defined in the legislative stage of budget process;

Expenditure responsibilities during the implementation phase between the levels of government are overcast. Non-compliance with accountability measures is widespread. The powers of the auditor general, while clear in principle, do not translate into effective budget monetary practice.

Role of civil society and non-executive stakeholders in the budget process is not defined.

Capacity In Budget Process The executive has the basic minimum capacity to carry out its budget

function; The House of Representatives does not have the needed capacity to undertake

or fulfill its responsibilities in the budget process due to lack of bothtechnical and financial resources;

Monitoring institutions do not have adequate financial and human resourcesto fulfill their tasked responsibility, that’s ensure timely theavailability of fiscal information;

Civil society capacity to engage in the budget process is weak andfragmented.

Availability of Information No budget information is accessible during the stage of budget preparation,

in fact budget planning is masked in secrecy; Budget information is presented in technical language and estimates are most

of the time not reliable. When actual spending figures for the precedingyear are produced, their accuracy are of questionable nature;

Actual spending reports are not always submitted to the House ofRepresentatives as stipulated in the accounting procedures. Reportingformats are inconsistent undermining the ability of the legislature to holdthe executive accountable;

Audit report are frequently delayed due to the inability on the part of

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ministries to supply needed financial information to the auditor general; Budget information is not detailed enough to allow civil society to engage

in meaningfully way with the budget process; Information on budget priorities and fiscal constraints is inadequate.

Participation in the Budget process Non-state actors are just beginning to develop a more active role in the

budget process. However, their role in policy formulation, budgetimplementation and monitoring remains insignificant. There is neither apublic forum where various groups could make input into the budget processnor to submit proposal to any institutions;

Non-state actors lack access to information needed to monitor publicexpenditure;

Development partners play an important role in budget process in Somaliland.Yet, information about development activities is not available as most theiractivities are implement by the development partners off budget.

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Role of the House of Representative in Budget making in Somaliland

Documents

Transcript of Role of the House of Representative in Budget making in Somaliland