this is the first assignment of MGX5440, got D of this one.
Public sector budgeting is very important for both governments and stakeholders (e.g. citizens). Governments make the whole year plan through the budgets, and the stakeholders can know what governments’ plan via budgets. In this report, it first discusses what should be the most important feature of effective public sector budgeting. And finds out transparency should be the most important one. Then it analyses why transparency is important, what benefits can government get though transparent public sector budgeting, and how to make transparent public sector budgeting. After that, cases from China can prove the importance of transparency. At the end, a conclusion is given.
Generally, a budget is a written financial plan of a business for a specific period of time, expressed in dollars (Tripod, 2010). For the government, budget is beyond dollars. It is the ways in which budgets are made reflect the choices, polices, and philosophies of governments. Budgets distribute resources and determine what government can do and cannot do (Tableman, 2005). Several essential features characterize a good budget process. To make an effective public sector budgeting, the government should:
• Incorporates a long-term perspective
• Establishes linkages to broad organizational goals
• Focuses budget decisions on results and outcomes
• Involves and promotes effective communication with stakeholders
• Provide incentives to government management and employees (National Advisory Council on State and Local Budgeting Practice ).
Through these processes, it can be inferred that the transparency should be the important feature of an effective public sector budget, because the budget making processes are the communication between government and the stakeholders, such as citizens. The government should show its works to the stakeholders. In the rest of this report, it will state why transparency is important, what the benefits government can get through improving transparency and what government should do to improve transparency. Besides that, some examples from China will be applied. At the end of this report, a conclusion will be given.
According to Danida (2007, P10), the attainment and maintenance of the needed gains in efficiency and effectiveness is closely related to the public sector’s degree of transparency and the strength of accountability between the public sector, on the one hand, and citizen, civil society and other non-state actors on the other. From this statement, it indicates that why transparency is important. In another words, there are two parts of the public budget- revenue and expenditure. The revenues are from tax, fines, fees and so on. And the revenue should be spent on the projects which can benefit to the stakeholders. So, the stakeholders have the rights to know how government spend the funds, also the governments have the obligation to show how they allocate and distribute the funds. And a transparent budget can help these processes work better. When the public sector is not transparent, the citizens may confuse whether the governments use their revenue in a right way.
Corruption has been shown to be most detrimental to the poor and vulnerable. It undermines the public sector and economic growth rates, the allocation of public resources, and other essential elements of national development. Corruption redistributes resources and welfare away from those already deprived. It has the general effect of reducing the legitimacy of the government and the public sector in the eyes of the rest of society (Danida, 2007, P15). If the public sector budgets are transparent, the citizens know how the governments spend their money, and how much each government project (e.g. infrastructure construction) cost, there will be less chance for government officers to get their own benefits or interests from the project. Because the inputs are clear shown on the public budgets, if the outcomes are so far away from which it should be, the stakeholders will know that there must be some problems contained in that project, so the government officers who get their own benefits from the projects will be caught. In contrast, if the public budget is lack of transparency, the government officers can easily get their own benefits from the projects, because few people know the details of inputs. Consequently, the corruption will be increased.
A well-functioning public financial-management system is critical to efficient and effective service delivery. It provides relevant and reliable financial information in a timely and consistent manner for control and accountability at all levels. It supports and reinforces other accountability systems regarding budget execution, and thus has a central place in the fight against corruption. The broad objective of a public financial-management system is to achieve overall financial discipline, allocation of resources to priority areas, and efficient and effective use of public resources for the achievement of results. Financial management is the active use of financial and other information to plan activities and transform inputs and resources into outputs. This is guided by the relevant legislation, the organisation of work, the procedures and systems, the administrative and accounting tools (including IT systems), and the control systems (Danida, 2007, P15). So, it is clear that, a transparent public sector budgets can help the governments manage the public funds in an effective and efficient way. Because on the budgets, they show both revenue and expenditure in details, it can help the governments assess both sides of the public funds.
The foundation of transparency is access to information. Information needs to flow across the organisations of the public sector in order for public-sector leaders to take rational and well-informed decisions. Equally important, information is needed for citizens, civil society and other non-state actors to take rational decisions themselves, and to exact effective accountability from the public sector regarding the way in which it takes decisions and manages society’s resources (Danida, 2007, P10). So the first thing which governments need to do is making the information available to everyone. Government usually put all the documents on the websites, so everyone can download them. For example, people can access Australian Budget on www.budget.gov.au. Not only Australian, people live in others countries also can access Australian Budget. Japanese government puts both Japanese and English versions Budgets on the websites. Another thing governments can do is publishing the news about public sector budgets regularly. They can use internet, TV, newspaper or other channels to let people how the budgets work. Through these two methods, the transparency of the public sector budgets will be increased.
Foreign governments, especially US government always criticise the Budgets of China is lack of transparency. Well, in one hands, compared with some developed countries, the transparency of Budgets is really low in China. In some Chinese official websites, people really cannot find the original documents about public sector budgets, there are only some news about the budgets. Because of lack of the documents, people really hard to determine the validity of that news. On the other hands, Chinese government on its official website claims that the transparency of the budgets, especially the military budgets, has been increased. But no whole budget reports shown on the website, people really hard to believe that. For example, in 2008, China successful held Olympic Games, it cost the government approximately $40 billion, which would make it the most expensive Olympic Games by a wide margin (Rabinovitch, 2008). But before Olympic Games began, Wenchuan in Sichuan Province suffered a serious earthquake, and the government encouraged citizens to donate funds to Wenchuan. People did donate a lot of money. At that time, people donated as much as they could and they would. But two years late, Yushu in Qinghai Province suffered a serious earthquake again, and at the same time, the government spent more than $58 billion on Expo 2010 Shanghai China (Boston, 2010). The government still encourage people to donate, but at this time, some people concerned why the government spent that much money for Expo 2010, but has no money for Yushu. Besides that, some scandals were disclosed which happened in Wenchuan. The news said some government officers put the donation funds into their own pocket, and some local governments in Wenchuan bought a lot of luxury cars by using the donation funds. So after Yushu earthquake, some people chose not donate. If the government put the Olympic Game and Expo 2010’s budget in details on the websites, people would understand why the government had less money to re-build Wenchuan and Yushu. Also, because the public sector budget’s transparency is low, corruption is very common in China. Making own interests through public projects is very common, and what happened in Wenchuan is a perfect example for that. According to Transparency International (2009), Corruption Perceptions Index of China is listed in 79. If Chinese Central Government and local governments can put their budgets on websites, the corruption will be decreased sharply.
To make effective public sector budgets, the first thing for government to do is increasing the transparency. Because when the transparency of public sector budgeting is increased, the corruption will be decreased. Besides that, transparency public sector budgets can help the government manage the public funds in an efficient way. There are two ways for government to improve the transparency. First, they can put all the documents on the websites, such as what Australian and Japanese government do. Second, the government can publish the news about how budgets work regularly. What have happened in China can demonstrate the importance of the transparency. Because of lack of transparency, the government lost the credit to citizens, and the corruption is very common.
Tripod, 2010, Purpose of budget, http://accmana3d.tripod.com/id2.html
Tableman, 2005, Best Practise Briefs, http://outreach.msu.edu/bpbriefs/archive.asp
National Advisory Council on State and Local Budgeting Practice, 2010, www.co.larimer.co.us/budget/budget_practices.pdf
Danida, 2007, Effective and accountable public-sector management
Rabinovitch. B, 2008, Beijing Games to be costliest, but no debt legacy, http://www.reuters.com/article/idUSPEK25823820080805
Boston, 2010, Shanghai's Expo nearly ready http://www.boston.com/bigpicture/2010/04/shanghais_expo_nearly_ready.html
Transparency International, 2009, Corruption Perceptions Index 2009 http://www.transparency.org/policy_research/surveys_indices/cpi/2009/cpi_2009_table
Video: http://www.youtube.com/watch?v=6Q6TApaPHcA Wenchuan local government bought luxury cars by using donated funds
Video: http://www.youtube.com/watch?v=2kiGpXGgEs0 Fake donation, this video was shot at a school, at first the school leaders donated, after that the students donated. This video was shot at Guangdong
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