Aid through budget support (RiR 2007:31)

Report ID: 205

The Riksdag (Swedish Parliament) adopted a new Policy for Global Development in 2003. This policy established a new objective for development cooperation: to contribute to an environment supportive of poor people’s own efforts to improve their quality of life. At the same time, the Riksdag decided that development aid should amount to 1 per cent of the Swedish gross national income. The growing importance of budget support can be seen against this background. In addition, this development is also a result of international agreements to the effect that aid should increasingly be given in more general forms and that the handling of aid should be harmonised among donor countries.

Budget support is financial support provided to the national budget of a poor country in order to support poverty reduction in that country. The choice of this type of support is based on the assumption that aid will be more effective if it is governed to a greater extent by the recipient country’s own priorities rather than by requirements imposed by donors.

From the perspective of recipient countries, it is important that budget support is predictable. This requires that decisions on budget support be based on long-term positions which, in turn, must build on careful analysis.

The effectiveness of budget support depends on two factors: first, the extent of political will in the recipient country to implement measures to reduce poverty and, second, the effectiveness of economic policy and public financial management in that country. For budget support to be an appropriate type of aid, certain basic conditions with regard to the economic policy and public financial management of the recipient country must be met. In addition, the recipient country must have a poverty-reduction strategy whose content is deemed to be credible and relevant.

The Riksdag has emphasised that the Government should create conditions ensuring that decisions on budget support can be based on a solid foundation, given that budget support constitutes support to the overall policy of the recipient country. The Government has authorised Sida (Swedish International Development Cooperation Agency) to prepare matters, enter into agreements and make disbursements in the field of budget support. This delegation of responsibility makes heavy demands on the ability of the Government Offices (i.e. ministries) and Sida to determine whether the conditions for the provision of budget support are met.

The Government?s Preparation and Statement of Tax Expenditure (2007:3)

Report ID: 206

The Government can choose to give support or assistance to businesses and households through different types of allowances, grants or subsidies or through concessions (exemptions and special provisions) in the tax system. Such exemptions and special provisions in the tax system are called tax expenditures. Tax expenditures are the estimated cost to the unrealized tax revenue, which means that this cost is less visible than the cost of other forms of support and allowance.

In connection with the Swedish budget reform which took place in the mid-1990s, the Government established that an important requirement to assist a new, more efficient budget process would be for all exemptions and special provisions resulting in a reduction in revenue to be subjected to equally close scrutiny as the general expenditure appropriations. In order for this to be possible, the support given in the form of tax expenditures must be rendered visible.

Accordingly, since 1996 the Government has compiled an inventory of tax expenditures in a statement of tax expenditure appended to the Spring Fiscal Policy Bill. The objective of the statement is both to render visible the indirect support entailed by the tax expenditures and to provide a foundation for prioritising between different types of support.

In the 2006 statement, support in the form of tax expenditures is estimated at approximately 12 per cent of the total tax revenue, or approximately SEK 170 billion. So the tax expenditures amount to significant sums. At the same time, tax expenditures do not compete for scope in the budget in the same way as general expenditure appropriations. Nor are tax expenditures scrutinised and evaluated with the same regularity as general expenditure appropriations.

Since tax expenditures entail lower tax revenues, they have the same effect on the balance of the central government budget as support on the expenditure side of the budget. With the aim of maintaining good budgetary discipline, there is thus reason to set equally strict requirements for the preparation and accounting for new and existing tax expenditures as for the preparation and accounting for expenditure appropriations.

Joint Report of the International Coordinated audit of Chernobyl Shelter Fund

Report ID: 219

On April 26, 1986, the worst accident in the history of civilian nuclear power occurred at the Chernobyl Nuclear Power Plant in Ukraine, where an explosion destroyed the core of reactor Unit 4 containing approximately 200 tons of nuclear fuel. The explosion and heat from the reactor core propelled radioactive material as much as six miles high, where it was then dispersed mainly over 60,000 square miles of Ukraine, Belarus, and Russia. Smaller amounts of radioactive material spread over Eastern and Western Europe and Scandinavia and were even detected in the United States.

The Chernobyl Shelter Fund (CSF) was founded at European Bank for Reconstruction and Development (EBRD) in 1997 aimed at financing Shelter Implementation Plant (SIP).The Fund is guided by the set of rules regarding its resource management. Contributor Governments, mainly of G-7 and European Union, contribute to the Fund. The Assembly of Contributors supervises SIP implementation progress.

The Initial SIP costs were estimated at about USD 758 million (about EUR 585 million 4) in 1997. In 2003 and 2004 technical uncertainties and delays in the SIP fulfilment became apparent, especially with the construction of NSC, which resulted in cost escalation to EUR 840 million. The causes of those cost increases and the resulting need for additional steps to control cost and time overruns were discussed at all level including the Assemblies of Contributors. All G-85 Governments agreed to increase the scale of CSF.

Such increase was tied to the requirements to be fulfilled by Ukraine, including improvement of management, removal of procedural obstacles and timely delivery of Ukraine’s contributions. Thus, as of January 2006 estimated total costs were EUR 955 million and term for SIP completion was extended from 2005 to 2010.

Due to failure in timely realization of SIP, in 2006, the Special Subgroup on the Audit of Natural, Man-caused Disasters Consequences and Radioactive Wastes Elimination of the EUROSAI Working Group on Environmental Auditing decided to conduct an international coordinated audit of the Chernobyl Shelter Fund.

The aim of the audit was the establishment of actual state of affairs regarding legal, organizational and financial support of decommissioning the Chernobyl Nuclear Power Plant (CNPP) and transforming destroyed CNPP Unit 4 into an environmentally safe system by fulfilling the Shelter Implementation Plan.

Source: http://old.ac-rada.gov.ua/img/files/auditeurosai1.pdf

Abstract of the Joint Audit Report on Quality review in higher education in the Netherlands and in Belgium

Report ID: 277

The important implications of the Bologna Process, which aims to create a European Higher Education Area, have been highlighted by the Court of Auditors and the European Court of Auditors.

Court of Auditors to undertake a joint review of the operation of the system of quality assurance in higher education. The quality of higher education is important for the development of the knowledge economy and thus for the international economic position of the Netherlands and Flanders.

The aim of this research was to contribute to the good functioning of quality assurance in higher education in the Netherlands and Flanders

The audit questions addressed were:

- Is there a system of internal quality assurance that is aimed at measuring, improving and thus maintaining the quality of the higher level education as found in the accreditation process?

- How does external quality assurance work and does it lead to well-founded quality assurance accreditations?

- Do the institutions involved in the accreditation have an insight into the costs of quality assurance?

- Does the Minister supervise internal and external quality assurance?

35 study programmes were selected for this study: 18 in the Netherlands and 17 in Flanders, each divided between three universities and three colleges.

Source: https://www.ccrek.be/EN/Publications/Fiche.html?id=72338820-a787-4361-8eeb-e87adf02c5e8

Report on the Coordinated Audit on Tax Subsidies (in Russian)

Report ID: 397

The VI EUROSAI Congress held in Bonn from 30 May to 2 June 2005 dealt with the audit of public revenues by Supreme Audit Institutions (SAIs).The analysis of the country papers submitted by EUROSAI’s members prior to the congress showed, among others,  that there was still  insufficient knowledge about the effectiveness of tax subsidies, noted the extent and complexity of tax legislation that can lead to tax shortfalls and tax exceptions and concluded that SAIs should develop more reliable findings about the volume and target achievement of such tax subsidies.

The Congress therefore advocated conducting a coordinated audit of tax subsidies that was open to all EUROSAI members. For that purpose, a Working Group was set up to coordinate the planning of the audit and to establish the contents and headings of it.

The Supreme Audit Institutions of Germany, Cyprus, Denmark, France, Finland, Hungary, Iceland, Italy, Latvia, Lithuania, Poland, Romania, Russian Federation, Sweden, Switzerland, Slovak Republic, United Kingdom and Netherlands (observer) participated in the audit.

The objectives of the coordinated audit were:

• Enhancing the sharing of knowledge,
• Enhancing communication between EUROSAI Members in areas of special interest,
• Obtaining best practice information,
• Strengthening informal networks,

To obtain comparable results, a checklist was drafted that addressed all stages of a tax subsidy from legislation via implementation up to reporting. At the same time, this checklist formed the non-binding framework for an audit of transparency and reporting. Furthermore, three Working Sub-Groups were set up to deal with specific tax subsidies: Corporate Income Tax , Value Added Tax and Transparency and Subsidy Report.

After completing audit work, the Working Group came to the conclusion that, concerning tax subsidies, improvements were needed in the fields of legislation, evaluation and reporting in all participant states in order to create the overall transparency which it considered necessary both for the legislator and the general public.

SOURCE: https://www.eurosai.org/en/working-groups/historic-working-groups-committees/coordinated-audit-on-tax-subsidies-working-group/index.html

*This report is also available in the catalogue in English, Spanish, German and French.