Separation of powers and financial oversight
Aimée Figueroa Neri*
Abstract
This work examines ex post financial oversight under the concept and horizontal
and territorial dimensions of the separation of powers. Presenting the case of
Mexico and comparing it with other countries, the analysis considers the design
given in the constitutions to the institutions –supreme audit institutions–
responsible of oversight. We also review constitutional provisions that outline the
bonds of such external audit services to public authorities. We suggest a
perspective of the principle of separation of powers under an objective relationship
that arises from the ex post financial oversight, – with an emphasis on the
information that is generated –, not excluding the subjective relationship between
powers and between them and the supreme audit institutions in both national and
sub national level of federal States.
Index
I. Introduction. II. Financial oversight as a key element of separation of
powers. III. Supreme Audit Institutions and their relationship with
government. IV. Financial control and oversight in federal systems. V.
Information: guideline of a comprehensive financial control and the
relationship between powers (final thoughts). References
Key words: Separation of powers, Supreme Audit Institutions, oversight, and fiscal
federalism.
*
Researcher of the Department of Public Policies of the University of Guadalajara, campus CUCEA,
Mexico, aimeefn@cucea.udg.mx
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I. Introduction
The financial control that the legislative power has over the executive plays a
foremost role in a system of checks and balances in democratic states.
However public budgets and ex-post review of public spending are not always
used by congresses and parliaments with the same intensity.
In recent years, Mexico and various Latin American countries have strived to
strengthen the surveillance of the legislature over the executive. These
countries have reformed the legal system and institutional design regarding the
external and subsequent control of the use of public resources; changes
include the external entities or audit bodies such as the Supreme Audit
Institutions (SAI) –pillars of an accountability system–. SAIs, conceptually and
legislatively have acquired independence or autonomy from the executive
branch and the legislature. SAI´s role is to assist the latter in monitoring public
resources and hence supervise the executive branch.
In this scenario, doctrine, legislation and public policies face the challenge of
the classical conception of the principle of separation of powers to
accommodate constitutionally autonomous bodies, including SAI´s, which must
be linked with the legislature and contribute to improve public financial
management
by
the
executive.
Moreover, the territorial dimension of the principle of separation of powers in
countries with a federal system, presents obstacles for an effective financial
supervision by SAI´s and for a comprehensive accountability of public finances.
The present study compares the case of Mexico and nine other countries by
reviewing the design provided in their constitutions to SAI´s and their relation
with public authorities and the foundations of federalism. We offer a perspective
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of the principle of separation of powers under the lens of the objective
relationship that arises from the ex post financial oversight. We highlight the
information that is generated, without excluding the subjective relationship
between authorities and SAI´s, at the national and sub national level of federal
States.
II. Financial oversight as a key element of separation of powers
The principle of separation of powers in its classical conception, is based on the
separation of functions for three bodies that are “independent and balance each
other": executive, legislative and judicial (Solozabal Echavarría 1981:215).
However, time and doctrinal developments have shown that government functions
are not always carried out separately or exclusively by the power vested with the
authority. The complexity of government activity fosters an ongoing interaction
between the three branches (Huerta Ochoa 2001:77) and provides acceptance of
the theory regarding the distinction and collaboration of powers (Solozabal
Echavarria 1981:233). The new independent constitutional bodies that have
emerged in recent decades in some Latin American countries (Ackerman 2010)
underscore this idea.
The principle of separation of powers implies surveillance among them to control
the inherent political power they possess. Such control should ensure the
constitutional limits of each branch, keeping the balance between them and
avoiding the abuse of authority and power conferred (Huerta Ochoa 2001:35). The
checks and balances system from the constitutional doctrine of the United States
of America, is considered today, a fundamental element of democratic states
(Vallès
Vives
2001:13).
There are several legislative controls over the executive (Huerta Ochoa 2001:122142), financial oversight is a leading one that can be understood as a series of
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monitoring mechanisms during the different processes of the financial activity of a
State1: draft and approving of the expenditure budget, its implementation, and
review and audit of public expenditure (Figueroa Neri 2005:59, 2009:22 Main
Pozuelo,
Wehner
2006:82).
The first process –legislative approval of all public spending, taxes and revenue–,
has its roots in the representation of citizens –popular sovereignty– and is a pillar
of a checks and balances system. Likewise, the subsequent review of public
spending or ex post oversight by the legislature is part of the traditional
mechanisms regarding the accountability of the executive branch to taxpayers and
society at large, also included in popular sovereignty. Financial oversight of the
legislature over the executive power is a key element of the principle of separation
of public powers and one of the preeminent ways to maintain the balance between
them.
Ex post financial oversight (external monitoring) is carried out at the end of the
fiscal year or period during for which public resources were used and based on the
official reports that the executive presents to the legislature.2 It contains the annual
report or financial statement, thus, the legislature initiates a review, external to the
realm of the public administration of the executive. The legislature oversees this
financial management and can later exert its political control.
Some studies provide evidence that in not all countries, the legislature uses an ex
post oversight with the same intensity or efficiency as opposed to budget approval
(Santiso 2009). In recent years the virtues of this control and its contribution to
accountability and improving public financial management have been highlighted
(Neal 2003, Stapenhurst and Titsworth 2006). Moreover, the complexity of the
financial management of the public sector and the technical expertise required to
1
2
Also known as the budget cycle.
In Mexico the financial annual report is referred to as the Cuenta Pública.
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supervise it, make ex post oversight by the legislature to require assistance of a
specialized body to audit public spending such as the Supreme Audit Institutions.
III. Supreme Audit Institutions and their relationship with government
SAI´s, with their corresponding differences –depending on the system and
country–,3 are entities that assist the legislative branch. Since INTOSAI issued the
Declaration of Lima (1977) regarding the basic guidelines of accountability and the
Declaration of Mexico (2007) regarding the independence of Supreme Audit
Institutions, the independence of SAI´s from the executive branch has been
considered as an essential element for their proper functioning; likewise it has
been noted that SAI´s must also be independent or autonomous from the
legislature to ensure audits and oversights that are impartial, objective, and distant
from political or partisan interests of parliaments. Some authors in Mexico, suggest
SAI´s become an independent constitutional entity (Ackerman and Astudillo 2009).
Although some SAI´s have judicial powers,4 they are not part of the judiciary.
The independence of SAI´s raises two important issues concerning the principle of
separation of powers, what kind of entity are they? And, what is their relationship
with government?
To answer these questions, we present the results of a research that focuses these
issues and compares the Superior Audit Institution from Mexico with nine other
countries (Figueroa Neri 2007) based on empirical data. We also consider other
research data that compares 26 SAI´s of the European Union (Clark, De Martinis
and Krambia-Kapardis 2007), both works are based on current legislation.
3
Overall there are three models: Westminster (audit office or general audit), Audit Council (a
colligate group of auditors), and the Napoleonic (fiscal courts).
4
Some SAI´s are known as cours de competes, although they do not function as legal courts.
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Chart 1 presents a number of SAI´s and their sorting as entities that must be
independent but remain linked to the legislature –original power of financial
oversight–. As mentioned the legislature entrusts to SAI´s the ex post technical
review of public spending. Having an absolutely independent SAI, without a close
relationship with the legislature, would hamper the principle of separation of
government because there would be no direct control regarding the financial
management of the executive.
In addition as to how independent are these 10 entities with the legislature we also
compared them alongside their Constitutions or equivalent legal document. We
focused
that
the
legal
documents
guarantee
three
key
dimensions
of
independence or autonomy: organizational, functional and financial. Clark, De
Martinis and Krambia-Kapardis (2007) reported that in 20 of the 26 cases studied,
adequate independence of the SAIs from the executive branch was guaranteed by
law. Without questioning their results and considering the indicators they used to
verify SAI´s autonomy,5 their results suggest that between 16 and 20 cases have
an organizational independence, which we assume includes financial, and between
12 and 11 cases a functional one (p. 52).
5
The authors used 7 indicators to measure how autonomous the SAI´s were. The research of
Figueroa Neri (2007) groups four of them (free of direction/control from anyone, discretion in
determining type of audits and auditee, head of SAI to determine themes and conditions of staff,
head of SAI to appoint contractors to audit ) for the dimensions of organizational and functional
autonomy.
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Chart 1
SAI*
Legal and Institutional Framework and Independence of SAIs
Independence
Who controls SAI?
Type of Institution
Organization Functions Finances
Depend of
or
Responsible
BRH
Independent entity
Germany
Parliament and
Senate
yes
yes
yes
AGN
Argentina
Entity for technical assistance
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