In its 2005 report in Fiscal Transparency in Colombia, Oxford Analytica stated that Colombia's overall score of "Enacted" remained unchanged from the previous year. The Fiscal Responsibility Law of July 2003 provides a framework for short- and medium-term fiscal planning. This has led to improved evaluation of factors that generate expenses across different budgeting periods, and of the financial impact of new laws. The objective is that by 2007 the Fiscal Responsibility Law will be fully applied. The Medium Term Fiscal Framework (MTFF) improved in 2005 in terms of the availability of information, forecasts, contingent liabilities, tax exemptions, and quasi-fiscal expenditures. Overall, fiscal transparency in Colombia continues to make steady progress, although Congress did not approve the revised Budget Code that had been set to address many concerns regarding the transparency and efficiency of the budget process. The government intends to implement as many provisions as possible of the revised Budget Code by presidential decree, and will submit the remaining provisions as part of smaller laws. In the meantime, many of the provisions of the Budget Code are already being implemented. The most significant upcoming reforms to watch for include a reform to the tax code designed to strengthen, simplify and unify the tax structure to increase its efficiency and a reform to regional transfers. The International Monetary Fund (IMF) reports in its 2006 Article IV consultations with Colombia that the tax reform was submitted to congress in July. The reform of intergovernmental transfers proposes to limit the growth in transfers from the central government to local and regional governments, which is seen as crucial to avoid a significant widening of the deficit of the central administration and preserve the credibility of fiscal policy.

General Overview

Oxford Analytica's (OA) 2005 Fiscal Transparency report states that Colombia has continued to make steady progress in improving fiscal transparency over the past year. Congress did not approve the revised Budget Code that had been set to address many concerns regarding the transparency and efficiency of the budget process, instead diluting its provisions to the point that the government withdrew it. The government intends to implement as many provisions as possible of the revised Budget Code by decree, and will submit the remaining provisions as part of complementary laws. Several provisions of the revised Budget Code are already being implemented, such as the improved availability of information on tax expenditures, contingent liabilities, quasi-fiscal activities, and mid-year budget reporting. Colombia complies with the International Monetary Fund (IMF) Special Data Dissemination Standard (SDDS). The government has started to implement the IMF Government Finance Statistics Manual 2001; it is expected to be fully compliant at the national and sub-national levels by 2008. (OA 2005, p. 89)

OA also notes that the Fiscal Responsibility Law of July 2003 provided a framework for short- and medium-term fiscal planning. This has led to improved evaluation of factors that generate expenses across different budgeting periods, and of the financial impact of new laws. The objective is that by 2007 the Fiscal Responsibility Law will be fully applied. The Medium Term Fiscal Framework (MTFF) improved in 2005 in terms of the availability of information, forecasts, contingent liabilities, tax exemptions, and quasi-fiscal expenditures. There has also been a significant improvement in access to, and timeliness of, budget information, particularly online. Another improvement for 2005 has been that there was no additional budget presented to Congress. In general, there has been a more efficient and transparent management of the budget this year. (OA 2005, p. 89)

As of 2005, Central government expenditure administration continued to be constrained by a number of rigidities including regional transfers, mandatory transfers to the public pension system, and multi-annual expenditure for important investment projects, according to OA. The revised Budget Code was set to reduce revenue earmarking and scale back multi-annual commitments. This will not be addressed by the upcoming presidential decree, so the Ministry of Finance and Public Credit (MFPC) plans to submit a budget flexibility project to Congress separately. In December 2004, the government withdrew a major tax reform bill, which sought to reform the tax structure, in the face of opposition in Congress. However, the government intends to submit legislation designed to simplify and unify the tax structure to increase its efficiency. (OA 2005, p. 89)

The Organic Law of Territorial Organization, which seeks to improve clarity in the roles and responsibilities of different levels of government, had not yet been approved by Congress at the time of the 2005 OA report. In terms of sub-national budgetary reporting, there remained a lack of systematic monitoring and integration of complete fiscal data. However, progress had been made over the prior year in improving the regional budget reporting systems. As of 2008, the current temporary system of transfers from the central government to regional governments (which has resulted in improved fiscal discipline at the regional level) expires, and revenue sharing is to return to the pre-2002 system. This poses a potential risk to the finances of the central government. By the end of 2005 the government intended to publish a report evaluating the current system, with a view to ensuring medium-term fiscal sustainability at all levels of government. (OA 2005, p. 89)

Privatization has progressed with the sale of Granahorrar on 31 October 2005 for more than twice the anticipated price. Finally, given that the public pension system depleted its reserves in 2004, mandatory transfers have started to increase sharply. Pension payments will peak in 2007, but they will start decreasing thereafter owing to a legislative act reforming the pension system, passed by Congress on June 20, 2005. The new law eliminates special pension regimes and one of the 14 annual payments to pensioners, and it caps monthly pension payments at 25 times the minimum wage. The long-term nature of the reforms means that their immediate fiscal impact is limited. (OA 2005, p. 89)

The Ministry of Finance (MFPC) recently produced a manual for the preparation and reporting of the budget following the IMF's statistical methodology - the Government Finance Statistics Manual 2001 (GFSM 2001). The government is starting to use the new manual and it is expected to be fully compliant at the national and sub-national levels by 2008. (Commentators noted that GFSM 2001 standards are currently used to facilitate the comparison of statistics internationally, but are not yet used in producing the budget.) As such, it will change significantly the way budgetary statistics are compiled and reported, and will increase transparency as it will allow for much better economic analysis. (OA 2005, p. 104)

OA reported that the government intended to submit to Congress legislation designed to strengthen, simplify and unify the tax structure to make it more efficient. The authorities' powers to negotiate and settle disputed tax arrears and penalties would be enhanced and some penalties for tax evasion be increased. Measures to centralize and unify tax accounts will be adopted, as well as others to close businesses that evade paying taxes and to report persons with tax arrears to credit bureaus. Additionally, a computerized information system to improve monitoring of tax compliance is being developed. All these efforts should make Colombia's tax structure more efficient and should reduce the current exemptions and distortions, such as the many rates and exemptions of the value-added tax (VAT), and the over-reliance on a number of temporary taxes. Details can be found in the MTFF. The plans do not include a reform of the regional transfer system, a development that would significantly help to reduce the structural fiscal deficit - but which would likely face strong opposition in Congress. (OA 2005, p. 95)

The IMF reports in its 2006 Article IV consultations with Colombia that the reform was submitted to congress in July and is furthermore designed to promote investment and growth by simplifying tax administration, narrowing the differences in marginal effective tax rates across sectors, limiting the taxation of capital and lowering the cost of financial intermediation. The authorities were working with Congress to approve this reform by end-2006. (IMF 2006, p. 16)

Additionally, reform of intergovernmental transfers proposes to limit the growth in transfers from the central government to local and regional governments to 3.5 percent in real terms in 2009 and 2010, and then to 2 percent in real terms from 2011 onwards. The IMF staff agreed with Colombian authorities that this reform was crucial to avoid a significant widening of the deficit of the central administration and preserve the credibility of fiscal policy. (IMF 2006, p. 18)

In the same context, IMF staff reported that revenue earmarking and mandatory expenditure still amount to over 90 percent of all outlays. The authorities pointed out that intergovernmental transfers--one of the most important rigidities--would decline in relation to GDP if Congress approved the proposed reform. Pensions--another significant rigidity--would begin to decline in relation to GDP next decade, based on the three pension reforms approved under President Uribe's first government in 2002-2006, and the authorities felt there was virtually no political support for yet another pension reform, at least in the near term. Transfers to universities also had strong political support. (IMF 2006, p. 19)

With respect to fiscal performance, Colombian authorities commented in the 2006 Article IV consultations that they have been taking advantage of exceptionally strong fiscal performance to reduce public debt. In this context, their analysis indicated that--because of the stronger than expected fiscal performance in 2004and 2005--they could reduce public debt to 40 percent of GDP by 2010 with the primary surplus declining to 2.1 percent of GDP starting in 2008, below the range of 21/2 to 3 percent of GDP contemplated in the program (Table 8). 8 Moreover, they noted that public debt net of deposits would fall to 32 percent of GDP in 2007. (IMF 2006, p. 13)

The Principles

Clarity of roles and responsibilities.

EN

Oxford Analytica (OA), in its 2005 Report on Fiscal Transparency in Colombia, rates Colombia's compliance with this principle as "Enacted". In its 2003 Report on the Observation of Standards and Codes, the International Monetary Fund (IMF) described the legal and administrative framework for fiscal management as clearly established in the law; but highly complex. Each government must submit to Congress at the beginning of its four-year term, which roughly coincides with the four-year term of the new legislature, a National Development Plan (PND). The annual budget is prepared within the framework of the administration's PND and the economic planning process that begins with it. The result is a multiplicity of documents related to the formulation, presentation, and execution of the budget, separately prepared by different entities, without a clear framework of coordination, and a consistency difficult to verify. (OA 2005, p. 90; IMF 2003, p. 14)

However, OA's 2005 Fiscal Transparency Report states that, in the past two years, the government has taken several steps to improve fiscal planning, budgeting, availability of information, spending execution, and follow-up processes at all levels of government. The Fiscal Responsibility Law, approved in July 2003, established principles of fiscal discipline across all levels of government and organized the budget process at the sub-national level. It was a major step forward in terms of fiscal discipline and transparency. The law allowed the establishment of a framework and an evaluation benchmark for short and medium term fiscal planning. This is represented in the Medium Term Fiscal Framework (MTFF), which has already been published twice. This has led to better evaluation of factors that generate expenses across different budgeting periods, such as contingent liabilities, and of the financial impact of new laws. Municipalities are also mandated to produce their own MTFF with multi-year financial plans detailing revenue and primary fiscal balance targets, although progress at the municipal level has been much slower than at the central government level. In addition, the law prevents municipalities and department level administrations from issuing debt to fund administrative expenses or use national transfers to securitize debt The Fiscal Responsibility Law complements measures adopted in Law 715 of 2001 and 617 of 2000 in improving the fiscal process at the regional level. The regulatory framework for the Fiscal Responsibility Law has also been published and implemented. The objective is that by 2007, both the Fiscal Responsibility Law and regulatory framework will be fully applied. (OA 2005, p. 94)

At the national level, the Fiscal Responsibility Law sets fiscal stability rules that limit the fiscal deficit and ensure long-term sustainability of the public debt. The administration is obliged to set a primary deficit level for the non-financial public sector (including sub-national governments) and to establish indicative fiscal deficit targets for the following ten years. The law also includes a series of transparency rules aimed at enhancing the standards of the information released. Financial plans at all levels of the administration are now required to include a statement on contingency liabilities, and an annual report of 'Fiscal and Macroeconomic Results' that assesses the achievement of the objectives set out in the Financial Plan. The Financial Plan is presented annually on the Fiscal Policy Council (Consejo Superior de Política Fiscal, or CONFIS) website, along with any mid-year revisions. The Fiscal Responsibility Law also requires that if forecasts were different from actual out-turns an explanation is provided. This has resulted in more accurate forecasts and has strengthened fiscal responsibility. Some commentators judged that the Fiscal Responsibility Law has improved the planning framework, but that beyond that, it 'lacks teeth.' They maintained that the Budget Code revision submitted to Congress in December 2003 was intended to be the response to this lack. (OA 2005, p. 94)

Law 448 of 1998 and decree 1,849 of 1999 require that the general government should estimate, appropriate, and report contingent liabilities. To cover contingency risks, the government has established a contingency fund administered by the Ministry of Finance and Personal Credit (MFPC) and funded by the beneficiary entities according to their levels of exposure. Until recently, there was no systematic effort to publish details of contingent liabilities. The Fiscal Responsibility Law, however, mandates that the government must present an MTFF before June 15th of every fiscal year, which should contain a chapter on the evaluation of contingent liabilities. OA reported that in 2005 the MTFF had improved its reporting of contingent liabilities, with many more contingent liabilities included. The MTFF also includes some scenarios for public debt sustainability. CONFIS also presents a report every quarter to Congress detailing future obligations, as they will be incorporated into budget liabilities in forthcoming years. The government is also working on completing the valuation of contingent liabilities arising from public-private partnerships (PPPs) by including all past liabilities, in particular those stemming from infrastructure investment. Finally, systems are being put in place to track counter-guarantees for sub-national governments. However, as pointed out by the World Bank, the handling of pension liabilities and contingent liabilities related to lawsuits represents an important financial management weakness. (OA 2005, p. 100)

In 2001, the Ministry of Finance produced a manual for the preparation and reporting of the budget following the IMF's statistical methodology -- the Government Finance Statistics Manual 2001 (GFSM 2001). The government is starting to use the new manual and it is expected to be fully compliant at the national and sub-national levels by 2008. (Commentators noted that GFSM 2001 standards are currently used to facilitate the comparison of statistics internationally, but are not yet used in producing the budget.) As such, it will change significantly the way budgetary statistics are compiled and reported, and will increase transparency as it will allow for much better economic analysis. A recent IMF mission produced an interim progress report in which they noted that progress has been made based on the agreed milestones in complying with the GFS 2001. At the sub-national level progress has been less noticeable than at the central government level. The decree that will be passed in the wake of the failed Budget Code reform seeks to ensure compliance with accounting standards by 2008. (OA 2005, p. 104)

The structure and responsibilities of the public sector are well defined in the 1991 Constitution. Colombia is a decentralized republic, with a national government and sub-national departments and municipalities. The state is divided into autonomous legislative, executive, and judiciary branches. Other entities of the state include the central bank (Banco de la República - BanRep), the Office of the Attorney General, the Office of the Comptroller General of the Republic, the Office of the Prosecutor General, the National Electoral Council, the National Registry of the Civil State, and the National Television Commission. The national government, the departmental governors and the municipal mayors constitute the executive power, while the national congress, the departmental assemblies, and the municipal councils constitute the legislative branch. (OA 2005, p. 90)

The Colombian government continues to make progress in clarifying the roles and responsibilities of the national and sub-national governments, albeit in a somewhat disorganized fashion. Roles and responsibilities are governed by Constitutional Reform 01 of 2001 and Law 715 of 2001. The Organic Law of Territorial Organization (Ley de Ordenamiento Territorial), which seeks to improve clarity in these roles and responsibilities, has still not been approved in Congress. Commentators judged that over the past year, there has been an increased diffusion of the lines dividing national and regional responsibilities. They noted that this is in part a result of President Uribe's management style, and his propensity to "micro-manage." The IMF has also recommended strengthening fiscal coordination among the different levels of government, perhaps by establishing an agency that would monitor and coordinate the budgets of the different levels of government. (OA 2005, p. 90)

At present, Congress has delegated broad powers to the president to reform and modernize the national public administration in order to increase administrative efficiency and reduce administrative costs. The reform is currently being implemented. Commentators pointed out that the outsourcing of certain activities does, however, make it difficult to see how much has really been saved so far in this respect. (OA 2005, p. 90)

The budget process in Colombia is centralized in the Ministry of Finance and Public Credit (MFPC). The Fiscal Policy Council (CONFIS) - an inter-ministerial council chaired by the finance minister - coordinates and manages the fiscal process between the central government and the rest of the public sector. The CONFIS approves the budgets of state-owned enterprises, which are drafted following the same principles and guidelines as the Budget Statute. Budgetary responsibility is divided between the MFPC (responsible for the operating budget) and the National Planning Department (DNP - Departamento Nacional de Planeacion, which is responsible for the investment budget). The DNP reviews and approves investment projects which, in practice constitute the remainder of the budget that is not earmarked, and also has power to establish spending ceilings over certain institutions. The DNP is not officially a ministry, but the director reports directly to the president. The division of responsibility for the budget between the MFPC and the DNP ensures that there are some checks and balances in the fiscal process. As such, the DNP director can be said to "monitor" the transparency of the budget, as any gaps will impact the investment budget that is under his supervision. However, some say this division inhibits the production of a comprehensive budget resulting in budget proposals that exceed available resources. Finally, the National Council of Economic and Social Policy (CONPES) - which is chaired by the president - determines the transfer of resources from state-ownd enterprises to the government. (OA 2005, pp. 90-91

Colombia is implementing the recommendations of an IMF study on fiscal decentralization, which was established by the 1991 constitution in order to improve the efficiency of public spending, particularly in health and education. The plan involved moving the responsibility for expenditure to the local and regional governments, financed by revenue sharing from the central government and increased reliance on local taxes. However, the decentralization process has encountered a number of problems, as identified by the IMF. The allocation of expenditure responsibilities among the different levels of government is unclear, leading to duplication of spending in a number of areas; transfers from the central government are subject to extensive earmarking, which makes it difficult for sub-national governments to manage spending flexibly; and there may be rising contingent liabilities, especially for transport and energy projects. Improved coordination of decentralisation issues would be beneficial, as would improvements in information, control and audit systems across sub-national governments. CONPES is developing a strategy to strengthen decentralization. (OA 2005, p. 91)

The OA report further notes that proposed revisions to the Budget Code were intended, inter alia, to make expenditure management more flexible. Currently, the executive has discretion over only two billion (approximately) of the 93 billion pesos in the 2005 Budget. The rest is earmarked for expenditure, for example, for foreign debt servicing and regional transfers. The revised Budget Code was also intended to: require the adoption of international standards for budget classification; establish provisions for phasing out most non-constitutional earmarked tax revenues while restricting new earmarking; limit the carry over of spending from one year to the next; and restrict the government's power to make spending commitments for future years on projects not authorised under the Development Plan. Unfortunately, Congress did not approve the revised Budget Code; the reform had been so diluted in Congress that the government withdrew it. The government intends to implement as many provisions as possible of the revised Budget Code by a decree, and will submit the remaining provisions as part of smaller laws that may be easier to pass. (OA 2005, p. 94)

However, many of the provisions of the Budget Code are already being implemented, such as the provision of information on tax expenditures and quasi-fiscal activities, and mid-year budget reporting. A Medium Term Fiscal Framework was produced for the first time in June 2004, which commentators judged to be a very positive development for fiscal transparency. The MTFF is greatly improved this year in terms of the information available, forecasts, contingent liabilities, tax exemptions and quasi-fiscal expenditures. The revised Budget Code had sought to make this reporting a legal requirement. (OA 2005, p. 94)

In its 2003 Report on the Observation of Standards and Codes, the IMF noted that Colombia's tax legislation is public but suffers from great complexity. National and territorial tax legislation is public. The General Directorate of National Taxes and Customs (DIAN) releases the texts of national tax laws on the Internet, together with regulations, administrative provisions and explanatory material. General administrative provisions applicable to national taxes are issued annually through Opinions (Conceptos) and are published in the Official Gazette of the Republic. Administrative provisions affecting individuals are not available to the public. Simplicity in the regulation of some taxes is diminished by the existence of a significant number of exemptions and special sectoral treatments. In addition, the legal wording crafted by the Congress and regulatory wording crafted by the tax administration sometimes lack enough clarity. (IMF 2003, pp. 16-17)

Oxford Analytica noted that the government submitted to Congress legislation designed to strengthen, simplify and unify the tax structure to make it more efficient. The authorities' powers to negotiate and settle disputed tax arrears and penalties would be enhanced and some penalties for tax evasion would be increased. Measures to centralize and unify tax accounts would be adopted, as well as others to close businesses that evade paying taxes and to report persons with tax arrears to credit bureaus. Additionally, a computerized information system to improve monitoring of tax compliance is being developed. All these efforts should make Colombia's tax structure more efficient and should reduce the current exemptions and distortions, such as the many rates and exemptions of the Value-Added Tax, and the over-reliance on a number of temporary taxes. Details can be found in the MTFF. The plans do not include a reform of the regional transfer system, a development that would significantly help to reduce the structural fiscal deficit - but which would likely face strong opposition in Congress. (OA 2005, p. 95)

The IMF reports in its 2006 Article IV consultations with Colombia that the reform was submitted to congress in July and is furthermore designed to promote investment and growth by simplifying tax administration, narrowing the differences in marginal effective tax rates across sectors, limiting the taxation of capital and lowering the cost of financial intermediation. The authorities were working with Congress to approve this reform by end-2006. (IMF 2006, p. 16)

Open budget processes

EN

Oxford Analytica (OA), in its 2005 Report on Fiscal Transparency in Colombia, rates Colombia's compliance with this principle as "Enacted". In 2003, the International Monetary Fund's (IMF) Report on the Observance of Standards and Codes (ROSC) noted that there was no norm or standard governing the content of the Presidential Message. In turn, the Organic Budget Law (EOP) establishes that the Budget Bill (Presupuesto General de la Nacion: PGN) must be consistent with the four-year PND (National Development Plan). However, the Presidential Message does not clearly indicate how the PGN is adapted to the objectives of the PND. In its report on the General Budget Account of 1999, the Office of the Comptroller showed that the PGN differs substantially in amount and composition from what is established in the PND. By law, the Presidential Message must also include an evaluation of ability to pay the public debt, which at a minimum must include evolution of the balance and debt service in proportion to GDP and exports. In this regard, the Presidential Message presents debt indicators from an annual perspective and incorporates developments over the last two years. (OA 2005, p. 99; IMF 2003, pp. 24-25)

The 2005 OA report states that Colombia provides broad information for the current, forthcoming and previous budget years. The budget does not include information about quasi-fiscal activities and presents very limited information concerning its macroeconomic forecast, financial assets and contingent liabilities. However, there has been some improvement with the quantification of some quasi-fiscal activities now available in the MTFF. The executive's year-end reports do not report on steps it has taken to address audit recommendations. One feature noted by commentators was that most of the budget allocation is legally earmarked. About 94% is written into the constitution (transfers to the regions, pensions, and so on) and about 6% has to be included item by item in the budget law. The revised Budget Code was set to reduce revenue earmarking and scale back multi-annual commitments. The budget inertia will not be addressed by the upcoming decree, so the Ministry of Finance (MFPC) plans to take a budget flexibility project to Congress, whenever it is politically viable to do so. (OA 2005, p. 99)

OA also notes that fiscal policy objectives are set out in the annual financial plan produced by Council of Economic and Social Policy (Consejo Nacional de Planificacion Economica Social, or CONFIS). The plan is released on the website of the Ministry of Finance and Public Credit (MFPC). These objectives are included in the annual financialmacroeconomic plan produced by the Council of Economic and Social Policy (Consejo Nacional de Planificacion Economica Social, or CONPES), which is available on the respective websites of the National Planning Department and the central bank. A revision of the finncial plan is produced mid-year. The Fiscal Responsibility Law requires that if forecasts did not match outcomes, an explanation be given in the form of an annual report of 'Fiscal and Macroeconomic Results' that assesses the achievement of the objectives set out in the Financial Plan. In 2002, for the first time, fiscal policies were determined using a medium-term fiscal framework (MTFF) aimed at matching spending requirements and fiscal sustainability. The government is making an effort to be more target-oriented. It is through the National System of Evaluation of the Results of Public Management (Sistema Nacional de Evaluación de Resultados de la Gestión Pública: SIGOB) that the central government, and particularly the National Planning Department, evaluate and follow the results and impacts of their main policies, programs and investment projects. All targets and the progress made to date in attaining them are available on the SIGOB website. Most targets have expenditure tied to them so that, in practice, this process enhances budgetary accountability. The presidency also monitors the progress of commitments made in the communal councils. (OA 2005, p. 99)

The Fiscal Responsibility Law, approved in July 2003, ensures and sets fiscal stability rules that limit the fiscal deficit and provide for long-term sustainability of the public debt. Financial plans at all levels of the administration are now required to include a statement on contingency liabilities, and an annual report of 'Fiscal and Macroeconomic Results' that assesses the achievement of the objectives set out in the Financial Plan. The MFPC has entered into debt restructuring agreements with municipal governments. The agreements include an assessment of liabilities and creditors, and sets clear parameters for fiscal solvency and debt payment. These agreements are available on the MFPC website. (OA 2005, p. 100)

In general, according to OA, there was a more efficient management of the budget in 2005. The Revenue Budget contained estimates of tax revenues, quasi-fiscal taxes, special funds, and revenues of national government agencies. The Appropriations Bill detailed expenditure classified by institution and disaggregated by type of expenditure. The MFPC is responsible for preparing the Annual Budget Bill. Once approved the bill is published and the MFPC posts the bill on its website. Data can be sorted by government agency, type, revenue, and expense. Interested parties can also review the amount appropriated, payments made, and expenses to be disbursed. (OA 2005, p. 101)

In 2003, the IMF's ROSC noted that the accounting system used by the central public administration makes it possible to obtain timely information for evaluating arrears. For the central administration as a whole, excluding public establishments, the integrated financial information system (SIIF) - which includes the budget, treasury and accounting modules - registers and incorporates timely and reliable information on the different stages of the expenditure process (commitment, obligation, and payment), encompasses on a timely basis all externally financed transactions, and maintains records of assistance in kind not associated with cash flows (such as machinery and medications, for example). These features make the SIIF a reliable tool for evaluating arrears. (IMF 2003, pp. 29-30)

The OA report of 2005 adds that Law 716 of 2001 sets a clear accounting methodology for all public sector organizations. The law establishes accounting methods to value state-owned assets, liabilities, and contingent liabilities. In addition, the law requires government institutions to produce accounting reports twice a year and encourages political control by legislatures and fiscal control by comptrollers at all levels of government. Colombia is currently making the move from cash to accrual accounting, as stated in the implementing regulations of the Fiscal Responsibility Law. There is currently a mix of the two being used. Full implementation is expected in the medium term. A project is currently underway to help make the accounting data easier to understand for those outside the National Accounting Office. (OA 2005, p. 102)

OA notes that Colombia is only in the initial stages of developing a performance-based system of monitoring and evaluation. The budget process lacks monitoring and evaluation to track the use of public resources and to evaluate the performance of those responsible for implementing it. The National Planning Department is constructing a Unified Public Financial Investment System (SUIFP) designed to evaluate and monitor investment projects, but it is not yet operational. CONFIS produces a final fiscal report in late December, which presents the consolidated fiscal results for the fiscal year. This report describes the evolution of the main fiscal accounts during the year, including the consolidated balance, the central government balance, and the balance of the sub-national governments and state enterprises. In addition to the CONFIS report, the central bank produces an annual macroeconomic report. Consolidated fiscal results are also now available quarterly on the CONFIS website. (OA 2005, pp. 101-102)

Public availability of information.

EN

Oxford Analytica (OA), in its 2005 Report on Fiscal Transparency in Colombia, rates Colombia's compliance with this principle as "Enacted". According to the OA report Colombia's government is committed to publishing fiscal information. The National Planning Department publishes the National Development Plan, which details the government's main investment and macroeconomic objectives as well as the four-year investment plan. The National Planning Department also releases the annual macroeconomic plan, as approved by the Council of Economic and Social Policy (CONPES). Since 2000, the Ministry of Finance and Public Credit (MFPC) website has provided full details of the annual budget. Information comparable to that in the annual budget is provided for the outturns of the two preceding fiscal years, together with forecasts of the main budget aggregates for ten years following the budget. This is a requirement under the Medium Term Fiscal Framework (MTFF). Some commentators have noted that this information is aggregated, but once the MTFF is applied in full, there will be a significant improvement in transparency. The División de Apoyo Fiscal (DAF) has yearly publications on budget and debt information for the regions. There is good public access to the latest data on the sources and uses of the budget. The National Accounting Office produces quarterly information on the balance sheet of every institution of the government and every municipality, although it is not entirely easy to understand. A project is currently underway to address this, which will help make the data clearer and more user friendly. (OA 2005, p. 97)

OA also notes that the MFPC, under the Fiscal Policy Council (CONFIS) webpage, releases a monthly statement on the preliminary balance of the central government, excluding sub-national governments and state-owned enterprises. Each report reviews monthly trends and explains short-term variations. Currently, the Integrated Information System (Sistema Integrado de Información Financiera, or SIIF) collects data on 84% of the General Budget of the Nation operations, and 93% of the National Budget operations. All financial decisions made in Congress are now on the CONFIS website. (OA 2005, p. 97)

Until recently there was no systematic effort to publish tax expenditures. However, a number of reforms are currently underway that should address this. In addition, there has been a considerable improvement since 2003 in terms of the amount and quality of information presented in the Presidential Message to Congress on the Annual Budget Law. There have also been significant improvements in the information available on the MFPC and CONFIS websites.(OA 2005, p. 97)

CONFIS publishes a report of the consolidated public sector, which includes sub-national governments, the central bank (BanRep), the Deposit Insurance Agency (FOGAFIN), a sample of state-owned enterprises, and the Social Insurance Institute (ISS). The report is published annually and every quarter through the annual closing accounts and through the annual Financial Plan and the Revision to the Financial Plan. The reports broadly follow the International Monetary Fund's (MF 's) methodology. In 1999, Colombia began to publish quasi-fiscal operations conducted by the BanRep and FOGAFIN. These are published by CONFIS and are available on the MFPC website. Beyond this, until recently, there was no systematic effort to publish details of quasi-fiscal operations undertaken by state-owned enterprises, though there has been some improvement with the quantification of some quasi-fiscal activities now detailed in the MTFF. (OA 2005, pp. 97-98)

The MTFF will enforce better municipal and departmental reporting. Budgetary information for the largest departments is now available with a six-week reporting lag after each quarter ends, which is a considerable improvement from previous years. In total, this adds up to 80% of the regions. The remainder has a sixteen-week lag. Each semester, the DAF at the MFPC produces a fiscal report of departmental and municipal governments. This information is available with a two-month lag. The Annual Financial Plan produced by CONFIS details the non-financial public sector balance using a modified accrual accounting methodology. The BanRep also releases quarterly reports on macroeconomic policy that covers fiscal data. There is a slight discrepancy in deficit figures between CONFIS and BanRep reports, since the latter covers all state-owned enterprises. (OA 2005, p. 98)

As part of its commitment to the IMF's Special Data Dissemination Standard (SDDS), Colombia publishes data on domestic and public external debt, according to the OA report. The MFPC website provides reports on their composition and maturity terms. The Office of Public Credit under the MFPC produces a weekly and quarterly report on domestic government bonds and publishes ad hoc special reports. CONFIS has produced a document comparing debt measurement methodologies between the MFPC, the BanRep, and the Office of the Comptroller General, which has revealed significant methodological differences. Debt is thought to be sustainable in the medium term. As with the deficit and pensions, it is expected that national debt will reach its peak in 2007/2008, and will reduce from then on. Debt has reduced more significantly than was forecast in conservative scenarios such as the MTFF. (OA 2005, p. 98)

Furthermore, OA notes that there is no legal obligation to supply information to the public or any requirement for periodic publication of information. The legal framework simply requires that the Office of the Comptroller General submit fiscal information to Congress on an annual basis. In addition, although Colombia is committed, under the terms of the IMF SDDS to produce advance release calendars, these are not available on the national websites. The calendar and contact information for personnel responsible for posting the information are, however, available from the IMF SDDS website. Monetary data are published according to the advance release calendar available on the BanRep website. (OA 2005, p. 98)

Finally, commenting on World Bank findings, OA reports that Colombia has made progress in modernizing and automating its public financial management (PFM) and information systems, particularly with regard to the implementation of central government's information management system (SIIF). However, the World Bank also noted that SIIF has not been implemented uniformly, and that there is a need for an integrated vision of an overall PFM system. They note duplication and overlapping agency responsibilities, which hinder the setting and achieving of clear PFM goals. In response to these weaknesses, the government is working to eliminate any overlaps in responsibilities, and an Inter-Governmental Policy and Information Management Committee has been created. In general, there has been a more efficient management of the budget this year. (OA 2005, p. 92)

Independent assurances of integrity.

CP

Oxford Analytica (OA), in its 2005 Report on Fiscal Transparency in Colombia, rates Colombia's compliance with this principle as "Compliance in Progress". The OA report notes that data produced by the Ministry of Finance and Public Credit (MFPC) are reliable and meets international standards. However, there are concerns over data produced by the sub-national governments, which may not accurately reflect debt levels and contingent liabilities. The administration is committed to producing high quality fiscal data. For that purpose, in 2001, Congress approved the bill on accounting standards (Law 716 of 2001). The law requires all levels of government, as well as all government agencies and state enterprises, to follow a harmonized accounting methodology. Law 734 of 2002 establishes a unified disciplinary code that requires public officials to conform to accurate accounting practices and register fiscal expenses and revenues in a timely way. The code also requires public servants to implement information dissemination and transparency practices set out by the national government, the Office of the General Accountant, and the General Comptroller of the Republic Office. Some commentators indicated that there were contradictions between some of the statistics of different government departments. The Presidential Message to Congress on the annual Budget Law, however, has a section that presents a methodology to go from the budget data to the Financial Plan data, with the aim of making these more transparent and consistent. (OA 2005, p. 103)

OA also reports that the National Statistics Department (DANE) is responsible for producing and publishing national statistics. However, the department has no obligation to produce and release fiscal information. This authority lies exclusively with the Office of the Comptroller General and the Office of the National Accountant. The MFPC has recently produced a manual for the preparation and reporting of the budget following the International Monetary Fund's (IMF's) statistical methodology -- the Government Finance Statistics Manual 2001 (GFSM 2001). The government is starting to use the new manual and it is expected that full compliant at the national and sub-national levels will be attained by 2008. As such, it will change significantly the way budgetary statistics are compiled and reported, and will increase transparency as it will allow for much better economic analysis. (OA 2005, p. 104)

The Office of the Comptroller General is responsible for the independent scrutiny of fiscal affairs. The office is required to report periodically to Congress, producing an annual fiscal report based on data drawn from different levels of government. There have been recommendations from some institutions that the technical capacity of the Office of Comptroller General should be reinforced and that its political independence should be guaranteed. Public confidence in the office has increased over the year. It has been proactive in promoting transparency in public finances. The OA report goes on to note that, in Colombia, there are also a number of independent advisers who are invited to assess fiscal forecasts, the macroeconomic forecasts on which they are based, and the underlying assumptions. Many of these experts previously worked in government, and many move into government from their current positions. Some commentators see this as a positive thing. Other commentators felt that there is also a need for more experts with no connection to the government, in order to facilitate fresh perspectives and insights. (OA 2005, pp. 103-104)