Question 116

Does the executive seek approval from the legislature prior to spending excess revenue (that is, amounts higher than originally anticipated) that may become available during the budget execution period, and is it legally required to do so?
 * a. The executive is required by law or regulation to obtain approval from the legislature prior to spending excess revenues, and it does so in practice.
 * b. The executive obtains approval from the legislature prior to spending excess revenue, but is not required to do so by law or regulation.
 * c. The executive is required by law or regulation to obtain approval from the legislature prior to spending excess revenues, but in practice the executive spends these funds before obtaining approval from the legislature.
 * d. There is no law or regulation requiring the executive to obtain approval from the legislature prior to spending excess revenues, and in practice the executive spends these funds before obtaining approval from the legislature.
 * e. Not applicable/other (please comment).

OBS Guidelines
Question 116 examines whether the executive receives approval from the legislature prior to spending excess revenue, and whether it is legally required to do so. Good practice requires the legislature to approve changes in revenue or expenditure relative to the Enacted Budget. For example, if additional revenue is collected unexpectedly during the year, which often happens in oil/mineral-dependent countries, and it was not accounted for in the Enacted Budget, there should be a procedure in place to ensure that the legislature approves any proposed use of these “new” funds. If such requirements are not in place, the executive might deliberately underestimate revenue in the budget proposal it submits to the legislature, in order to have additional resources to spend at the executive’s discretion, with no legislative control.

To answer “a,” the executive is required by law or regulation to obtain prior legislative approval before spending any funds resulting from higher-than-expected revenues, and it does so in practice. Answer “b” applies if the executive obtains legislative approval before spending excess revenue, but is not legally required to do so. Answer “c” applies if the executive is legally required to receive legislative approval before spending excess revenue, but does not do so in practice. Answer “d” applies if prior legislative approval is not legally required for the executive to spend excess revenue and the executive does not obtain legislative approval in practice. A “d” response applies if the legislature only approves the additional spending after it has already occurred.

Typically, legislative approval of additional spending beyond what was reflected in the Enacted Budget would occur with the adoption of a supplemental budget. But other formal procedures for getting approval from the legislature in advance of it adopting the supplemental budget may exist. If that is the case, then please provide information about that approval process.

1) Law approved by parliament specifies how excess revenue must be spent
If no explicit legislative approval is needed at the time of spending by the executive, but a law approved by parliament specifies how excess revenue must be spent, then answer “a” applies. See Slovakia in OBS 2017.

2) Legal authority of Executive to use excess revenue
If the budget law explicitly allows for the Executive to appropriate/incorporate the excess revenue into the budget, then answer “d” applies. This is because this authorization diminishes the role of the legislature in oversight of the budget, despite the fact that they themselves handed those powers over the Executive.

3) What is the difference between a “d” and an “e” response?
In OBS 2019, we found a national law in Ecuador that allows the government to implement changes without approval from Congress when the change is equal or less than 15% of the budget (see Article 118). The researcher in this argued that the response should be “e” and not “d”, because marking “d” would make one think that there is no law, and there is a law.

However, the spirit of the question is that the more limited the powers that the legislature has to oversee budget implementation, including approving changes to the original budget, the weaker the role of the legislature and the less effective its oversight. This includes the many cases in which the weak role of the legislature is "self-inflicted", i.e. when some law they passed says the government can do what it wants up to a certain limit, etc.

Since that limit is more than 3% in the case of Ecuador, we scored this question “d”, based on the above reasoning. (Note that the clarification about the 3% is in the guidelines for Question 115, but not for Question 116 or Question 117, hence this clarification.)