HONDURAN FISCAL TRANSPARENCY AND ACCOUNTABILITY

UNCLAS SECTION 01 OF 02 TEGUCIGALPA 001041

SIPDIS

STATE FOR WHA/CEN, WHA/EPSC, DRL/IL, AND EB/IFD/OMA
STATE PASS AID FOR LAC/CEN
LABOR FOR ILAB
STATE PASS AID FOR LAC/CEN

E.O. 12958: N/A
TAGS: ECON EFIN EAID ELAB PGOV KJUS KCRM HO
SUBJECT: HONDURAN FISCAL TRANSPARENCY AND ACCOUNTABILITY

REF: STATE 100294


1. The following are responses, requested in reftel, reporting on
the GOH's fiscal transparency and accountability.


A. Does host government publish the national budget in a timely
manner?

Level 3 - Yes, with minimum delay (under one year)


B. Where substantial levels of government are significant, are
their combined fiscal position published?

N/A - Subnational governments do not represent significant levels
of spending.


C. In what form is national budget published? Government
publication or newspaper? Private media? Internet? Other?
Please indicate.

The Ministry of Finance published the 2002 national budget on
their website and they have also made
it available on CD-ROM. The national budget is also published in
the governmental publication La Gaceta (akin to the Federal
Register),as required by the Constitution.


D. Please rate the quality and comprehensiveness of fiscal data
published.

Level 2 - Limited system of budget reporting and monitoring with
limited classification system. Some payments arrears and
deviations between actual expenditures and amounts budgeted.

The fiscal data published shows little if any expenditure
spending.


E. List up to 5 key laws and/or regulations governing public
disclosure of revenues and expenditures in the national budget,
if applicable and such laws exist.

Honduras commenced the implementation of the Integrated Financial
Management System (SIAFI). The SIAFI will work to improve
governmental accountability through improvements in the execution
and control of expenditures. The system will be comprised of
four main subsystems: budget, treasury, accounting and public
credit. At full implementation the system will include 15
ministries, 20 dependencies of the ministries, and 36
decentralized entities, as well as 298 municipalities. At
present, eight ministries are connected to the SIAFI via
electronic data transmission, covering about 85 percent of the
central government budgetary transactions. Implementation of the
SIAFI has not yet begun at the municipal level.

The National Statistics Institute of (INE) was recently
established, through Legislative Decree No. 86/2000 and will
report fiscal statistics for the budgets collection of Government
Finance Statistics (GFS).

According to the 2002 Legislative Decree No. 10/2002 establishing
a national auditing body (the Tribunal of Accounts),the Tribunal
must present reports to Congress.


F. Assess adequacy of those laws and regulations establishing
fiscal transparency and accountability requirements.

Level 1 - Inadequate


G. Assess extent to which laws and regulations on fiscal
transparency and accountability are implemented and enforced.

Level 2 - Sporadically/unevenly enforced


H. How would distribution of tax powers and expenditure
responsibilities of central government be described?

Level 1 - Unclear

The Customs and Tax Division (DEI) is responsible for tax powers
and the Ministry of Finance handles expenditures.


I. Does a national audit body or equivalent organization,
independent of the executive, provide reports for the legislature
and the public on the financial integrity of government accounts?

Yes, but the reports are not published.


J. How would the link between nonfinancial public/state-owned
(e.g. extractive industries) enterprises and general government
be described?

Level 3 - Clear control under central government budget process
The government has clear control over state-owned enterprises
(the largest ones include the port authority, the electric power
company, and the telephone company). In the past the central
government has used the revenues of state-owned enterprises to
finance other governmental offices and projects.


K. Are privatization processes transparent and published?
Level 2 - Moderately transparent

The bidding documents are published, and tenders are opened
publicly, but the decision process is not totally transparent.


L. How would the reliability of budget revenue and expenditure
estimates best be described?

Level 2 - Moderately reliable


M. Please provide a short evaluative narrative of host government
commitment to fiscal transparency and accountability.

Honduras has taken several steps in recent years to improve
fiscal transparency and accountability. The GOH has improved its
budget documentation by offering more complete information on the
governments fiscal activity. The gradual implementation of the
SIAFI can be accredited for improving the quality and consistency
of budget documentation. The presentation and publishing of the
central government's budget including revenues and expenditures
has significantly improved. Quarterly and monthly reports by the
Ministry of Finance to Congress report the central government's
fiscal position and budget execution. The GOH has also improved
the quality of internal consistency of fiscal data.

However, there are many areas in which the GOH is deficient, such
as implementing measures designed to create better fiscal
transparency and accountability. Although the gradual
implementation of the SIAFI has lead to improvements, the slow
pace of implementation has prevented other changes. These
changes include enhanced budget formulation, control procedures,
and improvements in the quality and timely budget execution
reports and final accounts. The reliability of budget data has
increased in recent years, but deviations between approved and
executed budgets are still significant. Budget documents and
final accounts do not include a statement of the accounting
policies and standards used.


N. Please list U.S. government-sponsored programs and activities
that promote accurate disclosure of revenues and expenditures in
the national budgets of your host country. Please also summarize
the results of those programs and activities.

In an effort to facilitate greater transparency in the
development and implementation of the GOH's budget, and with
the conviction that civil society has the responsibility to act
as an independent agent, overseeing the appropriate use of public
funds, USAID/Honduras under its Hurricane Mitch funded a
Transparency and Anti-Corruption Activity, working in conjunction
with a local NGO (the Center for the Investigation and Promotion
of Human Rights) to sponsor workshops on the GOH's general
budget. The objective of these events is threefold: a) increase
civil society's understanding of current budget legislation and
its shortfalls; b) formulate solutions to solve the lack of
transparency in the budget formulation, approval, execution and
control systems, and c) increase civil society's participation
and understanding of the Honduran national budget process.

Conclusions and recommendations resulting from these workshops
were developed by a group of civil society organizations and
presented to the Transparency and Good Governance Group
(mechanism of dialogue which includes the government, civil
society and international donors) for inclusion in the table of
indicators. Events also received extensive press coverage. In
addition, these events helped place the national budget's process
and its transparency high on the agenda of civil society and
political leaders (e.g. articles were published in local
newspapers on the need for fiscal transparency).

Palmer