HONDURAS: TRANSPARENCY OF BUDGETS/MILITARY SPENDING

UNCLAS TEGUCIGALPA 002724

SIPDIS

TREASURY FOR OASIA/MDM:JFRANCO AND DDOUGLASS
STATE FOR EB/IFD/OMA:LGALLAGHER
STATE FOR EB/TPP/MTA/MST, IO/T, AND WHA/CEN

E.O. 12958: N/A
TAGS: EFIN EAID HO
SUBJECT: HONDURAS: TRANSPARENCY OF BUDGETS/MILITARY SPENDING

REF: State 239929


1. The following answers are keyed to the questions in
reftel:


A. General Overview of Auditing Procedures:

1,2,3,4: Responsibility for auditing Honduran military
expenditures lies with a civilian Auditor who is named by
the President and works for the Ministry of Defense (MOD).
Underneath him works the Paymaster, who is also a civilian.

Each branch of the military service (Army, Navy, and Air
Force) has its own Paymaster section, and within each there
is an Audit Department responsible for continuously auditing
all its expenditures. The MOD's Paymaster then audits the
services' reports and reports to the MOD's Auditor who has
overall responsibility. Once all internal auditing is
complete, the MOD is responsible for reporting findings to
the President. Usually this is done at the end of the
calendar year.

Additionally, the Supreme Court of Accounts (Tribunal
Superior de Cuentas or TSC, a national hybrid general
accounting and public ethics office established in 2002),is
nominally responsible for conducting audits of all
government ministries, including the MOD.


5. Yes; auditing is done continuously. All subordinate
elements must present an expenditure report (with purchase
receipts) on a monthly basis. If not provided, funds for
the following month will not be allocated. Each service has
an account with the Central Bank; no cash is handled at the
service level. If a purchase is required, an order is
generated to request a check from the Central Bank; these
purchases are matched against existing budget lines, and
appropriate deductions are made. Once receipts are
provided, the Central Bank provides the checks. Generally
the services' paymaster's offices have established relations
with several civilian providers who provide required items
on a credit basis.


6. As described above, Post believes that Honduras does
indeed have a "functioning system for reporting audits of
military expenditures to civilian authorities," which is
established by law. The only problem identified with the
procedures is the turnaround time that the services must
wait to receive checks from the Central Bank in order to pay
their creditors. This delay exists as a result of the way
the system is currently organized and does not represent a
lack of transparency or indicate any intentional
unwillingness to be transparent on military expenditures.


B. The Military Budget and On-budget and Off-budget
Revenues and Expenses


1. The country's defense budget includes only the military.
The budget for the National Police is the responsibility of
the Ministry of Public Security.


2. If a contingency arises which would require off-budget
military spending (participation in Iraq or Haiti, response
to a natural disaster, etc.),the MOD can request additional
funding from Congress. If approved by Congress, these
additional expenditures would be audited in the manner
described above.


C. The Military Component of the National Budget


1. Yes. In 2003 the MOD's budget comprised 2.7 percent of
the national budget, and 0.8 percent of GDP. By contrast,
the Ministries of Education and Health received a combined
42 percent of the national budget, or 12 percent of GDP.


2. Yes. Preparation of the military's budget begins with
each service chief, who is responsible for formulating his
service's respective budget. The MOD then approves the
proposed budgets, consolidates them, and submits them to
Congress for final approval. Once Congress approves all
ministries' budgets, it formulates the National Budget.
Congress is expected to approve the 2005 National Budget on
or about December 13.

Palmer