=Paper=
{{Paper
|id=Vol-1614/paper_123
|storemode=property
|title=Government Financial Accountability and Transparency in the Digital World
|pdfUrl=https://ceur-ws.org/Vol-1614/paper_123.pdf
|volume=Vol-1614
|authors=Lidiia Hladchenko
|dblpUrl=https://dblp.org/rec/conf/icteri/Hladchenko16
}}
==Government Financial Accountability and Transparency in the Digital World==
https://ceur-ws.org/Vol-1614/paper_123.pdf
Government Financial Accountability and Transparency
in the Digital World
Lidiia Hladchenko
Kyiv National Economic University named after Vadym Hetman
l_gladchenko@kneu.edu.ua
Abstract. This article examines the issues of accountability and transparency of
government finance in Ukraine. The research explains the significance of finan-
cial accountability for the economic improvement and civil society develop-
ment. The study defines the instruments that contribute to government account-
ability in the digital world. The key problems of ensuring financial accountabil-
ity and transparency in Ukraine are analyzed. The study focuses on information
and communication technology capacity in supporting government perform-
ance. The conclusions summarize the main findings of the research.
Keywords. Transparency, government accountability, public finance, civil so-
ciety, information and communication technology.
Key Terms. InformationCommunicationTechnology, Collaboration, Decision-
Support, Model
1 Introduction
The current tendencies of Ukrainian civil society development have great influence on
economic performance both in private and public sectors. The evolution of civil soci-
ety and democratic institutions necessitates strengthening of government accountabil-
ity. As information and communication technology (ICT) has permeated all the areas
of people’s life, they are able to improve practice of public governance. Government
accountability and transparency have created institutional background for sustainable
development. State and local budgets play the leading economic role in this process as
they express public policy, society’s aims, needs and intensions.
Ukraine demonstrates substantial progress in developing of ICT in the government
sector. At the same time, the practice of government financial accountability and
transparency in Ukraine are still weak. This situation requires research and develop-
ing the ways of improving public governance.
The aim of this study is to reveal influence of ICT on government financial ac-
countability and transparency.
ICTERI 2016, Kyiv, Ukraine, June 21-24, 2016
Copyright © 2016 by the paper authors
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2 Theoretical and Methodological Background
The conceptual framework for government transparency and accountability was de-
veloped by research in political science. The common approach considers them as
relationships promoting democracy. Thus, O’Donnel [5] focuses on different types of
accountability in the context of a political system. The special attention is devoted to
the horizontal accountability in counties that have recently become political democra-
cies (mainly, in Latin America). They demonstrate reasonably good vertical account-
ability, and have problems with horizontal accountability.
In recent research, much attention is paid to the government horizontal account-
ability, i.e. accountability to parliament. Rahman [9] has examined parliament control
and government accountability in the South Asia countries, and concluded that al-
though parliaments have been able to perform the key parliamentary tasks, they do
not perform as successfully as their counterparts in the Western world in controlling
the government and holding it to account.
Ukraine belongs to the group of countries with young democracy, and demon-
strates the common tendencies for this group. This explains the significance of ex-
perience of democratic developing countries for Ukraine.
Pelizzo and Stapenhurst [7] use the broad approach to the accountability, and stress
that the concept of accountability refers not only to the financial control and report-
ing. Accountability means a relationship between agent and principal where the agent
provides information or justification for its actions. Authors identify four types of it:
vertical, horizontal, diagonal and social.
Some international organizations permanently examine financial or budget gov-
ernment transparency and accountability. They usually use indices and ratings to as-
sess countries progress in this area, and take into account different dimensions includ-
ing financial aspects and information technologies for public governance.
Transparency and accountability studies of Ukrainian academics demonstrate the
same pattern as foreign scientists’ research. They traditionally concern political sci-
ence. There are few research devoted to the budget aspects of transparency and ac-
countability. For instance, Lytvynchuk [4] has explored public control over local
budget execution in Ukraine, and has concluded that public control although has leg-
islation framework, but does not lead to the better governance. Belets [1] has paid
attention to the experiment of providing participatory budgets in Ukraine. This project
started in the middle of 2015, and it is too early to have the results.
The using of information and communication technology to promote government
financial transparency and accountability has not yet obtained proper attention. The
cases of ICT providing for government needs in Ukraine are covered in mass media.
They deserve research in the context of dynamic development of a civil society as a
background for horizontal accountability relationships.
3 Types of Government Accountability
Government accountability is a concept of relationships where government institu-
tions provide information or justification for its actions [7]. The key questions of such
approach are “What kind of information?” and “For whom should information be
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provided?” The answers determine different types of accountability. Depending on
the principal in the relationships of accountability, there can be horizontal and vertical
accountability. Horizontal accountability exists within the public authorities and sup-
poses the capacity of higher level of public authorities to control the lower level au-
thorities. These are the strong hierarchical processes, usually determined by laws.
They encompass various forms: compliance with different rules and regulations,
monitoring and auditing, reconciliation of budget revenues and expenditures, and
budget reporting. The executive branch is based on some principles of administrative
science such as hierarchy, rules, impersonality and other [9]. They naturally lead to
the centralized character of relations within the government institutions.
The structure of public power in democratic countries consists of three branches:
the executive, the legislative and the judicial. It causes three dimensions of horizontal
accountability: government institutions can be responsible to the higher levels of gov-
ernment within the executive branch, to the legislative institutions, and in some cases
to the judicial institutions. Parliament may be aided by other institutions: supreme
audit institutions, anti-corruption commissions, ombuds offices and human rights in-
stitutes.
Vertical accountability is the ability of citizens, civil organizations and groups, and
mass media enforce standards of good performance on officials. The key instrument
of vertical accountability is elections. The strength of democracy as a social institu-
tion constitutes a precondition for high effectiveness of government accountability.
There are a number of other instruments supporting vertical accountability: participa-
tory budgets, public hearings at budget process, budget reporting, monitoring, civil
boards at government authorities, petitions, and other.
Diagonal accountability is a relatively new concept of government accountability.
It supposes that citizens are engaged directly in the performance of government insti-
tutions. The main instruments of it concern the idea of citizens’ direct participation in
public governance. The abovementioned instruments, such as participatory budgets
and civil boards at government authorities, contribute to diagonal accountability.
There are also other types of government accountability (political and legal, social,
personal and group), which are beyond this research. Horizontal, vertical and diagonal
accountability are the components of logical model of government financial account-
ability (fig. 1).
4 Government Financial Accountability: Challenges
for Ukraine
Financial information that concerns government budget, public debt and fiscal policy
determines the financial (or budget) accountability. There are three pillars of budget
accountability: transparency, public participation, and formal oversight institutions
that create together a budget accountability ecosystem [6] (fig. 2).
Budget transparency refers to the extent and ease with which citizens can access
information about and provide feedback on government revenues, expenditures, fiscal
deficits and public debt. Transparency also supposes the understandable for citizens
and clear (1) procedures of decision-making at budget process, and (2) budget infor-
mation.
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PARLIAMENT
Diagonal accountability
Elections
Citizens, civil society organizations and groups,
Fiscal External
policy audit Budget report-
local communities, mass media
approval
ing
Budget
Legislation reporting Public hear-
ings at budget
process
Executives
CENTRAL GOVERNMENT Budget moni-
toring
Budget Audit Normative
reporting regulation
Participatory
budgets
LOCAL GOVERNMENTS
Other instru-
ments
Horizontal accountability Vertical accountability
Fig. 1. Logical model of government financial accountability
Further research requires attention to the main features of government sector in
Ukraine. It has several components: (1) budget system and (2) social security funds
(Figure 3). The distinguished feature of government sector is a wide range of budget
organizations. They provide goods and services to the community and individual
households: elementary, professional and high education, healthcare services, scien-
tific researches, cultural development, art, sport etc. All budget organizations are un-
der full government control and are funded by central and local budgets. Social Secu-
rity Funds are included in budget, except of Pension Fund of Ukraine.
The structure of budget system demonstrates a high level of centralization. Thus,
according to the reporting data of the Ministry of Finance and the State Treasury,
76.25 % - 81.5 % of all budget revenues (excluding intergovernmental transfers) were
concentrated in the State budget during last four years. At the same time, more than
90 % of the local budgets are subsidized. The share of official transfers in the struc-
ture of local budgets revenues has increased from 31.2 % in 2002 to 57.1 % in 2015.
This creates basis for the low level of the local governments’ financial accountability
to the local communities and high level of accountability to the higher levels of gov-
ernment.
For a long time Ukraine had a centralized system of governance, where citizens
had no real opportunity to influence the decision-making process. This practice has a
strong negative influence on national economy: unwillingness to pay taxes and tax
avoidance, high level of shadow economy, the very low level of trust to all public
authorities. Thus, according to the Ministry of Economic Development and Trade of
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Ukraine, shadow economy in 2015 equals 47 % of official GDP of Ukraine. The Ilko
Kucheriv Democratic Initiatives Foundation [11] explored the political results of
2015, according to which the level of citizens’ trust to the central public authorities –
parliament and central government – equals 50 % and demonstrates the declining ten-
dency for the last two years. That is why public participation should become the cru-
cial point in reforming public governance and budget sector in Ukraine.
Access to financial Financial reporting Clarity and quality of
information financial procedures
GOVERNMENT FI-
NANCIAL ACCOUNT-
ABILITY
Public participation in Government responsi- Instruments of enforcement
budget process bility and control
Fig. 2. Key features of Government financial accountability
Government Sector in Ukraine
Pension Fund of
State Budget Ukraine
(Central Gov- Social Security
ernment Budget System Social Security Funds Fund for Unem-
Budget) ployment
Social Security
Fund for Work
Local Budgets
Injury
Social Security
Fund for Tempo-
rary Disability
Fig. 3. Structure of Government Sector in Ukraine
More detailed information about government financial accountability and transpar-
ency can be analyzed on the basis of Open Budget Index (OBI) methodology. The
Open Budget Survey [6] demonstrates that Ukraine obtained 46 of 100 points in 2015.
It means insufficient level of budget openness. OBI is an integrated indicator, which
takes into account the three components of a budget accountability system [6]:
(1) Availability of budget information to the public. Ukrainian government demon-
strates sufficient level of this indicator, failing only two positions [6]. Available
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documents included Pre-Budget Statement, Executive’s Budget Proposal, Enacted
Budget, In-Year Reports, Year-End Reports, and Audit Report; while Ukraine did not
have Citizens Budget and Mid-Year Review. This creates the pretty good basis for
financial transparency.
(2) Strength of formal oversight institutions shows high points for Ukraine: Over-
sight by Legislature equals 79, and Oversight by Supreme Audit Institution equals 83
(with a score from 0 to 100). This indicator confirms high level of horizontal account-
ability in Ukraine, which is natural for the country with centralized system of public
governance.
Comprehensive budget information and formal oversight institutions are those
tools that afford citizens to monitor and supervise decision–making process, budget
planning and implementation.
(3) Opportunities for the public to participate in the budget process. The Open
Budget Survey estimated Public Participations at the very low level - 23. Public par-
ticipation characterizes diagonal accountability, which proves to be a real challenge
for Ukraine. Information and communication technology can play the key role in
combating this problem.
5 Information and Communication Technologies for Improving
Government Financial Transparency and Accountability
ICT offers solutions for governments to improve the situation with engaging citizens
to public governance processes. ICT also supports public administration, public fi-
nancial management, and provision of government services. ICT has potential benefi-
cial effects on governance: (1) ICT is able to increase the quality of governance to
meet citizens’ demands, reducing the cost of government operations, the access to and
delivery of government services; (2) the use of ICT enhances improving transparency
and accountability; (3) ICT allows to engage citizens and develop democracy; (4) ICT
improves government ability to collect taxes and even is able to increase the level of
voluntary tax payments [3]; (5) ICT provides ready access to information without
visiting government entities; (6) ICT provides feedback to government implementing
institutions in real time; (7) ICT ensures easily reporting in real time; (8) ICT curtails
corruption in service delivery.
This wide range of positive effects is confirmed by tendencies in public administra-
tion. The distinctive feature of the current period is “the generalization of IT systems
from only affecting back-office processes to conditioning in important ways the
whole terms of relations between government agencies and civil society” [2]. The
United Nations E-Government Survey claims that “the transformative changes entail
not only the design and implementation of innovative practices, but more fundamen-
tally a transformation of government’s role, functions, institutional frameworks and
processes” [13].
The index of e-government development demonstrates the same tendency in
Ukraine as the Open Budget Indicator. This index estimates the readiness of national
governments to use the Internet and mobile technologies for government functions. E-
Government Development Index (EGDI) rates the e-government performance of
United Nations Member States on the basis of integrated indicator which takes into
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account [13]: (1) Online Service Index (OSI); (2) Telecommunication Infrastructure
Index (TII); and (3) Human Capital Index (HCI):
EGDI = 1/3 (OSInormalized + TIInormalized + HCInormalized) (1)
Ukraine was in the group of countries with high EGDI in 2014 (the last issue of the
Survey). It ranked 87th place of 193 countries with EGDI equaled 0.5032 (in 2010
Ukraine was on the 54th place of 184 countries). The Survey showed that in 2014
there was a tremendous gap between Online Service Index 0.2677 and Telecommuni-
cation Infrastructure Index 0.3802, from the one hand, and Human Capital Index
0.8616 - from the other hand. It means that online services and communications were
substantially behind the society’s capacity of participating in public governance.
Civil society development in Ukraine is expressed through the vast volunteer
movement. Volunteers are engaged in the developing of e-Democracy and e-
Governance, anticorruption legislation, ensuring government transparency and open-
ness. Among the most prominent results of volunteers work is the system of public
procurements ProZorro. The volunteers’ idea of reforming the system of public pro-
curements appeared at the Open University of Maydan in the beginning of 2014. The
pilot project started to work in February 2015. Ukrainian parliament adopted the law
on public procurements reform in September 2015 and it was put in force since April
1st, 2016. ProZorro was developed by IT-Volunteers. Ukrainian government obtained
it free of charge. The total market of public procurements equals to about 250 billion
UAH per year. Trade volumes on the new e-platform have reached more than 15 bil-
lion UAH since ProZorro was launched as the pilot project. ProZorro managed to
save 1.4 billion UAH (it equals 9.2 %) and 30 % of time for tenders participants for
the first year of its existence in the test regime [8].
At the same time, IT-Volunteers actively participate in developing e-Governance
and e-Democracy in Ukraine. Among the recent projects, that have successfully
started, are e-Petitions, the “Digital Cabinet”, e-Delivery of government services,
online budget monitoring. The Association of Ukrainian cities is gathering the best
practices of public initiatives on the local level.
IT-Volunteers participation in improving of public management witnesses about
active development of diagonal accountability processes in Ukraine. The integration
of participatory elements in the process of decision-making is a crucial for improving
efficient public governance.
6 Conclusions
Government financial accountability and transparency have the crucial influence
on the performance of political system and the quality of public administration.
Ukraine demonstrates sufficient development of horizontal accountability. By con-
trast, the vertical accountability is weak and needs substantial improvement. The re-
cent activation of civil society in Ukraine gave examples of diagonal accountability.
The prominent role in ICT embedding in the Ukrainian government sector belongs to
volunteers. They initiated, developed and raised money to fund several projects. The
gap between horizontal and vertical accountability can be overcome by using infor-
mation and communication technology. ICT offers a wide range of instruments: e-
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Petitions, the “Digital Cabinet”, participatory budgeting, online monitoring, online
voting, online budget reporting, and delivery of government services. The e-
Government allows for broad changes in collaboration between a government and its
stakeholders. The integration of participatory elements in the process of decision-
making is a crucial for improving efficient public governance.
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