US embassy cable - 03TEGUCIGALPA1041

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