Transfer of Auditing Rights

Parliament should control government expenditure of taxpayer money as in advanced countries

By Choo Young-jin
Senior staff Director
The Special Committee on Budget & Accounts
The National Assembly

From the viewpoint of parliamentary tradition, the most important parliamentary functions are the enacting of legislation and the right to control the national treasury. As the saying goes in advanced countries’ parliaments, “No taxation without legislators,” the legislature’s right to control the national treasury has been one of the most important features of parliamentary actions.
The national fiscal act was passed by the National Assembly on Sept. 8, 2006 and went into force on Jan. 1, 2007. The new law integrated a number of laws on government budget, such as the budget accounting law, which went into force in 1961 but went through 25 revisions since then, and other laws and regulations regarding government budget.
The new law is considered to have given more autonomy and a result-oriented treasury operation for more extended periods, providing a basic framework for government budget execution.
The new law, however, is believed to have been made for the government in its management of the budget, creating the need for a parliamentary right of control of the administration’s expenditures in so far as the interpretation of details of the law’s provisions and analysis of its operating system are concerned.
It would require a revision of the Constitution to give the parliament more rights to control the government’s execution of its budget. I will offer some appropriate solutions through my writing, confirming various arguable points in the budget law, and set guidelines for positive courses of action to take to give the parliament justifiable and effective rights to the control of the treasury.
Accounting auditors in advanced countries usually belong to the parliamentary body to allow them to examine budget plans and the execution of budgets more closely so that tax money won’t be wasted by ensuring budgets are executed as approved by the legislature.
The auditors, who watch how the vast government budget is spent as approved by parliament and evaluate budget-financed projects thoroughly, should be completely independent from the administration.
Auditors tenures are long; 15 years in the United States, for life in Britain and 12 years in Canada. Both parliament (congress in the U.S.) and the government deal with the appointment of chiefs of auditors and guarantee their independence thoroughly to preempt any problems arising from the fact that they get paid by the parliament.
To transfer the auditors’ accounting inspection functions to parliament, the Constitution of Korea should be amended but even before seeking a Constitutional revision, there ought to be a serious discussion on the transfer of the auditors. Both the administration and the National Assembly should prepare various steps including the collection of public opinions on how the revisions would be made in the Constitution to enable the transfer of the rights of audit to the parliament.
At present, the chief auditor is appointed by the president following parliamentary approval according to section 2 of Article 98 of the Constitution. Additional audit members are appointed by presidential approval on the chief auditor’s recommendation Currently, the audit committee decides major issues that come before the Board of Audit and Inspection and audit members’ powers are as important as those of the chief auditor himself in many cases.
To cite some examples in other countries: in the United States, the chief auditor and deputy chief auditor need congressional approval to be appointed; in Japan, all of the three auditors require the approval of the Diet to be officially named to their posts.
The audit board and inspection members are comprised of three from inside the board, two from judiciary circles and one from the administration. Considering that their jobs include being the inside watchdog on how government policies and projects including activities and their results, among others, it appears that their appointments should require parliamentary approval.
As mentioned before, members of the audit board are made up of those promoted from inside and those from the judiciary communities and, therefore, they should include some from the legislative side whose duties have been involved with the issues related to the management of the state treasury and government budgets. This, in my judgment, should be done even before legal steps are taken to strengthen the relationship between the Audit and Inspection Board and the National Assembly and for the sake of the principle of the independence of power and a diversity of backgrounds among Audit Board personnel.
The Law and Judiciary Committee is the parliamentary committee that deals with the affairs of the Audit Board, according to Article 37 of the National Assembly act with its function divided into two areas such as accounting inspection and audit inspection, when looking at the audit board as a government unit born of the merger of the accounting board and the inspection committee as of March 1963.
The accounting inspection function of the Audit Board, when The Special Committee on Budget & Accounts is upgraded to a standing committee, deserves to be included in a plan that will reassign the function to the Budget Committee. In Japan, too, the accounting inspectors belong to the accounts administrative supervision committee, and in Great Britain account inspectors belong to the public accounts committee of parliament.
In the case of the United States, the committees in both the Senate and the House of Representatives can ask for audits from accounting inspectors ― even individual members of both the Senate and House can ask for audits from the accounting inspectors. In Britain, the members of the Parliament can hold consultations with the public accounts committee on items to be audited.
In Japan, both the Diet and the Upper House of Councilors can ask for audits provided that the plenary session or committees give their approvals. As such, there is a need for expanding the system to allow the standing committees and plenary sessions of the National Assembly to have the rights to ask for audits by amending Article 127-2 of the National Assembly act concerning the audit demand system.
The principle for the expenditure law system, which calls for parliament to approve the content ant amount of expenditure by law, has been accepted as a basic factor of fiscal democracy in most democratic countries, except Korea and Japan
In Korea, the system has been enforced in the framework of the budget plan not stipulated in the Constitution because the system was incorporated in the so called “Great Japan Imperial Constitution,” set up in 1889 based on Japanese imperialism whose basic motive was to limit the parliament’s budget deliberation rights. At the time, the Japanese imperialists copied Germany’s constitutional system and the expenditure system was put under the plan, but not in the law, thus not requiring parliamentary approval, just its support.
The British parliament took over control of the nation’s treasury through a law in the 1688 honorary revolution and made any special government expenditure subject to parliamentary approval. In the United States, too, it’s been put into the Constitution that no money shall be drawn from the Treasury, but in consequence of appropriations made by law(article I, section 9).
Some of the problems caused by not regulating government payment by expenditure law include unruly government expenditures resulting in the abuse of the government budget in the absence of limitations and guidelines on the use of the budget, as well as no say in funding sources, which would give the government excessive power.
Secondly, it would also limit the deliberation time, not allowing for deeper inspection.
Thirdly, government interference in independent official organizations’ requests for budgets go against the independent nature of power sharing.
Accordingly, it is necessary to turn to the expenditure legal system by amending the appropriate provisions in the Constitution. But before the constitutional amendment can be made, the budget plan and the contents of the budget plan must be made in greater detail, such as expenditure plans, details of projects and reports to the committees in the name of the so-called expenditure approval draft law whose necessity is growing.
Our Constitution prohibits the parliament from increasing the requested amount of each item or adding new items without government accent, not recognizing the right to alter the requested budget amounts.
The system can only be recognized and retained where they have a Westminster-type cabinet system like in Great Britain. In Korea, the mixed-type presidential state system has been introduced and practiced, which could severely restrict the parliamentary rights to deal with government expenditures.
On the other hand, in Germany, where a Continental-type cabinet system is in place, the parliament can increase or decrease the requested budget amounts by the government. In France, where the semi-presidential system is in operation, the parliament can reduce or increase the requested amounts of expenditure by the government, provided that the approved gross amount of budget remains unchanged. In Britain, too, questions have come up over a system that limits the parliament’s rights on government expenditures.
The U.S. Constitution, which selected the presidential system, stipulates that the legislative rights belong exclusively to the Congress and the budget plan suggested by the President is just a proposal and the final approved version can be different from those requested by the administration. Therefore, the elimination of the provisions restricting additional budget request items and an increase in budget that needs government agreement may be seriously considered at this stage.
In Korea’s case, the government has the exclusive right to draft the budget and, therefore, it damages the spirit of the three separate independent rights of the government ― in many cases with not much consideration for the special nature of independent organizations ― and thus, allows the administration too much freedom to meddle excessively in the affairs of the parliament, the judiciary organizations and other independent institutions through its right to draft the budget.
In the United States, Great Britain, France, Germany and other countries, the administrations are barred from interfering with the budgets written by parliamentary bodies. The rights should be guaranteed legally or by practice so parliaments, the judiciary sector and the administration may set up their own budgets through a systematic means, as their functions are different from each other.
The Special Committee on Budget & Accounts currently a permanent committee, should be upgraded to a standing committee, despite pros and cons on the issue. In the United States, Japan, Great Britain, France and other countries, the committee has been a standing committee and Korea must seriously consider upgrading the status of the committee.
Once the committee is upgraded to a standing committee, it should have under its jurisdiction such organizations as an office in charge of drawing up the national budget, offices in charge of budget accounting and the board of audit’s budget inspection unit.
Under the national fiscal act that went into force beginning the 2007 fiscal year, the budget expenditure results should be submitted to the parliament by May 31 instead of Sept. 2, three months earlier than usual. But the draft budget should be submitted for parliamentary approval not later than Oct. 2, within 90 days from the start of the fiscal year. This previously gave the parliament only 60 days to go over the expenditure report, and the parliament has been having a hard time finishing the inspection on time.
While only 60 days were given to the National Assembly in Korea, the parliaments in other countries are given far longer periods ― in the United States, congress is given 240 days, Great Britain’s parliament has 120 days and France’s parliament receives 70 days ― all enough time to scrutinize the expenditures within the budget. So when the current Constitution is up for revision, they ought to consider extending the deadline for the submission of the government expenditure report to the parliament to 120 days from the start of the new fiscal year (Sept. 2) or until the start of the legislature (Sept. 1) as it had been done during the Yushin Constitution under the late Park Chung-hee regime.
The current term of office for members of The Special Committee on Budget & Accounts is only a year, which is too short a period to keep up with budget approval matters and the budget expenditure report, causing a lack of continuity and professionalism. In the United States, they can serve six years for senators and two years for congressmen; in Japan it’s four years, and in Britain it’s five years and, therefore, the tenure should be extended to more than two years in Korea.
The president or the prime minister come before the parliament to explain the need for parliamentary approval for the government budget every year or the presidential speech is read by the prime minister on behalf of the president, but cabinet ministers come before the parliament in cases when budgets are increased or additional budget items were added.
The practice should be amended so that the prime minister is called upon to explain the changes in the budget in terms of appropriateness and responsibility.
the current national fiscal act has many good points, such as setting up plans for national treasury management, introduction of a top-down system, the joint management of surplus resources from various funds strengthening expenditure management, open treasury information, strengthening conditions for supplementary budgets and the management of tax exemptions, among others, which are considered to have established the systematic nature of national treasury management, forecasting ability and other positive elements in the law.
However, from the standpoint of the fiscal democracy it is unfortunate that diverse systems were not included in the law during the process of deliberation of the parliament’s rights to control the national treasury.
As such, the treasury control rights should be more evenly split between the administration and the parliament in accordance with the principle of the separation of powers in the discussions for an amendment to the Constitution and the National Assembly Law, along with serious discussions and revision of the systems.. nw

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