Fiscal transparency practice, challenges, and possible solutions: lessons from Covid 19

IMPACT

The extraordinarily fast-paced growth in government spending during Covid 19 highlights the need for effective measures to ensure fiscal transparency during emergencies. Governments must improve emergency fiscal transparency by disclosing more detailed information on the types and conditions of funding sources, extra- and off-budget revenue sources, and recipients and impacts of spending. Institutional procedures should be established to safeguard fiscal transparency during emergencies, and to increase the effective involvement of legislatures, auditing agencies, and citizens in the management of fiscal rescue packages.

ABSTRACT

This article revisits the concept of fiscal transparency in an emergency context. Examining the fiscal reporting practices of 120 national governments during Covid 19, as compiled by the International Budget Partnership, the authors found under-reporting of critical information on external funding sources; limited reporting on spending levels and impacts on vulnerable groups and areas; and lack of sufficient institutional safeguards to ensure fiscal transparency. They discuss the theoretical implications of their findings and provide policy recommendations for improvement.

KEYWORDS:

• Covid 19
• crisis management
• emergency fiscal rescue policies
• fiscal transparency
• information production
• institutional procedures and relationship
• International Budget Partnership

Introduction

Covid 19 has heightened the importance of information transparency, as governments around the world have disclosed pandemic information and policies to the public (Wu et al., 2022). However, fiscal transparency—an important component of government information transparency and an effective way of meeting managerial and accountability goals—attracted little attention during the crisis. For example, the Covid 19 Government Response Tracker, developed by the University of Oxford, includes only a few indicators on fiscal policies, with some public complaints concerning the lack of fiscal information on pandemic spending (International Budget Partnership, 2020). As emergency fiscal rescue policies remain at the core of government responses, and entail large-scale resource inputs, a lack of financial information could lead to misunderstandings or misperceptions among stakeholders in governments’ pandemic responses. This article empirically examines the state of fiscal transparency during Covid 19 and draws lessons for emergency fiscal transparency for the future.

During non-emergency times, fiscal reporting systems provide information to stakeholders on a routine, often annual, basis (Chan, 2003; Craig & Kopits, 1998). However, such systems are inadequate during large-scale crises, such as Covid 19, when spending surges and fiscal sources multiply quickly (Wang & Xu, 2022). By the end of 2020, governments worldwide had spent US$14 trillion, or 17% of global GDP, on pandemic-related measures, and even more funds are being allocated for coming years (International Budget Partnership, 2021).

The literature on emergency fiscal management is largely concerned with identifying strategies to manage resources during emergencies and recovery periods. Issues of fiscal transparency are little studied—what should be reported, who should report it, to whom, and through what institutional procedures? This is not surprising given that the rapid and effective distribution of resources, rather than reporting of the distribution, is often the priority in emergency management. Nevertheless, the increasing frequency of natural or human-caused disasters, challenges in managing resources, and the potential for great losses due to waste, misuse, or abuse of resources during emergencies are raising significant concerns and call for intensified reporting efforts by scholars, governmental officials, and international organizations (Arapis & Reitano, 2018; International Budget Partnership, 2021).

In this article, using the International Budget Partnership’s (IBP) data on 120 countries during Covid 19, we examine three key questions at the heart of fiscal transparency:

• What revenue sources were reported, and how well were they reported?

• What spending was reported, and how well was it reported?

• What institutional processes were established to ensure fiscal transparency?

We begin our examination with a theoretical framework that conceptualizes fiscal transparency as a set of institutional relationships in fiscal information production and reporting, followed by a methodological description of the IBP data of emergency fiscal reporting and key findings. We then discuss the theoretical and practical implications of these findings, and draw conclusions within the established framework.

Framework

This section defines fiscal transparency as a dynamic interaction between a government and its stakeholders, with a focus on the specific issues that further extend this relationship in emergencies.

Fiscal transparency as institutional relationships

The concept of fiscal transparency goes beyond the simple provision of fiscal information to stakeholders, which, along with performance and other institutional information, forms a foundation for administrative accountability (Arapis & Reitano, 2018). In liberal democratic contexts, fiscal transparency is defined broadly and rooted in democratic development and policy instruments to ensure and strengthen democracy, participation, accountability, and legitimacy (Cucciniello et al., 2017; De Fine Licht et al., 2014; Hood & Heald, 2006). The development and evolution of fiscal transparency in governments essentially concern institutional interactions among stakeholders engaging in the resource allocation process and decision-making. These interactions normally consist of two important components: stakeholders’ demand for fiscal information, and institutional procedures and mechanisms to fulfil the demand by producing the information.

First, fiscal transparency requires fiscal information to be available and comprehensive to meet the diverse needs of stakeholders in budgetary decision-making. Heald (2012) operationalizes full transparency in four dimensions—inward, outward, upward, and downward—designed to fulfil stakeholders’ various demands for fiscal information. The comprehensiveness and availability of fiscal information are focal points advocated by international institutions, including the IBP, the International Monetary Fund (IMF), and the World Bank (Bastida et al., 2017). Nevertheless, stakeholders from different institutions often have different interests in the budgetary process that lead to demands for different types of fiscal information (Xu et al., 2021); for example, citizens may be interested in tax burdens, legislators in the costs of services, and managers in revenues needed for service provision (Mikesell, 2013). Even stakeholders within the same group, such as citizens, may have different demands for fiscal information (Piotrowski & Van Ryzin, 2007). Moreover, the demand for fiscal information may change as the stakeholders’ focus changes to reflect socio-political and economic circumstances. For example, the fiscal reporting practice of performance budgeting has evolved since the 1990s to include performance information to supplement fiscal information (Ho, 2018; Wang, 2002). The need for fiscal transparency increases in response to fiscal crises and development aid, as the demand from external stakeholders increases (Arapis & Reitano, 2018). Thus, fiscal transparency should address what types of information should be disclosed under what socioeconomic circumstances, taking into consideration stakeholders’ different demands.

Second, sound institutional procedures are required to ensure the production of quality information, which inevitably requires the empowerment and engagement of stakeholders to overcome the political and technical obstacles that often hamper fiscal information production (Heald, 2012). In the relatively limited literature on institutional procedures and strategies to ensure fiscal transparency, two broad categories of institutional instruments are discussed: political and legal procedures, and hierarchical and professional procedures (Wang, 2002).

Political and legal procedures define the roles and responsibilities pertaining to fiscal information flow among bureaucracies and oversight institutions, including but not limited to the legislature, auditing agencies, independent financial institutions, civil society, and citizens (Ma & Hou, 2009; Wang, 2002; Workman, 2015; Xu et al., 2021). For example, lawmakers usually review, discuss, and approve the bureaucracy’s resource allocation decisions in the budgetary process (Wehner, 2006). Legislators use budgetary institutions to demand and prioritize fiscal information from the bureaucracy (Workman, 2015). Auditing agencies are legally required to conduct financial audit reviews and present reports to the legislature, strengthening fiscal information flow in an ex post manner. Participatory budgeting is also an important mechanism to empower individual citizens or civil society in the production of fiscal information during budgetary processes (Ebdon & Franklin, 2006; Van Zyl, 2014).

Along with political or legal procedures, hierarchical and professional procedures within the bureaucracy can significantly influence fiscal information provision (Harrison & Sayogo, 2014). Indeed, such procedures can be dominant in contexts where political and legal control is absent or lacking. Tools and processes in financial planning, monitoring, and reporting are critical to financial management. Proper accounting and auditing control are necessary for developing sound financial information. Other hierarchical or professional arrangements to ensure high-quality fiscal information include a fiscal reporting system with a professional central budget agency (Cheung, 2006), fiscal reforms featuring the consolidation of all revenues and expenditure, including extra- and off-budget funds (Ma & Ni, 2008), a centralized government procurement system, separation of capital programmes from recurrent operating expenditures (Mikesell, 2013), and sound public accounting and reporting systems (Chan, 2003). Recently, information and communication technologies (ICT) are increasingly being adopted to boost fiscal information production and management as a response to evolving and challenging social environments (Allen et al., 2020; Bhattacharya et al., 2021; Una et al., 2020).

In summary, fiscal transparency can be understood as institutional relationships that involve interactions between institutional stakeholders to define what fiscal information is (or should be) available, and what institutional procedures are (or should be) available to ensureg fiscal transparency. In the following, we use these two dimensions to elaborate fiscal transparency during emergencies, demonstrating that emergencies provide a specific context and expectation for refining, and perhaps even extending, the concept of fiscal transparency during normal times.

Fiscal transparency as fiscal information production

The aim of fiscal transparency is for a government to fulfil its obligations for fiscal information production, which inevitably requires identifying the demand for fiscal transparency—particularly what fiscal information should be tracked, collected, and reported to fulfil stakeholder demands. In a non-emergency situation, fiscal information can be developed and examined in budgetary instruments/documents, including pre-budget statements; executive budget proposals; legislative budgets; citizens’ budgetary participation reports; in-year, mid-year, and year-end budget reports; and audit reports, as incorporated in the IBP’s evaluation framework.

However, this framework may be insufficient for understanding fiscal transparency in emergencies that require governmental and fiscal responses beyond regular routines and procedures (Ansell et al., 2010). Emergency-specific categories of fiscal information are necessary for reporting information in fiscal rescue packages. Specific considerations regarding fiscal information reporting must be accentuated during emergencies.

The first consideration concerns the reporting of fiscal resources in three stages of emergency management: preparation, response, and recovery. We focus on the latter two stages because both demand fiscal transparency that is very different from those in normal times, although we broadly consider all three stages in our discussion. During emergencies, given the needs and decision circumstances, the fiscal information required for tracking and reporting may evolve. Financial resources beyond a government’s usual sources (such as private donations) may become important during emergencies. Although governments have contingency resources—budget stabilization funds (i.e. rainy-day funds), contingency funds, and fund balances and reserves—and may initiate re-budgeting to cope with crises (Anessi-Pessina et al., 2012; Barbera et al., 2017), they often have difficulty generating sufficient resources for a long period of time, such as during Covid 19. As of June 2020, Covid 19 pandemic-related spending worldwide had already reached 13.6%, on average, of each country’s GDP (Chen et al., 2021), far beyond the level of resources normally reserved by governments for contingency or emergency purposes. Therefore, governments may resort to external resources, such as donations and emergency borrowing, to strengthen their resource buffers during emergencies. External revenue sources often bring in new stakeholders (lenders and donors for example) and information on the new revenue sources is required. Stakeholders are interested in the institutional arrangements for these external sources because they reflect the soundness of public fiscal management, and such information can help stakeholders to better understand the overall financial situation and manage their expectations (Heald & Hodges, 2020; Rahim et al., 2020; Wang, 2002). Research finds that external aid is often accompanied by increased fiscal transparency due to increased pressure from external stakeholders (Arapis & Reitano, 2018).

Another key consideration in an emergency is the reporting of sudden increases in spending and its impacts. During a crisis, fiscal relief is normally targeted to the most affected areas, populations, and service sectors and functions. When resources are rushed to the most affected areas and to the most vulnerable individuals and all available means are used to distribute payments to all recipients (Chen et al., 2021), fiscal reporting systems should be ready to track, record, and report these spending activities. The capacity of fiscal reporting systems to capture fiscal activities during normal circumstances should be extended to cover emergency fiscal payments. A major challenge for an emergency fiscal reporting system is the collection of timely and comprehensive fiscal information on spending execution, given the rapid evolution of emergency needs and stakeholder demands for transparency of funds (George et al., 2020).

Emergencies demand not only timely responses but also immediately visible policy outputs and impacts to reduce uncertainty and boost stakeholders’ trust and consensus (Caiden, 1981; Wang, 2002). Stakeholders want to know whether fiscal rescue packages can mitigate detrimental effects caused by disruption and crises, and this requirement becomes increasingly critical and challenging as crises become more transboundary and their impact evolves (Ansell et al., 2010). Therefore, it is important to develop relevant performance indicators to evaluate the impact of rescue packages during crises (George et al., 2020). Natural disasters can place vulnerable groups in more financially disadvantageous positions than other groups. For example, the outbreak of an infectious disease like Covid 19 had greater effects on low-paid workers within the tourism industry than on many other groups. The impacts of fiscal rescue packages on such vulnerable groups may be particularly informative and of interest to decision-makers and to the public. However, the timely integration of information on both fiscal packages and their performance impact in a comprehensive reporting system that reflects the evolving phases of emergencies remains a challenge to fiscal transparency during emergencies.

Fiscal transparency as institutional procedures

During non-emergency times, political and legal procedures embedded in a constitutional system can strengthen political accountability and ensure information flow. However, information exchange through these procedures can be time-consuming and slow in order to facilitate comprehensive and thorough political debates and decisions (Xiao et al., 2020).

During crises and emergencies, when the timeliness of policy execution is a major concern, adaptive political and legal procedures are needed to ensure information transparency and timely decision-making for the execution of fiscal rescue packages. Examples of such procedures include special legislative committees established to provide a thorough review and prompt approval of rescue packages, speedy external auditing of fiscal rescue packages during the crisis, and rapid ex post auditing to ensure timely reporting of fiscal compliance rules and therefore maintain fiscal accountability (Barroy et al., 2020). New channels, such as websites and social media accounts, can be created to disclose timely financial information to reduce citizens’ concerns and uncertainties (Wu et al., 2022).

Moreover, hierarchical and professional mechanisms within the bureaucracy can be adopted to enhance procedures to safeguard fiscal transparency during emergencies. Because these practices are within the bureaucracy and can be quickly adopted in a top-down manner, they enable procedural accountability and transparency more easily and quickly than legal and political procedures (Khasiani et al., 2020; Wang, 2002). For example, extra-budgetary or off-budgetary resources, which often experience a significant surge during emergencies, can be pooled as special revenue funds earmarked for emergency purposes. Many countries established special Covid 19 funds immediately after the outbreak of the pandemic; according to a World Health Organization survey in June 2020, more than 40 countries introduced Covid 19 extra-budgetary funds (Rahim et al., 2020). A special fund for Covid 19 can enable pooling multiple resources, help centralize spending decisions and execution, facilitate policy priorities, and provide an effective management structure.

In addition, given the need for speedy processing of purchase orders during crises, timely procurement steps that target precise recording of payments should be established. Rescue resources are designated for emergency spending programmes, which often involve large and quick purchases of emergency services and equipment to increase public health capacities and save lives and economies (Neu et al., 2015). It is virtually impossible to achieve these policy goals in an environment that allows fiscal misconduct and corruption (Khasiani et al., 2020). Government procurement is crucial in planning, implementing, and regulating expensive emergency purchases, and it is more vulnerable to corruption during emergencies (Anessi-Pessina et al., 2020; Bauhr et al., 2020).

Finally, Covid 19 has accelerated the adoption of ICT to speed up public service deliveries and payments to vulnerable people (Agostino et al., 2021). ICT can serve as an important transparency mechanism through which fiscal information can be promptly collected, saved, analysed, and shared with stakeholders in a timely manner (Ansell & Gash, 2018).

Method and data

Fiscal transparency data for our study were obtained from the IBP, which has conducted extensive surveys on governments’ fiscal transparency biannually since 2006. The IBP surveyed 120 countries’ fiscal transparency practices pertaining to their fiscal rescue packages during Covid 19, designing survey questions in collaboration with other important international organizations that promote fiscal transparency, including the IMF and the Global Initiative for Fiscal Transparency. The IBP relied on its existing collaborative networks with governments and professional and civil societies for its biannual fiscal transparency evaluation—resulting in expedited and high-quality responses. The IBP reviewed all survey responses provided by its collaborators to ensure that the answers were based on a consistent standard for all countries, and double-checked the explanations and data sources to support the answers. The survey was completed in May 2021.

The survey addressed fiscal reporting and monitoring practices in governments’ fiscal rescue packages that were introduced from March to September 2020—the most critical response/recovery period in the fight against Covid 19. It included 26 categories of questions consisting of 190 detailed indicators concerning budget planning, implementation, oversight, and citizen participation. The responses to each indicator included ‘yes’ (i.e. information was provided) and ‘no’ (i.e. no information was provided), with spaces for comments, explanations, and sources to support the answers. The survey defined fiscal information disclosure as meaning that a country used such practices and published the relevant information. No information disclosure meant that the country had not implemented such practices or such practices were not communicated to the public through official channels.

We selected questions concerning revenue sources, spending impacts and beneficiaries, and institutional procedures to safeguard information transparency in our analysis based on the framework developed in the previous section. In total, we analysed the responses of 18 questions containing 130 indicators with ‘yes’ or ‘no’ answers, which provided comprehensive coverage of fiscal transparency practices during the pandemic. In their survey response, a country could choose multiple fiscal transparency practices or ‘none of the above’. We present the statistics of all choices in the next section of this article. It should also be noted that not all questions contained the open-ended item ‘others’ in the IBP survey. In the following section, we report the overall trends in the practices across countries and summarize the proportions of countries that have adopted them.

Findings

This section presents the key findings concerning fiscal transparency from the IBP Covid 19 survey, as defined in the framework, in terms of revenue sources, spending and immediate impacts, and institutional procedures.

Revenue sources for fiscal rescue packages

Revenue capacity is key in fiscal preparedness during crises. Although the literature studies emergency funding sources (Lee & Chen, 2021), such as budget stabilization funds and supplemental funding schemes, more information is needed about revenue sources in global, large-scale, and sudden fiscal crises. Covid 19, with its global reach and overwhelming effects, provides such an opportunity. The IBP survey covered three important revenue sources: current revenue sources, borrowing, and donor funding. Figure 1 shows that many governments (42.5%) failed to identify any actual sources of Covid 19 financing in their fiscal rescue packages. Among these, 69 governments (57.5%) provided information on revenue sources, 17 provided only one item of information, and 42 governments provided two or three items. Note that the items are independent and do not add up to 100% in the figures in this article because responding governments were allowed to choose multiple items.

Figure 1. The disclosure of actual financing sources of fiscal rescue packages.

Note: N = 120 national governments. In this article, ‘current revenues’ refers to the revenue sources within a government’s fiscal system. The sources include budget reallocations, contingency reserves, and other government revenues within the existing budget system. In the IBP survey, current revenues were referred to as ‘domestic revenue sources’. The term ‘unspecified’ was used to replace the original term ‘explanatory narratives’ in the survey to describe answers that included general revenue information but did not specify sources. For this question, the survey specified alternative options in an ‘other’ category.

Sources: IBP Covid 19 survey, question 15.

Regarding current revenues, Figure 2 shows first that more than one third of the governments (35%) failed to disclose any information about their revenue sources. Although it is common for governments to redirect resources during emergencies, less than half (48.3%) reported information on budget reallocation. Furthermore, despite fiscal slack (for example fiscal reserves and stabilization funds) serving as an important fiscal buffer during emergencies, only 21.7% disclosed information about contingency reserves and additional government revenues.

Figure 2. The three main revenue sources for fiscal rescue packages.

Note: For the questions on current revenues and borrowing needs, N = 120. For the donor funding questions, N = 99. Some of the countries did not use donor funding to raise emergency revenues. Thus, in the survey, they were classified as ‘not applicable’. These donor questions concerned the planning stage, whereas the donor item in Figure 1 relates to the actual implementation. ‘Unspecified’ is used here to replace the IBP original option of ‘explanatory narrative’. For the questions of current revenues and borrowing needs, the survey specified alternative options in an ‘other’ category.

Sources: IBP Covid 19 survey, questions 10 to 12.

In addition to current revenues, borrowing was an immediate source of fiscal relief for many governments (approximately 40%: see Figure 1). However, only 47.5% of the governments disclosed their total borrowing needs, and most governments did not report critical information, such as debt types and interest rates (see Figure 2, middle).

Another important fiscal source is donations (23.3%, Figure 1), which are expected to increase during disasters. Nevertheless, almost half of governments (48.5%) did not disclose any information on donor financing. Even for those providing such information, the critical details regarding donation types, purposes, and restrictions were largely missing (Figure 2, bottom).

In summary, Covid 19 has forced governments to significantly increase the use of external revenue sources, such as emergency borrowing and donor financing, instead of reallocating existing sources. Nevertheless, the critical information on the types and restrictions of these new funding sources is missing from fiscal reports. Improved tracking, monitoring, and reporting of such information are needed in governments’ fiscal reporting systems.

Spending and beneficiaries

Spending information is critical for government stakeholders (for example legislators or citizens) and public managers for crisis management. Figure 3 compares the reporting of budgetary spending (i.e. planning) and implementation. Only two thirds (66.7%) of the governments reported total spending in their budgets, less than half reported the total spending by programmes (49.2%), and even fewer reported on spending by administrative units (37.5%). The respective figures for implementation were even lower than those for the budget. Tax relief and loan measures are widely used to help economies during the crisis, but only a few governments disclosed such information.

Figure 3. Spending information disclosure during the planning and implementation stages.

Note: N = 120 for the planning stage, except for two tax items, for which N = 100. The IBP questionnaire did not check the availability of loans and loan guarantees during the planning stage. N = 116 for the implementation stage. ‘Unspecified’ replaces the IBP original option of ‘explanatory narrative’.

Sources: IBP Covid 19 survey, questions 4 and 5 (planning stage) and 14 (implementation stage).

Information concerning spending beneficiaries and impacts is critical in managing a global crisis such as Covid 19 (Grossi et al., 2020). A significant number of the governments reported this information in their plans (see Figure 4, top). However, 18 governments (15%) failed to provide any information about the beneficiaries, missing the opportunity to reveal fiscal performance information critical to stakeholders.

Figure 4. Intended beneficiaries, gender impact, and performance of fiscal rescue packages.

Note: N = 120. ‘Unspecified’ replaces the IBP original option of ‘explanatory narrative’. For the question of gender impact, the survey specifies other options in an ‘other’ category.

Sources: IBP Covid 19 survey, questions 7, 8, and 16.

A critical issue in pandemic management is the immediate impact on groups that may be disproportionally affected by the disaster; this area has been identified as requiring urgent improvement in budgeting (Rubin & Bartle, 2021). The survey shows that governments were ill-prepared to reveal this information. Only 5% of those surveyed could detail any impact of their spending on women and girls (Figure 4, bottom), and 75.8% of the respondent governments failed to provide any gender information (Figure 4, middle).

A related finding was the lack of reported performance information. Almost two thirds of the surveyed governments failed to provide any performance information. Less than 30% reported performance outputs, and only a few disclosed information on the impact of spending on poor people, women, or other vulnerable beneficiaries. This finding reveals that it is vital to develop emergency performance measures.

In summary, regarding Covid 19 spending reports, although most governments disclosed overall expenditure information, information on the beneficiaries, impact, and performance was largely missing. Efforts should be made in the future to establish and enhance these aspects of fiscal tracking, monitoring, and reporting.

Institutional procedures to ensure fiscal transparency

The unprecedented amount of resources used and the urgency to spend during Covid 19 emphasize the need for institutional mechanisms to ensure fiscal transparency. This section reports the survey results on the roles of legislatures, auditing agencies, and citizens in fiscal transparency practices and related political, legal, and managerial practices during the crisis.

Legislatures and auditing are two important political mechanisms to safeguard fiscal accountability (Barrett AO, 2022; Wehner, 2006). However, 48 of the 120 governments surveyed (40%) reported that their legislature had not been involved in the process of approving the fiscal rescue packages. Although more than 80% of the remaining 72 governments conducted legislative votes and debates on their fiscal rescue packages, far fewer governments had sufficient time (at least two weeks) or human resources (special Covid 19 committees) to review the fiscal rescue packages (see Figure 5, top).

Figure 5. The role of legislatures and auditing in fiscal rescue packages.

Note: N = 72 for the legislature questions. N = 120 for the audit questions.

Sources: IBP Covid 19 survey, questions 20 and 23.

Furthermore, 61.7% of the national audit offices did not disclose any auditing information on the rescue packages. Approximately 20% only published auditing plans and findings. Even fewer (9.2%) detailed the executive agencies’ responses to audit findings. These findings indicate weak institutional safeguards to ensure fiscal accountability and transparency during emergencies.

The data also suggest that citizens played a minimal role in ensuring transparency in the fiscal rescue packages. Up to 78.3% of countries did not provide any participation opportunities during the formulation and approval stages; similarly, 74.2% of countries failed to provide opportunities during the implementation and evaluation stages (see Figure 6). Among the 20 possible participation forms and activities listed in the survey, very few countries adopted these participatory practices in their fiscal rescue packages, suggesting that citizens were not engaged in the emergency budgetary process during Covid 19. These findings indicate a need to improve delivering critical fiscal information to citizens during emergencies like pandemics.

Figure 6. Citizen participation in the budgetary process for fiscal rescue packages.

Note: N = 120. SAI = supreme audit institution.

Sources: IBP Covid 19 survey, questions 25 and 26.

In terms of bureaucratic procedures, emergency spending is typically considered as and requires off-/extra-budgetary arrangements that are not included in the annual budgetary process and are drawn from a wide range of revenue resources (Rahim et al., 2020). Adopting this definition, the IBP survey finds that 46.3% of governments failed to provide any information about extra- and off-budget arrangements in the planning stage (Figure 7). An even larger proportion of governments (63.8%) failed to provide any information from the implementation stage that would help stakeholders understand the extra- and off-budget fiscal liabilities.

Figure 7. Extra-/off-budgetary funds in the planning and implementation stages.

Note: N = 80. ‘Unspecified’ replaces the IBP original option of ‘explanatory narrative’.

Sources: IBP Covid 19 survey, questions 13 and 17.

Significant growth in spending during the Covid 19 pandemic requires timely and accurate government procurement information. Unfortunately, 40% of the governments failed to provide any guidance, rationale, estimates, or other explanatory information on procurement in their fiscal rescue packages (see Figure 8, top). An even greater proportion of governments (60.8%) failed to provide actual procurement information (Figure 8, bottom). Inadequate information about procurement risks increasing the incidence of misuse and corruption in the fiscal rescue package. The IBP survey did not contain questions about ICT adoption.

Figure 8. Emergency government procurement during the planning and implementation stages.

Note: N = 120. For these two questions, the survey specifies other options in an ‘other’ category.

Sources: IBP Covid 19 survey, questions 18 and 19.

In summary, fiscal rescue packages across the world had weak legislative, auditing, and public (citizenry) safeguards during Covid 19. Reports largely lack critical information about extra- and off-budget funds and government procurement practices.

Discussion

Fiscal transparency, as institutional relationships, concerns the production and reporting of fiscal information for managerial and accountability purposes. Significant growth in external funding sources, the need for targeted spending and impact assessment, and the development of institutional safeguards to track spending all pose challenges and call for refinement and integration of fiscal transparency practices based on lessons learnt during Covid 19.

Crises and emergency situations challenge governments to balance the requirements of information reporting with the need for emergency management in their fiscal systems. Essentially, they must strike a balance between the democratic principles of transparency and accountability and the governance requirements of efficiency and effectiveness. In a rapidly-evolving emergency involving significant uncertainty, the fiscal capacity required to deal with the emergency also changes rapidly, and the government needs to constantly assess the development of the emergency and respond with appropriate fiscal contingency plans. Therefore, the rapid and timely dissemination of information is critical to ensure timely decision-making for emergency management.

The need for speed and timeliness in emergency management presents a challenge to reporting information with the same levels of thoroughness and comprehensiveness required during non-emergency times. Covid 19 makes this conflict evident, as the rapid evolution of the pandemic situation made swift production and utilization of fiscal information a priority for pandemic responses and rescue packages. Such a situation inevitably affects the thoroughness of information preparation, as demonstrated by our findings that rescue packages did not include some critical information, leading to weakened fiscal transparency. The fundamental challenge for fiscal transparency is to meet the need for information transparency, openness, and accountability, while ensuring efficient delivery of information required for emergency management.

Our findings reflect several challenges in striking the balance between timely and efficient management of the crisis and the achievement of transparency, openness, and accountability. First, ensuring the timeliness of information for emergency management challenges the thoroughness and comprehensiveness of revenue reporting and fiscal transparency. Covid 19 was characterized by under-reporting of certain revenue sources, with governments seeking revenue sources outside the normal fiscal system in their efforts to diversify revenue sources and withstand the impacts of the fiscal shock. This institutional boundary spanning led to some innovative funding developments, especially in extending revenue sources, such as donor financing and emergency borrowing, which are not normally utilized or reported in the fiscal system. Indeed, while governments are taking innovative measures, it remains challenging to report these ‘unexpected’ measures properly for fiscal transparency and accountability purposes.

A possible solution to this challenge is to develop measures that recognize such revenue-raising practices for emergencies. The last two columns of Table 1 propose principles of solutions at the legislative/political and bureaucratic/professional levels. A legal and legislative framework should be introduced to recognize the important role of external financing methods during emergencies, so that external stakeholders can access the relevant fiscal information and use it in their decision-making. The framework should allow for flexibility in developing proper reporting practices to account for such revenue sources and simultaneously maintain an accurate record of their use.

Table 1. Covid 19 practices, challenges, and principles of solutions for fiscal transparency.

Practices (key findings of this study)	Challenges indicated	Principles of solutions in legal and political procedures	Principles of solutions in bureaucratic and professional procedures
Under-reporting of rapidly expanding external revenue sources in donor financing and emergency borrowing	Timeliness and speed of information required for emergency management challenge the thoroughness and comprehensiveness of revenue reporting and fiscal transparency	Legalizing and developing legal and political procedures/mechanisms to allow for administrative flexibility in recording and reporting external financing methods when dealing with unexpected fiscal circumstances arising from emergencies	Extending and introducing fiscal accounting and reporting practices that incorporate reporting of external revenue sources into existing reporting systems
Not reporting or under-reporting of spending impact or outcomes	The need for timely, immediate or even real-time impact assessments during emergencies challenges the process orientation and openness of the existing reporting system	In the budgetary process (especially the legislative debate), deliberating, developing, or enhancing a budgetary and fiscal reporting system that includes information on the targeted populations and immediate impact assessments during crises	Developing or continuing to improve the performance budgeting and reporting within the existing framework in measuring, tracking, and assessing performance, with a specific focus on emergency performance reporting measures such as real-time performance tracking of emergency outcomes and performance tracking of groups disproportionally affected
Lack of institutional procedures to monitor spending	The greater need for fiscal transparency for spending during crises challenges existing institutional arrangements to monitor and safeguard spending	Establishing and strengthening timely reporting of the legislative process in emergency approval, supplemental funding legislations, and auditing practices	Introducing special reporting of expedited procurement processes by administrations during crises, expedited reporting of auditing processes that focus on large emergency spending items, and increasing the use of ICT in emergencies to improve the speed and accuracy of recording and reporting. Considering reclassification of emergency spending and possibility of accrual-based reporting of spending (and revenues)

Second, the call for prompt spending on targeted populations in need and impact assessments for timely decision-making in emergency management challenges fiscal transparency, which has traditionally stressed regulatory compliance, process openness, stakeholder engagement, and information availability. Spending during emergencies often has a designated policy impact, identifying and targeting certain specific policy areas and demographic groups severely affected by the crisis. However, our findings suggest that the traditional reporting systems may not provide such information at an appropriate level.

Although information on performance impacts and spending outcomes has long been encouraged and promoted in public sector reporting (Wang, 2002), our findings suggest a greater need to develop performance budgeting and reporting systems, especially in terms of their ability to provide information on targeted beneficiaries and the immediate impacts of spending so that decisions can be adjusted to improve emergency responses. This finding indicates an important need for a performance reporting system that records and reports the immediate impact of spending. There are several possible solutions to this challenge, as demonstrated in Table 1, all of which involve improving the performance budgeting system by developing the institutional capacity for performance impact assessment.

Third, emergencies require greater transparency in the tracking of spending. The unprecedented amount of resources used and the urgency to spend during Covid 19 underlie the need for institutional mechanisms to ensure spending transparency. Although most governments appear to have the ability to significantly increase their spending, especially extra-/off-budget spending, the tracking and safeguarding of these sources through institutional arrangements were inadequate (Rahim et al., 2020). For instance, the IBP survey revealed that both the legislative and administrative processes for tracking emergency procurement were insufficient. Proper legislative, administrative and auditing mechanisms are not in place to approve, track, and monitor the emergency spending flows, increasing the risk of fraud and corruption.

The IMF’s database of fiscal policy responses to Covid 19 may provide additional lessons (IMF, 2021):

• First, the IMF classification of governmental emergency spending measures—direct governmental support (or ‘above-the-line’ measures); market liquidity enhancement measures (‘below-the-line’ measures), such as equity injections or asset purchases; or contingent liabilities, such as loans or deposits guarantees—can help clarify the nature of spending measures and may be considered as a way of classifying (or reclassifying) and reporting emergency spending.

• Second, importantly, the IMF adoption of accrual based accounting allows a more accurate measurement of fiscal impact on the government. Indeed, there can be significant fiscal commitments, such as loans and equity injections by governments during a crisis and using cash based accounting, as seen in the IBP survey, can inflate fiscal liabilities during the crisis period. This is because at least part of the loans will be paid back and equities will be sold after the crisis. To report financial transactions, spending as well as revenues, on the accrual basis provides a more accurate reflection of fiscal impact on the government.

Additionally, measures can be taken to strengthen the legislative process for emergency approvals, supplemental funding legislation, and auditing practices. Examples of such measures include adding supplementary clauses to allow for additional (but still timely) legislative approval and reporting of extra-/off-budgetary measures during large-scale crises, and special reporting of expedited procurement and earmarked funds to support essential fiscal information flow. Given the unprecedented demand for fiscal information production during crises, governments may need to upgrade their technological infrastructure and embrace ICT to ensure prompt and comprehensive fiscal information.

Moreover, due to the need to relax certain spending controls (such as fraud control and corruption prevention) during large-scale crises, such as Covid 19, to speed up decision-making, consideration should be given to what circumstances constitute a timing of declaration that an emergency is over and what institutional processes should be in place to recover the measures. This is also important for non-spending performance measures that may be relaxed during crises—measures such as stakeholder participation and public consultations in the budgetary process. Having such an ex post system in place may help overcome potential stakeholder resistance (from the legislature or the public for example) due to the lack of institutional safeguards during crises in fiscal rescue packages when ex ante procedures to control financial resources are lifted.

Conclusion

This article extends the discussion on fiscal transparency by placing it in the context of crises, which has become increasingly important, particularly given the unbalanced disclosure of fiscal and other governmental information during Covid 19 and other crises. To do this, we conceptualized fiscal transparency as a dynamic and interactive institutional relationship consisting of fiscal information production and institutional procedures to ensure fiscal transparency during emergencies.

This relationship is manifested in different ways during crises than during non-emergency times, when fiscal reporting stresses routine practices to ensure information availability and accuracy, openness, and easy comprehension of records by stakeholders. In emergencies, there is an added dimension in that fast-evolving circumstances require rapid and responsive decision-making, which may complicate a government’s ability to fulfil requirements for information transparency and openness. During emergencies, the public’s interests will be better served by achieving a balance between timely decision-making and information transparency in the government.

In practice, the demand for such a balance challenges policy-makers and public administrators to develop a fiscal reporting practice that, despite its ability to respond to fast-evolving fiscal circumstances during emergencies, can provide critical information to various stakeholders. As emergencies, whether caused by human activity or natural phenomena, become more frequent, it is conceivable that certain fiscal information that would normally be considered important only during emergencies will become part of routine fiscal reporting practice. The tendencies of governments during emergencies to expand their revenue sources and redirect spending to achieve specific policy effects, including focusing on vulnerable groups, highlight the need to integrate fiscal transparency practices into fiscal reporting for better institutional outcomes.

Our study, based on novel descriptive empirical findings from the IBP survey, sheds light on future directions for research. Studies should investigate factors affecting fiscal transparency and explore further how fiscal transparency practices during crises can be enhanced using solid empirical evidence. It will also be important to evaluate the impact of having insufficient transparency arrangements, particularly in procurement and auditing, on corruption risk when data about corruption become available in a later period. While governments generally disclosed sufficient, and sometimes overwhelming, amounts of general information (such as confirmed cases and deaths and policy priorities during Covid 19) to stakeholders, they should also have disclosed fiscal information on revenue sources, spending, and immediate impacts, and enhanced their institutional procedures to ensure fiscal information flow among stakeholders, thus reducing the disclosure gap between fiscal information and other governmental information and delivering fiscal transparency.

This article provides important lessons on global fiscal transparency practices during Covid 19. Its limitations lie in its descriptive and exploratory nature, and discovering the causes of these practices was outside the scope of the research. Moreover, the lessons drawn are from a global database, and specific practices in different countries may vary. Other databases, such as the IMF Database of Fiscal Policy Response to Covid 19, may be incorporated in the future research (IMF, 2021). Despite these limitations, we provide an initial picture of emergency fiscal reporting practices and offer lessons to improve the practices for managing crises, which are likely to become more frequent in the future.

Acknowledgements

We are grateful for the editors’ support and the anonymous reviewers’ feedback to enhance the quality of this article.

Disclosure statement

No potential conflict of interest was reported by the author(s).