Debate: Parliament’s quest to improve accounting information in the Netherlands

Over the past 20 years there have been various efforts to adapt the structure and the content of central government budgets in the Netherlands, with the aim of improving insight into the effectiveness and efficiency of public expenditure. This resulted in a kind of pendulum, with either too little or too much accounting information. In this article, we discuss some recent initiatives in the Dutch central government and present some possibilities for additional improvements.

The pendulum of accounting information

The policy initiative ‘From policy budget to policy accountability’, that started in the Netherlands in 1999, was meant to include non-financial information in central government’s budgets (MoF, 1999). It aimed to create more coherence between policy objectives, actual activities and accompanying information in budgets. However, this led to a (perceived) overflow of qualitative policy information in national budgets and too few quantitative indicators to measure the effectiveness of policies (for example Netherlands Court of Audit, 2019).

As a result, a new approach was initiated: ‘Accountable budgeting’ (MoF, 2011). The aim was to make budgets more business-like, and present factual and numerical data. Whereas information on policy effectiveness was included in budgets under the former system, this information was now presented in separate, periodical evaluations of each article in the budget. Although annual budgets were indeed shortened, data on effectiveness and efficiency were made available much later. As a consequence, a coherent and timely picture of the policy cycle was lacking.

Both extreme sides of the pendulum had thereby proven to be undesirable and the hope was that a new endeavour would be able to strike a balance. Such balance is, however, notoriously difficult as it means finding a compromise between the government wanting to focus on the big picture, the bureaucracy tending to focus on details, and the parliament in need of compact information to scrutinize the government.

Scrutiny of (ex-ante) information on effectiveness: the steady one wins the race

The Dutch Government Accounts Act 2016 included a new section (3.1): all policy proposals now had to include information on policy objectives; the instruments to be used to obtain that; the financial implications of doing so; and a formulation of the expected effectiveness and efficiency. In 2019, the Dutch parliament published our report on the way section 3.1 had been applied (NHoR, 2019). We concluded that little information was presented in a ‘SMART’ way; meaning specific, measurable, achievable, relevant and time-bound. We also found that the information was often hard to find and too little attention was paid to the way in which effectiveness and efficiency could be measured. In reaction to our findings, the government has carried out a pilot project, in which each new proposal included a separate attachment with the desirable information. In November 2021, the government announced that this will be replaced by a compulsory paragraph included in each proposal (MoF, 2021).

The operation ‘Insight into quality’ of central government that came into effect in 2018 was meant to maximize added value of public expenditures by improving insight into effectiveness and efficiency and making improvements accordingly (MoF, 2018). One of its objectives is enhancing the feedback loop of evaluations—promoting learning and making evaluations of interconnected and coherent policy fields, rather than of separate (budget) instruments (MoF, 2020a). To that aim, in 2020, the annual budgets contained, for the first time, a so-called ‘Strategic evaluation agenda’. It remains to be seen to what extent ministries indeed make serious work of this initiative. What matters for parliament is that an evaluation strategy not only improves information before (ex-ante) and during (ex-durante) policy implementation but that the accountability function (ex-post) of structurally evaluating all aspects of the budget also remains intact.

The user-friendliness and comparability of the accounting system of the central government had to be improved too. We advised the government to start pilots with accrual accounting at two ministries that often deal with large scale investments: the Ministry of Infrastructure and the Ministry of Defence (NHoR, 2018). These pilot projects are now up and running and will be evaluated. The results are expected during 2022. The High Level Working Group on the Budgetary Stance, that published its report in October 2020, has been hesitant to make a clear recommendation to the next government on the added value of the introduction of accrual accounting (MoF, 2020b). We regard this as a missed opportunity to align the accounting system of the central government with that of municipalities and regional authorities in the Netherlands, as well as with international institutions.

Practice what you preach

As rapporteurs of the parliament, we argued that it is too easy to criticize the acts of the government without looking at our own internal procedures. To that end, we have undertaken a number of initiatives of which we only mention a few in this article. Over the past couple of years, we have seen a steep increase in the use of rapporteurs for the parliamentary proceedings of departmental budgets and annual reports. Recently, a proposal has been made to standardize the use of such (multiannual) rapporteurs. We also have made proposals to actively seek ex-ante input of scholars before a new legislative proposal is discussed. This will improve the knowledge base of parliament, as well as to improve the final policy decision. To that same aim, we have pushed the use of open data and a move towards a digital budget.

Last but not least, we are advocating enduring attention for matters of accountability in parliament. Hopefully, the reinstalled Public Expenditure Committee will manage to continue the endeavour to improve public accounting information and to make the wider public aware of the importance of doing this. This all stands and falls with the persistence of individual members of parliament who are willing to engage in such a process that will surely pay off, but not in the short term. We like to believe that we have set such an example.