The Scope of Government

2. The structure and functions of government are well defined in the law.² Colombia is a unitary but decentralized republic made up of the National Government and the governments of the territorial entities (departments, districts, municipalities and indigenous territories) that enjoy autonomy in the management of their own interests.³ Supreme power lies with the legislative, executive and judicial branches. In addition to the bodies that make up the branches of government, there are other autonomous and independent bodies, which carry out the remaining functions of the State.⁴ Executive power lies with the National Government, the Departmental Governments, and the municipalities’. The National Government consists of the President of the Republic, the ministers and the directors of administrative departments.⁵ Policy formulation and implementation is the responsibility of the executive branch, which essentially means the National Government and, to a lesser extent, the governments of the territorial entities.

3. The boundary between the public and private sectors is generally clear. The national public administration, under the authority of the National Government, is made up of the central and decentralized sectors. The central sector consists of the Office of the President of the Republic, the Office of the Vice President of the Republic, the High Councils of the administration, the Ministries. Administrative Departments, and Superintendencies and special administrative units without legal status.⁶ The decentralized sector consists of bodies and entities attached or connected to a Ministry or Administrative Department that have legal status, administrative autonomy and their own assets. These are public establishments,⁷ non-financial public enterprises (NFPE) and mixed-capital societies at the national level,⁸ and other administrative entities with legal status created by law. A similar organization occurs in the public administrations at the territorial levels, which are divided into a central sector consisting of the departmental or municipal government and a decentralized sector consisting of public establishments, NFPE, and mixed-capital societies at the territorial level. There are private sector entities that provide non-commercial services that are financed with compulsory contributions established by law (parafiscal contributions).⁹ In addition, quasi-fiscal activities carried out by specific decentralized entities, particularly by NFPE, make it impossible to establish a clear separation between the commercial and non-commercial activities of the public sector. This makes international comparisons of Colombia’s public finance statistics and aggregates difficult.¹⁰

4. The division of responsibilities in the area of taxes and resources between the national and territorial governments is sufficiently clear in the law. The Constitution establishes that the territorial entities enjoy autonomy for the management of their own interests and have the right to self-governance through their own authorities, to exercise the responsibilities assigned to them, to administer their resources, establish the taxes necessary to carry out their functions, and to share in national revenues. Law 60 of 1993, based on the 1991 Constitutional reform, established criteria for the transfer of resources to the territorial entities, which led to a series of problems.¹¹ Accordingly, Legislative Act 01/2001 (amending Article 356 of the Constitution) and Law 715/2001 expanding upon it, clearly and transparently established the amount of resources to be transferred, the rules of growth of the transferred resources, and criteria applicable for distributing resources among departments, districts and municipalities (Box 1).

5. However, there are still significant ambiguities and duplications with respect to the distribution of expenditure responsibilities. Despite the significant advances made in this area, there is still no legislation that provides for a clear and exhaustive division of responsibilities between the national and territorial governments. Under the Constitution, the Organic Law on Territorial Organization (LOT) must establish the division of functions between the National Government and the territorial entities. However, and although eight bills have been submitted to Congress, this law has still not been promulgated. A partial solution has been provided by Law 715, which contains a distribution of functions between the National Government and the territorial entities and establishes those territorial entities’ obligation within a deadline to certify themselves towards the discharge of those devolved responsibilities. However, the law retains some ambiguities: rather than distributing functions and expenditure responsibilities among the territorial entities and ensuring financing for them, the law distributes resources, and establishes the activities to which the territorial entities must apply them.

For example, whereas provision of education and health services seems to be mandatory for the territorial entities, since these areas are the rationale for their share in National Government revenues, it does not follow from Law 715 that general purpose functions are mandatory for territorial governments (or thereby exclusive), except in the case of sanitation and potable water when this is clearly specified. Box 1 describes the distribution of expenditure responsibilities established by Law 715 of 2001 and the current draft of the Law of Territorial Organization.

6. The territorial entities’ share in oil revenues, as well as in the distribution of Cofinancing Funds,¹² is generally based on objective criteria with legal support, although there are significant exceptions. The Constitution establishes that the utilization of a non-renewable natural resource produces royalties in favor of the State, and creates the National Royalties Fund in which all territorial entities have a share, including non-producing ones and those without a port. The percentages for the distribution of the royalties are set by Law 141 of 1994 and are generally based on transparent and non-discretionary criteria, although there are exceptions. For example, the National Royalties Commission¹³ distributes funds from the National Royalties Fund among investment projects submitted by the territorial entities, which are selected on the basis of both objective and discretionary criteria. In addition, Law 209 of 1995 establishes the conditions under which the territorial entities producing oil royalties must contribute to (and may withdraw funds from) the Oil Administration and Stabilization Fund (FAEP).¹⁴ Finally, although the distribution of the Cofinancing Funds has been regulated, it does incorporate discretionary elements.¹⁵

7. The allocation of responsibilities between the executive and legislative branches in the budgetary process is, formally, well established in the law. The Constitution establishes that the government shall formulate each year and submit to the Congress for its approval the General Budget of the Nation (PGN), which consists of the Revenues Budget (PR) and the Appropriations Law (LA). The PR contains the estimate of tax and non-tax revenues collected by the National Government, the parafiscal contributions administered by national public establishments, the special funds, and resources obtained from borrowing, which are called capital resources. The LA includes the budgets of the constitutionally autonomous entities, the agencies of central sector and the public establishments at the national level. The PGN does not include an estimate of tax expenditures.¹⁶ The General Directorate of the National Budget (DGPN) and the National Planning Department (DNP) have powers to issue rules and set total spending limits that the entities of the central government and decentralized sector must follow in formulating their draft budgets. The powers of the legislature to amend the draft LA are established in the Constitution. At first glance, the timeframe allowed for legislative debate and approval (practically the first three months of each legislature: from July 20-30 to October 20) would seem sufficient for an informed process allowing enough time to do a complete review of government plans and programs. However, the approval process is gradual, broken into successive stages—each only lasting about 15 days—in which particular issues are gradually decided such as the total amount of spending and its composition. The Constitution contains a provision for the conduct of fiscal policy in the event that the PR and LA are not approved. Given that the PGN is approved on October 20 and budget execution starts only in January of the next year, it may happen that the PGN becomes obsolete and may soon have to be modified by the executive branch. The government may submit to Congress, for approval, proposals of supplementary appropriations as well as switches of appropriations between expenditure items without altering the composition of spending among operations, investment and debt service. Any supplementary appropriation must be accompanied by a certification of the availability of funds or shifting of credit. The existence of a considerable amount of earmarked revenues and the high proportion of committed spending (entitlements) distort Congressional deliberations on the PGN.

8. Budgetary and extrabudgetary activities of the central government and the rest of the public sector are subject to coordination and management mechanisms, and these are centralized and clearly regulated. The High Council for Fiscal Policy (CONFIS), an inter-ministerial body¹⁷ presided over by the Minister of Finance and with a technical secretariat in the MHCP, approves (and amends) the budgets of the NFPE in which public ownership exceeds 90 percent.¹⁸ These enterprises do not form part of the PGN, but their budgeting must following the same general principles and comply with the requirements of the Organic Budget Law (EOP).¹⁹ The National Council for Economic and Social Policy (CONPES),²⁰ a very important inter-ministerial body presided over by the President of the Republic, determines the transfers that the NFPE must make to the PGN and the date when deposit must be made to the General Directorate of the National Treasury (DGTN). NFPE in which public ownership is at least 90 percent may retain at least 20 percent of generated profits. Otherwise, CONPES determines how profits should be distributed. CONFIS coordinates the budgetary activity of the entire NFPS by preparing the Financial Plan (FP), which establishes the financial goals of the public sector as a whole, namely the National Government, territorial entities, and NFPE, both at the national and territorial levels. However, the FP is not sent to Congress with the budget. Consequently, the only document that the Congress discusses and approves is the PGN. This means that Congress does not receive detailed information on the fiscal deficit (broken down, for example, by principal sectors), nor the budgets of the NFPE and of the territorial entities.

9. The Constitution gives administrative, asset and technical autonomy to the central bank or Bank of the Republic (BR) to direct monetary policy, although its Board of Directors is presided over by the Minister of Finance. Relationships between the BR and the government are clearly defined in the law.²¹ The Minister of Finance does not have a double vote nor veto power in the Bank’s Board of Directors. The directors carry out their duties under a strict regime against conflict of interest and disqualifications, and are elected for four-year terms, serving for a maximum of 12 years. Every four years, the President of the Republic may replace two of them. The relationship of the BR with its employees is governed by private law, but they are subject to the civil service disciplinary code. The budget of the BR is approved by its Board of Directors, subject to a formal favorable Opinion from CONFIS. It must transfer its profits to the government, which in turn covers its losses. The BR provides treasury services to the National Government, for which it charges a fee; it manages the Treasury account, paying interest on its balances based on market criteria; it acts as financial agent for the management of public debt and as the government’s financial advisor. The BR may grant loans or guarantees in the State’s favor but only with the unanimous approval of its Board of Directors. The Bank also acts as the administrator of some government funds such as the FAEP and the Mortgage Portfolio Fund (FRECH), for which it charges a fee. The BR carries out quasifiscal activities, including in the printing of money but also some cultural activities.

10. The public corporate sector is present in many strategic sectors. In some it has a monopoly, as is the case of the postal service and oil exploration, production and refining.²² In other sectors it acts in open competition and is subject to the same regulations as the private sector, as is the case of electricity, residential utilities, and telecommunications. There is a legal framework for the privatization of public enterprises that is applicable both at the national and territorial levels. In recent years, the government has carried out a process of privatization and liquidation of public enterprises at the national level. The government may participate in the capital of private companies, directly or through public banks. The General Accounting Office of the Nation (CGN) prepares a list of public sector shareholdings in private and public companies, but does not disclose it.

11. The relationship between the central government and non-financial public enterprises is clearly regulated, and the latter must report to CONFIS regarding their activities and profits on their operations. Some of them carry out important quasifiscal operations. ECOPETROL sells oil derivatives at subsidized prices to distributors, who must operate with a maximum retail price. It also sells diesel fuel at subsidized prices to electricity service providers in areas not covered by the electricity network. ECOPETROL receives no transfers at all from the National Government under this heading. Some NFPE are implicitly required to act according to public service and guaranteed coverage criteria. For example, Decree 1020/88 establishes that TELECOM must ensure the supply of telephone services in rural areas. Another example is the Social Security Institute (ISS), which is ultimately responsible for providing health services to population groups that are not profitable for private providers. Estimates are prepared of the value of these subsidies but are not submitted to Congress along with the PGN. Sometimes NFPE receive transfers from the government for this purpose, but they are insufficient.²³

12. The public banking system, which represents close to 30 percent of banking system liabilities, carries out quasifiscal operations,²⁴ maintains significant contingent liabilities, and has access to financial resources under non-market conditions.²⁵ For example, 23 percent of the liabilities of the Agrarian Bank are judicial deposits, which it administers in exclusivity. In addition, it must carry out 70 percent of its operations in the agricultural sector, and maintain commercial offices in areas of the country where there are no other financial institutions. Another source of resources under privileged conditions are the mandatory investments that financial institutions have to hold in the area of housing and agriculture.²⁶ The financial statements of public banks are supervised by the Superintendency of Banks (SB), but such statements do not identify the non-commercial activities that public banks carry out on behalf of the government. Public banks generally do not receive transfers from the government to fully compensate them for these activities. In addition, little information is disclosed about the various trust funds that administer public funds.²⁷ The government programs to restructure the financial system that the Financial Institutions’ Guarantee Fund (FOGAFIN) administers, many of which are applied to public banks, are well documented in their reports and financial statements.

13. Numerous regulatory and supervisory entities were created during the 1990s. The regulatory commissions²⁸ are basically responsible for setting rates. They are set up as technical bodies, with administrative, asset and technical autonomy, attached to a sectoral ministry, and are basically financed with contributions from regulated operators. The independence of some regulatory commissions is compromised by the presence of representatives of the executive branch, who have a quality vote or power to decide in the event of a tie.²⁹ Prior notice must be given when changes are made in the regulatory framework, but there is no requirement to hold public consultations, or to estimate the regulatory impact, although this is sometimes done. The public is given access to current regulations and proposed new regulations. General regulations can be legally appealed, whereas specific regulations can be appealed to the respective superintendency. In most of the regulated sectors there exists a (quite complicated) cross-subsidy system according to which low-income users receive a subsidy through the regulated rate and high-income users, as well as industrial and commercial users, pay a contribution as a percentage of the regulated rate.³⁰ The Superintendencies,³¹ which have power to impose sanctions, are responsible for the work of inspecting the quality of service delivery, for monitoring compliance with the cross-subsidy system on the part of the provider agencies, for certifying the users by economic strata, and other regulatory matters (environmental, technical, granting permits to operate, etc.) Except for the electrical sector, no information is published on the amount and distribution of these cross-subsidies by type of user. In general, the surcharge to high-income users is not sufficient to finance the lower prices to low-income users, so that there is a transfer from the central government to the system, which appears in the PGN.

Framework for Management of Public Finances

14. The legal and administrative framework for fiscal management is clearly established in the law; it is publicly known, but highly complex.³² Each government must submit to Congress at the beginning of its four-year term, which roughly coincides with the four-year term of the new legislature, a National Development Plan (PND). The annual budget is prepared within the framework of the administration’s PND and the economic planning process that begins with it. This planning orientation is reflected in the fact that the current expenditures budget is prepared by the MHCP and the investment budget is prepared by the DNP, specifically by CONPES. CONFIS, the institution responsible for the design of fiscal policy, plays a coordinating role. The preparation of the PGN is centralized in the DGPN, which must formulate it by reconciling³³ the Financial Plan (CONFIS)³⁴, the Annual Cash Plan (DGTN), the Annual Investment Operations Plan (CONPES), the Debt Service (by the General Directorate of Public Credit (DGCP)), and the draft budgets of each of the entities covered by the PGN. The result is a multiplicity of documents related to the formulation, presentation, and execution of the budget, separately prepared by different entities, without a clear framework of coordination, and a consistency difficult to verify. As for discussion, the Colombian budgetary system assigns a very strong role to the MHCP, establishing it as the government’s channel of communication with the Congress on budgetary matters.³⁵ The Congress must request written authorization from the MHCP to modify the draft PGN by increasing an expenditure item, introducing a new one, or increasing revenues.³⁶ The MHCP also has an important role in executing the PGN, since according to the EOP it is the only body authorized to propose to Congress the modification of PGN appropriations.³⁷ As for the territorial entities, Article 300 of the Constitution establishes that the departmental Assemblies and municipal Councils shall be responsible for issuing the organic laws for the annual budget of revenues and expenditures. The budget cycle at the territorial level is governed by the principles established in the EOP.³⁸

15. National taxes, whether domestic or on foreign trade, and territorial taxes, are based on laws, with partial exceptions in the areas of commerce and parafiscal charges as discussed below. Article 338 of the Constitution establishes that “in peacetime only the Congress, departmental assemblies, and district and municipal councils may set fiscal or parafiscal levies.” It also specifies that the law must determine all the elements that make up a tax (rates, bases, passive and active subjects). There is a Tax Code, Decree 624 of 1989, which governs national domestic taxes. The specific provisions of each tax are not established through individual laws. The PGN Law may not contain provisions that modify taxes. The parafiscal contributions must also be established by law, although in certain cases the contributions have taxable bases determined by an administrative entity.³⁹ Territorial taxes (departmental and municipal), which must have a legal basis as well, are governed by an excessive number of laws and regulations.⁴⁰ The law establishes⁴¹ that the Fiscal Support Directorate (DAF) of the MHCP shall be the authority for interpreting the rules on territorial taxation. Law 488 of 1998 introduced important reforms⁴² and there is currently a draft law for the creation of a Territorial Revenues Statute (EIT) that will provide a compilation of territorial tax legislation and strengthen the sanctions and evidentiary systems at the territorial level.

16. Import tariffs proper can be changed by decree, including trade treaties of Colombia that are ratified by Congress and have the force of law. The principal trade treaties are (i) the Andean Community (CAN), which establishes a common external tariff (CET)⁴³ with rates of 5,10,15 and 20 percent (and exceptions), plus gradual intraregional dismantling of tariffs; (ii) the Free Trade Agreement of the “G3” with Mexico and Venezuela, which does not entail a CET but does involve mutual and gradual elimination of tariffs until reaching zero (excludes agricultural and automotive products); and (iii) the World Trade Organization (WTO) in which Colombia has established “tariff ceilings” well above the current tariffs.⁴⁴ Colombia also uses temporary tariff surcharges under the heading of safeguard provided both in the WTO (which limits it to four years, with extensions to eight years as an exception, and requires a publicized investigation of damages, public interest, need, etc.) and in the CAN’s Cartagena Agreement (which encourages limiting its use to one year in the case of safeguards of extra- and intra-regional applicability, according to Article 107, but sets no specific limit when the action is only between members, according to Articles 108 and 109). Colombia’s use of this instrument, based on Law 7 of 1991 on Foreign Trade, is not infrequent but is usually limited to periods of one or two years. Colombia applies a price band for certain agricultural products with a variable tariff above the CET, a practice inconsistent in the WTO that Colombia has maintained through extension. Two other schemes of interest are: first, the “Tax Reimbursement Certificates” (CERT) that, until September 2002 in which the rate was reduced to zero, reimbursed exporters 2.5 percent of the exported value, as an approximation to a reimbursement of indirect taxes paid, and second, the so-called “Vallejo Plan” of “temporary imports for active processing,” which grants exemptions (or deferment) of import tariffs and VAT to registered exporters who export 1.5 times and 2 times more than what they imported.⁴⁵ This has been subject to debate and recently extended for two years under a WTO agreement. Colombia is a moderate user of the antidumping system, and its procedures and regulations for importing seem to be simple and transparent.

17. Tax legislation is public but suffers from great complexity. National and territorial tax legislation is public. The General Directorate of National Taxes and Customs (DIAN) releases the texts of national tax laws on the Internet, together with regulations, administrative provisions and explanatory material. General administrative provisions applicable to national taxes are issued annually through Opinions (Conceptos) and are published in the Official Gazette of the Republic. Administrative provisions affecting individuals are not available to the public. Simplicity in the regulation of some taxes is diminished by the existence of a significant number of exemptions and special sectoral treatments. In addition, the legal wording crafted by Congress and the regulatory wording crafted by the tax administration sometimes lack enough clarity.

18. The private sector seems to feel that significant costs (and uncertainties) are generated in its relationship with the public sector beyond taxes, which render its investment decisions more difficult. Over-regulation, bureaucratic red tape or irregular payments in the areas of government contracts and taxes, lack of neutrality in policy decisions and public procurement, continuous changes in the legal and institutional framework and lack of independence in the courts⁴⁶ are factors that seem to weigh on performance and planning in the productive sectors. On the other hand, the Presidential Anti-Corruption Program is an interesting initiative that is obtaining results in the area of preventing irregular practices on the part of public officials. The program is based on a comprehensive inter-institutional approach led by an office with good support from the Office of the President of the Republic. The program comprises a public officials’ training program and a system for managing complaints.

19. Taxpayer rights and the system of dispute resolution on tax matters are clearly defined by law. The Tax Code establishes the formal rights and duties of the taxpayer, the penalties system, the evidentiary system, and tax inspections. The decisions of the tax administration may be challenged through an appeal to DIAN for reconsideration or reversal. DIAN will have a year to resolve appeals for reconsideration or reversal, provided there is no procedural defect to be remedied. Once this period has passed, administrative silence implies a decision in favor of the party filing the appeal. The taxpayer may also go directly to the administrative courts. If the dispute is not settled, the taxpayer may appeal to the regular courts of justice. Proceedings usually last an average of three years: two years before DIAN and one year in the courts. The ruling is in the taxpayer’s favor in 30 percent of cases. There is no possibility of negotiated settlement. The penalties system included in the Tax Code applies also to parafiscal contributions and territorial revenues. There is a Customs Code that deals with operating procedures, as well as disputes, penalties and appeals on tariff matters. There is a Defender of Taxpayers and Customs Users who, inter alia participates in the Joint National Commission on Tax and Customs Administration (CMGTA), a DIAN advisory body in which the private sector participates.⁴⁷

20. The observance of the principles of ethical conduct for public officials, which are stipulated by law, is being strengthened. In order to eradicate corruption in the administration, Law 90 or the Anti-Corruption Law was promulgated in 1995. It contains the following measures, inter alia: all public servants must submit a criminal background certificate issued by the Administrative Department for Security (DAS), a disciplinary background certificate issued by the Office of the Attorney General of the Republic (PGR); and an assets and income statement. In addition, Law 90 introduces changes in the penal code to increase the disqualifications and sanctions for using privileged information and for influence peddling. Law 734 of 2002 contains a disciplinary code for public servants establishing administrative responsibilities and ethical standards of public conduct. The code applies to all public servants (National Government, territorial entities and public enterprises). The PGR, which is in charge of applying the code, has the power to remove a public servant who violates the Code and to establish penalties.⁴⁸ In addition, there are specific codes of ethics for certain entities—among them DIAN and the Office of the Comptroller General of the Republic (CGR).

Coverage of Public Sector Information

21. Several public entities regularly disclose a large volume of information on public finances in Colombia, which differs in quality and coverage. CONFIS, DNP, BR, the National Administrative Department for Statistics (DANE),⁴⁹ and the CGR compile statistics pertaining to the monitoring of the NFPS. The coverage of the NFPS is broad, in that it includes the National Government, the social security entities, public enterprises, territorial entities, and decentralized entities. The SB publishes information on the financial public sector. However, data quality and calculation methodologies vary from sector to sector. Information on public enterprises and state banks can be obtained on an accrual basis;⁵⁰ the National Government publishes its outturns on a cash basis with accrual adjustments; and the information on the territorial entities is on a cash basis, and difficult to obtain although there are more detailed reports from these entities in the CGN.

22. Historical and current information on the National Government’s fiscal deficit is available to the public. Information on tax revenues and expenditures of the National Government can be found in CONFIS publications on the MHCP Web page, on the DIAN Web page and, to a lesser extent, through DANE and the BR. Activities of the public sector are monitored monthly. Public entities submit their monthly reports with lags of between one and two months. As a result, the consolidated figures for the NFPS are published with lags of two or three months. In particular, CONFIS publishes monthly statistical data on the National Government and quarterly data on the rest of the NFPS, including parafiscal contributions and the situation of public funds based on a sample of 227 entities. CONFIS has recently started to publish a monthly analysis of the National Government’s fiscal situation, using information from the Treasury.

23. Information available on the territorial entities is being improved, but for now is limited and fragmentary. The implementation of the CGN’s electronic repository and Law 617 have resulted in a significant accumulation of information on the finances of the territorial entities, their debts and contingent liabilities. This information is now being systematized, and the Program to Strengthen the Territorial Information System (FOSIT) is finalizing the start-up of an Internet-based electronic system that feeds the database on the territorial entities in the CGN. Upon completion of the FOSIT project, the CGN will be able to produce balance sheets for the territorial entities and the rest of the public sector from 1996 to the present.

24. The official NFPS deficit is published by CONFIS⁵¹ in the Financial Plan (FP). Following the practice of a relative majority of Latin American countries, CONFIS estimates the deficit on a cash basis with corrections for accruals, and publishes it in the FP. The FP is an analytical document that serves as the annual framework for the preparation and submission of the PGN, as an input in the Presidential Message that accompanies the submission of the General National Budget Law (LGPN) to Congress. In addition, the FP is the mechanism that ensures the consistency between the objectives of fiscal policy with monetary and exchange policy. The Presidential Message informs Congress of the goals established in the FP for the National Government, the NFPS and the consolidated public sector, and establishes the consistency between the fiscal goals established in the FP and the budget sent to Congress. However, there is no cross-reference table that could make possible to reconcile the FP figures with the PGN figures and vice versa. CONFIS evaluates the FP every six months and publishes its results on the MHCP Web page. The Organic Budget Law (EOP) is the legal framework that establishes that CONFIS is responsible for consolidating and publishing the public sector deficit.⁵²

25. In addition to CONFIS, other public entities publish estimates of the NFPS fiscal deficit. The DNP and the BR have traditionally prepared reports on the fiscal situation using different coverages, accounting methods, and classification systems. The CGN has also recently begun to produce its own estimates of the deficit. Given that it is not entirely possible to do the estimate on an accrual basis, the CGR for its part has recently suggested to change the method of estimating the deficit used by CONFIS to a cash basis. Even though the preparation of estimates of the fiscal deficit by different public institutions is in itself not necessarily a problem, the multiplicity of measurements can lead to unnecessary confusion and create uncertainty in public opinion as to the true fiscal situation, in particular when these public entities do not publish their methodologies on measurement and their relationship to the official CONFIS estimates. This is further discussed below (paragraph 55 and Box 4).

26. The Financial Institutions’ Guarantee Fund (FOGAFIN) publishes information on its activities with the banking sector.⁵³ FOGAFIN administers deposit insurance, carries out operations to support the banking system and monitors bank liquidation operations and privatizations in the banking system. FOGAFIN reports monthly on its financial operations, in particular those supporting the restructuring and liquidation of the public banking system, which is clearly presented in its reports.

27. The National Government publishes information on its financial assets, and domestic and external public debt Three entities compile data on the debt of the NFPS: the BR, the General Directorate of Public Credit (DGCP), and the CGR. The BR gathers information on the external debt and the domestic bond debt issued by the National Government and territorial entities, using data from DGCP and DAF. In addition, the DGCP releases information on placements, debt swaps, legal documents on debt operations and the technical characteristics of market bond placements. The CGR also publishes by legal mandate a report on public debt statistics⁵⁴. The DGCP and the BR have independently finalized a preliminary report on the debt of the National Government and other entities of the NFPS. The public debt reports published by the CGR and by the BR include a comprehensive set of debt statistics. Partial information on the banking debt of the territorial entities is available at the CGN, DAF and DGCP, which has been partially systematized and published by the BR. The BR, CGR, and CONFIS have recently prepared documents on the sustainability of public finances, but a systematic analytical and institutional effort on this subject is still needed.

28. There is no consistent recording of contingent liabilities of the National Government, nor public information on quasifiscal activities and tax expenditures. Some contingencies are included in the PGN. For example, there is a budgetary appropriation to be used in the event that the courts issue rulings against the National Government. Additional information on other contingent liabilities is very limited and is not made public. The most important contingent liabilities are National Government guarantees on the debt of the territorial entities and the payments from TELECOM to its partners in joint-venture contracts. In both cases, the contingent amounts are significant (something more than 1 percent of GDP) (Box 2). Other contingent liabilities are the energy purchase agreements with some public energy distributors, and the minimum traffic guarantee on leased highways. Law 448 of 1998 on contingent liabilities establishes that if the debt contracted generates contingencies for the nation, the corresponding public entity will have to contribute to a contingency fund in proportion to the risk of the operation. The quasifiscal activities of public enterprises and other public entities are not properly estimated, some of which are seemingly important such as subsidies for gasoline, compulsory services offered by public enterprises, and cross subsidization. Tax expenditures are not estimated at the National Government level and their magnitude is unknown in the case of the territorial entities.

29. Public opinion has become more aware of the financial situation of the Social Security Institute (ISS) and of the impact of its pension liabilities on the finances of the NFPS in the medium term. However, the information available on the pension system and the health system is still not systematized so that it could be easily understood by public opinion. In particular, the costs of minimum pension guarantees, the costs of recognition bonds to those transferring to the private individual capitalization system, and the costs of maintaining special privileged pension regimes, are not publicly known. However, the actuarial deficit of the pay-as-you-go system is known.

30. Military expenditure is included in the national budget. Spending for domestic security includes national police expenses. The PGN includes current expenditures and outlays to purchase and maintain military equipment.

The Legal Obligation to Report

31. The law determines how often the National Government, the BR, and the CGR must report to Congress, although there is no obligation to submit periodic reports to the public. The legal basis for the disclosure of public statistics comprises decrees that regulate the preparation and dissemination of public statistics as well as decrees on the rol of DANE as the principal body charged with the production of government statistics. In practice, reporting to Congress is the main axis in the preparation of official figures by the National Government, the CGR, and the CGN. Reports to Congress are annual and, in particular, the financial situation of the NFPS and execution of the PGN are not officially submitted to Congress in the course of the year. The obligation to disseminate information to the public is not established in the law, but the authorities and public officials understand that this is an important feature of their management responsibilities, and the Network of Citizen Inspectors⁵⁶ has been systematically exercising the right of citizens to access public sector information.

32. Mid-term projections of the fiscal outlook are not readily accessible to the public. The closest to an official medium-term projection is the National Development Plan (PND), which the executive submits to the Congress at the beginning of its term for approval. The Plan includes a four-year projection of the macroeconomic situation and projections of the fiscal deficit. However, economic agents cannot use it as a benchmark in decision-making, in that its assumptions are not revised during the rest of that government’s term nor do they extend beyond it (this is discussed in the next chapter). The DNP and CONFIS publish partial medium-term projections on the NFPS outturns.

On-line Public Sector Information Systems

33. The Integrated Financial Information System (SIIF)⁵⁷ gathers, processes and produces fiscal information on most of the entities included in the PGN. Currently, the SIIF’s coverage reaches 87 percent of the value of the PGN. The public entities that are still not covered are to be integrated into the system in the course of this year. In terms of the information it manages, as discussed in the next chapter, the system is capable of producing fiscal figures on an accrual basis, without performing the intermediate step of estimating cash values. The public does not yet have access to the SIIF.

34. The FOSIT project is a program designed to strengthen the territorial financial information system. FOSIT⁵⁸ is a data entry module that allows the territorial entities, inter alia to reduce the amount of time spent answering questionnaires from various interested entities, from the CGN, the departmental Office of the Comptroller, and DANE. Previously a territorial entity had to fill out 125 monthly forms frequently requesting the same information with different levels of aggregation. FOSIT standardizes these questionnaires and reduces them to 16 forms that have greater flexibility for adaptation to new information requirements. In a second phase of the FOSIT project, the data entry module could be converted to a public management module for territorial entities. For this purpose, FOSIT is developing a pilot project with 15 territorial entities to start up the management module.

35. The National Government is developing the Government On Line (GEL) initiative, creating Internet access to national public entities. This is a government strategy to ensure greater quality, uniformity and timeliness in the information that is disseminated through the public sector, and is at the same time a way to allow the National Government and national public entities to offer services to the private sector. Presidential Directive 02 of 2000 stipulated that the GEL must be implemented in three phases to conclude by June of 2002. The objective of the final GEL phase is for a large segment of National Government procurement to be carried out via the Internet. For the moment, the web pages make it possible to submit claims and complaints to all entities participating in the GEL. Currently, GEL incorporates 83 percent of national public entities and, after the presidential objectives are attained, it is hoped that the GEL will extend its coverage to the territorial entities. In addition, GEL offers to non-business users access to a wide range of government services through the Internet including tax information (calendar of tax payments, forms, services to taxpayers, auctions and sales), and drafts of proposed laws presented to congress.

International Commitment on Dissemination of Information

36. Colombia is a member of the IMF’s Special Data Dissemination Standard (SDDS). The BR is responsible for administering and updating the information on Colombia on the IMF’s Web page. Colombia meets the standards for coverage, periodicity and timeliness established for the fiscal sector by the IMF. In other sectors, there are some information requirements that are still under the flexible system.

Budget Documentation

37. Budgetary documentation specifies the objectives of fiscal policy and includes an evaluation of fiscal feasibility, but -does not strictly comply with the legal mandate to indicate how the budget adheres to the government’s development plan. The Financial Plan (FP) (see also paragraph 24 above) is formally part of the budget system, together with the PGN and the Annual Operating Investment Plan (POAI).⁵⁹ However, it is not submitted to the Congress. The document that presents to the Congress the objectives of fiscal policy in terms of the annual deficit goal approved in the FP is the Presidential Message which establishes goals for the National Government, the NFPS and the consolidated public sector. Currently there is no norm or standard governing its content. This document does not include a table or any reference to facilitate conversion of the figures from the FP to the PGN and vice versa. In turn, the EOP establishes that the PGN must be consistent with the four-year PND. However, the Presidential Message does not clearly indicate how the PGN is adapted to the objectives of the PND. In its report on the General Budget Account of 1999, the CGR showed that the PGN differs substantially in amount and composition from what is established in the PND. By law,⁶⁰ the Presidential Message must also include an evaluation of ability to pay the public debt, which at a minimum must include evolution of the balance and debt service in proportion to GDP and exports. In this regard, the Presidential Message presents debt indicators from an annual perspective and incorporates developments over the last two years.⁶¹ The shortcomings found in the budgetary system at the national government raise serious doubts about the functioning of subnational budgetary systems. As footnote 37 pointed out, by law, subnational governments should replicate the complex budgetary institutions and procedures at the national level but, except for large cities, an average subnational government might find more difficulties than the national government to comply and effectively operate such a complex budgetary system.

38. There are numerous legally defined fiscal rules, although some of them are subject to interpretation. The PGN verifies the level of compliance with only some of them. The EOP contains fiscal rules governing the PGN formulation. However, some are ambiguous in their application. This is true of rules on the real growth of the revenue budget,⁶² the rate of absorption of extraordinary national revenues that can cause a macroeconomic imbalance (leading to the FAEP), the social investment budget and social public spending by the territorial entities. Based on an imprecise definition of social spending,⁶³ the EOP establishes that the social investment budget may not decline as a percentage of total spending as compared to the previous year, and also that social public spending by the territorial entities may not decline as compared to the previous year. The Presidential Message only verifies the extent of compliance with the rule relating to social investment, although using data not supported by an adequate budget classification. The Constitution establishes that the BR may extend financing to the Government, but only with a unanimous vote of its Board of Directors. The Territorial Fiscal Restructuring Law sets ceilings on some spending items for the entities included in the PGN and public enterprises during the period 2001-2005.⁶⁴ In addition, it establishes that the operating expenses of the territorial entities may not exceed a certain percentage of freely disposable revenues, which varies according to the population and the income level of the territorial entity.⁶⁵ In turn, there are rules on the ratios of debt interest to operational savings, and debt to current income, on the basis of which three bands of values are established to control the indebtedness of the territorial entities (“traffic light” rule).⁶⁶ Both Law 617 and Law 358 seek to avoid the creation of a new and unsustainable deterioration of territorial public finances and debt like that which occurred in recent years.⁶⁷ The MHCP is now preparing a draft Fiscal Responsibility and Transparency Law (Box 3) to strengthen the State’s capacity to meet its obligations and at the same time provide greater transparency and disclosure of information to the public.

39. The formulation of the PGN is based on a comprehensive and consistent macroeconomic framework with an annual perspective. This framework is presented in the Presidential Message. The framework is approved before the budget is submitted to the Congress. The macroeconomic context is prepared by the MHCP in close coordination with the DNP and BR⁶⁸—although there is no law requiring this coordination—using a quantitative instrument of the MHCP called the General Economic Model of the Ministry of Finance (MEGHA), which consists of five modules (real, fiscal and external sectors, and debt and financial consistency). Its perspective is annual and it is submitted in July by the DNP for the consideration of CONPES, which approves it in the document called Macroeconomic Balance and Perspectives. Although this document discusses at length the elements and assumptions of the macroeconomic framework, it does not present the methodology used to compile it. The approved framework incorporates the fiscal goal established and approved by CONFIS. As paragraph 24 indicates, the FP is the mechanism that ensures the macroeconomic consistency between fiscal, monetary and exchange policies. By mandate of the EOP, once the PGN has been submitted to the Congress the BR must advise the legislative committees, during their discussion, of the macroeconomic and sectoral impact of the deficit, financing and the proposed spending level.

40. No budgetary estimates are prepared that are integrated, consistent and renewable in the medium term. The EOP establishes that the PGN must be consistent with the four-year PND that is approved at the beginning of each administration, but the PND is not updated during the four-year period, nor does it include any link between current and capital expenditures. The PND—which contains a statement of mid-term objectives and priorities in the government’s economic and social policy—establishes the National Investment Plan of the national public entities under the current administration. The plan identifies the objectives of each investment project and includes an indication in constant real terms of the four-year budgetary allocations to be assigned to them. The PND is issued through a law that has precedence over other laws. However, the expenditure levels approved in the Plan can be increased or decreased in the annual budget laws.⁶⁹

41. The budget document does not clearly distinguish the impact of new policies on the revenues or the expenditure side, nor does it contain an analysis of fiscal risks. Under the Constitution,⁷⁰ if the legally authorized revenues of the PGN are not sufficient to cover projected expenses, the Government may separately propose, to the same committees that are studying the proposed draft budget law, a draft law to create new revenues or modify existing revenues so that the projected amount of spending can be funded.⁷¹ However, this is not a common practice. Generally tax reform bills are submitted outside the budget framework and, as a result, the Presidential Message does not usually quantify in detail the impact of new tax revenue policies. In addition, the Presidential Message does not always or systematically explain the spending components for which new policies are presented nor the estimated fiscal effects of such policies. The Presidential Message does not include an analysis of the sensitivity of fiscal aggregates to variations in economic parameters or other uncertainties such as disputes, nor does it contain an analysis of principal contingent liabilities.

Budget Submission

42. Budgetary and extrabudgetary data are submitted using a classification system of expenditures and revenues that has serious deficiencies. As for budget expenditures, the EOP establishes that they must be submitted to the Congress classified by institutions⁷² and distinguish between operating expenses, debt service, and investment expenses. The expenditure classification by economic category, however, is not compatible with any international classification (for example, the investment heading of the PGN includes subsidies and debt service). In addition, there is no classification of spending by function or target, and classification by programs is limited to capital spending only. Regarding budget revenue, it contains estimated current income, parafiscal contributions, special funds, capital resources and income from national public institutions. Credit resources⁷³ are classified as part of capital resources, making it impossible to explicitly distinguish the financing aspect of the budget.

43. The Presidential Message presents the consolidated fiscal balance of the NFPS included in the FP, However, it does not present disaggregated information for the national public administration nor for the rest of the public sector. The FP—which as noted above is not sent to Congress—also includes broad balance measures including BR and FOGAFIN balances and the costs of the financial sector restructuring, important information that should be part of the budgetary documentation that is sent to the Congress. The Presidential Message does not state the accounting method used to obtain the fiscal balance of the NFPS.

Budget Execution

44. The accounting system used by the central public administration makes it possible to obtain timely information for evaluating arrears. For the central administration as a whole, excluding public establishments, the integrated financial information system (SIIF)⁷⁴—which includes the budget, treasury and accounting modules⁷⁵—registers and incorporates timely and reliable information on the different stages of the expenditure process (commitment, obligation, and payment), encompasses on a timely basis all externally financed transactions, and maintains records of assistance in kind not associated with cash flows (such as machinery and medications, for example). These features make the SIIF a reliable tool for evaluating arrears.⁷⁶ The SIIF began to operate fully in 2001. Nonetheless, for the official reports on the fiscal accounts prepared by CONFIS, a modified cash accounting method continues to be used, according to which the total deficit is calculated as the cash deficit reported by the SIIF, adjusted on the revenue side by the portion corresponding to revenue from concessions and on the expenditure side by the change in the floating debt (or variation in the stock of the budgetary carryover.⁷⁷ The SIIF performs in real time a reconciliation of accounting reports and budgetary allocations, and has the ability to reconcile accounting records with bank accounts. The executive branch does not submit reports to the Congress on budget execution in the course of the fiscal year.

45. The Internal Control System provided by the Constitution has recently been strengthened to improve the management and transparency of the results of public entities. The National Internal Control System (SNCI)⁷⁸ is directed by the President of the Republic and coordinated by the Civil Service Administrative Department (DAFP)⁷⁹. Effectiveness is verified through the Internal Control Offices or Units within each public sector agency.⁸⁰ Various entities play important roles in the internal control system: the MHCP helps in the preparation, execution and control of budgetary allocation; the DAFP establishes the policies of public management; the CGN coordinates with the entities on compliance with the National Government Accounting System; and the CGR assesses the SNCIs of the entities under its supervision. The different entities in the central and decentralized sectors must submit to the DAFP,⁸¹ before February 16, a copy of the Annual Executive Report containing the final result of the evaluation of the internal control system conducted by the respective Internal Control Office, using a standard format. This document is used as the basis for the report on the SNCI that the President presents to Congress at die beginning of each legislative session.

46. The legislation on public procurement is public and uniform for all of the levels of government.⁸² The law establishes the principle of transparency, which involves aspects of disclosure, objective selection, and the right of appeal. In addition, it requires the public entity to publicize the opening of bidding, competitions and other selection procedures as well as the rules to be used in awarding contracts. Cases where a public hearing is appropriate are established by legislation. There is a single registry of bidders in which registration must be renewed annually and which is public. The Chambers of Commerce prepare and publish a monthly bulletin with the proposed bidding sessions of the entities. The law requires that copy of actions taken and bids submitted must be provided to anyone who shows a legitimate interest. Bidders have the right to learn about reports, opinions, and decisions produced during the bidding process, and may submit observations and objections within the period established for this.

47. However, there are numerous exceptions where the law does not require compliance with established procedures. Exceptions include cases of clear emergency such as public disasters or situations affecting the delivery of service; the procurement of minor amounts in terms of the annual budgets of the entities; scientific or technological activities; procurement of goods with regulated prices; purchase or lease of real estate; and goods and services for national defense and security. In addition, there are exceptions for cases when bidding sessions or competitions produce no bidders; when there is a lack of acceptable bids, and when the direct purpose of a contract is commercial and industrial activities carried out by public enterprises. It should be particularly noted that the law does not regulate subcontracting.

48. The CGR has established an Information System for Monitoring Public Procurement (SICE).⁸³ SICE includes all significant information on public procurement and performs an on-line (and real time) comparison of all prices paid for purchases made by the State and the reference prices held by the information center. SICE helps to structure purchasing plans on a technical basis, and makes it possible to later compare such plans with actual contract outturns within the ranges of market prices.

49. In the current administrative career system adopted by law,⁸⁴ jobs in the public sector must be filled through a call for applications and open competition. However, following a decision of the Constitutional Court, competitions have been suspended since 1999. The general career system covers employees in the Executive Branch at the national and territorial levels and their decentralized entities (including, in the Ministry of National Defense, the Armed Forces and the National Police, civilian personnel only).⁸⁵ The law delegates the selection of personnel to the entities and establishes that calls for applications must be publicly advertised⁸⁶ and that the job should be filled through competition under the guidelines and supervision of the National Civil Service Commission (CNSC) and with assistance from the DAFP—which formulates administrative policy. The failure to apply professional standards is grounds for misconduct. However, procedures for issuing a call for applications and for competition have been suspended since 1999, when the Constitutional Court eliminated the CNSC because it was attached to the Executive branch. As a result, public entities were left without a supervisory body to monitor the process. There is currently a bill before Congress to set up the CNSC and issue rules on administrative careers.

50. Certain entities and employees are subject to special personnel regimes. There are special personnel administration systems, provided by the Constitution and regulated through Statutes adopted by laws for certain public sector agencies.⁸⁷ There are also specific personnel administration systems created by law for the employees of entities that carry out specific activities in the executive branch.⁸⁸ By Constitutional mandate, both in the special systems and in the specific systems, entry is determined based on merit, and continuation in the position is subject to good performance and conduct. Further, official workers are those in construction and public works maintenance, or who render their services in the NFPE and are governed under sector private law. This category of employee has the right to unionize and negotiate collective labor agreements. Lastly, personal service provision contracts apply to the hiring of highly qualified personnel and are governed by the General Public Procurement Law. The selection processes for both official workers and contractors are not usually based on open competition.

51. The Joint National Commission on Tax and Customs Administration (CMGTA)⁸⁹ was created by law to support and supervise the conduct of tax administration. The DIAN is legally required to submit to the CMGTA a quarterly report on the development of its activities and the Annual Plan to Combat Evasion and Contraband. In addition, the DIAN must submit on April 15^th to the third Committees of Congress the results of the Plan together with the opinion issued by the CMGTA.⁹⁰ Given the nature of some of its functions, the DIAN has a special personnel administration system, nomenclature and classification, staffing, and administrative career, as well as a special disciplinary system.⁹¹ However, it usually follows in practice the guidelines of the DAFP—which makes it difficult to remove officials for misconduct.

Budget Closure

52. The Balance Sheet and the General Budget and Treasury Account are submitted to Congress during the year following the fiscal year. By constitutional mandate,⁹² the government must send to Congress six months after the end of the fiscal year, the Finance Balance Sheet audited by the CGR.⁹³ The Balance Sheet is the responsibility of the General Accountant—an executive branch official—who consolidates the general accounts of the National Government with those of the rest of the public sector. The General Budget and Treasury Account—which covers the entities included in the PGN⁹⁴—must be submitted to the Congress by the CGR no later than July 30^th of each year. Legally,⁹⁵ the CGR must submit the computation of the deviation of each budgetary item from the initial calculation. In practice, in addition to meeting this requirement, the General Account also includes the factors that explain deviations in both the revenue and expenditure sides. To supplement this information, an analysis of sources and uses is included, to show the behavior of the different sources of financing for the initial budget in comparison with the final budget.

53. The National System of Evaluation of the Results of Public Management (SINERGIA) provides feedback for governmental management and decision-making. The DNP is legally mandated⁹⁶ to act as coordinator of an evaluation system of public management and results, in relation to PND investment policies and projects. In addition, DNP is responsible for submitting to CONPES each year a report on fulfillment of the PND. In 1994, the DNP began to develop SINERGIA to carry out its legal mandate. SINERGIA includes a system of indicators and a management tool called the Indicative Plan. The indicators are both quantitative and qualitative: plans developed and laws submitted to the Congress; planned products or services; impact on the achievement of the sectoral objective; and volume of procedures or processes carried out by the entity. The Indicative Plan is a tool that allows each entity to specify the sectoral or policy objectives to which it seeks to make a contribution; the specific objectives and commitments of the entity; and the indicators and goals to be used during the evaluation. The annual evaluation is conducted both on a decentralized basis (each entity evaluates itself) and centrally (conducted, selectively, by the DNP). The different evaluations must be consolidated by the DNP and submitted to CONPES in the month of April. Subsequently, the President must submit to Congress (in July) a detailed report on implementation of the PND and its different components at the start of each legislative session.

Rules on Data Quality

54. The budget data do not reflect expected expenditure during the year. Due to the existence of a significant volume of payable bills and outstanding commitments?⁹⁷ the final volume of expenditure in cash terms is quite different from the level of appropriations for the year. This is the result of unrealistic programming, which is then corrected in the course of the year through rationing of cash to spending units, which in turn is offset by the possibility they are given to defer budget execution appropriations through up to December 31^st of the following fiscal year.⁹⁸ This practice has, in turn, indirectly affected the measurement of spending “accrued” during the year. See paragraph 25 and Box 4.

55. The various units involved in compiling fiscal figures do not use the same accounting conventions, work with different dates for data submission by reporting entities, and do not carry out systematic data reconciliation. The General Accounting Office (CGN) consolidates the activities of the Colombian public sector, provides information on balance sheets and financial statements, and publishes the Annual Balance Sheet that must be submitted to Congress. The CGN follows double entry accounting and includes asset accounting, with active and passive accounts and accrual-based treatment. The CGN does not have the ability to impose sanctions on entities that do not release the required information, which delays the consolidation exercise. In addition, CONFIS compiles an estimate of the fiscal figures of the public sector based on the cash execution of a sample of entities, correcting the figures for certain accrual-based operations. No routine and detailed reconciliations are done on a timely basis during the year. In addition, CONFIS and CGN work with different closing dates for the fiscal year⁹⁹ (Box 4).

Independent Evaluation

56. External control of the public sector is well established at the national level but has some serious deficiencies at the territorial level. The Office of the Comptroller General of the Republic (CGR)¹⁰⁰ is a technical entity with administrative and budgetary autonomy that exercises external control over the execution of the budgets of all Colombian public sector entities and those private sector entities that manage public goods or resources. The budgetary independence of the CGR is reinforced by the collection of an auditing fee and by the ability to capture resources from the multilateral banking system. The Comptroller is elected by the Congress for a period equal to the term of the President of the Republic. Both financial and non-financial public enterprises are required to be audited by a contracted consulting firm. The BR is also considering doing the same thing. The Constitution assigns to the territorial comptrollers’ offices (departmental, district, and municipal) the corresponding functions within their jurisdictions. The territorial comptrollers are elected by Assemblies or Councils. The exercise of this external control currently has serious deficiencies. The law has established the precedence and concurrence of the CGR vis-à-vis the territorial comptrollers’ offices in the monitoring of resources transferred to the territorial entities by the National Government (transfers from the SGP and royalties). The law empowers the CGR to exercise ex-post control on an exceptional basis over the accounts of any territorial entity, without diminishing the control for which the territorial comptrollers’ offices are responsible. The recent elimination of municipal comptrollers’ offices has increased the workload of the departmental comptrollers’ offices and of the CGR.

57. The CGR exercises macroeconomic, microeconomic and fiscal responsibility controls on public finances. Macroeconomic control is reflected in the General Budget and Treasury Account that the CGR sends to the Congress, in the auditing and certification of the Finance Balance Sheet compiled by the CGN, and in the preparation of the Public Debt Report and the Report on the Status of Natural Resources and the Environment. The CGR carries out microeconomic control through its audits of entities under its supervision, on the basis of which individual Improvement Plans are prepared for the entities, which are subject to follow-up. Control of fiscal responsibility is carried out through the filing of cases against public servants who cause damage to public assets.

58. The design of the General Auditing Plan (PGA) of the CGR is appropriate. It is based on criteria on the representativeness of the entity to be audited, the level of risk of irregular practices, results of recent audits, and complaints. The auditing cycle is three years. There are different types of audits: regular, short, special, and follow-up; and different types of control such as exceptional or concurrent control. The PGA establishes auditing lines (matters for special attention), as in the case of 2002 with respect to the existence of contingent liabilities, contracts carried out under the clear emergency concept, and compliance with Law 617 on limits on operating expenses by public entities. The CGR has power to impose sanctions in the event of non-compliance or untimely information.

59. The external control agencies are in turn subject to supervision. The General Auditing Office of the Republic (AGR) monitors the fiscal management of the CGR and the departmental and municipal comptrollers’ offices, for which it does not charge an inspection fee. The Auditor is elected for two years by the Council of State, from a short list submitted by the Supreme Court of Justice. Although its existence was contemplated in the Constitution of 1991,¹⁰¹ the AGR was only recently set up. The AGR has a General Auditing Plan for 2001-2003 that reflects appropriate criteria. The AGR must submit reports for the year on its management to the Supreme Court of Justice, the Council of State, the DAFP and the CGN. The AGR may initiate a process to seek the imposition of sanctions on entities that do not submit information on a timely basis. It carries out training work for the territorial comptrollers’ offices.

60. DANE is the agency responsible for the national statistics system and uses fiscal information for preparing the national accounts. There is an agreement on collaboration between DANE and the CGN to perform a consistency analysis between the public sector’s accounting and financial information and the national accounts. Independent experts’ views are not sought in the evaluation of fiscal and macroeconomic projections.