There are important questions to be answered over the legitimacy and independence of a new body being set up to ensure Spain complies with its fiscal rules.

Plans to create a new watchdog to ensure Spain complies with fiscal rules handed down by the European Union were one of the top concerns when Spanish public auditors met in Sevilla last month.

The November 2011 EU Directive on member states’ budgetary frameworks requires a body be established to supervise member states’ compliance with their fiscal rules and to ensure they maintain stable and sustainable public finances.

To this end, the Spanish government has approved a draft law, where the authority, to be known as Autoridad de Responsabilidad Fiscal (AIRF), is labeled as ‘being of special nature and unique’.

The bill states that government itself will appoint the president of the authority for three years, with the potential for this to be extended to six years. It will be ‘directly attached’ to the Ministry of Finance and the directors of divisions within the AIRF will be appointed by the Spanish cabinet. These directors must have ten years’ experience in the subject areas they are responsible for.

This raises doubts over the independence of the body. The meaning of the term ‘independence’ is as clear-cut among auditors as it for the rest of society. As an auditor for the Auditing Authority of the Principality of Asturias I refer to the Principles and Standards for Public Sector of the Spanish audit watchdogs. Here independence is defined as an independent attitude and total objectivity, especially in relation to the administrative structure itself.

With a concept this clear on the table, the Spanish cabinet announced on April 15 that it would create an authority with ‘independent and functional autonomy’. Its duties would be:

• The execution of mandatory, but not binding, reports.
• The development of an annual report on the implementation of the objectives of budgetary stability and public debt which will involve tracking budget execution, public debt and careful spending rule.
• The formulation of opinions on its own initiative on matters defined within law.
• To report on macroeconomic forecasts to be incorporated in the draft budgets of public administrations or in the stability program, in compliance with European law.
• To report on changes that should occur in the methodology used to calculate the trend estimates of revenue and expenditure and the rate of reference growth alluded to in Spain’s Budgetary Stability Law.

The question, however, is how can the president of an institution who has been appointed by the government be objective, transparent and independent in carrying out this work? The answer is, sadly, they can’t.

Why have both the Spanish Court of Auditors, the supreme body responsible for auditing for the public sector, and the audit watchdogs for Spain’s autonomous regions been made subordinate to the AIRF? Not only does the new authority have zero independence, but its role also diminishes the importance of the existing audit watchdogs.

This is shown by three key characteristics of the new body, and how they relate to the regional audit watchdogs and the Court of Auditors, which were outlined by Dr. Roberto Fernández Llera during last month’s meeting:

• There is a clash of legitimacy and democratic representation between AIRF and the Court of Auditors. The former is appointed by the Spanish cabinet, on the basis of proposal made by the Minister of Finance and Public Administration, whereas the Court of Auditors is elected by a qualified majority of its members.
• The AIRF has access to higher quality data than the Court of Auditors or the autonomous regions’ audit watchdogs.
• Giving the new body a non-binding opinion on the government’s draft budget, a function which sits with the audit watchdogs’ equivalent in other countries, such as the Cour des Comptes in France.

This all begs the question – why has the AIRF been created in this way? Clearly it is not for the pursuit of transparency and budget stability and for the resolution of Spain’s fiscal problems.

Marta Riera López is an auditor at the Auditing Authority of the Principality of Asturias in Spain