Fiscal Transparency at Local Level

1. Fiscal Transparency at Local Level Baki Kerimoğlu 7 June 2005, ISTANBUL

2. Contents: • Transparency, • Implementation of transparency , • Legal infrastructure of transparency • Factors obstructing transparency at local level, • Effects of reform studies on transparency at local level, • Transparency, accountability and audit, • Conclusion,

3. What is transparency? • It is a policy of providing information for public and shareholders concerning functions, organization, economic and fiscal policy goals, financial estimates and accounts of an administrative unit. • It includes access to reliable, detailed, current, understandable and internationally comparable information about the activities of the administrative unit. • Thus, voters, legislative body, financial markets and other shareholders are duly informed about the present and future financial position and activities of the administrative unit.

4. Implementation of transparency: General Conditions: • That role and responsibilities are clear, • That information is accessible to the public, • That budget preparation, implementation and reporting processes are transparent, • Guarantees concerning liabilities of issuing data, • Institutional culture,

5. Implementation of Transparency: Special Conditions: • Budgetary reports -Budget document, -Monthly reports, -Midyear reports, -Year end reports, -Pre-election report, • Reports related to the extra budgetary transactions, -Reports related to management and utilization of assets, -Reports related to the activities intending to increase quality and security of life such as health, education, water, road, social security and social activities, • Reliability, audit and accountability, -to clearly determine accounting policies, management system and financial and managerial responsibilities, process audit, internal audit and public audit, -Standards (quality) of data issuing, -Individual transparency culture.

6. Legal infrastructure of transparency: • Public Financial Management and Control Law No 5018, Article 7- Fiscal transparency, Article 8- Accountability, I-Information is accessible to public Article 41- Accountability reports Article 49- Accounting system, Article 50- Recording time and Documents to be used, Fifth Part, Internal Control system -Actors of internal control system, 1-Authorizing officer, 2-Realization officers II-Role and responsibilities are defined clearly 3-Financial controller 4-Accounting officer, 5-Financial Services Unit, 6-Internal Auditor,

7. Legal infrastructure of transparency: • PFMC Law No 5018, Article 12- Budget types and scope, III-Budget preparation, implementation and reporting processes are transparent Article 15-19 Central Government Budget Law, Article 20-30 General Principles for Implementation of Budgets , Article 31-35 Spending authority, Article 36-40 Collection of revenues, Article 41-43 Accountability reports and final account Article 49-54 Public accounts and financial statistics

8. Legal infrastructure of transparency: • PFMC Law No 5018, Article 63-67 Internal audit, IV-Reliability of data Article 68 External audit, Efficiency and functional independence of the ones preparing data, Institutional environment (culture),

9. Legal infrastructure of transparency: • Municipality Law No 5272, Article 25 Auditing commission, Article 26 Municipal council’s ways of acquiring information and auditing, Article 54-55 Purpose, scope and types of audit, Article 56- Accountability report, Article 59 Municipality revenues, Article 60 Municipality expenditures, Article 61-66 Budget system and final account, • Acquisition of Information Law No 4982,

10. Transparency at local level: Negative effects on transparency: • No budgetary discipline, • No accounting and reporting standards, • No standards of data issuing, • Not efficiently using instruments of data issuing, • No creation of institutional culture, • Poor understanding for being democratic and participation in the management, • Poor internal audit, • Poor external audit, Positive effects on transparency: • Positive efforts based on willingness, • Technological improvements: Internet and TV, • New legal arrangements such as Law on Right to Acquire Information,

11. Effects of reform studies on transparency at local level: • Effects of reform studies in public administration (localization), -More authority and responsibility (decentralization), -More allocation of resources (fiscal decentralization), -More transparency and accountability • Effects of financial reform studies (financial localization), - Devolving more spending authority upon local governments, -Modern financial management system, -Accrual based accounting and reporting, -Effective internal and external audit,

12. Transparency, accountability and audit: • Transparency, accountability and audit are complementary, • Transparency not being supported by a sound accountability culture is insufficient, • Transparency not being supported by a sound audit system lacks guarantee, • Accountability and audit system not being supported by a sound transparency culture do not contribute to democratic development,

13. Conclusion: (-) Institutional and individual culture are not sufficient for an advanced transparency, (-) Accountability and audit systems to complete transparency are poor, (-) Arrangements contributing to transparency are new and their effects have not been evaluated yet, (+) EU adaptation process and increasing interaction with international organizations encourage public administration for much more transparency, (+) Participation of NGOs in public administration process will strengthen transparency, (+) Institutional organization contributing to transparency will grow stronger depending on improving reform studies,

14. Thank you for your attention Baki Kerimoğlu bkerimoglu@muhasebat.gov.tr