Control and Audit in Local Administration

1
Control and Audit in Local Administration

• The transition from centralised tutelage to an
  internal external control system compatible
  with local administrations autonomy
• Adolfo Sanchez
• Chief Technical Adviser / Team Leader
• April 2007

2
Summary of presentation

• The tutelage principle as a feature of
  centralised models of public governance and
  administration
• Developments in European systems after the II WW
  towards a full recognition of local
  self-government as an integral part of a system
  of multi-level governance and administration
• The abolishment of tutelage as a principle of
  relationships between central and local
  administration. Consequences on control
• The modern concepts of internal and external
  control in public/local administration
• Implications of recent reforms in Turkey in
  regards to control mechanisms and systems managed
  by the MoI/GDLA
• The role of MoI/GDLA in supporting the
  development of efective and efficient internal
  control systems in Turkish local administrations
  regulation, institutional support,
  capacity-building.

3
The tutelage principle as a feature of
centralised models of public governance and
administration

• Municipalities a self-governing local community
  (in the framework of the countrys Laws) or a
  public administration body ? the full
  acceptance of the principle of local autonomy
  (self-government)
• Local administrations as minors of age the
  tutelage principle (legal personality, but
  limited responsibilities, resources and capacity)
• Main manifestations of the tutelage principle
• Control and oversight over the organs and members
  of local entities
• Prior authorisations or ex-post approvals
• Financial subordination and dependence from state
  budget
• Unrestricted inspection, control and supervision
  powers of central administration

4
The development of European systems after the II
WW (towards a full recognition of local
self-government as an integral part of a system
of multi-level governance and administration)

• Evolution towards a concept of multi-level
  governance public powers and responsibilities
  are exercised by various levels of democratically
  elected and representive governments (central,
  regional, local)
• Council of Europe Conference of Local
  Authorities (now CLRAE) elaboration and
  adoption of a European Charter of Local
  Autonomy/Self-government. Turkey 1993
• Article 8 Charter
• Any administrative supervision of local
  authorities may only be exercised according to
  such procedures and in such cases as are provided
  for by the constitution or by law.
• Any administrative supervision of the activities
  of the local authorities shall normally aim only
  at ensuring compliance with the law and with
  constitutional principles. Administrative
  supervision may however be exercised with regard
  to expediency by higher-level authorities in
  respect of tasks the execution of which is
  delegated to local authorities.
• Administrative supervision of local authorities
  shall be exercised in such a way as to ensure
  that the intervention of the controlling
  authority is kept in proportion to the importance
  of the interests which it is intended to protect

5
The abolishment of tutelage as a principle of
relationships between central and local
administration. Consequences on control

• In European countries with a traditon of
  tutelage, reforms since the 1980s have led to
  abolishment of tutelage mechanisms (including
  control and inspection bodies or corps) and their
  replacement by stronger and more developed
  internal and external control mechanisms,
  particularly in regards to economic and financial
  management.
• In Spain, an early ruling of the Constitutional
  Court (Febr 1981) declared as opposed to the
  constitutional principle of local autonomy all
  generic or indetermined controls or any other
  type of control that would place the local
  administrations in a position of subordination
  or cuasi-hierarchical dependence vis a vis the
  central administration, as well as controls
  beyond legal compliance checks.
• However, in what concerns economic and financial
  management (including public assets and property)
  the Spanish TC declared as compatible with local
  autonomy the existence of administrative controls
  even beyond these general limits (prior
  authorisation for indebtment or sales of public
  property)

6
Stability of Public Finances

• International obligations undertaken by a country
  in the context of EU (or EURO) membership, such
  as the Pact for Stability and Growth (Amsterdam,
  1997) have lead some member states to adopt new
  legislation aimed at ensuring the contribution of
  all public authorities (central, regional, local)
  to the achievement of the objetive of budgetary
  equilibrium.
• Such legislation has imposed additional
  obligations to local authorities in regards to
  budgeting and efficient use of public resources
  and has empowered central governments and
  administrations (Ministries of Finance) with
  additional control mechanisms to ensure
  compliance with such objectives

7
The modern concepts of internal and external
control in public/local administration

• EU countries legislation in line with the
  Charter envisage only two types of control
• Internal carried out by officials or public
  servants working for the local authority itself.
• External carried out by external control bodies
  mandated by and reporting to the Parliament
  (Court of Accounts, SAI).
• Internal control has several modalities,
  depending on the objective 1) Ex-ante checks of
  files related to revenues and expenditure 2)
  Ex-post audits of financial management systems
  and processes 3) Performance audits (also
  ex-post) related to the achievement of
  objectives/results and the analysis of cost and
  performance of services and investments.
• External control usually deals with 1) Analysis
  and vetting of final accounts from previous
  fiscal years (as approved by the local Councils
  or Assemblies) 2) Financial and performance
  audits undertaken by the external control
  institution, at its own initiative or at the
  initiative of the Government /Parliamentary
  Committee)

8
Recent reforms in Turkey

• Legal reforms introduced in Turkey since late
  2003 (Laws 5018/5436, 5216/5390, 5302, 5355 and
  5393) have broadly set the system of control and
  oversight in local administration in conformity
  with international and European principles and
  standards.
• However, three main implementation issues
  remain as challenges
• Do all local administrations in Turkey have the
  resources, capacities and structures needed for
  effective internal control?
• Does the Court of Accounts have the capacity to
  perform external audit of the LA sector in
  Turkey, so as to ensure efficient management of
  public resources?
• What are the organisational and structural
  changes needed in central administration bodies
  traditionally responsible for LA affairs and
  supervision (MoI/GDLA) or now responsible for
  ensuring sound management an control of the
  countrys public finances (MoFin) ?

9
The role of MoI/GDLA in supporting the
development of efective and efficient internal
control systems in Turkish local administrations

• The setting up and development of a modern system
  of public financial control which complies with
  international principles and standards and the EU
  requirements for management and control of EU
  funds has been and still is a major challenge
  for all countries applying for EU membership.
• While main effort is at central level, similar
  standards have to be implemented in local
  administrations, if decentralisation strategies
  are to be credible and successful.
• This involves a profound cultural change in
  administrative organisations, as well as
  professional groups of public servants.
  Sustainable and adequate training systems and
  programmes are needed.

10
Conclusions

• Political level from local administration to
  local self-government
• From centralised/delegated control functions,
  with a focus on ex-ante checks and ex-post audits
  carried out by units and professionals whose
  independence is guaranteed by a strong central
  body (Latin, Napoleonic, Mediterranean or
  Third-Party systems) to systems based upon
  managerial accountability/independent internal
  audit (North-European and Anglo-saxon systems).
• Experience shows how difficult it is for the
  local authorities to build strong internal
  control systems. Moreover, top managers in local
  administrations are elected by citizens and are
  not always interested in strong controls which
  are often seen as administrative or
  bureaucratic obstacles hamperng the
  implementation of their political decisions.