DECENTRALISATION IN THE DUTCH PUBLIC FINANCIAL MANAGEMENT SYSTEM

1
DECENTRALISATION IN THE DUTCH PUBLIC FINANCIAL



MANAGEMENT SYSTEM

• Introduction by J.K.T. (Jan) PostmaConference
  in AnkaraMay 4th, 2005

2
SURVEY OF MY INTRODUCTION

• some introductory remarks on the Turkish-Dutch
  project on budget reform
• Dutch experiences with budget reform
• driving forces behind the reform
• three lessons, three success factors
• central conclusion decentralisation of
  responsibilities of the ministry of Finance to
  the line ministries is the essential condition
  for a strong public financial management

3
REFORM IN TURKEY AND DUTCH EXPERIENCES

• strong central power MoF over line ministries in
  order to maintain budgetary discipline
• new PFM and Control Law (2003) new FM tasks and
  responsibilities
• gradual delegation of authority to the line
  ministries
• since 1985, the Netherlands also experienced
  building a strong public financial management
• Dutch budgetary legislation and practices may
  therefore be useful for Turkish reform process

4
THE STRENGHTENING PROJECT

• The project Strengthening of the preparation
  process of the government budget in Turkey is a
  co-operation between Turkish and Dutch
  governments.
• The project was started in January 2004. Some
  elements are

5
THE STRENGHTENING PROJECT

• a gap analysis on differences between the new
  Turkish and Dutch budgetary legislation and
  practices
• on the basis of this gap analysis some
  recommendations for the Turkish transition period
  were made
• the Dutch ministry of Finance is assisting the
  Turkish reform by
• training professionals
• organizing study visits in the Netherlands
• advising on development of trainings and other
  institutional capacity (e.g. train-the-trainers
  programs)

6
BUDGETARY REFORM IN THE NETHERLANDS

• Since 1985 a new public financial management
  system was gradually founded
• Some important events were
• 1985 the start of the Government Accounting
  System Operation, a fundamental reform of the
  public financial management system
• 1991 introduction of the agency model
  (executive agency at arms length)

7
BUDGETARY REFORM IN THE NETHERLANDS

• 1999 introduction of performance budgeting
  (political objectives, performances, effects)
• 2004 evaluation of the main elements of the
  public financial management system
• Central theme in the background delegating
  powers to line ministries in order to make them
  responsible for the improvement and strengthening
  of financial management.
• Decentralisation of responsibilities to line
  ministries was to become the most essential
  element of the public financial management.

8
DRIVING FORCES BEHIND THE BUDGETARY REFORM

• A magic triangle of three driving forces has
  stimulated the reform process in a constant
  interaction between
• Ministry of Finance
• Parliamentary Committee on Government
  Expenditures
• Supreme Audit Institution
• The three institutions stimulate the reform in a
  delicate balance of influence.

9
SOME LESSONS, SOME CRITICAL SUCCESSFACTORS

• Create a good support for the reform operation
• Integrate the elements of the reform operation
• Be aware that permanent change is needed

10
LESSON ONE CREATE A GOOD SUPPORT FOR THE REFORM
OPERATION

• Political support from Parliament, Cabinet and
  Ministers is important
• Create a good co-operation between the Ministry
  of Finance and the line ministries
• A strong commitment at the highest level in the
  civil service of the line ministries is essential

11
LESSON TWO INTEGRATE THE DIFFERENT ELEMENTS OF
THE OPERATION

• The financial operation should be part of a more
  general change in public administration. So
  attention for result management and risk
  management is needed.
• Formulate an integral improvement program.
  Create a balance between planning and control on
  one side and auditing on the other.

12
LESSON TWO INTEGRATE THE DIFFERENT ELEMENTS OF
THE OPERATION

• Not only knowledge of administrative techniques
  is important. Attention for elements of
  organisation culture, like behaviour, attitudes
  and working methods, is also needed.
• Co-ordinated training efforts and capacity
  building must be an integral element of the
  budget reform.

13
LESSON THREE NECESSITY OF PERMANENT CHANGE

• Public administration and public finance have no
  static framework
• A quick implementation of law and regulations
  step by step and in the right order, is
  important
• But thereafter further changes and improvements
  are needed

14
LESSON THREE NECESSITY OF PERMANENT CHANGE

• After the Operation in the years 1985-1993 the NL
  introduced new elements, e.g. a system of
  performance budgeting
• In 2004 we evaluated our system again. Some
  improvements were decided on. Measures were taken
  to strengthen the interaction between
  controllers/auditors and line managers.
• So we have to be prepared to permanent change in
  the future

15
CONCLUSIONS

• Historical background, institutional structure of
  government and economic development in Turkey and
  the Netherlands are very different
• Nonetheless some lessons can be learned from the
  Dutch experiences
• One create a good support for the budget reform
  by politicians and civil service

16
CONCLUSIONS

• Two formulate an integrated programme of
  improvements in financial management and auditing
  
• Three be prepared to permanent change and
  improvement
• And the most important conclusion at the
  background of this all is decentralisation to
  line ministries needs a serious co-operation
  between Finance and the line ministries with good
  support from both sides