Control and Audit in Local Administration by 46MB805K

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									                         Support to Local Administration Reform




   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
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                                            Support to Local Administration Reform


                        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.

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                                        Support to Local Administration Reform

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 country’s 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


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                                                  Support to Local Administration Reform


    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
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                                       Support to Local Administration Reform

      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 1980’s
    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)
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                                   Support to Local Administration Reform


               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


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                                              Support to Local Administration Reform


    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)

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                                     Support to Local Administration Reform


                 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 country’s public finances (MoFin) ?

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                                   Support to Local Administration Reform


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.                                                                9
                                         Support to Local Administration Reform


                                 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.


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