IMF Viyana

Off-budget Activitiesin Turkey: 

Off-budget Activities in Turkey Ministry of Finance Turkey February 20, 2003 Vienna

Agenda:: 

Agenda: -Minimizing extra-budgetary funds, -Transparency of privatization receipts, -Reporting QFAs, contingent liabilities and tax expenditures, -Controlling local off-budget activities.

Minimizing Extra-Budget Activities: 

Minimizing Extra-Budget Activities Extra-budget activities were very common until 2001, There were almost 80 extra-budgetary funds; = managed by related administrations, = not under parliamentary control, = using different accounting and reporting systems, = using different expense procedures than governmental expense procedures.

Continued:: 

Continued: Extra Budgetary Funds(EBFs) had most of their own revenues from related sources, but some were receiving transfers from the general budget (a kind of earmarked revenue), Their activities were not being reported for public, but were audited by High Audit Board and Ministry of Finance, All extra-budgetary funds were abolished, except 6. There were 2600 revolving funds in different line ministries. They have separate budgets and different expenditure procedures. In 2001 and 2002, the number of the revolving funds were reduced to 1463.

Transparency of Privatization Receipts:: 

Transparency of Privatization Receipts: Privatization Administration(PA) was established in 1994 with Law number 4046. The privatization receipts are managed under the “Privatization Fund” administered by PA. Cash surplus of Privatization Fund is transferred to the treasury accounts for treasury payments. The proceeds of privatization are mainly used to increase capital in companies in privatization portfolio, transfer to companies, transfer to treasury, credit to companies and payment of loans and early retirement payments. The privatization revenues are not allowed to be transferred to public administrations, organizations and to the local administrations during privatization, unless necessary for the sake of national security and\or the best interest of the public.

Continued:: 

Continued: Total income from organizations on the privatization program during the 1985-2001 was US$10 billion. In the same period, total privatization expense was US$9.7 billion. Privatization revenues are mainly being used for privatization purposes; especially for preparing the companies to be privatized in the privatization portfolio. PA has its own accounts. Privatization activities, receipts and expenditures are reported on the web-page of the PA(www.oib.gov.tr), separately from government accounts. The activities of PA are audited by State Audit Board, not regularly.

Reporting QFAs, Contingent Liabilities and Tax Expenditures: 

Reporting QFAs, Contingent Liabilities and Tax Expenditures QFAs : Central bank is classified separately from the general government. Therefore, Central Bank activities such as credit subsidies, support of financial institutions, foreign exchange subsidies, foreign exchange revaluations are reported in the Central Bank accounts. Payments to the public financial institutions as duty losses are reported in the Consolidated Budget Accounts. Transfers to non-financial public institutions are also reported in the Consolidated Budget Accounts.

Contingent Liabilities:: 

Contingent Liabilities: Treasury guarantees are not recorded in the government accounting system, but reported on the Treasury web-page. Commitments are not recorded and reported in the government accounting system. Social Security Liabilities Future social security payments are not measured and reported. There are three social security institutions. They have their own annual budgets. The deficits of social security institutions are financed from the national budget. These transfers are reported in the consolidated budget accounts.

Tax Expenditures: 

Tax Expenditures Tax expenditures are not measured and reported in the government accounts.

Controlling Local Off-budget Activity: 

Controlling Local Off-budget Activity There are 3250 municipalities and 81 provincial administrations in Turkey. Each municipality and provincial administration has its own budget. Some municipalities have also annexed budgets for their city transportation and water businesses. These are not classified as off-budget activities. There were two off-budget funds serving local administrations; Municipalities Fund and Local Administrations Fund. These funds were being managed by central government but were abolished in 2001. There are no off-budget activities in local administrations. Except non-financial corporations established by local administrations; all local revenues and expenses are included in local administration budgets.

Current Studies: : 

Current Studies: A- Moving Accrual Based Government Accounting and Reporting: 1-All governmental units in the general government sector will use the same internationally accepted government accounting and reporting standards and framework chart of accounts. 2-IMF’s GFSM 2001 budget classifications are being adopted; all governmental units will use the same revenue and expense classifications. 3-Ministry of Finance will be the single authority to determine accounting and reporting standards and produce and disseminate general government data in predetermined periods.

Continued:: 

Continued: 4- All contingent liabilities and QFAs in the general government sector will be accounted and reported in the government accounting system. 5- Financial tables such as Balance Sheet, Statement of Operations and Statement of Cash Flows will be produced and made public for each sub-sector and general government sector. 6-Budget activities will be recorded and reported on cash basis; government activities will be reported on accrual basis. 7- GFS and ESA95 tables related to general government sector will be produced directly from accounting system by transforming accounting data.

B-Reform on Financial Management and Control System:: 

B-Reform on Financial Management and Control System: A new law on public financial management and control system is drafted. Roles and responsibilities of Ministry of Finance and line ministries are defined clearly in the budget preparation and implementation process. Responsibilities and authorities related to financial management will be delegated to spending agencies. Ministry of Finance will be a central governmental unit in setting standards and monitoring implementation in general government. All financial transactions will be included in related budgets. Tax expenditures will be reported. Accountability and transparency will be main values in public financial management system. All financial activities will be subjected to external and parliamentary control.

Thank you: 

Thank you