Control and Audit in Local Administration: 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


Summary of presentation: 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.


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


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): 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


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


Stability of Public Finances: 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


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


Recent reforms in Turkey: 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) ?


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


Conclusions: 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.