Essential reform of local self-government financing requires more frequent informing and reporting, through reporting to councillors about budget execution, regularly publishing analytical cards, audit reports and stricter penaltie provisions.
Institute Alternative addressed written comments and proposals to the Ministry of Finance within public consultations, in order to improve Draft Law on Local Self-Government Financing.
The main issues of the Draft Law are regarding lack of solutions that would increase transparency and accountability of local governments in managing citizens’ money.
Among other things, we proposed improving the use of funds from the current and permanent budgetary reserves, with prescribing limits in which these budget lines are allowed to move, as well as mandatory reporting to the public on all transactions.
A particular problem is temporary financing, which is allowed during the first three months of the year, if the local self-government do not adopt the budget decision on time. However, many municipalities are “breaking through” this three-month deadline. That is why we have proposed the obligation to report on consumption in the period when the municipality has not adopted budget decision. It is also necessary to introduce special restrictions regarding the borrowing and use of the budgetary reserve in this period.
The proposed legal solutions envisage the creation of a “revolving” fund, with purpose to create opportunities for municipalities to prefinance projects from donor founds, in the form of loan. But, the obligations of municipalities to report on consumption of these funds are not required, nor is provided protection for inappropriate use of donors’ funds or delays in carrying out supported activities. State should not be in a position to cover errors in the implementation of projects and ensure the return of its funds.
External auditing report must be submitted, beside Municipal Assembly, to the Ministry of Finance and State Audit Institution as well. Ministry supervises the legality of the work of local self-governments in implementation of the Law on Local Self- Government Financing and State Audit Institution audits final account of the municipality’s budget.
Current Draft Law does not envisage any form of informing the Municipal Assembly about budget execution during fiscal year to which the budget refers, which means that neither councilors nor the citizens have information on budget execution through the year.
In order to encourage the development of internal audit and increase its impact at the municipal level, we propose to introduce the obligation of submitting the internal audit report to the Municipal Assembly.
Particular attention was devoted to the penal provisions, which are considerably lower than the maximum amount stipulated by the Criminal Procedure Code. In addition, provisions do not include domain of budget rebalance, allocation, use of the current budgetary reserve, state-owned enterprises and public institutions reporting, as well as other types of borrowing.
Municipalities must be obliged to use their websites, to make important budget documents easily accessible to their citizens. In this regard, it is necessary to oblige municipalities to continuously publish analytical cards, and not only in periods of elections.
Institute Alternative within “Money Watch – Civil Society Guarding the Budget” project financially supported by European Union in cooperation with partners, is preparing a report on public finance management at local level, with a particular focus on the openness of local budgets.
Institute Alternative Team