At a session of the Public Administration Reform Council, on November 30th , Stevo Muk, president of the managing board at Institute Alternative (IA), suggested additional improvements to the draft Law on Local Government Financing.
IA took part in the public debate on the Draft Law on Local Government Financing, by submitting 20 proposals for more transparency and accountability in financial management at the local level. The Ministry of Finance has accepted some of our suggestions, but it rejected those which would ensure the real pressure on municipalities to spend money lawfully and rationally, was rejected.
Therefore, today we have repeated our proposal that municipalities should publish analytical cards from all its accounts on a monthly basis, in the form prescribed by the Ministry of Finance, within a special section of its website. This obligation is already prescribed by the Law on Financing of Political Entities and Election Campaigns, but in a limited period. We believe that it should be introduced as a regular monthly obligation, regardless of the period of the election.
Fines for violations of the Law are not high enough and dissuasive. Ranging from 200 to 600, or 1000 to 2000 EUR, they do not correspond to the violations committed. The Law on Misdemeanors prescribes that responsible person can be fined with up to 4000 euro if the violation committed concerns the area of public revenues.
The Draft Law does not envisage in-year reporting on the execution of the budget during, thus depriving local assemblies and citizens from timely information on budget execution. Some municipalities have this obligation in their statutes, but it is necessary to legally introduce this obligation, through semi-annual reporting, in order to ensure the effective exercise of the oversight function of the Assembly. The semi-annual report must contain all three budgetary classifications, in line with the budget decision and the final account.
In order to encourage the development of internal audit and to increase its impact on the municipal level, we suggested introducing the obligation for local governments to submit a report on the work of the internal audit to the municipal assembly. It is necessary for local councilors to obtain basic information on the work of the internal audit, including the number of audits carried out, the number of recommendations made, the percentage of fulfillment of recommendations – all for the purpose of better information and more fundamental control over the execution of the budget.
We have also suggested that budget inspection reports need to be submitted to the municipal assembly.
The key incentive for drafting of this law is to meet demands of municipalities for increase in revenues. However, this should not come at the expense of the balance between rights and obligations. In other words, financial rights of municipalities shoyld correspond to their obligations for transparent and accountable financial management. During the 15 years of implementation of the current Law on Local Government Financing, municipalities have not done enough to convince us of the ability to manage their finances responsibly. Therefore, it is necessary to prevent irrational expenditures, abuse and corruption through a new law.