Local Finance
75
Local Finance
description
Local Finance. Outline of Presentation. Revenues: Theory of revenue assignment Which financing tools for which services? Expenditures: Theory of expenditure assignment Main Municipal roles and responsibilities in different countries. Introduction. - PowerPoint PPT Presentation
Transcript of Local Finance
Local Finance
Outline of Presentation• Revenues:
– Theory of revenue assignment – Which financing tools for which services?
• Expenditures:– Theory of expenditure assignment– Main Municipal roles and responsibilities in
different countries
2
Introduction
• The main elements of local finance are the system of revenues, the system of expenditures, local budgets and local financial administration.
Expenditure Assignment
• Revenue assignment requires a clear description of task to be performed by each tier of LG.
• Resource gap could not me measured until the expenditure needs can be ascertained. This exercise requires a very clear delineation of task to be performed by each tier of LG.
Cont.,
• Expenditure assignment refers to specifying the functions and expenditure responsibilities for each level of government, central as well as local. In other words, what are the functions and expenditure responsibilities of each level of government in the decentralized system of governance; who will do what and who will pay for what?
Theory of Expenditure Assignment
• Guidelines to divide government expenditure responsibilities among federal, provincial, and local governments:1. Federal government should have primary
responsibility for stabilization policy and income distribution policies; local governments should focus on the allocation function – delivering goods and services and determining how funds will be raised
6
Theory of Expenditure Assignment
2. Services should be delivered at the level of government closest to the individual citizen for economic efficiency (“subsidiarity” principle). Exceptions occur where there are:
– economies of scale – externalities
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Theory of Expenditure Assignment
3. Finance follows function – assign expenditure responsibilities first and then revenue raising powers
4. Balance expenditure assignment and revenue assignment
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9
General government services10%
Protection of persons and property
17%
Transportation and communication
20%Health3%
Social services9%
Education0%
Resource conservation and industrial development
2%
Environment17%
Recreation and culture12%
Housing3%
Regional planning and development
2%Debt charges
4%
Other expenditures1%
Composition of Total Expenditure by Local General Government, Canada (2005)
Approaches
• Expenditure- led approach , is regarded as the best approach in identifying expenditure assignments to central and sub-national government. It minimizes the confusion emerging from the duplication and overlapping of function.
• The revenue-led approach, where public revenue resources are first allocated in a general way between levels of government.
Principles, Conditions for Successful Implementation and Common Problems in Expenditure Assignment
• Theoretically, expenditure assignment should adopt the principles of allocative efficiency, redistributive justice, subsidiarity, economic stability and growth.
Suggested Revenue Sources of Central Government and Local Bodies
ESTIMATING FISCAL GAP ANDINTERGOVERNMENTAL FISCAL
TRANSFER
Types of grants
• There are broadly two types of grants: conditional and unconditional. Conditional grants are given in two broad forms. They are matching and non-matching. Again the matching grant is divided into open-ended or closed-ended.
Cont.,
• Conditional grants are sometimes called specific purpose grants or categorical grants, wherein the central government specifies the purpose for which the recipient local body can use the funds.
• Conditional grants can be matching or non-matching. In the case of conditional matching grant the central government asks local bodies to match certain portion of the expenses on specific programs as a condition to receive the grant.
Cont.,
• Open-ended conditional matching grant is a type of grant in which the central government does not impose a limit on the matching funds. Closed ended conditional matching grant is such a grant fund for which the central government puts a maximum ceiling on the cost it will borne to finance a service.
Design of a grant system
• It has to address the following – what is the amount that is to be distributed (vertical balance); what is the purpose of the grant transfer to local bodies; how the grant amount be distributed among local bodies (horizontal distribution); and how is the system being administered, monitored and managed.
Size of the grant pool
• Determination of the size of the grant pool is essential to ensure vertical balance. There are three common approaches to determining the size of the grant pool.
a. The ad-hoc approachb.The systematic approach
Distribution of the conditional grant among eligible local bodies
• Various approaches are followed by different countries for distribution of conditional grants horizontally to LBs.
• One is to distribute the funds based on calculation of actual cost to provide the identified services with predetermined standards.
• Another approach is to estimate expenditure needs based on critical factor(s) as predictor that represent the needs most (for example, for calculating the education expenses the population of the school going age can be taken as predictor).
• A further different approach is to calculate the unit cost of the establishment to provide the services (such as unit cost of a health post) and factor it with the number of such establishments required.
Distribution of unconditional grant eligible local bodies
• Distribution of unconditional grants can also be made by calculating the actual expenditure needs and assessing revenue gaps, which is an elaborate exercise that demands huge MIS system, and is also not congenial from the standpoint of local autonomy.
Design of grant formula for intergovernmental fiscal transfer
• Bahl suggests that design of a formula based grant system should give serious considerations on the elements of the formula, the data necessary to implement the formula, and the costs associated with administering the grant program.
Cont.,
• Design of a formula requires selection of factors to be included the formula and their relative weights.
• A good factor is one that fairly reflects the characteristics of the LB jurisdiction (e.g., revenue situation, expenditure needs, services and level of development) and for which reliable data can be found from respected sources. The data should be free from manipulation, statistically sound and regularly updated.
1 Main steps to evaluate borrowing capacities of LG
2 Main issues: LG still an “unknown” entity
3 A comprehensive and long term financial approach
Institutional context: decentralisation process in the institutional framework, legal capacity to borrow (domestic and external borrowing), indebtedness limits, financial autonomy of LGs, possible guarantees (debt repayment),
Organizational context of LG: administrative capacities (skilled and experienced staff), financial information system, accountability system, certified accounts,
Political context: Master Plan (urban planning) Financial capacities: classic financial
assessment, risk analysis (including currency risk) => rating (rating agency or internal rating)
1 Main steps Evaluation of borrowing capacities of LG
Financial assessment: LG often considered as “Central government services” => Inappropriate financial tools (calculation of fiscal balances, debt ratios, cash on hands…)
Donors are cautious: implementation of Municipal Funds as a preliminary step => Way to reinforce decentralisation process but no direct dialogue with LG leaders and no real transfer of responsibilities
Donors favour most populated cities (State or regional capitals), which exacerbates financial inequities within a country of a region: direct loan with Central Government guarantee and / or credit line to local banks to finance LG
2 Main issues LG: still an “unknown” entity
Municipal Fund
LG &municipal companies
Central government
Donors
Specialized financial
institutionLocalbanks
Support of a reliable fiscal decentralization
Support of LG direct access to financial markets
Loans / Subsidies
Loans / Subsidies
Loans / Subsidies
Loans / Subsidies
Loans Loans
LoansLoans
Classic types of financial support for LG
Donors
PEFA methodology as a comprehensive approach: PEFA first used to evaluate financial performances of States (Ex: European Commission => PEFA & budgetary support for EDF project implementation)
PEFA studies for LG can provide: a global evaluation of local public finances
system, an evaluation on a long term (every 3-4 years)
to identify progress (better rating for weak component),
an objective diagnostic to implement an coordinated Action Plan (stakeholders: Central government, LG, national audit office)
3New
approachA comprehensive and long term financial
approach based on PEFA methodology1/4
3New
approachPEFA study’s place in a reform cycle of
Local Public Financial Management (LPFM)2/4
Implementation of LPFM reforms
LPFM reforms (short & long term
Objectives)
Recommendations& measures to be
taken
Analysis of causes
Financial & riskassessment
Identification of main weaknesses
LPFM
Credibility of the budget: the budget shall be realistic and executed as planned,
Comprehensiveness and transparency: complete follow-up of financial risks, communication of budget and financial information to public,
Policy-based budgeting: according to local public policies voted by local assemblies,
Predictability and control in budget execution: existing of mechanisms and procedures,
Accounting recording and reporting: adapted accounting system, perfect recording (paper – numeric)
External scrutiny and audit: certification and / or national public office
3PEFA
methodologySix dimensions taken into account 3/4
Outputs of financial management system: immediate outputs (to be compared with expected expenditures and revenues), amount of arrears and “debts”,
Cross-cutting issues of financial management system: capacity to produce full information at every step of budget cycle (budget, execution, final account),
Budget cycle: performance of each system, process and entities participating in the budget cycle of the LG.
3PEFA
methodologyThree categories for indicators 4/4
Fiscal Relationship between Central and Local Bodies
• In general three broad aspects of governance should guide the design of fiscal relationship between levels of governments. They are authority, resource and accountability.
• Besides, the crosscutting principles guiding the fiscal relationship are transparency, predictability, inclusiveness (participation of wide cross section of population) responsiveness, and reliability.
Authority
• Authority aspect of institutional relationship should address who does what, who controls what resources, how different functions (fixing rate, defining base, collection, distribution) are undertaken.
• How the authority is bestowed (through act, rules, policy or directives), the conditionality of the funds that are transferred are important to establish authority. The division of responsibilities among levels of government, the checks and balances system, the system of cooperation and coordination would make the authority more effective.
Resources
• In a decentralized system the degree of financial autonomy exercised by Local Bodies is a measure of fiscal power. The more financial autonomy the LBs achieve the higher the degree of control over financing of local services leading to exercise of higher fiscal power.
• LB revenue can be categorized as own-source revenue and revenue transferred by another level of government. Own-source revenue is revenue raised and spent by the agency levying the tax, fee or assessment.
Accountability• The functions related to accountability aspect of
managing intergovernmental relations are carrying out financial and performance audit to attest LB incomes and expenditures, to see if the procedures and processes are in compliance with the set norms and standards, and to judge to what extent the principle of value for money is applied by LBs.
• Accountability should also be evaluated on the part of the CG operations in relation to managing intergovernmental fiscal relations.
Distribution of Local Government Expenditures, Selected Countries (%)
40
US UK Fra. Spain Neth. Den. Swe. Italy Bel.
General admin.Public safetyEducationHealthSocial sec./welfareHousingRec. and cultureFuel and energyAgricultureMining, mfg., const.TransportationOther economicOtherTotal
139
387333
1100507
100
41229
033
53000518
100
112
202
1824
8400408
100
74
1821
511
603173
14100
93
183
2320
600070
11100
40
131657
13000050
100
204
87000000007
100
6010
681102162
11100
210
35640
1300006
15100
Fiscal Design across Levels of Government:
EU Applicant States and EU Member States
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GDP per head
GDP per head
0
5000
10000
15000
20000
25000
Mean 1
5 E
U m
em
ber
Sta
tes
Mean 1
3 A
pplic
ants
Sta
tes
Bulg
aria
Cypru
s
Czech R
epublic
Esto
nia
Hungary
Latv
ia
Lith
uania
Malta
Pola
nd
Rom
ania
Slo
vak R
epublic
Slo
venia
Turk
ey
GDP per head
43
Key IndicatorsPopulation
(in 1000)Size (km2)
Growth Inflation rate
Public deficit
(% GDP)
Public debt (% GDP)
Bulgaria* 8,170 110,971 4.00 10.3 -0.7 76.9Cyprus 757 9,251 4.00 4.9 -3.2 63Czech Republic 10,273 78,866 3.30 3.9 -4.2 17.3Estonia 1,436 45,227 5.00 3.9 -0.7 5.3Hungary 10,024 93,030 3.80 10 -3.1 55.7Latvia 2,373 64,589 5.90 2.6 -2.7 14.1Lithuania 3,696 65,300 7.70 0.9 -3.3 23.7Malta 391 316 -0.80 2.4 -6.6 60.6Poland 38,646 312,685 1.10 10.1 -3.5 40.9Romania* 22,435 238,391 5.30 45.7 -3.8 22.9Slovak Republic 5,401 49,035 3.30 12.1 -6.7 32.4Slovenia 1,990 20,273 3.00 8.9 -2.3 25.8Turkey* 65,293 769,604 -7.40 54.9 -11 57.8
Weighted average 10 Applicant States 2.54 8.45 -3.67 36.58Weighted average 15 Member States 1.50 2.30 -0.60 63.00
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II Main findings
• Current approaches to sub-national government within the EU– Federal approach (Austria, Germany, Belgium)– Tradition of relatively strong sub-national
government (Denmark, Finland, Sweden)– Tradition of relatively weak sub-national
government (Greece, Ireland, Portugal)– Intermediate approach (France, Italy,
Luxembourg, Netherlands, Spain, UK)
45
Current approaches to sub-national government in 10 Applicant Countries
• Unitary approach• Four countries with genuine regional level
(Czech Republic, Latvia, Poland, Slovak Republic)
• Only two countries with two tiers of local government (Latvia, Poland)
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Bulg
aria
Czech R
epublic
Esto
nia
Hungary
Latv
ia
Lith
uania
Pola
nd
Rom
ania
Slo
vak R
epublic
Slo
venia
Under 10001000-2000
2000-50005000-10000
10000-5000050000-100000
Over 100000
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
% o
f au
tho
riti
es
Population ofauthority
Bulg
aria
Czech R
epublic
Esto
nia
Hungary
Latv
ia
Lith
uania
Pola
nd
Rom
ania
Slo
vak R
epublic
Slo
venia
Under 10001000-2000
2000-50005000-10000
10000-5000050000-100000
Over 100000
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
% o
f au
tho
riti
es
Population ofauthority
Distribution of municipalities by size range
47
Decentralisation profiles Sub-national expenditure levels (% of GDP)
0.05.0
10.015.020.025.030.035.0
48
Decentralisation profiles Sub-national revenue levels
%GDP
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
45.0
%GDP % total revenue
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The allocation of responsibilities (sub-national spending by function as a percentage of total sub-national
spending. Mean values)
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
Ge
n. p
ub
.se
rvic
es
Ed
uca
tion
He
alth
We
lfare
Ho
usi
ng
Cu
lture
Tra
nsp
ort
Oth
ers
ApplicantStates
SelectedmemberStates
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
Ge
n. p
ub
.se
rvic
es
Ed
uca
tion
He
alth
We
lfare
Ho
usi
ng
Cu
lture
Tra
nsp
ort
Oth
ers
ApplicantStates
SelectedmemberStates
50
Composition of sub-national revenues
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Bul
garia
Cze
ch R
epub
lic
Est
onia
Hun
gary
Latv
ia
Lith
uani
a
Pol
and
Rom
ania
Slo
vak
Rep
ublic
Slo
veni
a
Bel
gium
Den
mar
k
Fra
nce
Italy
Net
herla
nds
Spa
in
Sw
eden
Uni
ted
Kin
gdom
Grants
Non-tax revenues
Tax revenues
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Bul
garia
Cze
ch R
epub
lic
Est
onia
Hun
gary
Latv
ia
Lith
uani
a
Pol
and
Rom
ania
Slo
vak
Rep
ublic
Slo
veni
a
Bel
gium
Den
mar
k
Fra
nce
Italy
Net
herla
nds
Spa
in
Sw
eden
Uni
ted
Kin
gdom
Grants
Non-tax revenues
Tax revenues
51
0%
20%
40%
60%
80%
100%
Income and profits Property Goods and services Others
0%
20%
40%
60%
80%
100%
Income and profits Property Goods and services Others
The choice of sub-national taxes
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Local tax autonomy
Revenue sharing where the CG:SNG revenue split…Level Sub-nationalgovernment taxesas % of total tax
revenue
SNG setstaxrate
and base
SNG setstax rate
only
SNGsetstax
baseonly
…is setby SNG
…can bechanged only if
SNG agree
…is set in legis-lationand may be changed
uni-laterally by CG
…is set annuallyby CG as part of
the budget
CG setsboth rateand taxbase ofSNG tax
Total
(a) (b) (c) (d1) (d2) (d3) (d4) (e)
Bulgaria (2000) Local 10.0 - - - - - 39.0 61.0 -100.0
Czech Republic (1999) Local 11.1 2.7 5.6 - - - 91.7 - - 100.0Estonia (1999) Local 16.2 - 9.2 - - - 90.8 - - 100.0
Hungary (1999) Local 10.4 49.2 - - - - - 50.8 100.0Latvia (1999) Local 17.1 - - - - - - - 100.0 100.0
Lithuania (1999) Local 22.0 - - - - - - - 100.0 100.0Poland (1999) Local 8.3 - 41.9 0.6 - - 57.6 - - 100.0
Romania (2000) Local 10.5 - 6.0 0.6 - - - 75.0 18.4 100.0Slovak Republic (2000) Local 4.0 7.0 28.2 - - - - 64.8 - 100.0
Slovenia (2000) Local 7.9 16.7 0.6 0.4 - - 82.3 - - 100.0Mean (by country) - 11.8 7.6 9.2 0.2 0.0 0.0 36.1 25.2 21.8 100.0
Belgium (1995) Local 6.0 13.0 84.0 - - - 2.0 1.0 - 100.0Communities 13.0 - 3.0 - - 97.0 - - - 100.0Regional 10.0 8.0 92.0 - - - - - - 100.0
Denmark (1995) Municipalities 22.0 - 96.0 - - - 4.0 - - 100.0Counties 9.0 - 93.0 - - - - - 7.0 100.0
Netherlands (1995) Municipalities 1.0 - 100.0 - - - - - - 100.0Polder boards 1.0 - 100.0 - - - - - - 100.0
Spain (1995) Local 9.0 33.0 51.0 - - 16.0 - - - 100.0Regions 5.0 15.0 7.0 - - 78.0 - - - 100.0
Sweden (1995) Municipalities 22.0 4.0 96.0 - - - - - - 100.0Counties 11.0 - 100.0 - - - - - - 100.0
United Kingdom (1995) Local 4.0 - 100.0 - - - - - - 100.0Mean (by tier) - 9.4 6.1 76.8 0.0 0.0 15.9 0.5 0.1 0.6 100.0
Revenue sharing where the CG:SNG revenue split…Level Sub-nationalgovernment taxesas % of total tax
revenue
SNG setstaxrate
and base
SNG setstax rate
only
SNGsetstax
baseonly
…is setby SNG
…can bechanged only if
SNG agree
…is set in legis-lationand may be changed
uni-laterally by CG
…is set annuallyby CG as part of
the budget
CG setsboth rateand taxbase ofSNG tax
Total
(a) (b) (c) (d1) (d2) (d3) (d4) (e)
Bulgaria (2000) Local 10.0 - - - - - 39.0 61.0 -100.0
Czech Republic (1999) Local 11.1 2.7 5.6 - - - 91.7 - - 100.0Estonia (1999) Local 16.2 - 9.2 - - - 90.8 - - 100.0
Hungary (1999) Local 10.4 49.2 - - - - - 50.8 100.0Latvia (1999) Local 17.1 - - - - - - - 100.0 100.0
Lithuania (1999) Local 22.0 - - - - - - - 100.0 100.0Poland (1999) Local 8.3 - 41.9 0.6 - - 57.6 - - 100.0
Romania (2000) Local 10.5 - 6.0 0.6 - - - 75.0 18.4 100.0Slovak Republic (2000) Local 4.0 7.0 28.2 - - - - 64.8 - 100.0
Slovenia (2000) Local 7.9 16.7 0.6 0.4 - - 82.3 - - 100.0Mean (by country) - 11.8 7.6 9.2 0.2 0.0 0.0 36.1 25.2 21.8 100.0
Belgium (1995) Local 6.0 13.0 84.0 - - - 2.0 1.0 - 100.0Communities 13.0 - 3.0 - - 97.0 - - - 100.0Regional 10.0 8.0 92.0 - - - - - - 100.0
Denmark (1995) Municipalities 22.0 - 96.0 - - - 4.0 - - 100.0Counties 9.0 - 93.0 - - - - - 7.0 100.0
Netherlands (1995) Municipalities 1.0 - 100.0 - - - - - - 100.0Polder boards 1.0 - 100.0 - - - - - - 100.0
Spain (1995) Local 9.0 33.0 51.0 - - 16.0 - - - 100.0Regions 5.0 15.0 7.0 - - 78.0 - - - 100.0
Sweden (1995) Municipalities 22.0 4.0 96.0 - - - - - - 100.0Counties 11.0 - 100.0 - - - - - - 100.0
United Kingdom (1995) Local 4.0 - 100.0 - - - - - - 100.0Mean (by tier) - 9.4 6.1 76.8 0.0 0.0 15.9 0.5 0.1 0.6 100.0
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Free revenues and tied revenues
0%10%20%30%40%50%60%70%80%90%
100%B
ulga
ria
Cze
ch R
epub
lic
Est
onia
Hun
gary
Latv
ia
Lith
uani
a
Pol
and
Rom
ania
Slo
vak
Rep
ublic
Slo
veni
a
Mea
n
Tied revenues (specif ic grants)
Other free revenues (general grants and tax categories d-e)
Ow n revenue (tax categories a-c and non tax revenues)
0%10%20%30%40%50%60%70%80%90%
100%B
ulga
ria
Cze
ch R
epub
lic
Est
onia
Hun
gary
Latv
ia
Lith
uani
a
Pol
and
Rom
ania
Slo
vak
Rep
ublic
Slo
veni
a
Mea
n
Tied revenues (specif ic grants)
Other free revenues (general grants and tax categories d-e)
Ow n revenue (tax categories a-c and non tax revenues)
54
III Some general conclusions• Problem of fragmentation; too many; too small• Total government spending in relation to GDP is 40% in
applicant States (45% in EU), but the applicants decentralise much less (7% of GDP against 16%)
• Inverse relation between degree of decentralisation and importance of tax revenue as source of sub-national finance
• Autonomy over sub-national taxes: overall lower in Applicant States
• Institutional framework for central/local relations in the applicant States: emerging systems of negotiations; still many countries have not established standard procedures (e.g. on “bailouts”)
55
What are the issues that Applicant States will face?
• The balance between national fiscal targets and sub-national fiscal discretion– How fiscal decentralization may be coordinated
with macroeconomic stability?– Can stabilisation agreements be developed
between different levels of government?
• What possible institutional framework for dialogue between EU and sub-national governments?
56
Further perspectives• How to strengthen ties between sub-national
government in the expanded Union• Need to re-examine the role of intermediate
government• Need to share experiences and identification of
“best practices” both within and outside of EU• Need to develop reliable internationally
comparable statistics• The OECD Forum on Fiscal Relations across Levels
of Government
Local Finance in Central and Eastern Europe
Albania, Bosnia and Herzegovina, Bulgaria, Croatia,
Macedonia, Moldova, Romania and Yugoslavia.
Overview
• Local governments everywhere share the problem of inadequate financing. In these transitional times of debate on structural reforms, scarcity of resources and tight public finances, the central government applies budgetary control and constraints on local governments.
Cont.,
• The main elements of local finance are the system of revenues, the system of expenditures, local budgets and local financial administration.
Revenues to local budgets
• The existing means of generating resources for the municipal budget are as follows: self generated revenues (local taxes, fees and others); revenues from national taxes (part of the state or shared taxes); budget transfers, including general transfers and special (targeted) subsidies and grants; and other means (some attempts recently have been made to raise funds through financial markets).
• Concerning the adoption and execution of local budgets, no methodological or normative problems exist, but local budgets as a rule follow the adoption of the state budget, which creates a number of problems.
• Local financial administrations have not yet attained their optimal structures, relationships and distribution of functions vis-à-vis the central government authorities, various levels of local government, subdivisions of municipalities, other financial institutions and the local administration.
• The idea of creating municipal tax administration at first glance may appear to be a type of empowerment for municipalities, but profound analysis proves that this solution is far from being expedient or even financially attractive to either municipalities or the central government.
• Most local authorities are unprepared or unable to take on increased responsibilities for fund raising, economic development and establishing true self-government. One major problem is a lack of investment capital.
• The structure of expenses in local budgets everywhere shows that expenses for social and cultural needs tend to prevail.
Background• The transition has imposed dramatic social• costs for societies in these countries—economic
decline, inflation, unemployment and poverty.• The number of citizens requiring social assistance
is on the rise, while financial resources are obviously inadequate to cover all demands. Short-term “production objectives” rather than
• long-term “program objectives” are central to the policy process in local governments. Reducing
• immediate shortages by means of ad hoc policies is still a general practice.
• The first steps in the• new conditions of the market economy and
recent experiences are not sufficient to reassess local
• self-government and to provide local authorities with significant authority in public finance.
• Many opportunities have emerged recently: whether or not they will be advantageous to local
• government depends on the on-going reforms.
• Projects and programs hold considerable promise as ways to mobilize resources to provide results.
• Regional development is one of the modern approaches aiming to create conditions for the stable and balanced development of particular regions of a country, to reduce interterritorial differences in employment and income and to realize regional and cross-national cooperation and integration.
• The modest experience already gained by some of these countries (for example, Bulgaria) has revealed that regional development planning is used to promote state policy for territorial development; that is, a regional development plan functions as yet another instrument of state involvement in local affairs. Rather, the regionalization process should consolidate and intensify local autonomy and the local authorities’ role.
• The functions of the regions must be defined and managed by the municipalities and not by the central government; otherwise the administrative regions will replace local self-governments. Financial resources for regional development should come predominantly from the central government, not from the municipalities.
• Partnership between central and local governments and nongovernmental organizations (NGOs) expands the political and social base of government decisions and improves their efficiency and successful implementation.
• The establishment and strengthening of intermediary institutions— national and regional associations of municipalities or mayors—demonstrate the existence of a well-developed network of partner organizations, which increasingly are improving coordination and unity of action while retaining their independence and identity.
• Currently, associations of local elected authorities exist for cities and communes, mayors, council chairs and municipal secretaries.
• Their activities and central-local government relations also are supported by the successful operation of similar organizations such as local government reform foundations; professional associations of municipal secretaries, financial officers, environmental officers; regional centers and agencies; et cetera.
• The existence of this network is indicative of the awareness of the need for joint action and interinstitutional cooperation.
• The models of such partnership have created useful forms of efficient interaction, such as participation of representatives of national associations of municipalities and other organizations in the work of parliamentary standing committees; involvement of central and local government representatives in the activities of working groups, boards, councils and discussions organized on the initiative of the central or local government; multilateral working meetings on top-priority topics of activity; procedural rules for consultations on budget drafting or planning and the drafting of legislative changes in certain matters; and improvement of information exchange as a means to better understanding and partnership.
• New forms of partnership also are connected with the requirements of regional development.
• Regional development laws, where they exist, provide frameworks for partnership between regional
• associations of municipalities and regional governors as representatives of the central government.
• The participation of nongovernmental organizations in local government is practiced to a great
• extent concerning the exchange of experiences and the dissemination of information on local
• government matters.
• For this purpose, NGOs develop systems to collect and disseminate innovative practices in local government, provide comparative reviews of legislation of developed democracies and other countries in transition, arrange discussions for the presentation of opinions of all parties concerned on certain bills in local government, conduct surveys and organize discussion and training seminars for politicians and local government administrators.
• The benefits from partnership between central and local governments and NGOs address four spheres—the legislative sector, local government, the “third” sector and civil society.
Thank you for your attention
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