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Financial Management and Control of Public Agencies

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Practice Advice on Public Financial Management

Financial Management and Control of Public Agencies (OECD)

Description: Transitional countries need to analyze their administrative problems and examine possible options before adopting an agency management regime used in developed countries.

Commentary: Transitional countries in Eastern Europe and former Soviet States must recognize the risks and challenges associated with the adoption of Western European public agency models (commissions, inter-ministerial committees, advisory boards etc.) that function outside of the state ministries hierarchy. The broad mandate of such organizations and the freedom of action that follows from it may give rise to country-specific risks such as corruption, lack of transparency, inconsistent financial reporting and neglect of citizens’ rights. In addition, transitional countries may lack trained personnel as well as financial and technological resources to oversee the implementation of government policies by such agencies.

The OECD has a number of recommendations for transitional countries seeking to adopt public agency models:

  • Reformers in transitional countries should not blindly adopt foreign models of public agencies, but instead create agencies by analyzing and prioritizing country-specific objectives, risks and incentives.
  • Agencies should be classified according to their degree of autonomy, and allow for minor adjustments in order to match autonomy with specific accountability mechanisms.
  • The legal status of the agency needs to be determined based on its mandate and the legal and administrative environment of the country.
  • Agency use of government assets needs to be supervised in order to ensure that the premise use is confined to the agency’s mandate. While large agencies may be allowed to own and manage property without direct government intervention, smaller agencies’ use of land or disposal thereof needs to be reviewed and approved by a government authority.
  • The state needs to limit the guarantee it extends to its agencies as far as borrowing from outside lenders is concerned. Earmarked contributions to agencies must be accompanied by written conditions. 

Source: OECD (2001) "Financial Management and Control of Public Agencies" OECD at http://www.oecd-ilibrary.org/financial-management-and-control-of-public-agencies_5kml60vk0h9x.pdf?contentType=/ns/WorkingPaper&itemId=/content/workingpaper/5kml60vk0h9x-en&containerItemId=/content/workingpaperseries/20786581&accessItemIds=&mimeType=application/pdf (Accessed October 28th, 2012).

Page Created by: Khilola B. Zakhidova

 

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