Ankara - TEPAV announced that there is a 42 % difference in expenses and 33,7 % difference in revenues between local government data produced by the Ministry of Finance and State Planning Organization, and asked for clarification in the issue.
The Fiscal Monitoring Report - Budget Realizations March 2007 which has been prepared by the Economic Stability Institute of the Economic Policy Research Foundation of Turkey (TEPAV) has been published. In the report is a section titled "What Do The Recently Disclosed Local Government Accounts Tell Us?".
In this section, it is reminded that the Ministry of Finance started to publish revenue and expense figures as well as detailed financial tables of local governments, followed by: "First of all, we would like to state that as a starter we welcome this action and reporting [revenue and expense tables as well as detailed financial tables] of the Ministry of Finance which we have been frequently criticizing in our fiscal monitoring reports for practices which were not transparent with respect to local government accounts."
Figures of the Ministry of Finance and SPO are so Different…
Elaborating on the outcomes which can be reached by comparing figures for local governments produced by the Ministry and SPO, the report continued as follows:
"One of the first issues worth mentioning in the table is the fact that the expense figures of the Ministry of Finance are 42 % bigger than that of SPO, while it reaches 33,7 % in revenue figures. Thus, the expense and revenue figures of the two institutions have significant differences. Although SPO data is forecasted to be realized in 2006, this large difference gives way to some questions. The perspective of assuming that the data collected by SPO via surveys represents 90 % of the real situation loses validity seriously because of the 30-40 % difference between the figures. We can list the questions that come to mind as follows:
Are SPO data not reflecting the reality and are the calculations for PSBR made so far using this data which have been gathered via surveys misleading? In fact, the local government budget balance which is announced to have a surplus by SPO has a deficit according to the Ministry of Finance data.
The real local government expenses are much more than that is calculated by the State Planning Organization. So, is it the case that while the central budget is being shrunk, expenses are being shifted largely to local governments and SPO calculations do not reflect this? Is there a methodological error arising from the surveys?
Are SPO data being manipulated, while apart from minor divergences SPO survey data and the Ministry of Finance data are essentially the same?"
It has been stated in TEPAV's report that, in addition to concerns about the transparency of the Central Government Budget, concerns about the transparency of the calculation method for local government accounts which has been being used so far needs to be dispelled by the commentaries of the authorities.
Local Governments are in Serious Financial Distress
Pointing out the fact that an examination of the other financial tables published by the Ministry of Finance reveals that the net financial value of the local governments is "negative" close to 2 % of the GDP, which means that they have more obligations than their assets, the report stated:
"About 60 % of the negative structure of the net financial value of the municipalities comes from metropolitan municipalities. From a total local government expenses perspective, when the institutions affiliated with metropolitan municipalities and special provincial administrations are included in the analysis, 90 % of the negative outlook in the net financial value is observed to arise from metropolitan municipalities.
More than half of the Short Term Financial Obligations is seen to be debts they have not paid to other public administrations and debts they booked in escrow accounts due to lack of cash for payments.
46 % of total liabilities are composed of long term liabilities. In long term financial liabilities, debts to public administrations, primarily to the Treasury, and bank loans and foreign debt is over 90 % of total liabilities.
As a summary, the local governments can be said to be in a serious financial distress from a perspective of both budget balances and stock liabilities and this can cause problems in the future."