Keeping an eye on subnational governments : internal control and audit at local levels

Abstract

Fiscal decentralization in developing countries has been at the center stage of public sector reforms in the last two decades. Yet, a closer look at the recent reforms in the developing world indicates that decentralization does not necessarily translate into better outcomes because of waste, corruption, and inefficiencies. The success of decentralization depends on the existence of a framework that keeps local or “subnational” governments on track and holds local government officials accountable for results—two missing components in most recent decentralization efforts. This paper attempts to close this implementation gap by developing a conceptual framework of internal control and audit at the local level. We analyze the role of internal control in public financial management practice and specify the necessary steps in establishing contemporary internal control and audit systems in a subnational government. World Bank Institute Washington, D.C. Copyright © 2006 The International Bank for Reconstruction and Development/The World Bank 1818 H Street, N.W. Washington, D.C. 20433, U.S.A. The World Bank enjoys copyright under protocol 2 of the Universal Copyright Convention. This material may nonetheless be copied for research, educational, or scholarly purposes only in the member countries of The World Bank. Material in this series is subject to revision. The findings, interpretations, and conclusions expressed in this document are entirely those of the author(s) and should not be attributed in any manner to the World Bank, to its affiliated organizations, or the members of its Board of Executive Directors or the countries they represent. Keeping an Eye on Subnational Governments: Internal Control and Audit at Local Levels Mustafa Baltaci and Serdar Yilmaz 2006. 31 pages. Stock No. 37257

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