1. Local self-government and budgetary responsibility. Romania’s SAI role and activity Romanian Court of Accounts 2015

2. 1. Romania’s administrative structure and municipal finances

3. Local self-government and budgetary responsibility. Romania’s SAI role and activity Romania’s administrative structure State levelLocal level LegislativeExecutiveDeliberativeExecutive Parliament- Government - Central institutions -County council -City/Town/ Commune council - Mayor The local administration authorities of communes, towns, cities and counties are based on the principles of authonomy, legality, responsability, cooperation and solidarity in solving the problems of the whole county. There is no subordination between county and local authorities, and also between councils and mayors.

4. Local self-government and budgetary responsibility. Romania’s SAI role and activity Self – Government in Romania Romanian Constitution: The local public administration is based on the principles of:  Decentralization  Local autonomy, and  Deconcentration of public services.

5. Local self-government and budgetary responsibility. Romania’s SAI role and activity Self – Government in Romania The County Council  coordinates the activity of commune, town and city councils  carries out the public services of county interest.

6. Romania’s local administration - Counties  41 counties  1 general Council for București

7. Local self-government and budgetary responsibility. Romania’s SAI role and activity Self – Government in Romania Local autonomy in towns and communes is implemented by freely elected :  Local Councils, and  Mayors They act as autonomous administrative authorities and manage public affairs in communes and towns, in accordance with the law.

8. Romania’s local administration – Towns and Communes  6 București sectors  104 cities (of witch 41 are county capitals)  216 towns  over 2.700 communes  in average, 74 municipalities/cou nty

9. Local self-government and budgetary responsibility. Romania’s SAI role and activity MUNICIPAL BUDGET STRUCTURE Functional Section the basic, mandatory part of each local budget, containing the revenues necessary to fulfill the municipalities’ main functions and competencies, along with those expenditures. Developement Section the complementary part of each municipal budget, containing the revenues and capital expenditures for implementing national, regional and local (county, city, town or commune) development strategies.

10. BUDGET SECTION REVENUESEXPENDITURES FUNCTIONAL  local tax revenues, contributions, other income  % of income tax and broken down ammounts (BDA)  VAT broken down ammounts  subsidies form state and other budgets  wages and contributions  current goods and services  social assistance  loan reimbursement  transfers & subsidies to other budgets  loans for other local institutions/activities DEVELOPEMENT  transfers from functional to developement section (functional section surpluss)  disposal of fixed assets  subsidies for capital expenditures  state revenue broken down ammounts for capital expenditures  EU funds  investment projects  transfers for capital expenditures  loan reimbursement MAIN MUNICIPAL REVENUES AND EXPENDITURES

11. OVERVIEW OF MUNICIPAL FUNCTIONAL SECTION REVENUES - municipalities are dependent on state income broken down amounts and percentages - 90% of municipalities’ revenues are not in it’s administration, and 50% (VAT B.D.A. and subsidies) require political and/or administrative decision at the state level. - municipalities are dependent on state income broken down amounts and percentages - 90% of municipalities’ revenues are not in it’s administration, and 50% (VAT B.D.A. and subsidies) require political and/or administrative decision at the state level.

12. OVERVIEW OF MUNICIPALITY FUNCTIONAL EXPENDITURES - The personnel and current goods and services accounts for 71% of the functional expenditures, and around 60% of the total expenditures (excluding EU funds) - These current expenditures exceed by 180% the local reve- nues administered by Romanian municipali- ties, making them dependent of state finances even for basic functions. - The personnel and current goods and services accounts for 71% of the functional expenditures, and around 60% of the total expenditures (excluding EU funds) - These current expenditures exceed by 180% the local reve- nues administered by Romanian municipali- ties, making them dependent of state finances even for basic functions.

13. OVERVIEW OF MUNICIPALITY DEVELOPEMENT EXPENDITURES - Although we cannot speak of a functional section financial autonomy, the transfers made to the development section amounted to 45% of the total development revenues. - National and local funds that munici- palities used for capital expenses were only 18% of the total municipalities’ budget. - The importance of EU funds absorption is paramount to local development. - Although we cannot speak of a functional section financial autonomy, the transfers made to the development section amounted to 45% of the total development revenues. - National and local funds that munici- palities used for capital expenses were only 18% of the total municipalities’ budget. - The importance of EU funds absorption is paramount to local development.

14. While local self – government and the budgetary competencies and responsibilities of municipalities are keystones of Romania’s administrative structure, the local financial resources needed to fulfill them are far from sufficient. ARE MUNICIPALITIES FINANCIALLY INDEPENDENT?

15. 2. Romanian Court of Accounts. Recent activity regarding municipality audit

16. ROMANIAN COURT OF ACCOUNTS. STRUCTURE AND RECENT ACTIVITY Legal mandate To conduct the control of the establishment, management and use of state and public sector financial resources, subsequently providing the Parliament and the administrative - territorial units reports on their use and management, in keeping with the principles of legality, regularity, economy, efficiency and effectiveness.

17. ROMANIAN COURT OF ACCOUNTS. STRUCTURE AND RECENT ACTIVITY Internal Structure RCA Board (Plenum) 18 account concilors 12 Central Departments (230 auditors) 42 Chambers of accounts (760 auditors)

18. ROMANIAN COURT OF ACCOUNTS. STRUCTURE AND RECENT ACTIVITY Regulatory framework on municipality audit Municipalities shall be audited at least once every three years, and the county and county residence city shall be audited each year. Chambers of accounts must allocate at least 60% of the effective available time to municipality audit. The only chamber allowed a minimum of 30% is the Bucharest Chamber of Accounts.

19. ROMANIAN COURT OF ACCOUNTS. HISTORY, MANDATE, STRUCTURE AND RECENT ACTIVITY Regulatory framework on municipality audit When conducting an audit on the municipal financial statements, the auditors shall verify the financial transfers to subordinate institutions Starting in 2014, public external auditors assigned to municipality audit will also check companies owned by municipalities, and other entities under their coordination/authority.

20. ROMANIAN COURT OF ACCOUNTS. HISTORY, MANDATE, STRUCTURE AND RECENT ACTIVITY RCA’s recent activity regarding municipality audit -The main focus of RCA’s recent activity is on financial audit missions, that amounted to 60% of all 2.723 missions conducted in 2014. - The structure of RCA’s activities remained relatively constant throughout the last 5 years, which saw a significant rise in RCA’s findings -The main focus of RCA’s recent activity is on financial audit missions, that amounted to 60% of all 2.723 missions conducted in 2014. - The structure of RCA’s activities remained relatively constant throughout the last 5 years, which saw a significant rise in RCA’s findings

21. ROMANIAN COURT OF ACCOUNTS. HISTORY, MANDATE, STRUCTURE AND RECENT ACTIVITY RCA’s recent activity regarding municipality audit - Out of the 2,723 missions in 2014, 2,181 missions (80%) were conducted at the administrative – territorial level, making municipality audit the main focus in RCA’s activity. - The 1.323 municipality financial audit missions cover 43% of all Romanian municipalities - In 1,697 cases, the audit extended to the financial activity of subordinate institutions - Out of the 2,723 missions in 2014, 2,181 missions (80%) were conducted at the administrative – territorial level, making municipality audit the main focus in RCA’s activity. - The 1.323 municipality financial audit missions cover 43% of all Romanian municipalities - In 1,697 cases, the audit extended to the financial activity of subordinate institutions

22. ROMANIAN COURT OF ACCOUNTS. HISTORY, MANDATE, STRUCTURE AND RECENT ACTIVITY RCA’s recent activity regarding municipality audit - The regulatory amendments made in 2010 and also in 2014 were the starting point of a much broader, in-depth scrutiny of local public finances. - This lead to an increase by over 50% of the illegal expenditures found at the local level from 2011 to 2014. - The regulatory amendments made in 2010 and also in 2014 were the starting point of a much broader, in-depth scrutiny of local public finances. - This lead to an increase by over 50% of the illegal expenditures found at the local level from 2011 to 2014.

23. ROMANIAN COURT OF ACCOUNTS. HISTORY, MANDATE, STRUCTURE AND RECENT ACTIVITY CONCLUSION As local administration faces ever greater challenges and increasing pressure on its finances, the Romanian Court of Accounts must evolve and adapt to ensure audit quality and to raise awareness about local financial management and accountability.