1. Local Government Finance U.S. Systems and Serbian Finance Reforms Serbia Local Government Reform Program Financial Management Team Belgrade Office November 2000

2. Forms of Budgeting United States Line Item Based Line Item Based Zero Based Zero Based Program Based Program Based Performance Based Performance Based Program and Performance Based Program and Performance Based Republic of Serbia Line Item Based Line Item Based

3. Chart of Accounts United States Flexibility Flexibility Recommended by State Government Recommended by State Government Local Decision Local Decision Not IMF Based Not IMF Based Republic of Serbia No Flexibility No Flexibility Defined by Budget System Law Defined by Budget System Law Prescribed by ROS Book of Rules Prescribed by ROS Book of Rules IMF Based System IMF Based System 3,600 Line Items 3,600 Line Items

4. Consolidated Treasury United States Required Function by State Law Required Function by State Law Separate Function or Combined Separate Function or Combined Republic of Serbia Legal Requirement Budget System Law Legal Requirement Budget System Law Structure Needs Clarification Structure Needs Clarification

5. Internal Audit United States Optional Function Optional Function Formal Structure Formal Structure Informal Process Informal Process Republic of Serbia Legal Requirement Budget System Law Legal Requirement Budget System Law Local Inspection and Audit Service (LIAS) Local Inspection and Audit Service (LIAS)

6. External Audit United States Legal Requirement Legal Requirement Performed Annually Performed Annually Private Firms Private Firms Republic of Serbia Legal Requirement Legal Requirement ROS Function - Budget Inspection and Service (BIAS) ROS Function - Budget Inspection and Service (BIAS)

7. Short Term Debt United States Allowed by State Laws Allowed by State Laws Local Decision Local Decision Private Lending Institutions Private Lending Institutions Repayment allowed beyond current fiscal year Repayment allowed beyond current fiscal year Republic of Serbia Allowed by ROS Law, Article 58 Allowed by ROS Law, Article 58 Republic Budget Lending Only Republic Budget Lending Only Repayment by November 30 of current fiscal year Repayment by November 30 of current fiscal year 20% Combined Cap 20% Combined Cap

8. Long Term Debt United States Allowed by State Law Allowed by State Law Local Decision Local Decision Private Financial Institutions Private Financial Institutions Bond Markets Bond Markets Annual Cap Based on Percentage of EAV Annual Cap Based on Percentage of EAV Republic of Serbia Allowed by ROS Law, Allowed by ROS Law, Article 58 Requires meeting ROS Criteria – not defined Requires meeting ROS Criteria – not defined Requires ROS Approval Requires ROS Approval

9. Public Budget Hearings United States Required by State Law Required by State Law Annual Process Annual Process Republic of Serbia Not Required by Law Not Required by Law Encouraged by USAID – SLGRP Encouraged by USAID – SLGRP MOU Requirement MOU Requirement

10. Finance Department Structure United States Based on Internal Control Systems Based on Internal Control Systems Examined by Audit Examined by Audit Republic of Serbia Requires Restructuring Requires Restructuring Internal Audit Internal Audit Consolidated Treasury Consolidated Treasury Public Purchasing Public Purchasing