Local Government Finance Reforms Serbia, Phase II

Better public financial management (PFM) is an important element of Serbia’s reform agenda. The budgets of many local governments are unsustainable, with a majority of public enterprises showing poor performance. In addition, local government spend too much on subsidies and too little on public investments. Overall, poor financial management at local level results in poor public services. SECO has been supporting subnational PFM reforms since 2016. The scaling-up of activities to a larger number of municipalities under the second phase will allow to have a more systemic impact.

The overall objective is to strengthen PFM at the subnational level for increased oversight, fiscal risk management and more strategic allocation of public resources. More specifically, the project will work in three thematic areas: (i) introduction of financial management and control (FMC) systems, (ii) introduction of internal audit functions, and (iii) introduction of effective oversight systems on public enterprises. The project will work with a mix of implementation modalities and a specific change management approach to achieve sustainable results. Furthermore, it will continue to strengthen policy dialogue between the local and the central level and peer-learning amongst municipalities.

Improved risk management and decision making at municipal level

Better risk control enables proper use of funds and more efficient and effective budget execution

Better fiscal risk management through improved oversight on public enterprises

Efficient policy dialogue between local and central level established

Well-working peer-learning mechanism between municipalities is established

Risultati principali attesi:  

Introduction of financial management and control (FMC) systems

Introduction and strengthening of internal audit function

Piloting of two models of joint internal audit function

Development and implementation of fiscal risk oversight system for public enterprises

Establishment of policy dialogue discussion groups on FMC, internal audit and fiscal risk oversight

Elaboration of peer-learning knowledge products on FMC, internal audit and fiscal risk oversight

Risultati fasi precedenti:  

FMC systems introduced in all six municipalities and in four public enterprises.

Oversight over public enterprises has been improved through the introduction of a risk-based reporting format. Furthermore, partner municipalities have become aware of their ownership of public enterprises and their financial responsibilities.

Planning and budgeting processes were improved enabling partner municipalities to develop realistic budgets and execute them as intended.

Transparency of local budget information has been enhanced through the introduction of a budget execution format which covers all revenues and expenditures on a monthly basis.

Internal audit functions were introduced and strengthened in two municipalities.

Nine knowledge products were produced as part of the peer-learning activities.

Improvements in the collection of local tax revenues have been made in three municipalities through the integration of local tax administration databases with other databases.

Fase 2 01.01.2019 - 31.01.2023   (Completed)