Knowing Your City’s Finances Can Bring Real Change
By Peter Goliaš
Few ordinary citizens can claim to know much real detail about their city, borough, or municipality’s finances, if the debt of their home town is sustainable, or if it is on the same track as Greece. We usually know about the money going in—taxes and other levies paid for by citizens—but rarely see how that money is spent and what the final balance sheet looks like.
Now, if you want to learn more about the debts of municipalities in Slovakia, you are just a click away from a complete overview of financial indicators of all towns, villages and regional units there. By checking the site www.obce.ineko.sk, citizens in Slovakia can view their city’s debts, budgetary balance, or the overall rating of the city’s financial health. You can easily compare the data of one particular town with another. You can also rank municipalities according to different criteria of your choice or look at patterns dating back to 2006.
By checking this table you can learn, for example, that there are several big cities in Slovakia surpassing the legal maximum limit of 60 percent of debt to revenues ratio. Or that the debt per capita is €287 in the capital city Bratislava compared to a €157 average for other municipalities or €381 in the ninth biggest city Trenčín.
Why is checking your city’s debt like this useful? High levels of debt pose a serious threat to providing public services to citizens. For example, Trenčín is well known for deep cuts in expenditure affecting public services, from the minor—ending the mowing of grass in public areas—to the major, with an overall 25 percent cut in expenditure required. Bratislava-based think-tank INEKO is behind this new transparency site, which aims to improve the financial stability of Slovak municipalities. Our aim is to prevent problems caused by high indebtedness; these include lowering the amount and quality of public services, potential bankruptcy, and in the worst case, municipalities or the state budget sharing part of the debts incurred by other municipalities. In fact many of these problems have recently become urgent in several other European cities and regions including Parma, Palermo, and Sicily in Italy as well as Valencia, Murcia, and Catalonia in Spain.
The website www.obce.ineko.sk is targeted at a range of actors. For the general public, it means that citizens and media can gain a better knowledge of the financial stability of a particular municipality compared to others. They are therefore better equipped to demand prudent behavior from their municipality’s leaders such as the local mayor. Municipality leaders also benefit. Mayors and deputies can get feedback on how they comply with legal criteria regarding state finances as well as allow peer review, comparing one municipality’s performance to another. Policy makers in the Ministry of Finance can now get better information on which data they should collect and how to redefine legal criteria around different municipalities’ financial stability.
So far, the website has been well received. One of the biggest Slovak daily newspapers, SME, has also launched the project on its website (http://obce.sme.sk/), helping increase the readership even more.
The impact is beginning to be felt. After publishing data which showed that one of Slovakia’s eight regional units was approaching a 60 percent limit on its debt to revenue ratio, the banks financing that unit began to ask for explanations. One of the banks later invited us to give training to its employees about municipal finance.
When we began this project, we had a clear policy goal in mind: to improve monitoring of the financial health of municipalities by publishing relevant information and improving legislative limits that would prevent municipalities from incurring overly high debt. With this goal in mind, we published recommendations for the Ministry of Finance based on the data we collected. We received a positive response from the Ministry of Finance who promised to adapt some of our proposals either directly or through the amendment of current legislation planned for the following year. The Ministry also publicly committed to “issue guidance for municipalities” in order to prevent possible mistakes in reporting their financial data.
The lynch-pin of the site is data. Securing the data was not easy and was managed through Freedom of Information requests, which proved time-consuming and bureaucratic. After finally receiving the data, the challenge did not end there. The data were not in a unified format and had different patterns for different years, which took time to understand.
Along the way, we identified incorrect data and mistakes in the ministerial database. This was partly due to the challenges faced in small villages required to fill out this financial documentation and send it to the Ministry. The mistakes often resulted in computing higher debt compared to the reality. Several dozen villages contacted us directly (based on the survey sent before the official launch of the website) and we corrected their data after verification based on real accounting documents. However, several villages realized the numbers were incorrect only after they were published and confronted by local media. As a result, the Ministry of Finance agreed to adopt measures to ensure that the municipalities report data correctly in the future.
Challenges remain. We have not yet been able to secure an agreement with the Ministry of Finance on how to keep this database up to date. With new legislation planned for the first quarter of 2013, we will soon see if the Ministry of Finance commits to keeping this financial transparency effort going. If not, we will advocate for a legal amendment requiring the automatic publication of such data every year.
The site www.obce.ineko.sk is a working example of the value of good data presented in an accessible way and its potential to make real change on the ground for citizens directly affected by finance and budgeting decisions. We hope this will serve as an example not just in Slovakia, but around the world, for those seeking better financial accountability from the local to national level.
Do you work on issues of financial transparency and accountability? INEKO is happy to share this experience and methodology with anyone—civil society actors, political figures, financial institutions—interested in how they might apply this model.
Peter Goliaš is director of INEKO (Institute for Economic and Social Reforms).