Local governments face their own challenges and corruption risks. With significant decision-making and spending power, their closeness to citizens and businesses makes them more impactful on everyday life. They are in charge of delivering key public services and infrastructure such as water and sanitation, energy, healthcare, education, transport, and others. In turn, local governments are particularly vulnerable to corruption in public procurement as they mostly purchase work, goods or services from external suppliers. Nepotism, clientelism, and other malpractices are exacerbated by the smaller population size of local governments and the fact that, in such environments, relationships may play a more significant role in politics. Furthermore, the connection and dependency from the central government’s resources add a layer of complexity, as national politics can interfere with local budgets.
The United Nations Conventions against Corruption (UNCAC) focuses on national governments, however, preventing corruption in local governments is a priority topic for a number of UNCAC Coalition members in Europe. Several organizations are monitoring local governments and working to make them more transparent and accountable. This is why the 14th Regional Meeting of the Europe Network, held on September 26, addressed the role of civil society organizations to enhance integrity and accountability of local governments, showcasing three projects from the Eastern European region.
Insufficient transparency in fiscal relations entails state capture and corruption risks
Tihomira Kostova, Senior Analyst at the Center for the Study of Democracy (CSD) in Bulgaria, presented corruption risks related to the fiscal relations between central and local governments, drawing from a recently published report she co-authored covering nine countries in Southeast Europe.
As Tihomira explained, local governments in the region are very dependent on central government transfers and thus prone to clientelistic funding. In Romania and Bulgaria, over 80% of the revenue for subnational governments comes from the central state, and over 70% in Serbia and Albania, while the European Union average is around 46%.
Central funding to local governments is provided through conditional and unconditional transfers and both come with corruption risks. Conditional transfers are linked to specific policies and allow central governments more flexibility on how and for what to spend the money. However, they might subordinate local officials to the priorities of the central state and make them pursue policies or goals which do not necessarily reflect their local priorities.
In turn, in unconditional transfers the amount that will be received by each municipality is calculated by a formula. However, as the report revealed, there are risks related to the political manipulation of the formula, or discrepancies between the amount pre-determined and the funds actually disbursed. Such unconditional transfers are used to close the gap of economic disparities in different territories and, theoretically, they provide financial support to certain municipalities according to fixed criteria. However, political ties might affect or capture the allocation of funds. These types of transfers are more vulnerable to corruption and state capture risks -understood as a situation in which “narrow interest groups take control of the institutions and processes through which public policy is made” to shape it according to their own interests.
Evidence from the countries analyzed suggests that the distribution of government funding to sub-national authorities is often based on political alignment. For instance, ahead of elections, central authorities can seek to secure the reelection (or the change) of certain mayors, or seek to disseminate certain messages. They will be more or less disposed to benefit a particular municipality and might induce changes in the rules and formula determining the funding. A case study from Hungary showed how organizations linked to the main ruling party had secured the biggest disbursements of funds for electoral campaigns from the state, provided through the Municipal Civil Fund.
Even if formula-based funding is designed to limit the power of the central government when transferring funds to local governments, the lack of transparency frequently leads to abuse of power. In addition, the complexity of these formula make them less comprehensible to the general public.
Citizens and civil society organizations can rarely participate in decisions related to local government finances, and this is a primary problem fueling such state capture and corruption risks. Most municipalities in Southeast Europe comply with transparency requirements only partially: information on local government finances is not accessible, not easy to understand, and not relevant to citizens’ concerns. Addressing the lack of transparency and participation in local finances is the goal of CSD and other organizations which, in addition to tracking data, aim to explain the mechanisms behind central financing to local governments and involve citizens in overseeing public finances.
Promoting budget transparency in Croatian local governments
Branko Stanic, Researcher of the Institute of Public Finance (Croatia), focused on his organization’s efforts to promote transparency in local budgets in Croatia, based on a recently completed research project. Local budget transparency refers to how easily and to what extent citizens can access information on local government revenues and expenditures. As Branko highlighted, it is a first step toward bringing budgets closer to citizens and giving citizens a say in how policies are formulated and resources are spent by the local governments.
From 2015 to 2023, IPF has measured local budget transparency annually in all 576 local governments in Croatia (counties, cities and municipalities) and built the Open Local Budget Index. The following visualization shows a significant improvement in the levels of transparency during this period, as measured by the number of key local budget documents published on the official websites – from budget proposal to enacted budget, yearly reports and a citizens budget. As the graphic shows, while less than 3% of local governments were fully transparent in 2015, this percentage reached over 75% in 2023.
The improvement over time of transparency levels could partly be attributed to IPF’s promotion and acknowledgment of the best-achieving local governments, since it published research results every year in the form of an interactive map and held workshops and presentations on budget transparency.
Furthermore, their work has enabled us to better understand the drivers and the impacts of budget transparency. It has translated as well into legal changes and recommendations on the national level to: 1) Introduce sanctions for non-compliance with transparency obligations, 2) Create a unique platform, 3) Track expenditure, and 4) Promote citizen participation in the budget process. Indeed, the next step for IPF and civil society organizations would be to measure and foster public participation in local budget processes.
Citizens’ engagement in local budget decision-making in Albania
For Eduart Gjokutaj, Fiscal Advisor at Altax (Albania), transparency is also the key premise for citizens to understand the budgeting process and be able to participate. Based on the social audit methodology, Altax has been implementing the project “Budget from the citizens’ point of view” since 2022 to provide a version of municipal budgets that is less technical and more appealing to citizens.
In addition, the organization carried out a budget analysis for five municipalities in Albania, after collecting data from the municipalities and the views from a range of stakeholders, to assess what they had spent their resources on. The study detected that priorities were similar in all five municipalities, instead of being tailored to fulfill specific social and development objectives, due to patronage from the central government.
Altax also analyzed the process of public consultations and the space available for citizens to take part in the local budget process. They observed that citizens’ were heard on some topics -mostly to limit tax increases- but not in others -investment programmes, budget allocation etc.. Local investments in general lacked transparency with regard to unmet deadlines, additional costs, etc.
Now Altax is working on two fronts: to change practices and improve transparency at local level, and to advocate for changes in the law on public consultations. They seek to spread the model of deliberative dialogue between citizens and municipalities to put in practice participatory governance at the local level.
Need to boost citizen participation in local governance
The discussion with participants revolved around what should be the priorities for civil society organizations to enhance integrity and accountability of local governments. As highlighted by the guest speakers and others, transparency levels have improved -disclosure of key documents has become legally binding in many countries. Now efforts to prevent corruption risks should be put on encouraging participation from local communities and civil society organizations to be more involved and monitor local governments’ finances and activity. Some civil society organizations have provided training on citizen oversight of public procurement or on participatory budgeting, among other issues, such as the Center for Civil Communications (North Macedonia) and Transparency International Anti-Corruption Center (Armenia).
From the governmental side, it is vital to evolve from disclosing documents to improving the accessibility and reusability of information publicly available. Local governments can test participatory decision-making for instance through open government commitments, as ocurred in North Macedonia. Another key area is putting in place whistleblowing mechanisms at the local level that guarantee protection and support to whistleblowers.
Resources on anti-corruption and civic participation in local governments
- The United Nations Development Programme (UNDP) developed in 2018 the Guide To Corruption-Free Local Government, including examples of civil society engagement in local government corruption risk assessments, integrity planning and management.
- The Open Government Partnership (OGP) launched in 2016 a pilot program for subnational governments, which expanded and became the OGP Local Program two years later, including municipalities, regions and provinces. Today, over 100 subnational entities participate in OGP Local, and stakeholders have created over 180 commitments on anti-corruption and integrity and other related areas such as the right to information, democratizing decision-making, or fiscal openness at the local level.
- In 2014, Transparency International created the Local Integrity System (LIS) Tool to assess the internal capacity and performance of core local government actors, and the effectiveness of oversight and accountability functions.
- In Europe, the Congress of Local and Regional Authorities strengthens democracy in the Council of Europe’s 46 member states. The effective development of good governance and democracy at local and regional levels is one of its key priorities, following the “principles of citizen participation, ethical conduct, rule of law, transparency, sound financial management and accountability”.
- While the Global Initiative for Fiscal Transparency (GIFT) operates mostly at national level, it has maintained strong cooperative relationships with subnational governments that have shared their experiences in fiscal transparency practices, particularly, in public participation.
If you are a civil society activist from Europe and would like to become involved, please contact our Regional Coordinator Ana Revuelta Alonso at email hidden; JavaScript is required.