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1. 1
RECENT DEVELOPMENTS IN
THE AREA OF PUBLIC
INTERNAL FINANCIAL
CONTROL IN TURKEY AND
THE RELATIONS WITH THE
EUROPEAN UNION

2. 2
PUBLIC FINANCIAL MANAGEMENT-1
Public Financial Management, covers the institutions
and processes related to the management of public
resources. This process consists of three stages.
 Determination of policies and priorities
 Allocation of the resources of the country in accordance
with the specified policies
 Establishment of control and audit mechanisms aiming
to ensure the economical, effective and efficient
acquisition and utilization of public resources
Ability to execute the fiscal policy in an effective manner
depends on the capacity of the public financial
management.

3. 3
PUBLIC FINANCIAL MANAGEMENT-2
 Determination of the policies and priorities
 A government which operates efficiently is
required to make strategic decisions
considering also the resource constraint, to
make medium term plans in order to implement
these decisions and to form a budget in a way to
support these policies.
 This depends on reinforcing the policy
production capacity and the budget processes.

4. 4
PUBLIC FINANCIAL MANAGEMENT-3
 Allocation of the resources in accordance with the
determined priorities: Budget
Budget;
 is the allocation instrument of the limited
resources.
 is the instrument of realizing economic plan and
policies.
 is a basic political choice indicating what amount
of the common public needs is to be covered by
the government.
 is the financial reflection of the government
policy.

5. 5
PUBLIC FINANCIAL MANAGEMENT-4
 Establishment of the mechanisms relating to the control
and audit of the utilization of public resources
These mechanisms are called financial control.
 Internal Control
 Financial Services Unit
 Ex ante control
 Ex post internal audit
 External Audit
• Another element of the audit mechanism is financial
reporting and the existence of a budget code structure
and government accounting compatible with this.
Improvement of financial reporting is among the main
factors of transparency and accountability.

6. 6
CRITICISM OF OUR PUBLIC FINANCIAL
MANAGEMENT SYSTEM -1
 narrowness of the financial management system and
the scope of the budget
 increase in the extra-budgetary expenditures
 break of the link between the development plan and the
budgets
 failing to use public resources in an efficient manner
 spending process is subject to a strict preliminary
control
 failing to strike a fine authority-responsibility balance in
the spending process
 not enough initiative is provided to the administrations
in the course of budget preparation, execution and
control process

7. 7
CRITICISM OF OUR PUBLIC FINANCIAL
MANAGEMENT SYSTEM - 2
 Narrow scope of the audit of the Court of Accounts
 Insufficiency of the budget code structure
 Insufficiency of the accounting system
 The system does not include the principles of strategic
planning, multi-year budgeting, performance based
budgeting, accountability, fiscal transparency, efficient
internal financial control, which are predominant in
the modern concept of public financial management
 Insufficiency of the automation and information
system of the financial management

8. 8
TRANSFORMATION IN PUBLIC
FINANCIAL MANAGEMENT
 Defects of the current system
 Internal factors
 Increasing public sensitivity in terms of the
utilization of public resources
 Transformation demands formed in the public
sector and academic circles
 External Factors
 The European Union harmonization process.
 Relations with the IMF and World Bank

9. 9
TRANSFORMATION ACTIVITIES IN
PUBLIC FINANCIAL MANAGEMENT
The following include certain changes considered to
be made within the framework of the criticised issues:
 8th. Five-year Development Plan
 Report of the Specialization Commission
 Programs of 2001, 2002, 2003
 National Program (2001),(2003)
 Accession Partnership Document
 Letters of Intention to IMF
 Action Plan for increasing transparency in Turkey and
improving efficient management in the public sector
 Government Program and the Urgent Action Plan of
the 59th Government

10. 10
NATIONAL PROGRAM (2003)-1
As regards the chapter “28-Financial Control” of the
Negotiation Topics;
 Adoption of the public internal financial control
legislation, in compliance with EU practices,
international control and auditing standards,
 Strengthening the administrative capacity for the
prevention of irregularities and fraud
 Development of the external audit areas in
compliance with international standards

11. 11
NATIONAL PROGRAM(2003)-2
 Economical, effective and efficient
management of resources,
 Prevention of irregularities and fraud
 Gathering timely and reliable information
 Concentration of the control and audit
activities on the most risky areas determined
according to objective risk management
analyses

12. 12
NATIONAL PROGRAM(2003)-3
As regards the institutional structure;
 Establishment of Internal Control Harmonisation Unit
 Establishment of Internal Audit Coordination Board
 Implementation of systematic and comprehensive
training programs for the training of internal auditors
and those who are involved in the ex ante control process
 Establishment of a computer network between the
Board, Ministry of Finance and the Spending Agencies,
 Assigning sufficient number of internal auditors

13. 13
NATIONAL PROGRAM(2003)-4
As regards the external audit
 Amendment of the Law on Turkish Court of
Accounts
 Improvement of the external auditing standards
 Strengthening the administrative and institutional
capacity
 Utilization of Computer Assisted Audit Techniques

14. 14
KEY CONCEPTS OF THE NEW FINANCIAL
MANAGEMENT AND CONTROL SYSTEM
 Managerial responsibility model
 Effective, economical and efficient utilization of
resources
 Strategic planning
 Performance Based Budgeting
 Multi-year Budgeting
 Accountability
 Fiscal Transparency
 Accrual Based Accounting
 Internal Control System
 Efficient Internal Audit
 Broad-scope external audit

15. 15
NEW REGULATIONS IN THE PUBLIC
FINANCIAL MANAGEMENT SYSTEM
 Law on the regulation of Public Financing and Debt
Management, No 4749
 Public Procurement Law, No 4734
 Public Procurement Contracts Law, No 4735
 Public Financial Management and Control Law, No
5018
 Budget Coding Structure
 Accounting System
 Special Revenue and Special Appropriation Law No
5217
 Turkish Court of Accounts Draft Law
 Personnel Draft Law

16. 16
PUBLIC FINANCIAL MANAGEMENT AND CONTROL LAW
 Scope of the financial management and the budget has been
enlarged
 Accountability and fiscal transparency is achieved
 The principle of effective, economical and efficient utilization of
the resources is introduced
 Initiative of the administrations is increased
 Strategic planning and Performance based budgeting is
introduced
 Multi-year budgeting is introduced within the framework of
medium term expenditure framework
 Unity of Accounting in the public sector is ensured and
publication of the fiscal statistics is foreseen
 Internal Control System is established
 Internal audit system is established
 Auditing scope of the Turkish Court of Accounts has been
widened

17. 17
SCOPE OF THE FINANCIAL MANAGEMENT
AND BUDGET HAS BEEN WIDENED
 Instead of a general and annexed budget, a
central government budget, which covers the
administrations within the scope of the general
and special budget and the budgets of
regulatory and supervisory agencies, will be
prepared
 Public administrations within the scope of the
general government will be subject to the same
financial management and control system
 Budgets will be prepared on a three-year basis
 All the revenues and expenditures of the
administrations will be stated in their budgets

18. 18
SCOPE OF THE LAW ACCORDING TO
ADMINISTRATIONS
GENERAL GOVERNMENT
SOCIAL SECURITY CENTRAL GOVERNMENT LOCAL ADMINISTRATIONS
INSTITUTIONS
GENERAL BUDGET SPECIAL BUDGET REGULATORY AND
SUPERVISORY AGENCIES

19. 19
SCOPE OF THE LAW ACCORDING TO
DUTIES AND TRANSACTIONS
 Structure and functioning of the public financial
management
 Preparation and implementation of the public
budgets
 Accounting and reporting of all the financial
transactions
 Financial control

20. 20
STRATEGIC PLANNING AND
PERFORMANCE BASED BUDGETING
 Strategic Plan Preparation Guide (SPO)
 Performance Based Budgeting Guide (Ministry of
Finance)
 Budgets based on strategic plans
 The compliance of the budgets with the missions,
visions and strategic goals in the strategic plans
 Evaluation of the budgets in accordance with the
performance indicators
 Conduction of the performance audits within the
framework of these indicators
 Reporting

21. 21
MULTI-YEAR BUDGETING
 Preparation of medium-term program
 Preparation of medium-term fiscal plan
 Strategic plans to be prepared by the administrations
 Preparation of three-year budgets by the
administrations which will cover the revenue and
expenditure estimates for the current year and
following two years
 Accordingly, the relation between the planning and
budgeting is established within the framework of
medium term expenditure program.

22. 22
ACCOUNTING UNITY AND FISCAL
STATISTICS
 Accounting unity is being ensured. The same
accounting system shall be used in the
administrations within the scope of general
government. Consolidation and international
comparison of all the accounts shall be made
possible.
 The Board to be formed under the Ministry of
Finance shall determine the accounting and
reporting standards, framework Chart of Account
and the format, period and type of the reports to be
issued that will be applied by the administrations
within the scope of general government.
 Preparation and publicly announcement of the fiscal
statistics with regard to public finance is foreseen.

23. 23
EU STANDARDS FOR THE FISCAL
CONTROL SYSTEM REFORMS
1. A law which defines the financial control process
2. Purposeful internal control system and methods
-Accounting and Reporting Standards, and the
Policy Document
-Automation Based Accounting
-Mechanism for the auditing of the funds
-Ex ante control over the Payments and
Commitments
-Procurement control system
-Control of the public revenues
3. Functionally independent internal audit
4. A mechanism to prevent irregularities and fraud

24. 24
INTERNAL CONTROL SYSTEM
 Internal Control : is the entirety of institutional
structure, method, operational processes and tools which
enable the conformity with the budget and rules in
effect, assurance of the assets, assurance of the validity
and accuracy of accounting records and facilitation of
managerial decisions through making fiscal information
available to be used.
 Internal Control Central Harmonization Task shall be
carried out by the Ministry of Finance.
 Establishment of an efficient internal control system
shall be on the account of the administrations.

25. 25
ORGANIZATIONAL STRUCTURE OF THE FINANCIAL
MANAGEMENT AND CONTROL SYSTEM IN
COMPLIANCE WITH THE EU
MINISTRY OF FINANCE
INTERNAL AUDIT INTERNAL CONTROL
Internal Audit Coor. Board
Central Harmonization Unit Central Harmonization Unit
PUBLIC ADMINISTRATION
INTERNAL AUDIT UNIT FINANCIAL SERVICES UNIT

26. 26
INTERNAL CONTROL SYSTEM
 The Internal Audit Coordination Board has
been established.
Following issues have been planned:
 Performing audits as risk-based
 Employment of internal auditors as affiliated to
the head of public administration
 Certificated internal auditors
 systematic and continuous audit in accordance
with the internal audit standards

27. 27
AUDIT OF THE COURT OF ACCOUNTS
 Ex ante control function of the Court of
Accounts has been abolished.
 The scope of the audit of the Court of
Accounts has been expanded. Central
government administrations, social security
institutions and local administrations within
the scope of general government shall be
audited by the Court of Accounts.

28. 28
IMPORTANCE OF THE FINANCIAL
SERVICES UNIT IN THE SYSTEM
 Increasing financial tasks, authority and responsibilities of the
public administrations shall be carried out by the financial services
units of the administrations.
 Conduction of the financial management and control tasks within
the administration in a sound manner is dependent on the
organizational structure and capacity of this unit.
 This unit assumes some important functions on the issues such as
effective use of public resources, prevention of irregularity and
corruption, prevention of the mistakes arising from the lack of
information, assurance of accountability, fiscal transparency and
providing information to public opinion.
 These functions entail a sound financial services unit which is
directly affiliated to the head of public administration.

29. 29
EX ANTE CONTROL -1
 The article 58 of the Law No 5018 regulates
the task of ex ante control and the article 59
regulates the qualifications and appointment
of financial control officer.

30. 30
EX ANTE CONTROL-2
 Ex ante control process is set out in the scope of the
Law in a way to cover the following:
 allocating appropriations
 undertaking commitments
 holding tenders and concluding contracts
 receiving goods or services
 carrying out works
 issuing payment orders
 similar financial decisions to be taken by the authorizing
officer
 The ex ante control task shall be assumed by the financial
control officers who are appointed by the head of public
administration and directly affiliated to him. However, in
the decentralized units of the public administrations within
the scope of general budget, this task shall be carried out
by provincial treasurers.

31. 31
EX ANTE CONTROL-3
 Ex ante control mechanism foreseen by the Law is
based on the principle that compliance audit should be
performed before the payment by a certificated
financial control officer at various stages of the
spending process.
 Financial control officer who will take part at the
different stages of the spending process shall control
the compliance of the transactions with the legislation
and thereupon shall grant visa or positive opinion.
 In the event that the transactions not visaed or not
approved are realized, the authorizing officer shall be
deemed to have assumed personal responsibility.

32. 32
EX ANTE CONTROL-4
 Ex ante control mechanism foreseen by the Law is
based on the principle that compliance audit should be
performed before the payment by a certificated
financial control officer at various stages of the
spending process.
 Financial control officer who will take part at the
different stages of the spending process shall control
the compliance of the transactions with the legislation
and thereupon shall grant visa or positive opinion.
 In the event that the transactions not visaed or not
approved are realized, the authorizing officer shall be
deemed to have assumed personal responsibility.

33. 33
AUTHORITY-RESPONSIBILITY
 Political and managerial authority and
responsibilities have been separated.
 Authorities of the process :
 The Minister
 Head of public administration
 Authorizing officer
 Director of financial services unit
 Financial control officers
 Realization officers
 Accounting officers
 Internal auditors

34. 34
AUTHORITIES IN THE
MANAGEMENT AND CONTROL
PROCESS-1
 THE MINISTER is politically responsible
for:
 Implementation of government policies
 Preparation and implementation of the
budgets
 Coordination and cooperation with other
ministries
 Utilization of the resources
 Providing information to public opinion

35. 35
AUTHORITIES IN THE MANAGEMENT AND
CONTROL PROCESS-2
 Head of public administration: is responsible for the budget of
the public administration.
 Head of public administration is responsible for:
 Preparing and implementing the strategic plans and
budgets of the administrations
 Ensuring that the resources are provided and utilized in an
effective, economical and efficient way
 Supervising and monitoring the operation of the financial
management and control system
 Fulfilling the task and responsibility set out in the Law
towards the Minister; towards their local councils in local
administrations.

36. 36
AUTHORITIES IN THE MANAGEMENT AND
CONTROL PROCESS-3
 Authorizing Officers: Head of each spending unit
to which appropriation is allocated with the budget
is the authorizing officer.
 The authorizing officer grants spending
instruction and signs the payment order.
 Authorizing Officers are responsible for:
 the compliance of spending instructions with the
budget principles and basics,
 the compliance of spending instructions with the other
laws, by-laws and regulations
 Utilization of appropriations in an effective, economical
and efficient manner

37. 37
AUTHORITIES IN THE MANAGEMENT
AND CONTROL PROCESS-4
 Director of financial services unit
 Financial Services Unit carries out the tasks such as:
 Preparing the budget of the public administration
 Preparing the budget estimates for the following two
years
 Keeping the budget records
 Issuing the appropriation dispatch documents
 Compiling and reporting the data related to the
budget implementation results
 Carrying out the financial transactions on making
expenditures and collecting revenues
 Preparing the Final Account

38. 38
AUTHORITIES IN THE MANAGEMENT AND
CONTROL PROCESS-5
 Financial Control Officer :
 Grants visa or positive opinion on the spending
decisions upon a preliminary control
 The decisions and transactions to be subjected to
visa or positive opinion are determined by the
Ministry of Finance.
 Financial Control Officers are responsible for the
visas and positive opinions which they have granted.

39. 39
AUTHORITIES IN THE
MANAGEMENT AND CONTROL
PROCESS-6
 REALIZATION OFFICERS:
carry out the following duties
 Doing or having the work done
 Receiving goods or services
 Completing the receiving formalities
 Documenting the transactions
 Issuing necessary documents for payment

40. 40
AUTHORITIES IN THE MANAGEMENT
AND CONTROL PROCESS-7
 Accounting Officer:
 At the payment stage, controls the following aspects
in the payment order document and its appendices:
 Signature of the authorized persons
 The completeness of the documents listed in the
regulations pertaining to payment
 The existence of any material error
 The information on the identity of the rightful
person
 realizes the payment and keeps accounting
records.