How we can address the lack of financial audits for the municipality?

    • In the absence of any (recent) independent review of the local authority’s financial performance, it may be useful to conduct such a review before pursuing a credit rating. The objective of the review, or financial management assessment, will be to help the local authority identify key strengths and weaknesses in its financial management and performance. Based on the findings from the review, the local authority will determine the opportunity to secure further improvements and reforms prior to obtaining a credit rating. A well designed review will be an invaluable guidance to the administration, as well as a powerful signal to the private sector and the public at large of the public authority’s proclivity toward reform, transparency, and results-based improvements. Assuming the findings from the independent review will indicate promising overall fundamentals, even in the context of a few negative indicators, and assuming that subsequent monitoring confirmed the underlying trends towards improvement and reform, the local authority may consider obtaining a credit rating at that point.
    • Different instruments are available to local authorities seeking a review of their financial management and performance. Select among the options listed below to inform your action-plan accordingly – these options are listed in ascending level of effort required:

     

    1.     Review by an independent expert of the results from self-assessments. This is only suggested as a preliminary step in case more detailed analyses are not easily available. (~1 day)

    2.     Basic financial management assessment performed by a consultant. (15-20 days)

    3.     Completion of a full-fledged Municipal Finance Self-Assessment with step by step support from an expert consultant. (30-45 days)

    4.     Same as point 3 above, with additional urban audit providing a snapshot of the local authority’s quantity and quality of services and identifying a municipal investment program. (45-70days)

    5.     Completion of a Subnational PEFA (Public Expenditure Financial Accountability) to assess specifically the condition of public expenditure, procurement, and financial accountability systems. (60 days)

    6.     Comprehensive financial management assessment by a firm. (60-80 days)

    7.     Same as point 5 above, with the addition of a sub-national Debt Management Performance Assessment (DeMPA). (100 days)