All Member States of the EU and countries from Central and Eastern Europe use agencies of various
shapes and sizes as part of their system of public administration. The legal forms vary widely from country
to country depending on the legal tradition and the system of administration. Public agencies, if properly
designed and managed, provide an opportunity for decentralising public administration, achieving greater
transparency in government operations, and improving the efficiency and effectiveness with which
government services are delivered to end users. Agencies can thus be used for economically and socially
beneficial reasons, and indeed are sometimes employed as a stepping stone to more radical options, e.g. the
privatisation of government services. However, agencies can also be misused for purposes that contravene
the tenets of good governance and sound financial management. They can be a source of inefficiency,
unregulated and covert expenditures, political favouritism and corruption.
This paper originated in a request from the Ministry of Finance of the Czech Republic for SIGMA advice
in developing new legal provisions for the financial management of public agencies. However, this subject
cannot be addressed without avoiding the broader context. This paper has expanded well beyond the scope
of the original mandate. It highlights the practice and experience of five EU Member States with very
different legal systems and administrative structures. It focuses on issues relating to the financial
management of public agencies but also discusses, in less detail, other issues concerning legal structures
and governance. No single good practice "model" exists in this complex field. International best practice is
still evolving. Moreover, we recommend a cautious approach by countries that are tempted to transpose
elements of the agency models applied in countries such as New Zealand, Sweden and the
United Kingdom. Would-be reformers should consider whether the legal and administrative structures are
comparable, and the necessary systems of regulation, control and open reporting are in place and can be
enforced.
Whilst avoiding simplistic solutions, the paper includes recommendations that policy makers in Central
and Eastern Europe should take into account before embarking on major reforms in this area.
Financial Management and Control of Public Agencies
Policy analysis
SIGMA Papers
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