Hoofdstuk 10 Summary

This thesis deals with control of municipal fmances in the Netherlands. The subject of fmancial control surfaces every so often when financial problems arise in a municipality. Municipal decisions that lead to high expenses are usually subjected to thorough scrutiny by the general public, and rightfully so. The fmancial means of municipalities are provided, for a large part, by the taxpayer: not only by means of municipal taxes, but also by means of national taxation, which finds its way to the Municipalities Fund (Gemeentefonds).

In a more structural way, the topic of financial control was subject to political debate when in 2002 a complete revision of the Municipalities Act — known as the dualization (dualisering) of local government — was brought about. The main changes of 2002 concerned the relation between the municipal council (gemeenteraad) and the municipal executive (college van burgemeester en wethouders). Before 2002 aldermen (wethouders) had to be members of the council in order to be eligible for appointment. Now, the positions of council member and alderman are no longer compatible. A council member can still become alderman, but he has to terminate his council membership after taking office as an alderman. This change came about to limit undesired entanglement between the council and the executive. Another part of this revision of the Municipalities Act was a considerable transfer of executive powers from the council to the executive. A stronger emphasis on financial control by the municipal council became an important by-product of this legislative reform.

Because the municipal council had lost its direct portai into the municipal executive, and because the municipal council had lost several of its executive powers, the financial control that the council wields over the executive is now one of the more important ways in which municipal councils can influence municipal policies. In this light the central question of this thesis has become whether the institutional position of the municipal council with regards to the financial control over municipal fmances has been improved by the dualization of local government or not.

To this end, the second chapter of this thesis deals with the dualization of municipal government as such. Whereas the initial plans for this dualization were perhaps more far-reaching, chapter two demonstrates that the omission of a simultaneous revision of the Constitution has moderated the initial fervour quite a lot. For the municipal council, this is good news. As the Constitution has not changed, it still states that municipalities are still "headed" by their municipal council. This means that all major decisions should still be made by, or with the consent of, the council, which also means — apart from the enactment of ordinances, determination of the budget, and the scrutiny of the executive and the mayor — that the municipal council could not be stripped entirely of its executive powers.

In the original rhetoric of the dualization this poses a problem. In earlier plans for the dualization, a revision of the Constitution and a complete transfer of executive powers to the municipal executive was persued. In these original plans, the main task of the municipal council was to set boundaries (kaderstellen) for the executive beforehand (via ordinances and the budget), and to scrutinize the executive afterwards. Because a complete transfer of executive powers did not come about, the task of boundary-setting has become somewhat peculiar. The council can still set boundaries with regards to executive powers; in some cases, however, these boundaries will be set for the council itself.

The third chapter contains a detailed study of the new ways municipal budgets and annual accounts are to be drafted. Under the old system the precise layout of the budget was prescribed by national law. Now, municipalities are free to determine the general layout of the budget and the number of budget items. Although this freedom may seem to strengthen the position of the council, it is largely negated by the Explanatory Memoranda and Circulars of the national government concerning the number of budget items. According to the national government, the municipal council should refrain from drawing up a detailed budget because that would not be fitting with its mere boundary-setting task. The national government proposes a high level of aggregation for the budgets, otherwise the council would wield executive power through the budget, which (again: according to the national government) is not in line with the principles of dualization. This point of view is highly questionable. The government seems influenced by the original dualization rhetoric and refuses to acknowledge that the eventual dualization was far less radical than the original ideals. Therefore, a more active role of the municipal council and a more detailed layout of the budget should be maintained. A positive side-effect to this would be that not only the budget, but also the annual account (which contains the same items as the budget) provides a more detailed insight in the municipal finances.

The fourth and fifth chapter focus on the scrutiny of the municipal annual account. In first instance, this scrutiny is conducted by an accountant, who investigates the account and its individual items on their accordance with the law and the budget. The accountant receives his orders from the municipal council, and is therefore not subordinate to the municipal executive which he has to investigate. That being said, constitutional law should not turn a blind eye to the fact that in the Dutch municipal system, a coalition majority within the council is allied to the members of the executive. For the accountant's scrutiny to be really independent, it might be a good idea to transfer the control over the accountant to a higher (perhaps the provincial) level. At least the existing possibility of enlisting an accountant as a municipal civil servant, and having that civil servant conduct the annual scrutiny, should be abolished.

When the accountant has finished his investigation, his report is handed over to the municipal council. The council then debates the account with the municipal executive. Before 2002 this debate could end in civil liability for members of the executive when certain expenses were deemed illegal or malevolently over budget. Although in practice this liability was hardly ever put to effect, because of the strict conditions attached to it, the severity of the measure still posed a significant threat. The abolishment of this possibility — at least in theory — diminishes the power of the municipal council. However, one could argue that the assessment of the legality of the actions of the executive should not have been put in the hands of a political organ, such as the council, in the first place. It would have been more suitable to leave decisions regarding civil liability to the judiciary. The intention of the new Municipalities Act was to eliminate civil liability altogether. The fact that the legislator did not succeed in achieving this, is discussed in chapter five. It seems the legislator "forgot" that the article on discharge of civil liability still contains an exception for irregularities proven in court proceedings. This means that in spite of the legislator's intentions, a courtestablished civil liability should still exist, albeit only in extraordinary circumstances.

The main forms of fmancial control outside the budgetary cycle are discussed in chapters six, seven and eight. For a large part this fmancial control will be executed by the council when using its regular powers (chapter six). Municipal ordinances issued by the council, for example, can create fmancial boundaries with regards to local taxation or municipal policy regarding subsidies. Another means of controlling the municipal finances is to hold the executive accountable for their actions, and the financial implications of that actions. The new 'right of inquiry' of the municipal council provides the first real improvement in the position of the council with regards to the municipal finances. This right of inquiry also entails the possibility to organise hearings with former executives, and (former) civil servants, where they can be heard under oath. In practice this right has already been used for investigating large scale municipal projects (mainly builds or infrastructural projects), which have exceeded their budget. Especially in the case of long-term projects, the possibility of hearing former executives and civil servants proves useful.

Another new instrument brought on by the dualization is the local chamber of auditors (chapter seven). Whether this instrument strengthens or diminishes the powers of the council, is doubtful. Dwing it conception the Municipalities Act was strongly amended on the issue of the chambers of auditors. Some political parties feared that these chambers would prove to be too large of a burden for smaller municipalities and wanted to get rid of the mandatory nature of these chambers of auditors. As a compromise the function of a chamber of auditors remained obligatory, whereas the way in which municipalities would provide in this function was more or less up to them. Municipalities could opt for the arrangement laid out in the Municipalities Act (with an independent chamber of auditors) or they could opt for an auditing committee in which members of the municipal council could also be appointed. A majority of municipalities chose the laffer and appointed council members into their auditing committees. From the viewpoint of independent scrutiny, this was no ideal situation; from the viewpoint of strengthening the position of the council, it was applauded. In a way the two different types of auditing boards stand for two different types of accountability. The independent chamber of auditors scrutinizes the actions of all municipal organs (the council included) and reports not only to these organs, but also directly to the public. Therefore, one could argue that this chamber of auditors stands for a system of public accountability. The auditing committees, on the other hand, might stand for a system of political accountability, because these committees are usually dominated by council members, whose scrutiny is usually limited to the municipal executive. A recent ruling by one of the high administrative courts obliges the auditing committees to operate independently form the municipal council. Whether that is practically possible — because of the overlap in membership of the two institutions — remains to be seen. Because the auditing committees and the chambers of auditors can only make recommendations, this emphasis on independence should, in my view, not be exaggerated.

Chapter eight deals with forms of oversight by higher levels of government (provinces, national government) and the possibility of judicial financial control. Because this has no bearing on the overall relationship between the municipal council and the municipal executive, the purpose of this chapter was to complete the overview on financial control, rather than to contribute to answering the main research question.

Chapter nine does answer this question. In general, and in spite of what the government stated dwing the legislative procedures regarding the dualization, the position of the council has not improved. On some points one might even argue that the council's powers over the municipal (mances have diminished somewhat. In part, this depends on the attitude of the council itself, for instance with regard to the layout of the budget. Some of the restrictions of the council' s powers do not have to be rued. Especially the system of council-induced civil liability can be deemed a question of a too legal nature to be put in the hands of a political organ.