Do the data on municipal expenditures in the Czech Republic imply incorrectness in their management?

89 4, XIX, 2016 Finance DOI: 10.15240/ ul/001/2016-4-007 In oduc ion By way o public budge s is in economically de eloped coun ies edis ibu ed app oxima ely one hal o he p oduced GDP. Acco ding o he EUROSTAT da a (EUROSTAT, 2012), o al go e nmen expendi u es in he EU coun ies (EU-27) accoun ed in 2012 o 48.9 % o GDP, o which expendi u es on he local go e nmen s’ le el accoun ed o 11.5% o GDP. In he Czech Republic, hese expendi u es s ood in 2012 a 43.9% o GDP, while local go e nmen s’ spending accoun ed o 9.8% o GDP. A mo e de ailed compa ison o he a io o o al public expendi u es o GDP and expendi u es o local go e nmen s o GDP b ings he ollowing able. Dis ibu ion o public expendi u es be ween cen al and local go e nmen s depends on a ype o he model o i scal ede alism adop ed in indi idual coun ies. Fo mos o he e iewed coun ies, we may egis e a dec ease in public expendi u es o local go e nmen s. The cause could be a ibu ed o a d op in ax e enues due o he economic c isis. Local go e nmen s, unlike cen al go e nmen s, do no aim o s abilise he economy using a i scal policy. Wi h espec o he signi i can olume o alloca ed esou ces, i is desi able o possess in o ma ion on how a e hese incu ed expenses economically ea ed. The p esen s a e o heo e ical e l ec ion is such ha examina ion o municipal expendi u es is usually o ien ed owa ds analysing municipal expendi u es ela ed o a speci i c a ea, such as e i ciency in p o ision o municipal se ices (Pa el & Sičáko á-Bebla á, 2009), in con ac ing DO THE DATA ON MUNICIPAL EXPENDITURES IN THE CZECH REPUBLIC IMPLY INCORRECTNESS IN THEIR MANAGEMENT? Milan Půček, Michal Plaček, F an išek Och ana Coun y 2010 2011 2012 To al go e nmen Local go e nmen To al go e nmen Local go e nmen To al go e nmen Local go e nmen Czech Republic 43.0% 11.3% 42.5% 10.8% 43.8% 9.8% Slo akia 42.0% 7.3% 40.6% 6.8% 40.2% 6.4% Slo enia 49.2% 9.8% 49.8% 9.4% 48.1% 9.5% Hunga y 49.7% 12.6% 49.9% 11.5% 48.7% 9.3% Poland 45.9% 15.0% 43.9% 14.1% 42.9% 13.3% Romania 39.6% 9.5% 39.2% 10.3% 36.4% 9.6% Sou ce: Eu os a (2012) Tab. 1: Compa ison o o al go e nmen expendi u es o GDP and expendi u es o local go e nmen s o GDP in selec ed coun ies o Cen al Eu ope EM_4_2016.indd 89EM_4_2016.indd 89 30.11.2016 16:31:4230.11.2016 16:31:42 90 2016, XIX, 4 Finance public se ices a a local le el (Nemec, Och ana, & Šumpíko á, 2008), on analysis o municipal i nances (Peko á, 2011) and hei indeb edness. In addi ion o hese examina ions, u he ways a e being sough wi h he aim o s eamline ou lays o municipal expendi u es wi h a possibili y o in oducing public adminis a ion con olling (Š ando á, Mihaliko á, & Mi aťalo á, 2007) o inden i ying sui able ins i u ional o ms (Bebla ý & Šičáko á-Bebla á, 2006) o o ms o owne ship in he p o ision o se ices. A he same ime, i appea s as necessa y o look o ways o how o de ec possible inco ec ness in he managemen o municipal expendi u es and how o imp o e he public expendi u e con ol sys em. Towa ds one o he possible ways poin s also his s udy. Using Ben o d‘s es , i aims o examine expendi u es o he Czech Republic’s municipali ies eco ded in 2012, analyse unco e ed esul s and o mula e conclusions wi h espec o a mo e e ec i e ope a ion o he con ol sys em o public expendi u es. As a as ou knowledge based on analysis o expe li e a u e goes, Ben o d’s es has no ye been applied wi hin he ealm o con ol o public expendi u es. The p esen ed s udy a emp s o ca y ou such an analysis (on he example o he Czech Republic’s municipal expendi u es in 2012). The aim o his s udy is o explo e by way o Ben o d’s es municipal expendi u es o he Czech Republic ha we e unde aken wi hin one e e ence yea and based on esul s o he empi ical esea ch o ca y ou a discussion on he gi en issue and o o mula e heo e ical gene alisa ions and p ac ical ecommenda ions o he domain o a con ol o public expendi u es. C i e ion Type o con ol Subjec o con ol Moni o ed indica o Moni o ing ques ion Con en ocus Con en con ol Con ol o esul s (audi o esul s, pe o mance audi ) Ag eemen be ween achie ed esul s and speci i ed expendi u e a ge s How a e pe o mance indica o s being me ? How a e me c i e ia o economy, e i ciency and e ec i eness? Fo mal con ol Con ol o eceip s and legal e iew o documen s Compliance wi h he Ac on Accoun ing and legal compliance wi h expendi u e documen s A e accoun s and expendi u e documen s kep co ec ly om a o mal aspec ? Time aspec P elimina y Ex an e con ol o planned expendi u e ac i i ies Choice o he mos app op ia e alloca ion a ian o public expendi u es Has he chosen a ian been economically he mos app op ia e one? Running Con inuous moni o ing o achie ed esul s and con ol o eceip s and documen s Con inuous moni o ing o mee ing he p ede e mined indica o s A e he p ede e mined indica o s being me a e iew ime poin s? Do expendi u e ac i i ies co espond wi h o mal equi emen s? Subsequen and concluding Concluding con en and o mal e iew o he unde aken expendi u e ac i i y Final con ol o he achie ed esul s and he deg ee o compliance wi h accoun ing and legal p ac ices Do he i nal esul s co espond wi h he planned objec i e? A e all he o mal (accoun ing and documen a ion) p ocedu es in acco dance wi h he p inciples o accoun ing and he legal code? Ins i u ional In e nal con ol Con en , o mal, p elimina y, unning and concluding con ol by he ins i u ion i sel Indica o s o he con en and o mal con ol lis ed abo e, moni o ed by an in e nal audi Do he con olled indica o s co espond wi h he no m speci i ed by he Ac on Financial Con ol and o he ele an legal no ms? Ex e nal con ol Con en , o mal, unning and concluding con ol ca ied by an ex e nal independen ins i u ion – in CZE se e ely limi ed (by he Sup eme Audi O i ce) Indica o s o he con en and o mal con ol as lis ed abo e, moni o ed by an ex e nal audi Do he con olled indica o s co espond wi h he no m speci i ed by he Ac on Financial Con ol? Sou ce: own based on Ac No. 320/2001 Coll., On Financial Con ol in Public Adminis a ion Tab. 2: Gene al a chi ec u e o he con ol sys em o public expendi u es (case o he Czech Republic) EM_4_2016.indd 90EM_4_2016.indd 90 30.11.2016 16:31:4230.11.2016 16:31:42 91 4, XIX, 2016 Finance 1. Theo e ical Founda ions o he Resea ch The s a ing poin o con ol o public expendi u es is a duly e ec i e con ol sys em o public spending. The issue o a con ol o public expendi u es has al eady been s udied wi hin expe li e a u e o se e al decades. Au ho s usually de o e in de ail o a pa icula aspec o a con ol o public expendi u es, such as e.g. he issue o a i nancial con ol, audi o public sec o o ganisa ions o p og am e alua ion and pe o mance measu emen . Wi hin coun ies o he o me Eas e n bloc eme ges he issue o a con ol o public expendi u es app oxima ely o he pas en yea s (see e.g. Š ango á, Mihaliko á, & Mi aľo á, 2007). Based on he analysis o a discussion on he issue o a con ol o public expendi u es wi hin expe li e a u e and he exis ing con ol sys em o public expendi u es in he Czech Republic, he sys em o a con ol o public expendi u es may be cha ac e ised om di e en pe spec i es, as shown in Table 2. The able p o ides a syn hesis o iews on he issue o a con ol o public expendi u es. As a s a ing poin i akes he si ua ion as wi hin condi ions o he Czech Republic speci i ed by he Ac No. 320/2001 Coll., On Financial Con ol in Public Adminis a ion. F om he con en pe spec i e, he con ol sys em o public expendi u es ocuses bo h on he economic aspec o spending ac i i ies (moni o ing o he achie ed esul s) as well as on he o mal (accoun ing and documen a ion) e i i ca ion o he co ec ness o ca ied expendi u e ac i i ies. F om he ime aspec , we dis inguish be ween p elimina y, unning and i nal inspec ion. I may be di ec ed bo h o he a ea o audi ing esul s o implemen ed spending ac i i ies as well as on a o mal e i i ca ion o he co ec ness (accoun ing and documen a y) o he way hose expendi u e ac i i ies a e eco ded. F om he ins i u ional poin o iew, he con ol may be ca ied ei he by he ins i u ion i sel (in e nal con ol) o by an ex e nal ins i u ion. One p oblema ic aspec , howe e , ep esen s he ac ha he con ol sys em o municipal expendi u es has unde he condi ions o he Czech Republic i s weaknesses and limi a ions. Municipal expendi u es (as opposed o cen al go e nmen expendi u es) can no be checked by he Sup eme Audi O i ce. On he pa o he Sup eme Audi O i ce can be checked only hose expendi u es ha local go e nmen s de i e om he s a e budge . Wha is missing is hus one o impo an independen in o ma ion channels ha would se e a eedback on how we e municipal expendi u es implemen ed. Ano he p oblem poses he ac ha in he p ac ice o con ol ac i i y, he e is es ablished a ela i e sepa a ion o he con en con ol om he o mal con ol. The consequence is ha bo h ypes o con ols in ques ion do no co-ope a e; espec i ely, hey a e o en implemen ed sepa a ely (o independen ly). Expendi u e con ols usually ei he in en ionally ocus only on checking o economic esul s ela ed o he unde aken expendi u es, o concen a e pu ely on a e i i ca ion o he o mal (accoun ing and documen a ion) co ec ness o he ca ied ou lays. The ac ha bo h ypes o con ol emain unlinked means some aluable in o ma ion ge los o emain po en ially unused while hey could lead o an inc ease in e i ciency o he con ol sys em o public expendi u es, exposu e o o mal and ma e ial e o s in esou ce alloca ions o possible auds and machina ions in he managemen o public esou ces. The e o e, i is desi able o seek ways o con ibu e o a mo e e ec i e con ol o public spending and o u ilise acqui ed in o ma ion in a comp ehensi e moni o ing o expendi u e ac i i ies. One o hese ways may ep esen signalling o accoun ing and eco d-keeping i egula i ies in expendi u e managemen ac i i ies, acqui ed h ough a o mal con ol. This in o ma ion may subsequen ly igge a con en con ol o e iew he economic a ionali y (economy, e i ciency and e ec i eness) o he ca ied expendi u es. One o he ools ha a e ins umen al o acqui e signalling in o ma ion on possible e o s in he managemen o public expendi u es is he use o Ben o d’s es . Ben o d’s Law builds on he idea o he “ i s digi law”, o mula ed in 1881 by an Ame ican as onome Simon Newcomb in he a icle en i led “No e on he F equency o Use o he Di e en Digi s in Na u al Numbe s” published in The Ame ican Jou nal o Ma hema ics. In his a icle he holds ha he p obabili y o he i s digi in a numbe being 1 is no 0.111 (1:9 = 0.1111) as migh be expec ed, bu a he 0.301. This p oposi ion was edisco e ed by F ank Ben o d and o mula ed in de ail in he a icle “The Law o Anomalous Numbe s” (Ben o d, 1938). Ben o d suppo ed his in es iga ion by EM_4_2016.indd 91EM_4_2016.indd 91 30.11.2016 16:31:4230.11.2016 16:31:42 92 2016, XIX, 4 Finance an analysis o mo e han 20,000 da a samples. Wi hin his analysis, F ank Ben o d sough o u ilise he wides possible da a sou ces om andom numbe s, s ee numbe s, lake su ace a eas, popula ion da a, o s a is ics om he Ame ican Baske ball League (Nig ini, 2011). Ma hema ical applica ion o Ben o d’s Law is deal wi h by Hill (1995a; 1995b; 1998) and Be ge and Hill (2011). As undamen al may be conside ed he ollowing heo em, based on he Cen al Limi Theo em: “P o ided he chosen dis ibu ion is a andom one and p o ided om any such a dis ibu ion we pick a andom sample, signi i can numbe s om his dis ibu ion con e ge o he loga i hmic dis ibu ion, alias Ben o d’s dis ibu ion”, as pu by Hill (1998). The p obabili y o an occu ence o he i s digi D1 based on Ben o d’s dis ibu ion is: (1) The p obabili y o an occu ence o he second digi D2 based on Ben o d’s dis ibu ion is: (2) I we ex end ou analysis o he occu ence o a numbe on he n- h posi ion, we make use o he ollowing gene al o mula: (3) The i s applica ion o Ben o d’s Law in he i eld o accoun ing was pe o med by Ca slaw (1988) who claimed ha when he ne income o a company is jus below a gi en psychological le el i s manage s will end o ound his income up. Fo example, i we ha e a ne income o 798,000 and 19.97 million, manage s will y o ound hese numbe s o he amoun o 800,000 and 20 million, espec i ely. This ac i i y is unde s andable due o he managemen incen i e p og ams. Ca slaw claimed ha his beha iou can be de ec ed using Ben o d’s Law, i.e. wi hin he da a se he e will be a highe occu ence o ze os in he second posi ion and a lowe incidence o he numbe 9 in he second posi ion when compa ed o Ben o d’s dis ibu ion. The esea ch o Ca slaw was ollowed by Thomas (Nig ini & Mi e maie , 1997) who examined ounding o ax losses in he USA. His u he analysis ocused on Ea nings pe Sha e (EPS), o which he numbe nine occu ed on he las posi ion less equen ly han expec ed. This esul ed in a claim ha Ea nings pe Sha e a e ounded up while losses a e ounded down. In 1993, Gup a and Ch is ian (Nig ini & Mi e maie , 1997) analysed da a o axpaye s epo ed in ax e u ns. The s udy ocused on axpaye s wi h an income less han USD 100,000. P o ided a axpaye in his ca ego y educes his income by a ew dolla s, he may all in o a lowe ax a e b acke . The i ndings unco e ed an income mis ep esen a ion by axpaye s who anked on he bo de line o an inc ease in hei ma ginal ax a e. A signi i can shi in he heo y o Ben o d’s Law applica ion in he domain o accoun ing aud de ec ion is c edi ed o Nig ini (1993; 1996; 2011). Nig ini in his i s s udy (Nig ini, 1993) examined he i s and second digi in in e es s paid and in e es s c edi ed on a sample o abou 200,000 ax e u ns om 1985 o 1988. The esul was a bias owa ds lowe numbe s o in e es s acc ued and highe numbe s o in e es s paid. This esea ch was ollowed by p ac ical case s udies o speci i c companies, such as he es o i s digi s, second digi s and i s wo digi s o in oices issued by an oil company in o de o de ec duplica es in documen s. Ano he applica ion was an analysis o ounding in numbe s. Examina ions by Nig ini a e summa ised by Du shi, Hillison and Pacini in hei s udy “The E ec i e Use o Ben o d’s Law o Assis in De ec ing F aud in Accoun ing Da a” (Du schi, Hillison, & Pacini, 2004) whe e hey also p o ide a guide o he applica ion o Ben o d’s Law in o ensic audi . Conclusions om he men ioned sou ces can be summa ised in o he ollowing o e iew able (Tab. 3). Resul s o his gene alisa ion (see Tab. 3) ela ed o condi ions and ins ances o he use o Ben o d’s Law wi hin he domain o a o mal con ol (in his case accoun ing) will be adop ed as a basis o an empi ical analysis o agg ega e da a on municipal public expendi u es in he Czech Republic. EM_4_2016.indd 92EM_4_2016.indd 92 30.11.2016 16:31:4230.11.2016 16:31:42 93 4, XIX, 2016 Finance N . Da a o he use o Ben o d’s Law should sa is y he ollowing condi ions N . Ben o d’s law can be used o de ec he ollowing da a manipula ions 1All da a in he da a se mus be eco ded in he same uni 1 Rounding o economic pe o mance by manage s, e.g. ounding o p o i om 789,000 o 800,000 2Da a mus no be limi ed by hei maximum and minimum alue 2Upwa d ounding o ne income and EPS (ea nings pe sha e) 3 Da a can no be numbe s used o iden i i ca ion pu poses and hey a e no gene a ed andomly 3 Downwa d ounding o losses 4 Da a should consis o a he small alues 4 Duplici y o i nancial i gu es, e.g. in oices 5 I is ad isable o ha e la ge da a se s 5 Wiping da a o 6Da a should no be in l uenced by a psychology, e.g. p icing ending wi h 99 6Rew i ing i gu es Sou ce: own based on Nig ini and Mi e maie (1997); TPA Ho wa h (2011) S udy # 1 S udy # 2 S udy # 3 Name o he s udy On he Applica ion o Ben o d’s Law o In e na ional Mac oeconomic S a is ics Ben o d’s Law and Mac oeconomic Da a Quali y Fac and Fic ion in EU Go e nmen al Economics Da a Yea o publica ion 2007 2009 2011 Topic Tes s o da a on he de elopmen o GDP in OECD coun ies and A ica. Mac oeconomic da a o 80 coun ies and compa ison o esul s wi h an al e na i e me hod o assessmen o he mac oeconomic da a quali y – he IMF‘s Da a Assessmen F amewo k. Na ional accoun s o he EU MSs on da a ela ed o compliance wi h he SGP: (1) Go e nmen de i ci and deb , (2) Go e nmen e enue, expendi u es and main agg ega es, (3) GDP, (4) Balance shee , consolida ed asse s and liabili ies. Main conclusions (1) Mos o he da a con e ged o Ben o d’s dis ibu ion. (2) Ben o d’s es may se e as an indica o o poo quali y and manipula ions wi h da a. (1) Da a o some coun ies did no con e ge o Ben o d’s dis ibu ion despi e he ac ha hei s a is ical da a we e on he basis o he IMF anking ma ked as good (Japan, Finland). (2) Non-con o mi y wi h he es may be caused e.g. by s uc u al changes in he economy, seasonal adjus men s, e c. (1) The la ges de ia ions om Ben o d’s dis ibu ion indica ed da a o G eece and Li huania while he lowes de ia ion eco ded da a o he Czech Republic ( es ed o he i s ime) and Poland. (2) Ben o d’s es can be used as a i s ins ance es ha may indica e da a manipula ions. Sou ce: own based on Nye and Moul (2007); Gonzales and Pas o (2009); Rauch e al. (2011) Tab. 3: Te ms and examples o use o Ben o d’s Law in accoun ing Tab. 4: Conclusions om he analysis o s udies applying Ben o d’s Law on he con ol o mac oeconomic da a EM_4_2016.indd 93EM_4_2016.indd 93 30.11.2016 16:31:4230.11.2016 16:31:42 94 2016, XIX, 4 Finance Wi hin he scope o Ben o d’s Law applica ion on mac oeconomic da a, he e we e published h ee majo s udies. In he i s s udy “On he applica ion o Ben o d’s Law o In e na ional Mac oeconomic S a is ics” Nye and Moul (2007) ocus on es s o da a ela ed o he de elopmen o GDP in OECD membe s a es and A ica. In he second s udy (“Ben o d’s Law and Mac oeconomic Da a Quali y”), i s au ho s Gonzales and Pas o (2009) ocus on es ing o mac oeconomic da a collec ed om 80 coun ies while he esul s we e compa ed wi h an al e na i e me hod o assessmen o he mac oeconomic da a quali y, he IMF’s Da a Assessmen F amewo k, based on which a e compiled ankings o coun ies acco ding o he quali y o s a is ical da a (Da a Dissemina ion Repo s on he Obse ance S anda ds and Codes). The las published s udy (Rauch, Gö sche, B ähle , & Engel, 2011) examined na ional accoun s o he EU membe s a es on da a ela ed o he pe o mance o he S abili y and G ow h Pac . The au ho s o med a anking o coun ies based on he a e age de ia ion o x2 es esul s. Compa ison o hese s udies and hei conclusions a e summa ised in Table 4. Au ho s o all h ee s udies ag ee ha he applica ion o Ben o d‘s es on mac oeconomic da a may help o iden i y da a wi h a highe p obabili y o da a manipula ion. A he same ime, howe e , i is necessa y o ake in o accoun also he cons ain s ha om his adop ion a ise. These include p ima ily e oneous esul s due o s uc u al changes in he economy, adjus men s o seasonali y and mac oeconomic ans o ma ions. Conclusions o hese s udies a e ele an o in e p e ing esul s o empi ical examina ions ha use Ben o d’s Law. In addi ion o he abo e-men ioned adop ion wi hin he domain o accoun ing, audi ing and analysis o mac oeconomic da a, applica ion o Ben o d’s Law was also es ed in analysing esul s o he elec ions in he USA (Decke , Myagko , & O deshook, 2011), in i scal ( ax) con ol (Wa in, 2008), insu ance (Mahe & Ake s, 2002) and also in e i ying c edibili y o eg ession coe i cien s in scien i i c a icles, as epo ed by Diekmann (2007), Diekmann and Jann (2010) and Töd e (2009). In he li e a u e, we we e unable o iden i y any applica ion o Ben o d’s es on a lowe han mac oeconomic le el, e.g. wi hin he domain o municipali ies. This s udy, he e o e, likely s ands o be he i s examina ion ha audi s municipal expendi u es using Ben o d’s Law. 2. Resul s o he Empi ical Resea ch The esea ch ocused on examina ion o da a om municipali ies in he Czech Republic. To be speci i c abou he gene al cha ac e is ics o he objec o in es iga ion, le us obse e ha as o Decembe 31, 2012, he e we e in o al 6,246 municipali ies in he Czech Republic wi h 10,503,477 inhabi an s, while in municipali ies o e 2,000 inhabi an s he e li ed in o al 73.2% o he o e all popula ion. Managemen o municipali ies is in he Czech Republic go e ned by hei annual budge and he budge ou look, as speci i ed by he Ac No. 250/2000 Coll., On Budge a y Rules o Regional Budge s. Wi hin he esea ch, we ha e wo ked along he lines o he binding classi i ca ion o municipal budge s – he budge a y s uc u e, speci i ed by he Regula ion o he Minis y o Finance o he Czech Republic No. 323/2002 Coll., On Budge a y S uc u e. Desc ip ion o public adminis a ion e o ms in he Czech Republic is p o ided e.g. in (Špaček & Neshybo á, 2010). Fo he pu poses o empi ical analysis we e used agg ega e da a sou ced om he Minis y o Finance o he Czech Republic. The da a e e o he yea 2012 and ep esen sums o public expendi u es in he s uc u e o he s a emen o budge a y execu ion and con ol o all municipali ies in he Czech Republic, di ided in o ca ego ies acco ding o he popula ion (see Tab. 5). Fo he da a analysis he e we e used s a is ical me hods, hypo hesis es ing, linea eg essions and compa isons. The aim was o examine whe he agg ega e da a on public expendi u es o municipali ies in he Czech Republic con e ge o Ben o d’s dis ibu ion. Fo his pu pose, municipali ies in he Czech Republic we e di ided in o 12 ca ego ies acco ding o he size o hei popula ion, as shown in Table 5. Agg ega ion o da a using he espec i e size o municipali ies was chosen o wo easons. The i s eason is he ac ha wi h ega d o he o al numbe o municipali ies in he Czech Republic (6,246 municipali ies), wi hin his s udy i was no p ac icable o examine all expendi u es o all municipali ies. The second eason o op ing o an agg ega ion was he ac ha size-ca ego ies o municipali ies allow benchma king and he e o e make i possible o EM_4_2016.indd 94EM_4_2016.indd 94 30.11.2016 16:31:4330.11.2016 16:31:43 95 4, XIX, 2016 Finance compa e he es esul s o a speci i c municipali y wi h esul s o a pa icula municipali y size- ca ego y. The aim was o es he hypo hesis ha agg ega e da a on municipal expendi u es con e ge o Ben o d‘s dis ibu ion. Da a o he yea 2012, eques ed om he Minis y o Finance o he Czech Republic, we e s uc u ed based on sec ions o he sec o al b eakdown, whe e each sec ion con ained all i ems based on class b eakdown ha ha e o e he pe iod epo ed some mo emen (i.e. a leas one municipali y included in he espec i e size-ca ego y has accoun ed o his i em). Un il 2012, epo ing o he public sec o in he Czech Republic has been based on he so-called Cash P inciple. This app oach di e s om he p ac ice in Wes e n coun ies (e.g. Uni ed Kingdom, Finland, Swi ze land) whe e a e pu highe demands on he explana o y powe o accoun ing s a emen s o he public sec o , as shown by Sine o (2014), Lomb ano and Zanin (2013) and Be gman (2012). T ansi ion om cash-based accoun ing o he public sec o owa ds acc ual accoun ing is one o he co e ools o public i nancial managemen e o ms in line wi h he philosophy o he New Public Managemen (Hood, 1995). Wi hin he i s pa o he empi ical analysis, we ha e e i i ed on agg ega e da a whe he he da a on municipal public expendi u es con e ge o Ben o d’s dis ibu ion. The es c i e ion is Mean Absolu e De iance (he eina e MAD), calcula ed as ollows: (4) whe e: AP – p opo ion o occu ence o indi idual numbe s in he empi ical dis ibu ion, EP – p opo ion o occu ence o indi idual numbe s in Ben o d’s dis ibu ion, K – numbe o digi s. The ollowing Table 6 shows c i ical MAD alues o empi ical da a, based on which we can decide on he con o mi y wi h Ben o d’s dis ibu ion – 3 deg ees o con o mance, he ou h one o noncon o mi y. These alues N . Municipal size-ca- ego y based on popula ion Numbe o municipali- ies % numbe o municipa- li ies To al popu- la ion o he ca ego y % popula- ion A e age popula ion 1 0-100 477 7.64% 34,406 0.33% 72 2 101-200 1,001 16.03% 149,812 1.43% 150 3 201-500 2,007 32.13% 656,988 6.25% 327 4 501-1,000 1,362 21.81% 960,870 9.15% 705 5 1,001-2,000 726 11.62% 1,016,461 9.68% 1,400 6 2,001-5,000 400 6.40% 1,215,137 11.57% 3,038 7 5,001-10,000 142 2.27% 971,336 9.25% 6,840 8 1,0001-20,000 68 1.09% 954,676 9.09% 14,039 9 20,001-50,000 42 0.67% 1,217,062 11.59% 28,978 10 50,001-100,000 16 0.26% 1,137,171 10.83% 71,073 11 100,001-1,000,000 4 0.06% 947,894 9.02% 236,974 12 1,000,001+ 1 0.02% 1,241,664 11.82% 1,241,664 To al 6,246 100.00% 10,503,477 100.00% 1,682 Sou ce: Da a on he numbe o municipali ies om he Czech S a is ical O i ce. Table and calcula ions by au ho s. Tab. 5: Numbe o es ed da a in municipali y-size ca ego ies EM_4_2016.indd 95EM_4_2016.indd 95 30.11.2016 16:31:4330.11.2016 16:31:43 96 2016, XIX, 4 Finance we e de i ed om empi ical s udies by Nig ini (2011). Resul s b oken down by municipal size- ca ego ies a e lis ed in Table 7. MAD alues a e also shown in he ollowing cha . Resea ch esul s gi en in Table 7 and Figu e 1 indica e ha he da a on public expendi u es o municipali ies in he Czech Republic con e ge o Ben o d’s dis ibu ion. Eigh size-ca ego ies (including he Ci y o P ague) eco ded he alue o MAD a he le el o “close con o mi y” and h ee ca ego ies anked as “accep able con o mi y”. La ge , bu s ill accep able le el o de ia ion om loga i hmic dis ibu ion eco ded only da a o he size- ca ego y o municipali ies wi h a popula ion om 100,001 o 1,000,000 inhabi an s (“lowe con o mi y”). This g oup includes ou ci ies. 3. Applica ion o Ben o d’s Tes on he Da a o Czech Ci ies o 2012 The hi d objec i e o he esea ch was o conduc an empi ical analysis o municipal expendi u es in 2012 and o analyse he esul s / d aw conclusions applicable o he con ol o public expendi u es a he le el o municipali ies o he Czech Republic. The es hypo hesis was ha based on he analysis o con en and s uc u e o he s a emen o execu ion and con ol o ci y budge s, Ben o d’s es should (mos likely) iden i y s a emen s o ci ies wi h ypes o da a manipula ions and e o s such as ew i ing numbe s, duplici ies, ounding o numbe s, wiping o da a. Gi en he speci i c na u e o he public sec o and he cha ac e o epo ed s a emen s i can be assumed ha Ben o d’s es should be MAD alue Deg ee o con o mi y wi h Ben o d’s dis ibu ion 0.000-0.006 Close con o mi y 0.006-0.012 Accep able con o mi y 0.012-0.015 Lowe con o mi y 0.015 and mo e Noncon o mi y Sou ce: Nig ini (2011) Size-ca ego y based on popula ion Numbe o es ed da a MAD alue O de based on MAD Assessmen e dic 0-100 1,404 0.006941550 10 Accep able con o mi y 101-200 2,446 0.004812095 5 Close con o mi y 201-500 4,203 0.003228490 1 Close con o mi y 501-1,000 4,679 0.005652321 6 Close con o mi y 1,001-2,000 4,371 0.006520248 9 Accep able con o mi y 2,001-5,000 4,866 0.004004314 3 Close con o mi y 5,001-10,000 4,374 0.003456433 2 Close con o mi y 10,001-20,000 3,870 0.004362737 4 Close con o mi y 20,001-50,000 3,518 0.005951687 7 Close con o mi y 50,001-100,000 2,950 0.007030236 11 Accep able con o mi y 100,001-1,000,000 2,434 0.012114151 12 Lowe con o mi y 1,000,001 and mo e 2,365 0.005994241 8 Close con o mi y Sou ce: own Tab. 6: C i ical MAD alues o he i s numbe Tab. 7: Resul s o Ben o d’s es applied o agg ega e da a on municipal public expen- di u es in he Czech Republic acco ding o size-ca ego ies based on popula ion EM_4_2016.indd 96EM_4_2016.indd 96 30.11.2016 16:31:4330.11.2016 16:31:43 97 4, XIX, 2016 Finance able o de ec in en ional shi s o expendi u es be ween indi idual budge headings. This ac i i y may be aimed a co e ing e.g. adminis a i e misconduc s o b eaching he budge a y discipline. Ano he mo i e may be an a emp o mo e i ems be ween he ope a ing and in es men pa s o he budge in an e o o imp o e ope a ing esul s and hus mee he e alua ion c i e ia o secu ing a bank loan. Ano he mo i e may be o a pu ely poli ical na u e, e.g. an a emp o co e up expenses o legal and o he consul ing se ices (see i ndings o he Sup eme Audi O i ce o he pe iod om Augus o Sep embe 2013). The eason o such a da a manipula ion is o “p o ec i sel ” om a nega i e public eac ion owa ds expendi u es ela ed o ou sou cing o legal and consul ing se ices by public adminis a ion ins i u ions. Fo u he es ing we e used da a om all municipali ies in he Czech Republic wi h a ci y s a us. In o al, analysed we e public expendi u es in he s a emen o budge a y execu ion and con ol o all 602 Czech ci ies o he yea 2012. On he empi ical da a was applied he i s -le el es , i.e. o con e gence owa ds Ben o d’s dis ibu ion was es ed he i s numbe . This es is gene ally ega ded as he mos in o ma i e one (Nig ini, 2011). When analysing he con e gence o empi ical da a owa ds Ben o d’s dis ibu ion, we can u ilise p ima ily es s o goodness o i (Chi-squa e es , Z- es , Kolmogo o -Smi no es ). Howe e , hese es s a e a ec ed by he numbe o da a eco ds (Nig ini, 2011) and a lowe numbe s o eco ds hei alues may be dis o ed. To a oid a possible dis o ion o esul s due o a low numbe o eco ds, we ha e used as a es c i e ion he alue o Mean Absolu e De ia ion. The esul s o Mean Absolu e De ia ion, howe e , co ela e wi h he esul s o es s o goodness o i . Based on p e ious i ndings, we ha e applied Ben o d’s es on s a emen s o budge a y Fig. 1: MAD alues o indi idual municipal ca ego ies Sou ce: own EM_4_2016.indd 97EM_4_2016.indd 97 30.11.2016 16:31:4330.11.2016 16:31:43