Do the Data on Municipal Expenditures in the Czech Republic Imply Incorrrectness in their Management?
Abstract
Limited public resources confront public administration bodies with the question of how to handle these in an economically rational manner. Audit of public expenditures necessitates an ongoing creation and modification of an effective control system.
Such a system is made up by subsystems of a formal (accounting and documentation) and economic control, responsible for monitoring the efficiency, effectiveness and economy of managing public expenditures. Significance of such interconnection rests in the fact that the formal control may signal possible improper management of public expenditures.
This may become a stimulus for the economic control subsystem to verify the effectiveness, efficiency and economy of outlaid expenditures. For identification purposes related to potential accounting and record-keeping incorrectnesses in the management of public expenditures is proposed adoption of Benford's Law (Benford's test).
Benford's test is applied on municipal expenditure data for the year 2012. Although the empirical analysis points at a limited use of Benford's test in the conditions of municipal expenditures in the Czech Republic (mainly due to the instability of results and unavailability of suitable data), the analysis showed that Benford's test can be adopted as a supporting tool, suitable for building into the control system of public expenditures.
It is one of the ways to increase the effectiveness of a complex control of public expenditures.