Basic Report

In recent years, there has been a change towards fiscal decentralization in South Korea, in particular by reforming the system of revenue assignment between central and local government in order to enhance fiscal autonomy. However, this could shrink local accountability for expenditures. Therefore, this study investigate mechanisms that need to be in place to insure that local governments are accountable to their expenditure while extending their fiscal autonomy. The main results are as follows.
   Firstly, this study examines the concept of fiscal accountability with focus on the relations between agents involved in providing public good by local governments. In particular, it is considered in terms of the flow of information and resources needed to provide public good and the relations between local residents and central governments.
   Secondly, this study reviews the institutions for fiscal accountability in OECD countries and draws implications for mechanism to enhance fiscal accountability of local governments in South Korea.
   Thirdly, there should be changes from accountability to central government to accountability to local residents, particularly in terms of ① leading agents ② operating system, ③ information sharing and ④ evaluation criteria.
   At last, this study suggests mechanisms for strengthening accountability to central government and accountability to local residents respectively. To promote accountability to central government, the following are suggested ; ① introduction of fiscal rules, ② increase of fiscal stability fund, and ③ enactment of an ordinance for fiscal stability. In addition, To promote accountability to local residents, the following are suggested ; ① enactment of laws to promote the participation of local residents, ② more participation of local residents, and ③ introduction of external audit system.