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68. In addition, reular and dogiled fingaial da should<sup>be maintained on subutional govenments. Ideally,</sup> this requires; (1) the establishme of uniform financial reporting<sup>(and budgetng) systms -perhaps with</sup> different degre of complexity for different categories<sup>of local governments; and</sup> (2) the desigaion of an agency responible for<sup>coUecting and procesng then data in a timely</sup> fahion (which wiU probably, in a larg and complex<sup>country, requie use of some sampling</sup> thniques as well as occasional census exercises<sup>to provide the needed frtame).</sup> The first of these quiem ts in tun requirm<sup>the development</sup> of such systeum and, much more difficult,<sup>their</sup> implementation, which will geally require subsatial trining and folow-up efforts.<sup>Developing such</sup> 'infrastricture' is neither quick nor cheap,<sup>but it is esential if substantial ad important public sector activities are</sup> to b decentlized - for whatever rsrn - without losing sight of what is going on in<sup>these importat pua of the</sup> public sector. Implementation of this recomendation may rqui additional centnl govem ntot institutions (1) to develop and maintain the<sup>reporting systems, (2) to tran and support local govenment officials,</sup> (3) to develop independent auditing procedures for local administrations and their rovenueoeaning entexprises, and (4) to run the stical side of the opation<sup>- with the latter being amain input into the work of the instituion</sup> referred to in the first recommendation above.

69. Additional training efforts are clearly needed to uagade<sup>the technical canacity of subnational overnments</sup> to carry out efficiently and effectively the expendituro<sup>functions for which they are now responsible and others with</sup> which they may be entusted in the future, whether<sup>in exercise of 'local autonomy or as delegated agencies of the</sup> central goverment In some insance. (e.g. education) the neary support should probably como from the relevant central minisy, while in other instane<sup>(e.g. road and waterworks) it may come fomthe ministry,</sup> regional agencies, universities, private sources,<sup>or some mixture of the preceding. In view of the heterogeneous</sup> nature of both the services that are (or may be)<sup>decenalized and of most countries, it is unlikely the same solution</sup> will be appropria in aU coass, but it is clealy<sup>a high-pority item to work out in detil exactly who is going to</sup> support the new lood role in each functionl<sup>area and how that support is going to be delivered. Each functional</sup> area - including the budgeting and financi<sup>rporting discussed earier -has different needs, problems, and</sup> possibilities, and will likely have to be treated<sup>diffetly.</sup> 70. Finally, an especially high-priority task for<sup>the needed central unit monitoring local finance is to analy</sup> and evaluate intermovernmental fiscal transfers.<sup>As indicated later in this paper, there are many questions that must</sup> be raised about the objectives, the design,<sup>and the effects of such transfers. There is also much to be said for</sup> encouraging much more informed and open<sup>discussion of these matters than is common in many countries,</sup> especially when the whole process is as novel<sup>as it is in the transitional economies. Regular publication of data will</sup> of course help, but one cannot rely solely<sup>on an interested party -the central govermment -to carry out, and</sup> certainly not to publish, all the analysis<sup>that is really needed in any country in which intergovemmental financial</sup> issues are important, whether in political<sup>or economic terms, or both. For this reason and others, there is much</sup> to be said for establishing as soon as<sup>possible in most countries one or more smal non-govermnental research</sup> institutes focusing on local government problems.

# The Changin Role of Government:<sup>From Ownership to Service -Provision</sup>

71. Decentralization and intergovernmental<sup>fiscal reforms are taking place in the context of a major change in</sup> the role of goverment in the trasitional<sup>economies. Ia the past, governments at both the national and subnational</sup> levels have been involved in almost every<sup>aspect of economic activity. The state owned all enterprises, from the</sup> steel plant on the 'commanding heights'<sup>of the economy to the local laundry. The state organized production,</sup> allocated labor, planned exports, and so on.<sup>The first stage of decentralization in some countries began in the</sup> 1970's, when the ownership of some smaller<sup>industrial units and the retail sector were transferred to subnational</sup>