Message from the Minister ...... 2 Foreword by the Undersecretary ...... 3 I – GENERAL OVERVIEW ...... 4 A. Mission and Vision ...... 4 B. Authorities and Responsibilities ...... 4 C. Information on the Ministry of Finance ...... 5 1. Organizational Structure ...... 5 2. Information and Technology Resources ...... 9 2.1. IT Systems ...... 9 2.2. Library System ...... 10 3. Human Resources ...... 11 4. Services ...... 16 4.1. Services Delivered by Main Service Units ...... 16 4.2. Services Delivered by Advisory and Supervisory Units ...... 20 4.3. Services Delivered by Supporting Units ...... 22 5. Management and Internal Control System ...... 23 II – GOALS AND OBJECTIVES ...... 26 A. Goals and Objectives of the Ministry of Finance ...... 26 B. Main Policies and Priorities ...... 27 III-INFORMATION AND EVALUATION ON ACTIVITIES ...... 36 A. Financial Information ...... 36 1. Budget Execution Results ...... 36 2. Explanations on Fundamental Financial Statements ...... 36 B. Performance Information ...... 38 1. Activity Information ...... 38 1.1. 2009 Central Government Budget Execution ...... 38 1.2. Reform in Public Financial Management ...... 46 1.3. Audit Services ...... 48 1.4. Fight against Financial Crimes ...... 51 1.5. Legal Advisory and Legal Proceeding Services for the State ...... 53 1.6. National Property Transactions ...... 54 1.7. Studies on Revenue Policies ...... 57 1.8. Trainings ...... 65 1.9. Studies on the European Union ...... 67 2. Project Information ...... 68 3. Evaluation of the Performance Results ...... 81 4. Performance Results Table ...... 84 5. Evaluation of the Performance Information System ...... 107 IV – EVALUATION OF THE INSTITUTIONAL CAPABILITY AND CAPACITY ...... 108 V – INTERNAL AUDIT ACTIVITIES IN 2009 ...... 108 ANNEXES ...... 111

1 Message from the Minister

In the aftermath of the global crisis, the role of the government in the economy has increased significantly compared to the previous years. During this period, unemployment rates, budget deficits and roll-over rates have put a strain on the world economies. At this conjunction, it became more important to ensure fiscal discipline, increase global competitiveness, reduce unemployment, and ensure and maintain financial stability.

On the other hand, the crisis has brought along some opportunities that are important to our country. As an important economic and political actor in its region, Turkey attracts attention with its growth potential and dynamism. We continue to make dedicated efforts for a Turkey that can compete with the world in all fields, has transformed into an information society, has taken the necessary steps in the EU accession process, and has become one of the most powerful countries in the world.

In this process, it is of great importance to use public resources in an efficient way and to channel them into productive areas. The most important ground to this end is the Public Financial Management and Control Law No. 5018. With this Law which was enacted during the rule of our government, our public financial management system was strengthened through the principles and values of efficiency, economy and accountability in the use of public resources.

In this regard, public administrations should prioritize the use of public resources in accordance with their organizational goals and objectives by preparing strategic plans and performance programmes, and announce the results of the activities and projects that they carry out to this end to the public through accountability reports.

The Ministry of Finance Accountability Report 2009 includes performance results of the activities set out in the performance programme. Thus, an important step has been taken towards adoption of the accountability mechanism envisaged by the Law No. 5018 by public administrations.

I would like to extend my thanks all of those who have contributed to the preparation of such a qualified document and I wish that the Accountability Report serves its purposes in the best way.

Mehmet ŞİMŞEK Minister of Finance

2 Foreword by the Undersecretary

The reforms within the framework of the Public Financial Management and Control Law No. 5018 have been sustained by introducing new elements each year since 2003.

In this regard, the Ministry of Finance carries out its activities being aware of its pioneering and exemplifying role in full adoption and implementation of the new approach and practices introduced by the Law No. 5018 in public administrations.

As the basic elements of the new system, the Ministry of Finance enforced the Strategic Plan in 2007 and the Performance Programme and the Accountability Report which includes performance implementation results in 2008 in line with the Strategic Plan.

In 2009, studies were launched to establish an internal control system within the Ministry on the basis of accountability and transparency principles. Within this scope, the Ministry prepared the Action Plan for Compliance with Internal Control Standards with active participation of all of the Ministry units.

Besides, the Ministry continues to make efforts to develop the existing electronic infrastructure in order to ensure that the new public financial management processes and practices are faster and of better quality based on management information systems.

In accordance with the principle of fiscal transparency, we publicize the Ministry of Finance Accountability Report 2009 which includes the activities carried out diligently by the Ministry and performance assessments about the results of these activities.

I would like to take this opportunity to thank the Ministry staff that contributed to realization of the Ministry activities and I wish that the Accountability Report yields fruitful results for both the public and all of the concerned parties.

Naci AĞBAL Undersecretary

3 I – GENERAL OVERVIEW

A. Mission and Vision

Mission of the Ministry of Finance

To contribute to the fiscal policy-making and to carry out implementation, monitoring and audit of the fiscal policy in order to achieve economic and social objectives taking into account good governance principles.

Vision of the Ministry of Finance

To be a transparent, accountable and pioneering Ministry of Finance that provides fast and high-quality services.

B. Authorities and Responsibilities

Under the Decree No. 178 on the Organization and Duties of the Ministry of Finance, the duties of the Ministry of Finance are as follows:

 Assisting in fiscal policy-making, and implementing the fiscal policy  Providing the services of legal advisory and legal proceedings for the state  Developing and implementing expenditure policies, preparing and executing the state budget, and following and steering the execution of the budget  Keeping the state’s accounts, and rendering accounting services  Developing the revenue policy  Managing government property, determining the managerial principles regarding government property and immovables of the public institutions, and carrying out other relevant transactions  Preparing draft laws and other legislation regarding all kinds of revenue and expenditure transactions or taking part in the preparation of them  Following studies of international institutions regarding the Ministry services, drafting the Ministry’s opinion on these issues, and carrying out internal and external activities  Examining and approving the management and investment programs of the related institutions of the Ministry, and monitoring and auditing their activities according to the annual programs  Determining principles and procedures for prevention of laundering proceeds of crime

4  Carrying out the duties imposed on the Ministry of Finance by various laws  Monitoring, evaluating, examining, inspecting and auditing the implementation of the above mentioned duties

In addition, the Ministry of Finance is entitled to make the necessary regulations related to the enforcement of the provisions of the Public Financial Management and Control Law No. 5018 and the Law No. 5436 Amending the Public Financial Management and Control Law.

C. Information on the Ministry of Finance

1. Organizational Structure

The organization of the Ministry of Finance consists of central, provincial and overseas organizations and affiliated, related and associated institutions.

Central Organization of the Ministry of Finance: The central organization of the Ministry of Finance is composed of main service units, advisory and supervisory units and supporting units.

Main Service Units

 Chief Legal Advisory and Directorate General of Proceedings

 Directorate General of Budget and Fiscal Control

 Directorate General of Public Accounts

 Directorate General of Revenue Policies

 Directorate General of National Property

 Financial Crimes Investigation Board

 Department of the European Union and Foreign Affairs

Advisory and Supervisory Units

 Inspection Board of Finance

 Tax Inspectors Board

 Strategy Development Unit

 Advisors of the Minister

5

 Internal Auditors

 Advisory for Press and Public Relations

Supporting Units

 Directorate General of Personnel

 MoF Centre for Higher Training

 Department of Administrative and Financial Affairs

 Department of Data Processing (IT)

 Principal Clerk’s Office

Affiliated Institutions

 Revenue Administration

 Turkish National Lottery Administration

 Guarantee Fund

Related Institutions

 Turkish State Supply Office

 Turkish Accounting Standards Board

Associated Institutions

 Public Procurement Authority

* Privatization Administration was affiliated to the Ministry of Finance under the Memorandum published in the Official Gazette No. 25060 of 26/03/2003.

6 Provincial Organization of the Ministry of Finance:

The provincial organization of the Ministry of Finance operates through Provincial Treasuries in 81 provinces and 892 District Revenue Offices affiliated to the Provincial Treasures in districts. Units of Department of National Property, Directorate of Accounting, Directorate of Accounting Office, Directorate of National Property and Directorate of Personnel that are affiliated to Provincial Treasuries operate in provinces and District Revenue Offices operate in districts.

Overseas Organization of the Ministry of Finance:

The overseas organization of the Ministry of Finance comprises Offices of Financial Affairs Counsellor and Financial Affairs Attaché that are affiliated to Embassies, Consulate Generals and Permanent Representatives in various countries.

The Central and Provincial Organization Chart of the Ministry of Finance is as follows:

7

8 2. Information and Technology Resources

2.1. IT Systems

Public services delivered by the government and efficient provision of these services have an important effect on economic and social lives of countries. Facilities provided by information and communication technologies brought along new expansions in public management approach. In this regard, within the framework of information-based public management approach, it is essential that public administrations provide good-quality, fast, transparent, efficient and reliable services for the public, the business world and citizens by making maximum use of information and communication technologies.

Thanks to efficiency and inter-operability provided by information and communication technologies in public business processes, the increase in social welfare will be promoted and transparency, reliability, accountability and participation will be ensured in public management by increasing public revenues and efficiency in policy formulation and decision-making processes. Adopting information-based public management as a principle, our Ministry has developed its hardware and software capacity year by year in order to increase efficiency in decision-making processes and to develop qualified human resources and organizational capacity by using information and technology as efficient instruments.

The following projects are being carried out by the Ministry of Finance: Centrally Accessible Provincial Automation Project (METOP) which makes all processes of lawsuits in the provincial organization monitorable; Budget Management Information System (BYES)/e-budget Project which provides electronic environment support for all budget processes; say2000i Web- Based Accounting Automation Project which enables to carry out all accounting transactions in electronic environment, to keep all data in a central database and to daily monitor records; Public Expenditure and Accounting IT System (KBS) which combines expenditure and accounting stages of financial transactions under a single automation system and provides an electronic communication environment between spending and accounting units; National Property Automation Project (MEOP) which enables formulation of a national property information system; Personnel Automation Project (PEROP) which ensures keeping and monitoring personnel information and personal records in electronic environment; Inspection Board of Finance Audit Information System Project (MTK DEBIS) which enables electronic audits; and the MoF SGB.net System Project which makes all financial and non-financial transactions carried out by the Ministry manageable, measurable and analyzable in electronic environment and which can be integrated with other information systems.

9 2.2. Library System

The Ministry of Finance Library provides books and journals for readers and researchers by way of delivering library and publication services in the research areas related to the duties of the Ministry. Within the period of 2002-2009, the number of books in the Ministry of Finance Library is as follows:

Graph-1-

Number of Books in the Ministry of Finance Library

18.500 18.059

18.000 17.584 17.202 17.500 16.671 17.000 16.388 16.500 16.111 15.840 15.611 16.000

15.500

15.000

14.500

14.000 2002 2003 2004 2005 2006 2007 2008 2009

In addition, the total number of periodicals is 230 and by 2009 the number of subscriptions is 16.

In order to ensure access to maximum amount of electronic sources at minimum cost so that the library system of the Ministry delivers services to a wider group including academic circles; to take a share in the investment in electronic products within the framework of scale economy; to ensure access of Turkish academics and learners to the global information network at the highest level; and to increase the support of libraries for education and research, the following actions were taken in 2009:

 Subscription to the ProQuest ABI Complete database in order to meet the need for publications in fields of business administration, economics, accounting, international economics, environment, law and taxation, information sciences, oil, marketing and many other sectoral areas

 Subscription to the Cambridge University Press database in order to help readers in their studies in various fields by providing a full article

10 collection in economics, social and human sciences, politics, sciences, engineering, architecture, medicine and pharmaceutics

Thus, the Ministry of Finance Library has taken its place under the umbrella of the Anatolian University Libraries Consortium (ANKOS) through subscription to the abovementioned databases.

In addition, the following actions were taken:

 Subscription to the SourceOECD database in order to monitor over 5.000 books, 33 journals, meeting notes, statistics and reference sources published by the OECD and to ensure flow of information

 Subscription to the Economist Intelligence Unit database in order to monitor monthly country risk reports, country forecasts and daily economic, political and social developments and to ensure flow of information

 Subscription to the Reuters database in order to monitor foreign exchange rates and interest rates in the World Bank and world exchange markets and daily price of precious metals like gold and silver and to ensure flow of information

 Access to the International Monetary Fund (IMF) database where IMF credits, foreign exchange values and other economic and financial indicators are published

In order to ensure delivery of services by the Library in line with certain principles, to control whether the determined duties are fulfilled properly and timely, to speed up service delivery and workflow, and to increase effectiveness and efficiency, the “Principles and Procedures for Library and Publication Services of the Ministry of Finance Strategy Development Unit” was enacted on 22 December 2009 and the required announcement was made to the users.

3. Human Resources

The Ministry of Finance has 44.378 positions of which 23.429 are occupied and 20.949 are vacant as of 2009 year-end. 2.988 of the occupied positions are in the central organization while 20.429 are in the provincial organization and 12 are in the overseas organization.

The distribution of occupied and vacant positions by years is shown in the following table.

11 Table-1-

DISTRIBUTION OF POSITIONS BY YEARS Years 2002 2003 2004 2005 2006 2007 2008 2009 Occupied Position / Occupied Vacant Occupied Vacant Occupied Vacant Occupied Vacant Occupied Vacant Occupied Vacant Occupied Vacant Occupied Vacant Vacant Position Position Position Position Position Position Position Position Position Position Position Position Position Position Position Position Position Central 6.048 8.042 5.981 8.091 5.790 8.557 4.119 5.086 3.188 5.339 3.103 4.233 3.002 4.334 2.988 4.295 Provincial 64.529 34.779 63.692 35.634 63.071 36.530 22.341 14.306 20.433 17.243 20.705 15.972 20.552 16.512 20.429 16.635 Revolving Fund* 498 547 466 579 463 582 471 574 475 570 0 0 0 0 0 0 Overseas 17 9 19 7 24 2 22 4 18 13 12 19 13 18 12 19 TOTAL 71.092 43.377 70.158 44.311 69.348 45.671 26.953 19.970 24.114 23.165 23.820 20.224 23.567 20.864 23.429 20.949

* Under the Law No. 5622 of 17/04/2007, the Directorate General of Liquidation Affairs Revolving Fund was separated from the Ministry of Finance and affiliated to the Undersecretariat of Customs and revolving fund positions within that Directorate General were separated from the Ministry of Finance positions.

As it is seen in the following graph, the number of occupied positions of the Ministry fell in 2005. The reason for that fall is that the DG Revenue was separated from the Ministry of Finance and it was organized as the Revenue Administration on 16 May 2005.

Graph-2-

Distribution of Occupied Positions by Years

71.092 70.158 69.348 80.000 70.000 60.000 50.000 26.953 40.000 24.114 23.820 23.567 23.429 30.000 20.000 10.000 0 2002 2003 2004 2005 2006 2007 2008 2009

The distribution of the occupied positions of the Ministry by 2009 is shown as percentage in the graph below.

12

Graph-3-

Distribution of Occupied Positions by 2009 (%)

Pr ov inc ial 87.20%

Overseas 0.05%

Central 12.75%

Graph-4-

Distribution of the Ministry Personnel by Level of Education

11.316

12000

10000 6.291

8000 4.146

6000 1.154 4000 160 331

2000

0 PR SE U ASSOCI BACHELO POSTG PPER IMAR CO N DAR SECOND ATE R Y ADU R Y AT A E R Y

While the rate of personnel with bachelor’s or master’s degree was 39,6 percent in 2005, this rate rose to 49,8 percent in 2009. However, the rate of personnel with primary, secondary and upper secondary education diplomas decreased to 32,5 percent from 41,2 percent within the same period.

13

Table-2-

DISTRIBUTION OF THE MINISTRY PERSONNEL BY YEARS AND LEVEL OF EDUCATION (%) 20052006200720082009 PRIMARY EDUCATION 1,1 1,0 0,8 0,7 0,7 SECONDARY EDUCATION 6,6 6,6 5,7 5,3 4,9 UPPER SECONDARY EDUCATION 33,5 35,1 29,7 28,6 26,9 ASSOCIATE'S DEGREE 19,3 21,3 19,2 18,1 17,7 BACHELOR'S DEGREE 39,1 35,7 43,5 46,1 48,4 POSTGRADUATE DEGREE 0,5 0,4 1,1 1,2 1,4

Graph-5-

Distribution of the Ministry Personnel by Age

6.693

7.000

6.000 4.769

5.000 3.605 3.548

4.000 2.268 1.975 3.000

2.000 474 66 1.000

0 18-23 24-29 30-35 36-41 42-47 48-53 54-59 60 +

When the MoF personnel are grouped by age, it is seen that 28,6 percent of the personnel are in 42-47 age group, 20,4 percent are in 48-53 age group and 15,2 percent are in 36-41 age group.

14

Graph-6-

Distribution of the Ministry Personnel by Period of Service

6.878

7000

6000

3.810 5000 3.266

2.653 2.264 2.349 4000

1.625 3000

487 2000 66

1000

0 0-5 6-10 11-15 16-20 21-25 26-30 31-35 36-40 41-45

When the MoF personnel are grouped by period of service, it is seen that 16,3 percent are in 16-20 year period and 29,4 percent are in 21-25 year period.

Graph-7-

Distribution of the Ministry Personnel by Foreign Language Proficiency Level LEVEL A; 59

LEVEL C; 299 LEVEL B; 190

548 Ministry personnel in total benefit from foreign language allowance of which 59 personnel are at (A) level, 190 are at (B) level and 299 are at (C) level.

15 Graph-8-

Distribution of the Disabled Personnel of the Ministry

FEMALE 13 % (88 persons)

MA LE 87 % (586 persons)

87 percent of the disabled personnel in the Ministry are male and 13 percent are female.

The distribution of occupied and vacant positions by service categories is given in Annex 3 and the supervision capacity and specification level of the Ministry is given in Annex 4.

4. Services

4.1. Services Delivered by Main Service Units

Chief Legal Advisory and Directorate General of Proceedings

The Chief Legal Advisory and Directorate of General Proceedings (BAHUM) provides the services of legal advisory and legal proceedings for the state within the framework of the strategic objective of “To provide legal services for the state in a rapid, effective and efficient manner”.

Within the scope of legal advisory services, the Directorate General provides opinion on legal issues for public administrations with general budget and the Ministry; on draft contracts, laws, by-laws and regulations of public administrations with general budget and the Ministry; on disputes brought to court or not for amicable settlement of those disputes; and on arguments in administrative proceedings that include financial issues and that are related to the Treasury.

Within the scope of legal proceedings services, the Directorate General carries out the proceedings for lawsuits and executions of public

16 administrations with general budget and the Ministry, participates in trials for administrative proceedings related to the Treasury, and represents the State and public administrations with general budget in disputes that are envisaged to be settled by international courts and those to be settled by international arbitration.

Directorate General of Budget and Fiscal Control

Within the framework of the relevant legislation and the strategic objectives of “To form spending policies which protect fiscal discipline and to allocate public resources in accordance with public priorities” and “To establish a financial management system in compliance with international standards”, the Directorate General of Budget and Fiscal Control (BUMKO) contributes to formulation and implementation of the spending policy, coordinates central government budget preparation efforts and drafts budget laws, and steers the execution of central government budget.

The Directorate General is responsible for drafting the expenditure legislation of the Ministry, formulating the Ministry opinion on drafts and proposals that will affect the expenditure policy, and providing technical support for the Turkish Grand National Assembly (TGNA) on drafts and proposals related to financial legislation. In addition, the Directorate General renders services for resolving problems resulting from the enforcement of the expenditure legislation and for overcoming hesitations. Another important duty of the Directorate General is to contribute to the formulation of the public employment policy and to evaluate and approve personnel demands of public administrations.

The Directorate General performs the central harmonization function related to the financial management and control system established with the Law No. 5018. Within this scope, primary and secondary legislation on the system are prepared, relevant standards and guides are prepared to be used by public administrations, and training and guidance services are delivered in order to develop administrative capacity in public administrations. The Directorate General is also responsible for preparing the legislation on performance-based budgeting introduced to our financial management and control system with the Law No. 5018, and making necessary studies to steer the execution of the performance-based budget. Furthermore, under the Law No. 5018, the Directorate General prepares the “General Accountability Report” which includes activity results of public administrations within the scope of central government and social security institutions in a fiscal year, and the “Central Government Budget Realizations and Expectations Report” which includes central government budget execution results for the first six months and expectations for the second six months.

The Directorate General contributes to the relations with international organizations in the fields that fall into its area of responsibility, especially

17 the negotiations on financial control and public procurement chapters within the framework of negotiations with the EU.

Directorate General of Public Accounts

The Directorate General of Public Accounts provides accounting, reporting, supporting and auditing services within the framework of the strategic objectives of “To establish a financial management system in compliance with international standards” and “To prevent the informal economy and corruption”.

The Directorate General is responsible for contributing to the preparation and implementation of expenditure policies which are a component of the fiscal policy; providing accounting services for public administrations within the scope of general budget (including revolving fund accounting offices); preparing financial reports and statistics related to public administrations within the scope of general government; providing assurance for public accounts and auditing; providing trainings and certificates for accounting officers in public administrations within the scope of general government; steering financial transactions of and establishing accounting systems for the revolving funds that are affiliated to public administrations with general and special budget; and providing accounting services for the revolving funds deemed appropriate.

In addition, the Directorate General provides opinion in order to overcome hesitations about the issues that are related to its area of responsibility specified in relevant legislation, and transfers shares from general budget accounts under the relevant legislation.

Moreover, the Directorate General examines final accounts of public administrations within the scope of central government, corrects the detected errors and prepares the Central Government Final Account Draft Law.

Directorate General of Revenue Policies

The Directorate General of Revenue Policies formulates revenue policies of the Ministry within the framework of the strategic objective of “To form revenue policies that promote economic growth, social justice, employment and international competitiveness”.

The Directorate General carries out the activities of preparing public revenue legislation and improving it according to the current economic and social needs, and preparing the revenue budget within the framework of the medium-term programme and the medium-term fiscal plan.

In addition, the Directorate General makes legal regulations required within the scope of the taxation chapter in the process of harmonization with the EU legislation.

18 Directorate General of National Property

The Directorate General of National Property provides services of acquisition, management and disposal of the government property within the framework of the strategic objective of “To increase value added to the Turkish economy by rational utilization of public immovables”.

Acquisition services include barratry, construction in return for lot/flat on government property, purchase and expropriation, and donation transactions.

Management services include detection of government property, prevention of evacuation and confiscation, leasing of government property, registration of easement on government property, collecting damages for unlawful occupation of government property and assignment of government property.

Disposal services include sale, free-of-charge alienation and abdication of government property.

Financial Crimes Investigation Board

The Financial Crimes and Investigation Board (MASAK) provides the service of fight against laundering proceeds of crime and financing of terrorism within the framework of the strategic objective of “To prevent laundering proceeds of crime and financing of terrorism”.

The Board of which the duties and responsibilities were redefined under the Prevention of Laundering Proceeds of Crime Law No. 5549 provides the services of formulating policies and making research on fight against laundering proceeds of crime and financing of terrorism, having necessary examinations made on proceeds of crime, preparing legislation on money laundering and financing of terrorism, receiving, analyzing and assessing the relevant suspicious transaction reports, informing the Public Prosecution Office of the serious findings, and performing inspections of obligation.

Department of the EU and Foreign Affairs

The Department of the EU and Foreign Affairs is responsible for efforts for harmonization with the EU Legislation and coordination of international relations of the Ministry.

Under the supervision of the EU Permanent Contact Point of the Ministry, the Department provides the secretariat services for the Ministry which is the coordinator of the chapters of “Public Procurement”, “Taxation”, “Financial Control” and “Financial and Budgetary Provisions”. In addition, the Department coordinates the issues that fall into the Ministry’s area of responsibility within the framework of Turkey’s Contribution to the

19 European Commission’s Progress Report on Turkey, the National Programme for the Adoption of the Acquis, Works of Sub-Committees, the Negotiation Process and the Fiscalis Programme.

Moreover, the Department is responsible for maintaining the Ministry’s relations with international organizations such as the United Nations, the OECD, the Council of Europe, the World Bank, the IMF, World Trade Organization, Economic Cooperation Organization, Islamic Development Organization and the G-20, and for coordinating works related to these organizations among the Ministry units

4.2. Services Delivered by Advisory and Supervisory Units

Inspection Board of Finance

The Inspection Board of Finance provides inspection, examination, investigation and advisory services for the Ministry within the framework of the strategic objectives of “To prevent the informal economy and corruption” and “To prevent laundering proceeds of crime and financing of terrorism”.

The Board is responsible for making research and investigation on public expenditures, public revenues and government property within the framework of the inspections, the examinations on tax crimes, laundering crimes and violations of obligations, and the claims received by the Board on civil servants and other public officials.

Moreover, the Board provides advisory services in the fields of legislation and implementation.

Tax Inspectors Board

The Tax Inspectors Board provides audit and advisory services within the framework of the strategic objectives of “To prevent the informal economy and corruption” and “To prevent laundering proceeds of crime and financing of terrorism”.

The Board examines the accounts of taxpayers under tax laws and makes studies and research required by the Minister of Finance.

In addition, the Board makes examinations within the scope of preventing laundering proceeds of crime and fight against informal economy and makes examinations and research upon request.

Strategy Development Unit

The Strategy Development Unit provides the services of economic and sectoral analysis and general management and support within the framework of the strategic objectives of “To form spending policies which

20 protect fiscal discipline and to allocate public resources in accordance with public priorities” and “To provide rapid and good-quality services”.

Within the scope of economic and sectoral analysis service, the Unit prepares various reports on macroeconomic developments, especially the annual economic report, and speeches and presentations of the Minister and the Undersecretary.

Within the scope of general management and support service, the Unit is responsible for preparing, coordinating and monitoring the strategic plan, the performance programme and the monitoring and evaluation report of the Ministry; preparing and implementing the current and investment budget of the Ministry; preparing the final account of the Ministry; preparing the accountability report of the Ministry; carrying out the transactions under the by-law on movable property; and pursuing actions of annual programmes.

In order to ensure that the Ministry achieves its objectives by effective, economic and efficient use of resources, the Unit is also responsible for establishing and developing the internal control system and to this end providing advisory services for the top management and spending units and carrying out ex-ante financial controls and also for establishing and developing the management information system.

Advisors of the Minister

The Advisors of the Minister deliver various services with a view to helping the Minister in topics of utmost importance and priority.

Internal Auditors

Internal audit refers to the activities of ensuring independent and objective assurance and giving advice to provide guidance and to evaluate whether resources are managed in an effective, economic and efficient way in order to add value to and improve the works of the public administration.

According to the Law No. 5018, the duties of internal auditors who work in the field of internal audit in the public sector are to evaluate the management and control structures of public administrations and to perform system audits for the processes; making examinations and providing opinion on use of resources; performing audits to see if expenditures are in line with legal and top policy documents; providing opinion for improvement; and making notification in cases that require investigation.

Advisory for Press and Public Relations

The Advisory is responsible for daily follow-up of news, columns, features and comments, and of all kinds of activities of the media; transcription of the newscasts related to the Ministry and submitting them

21 to the Minister’s Office; and preparation of the press releases and organizing press conferences of the Minister.

In addition, the Advisory receives and examines citizen applications sent by the Prime Ministry, Ministries and other public agencies, all kinds of requests, complaints and notices coming directly to the Ministry and applications to the Ministry within the scope of “Information Law” and “Prime Ministry Communication Centre”, and sends them to the relevant units of the Ministry.

4.3. Services Delivered by Supporting Units

Directorate General of Personnel

The Directorate General of Personnel carries out the transactions on employee personal rights such as appointment, transfer, progress, promotion, replacement, orientation, evaluation of past services and retirement pursuant to the relevant legislation; produces statistical data on personnel and provides decision makers with accurate, reliable and up-to- date information on management of human resources of the Ministry; sets standards for the positions in the central and provincial organizations and carries out position assignment transactions; and plans and carries out transactions for replacement of administrative officers in the provincial organization in order to provide effective and efficient services.

In addition, the Directorate General contributes to the protection of the rights of the Ministry personnel and thus to the effective and efficient delivery of services by performing works and transactions required by the disciplinary law and keeping relevant records.

MoF Centre for Higher Training

The MoF Centre for Higher Training organizes and coordinates training programmes in order to increase the Ministry personnel’s knowledge of modern management techniques and financial legislation and to train them as innovative and open-minded managers in accordance with the modern public management approach.

Department of Administrative and Financial Affairs

The Department of Administrative and Financial Affairs provides the general services of cleaning, catering, security, transportation and health for the Ministry; provides the services for operation of social facilities affiliated to the Ministry; and when required carries out leasing transactions of the Ministry (including the provincial organization) and provides paperwork and archive services.

In addition, the Department is responsible for the repair of the Ministry office buildings and the maintenance and repair of all kinds of

22 supplementary equipment required for their operation; the payment of natural gas, water and electricity bills of the Ministry; and the transactions related to defence, mobility, National Security Council and emergency management, and military service deferment.

The Department dispatches allowances for electricity, water and solid and liquid fuels to the provincial organization of the Ministry, plans and performs the purchase of vehicles required for transportation services, decides to dispose of the vehicles which are uneconomic to operate, formulates policies to provide fast and good-quality services in line with the strategic objective related to its area of responsibility, decides to open dining halls for the personnel working in the provincial organization and dispatches the required appropriations, and purchases fire protection equipment for government offices in coordination with the Ministry of Interior.

Department for Data Processing

The Department of Data Processing provides data processing and communication services for the Ministry. In addition, the Department meets computer hardware demands of central units that do not establish a data processing unit yet, and ensures installation, initialization and operation of the hardware procured by the units with their own resources.

Principal Clerk’s Office

The Principal Clerk’s Office is responsible for official and private correspondences of the Minister, all kinds of protocol and ceremony procedures, services for visits, invitations, welcoming, hosting, seeing-off and national and religious days, and coordination with other agencies.

5. Management and Internal Control System

The Law No. 5018 emphasizes the principle of management responsibility. Within this scope, effective, economic and efficient utilization of the resources allocated to administrations, activities based on cost-benefit and cost-effectiveness analyses, accountability and fiscal transparency, and establishment of the required decision support systems for fulfilment of management responsibilities are defined as basic necessities for top managers and other managers. Internal control provides the management with a systematic instrument that it will use while performing these responsibilities.

In order to establish the internal control system within the Ministry, the Ministry of Finance Action Plan for Compliance with Internal Control Standards started to be prepared in accordance with the “Guide on the Action Plan for Compliance with Internal Control Standards” published by the Ministry on 4 February 2009.

23 The following activities were carried out within this scope:

 The “Internal Control Monitoring and Steering Board” composed of deputy director generals of spending units of ministries and the “Preparation Group of Action Plan for Compliance with Public Internal Control Standards” chaired by managers from spending units or representatives in the position hierarchically closest to the spending authority were established.

 In order to shed light on the future studies, a presentation on “Preparation of Ministry of Finance Action Plan for Compliance with Public Internal Control Standards” was delivered on 28 May 2009 for the participants from the Internal Control Monitoring and Steering Board and the Preparation Group of Action Plan for Compliance with Public Internal Control Standards.

 The Internal Control Monitoring and Steering Board held a meeting following the presentation in order to define the roadmap of the action plan to be prepared.

 An information meeting was held with the Working Groups of units in line with the defined action plan roadmap and then the units started to prepare draft action plans.

 Unit representatives were interviewed separately with the participation of the experts from the SDU and the BUMKO and by this way draft action plans of the units were worked on.

 The drafts prepared by the units were consolidated by the SDU.

 The Internal Control Monitoring and Steering Board decided that a smaller group would work on the consolidated draft so as to develop the internal control standards in a way that they include the mechanisms which enable them to function continuously and effectively.

 To this end, a working group was formed which was composed of the representatives at head of department level from the BAHUM, the BUMKO, the DG Public Accounts, the DG National Property and the DG Personnel and this group continued their studies under the guidance of the SDU and the Financial Management and Control Department of the BUMKO.

 Each stage of these studies was presented to the Internal Control Monitoring and Steering Board by the SDU and the next stage started upon the decisions taken during Board meetings.

These studies were evaluated by the Internal Control Monitoring and Steering Board and the final draft was prepared during the meeting on 4 September 2009.

24 In addition, within the framework of capacity-building for internal control system, the Ministry continued its studies on expansion and development of the SGB.net system created to obtain data required for the internal control system by way of transferring all financial and non-financial transactions carried out by the Ministry to the electronic environment, and on integration of the system with other systems within and outside the Ministry.

In this respect, all expenditure processes of the Ministry were modelled based on the By-Law on Central Government Expenditure Documents, and this module, automated within the scope of the SGB.net system, started to be used in the central and provincial organizations of the Ministry as of 1 January 2009 under the Expenditure Management Circular.

Moreover, the units are responsible for defining financial transaction processes under the “By-Law on Internal Control and Ex-Ante Financial Control Principles and Procedures”. Both financial transaction processes and business processes were modelled, process maps were defined and process improvement efforts were made in the SDU in order to set an example to the other units.

Ex-ante financial control is performed for financial transactions in all spending units of the Ministry. In addition, the SDU performs ex-ante financial control for financial transactions set out in the By-Law on Internal Control and Ex-Ante Financial Control Principles and Procedures and in the areas defined by the top manager.

25 II – GOALS AND OBJECTIVES

A. Goals and Objectives of the Ministry of Finance

Adopting the mission of “contributing to the fiscal policy-making and carrying out implementation, monitoring and audit of the fiscal policy in order to achieve economic and social objectives taking into account good governance principles”, the Ministry of Finance revised and publicized the Strategic Plan 2008-2012, which was prepared in 2007, in 2008 within the scope of the Strategic Management approach which increases stability and predictability by considering macro balances and introduces organizational and structural regulations which provide more efficient markets.

The Strategic Plan 2008-2010 includes four strategic themes, five strategic goals supporting these themes and eight strategic objectives related to these goals.

THEME 1: Policy Development

GOAL 1: To create a robust and rule-based financial structure

OBJECTIVE 1: To form spending policies which protect fiscal discipline and to allocate public resources in accordance with public priorities OBJECTIVE 2: To form revenue policies that promote economic growth, social justice, employment and international competitiveness

THEME 2: Policy Execution

GOAL 2: To ensure effectiveness, efficiency, accountability and transparency in the utilization of public resources OBJECTIVE 3: To establish a financial management system in compliance with international standards OBJECTIVE 4: To increase value added to the Turkish economy by rational utilization of public immovables

THEME 3: Audit and Advisory Services

GOAL 3: To protect the rights of the state by providing an effective legal service

OBJECTIVE 5: To provide legal services for the state in a rapid, effective and efficient manner

GOAL 4: To prevent black economy, corruption and informal economy

OBJECTIVE 6: To prevent laundering proceeds of crime and financing of terrorism OBJECTIVE 7: To prevent the informal economy and corruption

26

THEME 4: Institutional Effectiveness

GOAL 5: To ensure institutional excellence

OBJECTIVE 8: To provide a fast and good-quality service

B. Main Policies and Priorities

B.1. The Ninth Development Plan (2007-2013)

It is stated in the Macroeconomic Policies, Objectives and Estimates of the Ninth Development Plan that:

 Macroeconomic stability will be maintained in order to increase the competitiveness of the economy and to achieve sustainability of high economic growth.

 Structural reforms, which will secure the macroeconomic stability and provide an effective, flexible and productive economic structure, will be continued.

 Fiscal, monetary and incomes policies will continue to be implemented in a coherent and corroborative way.

 Regulations concerning the expenditure reform, which will provide significant contributions to the sustainability of the fiscal discipline will be continued; the Law No. 5018, which aims to increase efficiency, transparency and accountability in public expenditures will be fully implemented and with this aim:

 Resource allocation in the public sector will have been based on strategic plans and performance based budgeting system by the end of the Plan period.

 Internal control and internal auditing systems required for the strengthening of the management responsibility of administrations will be fully implemented in collaboration with the Central Harmonization Units responsible for guidance and supervision of these systems, in conformity with international standards and EU applications and at an internationally accepted quality level.

 The fields of social security, agriculture, health and personnel will have priority in the efforts to make public expenditures more efficient.

27  Regulations that contradict with the envisaged purposes of structural reforms will be avoided.

 Public investments will be directed towards infrastructure that will increase the competitiveness of the economy and they will be used as an effective instrument in the realization of sectoral, regional and EU harmonization purposes.

 In the provision of public services and in the realization of public infrastructure investments models that will increase the participation of the private sector will be developed.

 Incomes policy will be implemented in a way to take price stability and competitiveness into consideration in accordance to the requirements of the economic conjuncture.

 The fight against informal economy will be started with the preparation of a comprehensive strategy driven by a strong social and political will with the participation of all segments of the society.

 Transfer policies will be made more efficient by ensuring the redistribution of income in favour of the poor. In this scope, the social security system will be made capable of improving income distribution by providing security against social risks for all segments of the society.

 With the aim of increasing productivity and competitiveness, it will be ensured that R&D activities will be designed in a way to produce innovations and target the market.

B.2. Action Plan of the 60th Government Programme

The Action Plan of the 60th Government Programme was published by the Undersecretariat of State Planning Organization on 10 January 2008 based on the 60th Government Programme which was published in the Official Gazette of 07/09/2007 and in line with the proposals of the relevant public institutions.

It was decided that the short-term actions set out in the 60th Government Programme shall be implemented as a short-term action plan while the long-term actions were included in the Action Plan of the 60th Government Programme.

The implementation instruments of the Action Plan of the 60th Government Programme were defined as the Annual Programmes which include the measures required by the policies in the Ninth Development Plan, Turkey’s Program for Alignment with the Acquis and other national strategy and policy documents.

28 This Action Plan includes 145 activities under 10 titles. The Ministry together with its affiliated and associated agencies is defined as the responsible institution for 10 activities.

B.3. Pre-Accession Economic Programme (2009)

After recognition of its candidacy at the Helsinki Summit in December 1999, Turkey has prepared the Pre-Accession Economic Programme (PEP) triennially in accordance with the EU procedures within the framework of the pre-accession fiscal surveillance procedure and submitted this programme to the European Commission since 2001 upon the request of the ECOFIN Council of 26-27 November 2000.

The 9th Pre-Accession Economic Programme for 2010-2012 was prepared on the basis of the Medium-Term Programme (2010-2012).

The main purpose of the economic policies to be implemented in the Pre-Accession Economic Programme is to ensure that the economy enters into the stable growth period again by use of strengths of the economic and social structure during the exit from the global crisis, to minimize the effects of the global economic crisis on the growth by public revenue and expenditure policies, and to increase employment rate and thus the level of welfare of the country.

B.4. Turkey’s Programme for Alignment with the Acquis (2007- 2013)

The general evaluation meeting on the EU accession process and the strategy to be followed was held on 10 January 2007, and it was decided to prepare an integrated programme aiming at completing alignment with the acquis within the period of 2007-2013. Following that decision, Turkey’s Programme for Alignment with the Acquis (2007-2013) was publicized on 17 April 2007. The Programme is in line with the 9th Development Plan, the Medium-Term Programme, Annual Programmes and sectoral strategies adopted at national level.

B.5. Medium-Term Programme (2010-2012)

The Medium-Term Programme prepared by the Undersecretariat of State Planning Organization and finalized and enacted by the Council of Ministers is a policy paper guiding goals and priorities in the processes of preparing the budget, making legal regulations and taking administrative decisions.

The main purpose of the Medium-Term Programme for 2010-2012 is to ensure that our economy enters into a stable growth period again by use of the strengths of our economic and social structure during the exit from the global crisis, and to increase the level of welfare of the country.

29 Related to the public expenditure policy within the period of Medium- Term Programme for 2010-2012:

 The expenditure programs will be reviewed by the public administrations; activities and projects which have lost their priority and are inefficient will be eliminated.

 Regarding the employment of new personnel in the public sector, the limitations in the central government budget laws will be continued.

 Without compromising the quality of health services, measures aiming at making medicine and treatment expenditures more rationalistic will be continued as such including the arrangements that make beneficiaries contribute to the costs of the system.

 General health insurance system will be continued to be implemented together with the health transformation program in order to keep its financial burden at a reasonable level.

 The deductions from the general budget tax revenues of the local governments on account of the liabilities to the public sector will be made regularly and the ratio of deductions will be determined in a way that it will avoid new debts and help reducing the stock of debt.

 Concerning the arrangements and implementations leading to fiscal outcomes, impact analyses including medium and long term reflections as well as short term will be made.

 In order to make social assistance programs more effective, the social assistance system will be restructured by taking it as a whole.

Related to the public revenue policy within the period of Medium-Term Programme for 2010-2012:

 Stability in implementing tax policies and foresight in taxation will be essential.

 Legal structure in tax legislation and implementations will be strengthened in order to maintain simplicity and stability.

 The studies regarding the determination of fiscal amount of tax expenditures will be finalized.

 Audits for the purpose of preventing tax losses and exiles, mainly in heavily taxed products will be increased.

 In order to ensure punctual payments of taxes and other fiscal liabilities, an effective collection system will be established.

30  The studies about increasing voluntary tax obeying and broadening the tax-base will be continued.

 Lump-sum taxes and fees will be updated by taking the general economic environment into account.

 Studies about strengthening the audit and implementation capacity of tax administration will be continued.

 Necessary arrangements will be made for tax disputes in the area of administrative adjudication.

 In order to strengthen fiscal structure of municipalities and special provincial administrations and increase their administration responsibilities towards their citizens, arrangement about raising their own revenues; will be implemented.

 Necessary measures will be taken for State Economic Enterprises in order to discharge their tax liabilities of past years.

B.6. Medium-Term Fiscal Plan (2010-2012)

Within the framework of the new budget system envisaged by the Law No. 5018, one of the most important documents which steer the multi-year budget preparation process is the Medium-Term Fiscal Plan and it includes total revenue and expenditure estimates, deficit and borrowing targets and appropriation proposal ceilings of public administrations for the next three years in consistent with the Medium-Term Programme. This document is prepared by the Ministry of Finance and finalized by the High Planning Council.

It was stated that efforts will continue to be made to rationalize the public expenditure legislation during the Fiscal Plan period and increasing the efficiency of resource allocation will continue to be one of the major priorities during the period of 2010-2012 considering the experiences gained in implementation of the multi-year budgeting approach. In this regard, it was stated that public administrations will review their resource allocations within the framework of the defined priorities by considering their appropriation ceilings and they will eliminate the activities and projects that lose their priority.

In the Medium-Term Fiscal Plan 2010-2012, the followings are stipulated under the title of “Main Policies Regarding Budget Expenditures”:

 Main framework of fiscal policy to be followed in this period is to gradually reduce public debt to rational level which has risen with the effect of economic crisis, through decreasing the share of government in resource utilization.

31  Successful implementation of multi-year budgeting depends on the availability of the necessary cooperation and coordination between public administrations in budgeting process. All public administrations will act in the multi-year budgeting period covering 2010-2012 in the same manner as they did in previous periods.

 Activities aiming at improvement of administrative capacity in period 2010-2012 will be focused on in accordance with Public Financial Management and Control Law No. 5018 so as to ensure public administrations fulfil their tasks and responsibilities efficiently in the field of financial management and control.

 Works aiming at efficient implementation of financial management and control as well as internal audit in public administrations within the scope of general government will continue.

 It will be ensured that public administrations implement their internal control action plan in an efficient way in order to create an internal environment in consistent with international standards.

 Strategic planning and performance based budgeting which have been put into practice with a view to strengthening decision-making process in public administrations, increasing fiscal transparency and accountability, will be made widespread.

 Health, education and social expenditures as well as the expenditures supporting growth and employment and eliminating regional disparities will be attached importance; the policies aiming at increasing living quality the society, enhancing the skills of human capital will remain to be followed.

 Legitimateness will be ensured in social aids and efficiency in expenditures.

 Agricultural support payments will be diversified on the basis of land and product, management and control of the support will be conducted as land basis with a view to increasing competitiveness in the sector and ensuring income stability.

 In medium and long term, infrastructure investments supporting efficiency and productivity in economy will be focused on. Giving priority to South-eastern Anatolia Project (GAP), East Anatolia Project, Konya Plain Project; public investments will focus on economic and social investment projects. Investments which are required to implement the policies and priorities on the way to EU membership will be given impetus. Measures will be taken timely with a view to fast completion of GAP Action Plan and projects falling under the scope of other regional programs, considering additional sources provided.

32 In the Medium-Term Fiscal Plan 2010-2012, the followings are stipulated under the title of “Main Policies Regarding Budget Revenues”:

 Fundamental goal of budget revenue policies to be followed in this period is to support growth, investment and employment as well as make contribution to reducing informal economy,

 Tax legislation will be simplified through reassessing provisions regarding exception, exemption and tax relief included in tax laws in the framework of economic and social policies. Works aiming at determination of fiscal size of tax expenditures will continue. Moreover, works on harmonization with European Union legislation will continue.

 In the framework of Action Plan for Fight against Informal Economy, participation of all segments of society in fight against informality will be ensured.

 With the purpose of preventing tax loss and tax evasion, administrative capacity will be increased and efficiency will be ensured with regard to tax audits and collection of tax and other financial liabilities.

 Activities aiming at improving and raising tax awareness will be focused on.

B.7. 2009 Annual Programme

The main purpose of the 2009 Annual Programme is stated as “to maintain confidence and stability established in the economy, to keep economic growth at a reasonable level, to continue the persistent disinflation policies, to differentiate financing sources of the current account deficit, and to achieve fiscal goals given in 2009-2011 Medium-Term Programme by sustaining fiscal discipline under a well-defined fiscal structure through minimization of possible negative effects of the global crisis on Turkish economy which emerged in international financial markets and transmitted to the real production sectors.”

In order to enhance policy-making and execution capacity within the framework of increasing quality and efficiency in public services:

 Transition to strategic management in public institutions and organizations will be carried out through a change management approach.

 The budget will be structured to indicate the performance of public administrations by considering the costs of the policies to be implemented, the groups affected by these policies and the opportunity costs.

 It will be ensured that management decisions are formed with a medium to long-term perspective based on strategic plans and performance programmes.

33 B.8. Strategy for Increasing Transparency and Strengthening Fight against Corruption (2010-2014)

Strategy for Increasing Transparency and Strengthening Fight against Corruption aims at developing a fair and accountable management approach by acting as a follow-up of amendments to the legislations and other changes that are intended to increase transparency and prevent corruption in the country.

The 58th, 59th and 60th Government Programmes, the TGNA Corruption Investigation Board Report, the 9th Development Plan, the National Programme for the Adoption of Acquis, and evaluations of various international organizations on our country were taken as a basis in the preparation of the strategy.

The strategy comprises the components of prevention, implementation of sanctions and social awareness-raising. It is envisaged to remove factors feeding corruption with prevention component, to increase efficiency in investigations, proceedings and punishments with the component of implementation of sanctions, and to raise social awareness in terms of the related goals with the component of social awareness-raising.

B.9. Information Society Strategy and Annexed Action Plan (2006- 2010)

One of the main goals of the Ninth Development Plan for 2007-2013 is to transform Turkey into an information society. Applicable actions were highlighted in “Turkey e-Transformation Project” which aims at achieving the vision of transformation into an information society and “2005 Action Plan for Turkey e-Transformation Project”. The preparation process of Information Society Strategy for 2006-2010 was launched in 2005 as well. The main purpose of the e-Transformation Turkey Project is to create the conditions that will enable a government structure which adopts participatory, transparent, efficient and simple business processes as principle in order to deliver better quality and faster public services to citizens.

In this respect, Information Society Strategy and the annexed Action Plan that set out the main objectives and policies required to be achieved in Turkey’s transformation to the information society and that will include methods, instruments and resources needed for achieving these objectives were approved by the High Planning Council on 11 July 2006 and put into effect upon being published in the Official Gazette on 28 July 2006.

The Ministry was defined as responsible organization for four actions in the Action Plan and one action was completed while the remaining three actions are in the process of being put into effect.

34 B.10. GAP Action Plan (2008-2012)

The GAP Action Plan was prepared in 2008 under the coordination of the GAP Regional Development Department and the Undersecretariat of State Planning Organization considering the demands and recommendations coming from the related public institutions and from provinces and regions. The prepared Action Plan was given its final shape after being negotiated at the GAP High Council.

The Action Plan includes the following four strategic development axes:

 Ensuring Economic Development

 Ensuring Social Development

 Developing Infrastructure

 Developing Organizational Capacity

There are main headings and actions by provinces under the axes.

The Action Plan includes two actions for which our Ministry is responsible under the headings of “ensuring economic development” and “ensuring social development”.

35 III-INFORMATION AND EVALUATION ON ACTIVITIES

A. Financial Information

1. Budget Execution Results

Information on the institutional classification of 2002-2009 appropriations and expenditures are provided in the Annexed Table 5, information on the functional classification of 2002-2009 appropriations and expenditures is provided in the Annexed Table 6 and information on the economic classification of 2002-2009 appropriations and expenditures is provided in the Annexed Table 7.

2. Explanations on Fundamental Financial Statements

In 2009, an appropriation of 52,5 billion TL in total was allocated to the Ministry budget and 52,3 billion TL of this appropriation was spent.

Changes in the appropriations and expenditures of the Ministry by years are shown in the following graph.

Graph-9-

Distribution of Ministry Appropriations and Expenditures (Billion TL)

60,0 52,5 52,3 50,0 40,2 39,4 36,7 40,0 36,5 35,3 35,2 28,5 30,0 28,1 26,5 25,5 23,7 21,9 22,0 22,8 20,0

10,0

0,0 2002 2003 2004 2005 2006 2007 2008 2009

Total Appropriation Total Expenditure

When looked at the economic classification of budget expenditures, it is seen that the biggest part of the total appropriation was allocated for current transfers. In 2009, current transfers and capital transfers amounted to 93,06 percent and 4,46 percent of the expenditures, respectively.

Distribution of 2009 expenditures on the basis of the economic classification is as follows:

36 Graph-10-

Economic Distribution of 2009 Expenditures of the Ministry

93,06

0,70

0,12 0,03 1,11 0,52 4,46

PERSONNEL EXPENDITURES STATE CONTRIBUTIONS TO PURCHASE OF GOODS AND SERVICES CURRENT TRANSFERS CAPITAL EXPENDITURES CAPITAL TRANSFERS LENDING

When looked at the functional classification of the expenditures, it is seen that General Public Services comprise 57,74 percent, Social Security and Social Benefit Services comprise 38,17 percent and Housing and Social Welfare Services comprise 3,8 percent of the expenditures.

Distribution of 2009 expenditures on the basis of the functional classification is as follows:

Graph-11-

Functional Distribution of 2009 Expenditures of the Ministry

38,17

57,74

0,01 3,80 0,28

GENERAL PUBLIC SERVICES PUBLIC ORDER AND SECURITY SERVICES HOUSING AND SOCIAL WELFARE SERVICES EDUCATIONAL SERVICES SOCIAL SECURITY AND SOCIAL BENEFIT SERVICES

37 B. Performance Information

1. Activity Information

1.1. 2009 Central Government Budget Execution

Central Government Budget Expenditures Table-3-

Central Government Budget Realizations

2009 2008 (Million TL) Target Realization Budget Expenditures 227.031 259.156 267.275 1-Non-Interest Expenditures 176.369 201.656 214.074 Personnel Expenditures 48.856 57.211 55.930 State Contributions to SSIs 6.408 7.243 7.206 Purchase of Goods and Services 24.412 25.454 29.594 Current Transfers 70.360 87.956 91.761 Capital Expenditures 18.516 14.839 19.847 Capital Transfers 3.174 2.825 4.314 Lending 4.644 4.661 5.422 Contingency Appropriations 0 1.468 0 2-Interest Expenditures 50.661 57.500 53.201 Budget Revenues 209.598 248.758 215.060 1-General Budget Revenues 203.027 242.957 208.656 Tax Revenues 168.109 202.090 172.417 Enterprise and Ownership Revenues 7.422 7.362 9.944 Donantions and Grants and Special Revenues 850 942 879 Interests, Shares and Fines 17.126 19.424 23.070 Capital Revenues 9.114 13.139 2.044 Receivables 407 0 302 2-Own Revenues of Special Budget Administrations 4.825 3.878 4.603 3-Revenues of Regulatory and Supervisory Agencies 1.747 1.924 1.802 Budget Balance -17.432 -10.398 -52.215 Primary Balance 33.229 47.102 986

While a budget deficit of 10,4 billion TL was envisaged in the 2009 central government budget, the year-end realization was 52,2 billion TL. The primary surplus, on the other hand, was envisaged to be 47,1 billion TL while it realized as 986 million TL in the year-end.

While the 2009 central government budget expenditures were envisaged to be 259,2 billion TL, the year-end realization was 267,3 billion TL. Thus the 2009 budget expenditures exceeded the initial appropriation by 8,1 billion TL.

An appropriation of 57,2 billion TL was envisaged for personnel expenditures at the beginning of 2009, but personnel expenditures came in as 55,9 billion TL in the year-end. In 2009, 99,5 percent of the appropriation allocated to the social security institutions for state premium expenditures was used and 7,2 billion TL was spent in the year-end.

38 An appropriation of 25,5 billion TL was envisaged for purchase of goods and services at the beginning of 2009, but the expenditures increased by 16,3 percent and 29,6 billion TL was spent in the year-end.

As of the second half of 2008, investment expenditures were increased to boost economy and they continued to be increased in 2009. In 2009, 19,8 billion TL was spent for capital expenditures and 4,3 billion TL was spent for capital transfers from the central government budget. Thus, the total investment expenditures increased by 11 percent to 24,2 billion TL compared to the previous year.

In 2009, an appropriation of 500 million TL was envisaged for the KOYDES project which is involved in capital transfers, but the year-end expenditure was 588 million TL.

While an appropriation of 500 million TL was envisaged for TUBITAK R&D expenditures at the beginning of 2009, the expenditures came in as 740 million TL in the year-end.

An appropriation of 88 billion TL was envisaged at the beginning of 2009 for current transfers having the biggest share in budget expenditures with 34,3 percent, but 91,8 billion TL was spent in the year-end with supplementary appropriations allocated during the year. As a result, current transfers rose by 4,3 percent in 2009 year-end compared to the previous year.

In 2009, an appropriation of 21,4 billion TL was envisaged for financing the deficit of the Social Security Institution, but 29,2 billion TL was transferred to the Institution at the end of the year.

In order to make the labour market more efficient by reducing the tax burden of employers and to decrease unemployment and informal economy, 5 point of employer insurance premium was paid by the Treasury. This cut in the employer insurance premiums cost to 3,5 billion TL to the Treasury in 2009.

An appropriation of 5 billion TL was envisaged for the item of agricultural subsidies under the item of current transfers at the beginning of the year, but 4,5 billion TL was spend in the year-end.

In order to support small and medium size enterprises playing an important role in the employment, 169 million TL was allocated from the 2009 budget.

While the interest payments target was 57,5 billion TL, the year-end realization decreased by 7,5 percent to 53,2 billion TL. Thus, 92,5 percent of the appropriation envisaged in the budget for interest payments was spent.

39 Central Government Budget Revenues While the central government budget revenues were envisaged to be 248,8 billion TL at the beginning of 2009, 215,1 billion TL was obtained in the year-end. Therefore, central government budget revenues fell behind the envisaged figures in the Budget Law by 13,6 percent. The reason for that is the effect of the slow down in economic activities due to the crisis on tax revenues.

Tax revenues were envisaged to be 202,1 billion TL at the beginning of 2009 while 172,4 billion TL was obtained in the year-end. The reasons that actual tax revenues fell behind the envisaged figures are the slow down trend in the economy due to the global economic contraction and tax cuts made with an effort to alleviate the effects of the crisis.

Table-4-

Central Government Budget Tax Revenues

2009 Increase Rate 2008 Realization (%) (Million TL) General Budget Tax Revenues 168.109 172.417 2,6

Income Tax 38.030 38.445 1,1

Corporate Tax 16.905 18.023 6,6

Banking and Insurance Transactions Tax 3.695 4.003 8,3

Domestic VAT 16.805 20.852 24,1

VAT on Import 29.972 26.132 -12,8

Special Consumption Tax 41.832 43.620 4,3

Stamp Duty 3.945 4.169 5,7

Charges 5.050 4.738 -6,2

Other 11.875 12.435 4,7

However, both budget revenues and tax revenues increased by 2,6 percent in 2009 compared to the previous year. This shows that tax revenues are in a better position compared to the general situation of the economy.

The decrease of 12,8 percent in VAT on import together with the sharp contraction in imports played a decisive role in the low level of increase in tax revenues. On the other hand, domestic VAT and special consumption tax increased by 24,1 and 4,3 percent respectively especially as of the second half of 2009 as a result of the tax cuts that were in effect from April to September 2009. These increases in domestic VAT and special consumption

40 tax, especially in the last quarter of 2009, signalled that economic activities are in a recovery trend.

As for the other tax types in 2009, Revenue Tax increased by 1,1 percent, Corporate Tax increased by 6,6 percent, Banking and Insurance Transactions Tax increased by 8,3 percent and Stamp Tax increased by 5,7 percent while charges decreased by 6,2 percent.

General Evaluation on the Period of 2002-2009 Table-5-

Central Government Budget Realizations

(Million TL) 2002 2003 2004 2005 2006 2007 2008 2009

Budget Expenditures 119.604 141.248 152.093 159.687 178.126 204.068 227.031 267.275

Interest Expenditures 51.728 58.527 56.491 45.680 45.963 48.753 50.661 53.201

Budget Revenues 79.420 101.040 122.964 152.784 173.483 190.360 209.598 215.060

Tax Revenues 60.356 82.491 100.373 119.628 137.480 152.835 168.109 172.417

Budget Balance -40.184 -40.208 -29.128 -6.903 -4.643 -13.708 -17.432 -52.215 Primary Balance 11.544 18.319 27.363 38.777 41.320 35.045 33.229 986

Thanks to social and economic stability ensured and structural reforms made within the period of 2003-2008 and fiscal policies pursued without any concession, considerable improvements were made in budget execution.

The budget deficit was reduced to 17,4 billion TL in 2008 year-end from 40,2 billion TL in 2002 and budget deficit-GDP ratio declined to 1,8 percent from 11,5 percent in seven years. As a result, Turkey met the Maastricht criteria in terms of budget deficit within the period of 2005-2008.

However, the global crisis has affected Turkey as well as it is the case throughout the world in 2009 and thus an increase was seen in the budget deficit. The 2009 budget deficit-GDP ratio was envisaged as 6,6 percent in the Medium-Term Programme for 2010-2012 considering the effect of the crisis, but this ratio came in as 5,5 percent in the year-end owing to the positive developments in revenue performance.

41 Graph-12-

Budget Deficit

60.000 14 52.215 40.184 12 50.000 11,5 40.208 10 40.000 L 29.128 8 8,8 30.000 Percent Million T 5,5 6 20.000 17.432 5,2 13.708 4

10.000 6.903 1,6 4.643 2 1,1 0,6 1,8 0 0 2002 2003 2004 2005 2006 2007 2008 2009

Budget Deficit Budget Deficit / GDP

This increase in the budget deficit is not exclusive to Turkey and most developing and developed countries faced the same problem because of the global crisis.

Graph-13-

Budget Balance/GDP in Some Countries (2008-2009, %)

10 4,2 5 2,5 4,3 0,0 0,7 0 -0,5 -1,2 -2,2 -1,8 -2,7 -5 -3,3 -3,7 -3,3 -2,8 -4,1 -4,1 -4,9 -5,3 -5,5 -6,0 -6,0 -5,4 -5,9 -5,9 -7,1 -10 -7,5 -8,3 -7,7 -7,3 -9,0 -9,4 -9,9 -11,2 -11,5 -15 -13,6 -14,3 -20 UK USA Spain Latvia Poland Ireland Turkey Russia Finland France Czech Greece Belgium The Portugal Republic Sweden Romania Germany Netherlands 2008 2009

Source: Eurostat, IMF, The Economist

Russia, for instance, registered a surplus of 4,3 percent in 2008, but it faced a budget deficit of 6 percent in 2009. In Ireland, on the other hand, the budget deficit increased to 14,3 percent in 2009 from 7,3 percent in 2008

42 and in Greece it rose to 13,6 percent from 7,7 percent in the same period. The USA was also among the countries which had a rapid increase in the budget deficit. In the USA, the budget deficit increased to 9,9 percent in 2009 from 5,9 percent in 2008.

The fact that the budget deficit of Turkey was below that of Ireland, Greece, the UK, Spain, Portugal, Romania, France and Belgium in 2009 shows that Turkey is in a better position compared to many EU countries in terms of budget deficit.

Thanks to fiscal discipline implemented determinedly within the period of 2002-2008, interest payment-GDP ratio fell sharply. This ratio decreased to 5,3 percent in 2008 from 14,8 percent in 2002. However, it increased slightly in 2009 due to the effect of the global crisis and came in as 5,6 percent in the year-end.

Graph-14-

Interest Expenditures / GDP (%)

16 14,8

14 12,9 12 10,1 10

8 7,0 6,1 5,8 5,6 6 5,3

4

2

0 2002 2003 2004 2005 2006 2007 2008 2009

On the other hand, the share of interest expenditures in the budget decreased up to 19,9 percent in 2009 from 43,2 percent in 2002.

43 Graph-15-

Interest Expenditures / Total Budget Expenditures (%)

50 45 43,2 41,4 40 37,1 35 30 28,6 25,8 23,9 25 22,3 19,9 20

15 10 5 0 2002 2003 2004 2005 2006 2007 2008 2009

While 85,7 percent of tax revenues were allocated for interest expenditures in 2002, this figure continuously declined in the following years based on the increase in tax performance and the decrease in interest rates and it fell to 30,9 percent in 2009.

Graph-16-

Interest Expenditures/ Tax Revenues (%)

90 85,7 80 70,9 70 60 56,3

50 38,2 40 33,4 31,9 30,1 30,9 30 20

10 0 2002 2003 2004 2005 2006 2007 2008 2009

Tax revenues increased to 172,4 billion TL in 2009 from 60,4 billion TL in 2002.

44 Graph-17-

Tax Revenues (Million TL)

200.000 172.417 168.109 180.000 152.835 160.000 137.480 140.000 119.628 120.000 100.373 100.000 82.491 80.000 60.356 60.000 40.000 20.000 0 2002 2003 2004 2005 2006 2007 2008 2009

The ratio of tax revenues to budget revenues was 76 percent in 2002 while this ratio increased to 80,2 percent in 2009. Thus, it is ensured to finance public expenditures with more solid resources.

Graph-18- Tax Revenues/ Budget Revenues (%)

83 81,6 81,6 82 81 80,3 80,2 80,2 80 79,2 79 78,3 78

77 76,0 76 75 74 73 2002 2003 2004 2005 2006 2007 2008 2009

45 Graph-19-

Privatization Revenues (Million $)

10.000 9.000 8.222 8.096 8.000 7.000 6.297 6.000 5.000 4.259 4.000 3.000 2.275 2.000 1.283 536 1.000 187 0 2002 2003 2004 2005 2006 2007 2008 2009

Source: Privatization Administration

Privatization revenue of 2,3 billion dollar was obtained by the Privatization Administration in 2009. In this sense, privatization revenues obtained by the Privatization Administration since 2003 amounted to 30.8 billion dollar in total. Furthermore, it is expected to obtain 5,4 billion dollar from the privatization transactions for which the tender process has been completed and approval and contract are at the signing stage.

Thus, the total amount of privatization revenues obtained by the Privatization Administration, Savings Deposit Insurance Fund and Ministry of Transportation exceeded 50 billion dollar.

The 2009 Central Government Budget Realizations are included in Annex 8.

1.2. Reform in Public Financial Management

The Law No. 5018 which introduced new regulations in line with the developments in the world about the public financial management and control system and which significantly changed the financial structures and processes established with the General Account Law No. 1050 which had been implemented in our country since 1927 was approved by the TGNA on 10 December 2003 and published in the Official Gazette on 24 December 2003. In order to ensure effective implementation of the new system, to make the necessary changes in the organizational structures and to form the necessary positions, the Law No. 5436 was enacted at the end of 2005.

Furthermore, the necessary secondary and tertiary legislation was published with the aim of ensuring and directing the implementation of the new system concerning the Law No. 5018. Since early 2006, the new public

46 financial management and control system has started to be implemented in the public administrations within the scope of the general government.

 Arrangements made and studies carried out concerning the performance programmes in 2009 are as follows:

 The By-Law on the Performance Programmes to be Prepared by the Public Administrations, which was published in the Official Gazette No. 26927 of 05/07/2008 and enacted with the aim of preparing performance programmes, sending them to the related institutions, announcing them to the public and determining relevant periods and procedures and principles, was amended in the light of the experiences. The By-Law Amending the By-Law on the Performance Programmes to be Prepared by the Public Administrations was published in the Official Gazette No. 27289 of 15/07/2009.

 In order to explain the concepts and methods related to the performance-based budgeting and to determine the principles that should be observed by public administrations in preparing performance programmes, the “Performance Program Preparation Guide” published by the Ministry in 2008 was revised and 174 public administrations were delivered trainings on preparation of performance programmes.

 120 of the public administrations within the scope of the central government which are included in the gradual transition calendar annexed to the “By-Law on the Procedures and Principles of Strategic Planning in Public Administrations” sent their 2010 Performance Programmes to the Ministry to be reviewed as of the end of 2009.

 The performance budget module was included in the e-budget system. Thus, it was ensured that the administrations that would prepare performance programmes carry out relevant transactions and produce the tables required by the Regulation via the e-budget system. Thanks to this implementation, it was enabled that these transactions would be carried out via single software and without allocating an additional resource and gathered in the same database and thus, common standard reports would be produced.

 Budget structures were changed and budgets of higher education institutions were restructured as of 2010 with the “Project on Restructuring the Budgets of Higher Education Institutions” which was completed in late 2009. With the regulation, detailed budgeting structure in which the appropriations were allocated by spending units was replaced by a method in which they are allocated under a single unit at institutional level. Thus, it is aimed that budgets of higher education institutions are provided with more flexible and simple structures and budget appropriations are utilized in a more effective and efficient manner.

47  Under the Article 57 of the Law, the Communiqué on the Public Internal Control Standards prepared by the Ministry was published on 26 December 2007 in order to establish adequate and efficient internal control systems in public administrations. Furthermore, the Guide of the Action Plan for Compliance with the Public Internal Control Standards was published by the Ministry on 4 February 2009 with the aim of determining the studies necessary for compliance of the internal control systems of administrations with the Public Internal Control Standards, preparing an action plan for these studies and guiding public administrations on the studies related to preparation of the necessary procedures and related regulations. With a table annexed to the guide, a format was set for the action plan that administrations would prepare.

1.3. Audit Services

1.3.1. Audit Activities of the Inspection Board of Finance

1.3.1.1. Inspection and Examination Activities

In 2009, the Inspection Board of Finance prepared 828 reports within the framework of inspections, investigations, tax audits, advisory activities and examinations on money laundering activities carried out under the Law No. 5549. The number of reports increased by 56 percent compared to the previous year, by 72 percent compared to 2007 and by 165 percent compared to 2006.

143 units were inspected in 2009. This figure corresponds to an increase of 175 percent compared to the previous year, 433 percent compared to 2007 and 580 percent compared to 2006. 54 of these inspections were carried out in tax administrations as e-inspections.

In 2009, a total net Treasury contribution of 237.600.431 TL was ensured of which 98.386.570 TL was obtained from e-inspections carried out on tax administration basis, 81.746.111 TL from centralized e-inspections carried out countrywide, 48.739.335 TL from tax audits, 5.319.977 TL from national property inspections and, 3.408.438 TL from inspections of accounting. This amount is 24 times bigger than the 2009 budget of the Inspection Board of Finance.

Furthermore, as a result of the crosschecks performed within the scope of the e-inspection in tax administrations, the value added taxes carried over to the next years were decreased by 687.112.328 TL. Thus, an indirect contribution was made to the Treasury for the coming VAT collections.

48 Table-6-

Net Treasury Contribution of Inspection Board of Finance for 2009 Subject Amount (TL) Results of Tax Inspections 48.739.335

Results of e-Inspections throughout Turkey 81.746.111

Results of e-Inspections in Tax Administrations 98.386.570

Results of National Property Inspections 5.319.977

Results of Accounting Inspections 3.408.438

TOTAL 237.600.431 * The decrease of 687.112.328 TL in the value added taxes carried over to the next years is not included in the abovementioned amounts.

In 2009, within the scope of money laundering 9 reports, within the scope of investigation 33 reports and within the scope of advisory activities 102 reports were prepared.

Furthermore, there were 44 assignments in total as a result of the requests for examination, inspection, expertise, opinion and recommendation by the Presidency, the TGNA, the Prime Ministry, other Ministries and public institutions and public prosecution offices on different matters.

1.3.1.2. Activities on Fight against Corruption

In addition to the inspection, investigation and examination activities which were carried out in 2009 and in a sense which aimed to prevent and fight against corruption, a meeting was organized on 20 May 2009 within the framework of the Project on “Ethics for the Prevention of Corruption” conducted jointly by the Prime Ministry Council of Ethics for Public Service and the European Commission under the EU-Turkey financial cooperation. This meeting addressed the roles and functions of the Inspection Board of Finance in the field of fight against corruption in Turkey.

The workshop entitled “Prevention of Corruption and Methods of Fight against Corruption” was attended which was organized by the European Commission and Technical Assistance and Information Exchange (TAIEX) in Ankara on 9-10 June 2009.

With the aim of enhancing professional knowledge, skills and capabilities of inspectors and enabling them to be more productive and effective in fight against corruption, a workshop on “Crimes of Corruption: Protection, Deterrence, Detection and Investigation Methods” was organized in Ankara on 15 December 2009 and the participants were given certificates.

49 Moreover, the “Strategy for Increasing Transparency and Strengthening Fight against Corruption (2010-2014)” preparation were participated which were carried out in the Prime Ministry.

1.3.2. Audit Activities of the Tax Inspectors Board

In 2009, the Tax Inspectors Board prepared 2.547 tax audit reports, audited the tax base of 72.379.326.875 TL declared by taxpayers and detected a difference of 14.009.129.239 TL which corresponds to 20 percent of the tax base audited. As a result of the audits, it was envisaged to demand 1.867.340.252 TL from taxpayers as a difference between the assessed and actual taxes.

As for the conciliations before assessment in the permanent inspection centres and tours, conciliation was achieved for 1.005 out of 1.214 reports in 2009. As a result of the conciliation, taxes, fines and interests amounting to 327.668.073 TL in total of which 170.293.961 TL was for conciliations before assessment, 95.312.909 TL for central conciliations, 62.061.203 TL for other commissions were converted to final public receivables.

The Tax Inspectors Board undertakes many important tasks borne by its establishment law in addition to tax audits carried out at a high level. In 2009, the Board made inspections related to investment cut, tax crime, tax returns, limited checks, crosschecks, special account period, accounting systems and arrangement of records as well as tax audit. It also carried out significant investigations and examinations in economic and financial matters.

Within the framework of the examinations made by tax inspectors in 2009, 6.000 written statements were selected; 2 scientific reports, 1 information and statistics report, 58 tax crime reports, 97 tax technique inspection reports, 6 opinion reports, 2 economic and financial inspection reports and 26 miscellaneous inspection reports were prepared.

As regards to the inspections conducted within the framework of the Law No. 5549 on the Prevention of Laundering Proceeds of Crime, 19 percent of the active account experts were assigned to the MASAK in 2009.

Within the scope of the advisory activities in 2009, 6 account exports performed their duties in advisory offices. Furthermore, 1 account expert in the Turkish Accounting Standards Board, 6 account experts in the Tax Council, 3 account experts in international organizations, 5 account experts as academicians in various universities, 4 account experts in vocational training courses and other account experts on demand from different institutions were assigned. Furthermore, account experts participated in the financial inspection commissions of the international organizations such as the Organization of the Islamic Conference and Hoca Ahmet Yesevi International Turkish-Kazakhstani University.

50 1.3.3. Audit Inspection Activities of the DG Public Accounts

In 2009, within the scope of the scheduled audit, the DG Public Accounts inspected 71 units including 5 Directorates of Accounting, 12 District Revenue Offices, 32 Revolving Fund Accounting Offices and other units. As a result of the abovementioned inspections, 53 reports with responses, 62 audit reports and 104 personnel supervision reports were prepared. In other words, a total number of 219 reports were prepared. In 2009, the public damage of 13.906.173 TL was determined as a result of the scheduled audits.

Within the framework of the examinations and examinations, 409 reports in total were prepared including 402 examination reports, 2 investigation reports and 5 preliminary reports. As a result of these examinations, 231 recommendations were given in total including 89 judicial, 98 disciplinary and 44 administrative recommendations. In 2009, the public damage of 514.474.149 TL was determined as a result of the examinations and investigations.

In 2009, inspectors of accounting prepared 1.268 reports in total including 195 general situation reports, 630 examination reports, 91 preliminary reports and other 352 reports. The public damage of 10.986.671 TL was determined as result of these audits.

1.3.4. Audit Activities of the DG National Property

In 2009, the National Property Controllers Board prepared 144 simple reports, 2 official letters that stand for reports and 5 preliminary reports as a result of the audits. Furthermore, the examination on 29 assignments of 2009 and the previous years still continues.

In 2009, “thematic audits” were carried out in 9 provinces (including centre and affiliated districts) by 23 Controllers and at the end of the audits, 86 reports in total were prepared including 62 simple reports and 24 general establishment reports.

Furthermore, 3 Provincial Treasuries (Directorate General of National Property) and 4 District Revenue Offices (National Property Service) were inspected during the summer period. At the end of the inspections, 19 reports were prepared in total including 12 reports with responses and 7 general establishment reports.

1.4. Fight against Financial Crimes

The studies for the establishment of the necessary institutional and legal infrastructure in order to fight against laundering proceeds of crime and financing of terrorism in a more effective manner continued in 2009 as well.

51 With the aim of aligning the legislation on fight against laundering proceeds of crime and financing of terrorism with the international standards, the following documents were issued in 2009:

 By-Law Amending the By-Law on the Measures for Prevention of Laundering Proceeds of Crime and Financing of Terrorism,

 By-Law Amending the By-Law on the Program for Compliance with the Liabilities for Prevention of Laundering Proceeds of Crime and Financing of Terrorism,

 Financial Crimes Investigation Board General Communiqués No. (8) and (9).

In order to raise awareness of both financial institutions and other obliged parties on the liabilities known as “preventive measures” in fight against laundering proceeds of crime and financing of terrorism, training activities continued intensively in 2009 as well. Moreover, workshops were organized with the participation of auditors, judges and prosecutors and the authorized persons from the Directorate General of Turkish National Police and the General Command of Gendarmerie on the implementation of the provisions of the Law No. 5549 for the prevention of laundering proceeds of crime and financing of terrorism and Article 282 of the Turkish Penal Code No. 5237 in order to increase effectiveness of the fight against laundering and financing of terrorism and to develop cooperation among institutions.

Table-7-

Number of Training Activities and Participants

Number of Number of Number of Participating Units Trainings Training Hours Trainers Participants Obliged Parties 25 189,5 40 1.378 Law Enforcement Units 8 27 14 348 Audit Units 112233 Other Units 6 30,5 8 125 Total 40 259 64 1.884

Furthermore, 32 administrative fines were imposed within the scope of the inspections of obligation carried out on the basis of obliged parties. As a result of the training and inspection activities towards obliged parties, upward trend in the number of suspicious transaction reports (STR) continued in 2009 as well. The number of STRs received within the year exceeded the number of STRs (9.652) for the last five years (2004-2008) and reached 9.823.

With the aim of detecting laundering proceeds of crime, the MASAK carries out evaluation and inspection activities related to the received notifications and suspicious transaction reports.

52 Table-8-

Number of Evaluation and Examination Files Completed 2005 2006 2007 2008 2009 Number of Evaluation Files 283 275 353 324 152 Number of Examination Files 84 68 112 201 76

As a result of the examinations on laundering proceeds of crime carried out by the auditors, the MASAK filed 23 indictments to public prosecution officers in 2009.

Furthermore, the MASAK carries out analysis and evaluation studies regarding suspicious transaction reports and notifications on financing of terrorism. In this scope, 20 evaluation files were finalized in 2009.

On the other hand, within the scope of the studies for development of cooperation with equivalent institutions of foreign countries on fight against laundering proceeds of crime and financing of terrorism, the MASAK signed Memorandums of Understanding with the financial intelligence units of Croatia, Macedonia, South Korea and Bosnia and Herzegovina in 2009.

1.5. Legal Advisory and Legal Proceeding Services for the State

Legal advisory and legal proceedings services provided by the BAHUM gained more importance due to the right to represent granted to Treasury lawyers in the foreign lawsuits under the Law No. 5020, the increasing need for legal opinions because of the radical changes in the legislation during the EU harmonization process and finally the intensity and variety of public lawsuits in national and international arena.

Within the framework of legal advisory services for the state, the BAHUM provided 4.091 legal opinions including the legal opinions for amicable settlement of disputes under the Articles 30 and 31 of the Law No. 4353 and for amicable settlement of the applications to the European Court of Human Rights; the legal opinions for administrative proceedings related to the Treasury; and examination of requests for legal opinion coming from the Ministry and other administrations with general budget.

In 2009, within the framework of legal proceedings, the BAHUM followed and defended 545.848 disputes in total on behalf of all administrations with general budget including 454.431 lawsuits and 91.417 executive proceedings.

The BAHUM has so far contributed to the defence of 26 lawsuits in the international arbitration and followed a part of these lawsuits. 22 of the lawsuits filed against the Republic of Turkey or the relevant ministries or

53 administrations were concluded. 4 lawsuits still continue. 4 of the 5 lawsuits filed were concluded in favour of the Republic of Turkey in 2009. In 1 lawsuit, the amount of indemnity was rectified and decreased.

Graph-20- Total Number of Lawsuits and Execution Proceedings Concluded Between 2002-2009 Throughout Turkey

300.000 264.786

250.000 224.334

200.000

150.000 142.721 121.789 117.216 118.582 100.607 88.357 88.180 78.668

100.000 78.453 55.197 67.520 62.334 62.019 54.541 54.269 50.587 47.495 40.452 38.273 31.173 50.000 30.225 27.866

0 2002 2003 2004 2005 2006 2007 2008 2009

TOTA L NUMBER OF GENERA L LA WSUITS CONCLUDED CONCLUDED IN FA V OR OF TREA SURY CONCLUDED A GA INST TREA SURY

In 2009, 100.607 lawsuits and executive proceedings were concluded and finalized by Treasury lawyers in central and provincial units of the BAHUM. 62.334 of these lawsuits were concluded in favour of the Treasury while 38.273 lawsuits were concluded against it. The majority of the lawsuits concluded against the Treasury are the lawsuits for correction of name in land registry in which the Treasury is defendant since it is the adversary party pursuant to the law and the criminal lawsuits participated as required by the law although there is not any personal claim.

1.6. National Property Transactions

It is very important to utilize government property in socio-economic terms for sustainability of public services, support for local administrations and solution of the housing problem; and to make use of public immovables in the economy which are not assigned to public service or assigned but are not utilized for assignment purposes.

In this regard, the By-law on Assignment and Alienation of the Immovables of Public Administrations and the By-Law on Management of Government Property which specify the principles for the transactions of assignment, sale, alienation, barratry, construction in return for lot/flat, leasing, preliminary permission and registration of easement for government

54 property; assignment, leasing, preliminary permission and permission for use for property owned and used by the state; and damages for unlawful occupation of government property and evacuation were prepared and put into effect upon publication in the Official Gazettes No. 26315 of 10/10/2006 and No. 26557 of 19/06/2007, respectively.

In 2009, 1 billion 24 million TL was obtained from the transactions of sale, leasing, damages for unlawful occupation of government property and registration of easement. Furthermore, 111 million TL obtained from the sale of immovables was transferred to the municipalities and special provincial administrations. 21 million TL was deduced from the certificates given for the immovables on protected areas. Treasury shares of 47 million TL were collected due to establishment of incorporeal rights on docks, ports etc. Thus, 1,2 billion TL was obtained in total.

Within the framework of the legislation for alienation of government property to real or legal persons for various economic and social purposes, 2.053 immovables of 25 million m2 valued as 582 million TL were alienated in 2009.

In accordance with the principles of sustainability of public services, 99.717 immovables of 11.684 million m2 were assigned free-of-charge to public administrations for public purposes in 2009.

Graph-21-

Assignments to the Public Administrations

120.000 105.124 99.717 100.000

80.000

60.000 47.771

40.000 25.334

20.000 9.112 9.527 11.684 3.531

0 2006 2007 2008 2009

Number Surface Area (1.000.000m²)

Within the scope of the 60th Government Programme and “Forestation and Erosion Control Mobilization Action Plan for 2008-2012” prepared by the Ministry of Environment and Forestry, immovables of 303.3 million m2 in total in 742 different places were assigned to public administrations for forestation purposes in 2009. Within the framework of the Special

55 Forestation Project, immovables of 12,7 million m2 in 105 different places were leased to private persons or institutions for forestation purposes.

Graph-22-

Lands Assigned and Leased for Forestation

847 900

800

700 638

600 483 500

324 400 287 316 265 300 224

200

100

0 2006 2007 2008 2009

Number Surface Area (1.000.000 m²)

Approximately 6 billion TL was obtained by the Ministry from the transactions of sale, leasing, damages for unlawful occupation of government property, registration of easement, etc. between 2002 and 2009.

Graph-23-

National Property Revenues (Million TL)

1.200 1.024 944 1.000 935 912

800 654 534 600 502

367 400

200

0 2002 2003 2004 2005 2006 2007 2008 2009

56 1.7. Studies on Revenue Policies

1.7.1. Tax Cuts

 Under the Law No. 5838 which was enacted upon being published in the Official Gazette No. 27155 of 28/02/2009:

 Special communication tax imposed on cable, wireless and mobile internet services was decreased to 5 percent from 15 percent. The tax imposed on other telecommunication services which are not within the scope of (a), (b) and (c) clauses of the Law was determined as 15 percent.

 Banking and insurance transaction tax exception was applied on the revenues obtained by securities investment funds and trusts through their transactions in capital markets.

 The regulation was made on cancellation of 90 percent for the personnel with doctorate degree and 80 percent for the other personnel of the income tax calculated following the deduction of subsistence allowance and imposed on salaries of R&D and support personnel by way of reducing it from the accrued tax based on the withholding tax return until 31 December 2013.

 As for deleting records of motor vehicles older than 1979 until 30 June 2010 and end-of-life vehicles, the motor vehicles tax accrued until 31 December 2009 but not paid and related late fees, late interests, tax fines and administrative fines imposed on license plates until 31 December 2008 were cancelled.

 As for the taxpayers that operate in the sectors of textile, confection and prêt-a-porter and leather and leather products, that transfer their facilities until 31 December 2010 to the provinces to be determined by the Council of Ministers and that employ as least 50 persons, the Council of Ministers is authorized to cut corporate tax at most to 75 percent for five years as of the account period following the date of transfer for the earnings created by the taxpayers in those cities.

 Within the scope of the inward processing and provisional acceptance regime, the implementation of VAT postponement- cancellation was extended by 2 years.

 Legal arrangement was made with the aim of eliminating the unfair competition between imported – domestic lubrication oil that results from the implementation of the Special Consumption Tax.

 With “the Council of Ministers Decision No. 2009/14802 on Determination of the Rates of Value Added Tax and Special Consumption Tax to be imposed on Some Goods” which was enacted upon publication in

57 the Official Gazette No. 27171 of 16/03/2009, the following tax cuts were put into implementation for three months:

 The VAT rate was decreased to 8 percent from 18 percent for delivery of the houses with the net area of 150 m² and above.

 The Special Consumption Tax rate was decreased,

 to 1 percent from 10 percent for commercial vehicles,

 to 18 percent from 37 percent for automobiles with engine size less than 1.600 cm³,

 to 11 percent from 22 percent for motorcycles with engine size less than 250 cm³,

 to 0 from 1 percent for buses,

 to 1 percent from 4 percent for midi-buses,

 to 2 percent from 9 percent for minibuses,

 to 1 percent from 10 percent for the forwarding motor vehicles with engine size less than 3.000 cm³.

 The Special Consumption Tax imposed on white goods and some electronic products was decreased to zero from 6,7 percent. The products for which the special consumption tax rates were decreased to zero were household dishwashers, washing machines and refrigerators, vacuum cleaners, radios, shavers, and video tape recorders.

 With the Council of Ministers Decision No. 2009/14803 published in the Official Gazette of 16/03/2009, Fund Utilization Support Fund deduction in the credits used by real persons was decreased to 10 percent from 15 percent.

 With the Council of Ministers Decision No. 2009/14812 published in the Official Gazette No. 27184 of 29/03/2009 the following tax cuts were put into implementation for three months:

 The VAT imposed on delivery of offices as a building or an independent section of a building was decreased to 8 percent from 18 percent.

 The VAT imposed on every kind of household and office furniture was decreased to 8 percent from 18 percent.

58  The VAT imposed on computers, IT and bureau machineries was decreased to 8 percent from 18 percent.

 In order to revive investment and production, the VAT imposed on some industrial and construction equipment especially used by the SMEs was decreased to 8 percent from 18 percent.

 Title deed fees received from each seller and buyer in the sale of houses, workplaces and other real estates was decreased to 5 per thousand from 15 per thousand.

 With “the Annexed Decision No. 2009/14881 Amending the Decision on Determination of the Value Added Tax Rates to be imposed on Some Goods” which came into effect with the Official Gazette No. 27200 of 14/04/2009, the scope of the VAT deductions which came into effect on 29 March 2009 was extended. With the decision, the followings were taken within the scope of the VAT deduction:

 Forklifts and other carts, uninterrupted and stabilized power supplies,

 Some telecommunication devices,

 Automatic data processing machines,

 Some electronic integrated circuits and some electronic conductors,

 Dentistry and hairdresser chairs and the furniture made up of other materials.

 With “the Council of Ministers Decision on Determination of the Rates of Value Added Tax and Special Consumption Tax to be imposed on Some Goods” which was published in the Official Gazette No. 1 bis of 16/06/2009, temporary special consumption tax cuts valid until 15 June 2009 were revised and extended until 30 September 2009. According to this, the special consumption tax was revised as follows:

 SCT which was decreased to 1 percent from 10 percent was revised as 27 percent for automobiles with engine size less than 1600 cm³,

 SCT which was decreased to 1 percent from 10 percent was revised as 3 percent for vehicles with box body with a load limit less than 620 kilogram,

 SCT which was decreased to 1 percent from 4 percent was revised as 2 percent for flatbed commercial vehicles,

59  SCT which was decreased to 1 percent from 4 percent remained as 1 percent for towing vehicles, midi-buses, vehicles with special purposes and lorries,

 SCT which was decreased to 0 from 1 percent remained as 0 percent for buses,

 SCT which was decreased to 2 percent from 9 percent was revised as 4 percent for minibuses,

 SCT which was decreased to 11 percent from 22 percent was revised as 16 percent for motorcycles with engine size less than 250 cm³,

 SCT which was decreased to 0 percent from 6.7 percent was revised as 2 percent for white goods.

 Moreover, the VAT imposed on furniture and computers as 8 percent was extended until 30 September 2009.

 Under the Law No. 5904 which was published in the Official Gazette No. 27277 of 03/07/2009;

 Earnings gained from sale of bonds given in return for products governed by the Law on Licensed Warehousing of Agricultural Products are exempted from income and corporate taxes until 31 December 2014. The Law also introduced VAT and stamp duty exceptions.

 Within the scope of the provisional Article 5 annexed to the Corporate Law No. 5520 in order to encourage merging of the SMEs, if the SMEs merge until 31 December 2009, their earnings made by this merging was exempted from the corporate law. According to the Council of Ministers Decision No. 2009/15386 of 13/08/2009, the corporate tax of 5 percent would be imposed on earning which the dissolving institution gained during the account period which ended on the date of merge and the earnings which the merged institutions gained during three account periods including the account period when the merging occurred.

1.7.2. Arrangements for Improving the Tax System and Facilitating Transactions for Taxpayers

E-collection was introduced in order to facilitate tax payments of the taxpayers. In this scope, 25 banks and postal offices were given the power of tax collection. Thus, it is ensured that tax collection is performed in a faster and flawless manner.

With the aim of ensuring fast collection of public receivables, decreasing the follow-up costs and workload of the institutions related to

60 administration, saving time and carrying out the transaction of seizure in electronic environment, electronic seizure (e-Seizure) project was developed. The pilot project began to be implemented in 36 banks and all tax administrations where the studies were finalized.

Within the scope of the Project for Tax Collection by Credit Cards which was initiated with the aim of enabling collection of the motor vehicles tax and traffic fees over the Internet, banks having signed the protocol began to collect fees and taxes by means of credit cards. The efforts continue to extend scope of the project.

Pilot trainings of VerGİBİLİR project was completed which aims at informing primary school students about tax by their level of development and enabling them to gain awareness on the matter.

1.7.3. Implementations of the New Incentive System

The Council of Ministers Decision No. 2009/15199 on State Aids in Investments came into effect after its publication in the Official Gazette No. 27290 of 16/07/2009.

This incentive system aims at directing the savings to the investments with high value added; enhancing production and employment; ensuring continuity of the investment trend and sustainable development; encouraging technology and R&D intensive large-scale investments which will increase international competitiveness; increasing foreign direct investments; eliminating regional discrepancies in terms of development level; and supporting investments for environment protection and R&D activities.

The Council of Ministers Decision No. 2009/15199 included a different support under resettlement support provided for the sectors of textile, confection and prêt-a-porter, leather and its products. The Council of Ministers is entitled to impose the discounted corporate tax not exceeding 75 percent for the facilities which employ minimum 50 persons and which would be moved to Region 4 from the Regions 1 and 2 until 31 December 2010. It was stated that the costs arising from this resettlement completed until 2009 would be met by the Treasury. Furthermore, social security premium of the employees paid by the employer amounting to minimum wage would be met by the Treasury for five years starting from the date of resettlement.

This incentive system was divided into 3 groups: ''Large-scale Project Investment'', ''Regional and Sectoral Incentive System'' and ''General Incentive System''.

To be applied for the regions and large-scale project investments differently, the incentive instruments to be used with this new incentive system are determined as below:

61

 Income/corporate tax deduction,

 Value added tax exception,

 Customs tax exemption,

 Social security premium employer share support,

 Interest support,

 Investment area assignment.

Table-9-

Reduced Corporate Tax (until 31/12/2010) Regional and Sectoral Large-scale Project

Investment Contribution Corporate Tax Rate to be Investment Corporate Tax Rate to be Regions Rate Applied Contribution Rate Applied (Percentage) (Percentage) (Percentage) (Percentage)

1 20 10 30 10 2 30 8 40 8 3 40 4 50 4 4 60 2 70 2

Table-10-

Reduced Corporate Tax (after 31/12/2010) Regional and Sectoral Large-scale Project Investment Contribution Corporate Tax Rate to be Investment Corporate Tax Rate to be Regions Rate Applied Contribution Rate Applied (Percentage) (Percentage) (Percentage) (Percentage) 1 10 15 25 15 2 15 12 30 12 3 20 8 40 8 4 25 4 45 4

Table-11-

SSI Premium Employer Share Support (Until 31/12/2010) Regions Regional and Sectoral Large-scale Coverage period of all SSI premium employer share by the Treasury 1 2 years 2 years 2 3 years 3 years 3 5 years 5 years 4 7 years 7 years

62 Table-12-

SSI Premium Employer Share Support (After 31/12/2010) Regions Regional and Sectoral Large-scale Coverage period of all SSI premium employer share by the Treasury 1 -- 2 -- 3 3 years 3 years 4 5 years 5 years

Table-13-

Interest Support Regional and Sectoral Incentive Regions (Points) TL Credit Foreign Exchange Credit 1 - - 2 - - 3 31 4 52 R&D and Environment Investments 52

1.7.4. Tax Amnesty

The Law No. 5811 on the Repatriation of Some Assets to the National Economy known as the Tax Amnesty came into effect on 22 November 2008.

This law envisaged repatriation of money, foreign exchange, gold, equities, bills and other securities owned by real or legal persons to our country; repatriation of immovables through registration; and registration of the abovementioned assets through declaration of them to banks and intermediaries or tax administrations and payment of a small amount of tax. It was stated that no tax audit and assessment would be made for the periods before 01 January 2008 on the basis of these declarations.

This law also encourages the taxpayers of income or corporate tax to invest their domestic assets as capital in their enterprises. In addition, it was ensured that income obtained from foreign partnerships would be repatriated tax-free.

Durations for declaration and notification stated in the Law No. 5811 were extended until 30 September 2009 firstly in accordance with the Law No. 5917, then until 31 December 2009 in accordance with the Council of Ministers Decision No. 2009/15456.

Tax Amnesty has been an important opportunity for those who did not register and declare their incomes in previous periods.

With this implementation, the amount of assets declared as of 05 April 2010 was 48,1 billion TL; the amount of tax accrued was 1,6 billion TL and

63 the amount of tax collected was 1,1 billion TL. 14,8 billion TL of the total assets declared was obtained from the first-period implementation.

Furthermore, as a result of this implementation, tax revenue of 534 million TL was obtained in 2009.

1.7.5. Tax Council Meetings

52 members from public administrations, universities and non- governmental organizations take part in the Tax Council which was established with the aim of benefiting from contributions and opinions of all related sectors in formulating and implementing tax policies. The Council contributes to the establishment of a simpler, predictable and stable tax system thanks to a widespread tax reform.

In 2009, the following events were organized in the Tax Council:

 11 Regular Plenary Sessions,

 10 Executive Board Meetings,

 70 working group meetings on different matters, especially Tax Procedural Law and Tax Income Law.

1.7.6. Fight against Informal Economy

Informal economy, which is one of the most important problems of today’s economies, is a complex concept in terms of its reasons, consequences and functioning. For this reason, this has become a serious issue that needs to be dealt for both developing and developed countries.

Informal economy holds an important place in the economic problems of developing countries compared to others. When the reasons and consequences of informal economy are analyzed, it can be seen that it is affected by other economic problems and it affects these problems on the one hand, and it is both an independent and dependent variable on the other hand. More importantly, informal economy which is known to be in a close relationship with all social, political, psychological and ethical reasons together with economic factors manifests itself as a problem for which many theoretical solutions are offered, but which cannot be resolved at all.

In this sense, the “Action Plan for Strategy of Fight Against Informal Economy for 2008–2010” was prepared under the coordination of the Revenue Administration with the aim of establishing a comprehensive fighting strategy with the participation of all sectors with a powerful social will; raising awareness of the society against the damages of the informal economy; encouraging formal economy; simplifying legislation and transactions; developing an effective audit and penalty system;

64 strengthening information exchange between the agencies; and ensuring an effective coordination. The planned activities started to be implemented as of 1 July 2008.

This Action Plan was published in the Official Gazette No. 27132 of 05/02/2009 as a Prime Ministry Circular No. 2009/3.

Prepared under the coordination of the Revenue Administration and with the cooperation of the Ministry of Finance, Ministry of Labour and Social Security, Ministry of Industry and Commerce, Undersecretariat of Customs, Social Security Institution, Energy Market Regulatory Board, Tobacco, Tobacco Products and Alcoholic Beverages Market Regulatory Agency and Banking Regulation and Supervision Agency, the action plan is an important and comprehensive step taken for ensuring social conciliation among the agencies.

Goals and objectives of the Action Plan are as follows:

Table-14-

Goal Objective

To strengthen Formal Employment Creation Potential TO ENCOURAGE FORMAL ACTIVITIES To enhance voluntary compliance

To develop inspection capacity TO CONSOLIDATE THE INSPECTION CAPACITY AND TO ENSURE DETERRENCE OF THE To exchange databases SANCTIONS To ensure deterrence of the penalties

To enable, consolidate and sustain institutional cooperation TO ENABLE AND STRENGTHEN INSTITUTIONAL AND SOCIAL CONCILIATION To ensure and strengthen social conciliation through education and advertisement

1.8. Trainings

Since 2003, the annual training activities of the Ministry have been carried out in accordance with the Annual In-Service Training Plan prepared by the MoF Centre for Higher Training (MAYEM) by taking into account the opinions and requirements of all units of the Ministry.

The programs focus on providing basic and professional trainings for Ministry personnel as well as executive training, executive development training, training of trainers, use of IT at basic, medium and advanced levels and certification trainings for experts, auditors and medium and high level managers.

The graph regarding the training programs carried out by the MAYEM for 2002-2009 is below. According to it, respectively 32, 58, 57, 83, 53, 66,

65 64 and 77 training programs have been carried out since 2002. 19.744 persons in total participated in 490 programs during this period. The distribution of participants by years is 2.751, 2.190, 1.500, 2.289, 1.582, 2.823, 3.236 and 3.373.

Graph-24-

Number of Training Programs and Participants between 2002-2009 100 3 4.000 7 6 3 3. 3.23 1 3 80 5 2 8 2.7 2. 3.000

.190 60 2 .289 2 2.000 0 40 0 .5 .582 1 1 1.000 20 Number of Programs Number Number of Participants of Number

0 0 2002 2003 2004 2005 2006 2007 2008 2009

Training Program Participants

Moreover, the graph regarding the training programs carried out by the Ministry for 2003-2009 is below. According to it, respectively 774, 662, 1.126, 535, 480, 471 and 338 training programs by years have been carried out since 2003. 188.075 persons participated in 4.386 programs during this period. The distribution of participants by years is 27.313, 24.439, 54.947, 28.634, 20.952, 19.267 and 12.523.

Graph-25-

Number of Participants and Programs in the Units of our Ministry Between 2003-2009

60.000 1200 1.126

50.000 1000

40.000 774 800

662 30.000 600 535 480 471 54.947 20.000 338 400 4 Number ofPrograms Number Number of Participants of Number 28.63 10.000 27.313 200 24.439 20.952 19.267 12.523 0 0 2003 2004 2005 2006 2007 2008 2009 Number of Participants Number of Programs

66 1.9. Studies on the European Union

Turkey received official candidacy status at the Helsinki Summit participated by the heads of the EU member states on 10-11 December 1999 and was included in the system established within the EU New Enlargement Policy on equal footing with the other candidate countries.

On 3 October 2005, the European Council approved the Negotiating Framework and initiated negotiations with Turkey. In this scope, informative and detailed screening meetings were held for 35 different chapters in the Negotiating Framework.

The Ministry undertook the task of coordination in the chapters of “Taxation”, “Financial Control” and “Financial and Budgetary Provisions” and participated in 26 chapters. In “Public Procurement” chapter, the Ministry became the only responsible institution as the general coordinator in the studies related to public procurement after the completion of the screening process. This responsibility was legitimized with the Amendment to the By-law No. 178 on the Organization and Duties of the Ministry of Finance in accordance with the Law No. 5917 published in the Official Gazette No. 27284 of 10/07/2009. In addition, within the scope of its duty of coordination, the Ministry initiated preparation of the National Strategy Paper in the “Public Procurement” chapter in 2009.

Opening of the negotiation in “Taxation” chapter No. 16 became the most significant development in 2009 for the Ministry in terms of the relations with the European Union. Regarding the “Taxation” chapter officially opened on 30 June 2009, four closing criteria were notified. The studies still continue under the coordination of the Ministry in order to fulfil the closing criteria.

In addition to the chapters in which the Ministry carries out the task of coordination, it is directly involved in the “Economic and Monetary Policy”, “Free Movement of Capital”, “Justice, Freedom and Security”, “Regional Policy and Coordination of Structural Instruments” and “Statistics” chapters and actively participated in the screening meetings.

In 2008, “Judiciary and Fundamental Rights”, “Company Law” and “Competition Policy” chapters were also included in the area of responsibility of the Ministry. In this scope, the chapters which the Ministry coordinated and was directly involved in 2009 are as below:

Chapter 4: Free Movement of Capital

Chapter 5: Public Procurement

Chapter 6: Company Law

Chapter 8: Competition Policy

67

Chapter 16: Taxation

Chapter 17: Economic and Monetary Policy

Chapter 18: Statistics

Chapter 22: Regional Policy and Coordination of Structural Instruments

Chapter 23: Judiciary and Fundamental Rights

Chapter 24: Justice, Freedom and Security

Chapter 32: Financial Control

Chapter 33: Financial and Budgetary Provisions

Furthermore, the Ministry regularly participates in the meetings organized by the sub-committees of Turkey –EU Partnership Committee at certain intervals and in line with the requirements. In this framework, the following events were participated:

 The 7th Round Meeting of Internal Market and Competition Sub- Committee in Brussels on 19 January 2009,

 The 9th Round Meeting of Turkey-EU Economic and Monetary Issues, Capital Movements and Statistics Sub-Committee in Brussels on 12 February 2009,

 The 8th Round Meeting of the Regional Policy, Employment and Social Policy Sub-Committee No. 7 organized in the Secretariat General for EU Affairs (EUSG) on 3 March 2009,

 The Agriculture and Fisheries Sub-Committee Meeting No.1 organized in EUSG on 4-5 March 2009,

 The Sub-Committee Meeting No. 8 entitled Customs, Taxation, Drug Smuggling and Laundering organized in Brussels on 2-3 December 2009.

2. Project Information

Law Information System

The Legal IT System developed in order to enable the central and provincial organizations of the BAHUM to access legislation was opened for service of both citizens and portal users over BAHUM PORTAL installed in January 2009. BAHUM PORTAL established after renewal of the Legal IT

68 System introduces the unit, gives detailed information on history and duties of the BAHUM and ensures direct access of citizens and other public agencies to the system without any subscription. Institutional legislation prepared for the Treasury Lawyers and official gazette and judiciary decisions became accessible without any requirement for passwords or electronic records.

Centrally Accessible Provincial Automation Project (METOP)

The Project initiated in 2001 in order to carry out legal proceedings and automation services in all directorates of legal proceedings and Treasury lawyer offices under the BAHUM has been implemented in 81 provinces and 28 districts as of end-2009. In the system used by nearly 1,700 persons, all processes of lawsuits in the provincial organizations are followed.

Furthermore, module creation studies were carried out with the aim of obtaining statistics of the public legal advisory and proceedings services over METOP, and these studies are planned to be completed in early 2010. The statistics obtained from this module will shed light on the studies to be carried out with the aim of decreasing the number of lawsuits.

In order to carry out financial transactions like collection, payment and distribution of attorney’s fee in all case files prosecuted by the BAHUM over METOP and to prosecute them in electronic environment, the studies for establishing METOP Financial Track System were finalized. Software studies for the system are planned to be completed within 2010.

Furthermore, in accordance with the protocol regarding the use of Identity Sharing System (KPS) of the Ministry of Interior, the efforts started for integrating the system with METOP, and the integration that will speed up prosecution of lawsuits and execution proceedings is planned to be completed within 2010.

BAHUM IT System (BBS)

The studies for establishment and implementation of the databases of this IT system started in 2006 which aims at the integration the central organization with the METOP which is the automation of the main branches and advocacy services of the BAHUM and the automation of proceeding services of the provincial organizations. Thus, it became possible to centrally carry out the common services like personnel, documentation, budget, trusteeship and prosecution of lawsuits in a faster and more effective manner through the utilization of the data required.

BAHUM Content Support System (BIDS)

In addition to the data kept in METOP and BBS systems by the BAHUM, this system was established in order to enter the content of the

69 data into the system and to display and preserve the concerning documents and every kind of files kept electronically.

The system enables to keep and display original contents of all processes related to the registered incoming documents, outgoing documents and case files in METOP and BBS.

State Budget and Financial Audit Development Project

The State Budget and Financial Audit Development Project aims to develop state budget and financial audit, especially the studies carried out in accordance with the Law No. 5018.

Within the framework of the Project, the following services and activities were carried out as required by the duties, functions, goals and objectives of the Directorate General:

 Procurement, improvement and development of computer hardware and software,

 Organization of and participation in the activities such as trainings, courses, seminars, symposiums, meetings, congresses and conferences; and printing, registration and duplication of the written documents required for these activities and the materials prepared in magnetic environment and distribution of them to the institutions,

 Research for the preparation, improvement, implementation, audit and control of the state budget, and development of studies and projects.

BYES/E-Budget Project

In order to ensure electronic environment support in all implementation areas of the BUMKO, to carry out budget processes of the administrations within the scope of the central government budget and thus, to control the process from the appropriation proposal to the spending stage and to enable implementation of an effective budget policy, the studies concerning BYES/e-budget Project which was developed in 2001 and which had 11.500 users by the end of 2009 continued by the BUMKO in 2009 as well.

Budget preparation and implementation processes of all administrations within the scope of central government budget were carried out, monitored and consolidated over the e-budget system in 2009, as it was the case in previous years. Furthermore, the system was revised in accordance with the changes made in the budget systems of the universities and made ready for the budget preparation process. Thus, it was enabled that the universities would prepare their budgets according to the new system.

70 In 2009, the administrations which began to use MoF SGB.net started to exchange information via the e-budget system through the web service at the same time. The increase in the number of administrations which use SGB.net system results in the increase in the number of the administrations which exchange data via the e-budget and through the web service.

On the other hand, in 2009, many administrations demanded to exchange data between their own software and the e-budget system. Technical negotiations with these administrations still continue.

Furthermore, the help desk established in order to answer the questions by other administrations regarding the use of e-budget system also continued its services in 2009.

Strengthening the Public Financial Management and Control System in Turkey Twinning Project

Activities were launched in 2009 for the "Strengthening the Public Financial Management and Control System" Twinning Project prepared by the Directorate General of Budget and Financial Control and approved by the EU, with the aim of increasing efficiency and effectiveness of the financial management and control practices in Turkey and strengthening the public internal financial control system.

The Twinning Project aims at;

 Strengthening the implementation of financial management and control system in order to develop best practices for internal control in Turkey,

 Developing the capacity of the Financial Management and Control Centre Harmonization Unit,

 Making best practices widespread and ensuring full implementation of financial management and control transactions in Strategy Development Units.

The first component of the project, which is comprised of three components, was completed in October 2009. In this sense, with the aim of making a comparison between the EU requirements and international internal control standards, Draft Action Plan and Gap Analysis Report based on determination and analysis of the current system, structure and implementation gaps in our country were prepared.

Within the framework of the continuing second component, it is planned to;

 Prepare basic and advance training programs and documents,

71  Deliver basic and advance trainings,

 Provide a trainers pool,

 Make internships in and study visits to the member countries.

Within the framework of the third component, it is envisaged to;

 Prepare Financial Management and Control Guide,

 Prepare a manual for the Financial Management and Control Centre Harmonization Unit,

 Do pilot practices and prepare internal control evaluation reports.

Project on Comparative Evaluation of the Budget Processes of Turkey and the European Union

With the aim of evaluating the budgeting processes of Turkey and the EU in a comparative way and developing civil society dialogue with the universities in Europe, the Project which began to be carried out jointly by the Directorate General of Budget and Financial Control and Fatih University in 2007 and financed by the EU was completed in October 2009.

Within the scope of the project, the book entitled “Comparative Evaluation of the Budget Processes of Turkey and the European Union” and the Project Conclusion Report were published.

Public Expenditure and Accounting IT System Project (KBS)

The DG Public Accounts initiated web-based accounting automation project in the Public Expenditure and Accounting IT System (KBS-say2000i) on 03/03/1999 with the aim of carrying out all accounting transactions in the accounting units throughout Turkey in the electronic environment, keeping all data in the centre and monitoring the public accounts on daily basis.

In 2009, important studies were carried out in KBS which aims secure, fast and electronic information flow between the spending units which have the expenditure accrued and the accounting units which make payments by gathering financial transactions of the spending and accounting units under a single automation system, and which bears functions of say2000i system as well as many different implementations that will contribute to the public financial management.

In the Civil Servant Salary Automation System, transactions of calculation and automatic formulation of payroll and payment order document for salary payments of 1.444.541 personnel and additional course payments of 642.119 personnel working in the public administrations within

72 the scope of general budget and transfer of these documents to the accounting units in the electronic environment are carried out.

With the Overtime Payments application, overtime payments of 63.000 personnel; and with Social Right and Benefit Payments application, maternity allowances, burial pays, award and bonus payments of the civil servants started to be made through the KBS. Moreover, with the Trade Union application, civil servants are given a user ID for the trade unions of which they are a member and thereby trade unions are enabled to send monthly cuts from their members though the KBS.

With the KBS User Reports application, all Strategy Development Units and central spending units are enabled to receive immediate information on appropriations, expenditures, movables, school dormitories and budgeted debts.

Certain payments such as procurement of goods and services, travel allowances, transfers and etc. have started to be made in electronic environment between spending unit and accounting unit; Payment Order application has been launched to receive the Telephone and TT-net bills from the relevant agencies in electronic environment, which were previously attached to the payment order document; and pilot implementations have been carried out in the provinces of Antalya and Karaman.

Customs Collection System (GÜMKART) has become widespread among all customs accounting offices and customs trustees.

The KBS aims to ensure secure information flow among the units by gathering financial transactions of the spending and accounting units within an automation system. This system will minimize paper use in data exchange between spending units and accounting units; ensure uniform implementations for the documents which can be used in expenditure process, transferred to the electronic environment, monitored and recorded in a way to be available for auditing; and establish a manageable structure eligible for internal control and electronic auditing and functioning in a secure and rapid environment by monitoring all phases of the spending process beginning from budget phase to appropriation, assessment, spending, accounting, reporting and final account phases.

Submission of the Dispatch Orders to the Central Bank of Turkey in an Electronic Environment (Public Electronic Payment System – PEPS)

With this system (PEPS) developed in a joint action of the Directorate General of Public Accounts and the Central Bank of Turkey, remittance order records of central accounting units are transferred to the Central Bank of Turkey in electronic environment; and remittance order results and account statements are accounted and submitted to the accounting units via electronic environment. Central accounting units have been involved in this

73 application gradually beginning from 2008, and 16 central accounting units are covered by the application as of 2009.

Performance of Transactions between Accounting Units in the Revenue Administration and the Directorate General of Public Accounts in Electronic Environment

With the project carried out together with the Revenue Administration, transactions carried out among accounting units by tax administrations using e-VDO and accounting units using say2000i system on behalf of each other can be transferred to both systems in electronic environment and relevant accounting units can enter those transactions into account in electronic environment. Furthermore, efforts are going on to enable to make a trust query in say2000i system and to block the relevant trust in the say2000i system by the Revenue Administration system when the revenue service needs to make collection on account in district revenue offices having a revenue service.

Within the scope of PEPS, efforts continue to enable transfer of transactions for rebates and returns of the tax administrations affiliated to the Revenue Administration to the accounting unit associated to the process in terms of payment made through the Account for Transactions among Accounting Units in electronic environment, cash request by the relevant accounting unit, payments through PEPS and return of the payment information to the Revenue Administration.

National Property Automation Project (MEOP)

The National Property and Automation Project was launched in 1995 with an aim to automate national property transactions carried out by the Directorate General of National Property in the central and provincial organizations, to monitor them online and to establish national property information system. Within the framework of this project, the Directorate General continued writing application software related to its own works and transactions by its staff and making changes in accordance with legal adjustments and developing new software in 2009.

Moreover, equipment and software needs of 81 provincial and all district organizations were met; thereby full automation and continuous operability of them are ensured and all advertisements for leasing and sale of government property continued to be published online.

The Project on Strengthening the Capacity for Fight against Money Laundering

The purpose of the Project on Strengthening the Capacity for Fight against Money Laundering carried out by the MASAK in the framework of 2002 Financial Cooperation Program between Turkey and the EU is to constitute an effective legal, institutional and technical framework within the

74 scope of Acquis Communitaire and its implementations. The project is composed of twinning, technical assistance and investment stages and the twinning and technical assistance stages have been finalized.

The fundamental purpose of the investment stage of the project is to develop and strengthen technical and professional structures for the fight against laundering proceeds of crime, to endow multi-dimensional information sharing system with an effective and systematic structure and to increase information storage, analysis and safety capacity.

The investment part of the project includes three phases: servers, infrastructure and application software; development of office equipment; visual and statistical analysis software and security auditing. All transactions of the MASAK started to be carried out through the system thanks to the software developed in the phase of servers, infrastructure and application software. Final approval of the other two phases was received in September and November 2009.

Studies to enable submission of the suspicious transaction reports of all deposit banks and bank statements through the system by using electronic signature were completed and as of October 2009 suspicious transaction reports and bank statements started to be received in electronic environment.

Inspection Board of Finance Audit Information System Project (MTK DEBIS)

As a result of the fact that works and transactions in the Ministry started to be carried out through information technologies in an automation- based way, it became necessary to inspect the works and transaction electronically. The Inspection Board of finance, which is one of the leading providers of inspection service, started studies on e-inspection application by taking into account the abovementioned situation.

At the first stage, MTK VEDEBIS Project started to be implemented during inspections of tax administrations on the basis of VEDOP as of 2007. Studies started within the scope of MTK VEDEBIS were transformed into a comprehensive project for getting more holistic and efficient results in a way to cover all the “revenue”, “public expenditures” and “national property” components. This project is called as Inspection Board of Finance Audit Information System (TK DEBIS). MTK DEBIS includes the following three sub-components:

- MTK VEDEBIS (Inspection Board of Finance Audit Information System for Tax Administrations) - MTK SADEBIS (Inspection Board of Finance Audit Information System for Accounting Offices) - MTK MIDEBIS (Inspection Board of Finance Audit Information System for National Property)

75

Inspection guides, programs and inquiries was prepared for e- inspection of tax administrations with MTK VEDEBIS, accounting offices with MTK SADEBIS and national property transactions with MTK MIDEBIS. In 2009, both e-inspections on the department basis were carried out and centralized e-auditing application was launched through nationwide inquiries.

Project on Strengthening Institutional Capacity of Inspection Boards within the Scope of Public Financial Management and Control System (IPA Project)

An IPA Project entitled “Strengthening Institutional Capacity of Inspection Boards within the Scope of PFMC System” was prepared and approved by the EU commission. The purpose of the project is to strengthen institutional capacity of inspection boards within the scope of Public Financial Management and Control Law No. 5018.

Project on Strengthening Capacity of the Inspection Board of Finance in Fight against Corruption (MATRA Project)

A MATRA project entitled “Strengthening Capacity of the Inspection Board of Finance in Fight against Corruption” was prepared in 2009 with a view to enhancing capacity of the Inspection Board of Finance in fight against the corruption.

Project on Computer-Assisted Audit (Increasing Capacity of Tax Administrations)

The Project carried out by the Tax Inspectors Board in cooperation with the Revenue Administration and German and British Ministries of Finance with an aim to establish information systems supported with modern information technologies and implement computer-assisted audit techniques in order to enable an effective risk analysis system and taxpayer selection.

In addition to this, in order to fight against informal economy in a more efficient way, efforts are going on to attain other Project objectives such as to form a comprehensive database on taxpayers, to widely use computerized applications in audit, to systematically and efficiently identify taxpayers violating tax rules, to develop and install appropriate risk valuation models for the Revenue Administration, to develop and implement computer-assisted audit systems to facilitate tax compliance control, and to have access to the information to be used in the information systems which will constitute the basis of the special risk analysis models of the Tax Inspectors Board from the data warehouse of the Revenue Administration.

76 Tax Inspectors Board Project for Document Management and Workflow System

With this project, document records and workflows of the Tax Inspector Board and its groups of Ankara, Istanbul and Izmir which are permanent inspection centres, and all studies carried out in the Tax Inspectors Board and their outcomes and statistical data can be followed within the automation network. With this project, electronic document archiving opportunity will be added to the current electronic report archiving function of the Huk.net and information system of the Board and this system will also support the audit services. This project is in testing phase and will be ready to use in 2010 completely.

Strategic Management System Project

A public R&D project entitled Strategic Management System (Model and Software) was prepared in the Ministry of Finance with an aim to materialize strategic management which is one of components of the new public financial management approach and this project was approved within the framework of TUBITAK 1007 Support Program for Research Projects of Public Institutions.

The purpose of this project entitled Strategic Management System (Model and Software) is to search for and design a Strategic Management Model to be a reference model for the other public institutions within the framework of relevant international practices, to develop a process management model and an organizational structure on the basis of the designed strategic management model, to establish a performance-based budgeting model, to develop software to enable use of these sub-systems in the electronic environment and to deliver information needed by users and managers through training and counselling activities for the software.

Upon finalization of the Project covering a 34-month period in April 2009, another application was developed by the Ministry of Finance for the strategic management and performance-based budgeting which cannot be implemented in our country actually and with this application, a reference model for all public institutions was developed.

Efforts to make the model, software and knowledge yielded within the scope of the project widespread among all public administrations have been going on since 2007 and as a result of these efforts which gained a considerable momentum in 2009, training and counselling services were provided to many public administrations. Efforts for making this model and software widespread among public administrations will also continue in 2010 and it is aimed to ensure all public administrations to adopt the strategic management approach.

77 MoF SGB.net System Project

The MoF SGB.net System was put into implementation in the central and provincial organizations of the Ministry on 1 June 2007 in accordance with the Circular No. (1) of 16/04/2007 and Circular No. (2) of 25/05/2007 with an aim to establish a measurable, analyzable, controllable and more manageable structure by transferring all financial and non-financial transactions of the Ministry of Finance to the electronic environment.

Thanks to the SGB.net System covering strategic management, performance-based budgeting and internal control systems which constitute the basis of the Law No. 5018 together with the new public financial management approach and enabling them to be implemented, data on public services and business processes are transformed into information in a digital environment and this information is included in decision-making processes for policy-making purposes. The system is designed in a way to include all financial processes, and it is applicable in all public institutions and operable with other systems in an integrated way.

The system plays an important role in implementing e-state in our Ministry. The most important feature of the system is that it was the first system which was developed by a public administration for not only its own use but also use of other public institutions. Therefore, public institutions can use any sub-system or the whole system free of charge by adapting it to their own business processes. This feature avoids repeated investments in the same field and saves time and money.

The MoF SGB.net System has been transferred to more than 50 public administrations, and all software, installation, technical and operational support and training services are provided by the Ministry of Finance, when necessary.

The MoF SGB.net system was designed in a way to involve all aspects of the new public financial management approach. Planning, implementation, monitoring and control components, which are included in the new public financial management approach, constitute the basis of the system and therefore a connection is ensured between planning and implementation, implementation and monitoring, and monitoring and control

Expenditure Management Module developed within the scope of the MoF SGB.net System with an aim to ensure discipline in public expenditures was put into implementation within the Ministry, and made applicable in all public administrations and operable with other systems in an integrated way in 2009.

The expenditure management module:

- streamlined expense processes,

78 - ensured implementation unity, - formed document layout in electronic environment, - enhanced accessibility of the information, - allowed making expenditure comparisons among units, - enabled price and product comparisons, and - enabled e-audit.

Thanks to this module, data on all public expenditures from the lowest to the highest amounts became monitorable and accountable.

Decision-Making and Performance Management in Public Finance (IPA Project)

The financial agreement of the project entitled “Decision-Making and Performance Management in Public Finance” prepared and submitted to the EU Commission within the scope of Pre-Accession Aid Program was signed on March 31, 2009. The main beneficiary of the project which will be completed in three years is the Strategy Development Unit of the Ministry of Finance. The co-beneficiaries of the project are Strategy Development Unit of the Prime Ministry, Strategy Development Unit of the Undersecretariat of Treasury, Strategy Development Unit and Strategic Planning Unit of the Undersecretariat of the State Planning Organization.

The activities carried out in 2009 within the scope of the project are as follows: - Studies on the first phase, i.e. Twinning phase, of the project were conducted in 2009. - The project started to be circulated before 27 countries on February 13, 2009 and as a result of the circulation period Italy and Finland offered proposals for the project. - As a result of the Selection Committee Meeting held on May 5, 2009 in the Secretariat General for EU Affairs (EUSG), a public institution affiliated to the Finnish Ministry of Finance, “HAUS Finnish Institute of Public Management Ltd.” was selected as the Twinning partner. - Twinning contract period has started as of 17 June 2009. - The first official draft of the twinning contract was submitted on October 16, 2009 to the CFCU, EUGS and EU Delegation. After revising documents in accordance with the recommendations, the second official draft was submitted on December 14, 2009. After submission of the third and fourth drafts, the twinning contract was approved by the EU Commission in early 2010 and it is planned to launch the project in 2010.

Project for Strengthening Accountability within the Internal Control System (MATRA Project)

The Strategy Development Unit prepared a MATRA Project entitled “Strengthening Accountability within the Internal Control System” in order

79 to enhance capacity of the accountability mechanism within the framework of internal control system of our Ministry.

The beneficiaries of the Project are Plan and Budget Committee of the Turkish Grand National Assembly, Turkish Court of Accounts, Strategy Development Unit of the Prime Ministry, MoF Directorate General of Budget and Fiscal Control, Directorate General of National Property and internal auditors.

The Project was approved by the Dutch Ministry of Finance and it was launched in January 2010.

Personnel Automation Project (PEROP)

This project was launched in 1986 by the Directorate General of Personnel in order to store and follow personnel information and personal records of the MoF personnel in a computerized environment.

Within the framework of PEROP, personnel information of all staff working in central, provincial and overseas organizations of the MoF has been stored from the starting date of employment to the leaving date and the MoF Personnel Information System has been established through the programs developed for fundamental institutional services.

Efforts to enable PEROP programs to serve on the internet in a web- based way have started and studies on transformation and development of the necessary software continue.

Efforts for revision and connection to the personnel automation system continue within the framework of updating Directive for Transactions in Directorate of Personnel in 2009. It is aimed to enable the personnel to access to their information by providing sounder data and inquiry opportunities as a result of integration of the central and provincial databases.

Training Automation Project (EOP)

The Training Automation Project was launched by the MoF Centre for Higher Training with an aim to keep records of the In-Service Training Schedules of the Ministry, training programs, participant information and accountability reports, to store and follow these data in electronic environment and to share them with the other Ministry units via internet and intranet.

At the end of the Project, statistical data on the personnel participating in the training programs that were delivered by the Centre was attained and thereby repeated attendance of the personnel at the training programs was avoided and demands from the ministerial units for the training information on the participants were met rapidly and reliably.

80 3. Evaluation of the Performance Results

2009 budget of the Ministry is 52,5 billion TL. 976,4 million TL amounting to 1,9 percent of the total budget was allocated for the expenses of the Ministry. 885,4 million TL of the mentioned allocation was connected with the performance program. Total amount of the expenditures made within the scope of the performance program was 921,2 million TL.

Graph-26-

MOF BUDGET ALLOCATION DISTRIBUTION FOR 2009 BY MOF BUDGET ALLOCATION DISTRIBUTION FOR 2009 BY STRATEGIC STRATEGIC GOALS (ANNUAL) OBJECTIVES (ANNUAL)

400 600 357,98 489,94 350 500 300 275,57 TL TL 400 250 275,57 300 200 131,96 150

M200 ILLION MILLION 71,33 71,33 100 100 38,82 31,04 9,74 50 8,16 1,58 7,78 0 0 S S S S S S S S S S S S S trategic trateg trate trategic trategic trate trat trate trat trate tra trate trat e e te e gic gi gic gi gic gi gic g gic ic c c c ic Goal G G G Goal O b Ob O b Ob O b Ob O b Ob oal oal oal ject jective ject jective ject jec ject jective 1 2 3 4 5 ive ive ive tive ive 1 2 3 4 5 6 7 8

Graph-27-

EXPENDITURE DISTRIBUTION FOR 2009 BY STRATEGIC EXPENDITURE DISTRIBUTION FOR 2009 BY STRATEGIC OBJECTIVES GOALS 400 500 470,45 340,86

400 300 261,75 TL 300 261,75 TL 200 129,59 142,20 200 142,20 MILLION MILLION 100 100 38,99 31,51 7,82 6,63 1,19 7,48 0 0 S S S S S S S S S S S S S tra tra trategic trategic t ra tr tr tr tr trategic tr tr tr te te teg ategic ategic ategic ategic at ate ateg gic gic egi gi ic c c ic Go G Goal Goal Go Ob Objective Objective Objective Objective Objecti Objecti Objecti a o a a jec l l l tive 1 2 3 4 5 ve ve ve 1 2 3 4 5 6 7 8

One of the components that are necessary for smooth functioning of the performance-based budgeting is establishment of performance monitoring and evaluation system. With this system, it is possible to measure and evaluate to what extent public administrations have attained

81 the objectives set out in the strategic plan and performance program. In this regard, performance monitoring and evaluation process started in 2008 in the Ministry and monitoring and evaluation sub-module was created in the SGB.net system.

2009 performance data was entered into the system by spending units via this module and realizations were reported to the top manager quarterly. Data obtained in the year-end was consolidated and evaluated by the Strategy Development Unit, and submitted to the top manager with the title of 2009 Monitoring and Evaluation Report.

There are 61 performance indicators in 2009 MoF Performance-Based Budget. The following table indicates realization value of these indicators:

Table-15-

DISTRIBUTION OF THE PERFORMANCE INDICATORS BY ATTAINMENT SITUATIONS

2009 2009 No Performance Indicator Attainment Target Realization Strategic Objective 1: To form spending policies which protect fiscal discipline and to allocate public resources in accordance with public priorities Publication of the documents and reports prepared during budget 1 100 100 preparation and execution process in determined schedule (Percentage) √ 2 Number of regulations on financial control (Number) 34 62 √

3 Number of reports issued within the scope of economic analysis (Number) 767 767 √

4 Number of reports prepared on policy analysis capacity (Number) 10 10 √ Strategic Objective 2: To form revenue policies that promote economic growth, social justice, employment and international competitiveness

5 Ratio of the revenue budget realizations to those forecasted (Percentage) 100 105.41 √

6 Number of sectoral tax analysis reports (Number) 12 10

7 Number of detailed forecasts for different revenue types (Number) 113 113 √

8 Number of reports on forecasts for tax revenues (Number) 12 12 √ Strategic Objective 3: To establish a financial management system in compliance with international standards Number of administration which put into implementation performance based 9 108 120 budgeting model (Number) √ 10 Number of accountability reports evaluated (Number) 30 30 √

11 Number of performance programs evaluated (Number) 30 30 √ Rate of regulations on financial management and control system reviewed 12 38 38 for compliance with international standards (Percentage) √

13 Rate of total adapted IPSAS standards (Percentage) 50 40

Number of total per diems of the public administrations within the scope of 14 27,000,000 26,085,804 central government included into the say2000i system (Number) Number of spending units within the scope of central govenment included in 15 65 72 the say2000i system (Number) √ Compilation rate of the statistics of the public administrations within the 16 80 80 scope of the general government (Percentage) √ Publication rate of the COFOG of the public administrations within the scope 17 60 60 of the general government (Percentage) √ Ratio of the tables prepared in GFSM 2001 format to the total number of 18 80 80 tables (Percentage) √ Number of the persons provided with the accountant certificate training 19 600 1,036 (Number) √ Realization rate of the collection of customs revenue by means of electronic 20 20 16 money cards over KBS (Percentage) Number of accounting units outside the scope of general budget which use 21 248 248 Say2000i system (Number) √

82 2009 2009 No Performance Indicator Attainment Target Realization Strategic Objective 5: To provide legal services for the State in a rapid, effective and efficient manner

Number of legal opinions given to our Ministry and other administrations 22 3,100 3,726 within the scope of general budget (Number) √ 23 Number of opinions for the amicable settlement of disputes (Number) 100 305 √ 24 Number of files prosecuted (Number) 480,000 548,175 √ Rate of waives from lawsuits and execution proceedings and resorting to 25 80 88,57 legal remedies (Percentage) √ 26 Payment period of debt secured by a court judgement (Day) 12 12 √

27 Ratio of winning lawsuits (Percentage) 57 62 √

Strategic Objective 6: To prevent laundering proceeds of crime and financing of terrorism

28 Number of suspicious transaction reports received (Number) 3,000 9,823 √ Number of files brought into court/Number of files subject to indictment 29 90 57 (Percentage)

30 Number of incumbents that were audited (Number) 450 132

31 Completion Period for Assessing Laundering Proceeds of Crime (Month) 63.5 √

32 Completion Period for Assessing Financing of Terrorism (Month) 10 10 √

33 Number of memorandums of understanding signed (Number) 54 34 Number of prepared guides (Number) 20 25 √ Strategic Objective 7: To prevent informal economy and corruption

Number of reports prepared in the current year (except for MASAK) 35 500 819 (Number) √ 36 Tax base amount inspected (TL) (Tax Inspectors Board) 15,000,000,000 72,379,330,000 √

37 Tax base difference found (TL) (IBF) 150,000,000 153,231,207 √

38 Tax base difference found (TL) (TIB) 7,700,000,000 14,009,130,000 √

39 Tax amount requested to be assessed (TL) (IBF) 30,000,000 23,517,635*

40 Tax amount requested to be assessed (TL) (TIB) 1,200,000,000 1,867,340,252 √

41 Proposed fines (TL) (IBF) 30,000,000 25,071,288**

42 Fines proposed (TL) (TIB) 1,270,000,000 2,008,390,507 √

43 Number of reports prepared (Number) (TIB) 2,400 2,547 √

44 Tax base difference found after e-inspection (TL) 875,860,280 163,814,757***

45 Tax amount requested to be assessed as a result of e-inspection (TL) 12,712,399 57,652,978 √

46 Fines proposed as result of e-inspection (TL) 30,000,000 46,050,152 √

47 Number of units included into the e-inspection program (Number) 35 42 √ Number of accounting units in audited administrations within the scope of 48 general government/Total number of accounting units in administrations 88√ within the scope of general government (Percentage) 49 Average number of accounting units audited by inspectors (Number) 4.96 4.96 √

Strategic Objective 8: To provide fast and high-quality services

Entry rate of the Ministry expenditures to the expenditure management 50 90 90 module (Percentage) √ 51 Number of units that can prepare operational plans (Number) 11√ Number of units that can monitor their performance objectives and indicators 52 13 10 (Number) * The deviation was reflected to the e-inspection indicators positively as the unrealized amount was declared and paid voluntarily by the taxpayers during e- inspection studies. ** The deviation was reflected to the e-inspection indicators positively as the unrealized amount was declared and paid voluntarily by the taxpayers during e-inspection studies. *** The tax base amounts cannot be followed up during e-inspection because it is based on voluntary declarations and fast and undisputed cash flow into the Treasury. Note 1: No performance indicator was monitored under the Strategic Objective 4 in 2009. Note 2: 9 performance indicators were not monitored in 2009.

83 Performance indicators followed within the year are evaluated according to the level of attainment as of early 2010 and result of the evaluation is indicated in the graph below:

Graph-28-

Level of Attainment of the Performance Indicators (% )

% 15

% 17 % 38

% 30

Target is exceeded Target is attained Target cannot be attained Indicator cannot be followed

According to this graph, 38 percent of the indicators in the 2009 Performance-Based Budget of our Ministry exceeded the target values, 30 percent of them attained the target value completely, 17 percent of them remained below the target value and 15 percent of them cannot be followed.

In order to introduce performance based budgeting system with all its components an institutional culture should be developed and adopted. To this end, Strategy Development Unit organized several information meetings with participation of spending units in 2009. Moreover, 10 spending units in our Ministry followed their performance objectives and indicators in 2009. This can be regarded as an indicator for that a performance-based institutional culture started to be adopted.

4. Performance Results Table

Realization reports for the performance objectives and indicators set in the 2009 Performance-Based Budget of the Ministry of Finance are grouped on the basis of the relevant goals and objectives and presented below.

GOAL 1: To create a robust and rule-based financial structure

OBJECTIVE 1: To form spending policies which protect fiscal discipline and to allocate public resources in accordance with public priorities

84

Year : 2009 Unit : 12.01.31.00/DIRECTORATE GENERAL OF BUDGET AND FISCAL CONTROL Performance Objective : BUDGET MANAGEMENT

Realization Shifting Realized Year-end Level of Performance Indicator Target rate of rate of realization Attainment Q1 Q2 Q3 Q4 target target Publication of the documents and reports prepared during budget 100 0 0 0 100 100 100 0 Attained preparation and execution process in determined schedule (percentage) Refers to the publication of the documents (Medium Term Fiscal Plan, General Accountability Report and Central Government Budget Realizations and Explanation Expectations Report) drafted during budget preparation process within the period envisaged in the Law No. 5018.

Source of Indicator Budget Policy and International Relations Department

Publication dates of the mentioned documents and reports have been revised due to the global crisis. In this scope, Medium Term Fiscal Plan and 2009 Central Analysis of Performance Results Government Realizations and Expectations Report were published in mid-September and General Accountability Report was published in early July. Reason for Deviation Measures to Be Taken against the

Deviation

Year : 2009 Unit : 12.01.31.00/DIRECTORATE GENERAL OF BUDGET AND FISCAL CONTROL Performance Objective : FINANCIAL CONTROL

Realization Shifting Realized Year-end Level of Performance Indicator Target rate of rate of realization Attainment Q1 Q2 Q3 Q4 target target Number of regulations on financial 34 29 45 53 62 62 182,35 82,35 Exceeded control (number) Explanation Refers to regulations on public employment policy and expenditures. Personnel Legislation (I) (II) – Cadres Department – Salaries and Burden Calculation Department – Travel Allowance, Vehicle and Procurement Legislation Department – Source of Indicator Health and Social Security, Labour Law, Local Administrations and SEEs Department Necessary regulation was drafted for distribution of 21,000 cadres among agencies in accordance with the 2009 Central Government Budget Law. Arrangements were completed for the norm cadres of the Turkish State Theatres. Principles for Amending Principles and Rules for Hiring Contracted Personnel were enacted by the Council of Ministers Decision No. 2009/14799 of 02/03/2009. 2010 Central Government Budget Law articles for duties of the Cadres Departments were finalized in parallel with the enactment process. Transactions were completed for the cadre amendments to be made in accordance with the Decree No.190 and the relevant legislation. Some regulations were made with Council of Ministers Decisions No. 2009/14539 of 05/01/2009 and No. 2009/15152 of 29/06/2009 on increases in salaries and wages of public officers, Communiqués No. 236 of Analysis of Performance Results 10/01/2009 and No. 8367 of 03/07/2009 on practices for this issue, Decision No. 2003/5753 of 05/06/2003 on fees and other issues of officers sent external missions by Inter-ministerial Common Culture Commission, Council of Ministers Decisions No. 2009/14737 of 25/02/2009 and No. 2009/15026 of 25/05/2009, Decision No. 2004/7356 of 02/04/2004 on overseas wages, Council of Ministers Decisions No. 2009/14660 of 02/02/2009, No. 2009/14930 of 10/04/2009, No. 2009/15551 of 30/10/2009 on wages to be paid to officers sent overseas for a permanent mission and other rules and principle for the payment; Council of Ministers Decision No. 15191 of 29/06/2009 on rules and principles for additional courses of certain administrations, Council of Ministers Decisions No. 2009/14814 of 30/03/2009, No. 2009/15577 of 19/10/2009, No. 2009/15196 of 01/06/2009, No. 2009/14814 of 30/03/2009 and No. 2009/15215 of 14/07/2009. Reason for Deviation Measures to Be Taken against the

Deviation

85 Year : 2009 Unit : 12.01.00.23/STRATEGY DEVELOPMENT UNIT Performance Objective : ECONOMIC ANALYSIS

Realization Shifting Realized Year-end Level of Performance Indicator Target rate of rate of realization Attainment Q1 Q2 Q3 Q4 target target Number of reports issued within the scope of 767 203 387 573 767 767 100 0 Attained economic analysis (number) Refers to the number of good quality and informative books, documents and presentations Explanation prepared within the scope of economic analysis in accordance with daily, weekly and monthly developments in the economy. Source of Indicator Received from the relevant departments.

Analysis of Performance

Results Reason for Deviation Measures to Be Taken

against the Deviation

Year : 2009 Unit : 12.01.00.23/STRATEGY DEVELOPMENT UNIT Performance Objective : ECONOMIC ANALYSIS

Realization Shifting Realized Year-end Level of Performance Indicator Target rate of rate of realization Attainment Q1 Q2 Q3 Q4 target target Number of reports prepared on 10 0 6 10 10 10 100 0 Attained policy analysis capacity (number) Refers to the number of reports to be prepared with the findings obtained as a Explanation result of the studies. Source of Indicator Received from the relevant departments. Within the scope of policy analysis made in 2009, public administrations with high Analysis of Performance Results budget figures were determined. In this regard, 10 reports including expenditure analyses were prepared. Reason for Deviation Measures to Be Taken against the

Deviation

OBJECTIVE 2: To form revenue policies that promote economic growth, social justice, employment and international competitiveness

Year : 2009 Unit : 12.01.38.00/DIRECTORATE GENERAL OF REVENUE POLICIES Performance Objective : FORMULATION OF REVENUE POLICIES

Realization Shifting Realized Year-end Level of Performance Indicator Target rate of rate of realization Attainment Q1 Q2 Q3 Q4 target target Ratio of the revenue budget realizations to 100 23,22 48,35 76,63 105,41 105,41 105,41 5,41 Exceeded those forecasted (percentage) Refers to the ratio of tax revenues of the central government budget to the forecasted tax Explanation revenues. Source of Indicator Received from the relevant departments. Analysis of Performance

Results Revenue targets were revised by the Medium Term Fiscal Plan as a result of the economic Reason for Deviation developments in 2009 and therefore realization rate became 105,41 percent. The target was exceeded thanks to improvements in collection of tax revenues in the last quarter of the year. Measures to Be Taken

against the Deviation

86 Year : 2009 Unit : 12.01.38.00/DIRECTORATE GENERAL OF REVENUE POLICIES Performance Objective : FORMULATION OF REVENUE POLICIES

Realization Shifting Realized Year-end Level of Performance Indicator Target rate of rate of realization Attainment Q1 Q2 Q3 Q4 target target Number of sectoral tax analysis Not 12 3 6 6 10 10 83,33 -16,67 reports (number) attained Refers to the number of reports including reviews and evaluations on sectoral basis Explanation with an aim to follow developments in the economy. Source of Indicator Received from the relevant departments.

Analysis of Performance Results Reports for the last two months are in preparation phase due to late arrival of the Reason for Deviation data. Measures to Be Taken against the

Deviation

Year : 2009 Unit : 12.01.38.00/DIRECTORATE GENERAL OF REVENUE POLICIES Performance Objective : FORMULATION OF REVENUE POLICIES

Realization Shifting Realized Year-end Level of Performance Indicator Target rate of rate of realization Attainment Q1 Q2 Q3 Q4 target target Number of detailed forecasts for 113 113 113 113 113 113 100 0 Attained different revenue types (number) Refers to the number of detailed forecasting reports for each revenue items in the Explanation central government budget. Source of Indicator Received from the relevant departments.

Analysis of Performance Results Reason for Deviation Measures to Be Taken against the

Deviation

Year : 2009 Unit : 12.01.38.00/DIRECTORATE GENERAL OF REVENUE POLICIES Performance Objective : FORMULATION OF REVENUE POLICIES

Realization Shifting Realized Year-end Level of Performance Indicator Target rate of rate of realization Attainment Q1 Q2 Q3 Q4 target target Number of reports on forecasts for 12 2 3 10 12 12 100 0 Attained tax revenues (number) Refers to the number of reports evaluating monthly collection of central government Explanation revenues. Source of Indicator Received from the relevant departments. No report on forecasts for the tax revenues is prepared and published; forecasts for the tax revenues are included in the budget law draft for the relevant year. Instead Analysis of Performance Results “Report on Budget Revenue Realizations” is prepared and submitted to the undersecretary monthly (and quarterly in cumulative format). Reason for Deviation Measures to Be Taken against the

Deviation

GOAL 2: To ensure effectiveness, efficiency, accountability and transparency in the utilization of public resources

OBJECTIVE 3: To establish a financial management system in compliance with international standards

87 Year : 2009 Unit : 12.01.31.00/DIRECTORATE GENERAL OF BUDGET AND FISCAL CONTROL Performance Objective : CENTRAL HARMONIZATION

Realization Shifting Realized Year-end Level of Performance Indicator Target rate of rate of realization Attainment Q1 Q2 Q3 Q4 target target Number of administrations which put into implementation 108 0 108 108 120 120 111,11 11,11 Exceeded performance based budgeting model (number) Refers to the public administrations within the scope of central government which are Explanation responsible for preparation of the performance program. Source of Indicator Economic Services Department The By-Law on Performance Programs to be prepared by Public Administrations was amended and the By-Law Amending the By-Law on Performance Programs to be prepared by Public Administrations was published in the Official Gazette No. 27289 of Analysis of Performance Results 15/07/2009. In line with the amendments to the abovementioned by-law, “Performance Program Preparation Guide” was updated and published at http://www.bumko.gov.tr/peb. Reason for Deviation Measures to Be Taken against the

Deviation

Year : 2009 Unit : 12.01.31.00/DIRECTORATE GENERAL OF BUDGET AND FISCAL CONTROL Performance Objective : CENTRAL HARMONIZATION

Realization Shifting Realized Year-end Level of Performance Indicator Target rate of rate of realization Attainment Q1 Q2 Q3 Q4 target target Number of performance programs 30 0 30 30 30 30 100 0 Attained evaluated (number) Refers to the number of performance programs evaluated in the public Explanation administrations responsible for preparing performance programs. Source of Indicator Economic Services Department Performance programs of 30 out of 120 public administrations preparing performance Analysis of Performance Results programs were evaluated. Reason for Deviation Measures to Be Taken against the

Deviation

Year : 2009 Unit : 12.01.31.00/DIRECTORATE GENERAL OF BUDGET AND FISCAL CONTROL Performance Objective : CENTRAL HARMONIZATION

Realization Shifting Realized Year-end Level of Performance Indicator Target rate of rate of realization Attainment Q1 Q2 Q3 Q4 target target Number of accountability reports 30 0 30 30 30 30 100 0 Attained evaluated (number) Refers to the number of public administrations within the scope of central Explanation government of which accountability reports were evaluated. Source of Indicator Economic Services Department

Analysis of Performance Results Accountability reports of the 30 public administrations were evaluated.

Reason for Deviation Measures to Be Taken against the

Deviation

88

Year : 2009 Unit : 12.01.31.00/DIRECTORATE GENERAL OF BUDGET AND FISCAL CONTROL Performance Objective : CENTRAL HARMONIZATION

Realization Deviation Realized Year-end Level of Performance Indicator Target rate of rate of realization Attainment Q1 Q2 Q3 Q4 target target Rate of regulations on financial management and control system reviewed for compliance with 38 0 0 0 38 38 100 0 Attained international standards (percentage) Refers to the compliance of the regulations made within the framework of financial Explanation management and control system with the international standards. Source of Indicator Financial Management and Control Department Within the scope of alignment of the Public Financial Management and Control Law No. 5018 with international standards, efforts to make necessary amendments continue; a gap analysis based on alignment with the EU acquis was prepared within the scope of Twinning Project carried out by the Directorate General of Budget and Fiscal Control and the UK National Audit Office and entitled “Strengthening Public Financial Management and Control System in Turkey” with contributions of pilot institutions and other public agencies and this report developed several proposals for amendments required for the legislation. Once the Action Plan is approved, it is Analysis of Performance Results envisaged to carry out draft works for the mentioned amendments. In the event that the mentioned amendments are made, Procedures and Principles on Internal Control and Ex-ante Financial Control, By-Law on the Working Procedures and Principles of Strategy Development Units and General Communiqués on Spending Authorities No.1 and 2 will also be amended accordingly. Furthermore, amendment draft for the By-Law on Financial Services Expertise, and Draft Procedures and Principles on Training Financial Services Experts constituting a base for training the financial services experts working at administrations are prepared and ready to be signed. Reason for Deviation Measures to Be Taken against

the Deviation

Year : 2009 Unit : 12.01.32.00/DIRECTORATE GENERAL OF PUBLIC ACCOUNTS (CENTRE) Performance Objective : ACCOUNTING

Realization Deviation Realized Year-end Level of Performance Indicator Target rate of rate of realization Attainment Q1 Q2 Q3 Q4 target target (%) Rate of total adapted IPSAS Not 50 35 40 40 40 40 80 -20 standards (percentage) attained Explanation Refers to evaluation and adaptation of 20 IPSAS standards to our country.

Source of Indicator Received from the relevant departments. Governmental Accounting Standard No. 5 (Borrowing Costs) was published in the Official Gazette No. 27135 of 08/02/2009. Governmental Accounting Standard No. 6 Analysis of Performance Results (Consolidated and Individual Financial Statements) was published in the Official Gazette No. 27284 of 10/07/2009. Draft texts of Governmental Accounting Standard No. 7 (Investments in the Reason for Deviation Associations) and Governmental Accounting Standard No. 8 (Investments in Joint Ventures) were submitted to the Governmental Accounting Standards Board. Although Governmental Accounting Standards Board was established in 2006, it could start its activities actually in 2008. During this two-year period, some preparation activities were carried out such as determination of the working procedures and principles, translation of IPSAS standards, establishment of the working commission Measures to Be Taken against which will prepare the draft documents. Therefore, standards scheduled to be issued in the Deviation 2007 could only be issued in 2008. Moreover, pursuant to the joint decision taken by the board drafts are not sent to the Official Gazette as the final texts, instead they are sent with other final texts jointly or individually at the end of the year. Therefore, a certain date cannot be given which is directly related to each standard.

89

Year : 2009 Unit : 12.01.32.00/DIRECTORATE GENERAL OF PUBLIC ACCOUNTS (CENTRE) Performance Objective : ACCOUNTING

Deviation Realized Year-end Realization rate of Level of Performance Indicator Target Q1 Q2 Q3 Q4 realization rate of target target (%) Attainment Number of total per diems of the public administrations within the scope of central government 27,000,0005,058,253 13,595,650 19,458,681 26,085,804 26,085,804 96.61 -3.39 Not attained included into the say2000i system (number)

Refers to the total number of per diems of public administrations with general budget and special budget and regulatory and supervisory agencies which are public administrations within the scope of central government included into the say2000i Explanation system.

Source of Indicator Received from the relevant departments.

Number of per diems decreased in line with the increase in accounting transaction documents formed by the system automatically and decrease in number of erroneous per diems, and therefore this deviation in the annual average number of Analysis of Performance Results per diems is regarded as normal.

Reason for Deviation Deviation that occurred at the end of the year is evaluated as a positive deviation. Measures to Be Taken against the Deviation

Year : 2009 Unit : 12.01.32.00/DIRECTORATE GENERAL OF PUBLIC ACCOUNTS (CENTRE) Performance : ACCOUNTING Objective Realization Deviation Realized Year-end Level of Performance Indicator Target rate of rate of realization Attainment Q1 Q2 Q3 Q4 target target (%) Number of spending units within the scope of central government 64,500 70,159 70,370 71,661 72,266 72,266 112,04 12,04 Exceeded included in the say2000i system (number) Refers to the total number of spending units of public administrations with general budget and Explanation special budget and regulatory and supervisory agencies which are public administrations within the scope of central government included into the say2000i system. Source of Indicator Received from the relevant departments. Analysis of Number of the assessment units increased because of newly founded universities and districts. Performance Results Number of spending units increase as a result of the national and regional development policies making public services widespread and leading increase in number of districts within a province. Reason for Deviation Foundation and withdrawal of a district is dependent on legislation and the Directorate General has no effect on the number of the spending units which is bigger than the number envisaged. Measures to Be Taken

against the Deviation

90 Year : 2009 Unit : 12.01.32.00/DIRECTORATE GENERAL OF PUBLIC ACCOUNTS (CENTRE) Performanc : REPORTING e Objective Realization Deviation Realized Year-end Level of Performance Indicator Target rate of rate of realization Attainment Q1 Q2 Q3 Q4 target target (%) Compilation rate of the statistics of the public administrations within the 80 80 80 80 80 80 100 0 Attained scope of general government (Percentage) Statistics of general budget public administrations, special budget public administrations, regulatory and supervisory agencies and all local administrations were compiled. This Explanation indicator refers to that it is aimed to compile statistical data of the social security institutions and to issue this data in the public accounts bulletin by 2010 year-end. Source of Indicator Received from the relevant departments. Analysis of Performance When necessary data is received from the Social Security Institution, all statistics of the Results public administrations within the scope of general government will have been compiled. Reason for Deviation Measures to Be Taken

against the Deviation

Year : 2009 Unit : 12.01.32.00/DIRECTORATE GENERAL OF PUBLIC ACCOUNTS (CENTRE) Performanc : REPORTING e Objective Realization Deviation Realized Year-end Level of Performance Indicator Target rate of rate of realization Attainment Q1 Q2 Q3 Q4 target target (%) Publication rate of the COFOG of the public administrations within the 60 60 60 60 60 60 100 0 Attained scope of the general government (Percentage) Refers to the aim of publishing COFOG (Classification of the Functions of Government) of all Explanation public administrations within the scope of general government. Source of Indicator Received from the relevant departments. COFOG is a detailed classification of the functions which are carried out by the public Analysis of Performance administrations within the scope of the general government through expenditures. COFOG of Results the administrations within the general government (60%) was published. Reason for Deviation Measures to Be Taken

against the Deviation

91 Year : 2009 Unit : 12.01.32.00/DIRECTORATE GENERAL OF PUBLIC ACCOUNTS (CENTRE) Performance : REPORTING Objective Realization Deviation Realized Year-end Level of Performance Indicator Target rate of rate of realization Attainment Q1 Q2 Q3 Q4 target target Ratio of tables prepared in GFSM 2001 format to total 80 80 80 80 80 80 100 0 Attained number of tables (percentage) GFSM 2001 is a regulation that aims accrual based public accounting, preparation of financial statements of the state such as accountability report, and classification and reporting of Explanation stocks, liabilities, revenues and expenditures in the same way in every country. This indicator refers to the preparation of tables in GFSM 2001 format.

Source of Indicator Received from the relevant departments.

Analysis of Performance In 2010, the tables that have been prepared in line with ESA 95 definition since 2006 will be Results updated and the updated statements for 2007, 2008 and 2009 will be sent to the IMF.

Reason for Deviation Measures to Be Taken

against the Deviation

Year : 2009 Unit : 12.01.32.00/DIRECTORATE GENERAL OF PUBLIC ACCOUNTS (CENTRE) Performance : SUPPORT FOR ACCOUNTING Objective Realization Deviation Realized Year-end Level of Performance Indicator Target rate of rate of realization Attainment Q1 Q2 Q3 Q4 target target Number of the persons provided with the accountant 600 0 1.036 1.036 1.036 1.036 172,67 72,67 Exceeded certificate training (number) Refers to delivery of accountant certificate training to the personnel of public administration Explanation within the scope of general government.

Source of Indicator Received from the relevant departments.

Analysis of Performance In 2009, it was planned to deliver accountant certificate training to 600 persons and 1036 Results persons received training with an excess of 72,67 percent. Although it was among 2009 performance objectives of the DG Personnel to deliver accountant certificate training to 600 persons considering physical conditions of the Directorate General and MAYEM, due to the fact that accounting officer positions in public administrations are vacant for a very long time, it was decided to increase the number of persons that would receive training in order to increase the number of personnel that would participate in examinations to be appointed as accounting officers that will be assigned to Reason for Deviation provide accounting services for public administrations within the scope of general budget and to provide administrations with the opportunity of appointing accountant officers from more number of personnel. In this regard, trainings were delivered in two terms, five different provinces and twelve classrooms by allocating training facilities of other public institutions for these trainings and thereby 1.036 persons participated in trainings and the performance indicator of providing accountant certificate training for 600 persons was exceeded. It will be ensured that the need for accountants and all training facilities including public Measures to Be Taken institutions that can be used will be taken into account and more realistic objectives will be against the Deviation set during the determination of performance objectives.

92 Year : 2009 Unit : 12.01.32.00/DIRECTORATE GENERAL OF PUBLIC ACCOUNTS (CENTRE) Performance : SUPPORT FOR ACCOUNTING Objective Realization Deviation Realized Year-end Level of Performance Indicator Target rate of rate of realization Attainment Q1 Q2 Q3 Q4 target target Realization rate of the collection of customs revenue by means of Not 20 10 10 13 16 16 80 -20 electronic money cards over KBS Attained (percentage)

Explanation Refers to the collection of customs revenues over KBS via electronic money cards.

Source of Indicator Received from the relevant departments. Most of the accounting units that collect customs revenues began to use the Analysis of Performance Results GUMKART System (Customs Card System) and the amount of collection made over this system reached 16 percent of total amount of customs revenue collection. Due to the infrastructural problems, the GUMKART System could not be fully Reason for Deviation installed in all accounting units that collect customs revenues. Measures to Be Taken against the The amount of collection is expected to increase in 2010 with resolution of Deviation infrastructural problems. 2010 target was defined as 25 percent.

Year : 2009 Unit : 12.01.32.00/DIRECTORATE GENERAL OF PUBLIC ACCOUNTS (CENTRE) Performance : SUPPORT FOR ACCOUNTING Objective Realization Deviation Realized Year-end Level of Performance Indicator Target rate of rate of realization Attainment Q1 Q2 Q3 Q4 target target Number of accounting units outside the scope of general 248 248 248 248 248 248 100 0 Attained budget which use Say2000i system (number) Refers to the number of accounting units in which Say2000i system started to be used Explanation so as to support public administrations outside the scope of general budget.

Source of Indicator Received from the relevant departments.

Analysis of Performance Results New administrations with special budget have been taken within the scope of Say2000i.

Reason for Deviation Measures to Be Taken against the

Deviation

93 OBJECTIVE 4: To increase value added to the Turkish economy by rational utilization of public immovables

GOAL 3: To protect the rights of the state by providing an effective legal service

OBJECTIVE 5: To provide legal services for the state in a rapid, effective and efficient manner

Year : 2009 Unit : 12.01.30.00/CHIEF LEGAL ADVISORY AND DIRECTORATE GENERAL OF PROCEEDINGS (CENTRE) Performance : LEGAL ADVISORY FOR THE STATE Objective Realization Deviation Realized Year-end Level of Performance Indicator Target rate of rate of realization Attainment Q1 Q2 Q3 Q4 target target Number of legal opinions given to our Ministry and other administrations within 3.100 857 1.672 2.695 3.726 3.726 120,19 20,19 Exceeded the scope of general budget (number) Refers to the number of legal opinions given so as to steer the legislation and Explanation implementation, to establish consensus among public administrations and to contribute to the compliance of the transactions of public administrations with the law. Source of Indicator The data was compiled from Divisions of Document and Statistics.

Analysis of Performance

Results There is a deviation from the target because of the increase in legal opinion demands of the Reason for Deviation Ministry and other public administrations within the scope of general budget. Measures to Be Taken Although the deviation from the target is in favour of the public, forecasts will be revised to against the Deviation determine the objective in a healthier way.

Year : 2009 Unit : 12.01.30.00/CHIEF LEGAL ADVISORY AND DIRECTORATE GENERAL OF PROCEEDINGS (CENTRE) Performance : LEGAL ADVISORY FOR THE STATE Objective Realization Deviation Realized Year-end Level of Performance Indicator Target rate of rate of realization Attainment Q1 Q2 Q3 Q4 target target Number of opinions for the amicable settlement of disputes 100 46 185 258 305 305 305 205 Exceeded (number) Refers to the number of legal opinions given so as to prevent the suspension of Explanation disputes and reduce the burden of jurisdiction.

Source of Indicator The data was compiled from Divisions of Document and Statistics.

Analysis of Performance Results

There is a deviation from the target because of the increase in legal opinion demands of Reason for Deviation the Ministry and other public administrations within the scope of general budget. Measures to Be Taken against the Although the deviation from the target is in favour of the public, forecasts will be Deviation revised to determine the objective in a healthier way.

94 Year : 2009 Unit : 12.01.30.00/CHIEF LEGAL ADVISORY AND DIRECTORATE GENERAL OF PROCEEDINGS (CENTRE) Performance : LEGAL PROCEEDINGS Objective Realization Deviation Performance Realized Year-end Level of Target rate of rate of Indicator realization Attainment Q1 Q2 Q3 Q4 target target Number of files prosecuted 480.000 542.136 543.205 546.235 548.175 548.175 114,20 14,20 Exceeded (Number) Refers to the total number of civil, criminal and execution lawsuits prosecuted by BAHUM on behalf of Explanation the public administrations within the scope of general budget and administrative proceedings related to the Treasury. Source of The data was compiled from Divisions of Document and Statistics. Indicator Analysis of Performance Results Reason for There is a deviation from the target because it is not only affected by the transactions of our unit, but Deviation also the actions and transactions of the administrations and demands of individuals. Measures to Be Taken against The forecasts will be revised to determine the objective in a healthier way. the Deviation

Year : 2009 Unit : 12.01.30.00/CHIEF LEGAL ADVISORY AND DIRECTORATE GENERAL OF PROCEEDINGS (CENTRE) Performance : LEGAL PROCEEDINGS Objective Realization Deviation Realized Year-end Level of Performance Indicator Target rate of rate of realization Attainment Q1 Q2 Q3 Q4 target target Rate of waives from lawsuits and execution proceedings and 80 83 85 86 88,57 88,57 110,71 10,71 Exceeded resorting to legal remedies (percentage) Refers to the number of positive opinions given by BAHUM about demands for waive Explanation from lawsuits and executing proceedings and resorting to legal remedies for disputes that seem to end against the Treasury. Source of Indicator The data was compiled from Divisions of Document and Statistics.

Analysis of Performance Results

There is a deviation from the target because of the increase in waives from lawsuits and Reason for Deviation executing proceedings and resorting to legal remedies and appropriateness of demands for material and legal reasons. Measures to Be Taken against Although the deviation from the target is in favour of the public, forecasts will be revised the Deviation to determine the objective in a healthier way.

Year : 2009 Unit : 12.01.30.00/CHIEF LEGAL ADVISORY AND DIRECTORATE GENERAL OF PROCEEDINGS (CENTRE) Performance : LEGAL PROCEEDINGS Objective Realization Deviation Realized Year-end Level of Performance Indicator Target rate of rate of realization Attainment Q1 Q2 Q3 Q4 target target Payment period of debt secured by 12 12 12 12 12 12 100 0 Attained a court judgement (day) Refers to the payment period that starts with the completion of documents of the debts secured by a court judgement that can be paid only upon being clarified and fully Explanation documented and the debts secured by a court judgement that can be paid before being legally finalized. Source of Indicator The data was compiled from Divisions of Debts Secured by a Court Judgement.

Analysis of Performance Results

Reason for Deviation Measures to Be Taken against

the Deviation

95 Year : 2009 Unit : 12.01.30.00/CHIEF LEGAL ADVISORY AND DIRECTORATE GENERAL OF PROCEEDINGS (CENTRE) Performance : LEGAL PROCEEDINGS Objective Realization Deviation Realized Year-end Level of Performance Indicator Target rate of rate of realization Attainment Q1 Q2 Q3 Q4 target target Ratio of winning lawsuits 57 61 61 61 62 62 108,77 8,77 Exceeded (percentage) Refers to the ratio of lawsuits resulted in favour of the Treasury to the total number of Explanation lawsuits.

Source of Indicator The data was compiled from Divisions of Document and Statistics.

Analysis of Performance Results

Although the number of winning lawsuits is higher than the target, this situation is in Reason for Deviation favour of the public. Measures to Be Taken against Although the deviation from the target is in favour of the public, forecasts will be the Deviation revised to determine the objective in a healthier way.

GOAL 4: To prevent black economy, corruption and informal economy

OBJECTIVE 6: To prevent laundering proceeds of crime and financing of terrorism

Year : 2009 Unit : 12.01.30.00/FINANCIAL CRIMES INVESTIGATION BOARD (CENTRE) Performance : FIGHT AGAINST LAUNDERING OF PROCEEDS OF CRIME AND FINANCING OF TERRORISM Objective Realization Deviation Realized Year-end Level of Performance Indicator Target rate of rate of realization Attainment Q1 Q2 Q3 Q4 target target Number of suspicious transaction reports received 3.000 1.964 2.927 7.164 9.823 9.823 327 227 Exceeded (number) Refers to the number of information sources that constitute a basis for launching the activities Explanation of analysis, evaluation and examination that are performed in relation to the crimes of laundering and financing of terrorism. Source of Indicator Received from the relevant departments.

Analysis of Performance

Results

Reason for Deviation Measures to Be Taken

against the Deviation

96 Year : 2009 Unit : 12.01.30.00/FINANCIAL CRIMES INVESTIGATION BOARD (CENTRE) Performance : FIGHT AGAINST LAUNDERING OF PROCEEDS OF CRIME AND FINANCING OF TERRORISM Objective Realization Deviation Realized Year-end Level of Performance Indicator Target rate of rate of realization Attainment Q1 Q2 Q3 Q4 target target Number of files brought into Not court/Number of files subject 90 42 60 69 57 57 63 -37 Attained to indictment (percentage) Refers to the ratio of files brought into court to the number of indictments sent to Explanation prosecution offices and evaluations and examinations that are the subject of indictments.

Source of Indicator Received from the relevant departments.

Analysis of Performance

Results It was found that the target was not reached because the indictments issued by MASAK in 2009 were not all filed by the courts or prosecution offices or they were not notified, or MASAK was not provided with the information related to the filed lawsuits within the same Reason for Deviation year. If all of the indictments were evaluated by the relevant prosecution offices and evidence collection that was performed by the prosecution office was completed, the number of indictments would be equal to number of lawsuits in compliance with the determined targets. Information will be demanded from the National Judiciary Network Project on whether a Measures to Be Taken lawsuit was filed for an indictment issued against a person and this issue will be monitored against the Deviation with more frequent correspondence with BAHUM.

Year : 2009 Unit : 12.01.30.00/FINANCIAL CRIMES INVESTIGATION BOARD (CENTRE) Performance : FIGHT AGAINST LAUNDERING OF PROCEEDS OF CRIME AND FINANCING OF TERRORISM Objective Realization Deviation Realized Year-end Level of Performance Indicator Target rate of rate of realization Attainment Q1 Q2 Q3 Q4 target target Number of obliged parties Not 450 17 18 18 132 132 29 -71 that were audited (number) Attained Refers to the number of audited obliged parties that are responsible for fulfilling the Explanation obligations (e.g. identification, suspicious transaction reports, etc.) under laws.

Source of Indicator Received from the relevant departments.

Analysis of Performance

Results Under the By-Law No. 26999 of 16/09/2008 on Compliance with Obligations related to Prevention of Laundering Proceeds of Crime and Financing of Terrorism, banks, capital market intermediary firms, insurance and pension companies and DG Post and Telegraph Organization are obliged to create a compliance program and it was decided that this Reason for Deviation compliance program would be audited by the Prime Ministry in 2009 given the importance of this program to be created by the obliged parties in fight against laundering proceeds of crime and financing of terrorism. In this respect, the performance indicator was not achieved since the total number of obliged parties to be audited was about 178. It is envisaged to prepare the audit program considering the other obligations (e.g. Measures to Be Taken identification, suspicious transactions reports, custody and submission, etc.) in the against the Deviation upcoming period. Thanks to that, it is estimated that the target number of obliged parties will be achieved.

97 Year : 2009 Unit : 12.01.30.00/FINANCIAL CRIMES INVESTIGATION BOARD (CENTRE) Performance : FIGHT AGAINST LAUNDERING OF PROCEEDS OF CRIME AND FINANCING OF TERRORISM Objective Realization Deviation Realized Year-end Level of Performance Indicator Target rate of rate of realization Attainment Q1 Q2 Q3 Q4 target target Completion Period for Assessing Laundering 6 0 0 0 3,5 3,5 142 42 Exceeded Proceeds of Crime (month) Refers to the completion period of assessments on laundering proceeds of crime performed Explanation by experts and assistant experts of MASAK.

Source of Indicator Received from the relevant departments.

Analysis of Performance

Results Thanks to formulation of an analysis and assessment group in 2009, specialization of group Reason for Deviation members, faster information access and greater analysis capacity, assessments could be made in a shorter time than the target. Measures to Be Taken

against the Deviation

Year : 2009 Unit : 12.01.30.00/FINANCIAL CRIMES INVESTIGATION BOARD (CENTRE) Performance : FIGHT AGAINST LAUNDERING OF PROCEEDS OF CRIME AND FINANCING OF TERRORISM Objective Realization Deviation Realized Year-end Level of Performance Indicator Target rate of rate of realization Attainment Q1 Q2 Q3 Q4 target target Completion Period for Assessing Financing of 10 0 0 0 10 10 100 0 Attained Terrorism (month) Refers to the completion period of assessments on financing of terrorism performed by Explanation experts and assistant experts of MASAK.

Source of Indicator Received from the relevant departments.

Analysis of Performance

Results

Reason for Deviation Measures to Be Taken

against the Deviation

98 Year : 2009 Unit : 12.01.30.00/FINANCIAL CRIMES INVESTIGATION BOARD (CENTRE) Performance : FIGHT AGAINST LAUNDERING OF PROCEEDS OF CRIME AND FINANCING OF TERRORISM Objective Realization Deviation Realized Year-end Level of Performance Indicator Target rate of rate of realization Attainment Q1 Q2 Q3 Q4 target target Number of memorandums of Not understanding signed 5 0 2 3 4 4 80 -20 Attained (number) Refers to the number of memorandums of understanding signed with other countries in Explanation order to establish cooperation for fight against cross-border laundering proceeds of crime and financing of terrorism. Source of Indicator Received from the relevant departments.

Analysis of Performance

Results Memorandums of understanding are signed in order to share financial intelligence for prevention of laundering proceeds of crime and financing of terrorism upon agreement of the parties on a common text prepared in compliance with the principles determined by the Egmont Group and national legislations. Sometimes it takes a long time for the parties to agree on the common text and the parties need to exchange correspondence for a very long Reason for Deviation time. Since the financial intelligence units demand opinion of the relevant national agencies (e.g. Ministry of Justice, Ministry of Foreign Affairs, etc.) on the common text and this process repeats for each new common text, this period may become longer. In 2009 efforts were made to sign a memorandum of understanding with financial intelligence units of 16 countries and 4 memorandums of understanding were signed. Negotiations continue with financial intelligence units of 12 countries. The evaluation process for opinions and proposals during preparing the common text of memorandum of understanding could be speeded up. However, since it is not possible to Measures to Be Taken intervene in the internal processes of the other party, the number of signed memorandums against the Deviation of understanding will depend on the speed of functioning of the relevant financial intelligence units.

Year : 2009 Unit : 12.01.30.00/FINANCIAL CRIMES INVESTIGATION BOARD (CENTRE) Performance : FIGHT AGAINST LAUNDERING OF PROCEEDS OF CRIME AND FINANCING OF TERRORISM Objective Realization Deviation Realized Year-end Level of Performance Indicator Target rate of rate of realization Attainment Q1 Q2 Q3 Q4 target target Number of prepared guides 20 0 0 0 25 25 125 25 Exceeded (number) Refers to the number of guides published for the incumbents (banks, capital market Explanation intermediary firms, etc.) and customers carrying out transactions on behalf of the incumbents. Source of Indicator Received from the relevant departments.

Analysis of Performance

Results The target was exceeded because of the increase in the number of guides prepared in line Reason for Deviation with the requirements borne within the year. Measures to Be Taken

against the Deviation

99 OBJECTIVE 7: To prevent informal economy and corruption

Year : 2009 Unit : 12.00.00.20/INSPECTION BOARD OF FINANCE Performance : INSPECTION – CONSULTANCY Objective Realization Deviation Realized Year-end Level of Performance Indicator Target rate of rate of realization Attainment Q1 Q2 Q3 Q4 target target Number of reports prepared in the current year (except for MASAK) 500 195 306 457 819 819 164 64 Exceeded (Number)

Refers to the number of reports that are prepared by finance inspectors as a result of Explanation inspections, tax audits, investigations and their other duties.

Source of Indicator Received from the relevant departments.

Thanks to the measures taken by the Board, efficiency of the administration and Analysis of Performance Results inspectors was increased, and the number of the reports produced exceeded the target.

Reason for Deviation The performance indicator exhibits positive deviation from the determined objective. Measures to Be Taken against the

Deviation

Year : 2009 Unit : 12.00.00.20/INSPECTION BOARD OF FINANCE Performance Objective : INSPECTION – CONSULTANCY

Deviation Realized Year-end Realization rate of Level of Performance Indicator Target Q1 Q2 Q3 Q4 realization rate of target target Attainment Tax base difference found (TL) 150,000,000 54,511,988 77,379,201 77,477,889 153,231,207 153,231,207 102 2 Exceeded

Explanation the tax amount determined as a result of tax inspection.

Source of Indicator Received from the relevant departments.

Analysis of Performance Results The objective determined for the performance indicator was attained by a deviation of 2 percent.

Reason for Deviation

Measures to Be Taken against the Deviation The performance indicator exhibits positive deviation from the determined objective.

100 Year : 2009 Unit : 12.00.00.20/INSPECTION BOARD OF FINANCE Performance : INSPECTION – CONSULTANCY Objective

Deviation Realized Year-end Realization rate of Level of Performance Indicator Target Q1 Q2 Q3 Q4 realization rate of target target Attainment Tax amount requested to be assessed (TL) 30,000,000 3,732,409 8,190,562 8,619,026 23,517,635 23,517,635 78 -22 Not attained

Explanation Refers to the tax amount assessed regarding tax base difference found as a result of the tax inspection. Source of Indicator Received from the relevant departments. The targeted amount was not attained completely since e-inspection was given importance and taxpayers were encouraged Analysis of Performance Results for voluntary tax compliance. The deviation was reflected to the e-inspection indicators positively as the unrealized amount was declared and paid Reason for Deviation voluntarily by the taxpayers during e-inspection studies. Measures to Be Taken against the Deviation E-inspection implementations and voluntary tax compliance studies will continue to be given importance.

Year : 2009 Unit : 12.00.00.20/INSPECTION BOARD OF FINANCE Performance : INSPECTION – CONSULTANCY Objective

Deviation Realized Year-end Realization rate of Level of Performance Indicator Target Q1 Q2 Q3 Q4 realization rate of target target Attainment Proposed fines (TL) 30,000,000 5,802,138 7,141,321 7,619,785 25,071,288 25,071,288 84 -16 Not attained

Explanation Refers to the fines to be imposed on the taxpayers who have not undertaken their liabilities as a result of tax inspection. Source of Indicator Received from the relevant departments. Analysis of Performance The targeted amount was not attained completely since e-inspection was given importance and taxpayers were encouraged Results for voluntary tax compliance. The deviation was reflected to the e-inspection indicators positively as the unrealized amount was declared and paid Reason for Deviation voluntarily by the taxpayers during e-inspection studies. Measures to Be Taken against the Deviation E-inspection implementations and voluntary tax compliance studies will continue to be given importance.

Year : 2009 Unit : 12.00.00.20/INSPECTION BOARD OF FINANCE Performance : INSPECTION – CONSULTANCY Objective

Deviation Realized Year-end Realization rate of Level of Performance Indicator Target Q1 Q2 Q3 Q4 realization rate of target target Attainment Tax base difference found after e-inspection (TL) 875,860,280 0 0 0 163,814,757 163,814,757 19 -81 Not attained Explanation Refers to the tax base difference found as a result of e-inspection. Source of Indicator Received from the relevant departments. The tax base amounts cannot be followed up during e-inspection because it is based on voluntary declarations and fast and Analysis of Performance Results undisputed cash flow into the Treasury. Although there is a considerable deviation from the target, this deviation is not considered to be negative since the targeted Reason for Deviation result is achieved in the assessed tax amount. Although the tax base difference found is a natural outcome of tax inspections, during e-inspection the studies for Measures to Be Taken against determination of the tax base declared by taxpayers within the scope of voluntary tax compliance will be carried out within the the Deviation capabilities.

101 Year : 2009 Unit : 12.00.00.20/INSPECTION BOARD OF FINANCE Performance : INSPECTION – CONSULTANCY Objective

Deviation Realized Year-end Realization rate of Level of Performance Indicator Target Q1 Q2 Q3 Q4 realization rate of target target Attainment Tax amount requested to be assessed as a result of e- inspection (TL) 12,712,399 0 0 0 57,652,978 57,652,978 454 354 Exceeded Explanation Refers to the tax amount requested to be assessed as a result of e-inspection. Source of Indicator Received from the relevant departments. Analysis of Performance Results The attained amount is higher than the targeted amount since the e-inspection has been given importance. Reason for Deviation Measures to Be Taken against the Deviation The performance indicator exhibits positive deviation from the determined objective.

Year : 2009 Unit : 12.00.00.20/INSPECTION BOARD OF FINANCE Performance : INSPECTION – CONSULTANCY Objective

Deviation Realized Year-end Realization rate of Level of Performance Indicator Target Q1 Q2 Q3 Q4 realization rate of target target Attainment Fines proposed as result of e-inspection (TL) 30,000,000 0 0 0 46,050,152 46,050,152 154 54 Exceeded Explanation Refers to the fines proposed as a result of e-inspection. Source of Indicator Received from the relevant departments. Analysis of Performance In parallel to the tax amount requested to be assessed as a result of e-inspection, the outcome is above the envisaged Results target. Reason for Deviation Measures to Be Taken against the Deviation The performance indicator exhibits positive deviation from the determined objective.

Year : 2009 Unit : 12.00.00.20/INSPECTION BOARD OF FINANCE Performance : INSPECTION – CONSULTANCY Objective

Deviation Realized Year-end Realization rate of Level of Performance Indicator Target Q1 Q2 Q3 Q4 realization rate of target target Attainment Fines proposed as result of e-inspection (TL) 30,000,00000046,050,15246,050,15215454Exceeded Explanation Refers to the fines proposed as a result of e-inspection. Source of Indicator Received from the relevant departments. Analysis of Performance In parallel to the tax amount requested to be assessed as a result of e-inspection, the outcome is above the envisaged Results target. Reason for Deviation Measures to Be Taken against the Deviation The performance indicator exhibits positive deviation from the determined objective.

102 Year : 2009 Unit : 12.00.00.20/INSPECTION BOARD OF FINANCE Performance : INSPECTION – CONSULTANCY Objective Year- Realized Performance end Realization rate Deviation rate Level of Target Indicator realizati of target of target Attainment Q1 Q2 Q3 Q4 on Number of units included in the e- 35 0 0 0 42 42 120 20 Exceeded inspection program (Number)

Explanation Refers to the number of tax administrations and Ministry units inspected via e-inspection method.

Source of Received from the relevant departments. Indicator Analysis of Performance The number of units included in the e-inspection exceeds the targeted performance indicator. Results Reason for

Deviation Measures to Be Taken The performance indicator exhibits positive deviation from the determined objective. against the Deviation

Year : 2009 Unit : 12.00.00.21/TAX INSPECTORS BOARD Performance : INSPECTION Objective

Deviation Realized Year-end Realization rate of Level of Performance Indicator Target Q1 Q2 Q3 Q4 realization rate of target target Attainment Tax base amount inspected (TL) 15,000,000,000 11,744,220,000 48,892,510,000 58,515,110,000 72,379,330,000 72,379,330,000 483 383 Exceeded

Explanation Refers to the tax base amount declared by the taxpayers inspected as a result of their economic activities. Source of Indicator Received from the relevant departments. Analysis of Performance Results Reason for Deviation Measures to Be Taken against the Deviation The performance indicator exhibits positive deviation from the determined objective.

Year : 2009 Unit : 12.00.00.21/TAX INSPECTORS BOARD Performance : INSPECTION Objective

Deviation Realized Year-end Realization rate of Level of Performance Indicator Target Q1 Q2 Q3 Q4 realization rate of target target Attainment Tax base difference found (TL) 7,700, 000,000 1,994,499,581 3,327,991,920 7,449,929,357 14,009,130,000 14,009,130,000 182 82 Exceeded Refers to the tax base difference found between the tax amount declared as a result the economic activities of taxpayers inspected and the tax amount Explanation determined as a result of tax inspection. Source of Indicator Received from the relevant departments. Analysis of Performance Results Reason for Deviation Measures to Be Taken against the Deviation The performance indicator exhibits positive deviation from the determined objective.

103

Year : 2009 Unit : 12.00.00.21/TAX INSPECTORS BOARD Performance : INSPECTION Objective

Deviation Realized Year-end Realization rate of Level of Performance Indicator Target Q1 Q2 Q3 Q4 realization rate of target target Attainment Tax amount requested to be assessed (TL) 1,200,000,000 150,809,208 295,842,119 931,851,101 1,867,340,252 1,867,340,252 156 56 Exceeded

Explanation Refers to the tax amount assessed regarding tax base difference found as a result of the tax inspection. Source of Indicator Received from the relevant departments. Analysis of Performance Results Reason for Deviation Measures to Be Taken against the Deviation The performance indicator exhibits positive deviation from the determined objective.

Year : 2009 Unit : 12.00.00.21/TAX INSPECTORS BOARD Performance : INSPECTION Objective

Deviation Realized Year-end Realization rate of Level of Performance Indicator Target Q1 Q2 Q3 Q4 realization rate of target target Attainment Fines proposed (TL) 1,270,000,000 169,517,907 363,374,394 909,096,144 2,008,390,507 2,008,390,507 158 58 Exceeded

Explanation Refers to the fines to be imposed on the taxpayers who have not undertaken their liabilities as a result of tax inspection. Source of Indicator Received from the relevant departments. Analysis of Performance Results Reason for Deviation Measures to Be Taken against the Deviation The performance indicator exhibits positive deviation from the determined objective.

Year : 2009 Unit : 12.00.00.21/TAX INSPECTORS BOARD Performance : INSPECTION Objective Realiz Realized Year-end Deviation Performance ation Target realizatio rate of Level of Attainment Indicator rate of Q1 Q2 Q3 Q4 n target target Number of reports 2.400 169 509 1.656 2.547 2.547 106 6 Exceeded prepared (Number)

Explanation Refers to the number of reports prepared by tax inspectors after tax inspections.

Source of Received from the relevant departments. Indicator Analysis of Performance Results Reason for

Deviation Measures to Be Taken The performance indicator exhibits positive deviation from the determined objective. against the Deviation

104 Year : 2009 Unit : 12.01.32.00/DIRECTORATE GENERAL OF PUBLIC ACCOUNTS Performance : ACCOUNTING AUDIT Objective Realizat Realized Year-end Deviation ion rate Level of Performance Indicator Target realizatio rate of of Attainment Q1 Q2 Q3 Q4 n target target Number of accounting units in audited administrations within the scope of general government/Total 8 0 0 0 8 8 100 0 Attained number of accounting units in administrations within the scope of general government (Percentage)

Refers to audit of the financial reports of the accounting units in terms of Explanation compliance with the accounting arrangements and standards at least once a year and repetition of this audit every year regularly.

Source of Indicator Received from the relevant departments.

Analysis of Performance Results

Reason for Deviation Measures to Be Taken against the

Deviation

Year : 2009 Unit : 12.01.32.00/DIRECTORATE GENERAL OF PUBLIC ACCOUNTS Performance : ACCOUNTING AUDIT Objective Realizat Realized Year-end Deviation Performance ion rate Target realizatio rate of Level of Attainment Indicator of Q1 Q2 Q3 Q4 n target target Average number of accounting units 4,96 0 0 0 4,96 4,96 100 0 Attained audited by inspectors (Number)

Refers to the number of accounting units per inspector of which financial reports are audited with the Explanation standardization of the inspection process.

Source of Received from the relevant departments. Indicator Analysis of Performance Results Reason for

Deviation Measures to Be Taken

against the Deviation

GOAL 5: To achieve institutional excellence

OBJECTIVE 8: To provide fast and high-quality service

105 Year : 2009 Unit : 12.01.00.23 / STRATEGY DEVELOPMENT UNIT Performance : GENERAL MANAGEMENT AND SUPPORT Objective Realizat Realized Year-end Deviation Performance ion rate Target realizatio rate of Level of Attainment Indicator of Q1 Q2 Q3 Q4 n target target Entry rate of the Ministry expenditures to the 90 80 80 80 90 90 100 0 Attained expenditure management module (percentage)

Refers to the entry rate of the expenditures made by the Ministry units into the electronic Explanation environment.

Source of Indicator Received from the relevant departments.

The expenditure management module was put into implementation in 2009. With this module, Analysis of commitments, accruals, tariff transactions and payments are transferred to the electronic Performance Results environment.

Reason for Deviation Measures to Be Taken against the Deviation

Year : 2009 Unit : 12.01.00.23 / STRATEGY DEVELOPMENT UNIT Performance : GENERAL MANAGEMENT AND SUPPORT Objective Deviat Realized Year-end Realization Performance ion Target realizatio rate of Level of Attainment Indicator rate of Q1 Q2 Q3 Q4 n target target Number of units that can prepare 1 1 1 1 1 1 100 0 Attained operational plans (number)

Refers to the ability of the spending units to prepare operational plans that cover the activities that the Explanation spending units will carry out in the subsequent year and outputs and indicators of these activities.

Source of Received from the relevant departments. Indicator The operational plan for 2009 was prepared for the Strategy Development Unit. Thus, works to be done for Analysis of the related year and staff responsible for these works were determined with the aim of attaining the Performance performance objective in the performance program of the administration, and operations were followed-up Results quarterly. Reason for

Deviation Measures to Be Taken

against the Deviation

106 Year : 2009 Unit : 12.01.00.23 / STRATEGY DEVELOPMENT UNIT Performance : GENERAL MANAGEMENT AND SUPPORT Objective Realization Deviation Realized Year-end Level of Performance Indicator Target rate of rate of realization Attainment Q1 Q2 Q3 Q4 target target Number of units that can monitor their 13 10 10 10 10 10 77 -23 Not attained performance objectives and indicators (number)

Refers to what extent the Ministry units can monitor their performance objectives and Explanation indicators.

Source of Indicator Received from the relevant departments.

Analysis of Performance The performance indicators of 10 spending units throughout the Ministry were monitored. Results

The low number of the units that can monitor their performance objectives and indicators resulted from the fact that three support units in the Ministry could not be included in the Reason for Deviation process. During the monitoring and evaluation, the monitored data was not high-quality for the three units, and these units were excluded from the process at the beginning of the year. Measures to Be Taken During the budget negotiations for 2010, the abovementioned units were included in the against the Deviation monitoring and evaluation.

5. Evaluation of the Performance Information System

In our Ministry, planning and performance program processes are carried out through the SGB.net system. “Performance budget module” in the system constitutes the infrastructure of performance information system and has a cascading structure from the mission and vision of the Ministry to the activities defined in the performance program.

The hierarchical structure among the theme, strategic goals and strategic objectives set out in the strategic plan of the Ministry is also maintained in the performance budget module. In the next phase, the relation between the data on objectives and responsible spending units defined in the performance program and the strategic plan is put forward clearly.

Fundamental inputs of the monitoring and evaluation are the performance objectives set out in the performance program and targeted values of the performance indicators defined by the units for these objectives. Monitoring and evaluation includes performance indicator realizations entered into the system by the units quarterly in a year and a year-end analysis on the performance indicators realization results. Reports prepared within the scope of monitoring and evaluation are submitted to the top manager as year-end monitoring and evaluation reports and they are publicized with the Ministry accountability report for the relevant year.

In the reporting phase of the performance program, the prepared reports are in consistent with both the analytical budget classification and also performance-based budgeting. These reports include comprehensive information from activities to the themes defined in the strategic plan.

107

Furthermore, with the integration ensured in electronic environment through the e-budget, it became possible to exchange data on the performance program. Therefore, consistency between the data in the two systems is ensured and performance program proposal is prepared in line with the reports received from the e-budget system.

Within this framework, although performance information system is an indispensable part of the strategic management system, it is necessary to integrate all processes in the system and implementations for these processes with the performance information system in order to endow implementation results with a more realistic structure.

IV – EVALUATION OF THE INSTITUTIONAL CAPABILITY AND CAPACITY

The Ministry of Finance Strategic Plan for 2008-2010 includes the results of the SWOT (Strengths, Weaknesses, Opportunities and Threats) analysis conducted during studies for the Ministry of Finance Strategic Planning within the framework of certain aspects such as organizational structure, organizational capability and technological capacity.

V – INTERNAL AUDIT ACTIVITIES IN 2009

Internal audit aims to add value to the efforts of public administration and to develop these efforts, to evaluate whether the resources are managed in accordance with the principles of economy, effectiveness and efficiency and to guide the public administrations accordingly, to provide independent and objective assurance for the parties in relation with the public administration and to provide consultancy to the top management.

It is only possible with preparation of risk-based audit plans and programs to conduct more efficient internal audit activities which are envisaged to be performed in order to evaluate and improve efficiency of the risk management, control and governance processes of an administration in a systematic and disciplined way and to help it reach its objectives. Aim of the risk-based audit is to maximize contribution made to the management in increasing efficiency and effectiveness levels of the internal control processes by focusing on the risky fields during audits. Furthermore, with the risk- based audit approach, it is aimed to utilize audit resources in the fields including the highest risks according to the risk profile of the administration and to monitor risk profile changes in a systematic way.

2008-2010 Internal Audit Plan was prepared as a result of the risk analysis performed by internal auditors on the business processes of our Ministry and 2009 Internal Audit Program was prepared based on this plan. In preparation of the plans and programs, strategic goals and principles set

108 out in the “Public Internal Audit Strategy Document (2008-2010)” prepared by the Internal Audit Coordination Board were also considered.

In 2009, 14 certified internal auditors worked in our ministry. 10 auditors worked actually to carry out audits and inspections envisaged in the 2009 Internal Audit Program since one of these 14 auditors was Head of internal auditors, two were temporary experts in State Auditing Board, and one was abroad for his/her master education.

In 2009, audits and inspections were made on the following fields:

Public Financial Management and Control Reform Activities

Audits for the Public Financial Management and Control Reform activities were carried out in three directorates general by three separate audit teams. In this scope, the following activities were subject to audits:

- Central harmonization activities in public financial management and control, internal audit secretariat services and training activities in public internal financial control in the Directorate General of Budget and Fiscal Control;

- Public accounting system, efforts for restructuring the revolving funds and activities for preparation of the financial statistics in the Directorate General of Public Accounts;

- Preparation process of the strategic plan, performance program and accountability report of the administration and activities for risk management and internal control system in the Strategy Development Unit.

Administrative and Financial Services

System and compliance audits were performed for budget, tendering, procurement and transportation activities of the Department of Administrative and Financial Affairs.

Accounting Services of the General Budget Administrations

Within the scope of accounting services of the general budget administrations, a financial audit was performed on accounting and financial statements of the Istanbul Provincial Treasury (Directorate of Accounting).

National Property Services

Within the scope of national property services, a system audit was performed for damages for unlawful occupation of government property in central organization of Directorate General of National Property and national

109 property units of the provinces of İzmir, Muğla, Antalya, Mersin and Samsun.

Examination on Use of the Government Property for Income- Generating Purposes

Upon request of the top manager, examination studies were conducted on use of government property for income-generating purposes within the Program.

In the audits performed in 2009, business processes for duty and operation areas of units and risks within those processes were explored and efficiency and adequacy of those controls made for management of these risks were evaluated.

As a result of the audits and examinations carried out in 2009, totally 11 reports including 6 auditing reports and 5 examination reports were produced. Audit report (draft) prepared for damages for unlawful occupation of government property was consolidated and drafted by the internal auditors on the basis of reports and finding forms prepared by 5 separate audit teams in national property units of provincial treasuries in 5 provinces and then the draft report was submitted to the Directorate General of National Property for answer and action plan.

The audit report (draft) prepared for central harmonization activities in public financial management and control, internal audit secretariat services and public internal financial control training activities of the Directorate General of Budget and Fiscal Control is at the finalization phase within the framework of answer and action plan of the Directorate General.

The finalized audit reports were submitted to the top manager and sent to units to carry out actions within the framework of answers and action plans of the audited units and then monitoring phase started.

As there are some issues that should be improved for the audited processes and activities in the drafted reports, a “partial assurance” was issued to these activities.

Considering the fact that efforts for alignment of current situation with the internal control standards and that standards for control environment, risk evaluation, control activities, information-communication and monitoring which are the components of the internal control system cannot be implemented in practice although there are a number of business processes and related control measures within the framework of duties, authorities and responsibilities of the units defined in the legislation; proposals for the current processes and risks of the administration were developed and acceleration of the efforts for compliance with the internal control standards and improvement of the current controls were proposed.

110 ANNEXES

ANNEX 1 – Internal Control Assurance Declaration

As the top manager, I hereby declare that information included in this report under my own authority is reliable, complete and accurate.

I declare that the resources are allocated for the activities defined in this report in line with the intended purposes and in compliance with the good financial management principles and that internal control system provides the necessary assurance for the legacy and regularity of the transactions.

This assurance is relied on my own information and evaluations as the top manager and other sources within my knowledge such as knowledge transferred by the previous manager(s), internal controls, internal auditor reports and Turkish Court of Accounts (TCA) reports.

I announce that I do not have any information on aspects which are not reported here and harmful to the interests of the administration.

Ankara 28 April 2010 Naci AĞBAL Undersecretary

111 ANNEX 2 – Declaration of the Head of the Financial Services Unit

As the head of financial services unit, I declare that activities are carried out in accordance with the financial management and control legislation and other legislation; internal control processes are followed and put into implementation in order to ensure effective, economic and efficient use of public resources and my proposals for taking necessary measures are reported to the top manager in a timely manner.

I confirm that information contained in the “III/A- Financial Information” of the 2009 Accountability Report of our administration is reliable, complete and accurate.

Ankara 28 April 2010

Ahmet KESİK, Ph.D. Head of the Strategy Development Unit

112 ANNEX 3 – Distribution of Vacant and Occupied Positions in the Ministry of Finance by Service Categories and by Years

DISTRIBUTION OF OCCUPIED POSITIONS BY SERVICE CATEGORIES

2002 2003 2004 2005 2006

2007 2008 2009 Revolving Revolving Revolving Revolving Revolving Revolving Revolving Revolving Central Provincial Fund Overseas Central Provincial Fund Overseas Central Provincial Fund Overseas Central Provincial Fund Overseas Central Provincial Fund Overseas Central Provincial Fund Overseas Central Provincial Fund Overseas Central Provincial Fund Overseas General Administrative Services 5.530 57.472 406 17 5.446 56.908 381 19 5.262 56.494 381 24 3.636 16.652 393 22 2.762 16.055 397 18 2.701 16.489 0 12 2.610 16.464 0 13 2.601 16.402 0 12 Technical Services 153 388 9 0 163 385 9 0 161 384 7 0 128 353 8 0 129 263 9 0 124 300 0 0 122 299 0 0 122 371 0 0 Health Services 21 54 0 0 22 57 0 0 23 55 0 0 21 49 0 0 22 28 0 0 22 25 0 0 20 24 0 0 20 22 0 0 Advocacy Services 42 754 0 0 43 742 0 0 44 711 0 0 45 833 0 0 49 1.013 0 0 49 1.096 0 0 50 1.117 0 0 54 1.095 0 0 Support Services 302 5.843 83 0 307 5.600 76 0 300 5.427 75 0 289 4.454 70 0 226 3.074 69 0 207 2.795 0 0 200 2.648 0 0 191 2.539 0 0 Educational Services 0 18 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 TOTAL 6.048 64.529 498 17 5.981 63.692 466 19 5.790 63.071 463 24 4.119 22.341 471 22 3.188 20.433 475 18 3.103 20.705 0 12 3.002 20.552 0 13 2.988 20.429 0 12

DISTRIBUTION OF VACANT POSITIONS BY SERVICE CATEGORIES

2002 2003 2004 2005 2006 2007 2008 2009 Revolving Revolving Revolving Revolving Revolving Revolving Revolving Revolving Central Provincial Fund Overseas Central Provincial Fund Overseas Central Provincial Fund Overseas Central Provincial Fund Overseas Central Provincial Fund Overseas Central Provincial Fund Overseas Central Provincial Fund Overseas Central Provincial Fund Overseas General Administrative Services 7.639 32.628 501 9 7.705 33.210 526 7 8.129 33.898 536 2 4.737 10.787 526 4 4.931 12.744 522 13 3.935 12.117 0 19 4.019 12.834 0 19 3.965 12.972 0 19 Technical Services 168 238 24 0 158 241 24 0 188 289 26 0 119 320 25 0 120 388 24 0 108 385 0 0 117 493 0 0 118 421 0 0 Health Services 22 101 0 0 21 98 0 0 22 101 0 0 20 111 0 0 19 132 0 0 8 135 0 0 10 136 0 0 10 138 0 0 Advocacy Services 36 221 0 0 35 233 0 0 34 264 0 0 33 138 0 0 29 199 0 0 29 116 0 0 28 95 0 0 34 237 0 0 Support Services 177 1.567 22 0 172 1.810 29 0 184 1.978 20 0 177 2.950 23 0 240 3.780 24 0 153 3.219 0 0 160 2.954 0 0 168 2.867 0 0 Educational Services 0 24 0 0 0 42 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 TOTAL 8.042 34.779 547 9 8.091 35.634 579 7 8.557 36.530 582 2 5.086 14.306 574 4 5.339 17.243 570 13 4.233 15.972 0 19 4.334 16.512 0 19 4.295 16.635 0 19

113 ANNEX 4 – Audit Capacity and Specialization of the Ministry of Finance

Audit Officer Number of Audit Officers (including assistants) Finance Inspector 163 Tax Inspector 306 Internal Auditor 14 Accounting Controller 120 National Property Controller 65 National Property Auditor 234 Accounting Auditor 267 TOTAL 1,169

Expert Number of Experts (including assistants) State Budget Expert 137 State Accounting Expert 131 Public Property Expert 106 Finance Expert 39 Financial Services Expert 17 Financial Crimes Investigation Expert 67 Accounting Expert 577 National Property Expert 609 EU Expert 21 TOTAL 1,704

114 ANNEX 5 – Institutional Classification of the MoF Budget Expenditures for 2002-2009

Thousand TL 2002 2003 2004 2005 2006 2007 2008 2009 INSTITUTIONAL EXPLANATION TOTAL TOTAL TOTAL TOTAL TOTAL TOTAL TOTAL TOTAL CLASSIFICATION EXPENDITUR APPROPRIATI % EXPENDITURE % APPROPRIAT % % APPROPRIATI % EXPENDITURE % APPROPRIATI % EXPENDITURE % APPROPRIATIO % EXPENDITURE % APPROPRIATIO % EXPENDITURE % APPROPRIATIO % EXPENDITURE % APPROPRIATIO % EXPENDITURE % E ON ION ON ON N N N N

12.00.00.02 PRINCIPAL CLERK'S OFFICE 877 0,004 769 0,003 1.178 0,004 1.154 0,004 3.807 0,016 1.914 0,008 3.133 0,012 2.072 0,008 3.414 0,009 2.561 0,007 4.380 0,012 3.269 0,009 4.488 0,011 4.130 0,010 5.131 0,010 4.627 0,009

12.00.00.20 INSPECTION BOARD OF FINANCE 4.068 0,019 2.948 0,013 4.217 0,015 4.191 0,015 5.037 0,021 4.049 0,018 5.274 0,020 4.654 0,018 5.746 0,016 4.916 0,013 8.321 0,024 6.647 0,019 7.091 0,018 6.887 0,017 8.989 0,017 8.560 0,016

12.00.00.21 TAX INSPECTORS BOARD 8.727 0,040 8.005 0,036 10.715 0,038 10.551 0,038 13.073 0,055 12.142 0,053 14.425 0,054 13.317 0,052 15.624 0,043 14.019 0,038 16.370 0,046 15.530 0,044 17.990 0,045 17.374 0,044 19.658 0,037 19.170 0,037

12.00.35.00 FINANCIAL CRIMES INVESTIGATION BOARD 2.165 0,010 1.851 0,008 4.143 0,015 2.516 0,009 4.798 0,020 4.496 0,020 3.471 0,013 2.875 0,011 3.510 0,010 3.047 0,008 4.122 0,012 3.507 0,010 4.355 0,011 4.202 0,011 5.077 0,010 4.746 0,009

12.01.00.03 SECRETARIAT OF DEFENCE 718 0,003 543 0,002 705 0,002 746 0,003 1.064 0,004 1.005 0,004 433 0,002 1.094 0,004 1.260 0,003 870 0,002 804 0,002 737 0,002 875 0,002 677 0,002 390 0,001 390 0,001

12.01.00.04 DEPARTMENT OF ADMINISTRATIVE AND FINANCIAL AFFAIRS 125.967 0,576 121.308 0,550 165.631 0,581 149.622 0,532 78.894 0,333 71.589 0,313 77.030 0,291 77.677 0,305 73.502 0,200 67.114 0,184 80.348 0,227 76.317 0,217 90.405 0,225 86.444 0,219 99.263 0,189 94.608 0,181

12.01.00.05 DIRECTORATE GENERAL OF PERSONNEL 3.485 0,016 3.171 0,014 5.294 0,019 5.475 0,019 6.424 0,027 5.999 0,026 7.537 0,028 6.620 0,026 8.174 0,022 7.488 0,021 8.377 0,024 7.882 0,022 10.236 0,025 9.369 0,024 10.678 0,020 9.529 0,018

12.01.00.06 MoF CENTRE FOR HIGHER TRAINING 404 0,002 356 0,002 536 0,002 454 0,002 1.041 0,004 772 0,003 1.893 0,007 784 0,003 1.648 0,004 860 0,002 2.356 0,007 929 0,003 1.289 0,003 1.129 0,003 1.794 0,003 1.307 0,002

12.01.00.10 DEPARTMENT OF DATA PROCESSING (IT) 947 0,004 841 0,004 1.095 0,004 1.066 0,004 1.464 0,006 1.330 0,006 1.618 0,006 1.393 0,005 1.480 0,004 1.414 0,004 1.775 0,005 1.524 0,004 1.805 0,004 1.575 0,004 1.899 0,004 1.503 0,003

12.01.00.23 STRATEGY DEVELOPMENT UNIT 970 0,004 727 0,003 1.795 0,006 905 0,003 1.271 0,005 1.183 0,005 1.418 0,005 1.323 0,005 2.085 0,006 2.044 0,006 4.179 0,012 3.764 0,011 5.476 0,014 5.124 0,013 5.635 0,011 5.448 0,010

12.01.00.25 ADVISORY FOR PRESS AND PUBLIC RELATIONS 173 0,001 154 0,001 194 0,001 215 0,001 314 0,001 289 0,001 342 0,001 351 0,001 444 0,001 415 0,001 576 0,002 517 0,001 564 0,001 516 0,001 617 0,001 543 0,001

12.01.00.62 PROVINCIAL TREASURIES (DG PERSONNEL) 68.496 0,313 67.332 0,305 85.274 0,299 92.171 0,328 122.116 0,515 104.709 0,458 131.318 0,496 129.001 0,506 108.070 0,294 102.170 0,280 117.482 0,333 109.523 0,311 116.344 0,289 110.851 0,281 106.875 0,203 118.757 0,227

12.01.00.63 OVERSEAS ORGANIZATION 4.596 0,021 4.118 0,019 5.901 0,021 4.558 0,016 3.382 0,014 3.170 0,014 3.599 0,014 3.507 0,014 4.199 0,011 3.434 0,009 4.332 0,012 2.645 0,008 2.625 0,007 2.288 0,006 3.333 0,006 3.049 0,006

12.01.30 CHIEF LEGAL ADVISORY AND DG PROCEEDINGS 20.450 0,093 39.444 0,179 36.755 0,129 45.482 0,162 139.585 0,588 137.951 0,603 85.916 0,324 97.922 0,384 76.811 0,209 91.571 0,251 88.433 0,250 97.474 0,277 89.650 0,223 109.128 0,277 118.856 0,226 143.333 0,274

12.01.30.00 CHIEF LEGAL ADVISORY AND DG PROCEEDINGS (CENTRAL) 2.525 0,012 22.233 0,101 15.322 0,054 22.860 0,081 108.976 0,459 107.814 0,472 49.682 0,188 62.689 0,246 33.000 0,090 48.748 0,133 33.995 0,096 47.297 0,134 31.000 0,077 52.673 0,133 62.664 0,119 82.880 0,159

12.01.30.62 CHIEF LEGAL ADVISORY AND DG PROCEEDINGS (PROVINCIAL) 17.925 0,082 17.212 0,078 21.433 0,075 22.622 0,080 30.608 0,129 30.137 0,132 36.233 0,137 35.233 0,138 43.812 0,119 42.823 0,117 54.438 0,154 50.177 0,143 58.650 0,146 56.455 0,143 56.192 0,107 60.453 0,116

12.01.31 DG BUDGET AND FISCAL CONTROL 20.756.660 94,832 21.052.463 95,503 27.040.355 94,923 26.650.285 94,810 21.545.829 90,813 20.664.695 90,401 23.508.400 88,746 22.514.181 88,324 20.076.644 54,684 19.901.818 54,490 17.195.557 48,684 17.105.661 48,615 18.885.511 46,986 18.164.251 46,037 30.421.484 57,898 30.080.138 57,545

12.01.32 DG PUBLIC ACCOUNTS 238.976 1,092 200.703 0,910 388.669 1,364 406.842 1,447 827.745 3,489 825.439 3,611 1.494.135 5,640 1.491.062 5,849 16.208.026 44,147 16.201.227 44,358 17.644.407 49,955 17.619.809 50,076 20.793.582 51,734 20.781.357 52,670 21.596.437 41,102 21.630.906 41,381

12.01.32.00 DG PUBLIC ACCOUNTS (CENTRAL) 135.529 0,619 97.622 0,443 262.244 0,921 262.488 0,934 624.061 2,630 621.860 2,720 1.271.134 4,799 1.269.240 4,979 15.872.656 43,234 15.870.061 43,452 17.361.379 49,154 17.349.615 49,308 20.491.723 50,983 20.485.168 51,919 21.306.753 40,551 21.302.130 40,752

12.01.32.62 DG PUBLIC ACCOUNTS (PROVINCIAL TREASURY) 103.447 0,473 103.081 0,468 126.425 0,444 144.354 0,514 203.684 0,859 203.579 0,891 223.001 0,842 221.822 0,870 335.370 0,913 331.164 0,907 283.028 0,801 270.194 0,768 301.859 0,751 296.189 0,751 289.684 0,551 328.776 0,629

12.01.33 DG REVENUE 568.726 2,598 484.975 2,200 665.373 2,336 671.063 2,387 877.945 3,700 922.285 4,035 1.042.884 3,937 1.042.775 4,091

12.01.33.00 DG REVENUE (CENTRAL) 171.309 0,783 95.496 0,433 168.003 0,590 100.941 0,359 112.087 0,472 100.060 0,438 152.596 0,576 135.229 0,531

12.01.33.62 DG REVENUE (PROVINCIAL) 397.418 1,816 389.480 1,767 497.370 1,746 570.122 2,028 32.163 0,136 35.067 0,153 30.265 0,114 30.856

0,121

12.01.33.61 DG REVENUE (REGIONAL) 733.694 3,092 787.158 3,444 860.023 3,247 876.690 3,439

12.01.34 DG NATIONAL PROPERTY 80.044 0,366 52.836 0,240 66.612 0,234 59.528 0,212 89.372 0,377 93.480 0,409 104.039 0,393 97.326 0,382 118.974 0,324 114.827 0,314 135.257 0,383 127.855 0,363 158.468 0,394 148.496 0,376 133.701 0,254 143.726 0,275

12.01.34.00 DG NATIONAL PROPERTY (CENTRAL) 48.083 0,220 22.292 0,101 29.391 0,103 17.795 0,063 29.078 0,123 26.645 0,117 28.563 0,108 24.088 0,094 35.716 0,097 34.608 0,095 38.817 0,110 35.244 0,100 40.312 0,100 33.972 0,086 25.907 0,049 20.664 0,040

12.01.34.62 DG NATIONAL PROPERTY (PROVINCIAL) 31.961 0,146 30.544 0,139 37.221 0,131 41.733 0,148 60.294 0,254 66.836 0,292 75.476 0,285 73.238 0,287 83.258 0,227 80.219 0,220 96.440 0,273 92.611 0,263 118.156 0,294 114.524 0,290 107.794 0,205 123.062 0,235

12.01.36.00 DG LIQUIDATION AFFAIRS REVOLVING FUND 1.020 0,005 985 0,004 1.899 0,007 1.945 0,007 1.844 0,008 1.927 0,008 2.141 0,008 2.148 0,008 2.539 0,007 2.343 0,006 873 0,002 873 0,002

12.01.37.00 DEPARTMENT OF THE EU AND FOREIGN AFFAIRS 304 0,001 220 0,001 409 0,001 362 0,001 535 0,002 450 0,002 554 0,002 458 0,002 755 0,002 688 0,002 1.022 0,003 787 0,002 1.341 0,003 1.150 0,003 1.609 0,003 1.175 0,002

12.01.38.00 DG REVENUE POLICIES 856 0,002 779 0,002 1.555 0,004 1.051 0,003 1.410 0,004 1.025 0,003 1.598 0,003 1.201 0,002 OVERALL TOTAL 21.887.775 22.043.750 28.486.751 28.109.131 23.725.540 22.858.874 26.489.560 25.490.540 36.713.762 36.523.605 35.320.526 35.186.301 40.193.505 39.455.973 52.543.023 52.272.716

NOTE: 1- Percentages of the units are ratio of them to total appropriations and total expenditures. 2- Since the DG Revenue was re-organized in 2005 as the Revenue Administration, the appropriations and expenditures of the DG Revenue were included in the figures until 2005.

115 ANNEX 6 – Functional Classification of the MoF Budget Expenditures for 2002-2009 (Level 1)

Thousand TL

2002 2003 20042009 2005 2006 2007 2008 FUNCTION TOTAL TOTAL TOTAL TOTAL TOTAL TOTAL TOTAL TOTAL FUNCTIONAL CLASSIFICATION CODE APPROPRI APPROPRIEXPENDITAPPROPRIA APPROPRIAEXPENDITUAPPROPRIAEXPENDITURAPPROPRIAEXPENDITUAPPROPRIEXPENDITUAPPROPRIEXPENDITU % % % % % % EXPENDITURE % URE EXPENDITURE % RE E RE RE RE 17.042.765 17.180.176 77,94 22.301.658 21.915.647 77,97 15.781.368 14.916.766 65,26 17.510.040 16.498.892 64,73 21.579.705 21.379.220 58,54 24.170.157 24.029.471 68,29 28.162.733 27.413.976 69,48 30.466.621 30.183.665 57,74 01 GENERAL PUBLIC SERVICES ATION ATION TION TION TION TION ATION ATION 02 DEFENCE SERVICES 718 543 0,00 705 746 0,00 1.064 1.005 0,00 433 1.094 0,00 1.260 870 0,00 804 737 0,00 875 677 0,00 832 674 0,00

03 PUBLIC ORDER AND SECURITY SERVICES 20.138 39.133 0,18 36.755 45.482 0,16 139.584 137.951 0,60 85.915 97.922 0,38 76.812 91.571 0,25 89.068 98.082 0,28 90.417 109.860 0,28 119.990 144.286 0,28

04 ECONOMIC AFFAIRS AND SERVICES

05 ENVIRONMENT PROTECTION SERVICES

06 HOUSING AND SOCIAL WELFARE SERVICES 3.149.181 3.145.821 8,61 3.789.000 3.787.442 10,76 2.620.370 2.613.722 6,62 1.992.055 1.991.276 3,81

07 HEALTH SERVICES

08 RECREATIONAL, CULTURAL AND RELIGIOUS SERVICES

09 EDUCATIONAL SERVICES 2.134 1.898 0,01 2.583 2.227 0,01 3.524 3.152 0,01 3.852 3.312 0,01 3.733 3.239 0,01 3.596 2.668 0,01 2.951 2.481 0,01 3.076 2.370 0,00

10 SOCIAL SECURITY AND SOCIAL BENEFIT SERVICES 4.822.020 4.822.000 21,87 6.145.050 6.145.029 21,86 7.800.000 7.800.000 34,12 8.889.320 8.889.320 34,87 11.903.071 11.902.884 32,59 7.267.901 7.267.901 20,66 9.316.159 9.315.257 23,61 19.960.449 19.950.446 38,17 21.887.775 22.043.750 28.486.751 28.109.131 23.725.540 22.858.874TOTAL 26.489.560 25.490.540 36.713.762 36.523.605 35.320.526 35.186.301 40.193.505 39.455.973 52.543.023 52.272.716

Note: Percentages of the functional expenditures were calculated according to the total expenditure.

Note: Expenditures for General Public Services include the expenditures for the services excluding Legal Proceedings Services (Chief Legal Advisory and DG Proceedings), Defense Services (Dept. of Administrative and Financial Affairs-Secretariat of Defense) and Educational Services (Vocational Education Courses) of the MoF. Defense Services include expenditures for MoF Secretariat of Defense. Public Order and Security Services include the expenditures of Chief Legal Advisory and DG Proceedings. Educational Services include the expenditures for Vocational Education Courses. Social Security and Social Benefit Services include the appropriations allocated to SSIs.

Note: Since the DG Revenue was re-organized in 2005 as the Revenue Administration, the appropriations and expenditures of the DG Revenue were included in the figures until 2005.

116 ANNEX 7 – Economic Classification of the MoF Budget Expenditures for 2002-2009

Thousand TL. 2004 2005 2006 2007 2009 2002 2003 2008 ECONOMI EXPLANATION TOTAL TOTAL TOTAL TOTAL TOTAL TOTAL TOTAL TOTAL C CODE EXPENDITU EXPENDITU EXPENDITU EXPENDITU EXPENDITU EXPENDITUR EXPENDITUR EXPENDITUR APPROPRI % APPROPRI % APPROPRI % APPROPRI % APPROPRI % APPROPRIATI % APPROPRIATIO % APPROPRIATIO % RE RE RE RE RE E E E ATION ATION ATION ATION ATION ON N N 01 PERSONNEL EXPENDITURES 508.613 503.180 2,28 625.384 721.787 2,57 945.374 1.000.461 4,38 1.094.414 1.110.223 4,36 536.416 528.671 1,45 504.749 482.378 1,37 534.989 530.564 1,34 508.108 579.776 1,11 02 STATE CONTRIBUTIONS TO SSI 127.125 125.264 0,57 156.317 179.890 0,64 113.440 109.689 0,48 124.520 125.876 0,49 52.208 50.069 0,14 56.922 54.724 0,16 62.509 59.535 0,15 65.205 64.546 0,12 03 PURCHASE OF GOODS AND SERVICES 198.177 226.971 1,03 305.430 278.585 0,99 446.002 418.713 1,83 410.896 402.509 1,58 193.184 187.548 0,51 249.661 245.733 0,70 575.974 575.155 1,46 380.183 363.843 0,70 05 CURRENT TRANSFERS 18.463.299 18.877.952 85,64 24.134.451 23.738.656 84,45 15.893.197 15.549.212 68,02 16.490.290 16.297.706 63,94 31.282.999 31.204.606 85,44 30.776.702 30.766.263 87,44 36.136.176 35.548.038 90,10 48.939.577 48.645.973 93,06 06 CAPITAL EXPENDITURES 87.849 36.809 0,17 72.582 35.287 0,13 99.970 89.078 0,39 146.547 132.291 0,52 42.503 40.818 0,11 52.221 35.339 0,10 51.469 37.822 0,10 23.621 15.686 0,03 07 CAPITAL TRANSFERS 2.157.742 2.086.236 9,46 2.618.808 2.651.502 9,43 5.555.426 5.061.014 22,14 6.966.954 6.197.299 24,31 2.660.950 2.567.307 7,03 3.380.070 3.308.015 9,40 2.579.432 2.473.110 6,27 2.356.403 2.332.965 4,46 08 LENDING 75.216 75.216 0,34 240.185 240.185 0,85 593.483 593.483 2,60 1.224.635 1.224.636 4,80 1.944.586 1.944.586 5,32 293.849 293.849 0,84 231.749 231.749 0,59 269.926 269.926 0,52 09 CONTINGENCY APPROPRIATIONS 61.172 4.343 0,02 46.742 7.968 0,03 78.648 37.224 0,16 31.304 916 6.352 21.207 0,00 000,00

SPECIAL APPROPRIATIONS AND FOREIGN PROJECT CREDITS 208.582 107.779 21,65 286.852 255.271 35,70 505 39.455.973 52.543.023 52.272.716 TOTAL 21.887.775 22.043.750 28.486.751 28.109.131 23.725.540 22.858.874 26.489.560 25.490.540 36.713.762 36.523.605 35.320.526 35.186.301 40.193. 01 PERSONNEL EXPENDITURES 508.613 503.180 2,28 625.384 721.787 2,57 945.374 1.000.461 4,38 1.094.414 1.110.223 4,36 536.416 528.671 1,45 504.749 482.378 1,37 534.989 530.564 1,34 508.108 579.776 1,11 01 1 CIVIL SERVANTS 505.554 497.728 2,26 621.621 715.123 2,54 937.010 994.411 4,35 1.086.050 1.103.191 4,33 528.337 521.048 1,43 494.640 473.657 1,35 525.685 522.122 1,32 496.623 570.620 1,09 01 2 CONTRACTED PERSONNEL 593 0,00 846 0,00 1.533 1.362 0,01 1.910 1.353 0,01 1.809 1.749 0,00 2.529 2.291 0,01 3.998 3.586 0,01 5.575 3.907 0,01 01 3 WORKERS 3.059 2.845 0,01 3.763 3.736 0,01 4.548 4.268 0,02 4.944 5.060 0,02 5.170 5.106 0,01 6.220 5.997 0,02 4.346 3.993 0,01 4.540 3.899 0,01 01 4 TEMPORARY PERSONNEL 0,00 0,00 83 64 0,00 60 68 0,00 100 84 0,00 110 63 0,00 110 43 0,00 80 76 0,00 01 5 OTHER PERSONNEL 2.014 0,01 2.082 0,01 2.200 356 0,00 1.450 551 0,00 1.000 684 0,00 1.250 370 0,00 850 820 0,00 1.290 1.275 0,00 02 STATE CONTRIBUTIONS TO SSI 127.125 125.264 0,57 156.317 179.890 0,64 113.440 109.689 0,48 124.520 125.876 0,49 52.208 50.069 0,14 56.922 54.724 0,16 62.509 59.535 0,15 65.205 64.546 0,12 02 1 CIVIL SERVANTS 126.384 124.432 0,56 155.405 178.780 0,64 112.535 108.662 0,48 123.324 124.726 0,49 50.933 48.909 0,13 55.400 53.435 0,15 60.740 58.299 0,15 63.649 63.254 0,12 02 2 CONTRACTED PERSONNEL 143 0,00 205 0,00 219 237 0,00 304 235 0,00 315 285 0,00 448 368 0,00 737 595 0,00 800 632 0,00 02 3 WORKERS 741 689 0,00 912 905 0,00 686 790 0,00 882 915 0,00 960 875 0,00 1.053 921 0,00 1.032 641 0,00 756 660 0,00 02 4 TEMPORARY PERSONNEL 0,00 0,00 686 790 0,00 10 0,00 0,00 21 0 0,00 21 0 0,00 0 0 0,00 03 PURCHASE OF GOODS AND SERVICES 198.177 226.971 1,03 305.430 278.585 0,99 446.002 418.713 1,83 410.896 402.509 1,58 193.184 187.548 0,51 249.661 245.733 0,70 575.974 575.155 1,46 380.183 363.843 0,70 03 1 PURCHASE OF GOODS AND SERVICES FOR PRODUCTION 0,00 0,00 1 0,00 1 0,00 2 0,00 23 0 0,00 5.962 0 0,00 23.302 0 0,00 03 2 PURCHASE OF GOODS AND SERVICES FOR CONSUMPTION 58.358 55.845 0,25 71.928 71.230 0,25 102.614 92.487 0,40 120.489 116.724 0,46 58.675 53.308 0,15 88.194 83.762 0,24 107.463 104.245 0,26 123.862 121.898 0,23 03 3 TRAVEL ALLOWANCES 12.682 11.911 0,05 13.550 12.196 0,04 26.392 22.881 0,10 33.855 25.422 0,10 20.821 16.698 0,05 20.449 17.969 0,05 21.490 18.335 0,05 24.184 20.879 0,04 03 4 DUTY EXPENDITURES 230 34.562 0,16 34.730 41.386 0,15 127.560 131.516 0,58 57.238 86.042 0,34 28.994 45.258 0,12 29.926 43.507 0,12 30.680 52.023 0,13 58.091 78.596 0,15 03 5 PURCHASE OF SERVICES 49.387 46.513 0,21 75.042 57.804 0,21 78.556 63.621 0,28 85.618 73.985 0,29 30.671 26.056 0,07 31.563 26.938 0,08 31.122 28.570 0,07 33.156 29.774 0,06 03 6 REPRESENTATION AND PROMOTION EXPENDITURES 30 29 0,00 155 147 0,00 314 226 0,00 295 202 0,00 328 229 0,00 401 334 0,00 416 311 0,00 558 402 0,00 03 7 MOVABLES,INCORPOREAL RIGHTS, MAINTENANCE AND REPAIR EXPENDITURES 2.752 0,01 3.115 0,01 11.117 8.091 0,04 10.549 7.648 0,03 6.062 4.591 0,01 7.233 5.097 0,01 7.122 6.154 0,02 7.389 6.203 0,01 03 8 MAINTENANCE AND REPAIR OF IMMOVABLES 2.727 0,01 2.609 0,01 6.966 5.815 0,03 5.919 5.620 0,02 5.766 4.991 0,01 6.027 5.470 0,02 6.569 6.135 0,02 4.860 4.448 0,01 05 1 DUTY LOSSES 03 9 TREATMENT AND FUNERAL EXPENDITURES 10.596.410 11.033.271 50,05 15.245.37477.490 14.944.149 72.632 0,33 53,16 110.025 2.815.052 2.815.000 90.098 0,32 12,31 3.346.180 92.482 3.345. 94.076980 0,41 13,13 6.216.271 96.932 6.215.882 86.866 0,34 17,02 41.865 7.281.209 36.417 7.280.200 0,10 20,69 65.845 7.612.450 62.656 7.609. 0,18605 19,29 365.150 8.896.537 359.382 8.886.533 0,91 17,00 104.783 101.643 0,19 05 2 TREASURY AIDS 05 CURRENT TRANSFERS 7.582.233 7.568.370 34,3318.463.299 8.637.540 18.877.952 8.584.194 85,6430,54 24.134.451 11.952.435 23.738.656 11.895.09384,45 52,04 15.893.197 11.760.120 15.549.212 11.567.822 68,02 45,38 16.490.290 11.080.932 16.297.706 11.004.142 63,94 30,13 31.282.999 6.177.312 31.204.606 6.172.658 85,44 17,54 30.776.702 8.402.289 30.766.263 7.819. 87,44963 19,8236.136.176 18.696.839 35.548.038 18.416.71890,10 35,2348.939.577 48.645.973 93,06 05 3 TRANSFERS TO NON-PROFIT ORGANIZATIONS 204.046 199.125 0,90 164.547 164.365 0,58 125.553 129.457 0,57 90.261 90.209 0,35 107.840 107.781 0,30 334.118 329.390 0,94 212.775 210.217 0,53 404.037 401.276 0,77 05 6 TRANSFERS ABROAD 30.000 26.601 0,12 28.000 25.683 0,09 1.000.000 709.510 3,10 1.293.446 1.293.446 5,07 298 295 0,00 243 196 0,00 334 177 0,00 232 194 0,00 05 8 SHARES RESERVED FROM REVENUES 50.610 50.585 0,23 58.990 20.265 0,07 157 152 0,00 283 249 0,00 13.877.658 13.876.506 37,99 16.983.819 16.983.819 48,27 19.908.328 19.908.076 50,46 20.941.934 20.941.251 40,06 06 CAPITAL EXPENDITURES 87.849 36.809 0,17 72.582 35.287 0,13 99.970 89.078 0,39 146.547 132.291 0,52 42.503 40.818 0,11 52.221 35.339 0,10 51.469 37.822 0,10 23.621 15.686 0,03 06 1 PURCHASE OF PRODUCED GOODS 350 342 0,00 220 201 0,00 54.475 49.418 0,22 88.157 86.205 0,34 17.015 16.911 0,05 18.620 10.686 0,03 13.634 9.360 0,02 8.929 6.581 0,01 06 2 MOVABLES CAPITAL PRODUCTION EXPENDITURES 0,00 0,00 0,00 963 0,00 0,00 0,00 35 35 0,00 0 0 0,00 06 3 INCORPOREAL RIGHTS 0,00 0,00 16.537 13.624 0,06 16.283 14.711 0,06 3.610 3.045 0,01 6.000 0 0,00 7.439 4.503 0,01 2.750 1.972 0,00 06 4 PURCHASE AND EXPROPRIATION OF IMMOVABLES 3.139 0,01 1.249 0,00 2.856 1.734 0,01 4.817 3.469 0,01 6.321 6.320 0,02 4.357 4.254 0,01 7.174 5.132 0,01 2.000 1.186 0,00 06 5 IMMOVABLES CAPITAL PRODUCTION EXPENDITURES 0,00 0,00 6.791 6.366 0,03 6.580 3.483 0,01 0,00 0,00 1 0 0,00 1.345 0 0,00 06 6 OVERHAUL OF MOVABLES 60.741 18.325 0,08 39.691 12.284 0,04 7.592 7.428 0,03 12.505 11.366 0,04 965 816 0,00 4.764 4.130 0,01 3.820 3.676 0,01 3.901 3.073 0,01 06 7 OVERHAUL OF IMMOVABLES 26.758 15.003 0,07 32.671 21.553 0,08 11.719 10.508 0,05 17.242 13.057 0,05 14.592 13.726 0,04 18.480 16.269 0,05 19.251 15.001 0,04 4.476 2.657 0,01 06 9 OTHER CAPITAL EXPENDITURES 115 115 220 217 0,00 07 CAPITAL TRANSFERS 2.157.742 2.086.236 9,46 2.618.808 2.651.502 9,43 5.555.426 5.061.014 22,14 6.966.954 6.197.299 24,31 2.660.950 2.567.307 7,03 3.380.070 3.308.015 9,40 2.579.432 2.473.110 6,27 2.356.403 2.332.965 4,46 07 1 FOREIGN CAPITAL EXPENDITURES 2.157.742 2.086.236 9,95 2.618.808 2.651.502 9,43 5.555.426 5.061.014 22,14 6.966.954 6.197.299 24,31 2.660.950 2.567.307 7,03 3.380.070 3.308.015 9,40 2.579.432 2.473.110 6,27 2.231.682 2.332.965 4,46 08 LENDING 75.216 75.216 0,34 240.185 240.185 0,85 593.483 593.483 2,60 1.224.635 1.224.636 4,80 1.944.586 1.944.586 5,32 293.849 293.849 0,84 231.749 231.749 0,59 269.926 269.926 0,52 08 1 FOREIGN LENDING APPROPRIATION FOR COVERING PERSONNEL EXPENDITURES 75.2163.753 75.216 0,34 240.185 370 240.185 0,85 593.483 87593.483 2,60 1.224.635 1.224.636 4,80 1.944.586 565 1.944.586 5,32 293.849 401 293.849 0,84 231.749 368 231.749 0,59 269.926 0 269.926 0 0,52 0,00 0909 3 CONTINGENCYAPPROPRIATION APPROPRIATIONS FOR FACILITATING INVESTMENTS 61.172542 4.343 0,02 46.742 50 7.968 0,03 78.648 738 37.224 0,16 31.304 3.316 0 0,00 916 48 0,00 6.352 0 0 0,00 21.207 0 0 0,00 00 0 00,00 0,00 0909 1 5 APPROPRIATION FOR COVERING DISASTER EXPENDITURES 29.833 229 500 0 0 0 0 0,00 09 6 CONTINGENCY APPROPRIATION 22.698 38.023 37.491 27.216 15 236 20.839 0 0 0,00 09 7 APPROPRIATION FOR COVERING EXPENDITURES OF NEW UNITS 0 0 0,00 09 9 OTHER CONTINGENCY APPROPRIATIONS 4.346 4.343 0,02 8.299 7.968 0,03 40.103 37.224 0,16 272 288 5.713 0 0 0,00

SERVICES FOR SPECIAL APPROPRIATIONS AND FOREIGN PROJECT CREDITS * 208.582 107.779 0,49 286.852 255.271 0,91

21.887.775 22.043.750 28.486.751 28.109.131 23.725.540 22.858.874 26.489.560 25.490.540 36.713.762 36.523.605 35.320.526 35.186.301 40.193.505 39.455.973 52.543.023 52.272.716

* It is included in the programme budget classification, but it is not distributed according to the economic classification. NOTE: TOTAL 1- 2- Since the DG Revenue was re-organized in 2005 as the Revenue Administration, the appropriations and expenditures of the DG Revenue were included in the figures until 2005. 2- Appropriations for some expenditures are not seen since appropriations have been sent in total due to the programme budget for 2002-2003. 3- Special Appropriations are not included in total figures. 4- Percentage of the economic code is its ratio to the total expenditure.

117 ANNEX 8 – Central Government Budget Realizations For 2009

Thousand TL 2009

January- December January- December Target January February March April May June July August September October November December Realization December Total Realization Rate (%) Rate (%)

Budget Expenditures 259.155.933 18.796.137 25.808.272 21.820.289 21.009.963 19.463.744 17.932.371 23.392.214 23.518.304 25.427.734 21.430.590 20.942.143 27.733.324 10,7 267.275.085 103,13

Non-Interest Expenditures 201.655.903 15.013.225 15.949.584 17.371.673 17.971.922 14.473.114 16.809.105 18.166.105 15.460.658 20.441.164 16.699.175 19.026.883 26.691.582 13,2 214.074.190 106,2

Personnel Expenditures 57.211.200 5.645.861 4.429.917 4.420.834 4.702.039 4.584.468 4.685.801 4.871.174 4.406.468 4.850.310 4.815.395 4.884.946 3.633.038 6,4 55.930.251 97,8

State Constibutions to SSI 7.242.800 690.614 542.152 536.656 556.771 555.951 564.296 563.028 544.947 584.995 577.424 598.088 890.921 12,3 7.205.843 99,5

Purchase of Goods and Services 25.453.677 1.096.313 1.480.829 2.224.389 2.326.353 1.670.505 1.900.419 2.432.708 2.277.658 1.916.170 2.510.464 2.476.601 7.281.887 28,6 29.594.296 116,3

Current Transfers 87.955.756 7.166.408 8.777.144 8.235.812 7.829.130 6.329.959 7.758.742 7.637.483 6.447.761 10.022.619 6.866.057 7.806.467 6.883.434 7,8 91.761.016 104,3

Capital Expenditures 14.839.000 8.684 314.186 786.844 1.820.189 776.100 1.280.834 1.711.844 1.297.178 2.296.168 1.363.514 2.212.324 5.979.418 40,3 19.847.283 133,8

Capital Transfers 2.824.819 80.300 71.821 235.209 379.822 137.363 272.096 377.276 220.059 419.562 248.864 559.879 1.311.439 46,4 4.313.690 152,7

Lending 4.660.842 325.045 333.535 931.929 357.618 418.768 346.917 572.592 266.587 351.340 317.457 488.578 711.445 15,3 5.421.811 116,3

Interest Contingency Expenditures Appropriations 57.500.030 1.467.809 3.782.912 9.858.688 4.448.616 3.038.041 4.990.630 1.123.266 5.226.109 8.057.646 4.986.570 4.731.415 1.915.260 1.041.742 1,8 53.200.895 92,5

Budget Revenues 248.758.275 15.829.508 18.415.431 13.052.988 20.063.365 18.853.945 15.411.031 16.784.958 21.993.651 15.953.209 19.009.537 17.818.232 21.874.602 8,8 215.060.457 86,5

General Budget Revenues 242.957.046 15.572.729 17.363.465 12.499.341 19.430.162 18.436.145 14.984.950 16.323.391 21.712.882 15.556.464 18.100.891 17.362.791 21.313.224 8,8 208.656.435 85,9

Tax Revenues 202.089.590 13.825.041 13.804.651 10.514.428 12.813.506 15.275.419 12.850.277 14.435.135 19.296.297 12.517.349 13.831.397 15.083.957 18.169.118 9,0 172.416.575 85,3

Enterprise and Property Revenues 7.362.410 490.533 335.769 399.106 4.571.156 1.056.230 460.057 369.177 360.982 476.812 422.712 375.792 625.878 8,5 9.944.204 135,1

Special Revenues and Grants and Donations 941.822 37.660 210.092 111.656 40.389 32.397 89.755 29.072 26.446 135.795 79.348 37.884 48.900 5,2 879.394 93,4

Interests, Shares and Fines 19.424.424 1.199.479 1.689.477 1.433.226 1.963.750 1.955.212 1.558.065 1.451.189 1.995.113 2.397.348 3.717.564 1.833.795 1.875.831 9,7 23.070.049 118,8

Capital Revenues 13.138.800 13.257 1.306.689 22.666 22.641 12.951 19.141 15.639 24.680 12.070 14.795 15.438 564.309 4,3 2.044.276 15,6

OwnCollection Revenues of Receivables of Administrations with Spe c 3.877.618 6.759 164.390 16.787 339.900 18.259 503.578 18.720 356.407 103.936 343.113 7.655 308.791 23.179 381.282 9.364 213.542 17.090 327.178 35.075 805.548 15.925 370.344 29.188 488.437 12,6 301.937 4.602.510 118,7

Revenues of Regulatory and Supervisory Age 1.923.611 92.389 712.066 50.069 276.796 74.687 117.290 80.285 67.227 69.567 103.098 85.097 72.941 3,8 1.801.512 93,7

Budget Balance -10.397.658 -2.966.629 -7.392.841 -8.767.301 -946.598 -609.799 -2.521.340 -6.607.256 -1.524.653 -9.474.525 -2.421.053 -3.123.911 -5.858.722 56,3 -52.214.628 502,2

Primary Balance 47.102.372 816.283 2.465.847 -4.318.685 2.091.443 4.380.831 -1.398.074 -1.381.147 6.532.993 -4.487.955 2.310.362 -1.208.651 -4.816.980 -10,2 986.267 2,1

118