NGO: Legislation Does Not Include Regulations about Disposal of State Reserve Funds

The Institute for Development of Freedom of Information (IDFI) says that the Georgian legislation does not have records that regulate the disposal of state reserve funds.

The organization studied the expenditures made by 60 municipalities last year and found that there are risks of inappropriate use of finances and unjustified spending of budget funds.

To note, the state budget of Georgia includes reserve funds which aim to cover unforeseen expenses arising during the year. Like the state budget, reserve funds are also included in the budgets of local governments.

The Law of Georgia on the Budget of the Local Self-Government Units reads that the Reserve Fund is designated by the local self-government budget for financing “unforeseen, extraordinary and other local events.” Consequently, the Reserve Fund is intended to cover expenses incurred during the year that could not be accounted for in objective budgeting processes, such as natural disasters, epidemics, environmental and other disasters.

In addition to this, the Reserve Fund should not exceed 2% of the total appropriations provided from the annual budget.

After carrying out its study, the IDFI found that in 2018, GEL 8,949,777 ($3,015,118) was spent from 60 Municipalities’ Reserve Funds, the highest amount being spent by Tbilisi City Hall - GEL 2,747,100 ($925,479).

Further, during 2018, the largest part of the total expenditure of Municipal Reserve Funds, 30%, was spent on financial assistance and amounted to GEL 2,653,706 ($894,015).

“The fate of 15% of the total expenditures is completely unknown,” the organization stressed. “Specifically, 7 municipalities (Kutaisi, Borjomi, Kobuleti, Marneuli, Lentekhi, Tsageri, Lanchkhuti) did not disclose information regarding the destination of GEL 1,367,811 ($460,806) spent from their Reserve Funds.”

The NGO says that last year the Reserve Funds from various Municipalities funded a number of capital projects, yet failed to indicate the purpose or need for funding these projects.

The study also revealed that in some cases, reserve funds are used to finance cultural, sports and educational events, which is not envisaged by the legislation.

“Effective planning of reserve funds for local governments is problematic both in terms of exceeding the planned rate and failing to use it. For example, in 2018, the Gori, Kaspi, Kazbegi, Tsalka and Sighnaghi municipalities did not spend money from their Reserve Funds, which amounted to GEL 280,000 ($94,330),” the IDFI said.

The NGO concluded that the current legislation does not include important regulations related to the management of reserve funds, leading to risks of inappropriate use of finances and unjustified spending of budgetary funds.

“The Law of Georgia on State Procurement does not apply to the funds allocated from the Reserve Fund of Tbilisi City Hall. Accordingly, purchases from the Tbilisi City Hall Reserve Fund are carried out without ensuring the principles of competitive environment and transparency,” the IDFI reported, adding that there is no united standard for justifying the appropriateness of expenditures from the Reserve Funds or their proper monitoring.

By Tea Mariamidze

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10 October 2019 16:49