The Georgian government Reserve Fund is designed to fund unforeseen and urgent situations. But during the first nine months of 2016, the Fund allocated 62% of its money for programs already funded by the national budget and for which there seems to be no need for emergency spending.
This is not a new problem. For example, after the June 13, 2015 flood in Tbilisi which killed 20 people, only $US2.5 million was allocated from the Reserve Fund. In the same year, $7.6 million was spent from the Fund for hosting the European Youth Summer Olympic Festival, even though the government knew the Festival was coming more than two years in advance, and that $3.7 million had already been allocated from the Tbilisi city budgets for the years 2013-2015.
(Editor’s note: Conversions from Georgian currency to US dollars are based on the average yearly rates for the years 2013-16).
A State Audit Office report on 2015 spending concluded that proper government budget planning would solve the problem of using emergency funds for planned expenses. The 2015 national budget was $5.1 billion plus a Reserve Fund of $47.2 million; the 2016 national budget was $4.3 billion plus a Reserve Fund of $20.8 million.
But nine months into 2016, the government had already taken $15.4 million from the budgets of the Ministries of Culture, Defense, Foreign Affairs and Environment Protection, and directed that money to the Reserve Fund.
According to a 2009 amendment to Georgian law, the Fund the fund should only allocate money for urgent projects such as natural disasters, or to fund unforeseen national budget expenses.
Ifact.ge looked at all the Reserve Fund expenditures for the first nine months of 2016, and calculated that 62 percent could be considered “non-emergency” spending. It includes:
- $1.9 million for parliamentary elections. This was in addition to the $18.6 originally budgeted.
- $181,500 for annual May 26 Independence Day celebrations, of which $132,700 went to Georgia Public Broadcasting for TV coverage. In 2015, $777,800 was taken from the Fund for May 26 expenses, including $124,400 for Georgia Public Broadcasting.
- $2.1 million was transferred to the Ministry of Economics to implement a “Produce in Georgia” agriculture support project.
- $8.7 million to cover cost of Microsoft licenses purchased by the Ministry of Finance.
- $1.6 million in bonuses for national team athletes.
- $4.2 million for a national football development program. This amount was spent despite a different government decree that only $833,000 should be allocated.
State Audit Office criticisms of the use of the Fund include:
- a majority of the Fund spending is spent in the last quarter of the fiscal year, which increases the chances of spending it inefficiently, and can also have a negative effect on the currency exchange rate.
- a broad interpretation of the law allows allocations for projects which, with proper planning, would be fully paid for by the national budget.
When a national budget is passed by Parliament, a hasty process in Georgia which leaves little time for careful consideration, there is a budget line for the Reserve Fund. In the first 9 months of 2016, Fund spending has already exceeded its budget by $15.4 million, forcing the shift of money from the ministries. In 2015 the Reserve Fund budget was $47.2 million, but final spending was $93.9 million.
The government periodically orders the Ministry of Finance to take budget funds from ministries and redirect them to the Fund. An August 3, 2016 government decree ordered that $31.8 million be sent to the Fund. The same decree ordered that $33.3 million be transferred to the Fund out of $262 million set aside to service foreign debt.
The decree stated how some of the money would be spent:
- $14.6 million for the Ministry of Agriculture to organize wine harvest activities. The national budget had only provided $10.4 million for the harvest. In 2015, the national budget provided $27 million.
- $14.6 million for the Ministry of Health for the national Health Insurance Program. The national budget had already provided $237.5 million. However, a document provided by the Ministry of Finance indicates that only $8.4 million was transferred to the Ministry of Health. from the Fund.
Ifact.ge sent a list of questions to the Ministry of Finance about how the government uses the Fund. No reply has been received to date.