Budget Credibility: Extended Track

project supported by International Budget Partnership   

Joint Project on Budget Credibility: Extended Track - Final report -  November 2019

The research "Multi-Country Study on Budget Credibility"  in the first phase proofed all previously identified weaknesses of the system of contingency funds (budget reserve) and exposed some that the public was not aware of. Using of contingency funds in Serbia, by the Executive has significant impact to the budget during the fiscal year. Essentially, Government plans in advance that significant part of the original budget would not be spent for the original purposes. Government does not provide explanation on consequences of to the original budget programs from which money was taken. These funds are used for other purposes, either entirely new or for those where original funds were insufficient. Significant part of these funds is transferred to the municipalities selected in an arbitrary manner and without the explanation.

Since the Government did not submit its financial end – year report to the Parliament for several years, the ratio of contingency funds’ transfers is not explained even post festum. State Audit Institution is providing an overview of these expenditures. Individual Government decisions on transfers, without explanatory note are published in the Official Gazette papers, but not on-line and for free. This all reduces the level of transparency of this decision making.  

Another problem is lack of information about effects of the budget reserve transfers to the original programs. 

Our key recommendations are:

For the Government following:

• to publish all decisions on budget contingency reserve transfers on – line
• to draft and publish detailed explanatory note for these decisions
• to establish criteria for distribution of contingency funds to the municipalities with “reduced income”
• to publish these criteria and information about the selection process, where needs of municipalities is greater than available funds

State Audit Institution to perform performance audit of programs affected by transfers to the budget reserve and compliance audit of decisions related to the further distribution of these funds to municipalities;

Fiscal Council, to perform a more detailed analyze of phenomenon researched here and to initiated more strict fiscal rules

We would like to achieve following goals in a longer term:

Government:

• to publish all decisions on budget contingency reserve transfers on – line
• to draft and publish detailed explanatory note for these decisions
• to establish criteria for distribution of contingency funds to the municipalities
• to publish these criteria and information about the selection process, where needs of municipalities is greater than available funds

Supreme Audit Institution to  conduct performance audit of programs affected by transfers to the budget reserve and compliance audit of decisions related to the further distribution of these funds to municipalities;

In a mid-term (2020) we expect:

State Audit Institution to perform either compliance or performance audit regarding the allocation of contingency funds

and

Fiscal Council, to perform a more detailed analyze of phenomenon researched here and to initiated more strict fiscal rules