The Budget Code of Georgia allows the establishment of Contingency Funds of the Government of Georgia and the President of Georgia in the state budget. However, from 2019, the state budget no longer allocates assets for the Contingency Fund of the President of Georgia, and the financial resources provided for the Contingency Funds will be fully directed to the Government of Georgia.
According to Georgian law, money from the Contingency Fund of the Government of Georgia can only be allocated to finance unforeseen expenses. Consequently, natural disasters, epidemics, ecological and other types of disasters can be important reasons for withdrawals from the Contingency Fund. The situation created by the Covid-19 pandemic in 2020 imposed the necessity of financing certain measures to fight the virus from the Contingency Funds.
Following the outbreak of the pandemic, in order to examine the current practice of managing the Contingency Fund of the Government of Georgia, IDFI analyzed the purposes of expenditures from the Contingency Fund in 2020 and the first 6 months of 2021. As a result, IDFI examined the data reflected in the state budget spending reports, and in order to obtain detailed information on the specific amounts allocated from the Contingency Fund, addressed regulatory agencies with relevant public information requests. It should be mentioned that after the start of the pandemic, the government administration was no longer publishing government decrees on the website, including the allocation of funds from the Contingency Fund. In September 2020, IDFI's request for a government decree was also left unanswered, after which, on December 18, 2020, IDFI appealed to the Tbilisi City Court. Unfortunately, the process is facing significant delays and the trial has not been scheduled yet.
In 2020, the Government of Georgia adopted 12 decrees on the allocation of funds from the Contingency Fund, according to which the volume of allocated assignments amounted to a total of 56 million GEL, and cash spending - 54.6 million GEL. In the first and second quarters of 2021, 9 decrees of the Government of Georgia allocated 11 million GEL from the Contingency Fund, the cash spending amounted to 7 million GEL. As a result, in 2020 and the first 6 months of 2021, a total of 67 million GEL was allocated from the Contingency Fund of the Government, of which more than 61 million GEL (61.8 million GEL) was spent.
Among these funds, only 13% (7.9 million GEL) was spent directly on the fight against the coronavirus. The largest amount from the Contingency Fund - 37% (22.7 million GEL) was spent by the Ministry of Justice of Georgia on international arbitration disputes and ongoing proceedings in foreign courts. 10% (6.5 million GEL) was spent on the necessary measures for the second round of elections, 9% (5.6 million GEL) was spent by the Administration of the Georgian Government on the procurement of lobbying consulting services. 23% (14.4 million GEL) was spent on funding the Ministry of Defense of Georgia. The remaining 7% (4.2 million GEL) was spent on various purposes that have nothing to do with pandemic challenges. Additionally, approximately half a million GEL allocated for the Ministry of Foreign Affairs of Georgia has been classified.
It is important to mention that out of the 7.9 million GEL spent from the Contingency Fund of the Government of Georgia for the fight against coronavirus, 4 million GEL was allocated to the Ministry of Health of Georgia. According to the Ministry of Health of Georgia, the largest share of 2.8 million GEL was spent for the purchase of special clothing (overalls, masks, goggles BayMax S1551Q) for fighting COVID infection from Erio Production Ltd. 271 thousand GEL was spent with Made To Make Ltd. for the purchase of special-purpose clothing (bio-chemical overalls, microporous high-necked shoe covers).
145 thousand GEL was spent on the purchase of hand disinfectant solution for COVID infection based on the purchase made with Pharma Ltd., and 105 thousand GEL was transferred to GEONET EXPO Ltd. for the purchase of visitor coats. 96.6 thousand GEL was transferred to Green Systems Ltd. for the purchase of a CISCO Contact Center System (multi-year) license for the COVID infection hotline and a one-year license for the telephone recording system.
The Law of Georgia on State Procurement does not apply to state procurements with funds allocated from the Contingency Fund of the Government of Georgia. Consequently, there was no mandatory competition in the implementation of such public procurements by the Ministry of Health of Georgia, which significantly increased the risks of improper management of budget funds.
In procurements financed from the Contingency Fund, IDFI focuses on individual companies selected by the Ministry of Health of Georgia in various studies. For example, before the pandemic, GEONET EXPO Ltd. operated in the field of construction and real estate. The company won the e-tender twice and was fined for violating the deadlines in both cases. Against this background, in May 2020, the Ministry of Health of Georgia signed contracts valued up to half a million GEL for the supply of surgical coats in a simplified manner.
It is also interesting to note that Eroyo Production Ltd., with whom the Ministry of Health signed the most expensive contracts (totaling 2.8 million GEL) under the funding received from the Contingency Fund, was established in 2019 and had not participated in state tenders previously. According to the company's charter, its specific field of activity is not defined and it is indicated that the company can carry out any activity that is not prohibited by the legislation of Georgia.
Following is a list of the top 10 companies with whom the Ministry of Internally Displaced Persons from the Occupied Territories, Labor, Health and Social Affairs of Georgia made the largest number of purchases under the funding received from the Contingency Fund:
Of the remaining, 3.9 million GEL was spent from the Contingency Fund of Government to fight the Coronavirus, 3 million GEL was spent on mandatory quarantine services for Georgian citizens who were returned from abroad. IDFI's request for detailed information on this expenditure was left unanswered by the National Tourism Administration. 613 thousand GEL was spent from the Contingency Fund for the transportation of Georgian citizens from the Republic of Italy, 110 thousand GEL was spent on the return of students from the US during the pandemic to Georgia, and 200 thousand GEL was allocated for the operation of the Unified Government Hotline "144".
As mentioned above, the largest amount (23 million GEL) was allocated from the Contingency Fund to the Ministry of Justice, which, according to the budget spending report, was related to international arbitration disputes and cases pending in foreign courts. IDFI applied to the Ministry for detailed information on the costs incurred for each international arbitration dispute and the ongoing case in a foreign court, but the Ministry left the request from IDFI unanswered.
In 2020, 13 million GEL was allocated from the Contingency Fund of Government for meeting the commitments made by the Ministry of Defense by the end of the year. According to the information provided by the Ministry of Defense, 9.7 million GEL was spent on the remuneration of military servicemen, and 3.3 million GEL - on business trips to international peacekeeping missions. It should be noted that the need for additional funds in the area of remuneration was due to the increase in salaries of military servicemen, while the shortage of funds needed for business trips within international missions is associated with changes in exchange rates, in particular, the rising rate for US dollars. In 2021, an additional 1.5 million GEL was allocated for the Ministry to finance some of the events dedicated to the Independence Day of Georgia - May 26.
According to the Central Election Commission of Georgia, a total of 6.5 million GEL was spent on funding the Commission from the Contingency Fund of Government and 5.4 million was spent on election events (including salaries - 2.87 million GEL, various administrative expenses - 1.9 million GEL), 1 million GEL - to finance the election campaign expenses of election subjects, and 28 thousand GEL for the training of officials.
In 2020 and the first 6 months of 2021, in addition to the 5.4 million GEL spent by the Government Administration on the procurement of lobbying consulting services from the Contingency Fund, in June 2021, 282 thousand GEL was allocated to the Ministry of Foreign Affairs for the procurement of services of EURACTIV.COM information portal. Additionally, the Ministry of Economy and Sustainable Development of Georgia spent 889 thousand GEL in May 2021 to promote Georgia's tourism potential and also to finance the country's marketing campaign during the international tourism exhibition market "FITUR 2021".
In addition to the expenses discussed above, 7% of the expenses incurred from the Contingency Fund during the research period were spent for various purposes. Among them, 2.6 million GEL was allocated to the Ministry of Finance of Georgia to finance goods, services, and other taxes required by the Georgian legislation for issuing new Eurobonds of Georgia. 205 thousand GEL was allocated for families living in the villages adjacent to the border dividing the occupied territories to provide heating during the winter. The Ministry of Foreign Affairs of Georgia has spent 200,000 GEL from the Contingency Fund to cover the debt related to the buildings used by the Georgian Diaspora and the Embassy of Georgia in the State of Israel (3 buildings). The High Council of Justice allocated 200,000 GEL for the smooth operation of the mediation system, 66,700 GEL for the Ministry of Health to provide uninterrupted medical care to Maia Gomuri and Giorgi Sulashvili, and 40,000 GEL for the families of those tragically killed crossing the Enguri River on April 7, 2021.
The analysis of expenditures from the Contingency Fund of the Government of Georgia in 2020 and the first 6 months of 2021 shows that the practice of managing the Contingency Fund during this period is not entirely related to the challenges of the coronavirus pandemic in the country. For example, despite the difficulties caused by the Covid-19 pandemic in the country, only 13% of the expenditures during this period were used to fight the coronavirus directly. In addition, substantial funds were allocated from the Contingency Fund for activities that could have been considered in the budget planning process. For example, procurement of lobbying consultancy services, increase in salaries of military servicemen, funding of an event dedicated to May 26, financing of election-related expenses, and more.
An important precondition for such expenditures from the Contingency Fund is inadequate legislation, which does not explicitly limit the possibility of using the reserve fund for non-force majeure situations. Additionally, the avoidance of disclosing detailed information on the expenditures made by individual agencies within the framework of funding received from the Contingency Fund can be assessed as a significant problem. Concealing such information is particularly problematic in the light of the fact that public procurement law does not apply to funding received from contingency funds and there is a high risk of inefficient management of budget funds.
The publication was prepared in frames of the project – Empowered Civil Society and Enhanced Beneficial Ownership Transparency Standards for Good Governance – funded by the Governments of Czechia, Hungary, Poland and Slovakia through Visegrad Grants from International Visegrad Fund. The mission of the fund is to advance ideas for sustainable regional cooperation in Central Europe.
The responsibility of the content of the article lies with the Institute for Development of Freedom of Information (IDFI). It does not necessarily reflect the opinions of International Visegrad Fund.
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