Month: February 2013

The public debate on the Draft of Law on Budget and Fiscal Accountability is completed and the Law will, if adopted, replace the systematic Budget Law which is currently in force. According to the Draft of Law, misdemeanor accountability is arranged so that numerous actions remained without prescribed penalty. The authority in charge of misdemeanor proceedings has not been established, given deadlines will make that the misdemeanors will be obsolete and will not be processed and certain penalties are too low and will not deter anyone from abusing the public funds.

The novelty of this Draft of Law in the Budget Law in Montenegro is misdemeanor accountability. In that manner Montenegro will cease to be an exception in the region, the only country which in the systematic Budget Law hasn’t defined misdemeanor accountability. The text of the Draft Law uses every possible legal vacuum, in order to prevent determination of misdemeanor accountability for abuse of public funds in practice.

The Draft Law provides penalties for only 8 misdemeanors, while many other actions remain beyond sanctions. The same law in Croatia envisages even 124 misdemeanor actions. Some of the more obvious omissions are related to non- prediction of penalties for breaching the terms of budget preparation and reporting, management of public funds, cash management, loans and guarantees to local governments and enterprises, and so on.

From the penalty provisions it is not clear who will be supervise the implementation of this Act and of misdemeanor proceedings. Such a legal loophole definitely leads to the situation that we remember from the example of the Law on Public Procurement: when the question of jurisdiction for misdemeanor proceedings remains unsolved until the misdemeanor became obsolete.

The Draft Law does not prescribe a maximum period in which the misdemeanor becomes obsolete. This failure to effectively prevent the misdemeanor procedure continues because the most misdemeanors can be learnt only from the final annual account of the budget, and almost a year after the execution of the budget. If the maximum period in which the starting of the misdemeanor proceedings becomes obsolete is not defined, all proceedings will be discarded due to obsolescence.

Even if by some miracle, misdemeanor proceeding occurs only (amazingly low) financial penalties are provided. The proponent has decided to set minimum fines between 200 and 800 Euros, although the Law on Misdemeanors prescribes penalties of up to 4000 Euros for breach in the field of taxation. In addition to cash, it would be effective to predict the so-called measures of safety for particularly serious breaches of important provisions of the law. This would mean that the perpetrators are punished by permanent or temporary suspension from performance in public finances.

In short, the way the misdemeanor accountability is regulated in the Draft of Budget Law will surely prevent that anyone of being liable for systemic breaches of the norms of this systematic legal act. Therefore, it is necessary for proponent to amend the proposed text of the law, or, finally, for the MPs not to allow these solutions to be adopted.

Here you can download IA’s Commentary on the Draft Of Law on Budget and Fiscal Accountability. (only in Montenegrin)

Marko SOŠIĆ
Policy Analyst

The Draft of Law on Budget and Fiscal Accountability does not contribute sufficiently to the improvement of the budget transparency, to the participation of the Parliament in the budget cycle, to the regulation of misdemeanor accountability, and some of its provisions are directly opposite to the Government’s strategic goals.

During the public discussion on the Draft Law, Institute Alternative prepared its Commentary and sent it to the Ministry of Finance. Our main objections to the Draft of Law are related to the participation of the Parliament in the budget cycle, to the need of strengthening the financial independence of the control institutions, to the tendency of overlapping of the systems of internal control of public finances with the regulation of misdemeanor accountability.

The draft of law does not provide consultation and participation of the Parliament while drafting the Strategy of debt management as well as in the preparation of the capital budget. In order to change this situation, the Government should submit a draft of the strategy and capital budget to the Parliamentary Committee for Economy, Finance and Budget to review it and give opinion.

The dynamics of the submission of key budget documents to the Parliament also remains problematic and prevents the possibility of a thorough analysis of the budget proposal and its implementation by the MPs. MPs do not have enough time to review and approve these documents, since their submission is not prompt. We propose that the deadline for the submission of each of these acts move so that MPs have a minimum of three months to review the budget proposal and to discuss the final account of the budget at the beginning of the third quarter of the year.

Adoption of the new budget is the opportunity to finally establish a system of reporting of the Parliament on the execution of the budget during the fiscal year. Accordingly, the Ministry of Finance should submit each six months a report to the Parliament on the Budget. In that manner, Montenegro would cease to be the only country in the region where there is no practice of semi-annual reporting to the Parliament on budget execution.

Our comments are focused on strengthening the financial independence of the SAI, the Ombudsman and the Agency for the Protection of Personal Data, which is directly threatened by the authority of the Ministry of Finance to carry out the correction of the proposals of the annual budgets of these institutions. Therefore, the new law should empower the Parliament to have a final word in determining these proposals, without the intervention of the Ministry.

Introducing the Inspection, provided by the draft, is in contrary to the efforts of the Government to develop a system of internal financial control in the public sector. Instead of establishing new bodies, it would be more effective to show the Government’s determination to strengthen its internal control system in which the legal and institutional framework has already been established.

Here you can download IA’s Commentary on the Draft of the Law on Budget and Fiscal Accountability (in Montenegrin only)