On 10 December 2014, Deputy Minister of Finance of Georgia, Giorgi Kakauridze, addressed the Parliament of Georgia regarding the planned amendments to the Budget Code of Georgia. The Ministry of Finance of Georgia elaborated a reform package to ensure the growing efficiency of public finance, better accounting of state funds and more transparency of the state budget. Giorgi Kakauridze remarked that one of the requirements of the Association Agreement with the EU is to implement the aforementioned reform package and introduce an integrated system of treasury management for self-governing units.

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On 12 December 2014, the Parliament of Georgia voted in favour of the amendments to the Budgetary Code of Georgia. Amendments were drafted by the Ministry of Finance upon the request of the Government of Georgia. The amendments envisage the expansion of budgetary regulation. Therefore, within the framework of public finance management reform, budgets at every level and within each budgetary organisation have been incorporated into an integrated accounting system of the State Treasury beginning from 1 January 2015.

Of particular mention is that the initial draft of the amendments envisaged all legal entities of public law (LEPLs) and non-commercial legal entities (NCLEs) founded by or being accountable to the organs of self-government, an autonomous republic or the central government to be incorporated into the integrated accounting system of the State Treasury. The planned incorporation of self-governing units within the system was criticised by a representative of the United National Movement and member of Tbilisi City Council, Irakli Abesadze. Mr Abesadze asserted that the aforementioned regulations were aimed at limiting the independence of the self-governing units.

There were several changes in the final draft of the amendments approved by the Parliament. For example, the LEPLs founded upon a membership basis were exempted from the list and will not be incorporated into the integrated accounting system of the State Treasury unless they are funded from the state budget. National regulatory bodies were also exempted. It must be noted that LEPLs, NCLEs, local self-governments and autonomous republics will be able to have an account in commercial banks and transfer their surplus funds to these accounts. Interest payments on the accounts will comprise income and they will be able to use the money for what they decide as appropriate. These changes in the amendments were initiated by the Parliament’s Budget and Finance Committee.

According to information obtained from the Ministry of Finance, the planned measures within the framework of public finance management reform represent a part of the action plan agreed with different donor organisations to ensure the implementation of budgetary assistance reforms. Similar action plans also exist within the framework of cooperation with the European Union, World Bank and the Asian Development Bank. Different measures are under discussion as a part of the provision of donor organisation assistance, including that of the European Union. The implementation of these measures is necessary to ensure harmonisation with international standards in respective fields. Action plans are drafted taking these requirements into account.

According to the EU’s Public Financial Management Reform Programme (

PFM III), the public financial management reform action plan is approved annually. The plan envisages having the treasuries of the self-governing units as a part of the integrated accounting system and their budgetary processes managed electronically.

Conclusion

On 12 December 2014, the Parliament of Georgia voted in favour of the amendments to the Budgetary Code of Georgia. The amendments envisage expanding budgetary regulation alongside ensuring the growing efficiency of public finance with budgets at all levels, including those of self-governing units, moved into the integrated accounting system of the State Treasury. However, it must be noted that different from the initial draft, the final draft of the amendments allows local self-government bodies to have an account in commercial banks. Moreover, as the Ministry of Finance accepted the changes proposed by the Parliament’s Budget and Finance Committee, regulatory commissions together with LEPLs and NCLEs founded by or accountable to the government were exempted from moving into the integrated accounting system of the State Treasury.

The incorporation of the budgets of self-governing units into the integrated accounting system of the State Treasury was accomplished according to the public financial management reform action plan within the framework of the EU’s Public Financial Management Reform Programme (PFM III). The integration into a single accounting system of the State Treasury aims at harmonising Georgia’s legislation with international standards as required by the cooperation agreements with the EU, World Bank and the Asian Development Bank.

Therefore, Giorgi Kakauridze’s statement: "The EU-Georgia Association Agreement requires introducing an integrated system of treasury management for the self-governing units," is TRUE.