At the plenary session of the Parliament held on 11 December 2013, the Minister of Finance, Nodar Khaduri, discussed the 2014 Draft Budget of Georgia and spoke about the transfer of GEL 12 million not being fully exploited by the self-government of Poti. Majoritarian Deputy of Poti, Eka Beselia, was among those delivering a speech at the session. She discussed the transfer made to Poti in 2013 and stated:  “In 2013, the government allotted a total of GEL 12 million in the form of a transfer to Poti and the current situation is that not even a half of this sum has been employed. Mildly put, this represents an extremely irresponsible act on the part of the self-government.”

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took interest in the information outlined in the abovementioned statement and set out to check its accuracy.

Prior to discussing the immediate subject of our research, it is worthwhile to clarify what the self-governing entities are and describe the procedures of how their budgets are formulated.

Pursuant to the Organic Law of Georgia on Local Self-governments, a self-governing entity represents a settlement (self-governing city) and a unity of settlements (municipalities) which have representative and executive bodies. The representative body of the self-governing entity is represented by the city council while the functions of the executive body are fulfilled by a city hall or gamgeoba.

A self-governing unit is an independent legal entity and possesses its own property, incomes, budget and an administrative centre. The budget of every self-governing entity is formed upon the basis of its personal as well as non-personal receipts. At present, there are five self-governing cities and 65 municipalities in Georgia.

The entity’s personal receipts include local taxes and fees and equalisation transfers received from the state budget. The purpose for the employment of personal receipts is defined independently by the representative body of the local self-government. The non-personal receipts of the local self-government budget include the special and targeted transfers made from the state budget and other receipts defined by Georgian legislation (the Budgetary Code of Georgia, Part IV, Chapter X, Articles 66, 67).

Aiming to ascertain the volume of the transfer made to the self-governing city of Poti in 2013, we addressed an official letter to the City Hall of Poti. As stated in the response, in line with Decree No. 311 of the Georgian Government, a total of GEL 11,878.7 million was allocated from the central budget to the city of Poti in 2013. This amount was to be applied for the implementation of various infrastructural projects. In particular, these projects are:  construction of a drama theatre, reconstruction of multi-residential buildings and sidewalks on Aghmashenebeli Street, reconstruction of the pumping stations for the city sewage system, reconstruction of the Poti stadium and so forth. According to the letter received from Poti, only half of the sum, GEL 5,061,534, was employed in the course of 2013.

We inquired about the reasons as to why the Poti self-government failed to employ the funds obtained through transfers. In the course of our query, we contacted the PotiCity Hall and spoke to Nino Khakhobia, Deputy Head of the City Hall Financial Office.

As clarified by Khakhobia, the central government started administering the transfers late; specifically, in April of 2013. The process was further impeded due to drawn-out procedures:  designing, examination, tenders. The whole process took at least four-to-five months. All of the abovementioned was topped by unstable meteorological conditions present in Poti. Owing to these reasons, only half of the sum allocated through transfers was able to be utilised by the self-government. However, the spokesperson of the City Hall also added that she did not deem the described circumstances to be grave in any way as the contracts had already been signed for the activities with the total cost of GEL 10,750,313. These contracts were signed prior to 31 December 2013 which means that the presently unspent amount of GEL 5,688,497 will be transferred to the Poti self-government in 2014 and the projects initiated in the previous year will be continued.

Khakhobia further indicated that the transfer funds are received by the self-government in stages, based upon the acts of receipt and delivery and in accordance with the implementation of the contracted activities. According to her, the transfer received by the Poti self-government in 2013 amounted to GEL 11,878,700. The sum saved through tenders totalled GEL 1,128,387. Accordingly, contracts have been signed for the activities with a total cost of GEL 10,750,313 of which activities with a total cost of 5,061,534 have already been completed. Although GEL 5,688,497 was not spent in 2013, relevant contracts had, nevertheless, been created.

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also contacted the Ministry of Finance which confirmed the fact that the unused portion of the funding foreseen for 2013 would be transferred to the Poti self-government in 2014.

Conclusion

The Poti self-government was allotted a total of GEL 11,878,700 in the form of a transfer from the central government. The amount saved through the organised tenders totalled GEL 1,128,387. The transferred funds were to be employed for the implementation of different infrastructural projects. In 2013 the city self-government managed to spend only half (GEL 5,061,534) of the allocated amount. As clarified by the spokesperson of the self-government, the transferred funding could not have been fully employed mainly due to the lack of time. However, contracts for the implementation of the activities with the total cost of GEL 10,750,313 were signed prior to 31 December 2013. Therefore, the sum needed for the completion of those activities; that is to say, the remaining GEL 5,688,497 from the government funding, will be forwarded to the Poti self-government in 2014.

Consequently, we conclude that, the statement of the Majoritarian Deputy of Poti, Eka Beselia, “The government allotted a total of GEL 12 million in the form of a transfer to Poti and the current situation is that not even a half of this sum has been employed,” is HALF TRUE.