IDFI: Georgian law fails to regulate reserve funds properly, causes inadequate spending

The Georgian legislation does not include regulations related to reserve funds management, which causes inappropriate spending of budget funds, reads the study of the Institute for Development of Freedom of Information (IDFI) on municipal spending of reserve funds.

In 2018, a total of 8.9 mln GEL ($3 mln/€2.7 mln) was spent from the reserve funds of 60 municipalities of Georgia.

The following city halls have spent the highest reserve funds in 2018:

• Tbilisi City Hall - 2.7 mln GEL ($925k/€842k)
• City Hall of Batumi Municipality - 1.4 mln GEL ($470k/€428k)
• Kutaisi City Hall - 554k GEL ($187k/€170k)
• Borjomi Municipality City Hall - 478k GEL ($161k/€146k)

The top 10 municipalities spend 76 per cent of total spending of reserve funds.

Most of the expenditure from municipal reserve funds in 2018 was spent on:

• Financial Aid - 30%
• Damage caused by natural disasters or other accidents - 25%
• Medical expenses - 17%

In 2018, the Gori, Kaspi, Kazbegi, Tsalka and Sighnaghi municipalities did not spend any money from the Reserve Funds, however not spending the reserve funds is often not reflected in the planning of next year's budget. 

For example, the Gori Municipality City Hall, although it did not spend any money from the reserve funds in 2018, has planned a reserve fund of 200,000 GEL ($67k/€61k) for 2019.

The IDFI study notes that there are capital projects in municipalities financed by the municipal reserve funds that could have been included in the budget planning process.

The goal of creating municipal reserve funds is to cover unexpected expenses in municipalities which cannot be planned at the budget planning level.