On 10 December 2014, the amendments to the Budget Code of Georgia were discussed at the plenary session of the Parliament of Georgia. According to the proposed bill, the income and payments of all kinds of budgets and budget organisations will be integrated into a single reporting system.

During the discussion, the Deputy Minister of Finance of Georgia, Giorgi Kakauridze, stated: “In terms of financial independence, we are not altering any legislative norms which would concern the independence of any legal entities of public law, self-governing structures or organisations.”

The Member of the Parliamentary Minority, Sergo Ratiani, responded to this statement saying that: “The independence of the universities is being curbed.”

FactCheck took interest in these statements and verified their accuracy.

On 12 December 2014, the Parliament of Georgia adopted a bill on the amendments to the Budget Code of Georgia which was enacted on 1 January 2015. According to the bill, the income and payments of all kinds of budgets and budget organisations were integrated into a single reporting system of the treasury. The budgets of the state universities were integrated into the same system.

It should be noted that state universities represent legal entities of public law founded by the state. According to both the new and old laws, neither the National Bank of Georgia nor the national regulating structures or commercial entities were included in the single reporting system of the treasury.

According to the legislation acting before 1 January 2015, the income and payments of all kinds of budgets and budget organisations were not integrated into a single reporting system of the treasury. Hence, the financial assets of the budgets of the autonomous republics and local governments were controlled by commercial banks. The financial (non-budgetary) assets of legal entities of public law and non-commercial legal entities were also in the hands of the commercial banks.

The amendments to the Budget Code of Georgia determined that the accounts of legal entities of public law and non-commercial entities founded by the state will be opened in a single reporting system of the treasury and only relevant legal entities of public law (in our case, state universities) will have the authority to give permission for running, controlling and making transfers from the account.

The stated rationale behind the amendments was to integrate the income and payments of all kinds of budgets and budget organisations into a single reporting system of the treasury. According to the author of the bill, this will ensure a better quality of financial accountability, consolidated reports and effectiveness of financial management.

According to the statement of the Parliamentary Minority MP, the aforementioned bill will curb the independence and autonomy of the universities.

We contacted Mr Ratiani for additional comments. According to him, the main problem is that the state did not negotiate with the state universities and made the decision without consulting with them. He also explained that the procedures of the commercial banks and the treasury are different and this will complicate the transfers for the universities. Mr Ratiani also believes that there should have been an exception for the state universities as there is for the National Bank of Georgia as well as various regulating structures. He also explained that a state university is not an institute financed by the budget and money transferred from the state budget to the universities is only for student funding which can be transferred to both state and private universities.

The Law of Georgia on Higher Education determines that the state must ensure the independence and autonomy of higher education institutions.

The rectors of eight state universities also saw the danger of curbing their autonomy and addressed the Parliament of Georgia. According to them, an exception should also have been made for state universities and they should not be subject to a single treasury system.

The Rector of Ivane Javakhishvili Tbilisi State University, Vladimer Papava, responded to the address of the state universities. He explained that a meeting was held between the Ministry of Finance of Georgia and the representatives of the state universities where the Minister of Finance of Georgia promised the universities that all of their remarks and suggestions would be taken into account and that the autonomy of the universities would not be limited.

We addressed four higher education institutions operating in Tbilisi, asking whether or not the aforementioned legislative changes had affected their autonomy.

The Financial Department of Ivane Javakhishvili Tbilisi State University explained that the aforementioned legislative changes cannot affect the independence of the University. The only possible problem named by TSU was that of time. Specifically, they believe that there might be a danger of extending the transaction process. In addition, the University’s Financial Department will be required to study the rules of treasury accounting which also requires some time and effort.

We were told at Ilia State University that the spending in the treasury is performed from a single account which complicates the administration of transferred sums. This requires indicating (within the limits of symbols allowed by the programme) detailed information about the purpose of the transaction when filing a request. According to the University, they have already had cases of the requests being returned to them with the note “Rejected by the State Treasury.” There were no such problems with commercial banks.

Ilia State University additionally underlined problems concerning communication. Specifically, they say that they cannot always contact the person who “rejected” their request which further extends the period of the payment.

According to the Head of Administration of Ilia State University, Davit Aprasidze, despite the fact that a consultation was held with the higher education institutions before adopting the law, this was only a one-time occurrence, in December 2014. The higher education institutions demanded that exceptions be made for them as they were in the cases of various regulating commissions. The universities were also ready to implement electronic systems of reports which would obligate them to present real time information about their income and expenditure in the form determined by the Ministry of Finance of Georgia. In the end, the universities even agreed to postpone the enactment of the amendments to 1 September 2015; however, their proposals were not taken into account.

As they told us at the Georgian Technical University, they had two demands: first – no commission fee must be added to the tuition fees of the students and second – there must be no delays in transactions. They were given a promise that they would have no problems due to their integration into the treasury account. They say that practice has yet to show whether or not the work of the university will be hindered by these amendments.

Tbilisi State Medical University told us that they have had no problems due to their integration into a single treasury account. The University manages its finances freely. For them, the main factor for participating in the joint statement was that of the foreign students as they might have had problems with transferring their tuition fees.

Conclusion

The amendments to the Budget Code of Georgia provide for the integration of income and payments of all kinds of legal entities of public law and non-commercial legal entities into a single reporting system of the state treasury. Some universities addressed the Parliament of Georgia with a joint statement which talked about the dangers of limiting their autonomy in managing financial and economic resources. In their statement, the universities underlined the danger of extended or hindered transactions which never happened in the case of commercial banks.

FactCheck contacted the administrations of several higher education institutions. Their responses differ. Some claim that the amendments pose no problems for them whilst others talk about the dangers to their autonomy and the already experienced problems. For example, according to Ilia State University, the state treasury has, on several occasions, rejected the transactions requested by the University.

FactCheck believes that the amendment in question might contain risks of limiting the autonomy and independence of the state universities; however, more time might be necessary to observe and assess the effects of this amendment given the fact that only a short time has passed since its adoption. Hence, at this stage FactCheck refrains from providing a verdict and simply describes the situation underlining possible risks and analysing the available facts.


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