Fiscal council notes on maximum budget expenditure violation  23 October 2018

The Fiscal Discipline Council concluded that the decision taken on 23 October at the Cabinet of Ministers to reallocate savings from the budget sub-program "State Social Benefits" of the Ministry of Welfare did not comply with the Fiscal Discipline Law, as such a decision exceeds the maximum expenditure ceilings for 2018.

On 23 October 2018, at the meeting of the Cabinet of Ministers, was taken the decision of redistribution of state funds (appropriations) from the budget sub-program "State Social Benefits" of the Ministry of Welfare to other sub-programs of the Ministry of Welfare amounting to 4 561 470 euros, as well as to the budget sub-program of the Ministry of Education and Science "Grant for the organisation of international sports events of national significance in Latvia" amounting to 1 031 641 euros.

In accordance with the Fiscal Discipline Law, if the Cabinet of Ministers adopts a legislative act that stipulates that budget expenditures exceed the maximum amount of state budget expenditures or reduces planned state budget revenues, the Cabinet of Ministers must ensure that simultaneously the laws and regulations that compensate for expenditure increases or reductions in revenue.

"Any expenditure savings in these law-protected budget programs will reduce the maximum spending in 2018, so redistribution will lead to a breach of the Fiscal Discipline Law. The law makes it easy to increase spending on these programs if this is needed, but the savings in these programs should also be automatically set as a reduction in the maximum budget expenditures," said Jānis Platais, Chairman of the Fiscal Discipline Council.

In order to rectify the non-conformity created on 23 October 2018 the Council recommends the Cabinet to prepare and adopt legislative acts that would fully compensate the decision to allocate an additional 5 596 470 euro over the maximum allowable amount of state budget expenditure fixed in the 2018 budget for the corrected medium-term budgetary framework. The Cabinet should not consider proposals to reallocate the expenditure savings thus exceed maximum permissible state budget expenditures for 2018 and further years stipulated in the medium-term budget framework.

Irregularity report available here.