Internal co-financing of on-budget entities as a source of funding for their activities

At present, the state budget does not provide sufficient transparency on the use of appropriations for co-financing. The Ministry of Finance should see to it that the use of an appropriation for the payment of internal co-financing is clearly indicated in the budget.

The audit was targeted at the co-financed internal activities of on-budget entities. Internal co-financing means that a government agency finances another government agency’s activities. In 2019, central government’s internal co-financing totalled approximately EUR 130 million.

The reason for conducting the audit was that the National Audit Office considered it necessary to examine the central government’s internal co-financing as a whole. The purpose of the audit was to verify whether the central government’s internal co-financing has been recorded correctly in the accounts, whether it is used in accordance with the legislation, and whether the budgetary power of Parliament is realized in its use.

The audit found that, at present, the budget does not provide sufficient transparency on the use of appropriations for co-financing and thereby on the transfer of appropriations to another budget item. It is important that Parliament is informed in the budget decisions if an appropriation can be used for financing projects carried out by other agencies. The aim is to safeguard Parliament’s budgetary power by preventing government agencies from amending Parliament’s decision on the allocation of appropriations through their own decisions.

A significant number of the projects treated as co-financed in the accounting were, in fact, not co-financed in nature. The accounting offices should observe that internal co-financing cannot be used for assignments or for statutory official duties, nor can it be used for financing projects in full. In addition, chargeable activities as referred to in the Act on Criteria for Charges Payable to the State cannot be considered co-financed activities.

Categories