“Until yesterday, the Ministry of Finance did not have summary information on who, how, for what and through which companies spend the largest sums of money on the state’s capital expenditures.”
This was revealed by the Minister of Finance Asen Vassilev during the Second Public Council, which was held in the department. The Minister made a presentation on the amount and distribution of capital expenditures in 2020 by sector, with the main focus on the award of in-house contracts and public procurement with only one candidate.
In the presentation you can see the biggest managers of public resources; public enterprises that have concluded contracts with private contractors; the assigned additional costs without secured financing, as well as the made assignments, which are above the value of the concluded contracts. The presentation shows data on non-transparent spending of public funds in huge amounts, collected by the team of the Minister of Finance from the beginning of the mandate of the caretaker cabinet until today, in order to reveal the vicious practices in public procurement.
The Minister gave an example of the mechanism for the non-transparent „in-house“ spending of public funds by the Road Infrastructure Agency (RIA) – a report is made to the Management Board for super urgent repairs or construction of a specific site. This expenditure is then approved, indicating the necessary funds to be provided from the state budget. The builders do not receive this report, which says that at the moment RIA does not have this financial resource, they are told „Build!“.
This is done regardless of whether the budget has set aside these funds, whether the budget law for the year allows these costs, whether this expenditure is justified. Thus, RIA obliges the state continuously in recent years, as only for the first four months of this year, assignments were made for BGN 2.9 billion, with an annual budget of RIA of BGN 382 million. Minister Vassilev said:
“This is not just an example of lack of control, this is a crime. We have talked with the leadership of the Ministry of Regional Development and Public Works to give this practice to the prosecutor’s office.”
He also gave specific examples of RIA contracts for which the estimated values have been exceeded many times over. According to the Minister, this practice of RIA is „so deeply immoral both to the executors of these orders and to all those who are waiting for this state resource so that it can be given for something meaningful”.
“But the truth is that we will all have to pay this bill.”
According to him, road construction in Bulgaria has been in this situation for many years, and a sector that is managed in this way cannot make quality roads, despite the huge funds set aside by the state for it.
In his presentation, the Minister pointed out other specific examples of the capital expenditures of the various economic sectors, which through „in-house“ procurement make a huge expenditure of state funds in a non-transparent way. To illustrate the problem, Minister Vassilev said that each gold bar used as a symbol in the presentation is as much as the value of a children’s hospital.
The Public Procurement Agency has already started the process of changes in the legislation on public procurement, in order to correct these practices, said Minister Asen Vassilev. According to him, the genesis of this practice would not have been visible if the Ministry of Finance had not made efforts to find these contracts in the spending units and an analysis of the assignment had not been made.
“This level of impudence, irresponsibility and ruthlessness could not be solved only by laws, we need a properly functioning judiciary and severe sanctions”, the minister said.
The Minister of Finance added that this vicious practice is not only in the ministries and their agencies, but also in the municipalities. Their capital and subsistence costs are 43% of their total costs. In his presentation, the Minister pointed out how additional expenditures for municipalities have been approved by decrees of the Council of Ministers, what is their distribution by districts and what is spent by the municipalities as a priority, as well as which contracts without public procurement or those with only one participant.
The presentation for the municipalities also shows the concentrations of the funds spent in certain companies, as well as orders with only one participant. The finance minister compared:
“Municipal spending is comparable to that for Turkish Stream.”
He pointed out that an interesting fact that is observed in the municipalities is that there are approved and allocated funds, for example, targeted for kindergartens, but the process of their construction is extremely slow.
The main message of the Minister of Finance of today’s Public Council is that more effective control is needed over the spending of public funds and the collection of taxes. The purpose of shedding light on capital expenditures is to make sense of the state’s priorities in expenditure policy and to make them happen in the future through public debate. It should also be clear what practices in public procurement are used to make expenditures, the minister urged.
“The debate on the new budget must also take place through a review of all these hidden contracts, which oblige the state budget for future expenditures”, the finance minister said.
He is adamant that the current practice of state funding with decrees of the Council of Ministers on the principle of „Give!“ Should be stopped immediately. The Minister believes:
“The different approach to the capital expenditures of the state should be through discussion at expert level, to prepare a list of projects, to present them publicly, to discuss and be approved by the National Assembly, and not as before – in the dark and without clarity about the financing of the projects.”
