TI Georgia: Corruption prevention mechanisms for state LEPLs and N(N)LPs remain weak, while expenditures continue to rise

TI Georgia: Corruption prevention mechanisms for state LEPLs and N(N)LPs remain weak, while expenditures continue to rise

access_time2021-11-22 16:03:42

Corruption prevention mechanisms for state LEPLs and N(N)LPs remain weak, while expenditures continue to rise, reports Transparency International - Georgia.

According to TI, it is a widespread practice in Georgia, when public institutions, at both central and local government levels, set up subordinate legal entities - Legal Entities of Public Law (LEPLs) and Non-Entrepreneurial (Non-Commercial) Legal Persons (N(N)LPs) - to perform those public functions, which these public institutions are charged with. As TI reports, a lot of questions have accumulated over the years regarding the effectiveness of these organizations, the need of their operation and their possible use for corruption purposes.

"Transparency International Georgia thoroughly discussed this issue back in 2017: The organizations that essentially perform public functions and are largely financed from the budget do not properly fall under the legislation regulating public service and anti-corruption mechanisms, which ultimately poses a risk of abusing them for corruption purposes.

The situation has not changed even after four years – more and more budget resources are being spent on LEPLs and N(N)LPs every year, their number, as well as number of their employees and expenditures is increasing, while transparency and monitoring mechanisms remain minimal. This gives rise to significant corruption risks, especially as no effective measures and legislative amendments are being implemented to ensure risk management.

As a result, ministries and municipal bodies are creating sub-institutions, which perform public functions under much lower standards of transparency and accountability than it is required for parent institutions. And this practice is becoming more prevalent.

The following key problems have been identified with regard to the state-founded LEPLs/N(N)LPs:

1. Number of LEPLs/N(N)LPs subordinated to government agencies is increasing from year to year, while the criteria for their establishment are obscure; frequently, a question arises why it is necessary to set up a specific organization to perform the functions, which are directly within the competence of a supervising ministry or mayor’s office. The issue is especially problematic with regard to N(N)LPs, because the obligation to select employees through a competition does not apply to them.

2. Receiving information from public institutions is a problem. In response to our requests, we received full or, in some instances, partial public information regarding only 105 out of 150 LEPLs and N(N)LPs selected for the study. According to the received information, in 2020, up to 100 organizations spent GEL 372,267,815.23 on remuneration paid to 28,948 permanent and supernumerary employees.

3. Number of LEPLs selected for the study, number of permanent and supernumerary employees, amount of remuneration and other administrative expenses have been increasing from year to year that creates corruption risks in the absence of control and prevention mechanisms:

  • 45 LEPLs were subordinated to 12 agencies in 2017; by the end of 2020, the number of LEPLs functioning under the same agencies increased to 54. Further, 33 N(N)LPs were subordinated to 15 agencies in 2017; by the end of 2020, number of N(N)LPs functioning under 17 agencies increased to 51.

  • In 2017, GEL 14,288,771.57 was spent on salaries paid to permanent employees working for LEPLs; by the end of 2020, this figure increased by 38.4% and amounted to GEL 19,777,021.63.

  • In 2017, there were 9,288 supernumerary employees working for 41 LEPLs; in 2020, their number increased by 45.5% and amounted to 13,517. In 2017, there were 784 supernumerary employees working for 23 N(N)LPs; by the end of 2020, their number increased by 46% amounting to 1,145.

  • In 2017, 42 LEPLs paid GEL 73,826,398.59 in salaries to supernumerary employees; in 2020, this expenditure increased by 108.1% to GEL 153,645,554.5. The situation is identical in respect of N(N)LPs: in 2017, 21 N(N)LPs paid GEL 3,630,496.88 to supernumerary employees in salaries; in 2020, this expenditure increased by 104.4% to GEL 7,419,935.65.

  • In 2017, 44 LEPLs spent GEL 8,509,301.25 on fuel; in 2020, their fuel expenses increased by 54.5% to GEL 13,149,717.75. N(N)LPs also consumed an increased amount of fuel: in 2017, 24 N(N)LPs spent GEL 1,023,775.54 on fuel; in 2020, fuel expenses of the same organizations increased by 47% to GEL 1,504,967.22.

4. There is no unified database/registry to provide information about the exact number of LEPLs and N(N)LPs subordinated to government agencies, number of their employees and expenditures.

5. A number of anti-corruption regulations do not apply to the state-founded LEPLs and N(N)LPs, most of these organizations do not have effective internal mechanisms to prevent conflict of interests and corruption that further increases corruption risks and complicates the introduction of effective control and integrity mechanisms in these organizations.

6. Although the majority of organizations claim to have a body responsible for identifying corruption-related violations, not a single violation has been identified in 96% of LEPLs and N(N)LPs (that provided public information) over the past four years.

7. According to the law, the activities of LEPLs are deemed to be part of the public service. However, the decision to fully extend the purposes of the Law on Public Service to these organizations has been postponed four times. Due to this, a number of anti-corruption restrictions imposed on civil servants do not apply to the employees of these organizations, among them observing the norms of ethics and integrity, identifying and preventing conflict of interests, observing the rules related to accepting a gift, etc.

8. The legislation regulating public service and anti-corruption mechanisms does not apply to the state-founded N(N)LPs, causing a high risk of corruption-related violations in these organizations", - reports TI.


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