EVERY MANAT COUNTS

The economic realities of recent years call for unprecedented radical economic reforms in Azerbaijan. The key point is to ensure a shift of investments to the competitive and export-oriented non-oil cluster of economy. However, the new economic course is implemented amidst the significantly reduced financial capabilities of the state. The government of Azerbaijan has been introducing strict budget saving regime for three consecutive years and have significantly strengthened the financial control mechanisms. All these issues were discussed during the recent 17th session of the Council of Heads of Supreme Audit Institutions of the CIS countries.

Amidst the ongoing energy crisis and a noticeable reduction of budget revenues, Azerbaijan had to devaluate its national currency, like a number of other CIS countries. This has eventually increased the volume of credit non-payments, accelerated the banking crisis and inflation, and negatively influenced the construction and a number of other sectors of the non-oil economy. To overcome the financial imbalance, the government had to tighten the financial regulations, as well as to review the structure of budget expenditures. Another, important area of ​​budgetary savings was a consistent increase in financial control over the expenditures of public funds.

As the President of Azerbaijan Ilham Aliyev said at the meeting with the participants of the 17th session of the Council of the Heads of Supreme Audit Institutions of the CIS member states, the countries of the Commonwealth encountered similar problems in this transitional period of reforms. According to him, the ongoing global processes associated with the economic and financial crises call for the optimization of government spending. Undoubtedly, the financial control authorities of the CIS countries have the greatest responsibility under these circumstances.

In Azerbaijan, the Accounts Chamber is the main audit body of the country, which ensures accountability and transparency in the field of spending state finances. During the crisis period, the Chamber has significantly expanded the scope of activities, as indicated by the increased volume of public funds involved in monitoring. "For example, in 2014-2016, the Chamber audited ₼3.5, ₼4.2 and ₼5.6 billions of public funds, respectively. Our goal is to reach the minimum coverage indicator (50%) for the budget funds, as specified in the Public Expenditure and Financial Accountability (PEFA) report, and even to exceed this figure," said the Chairman of the Accounts Chamber of Azerbaijan Vugar Gulmammadov.

According to Mr. Gulmammadov, the Chamber has developed its own information base grouping the violations and shortcomings in compliance with relevant regulatory acts developed on the analysis of the experience of other countries, in particular Russia and Kazakhstan. This also includes budget legislation, legal norms on capital investments (construction), state property, calculation, collection and payment of revenues to the state budget, as well as the state debt, accounting and reporting, extrabudgetary funds, social security and social protection. Thus, the Chamber identified 825 cases of violations and shortcomings in 2016. The most common ones include the areas associated with the overhaul repair and construction works, accounting management and reporting, compliance with the requirements of budget regulations, as well as the violation of the requirements of regulatory acts governing the public procurement and capital investments.

The last one is very important, given that the state purchases make up about 30% of all budget expenditures of Azerbaijan. The shortcomings in public procurement are also characteristic for the institutions financed from the state budget. A failure to comply with procurement procedures or a change in the method of procurement contributes to inefficient use of funds and creates favorable conditions for corruption.

In the future, the Accounts Chamber of Azerbaijan will intensify the efforts started three years ago to optimize and systemize its activities. "In particular, the Chamber has started developing a new strategic development plan for 2018-2020. This document will outline specific goals, as well as the criteria to enable the assessment of the extent to which the goals have been achieved," said Gulmammadov.

How effective is the Accounts Chamber of Azerbaijan in controlling the over-spending of budget funds?

According to V. Gulmammadov, the state funds recovered by the Chamber many times exceed the expenses for the maintenance of this structure. "In 2014-2016, the Accounts Chamber returned a total of ₼30.2 million to the state budget, while an average of ₼3.1 million were spent on the maintenance of the Chamber. Thus, the recovered amount was 2.8-3.4 more than the amount spent for the maintenance. If we add the material cost of the implemented measures to the amount of recovered funds, as well as reduced material costs, this difference will be even greater," said Gulmammadov.

Analysis of indicators of the information base shows that the degree of implementation of recommendations proscribed by the Chamber exceeds 95%. The unperformed recommendations require some time for accomplishment.

Positive aspects can also be attributed to the activities of the Chamber on the analysis of the regulatory framework and the development of proposals for the improvement and optimization of these documents. In particular, the Chamber annually submits a package of proposals to the government related to the identified gaps and inconsistencies in the legislation: overall, more than 100 proposals were submitted, and most of them were amended to legislation, and several new legislative acts were prepared.

Thus, as the highest control institution of the country, the Accounts Chamber of Azerbaijan plays an important role in state financial control and ensures rational, economical and efficient use of public funds.

At the same time, there are many opportunities to expand the functions and powers of the Chamber, to strengthen its human and technical potentials, to give it "leverage" and greater opportunities for auditing state structures.

The members of parliament (Milli Majlis) believe that the need for strengthening financial control is very high. "Legal and financial violations in various areas cause huge damage to the budget. Return of funds is one of the main conditions: no matter how severe the punishment is, if financial allowances do not return to the budget, there is no sense. Therefore, it is necessary to expand the powers of the Accounts Chamber of Azerbaijan," said MP Siyavush Novruzov. According to a number of MPs, the Accounts Chamber should be given greater powers to control the correction of violations identified during the audit, and above all, the audit of lost budget funds.

In this context, the experience of Russia is noteworthy. In February 2017, the Russian Duma ratified a law that considerably expands the powers of the Accounts Chamber of the Russian Federation. Among other things, the functions of the Chamber for the audit of state non-budgetary funds have been expanded, as well as the implementation of external state audit for the facts of compliance of legal entities with the terms of state contracts (foreign economic activities). At the same time, the new law establishes a responsibility of auditors for abuses and improper performance of their duties.

Apparently, studying the experience of the neighboring country is useful for Azerbaijan. "The Accounts Chambers of Azerbaijan and Russia will adopt a program of cooperation for 2018-2021. This program will cover joint control measures by the audit chambers of the two countries. We signed an agreement on cooperation with our colleagues in Azerbaijan in 2015. We have the capacity not only to exchange experience, but also to conduct joint parallel control measures. We already had such experience on the Caspian Sea," said the Chairman of the Accounts Chamber of Russia Tatyana Golikova.

As for the expansion of the powers of the Accounts Chamber, it would also be appropriate to refer to the experience of European states and other countries in the post-Soviet space where the highest audit structures work closely with civil society and are entitled to audit all areas of public finances, as well as provide advisory services. The financial control structures in Europe and a number of other foreign countries carry out their activities based on the principles of the Lima Declaration, which provides for maximum independence of control bodies from the organizations they audit, prevention of extraneous influence, and independence of members of the supervisory bodies. Some experts believe that the implementation of positive foreign experience in Azerbaijan will ensure the maximum efficiency and transparency in state audit services.