Serbia Justice Functional Review
Internal Performance Assessment > Financial Management
d. Effectiveness in Budget Execution
i. Barriers to Efficient Utilization of Resources
- The budget execution framework is very rigid. Once a budget is approved, it is very difficult to adjust it, even if not doing so undermines technical and financial performance. At the level of the entire budget system, direct budget beneficiaries are required to comply with the breakdown by economic classification.
- The HJC passes the rigidity of the state budget’s economic classification on to the courts, even though it is not required to do so. The courts commonly complain that the funds they receive are broken down by economic classification that is inconsistent with their needs. There is often too much money in some classification categories and not enough in others, but no ability to move funds between them. The HJC could permit individual courts, which are not direct budget beneficiaries, to use their non-salary current budgets more flexibly as long as the aggregate results of each court type are consistent with the budget ceilings. However, the HJC is unable to do this on a systematic basis because it lacks both trained staff and software for reconciling multiple court requests for budget adjustment with the state budget’s economic classification.
- Budget execution is characterized by fluctuations in the disbursement of budget funds from the Treasury to budget beneficiaries. In the beginning of a fiscal year, the HJC notifies the courts of their approved annual operating budget. Although the courts should expect to receive one-twelfth of that amount each month, the actual disbursed amounts vary. The MOF is unable to even out fluctuations in revenue collection and passes on the fluctuations to the budget beneficiaries.712 The HJC distributes funds to the courts when it receives them and is not allowed to maintain a reserve fund to even out fluctuation in the disbursement of its appropriation.
- The courts are driven by incentives to spend as much money as possible and then ask for more. First, by saving resources, courts risk a reduction in their allocation for the following year. Second, as mentioned above, the financial management system does not provide any personal or institutional rewards for improving productivity or flexibility to move between categories. This ‘use it or lose it’ choice imposed on the courts in combination with an inflexible HR plans713 acts as a disincentive for any financial management initiatives aimed at improving efficiency in resource utilization, such as the automation of manual clerical functions.
ii. Allocation of Responsibilities for Budget Execution
- The breakdown of court expenditures by organization varies significantly from year to year (see Figure 18). This is indicative of a system in transition that has not settled on any particular budget implementation model. However, from 2010-2013 individual courts have been consistently executing the greatest share, at around 80 percent of the court system’s budget. The combined expenditures executed directly by the HJC and the MOJ for the benefit of the courts under FC-330 ranged from 3 percent in 2011 to 19 percent in 2012. The combined administrative expenditures of the MOJ and the HJC ranged from 2.6 percent of the total executed budget in 2012 to 3.57 percent in 2013, when the MOJ’s administrative expenditures ranged from 2.26 percent of executed total budget in 2012 and 3.23 percent in 2013. The HJC’s administrative expenditures increased from 0.28 percent in 2010 to 0.34 percent in 2013, which is to be expected given its expanding responsibilities.
- The MOJ has established a unit of well-qualified procurement specialists, but the unit requires more staff to effectively oversee the procurement actions for which the MOJ is responsible. With limited capacity, the MOJ tends to aggregate all components of civil works in one tender. Although it is cost-effective to allocate different types of tasks to specialized contractors, the MOJ does not have the capacity to manage multiple contracts and therefore, as a matter of practice, relies on a general contractor to manage the entire project. This frequently results in failed or stalled procurement processes, which reduces spending and makes the court system vulnerable to losses in supplementary budget processes. It is also highly risky to have so few procurement specialists in any system, as this creates an inherent vulnerability towards malfeasance such as collusion, corruption, or favoritism towards certain providers.
- The courts lack staff qualified in procurement and rely heavily on the limited capacity of the MOJ procurement team. Courts report that they seek advice from the procurement specialists at the MOJ and that the quality of advice they receive is high, although the helpline is constantly busy. Courts complain that they lack understanding of the rules and how to follow them. In one court, staff commented to the Functional Review team that compliance with the procurement rules requires courts to buy the cheapest things of inadequate quality that do not fully respond to their needs. This clearly shows a lack of understanding of basic procurement rules. This lack of awareness could be resolved through training on public procurement, however it has been reported to the Functional Review Team that funds for such training are not available.
- Limited capacity in procurement has a range of impacts on service delivery. Externally procured
inputs such as legal services, communication, security, utilities, and building maintenance have a significant
impact on court productivity. For instance, reliability of the Internet connection makes a great difference in
productivity of staff responsible for electronic submission of reports.