Money Kickback through Regional Projects?
28 February, 2013
Money Kickback through Regional Projects?
Unreasonably inflated budgets of state-financed regional projects implemented against the backdrop of pre-election campaign of 2012 raise money embezzlement suspicions.
Non-transparent money circulation through the state-budget-regional-projects-financing scheme that many-fold inflated budgets of targeted infrastructure projects in nine months of the election year of 2012 lays ground to speculations that the ex-power exercised so called money-kickback system to pocket the state money or finance the elections.
Non-governmental Institute for Development of Freedom of Information (IDFI) that keeps an eye on election
procedures and financing scrutinized Special Transfers in the Regions in the Pre-Election Period of 2012 and came to conclusions that money transfers from the state budget-based funds (Reserve Fund of the President, Reserve Fund of the Government, the Fund for Projects to be implemented in the Regions, the Rural Program) to regional infrastructure projects were non-transparent.
According to the study, governmental decisions on financing infrastructure projects in different regions of Georgia have been permanently amended within nine months of 2012 jacking project findings up each time. Meantime the date and number of the decision on increased funding was not changed that made impossible to outline how much was allocated and when exactly by government through the said decisions.
All in all in nine months spending of 2012 exceeded the similar period of 2011 by almost 400 million that has been spending in three quarters of the year against the background of the pre-election campaign. And the bigger part of state transfers to the municipalities comes on the much trumpeted infrastructure projects such as Batumi Tower in Ajara, rehabilitation of Rabati historical fortification compound in Akhaltsikhe district as well as construction of the new port-city Lazika in Anaklia, Zugdidi district.
Batumi Tower turns out to be the most expensive and non-transparent project implemented in the regions in 2012. The budget of Batumi Tower increased 8-fold within 9-months period from initially defined GEL 5 million to GEL 40 million. The runner up is Rabati project funding of which almost tripled increasing from GEL 9 million to GEL 23 million. The third largest project was construction of aqua-park in Ganmukhuri owned by Zugdidi municipality. GEL 26 267 780 was spent on the project.
What makes economic analysts suspicious is that the said projects as well as other smaller projects have been implemented by the 100% state-based LLC companies and money sent from the state budget to municipalities were accumulated on the accounts of these state companies in fact. Municipalities were reluctant to provide IDFI by details description of the expenditure accounts: Zugdidi municipality for example sent just total expenditure figure of works implemented in Ganmukhuri and Anaklia that makes IDFI analyst presume that state transfers went through Zugdidi municipality just symbolically. Only Akhaltsikhe municipality provided the detailed account of Rabati rehabilitation project.
According to Davit Narmania, Minister of Regional Development and Infrastructure, none of the projects with inflated budgets were put under control of his ministry that is responsible for supervising projects implemented in regions. But it is not a legal infringement for there was no mandatory obligation to put the Ministry of Regional Development and Infrastructure (MRDI) in course of all projects for they were implemented by municipalities generally.
“Some were under control of Prosecutors’ Office as there was a construction company founded with the Prosecutors’ office that carried out works on the state-based projects and perhaps those 100% state-based companies that worked for the researched projects were from the Prosecutor’s construction company,” Narmania said in the interview to Georgian Journal.
After the shift of power the Ministry of Regional Development and Infrastructure made obligatory to put all projects implemented in regions under supervision and control of the ministry no matter who is in charge with the project, Narmania elaborated. He thinks the huge gaps between the initial and final budgets of Batumi Tower, Rabati and aqua-park projects bespeak of incompetent planning and should be audited by relevant structures or may be investigated if a claim will be raised at Prosecutors’ office.
Ditrikh Muller, a co-founder of Georgian Investment Group, sees money embezzlement scheme behind the unreasonably inflated budgets of the researched projects. Involvement of the state-based companies in the show makes him think so.
“There was no economic factor like inflation for example that might cause such big changes in the funding of the construction projects, on the reverse inflation dropped significantly during the researched period. I think they used the so called money kick-back scheme through the state operator companies when you allocate inflated sum on the account of the company and half of its goes to the pockets of officials who are involved in financing and operation of the projects. I do not rule out that the embezzled money went on financing pre-election campaign of the ex-power,” Muller said.
The State Audit Service been in charge of the control of the state-budget financing makes no comment as of yet.
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