Question 115

Does the executive seek approval from the legislature prior to shifting funds between administrative units that receive explicit funding in the Enacted Budget, and is it legally required to do so?
 * a. The executive is required by law or regulation to obtain approval from the legislature prior to shifting funds between administrative units, and it does so in practice.
 * b. The executive obtains approval from the legislature prior to shifting funds between administrative units, but is not required to do so by law or regulation.
 * c. The executive is required by law or regulation to obtain approval from the legislature prior to shifting funds between administrative units, but in practice the executive shifts funds before obtaining approval from the legislature.
 * d. There is no law or regulation requiring the executive to obtain approval from the legislature prior to shifting funds between administrative units, and in practice the executive shifts funds between administrative units before obtaining approval from the legislature.
 * e. Not applicable/other (please comment).

OBS Guidelines
Question 115 examines whether the executive seeks approval from the legislature prior to shifting funds between administrative units, and whether it is legally required to do so.

In some countries, the executive has the power in law to adjust funding levels for specific appropriations during the execution of the budget. This question examines rules around shifting funds between administrative units (ministries, departments, or agencies) or whatever funding unit (or “vote”) is specified in the Enacted Budget.

The conditions under which the executive may exercise its discretion to shift funds should be clearly defined in publicly available regulations or law. In addition, the amount of funds that the executive is allowed to transfer between administrative units should not be so excessive as to undermine the accountability of the executive to the legislature.

To answer “a,” the executive is required by law or regulation to obtain prior legislative approval before shifting funds between administrative units, and it does so in practice. Answer “b” applies if the executive obtains legislative approval before shifting funds between administrative units, but is not legally required to do so. Answer “c” applies if the executive is legally required to receive legislative approval before shifting funds, but does not do so in practice. Answer “d” applies if legislative approval is not legally required for the executive to shift funds between administrative units and the executive does not obtain legislative approval in practice. Answer “d” also applies if the executive is authorized to shift an amount considered so excessive as to undermine accountability (roughly equal to 3 percent of total budgeted expenditures). A “d” response applies if the legislature only approves the shifting of funds after it has already occurred.

In the comments, please indicate any law or regulation that provides the executive with standing authority to shift funds between administrative units and, if so, describe that authority. Similarly, legislative approval for shifting funds between administrative units typically occurs with the adoption of legislation such as a supplemental budget. But if other formal procedures for gaining approval from the legislature exist, then please provide information about that approval process.

1) Definition of administrative units
The definition of “administrative units” is flexible here. It is acceptable to look at the “vote” level, rather than the minister level, if that is more relevant given the structure of budget approval in a given country. For example, in New Zealand, the executive cannot shift funds between vote totals (which apply to several administrative units/ministries), but can shift funds between administrative units within a single vote. Answer “a” applies. See New Zealand Open Budget Survey 2017.

2) What amount of funds shifted would be considered "excessive"?
In paragraph 2 of the guidelines, it says that the amount of funds that the executive is allowed to transfer between administrative units should not be so excessive as to undermine the accountability of the executive to the legislature.

Any shift above 3% of the original total of expenditures is considered excessive.

3) The case of Armenia in OBS 2021
The Law on the Budgetary System of Armenia provides that any shifts of funds between administrative units in the Enacted Budget must be approved by the legislature prior to such shifts. The government can only shift amounts without prior approval that do not exceed 3% of the total allocations of the state budget, and in practice, it abides by the law. However, in 2020 the government decided that the outbreak of COVID-19 and then war in Karabakh (from September 27 to November 9, 2020) made it impossible for the National Assembly to quickly convene and adopt decisions on the approval of additional budget re-allocations (that is, those exceeding the 3% cap) that were inevitable during a crisis. At the end of April (in connection with COVID-19), and then at the beginning of October (in connection with the Karabakh war), the government submitted to the National Assembly a draft on changes and amendments in the Law on the 2020 State Budget. Among these changes was a request to exceed the 3% cap (though without specifying a new cap) for the 2020 state budget. The National Assembly adopted these changes and amendments first on April 29 and then on October 10. As a result, after May 8, 2020, when the first changes and amendments to the Law on 2020 State budget entered into effect, the Government was shifting the funds between administrative units without prior approval from the National Assembly. This practice was not continued for 2021 state budget. Question: What would be the best answer to this question in this case? It appears that the Law on the Budgetary System of Armenia has long been in place and abided by in practice, but in 2020, the National Assembly twice approved amendments to the Enacted Budget itself that allowed the executive to shift funds greater than 3% between administrative units without prior approval from the National Assembly. In 2021, the practice was not continued.

Resolution: In cases similar to Armenia, when the legislature provides a general authorization to the executive to shift large amounts of funds around under special circumstances, we have usually resorted to score “‘‘‘c’‘‘”, which we did here in the case of Armenia for OBS 2021.