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Multi-Country Study on Budget Credibility: Using of contingency funds in Serbia 2014-2017

project supported by International Budget Partnership

case study Serbia: Using of Contingency Funds


Using of “current budget reserve”, i.e. contingency funds by the government during the fiscal year has significant impact to the budget.

Government is transfers funds from approved budget appropriations to the contingency funds, but does not provide explanation on consequences of to the original budget programs. Similarly, Government re-transfer significant part of these funds to the selected municipalities in arbitrary way and without explanation.

Since 2015, there is a legal threshold for such reserve funds, that is 4% of overall budget income. In practice, the level of contingency funds is significantly smaller in the adopted budget, but the Government increases it by transferring funds from approved budget appropriations that “cannot be used”, to the contingency funds and thereafter to other budget beneficiaries and other purposes, either entirely new or those where original funds were insufficient. 

It is worth to mention that this worrying practice is also supported by the changes in the Budget system law. Namely, before the budget for 2015, it was allowed to spend at most as 2% for the “current contingency funds” and 0,5% for the permanent budget reserve. If the original budget planed less than 2%, it was possible to increase it during the fiscal year, but only up to 1% of total budget. Amended Budget system law provides for possibility to assign 4% of the budget to the “current contingency funds” or to transfer funds during the fiscal year till the same level. This increased several times the amount of contingency funds and transfers made during the year.

For instance, in 2016 government maximally used this possibility. Namely, the original budget income was 997,4 billion RSD, and the maximum allowed contingency fund 39,9 billion RSD. However, original approved budget had only 1,14 billion contingency funds. During the fiscal year, Government issued more than 70 decisions about contingency funds, and used the total of 38,9 billion RSD in that way. Out of that amount, only 0,063 billion was for the purpose to finance newly established administrative units of the government and 1 billion for extraordinary elections. So huge amount of funds spent for other purposes, indicates poor planning in the original budget. Furthermore, 1,6 billion of contingency funds was spent for forbidden purpose – funds dedicated to the executive were spent for judiciary.

Within this project TS will try to find out:

  1. What was the total amount of money transferred to the contingency funds, from the contingency funds, and what were the biggest individual transfers to the fund and from the fund to local authorities?
  2. Why some budget appropriation, transferred to the contingency fund, remained unspent and in which way that affected achievement of budget program goals?
  3. On the basis of which information Government selected municipalities to be given transfers from the contingency funds and amounts of transfers?
  4. What was the ultimate purpose that contingency funds were used for?

We will also try to find out what are Ministry of finance, State Audit Institution and relevant parliamentary committee doing regarding:


What are SAI conclusions regarding the legal ground of using the contingency funds for municipal transfers?      

How did SAI evaluated effects of budget transfers to the contingency funds and consequences for the original budget programs?         

Did SAI consider to perform performance audit or to evaluate budget planning process that would be related to the identified practice with contingency funds transfers?


Does MF check whether municipalities need transfers from contingency funds due to decreased income and what information collects in that regards?      

Does MF perform pre-selection of municipal requests for financial support from the central budget?     

In which way MF identifies approved budget appropriations to be decreased in favor of contingency funds?

Parliamentary committee for public finances:

Did parliament asked information from the Government on modification of the original budget that is related to the contingency funds transfers?    

Did parliament asked government to explain consequences of budget reserve transfers for the affected programs?      

Does finance committee, when discussing the new draft budget, compares it with previous years appropriations for the same purpose, in particular when funds were unspent in previous budget year and transferred to the budget reserve?

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