Underutilized Donor Funds Cost Georgia USD 2 Mln, Audit Finds

The audit of the implementation of Georgia’s 2021 state budget found that the Government paid GEL 5.8 million (USD 2.01 million) in commitment fees for using less than 60% of planned expenditures from foreign donor funds it took for twelve projects.

Of the amount, Georgia had to pay GEL 2.7 million (USD 934 thousand) in fees over five infrastructure projects for which the state spent nothing at all, the State Audit Office’s report, published on May 25, said.

Elaborating on the other 7 projects for which the Georgian Government also had to pay commitment fees, the audit found that the state had spent more than 50% of the budgeted foreign funds for only two of the projects.

Two of the largest fees were attributed to the Government over three projects — for improving water infrastructure in Khashuri and nearby settlements, financed by the EU and the French Development Agency (AFD); for constructing Tskaltubo-Akhaltsikhe-Tortumi high voltage power line, funded by the German state-owned Credit Institute for Reconstruction (KfW) and the EU Neighbourhood Investment Facility.

As regards the Khashuri water infrastructure project, the authorities had spent none of allotted the GEL 1.2 million (USD 415 thousand), and thus had to pay a commitment fee of GEL 1.18 million (USD 408 thousand).

As for the high voltage power line project, the authorities had spent GEL 86 thousand (USD 30 thousand), 1.3% of the allotted GEL 6.7 million (USD 2.3 million), subsequently being obliged to pay GEL 1.12 million (USD 386 thousand) in fees.

In total, the State Audit Office reported that the state had utilized less than 70% of the expenditures laid out in the 2021 budget for 32 of the 95 ongoing infrastructure projects. Ten of the programs had the same issue in 2020, it found.

“Existing shortcomings in the planning stage affect the projects’ implementation process, which in many cases manifests itself in unutilized resources within the project or the actual costs of projects significantly exceeding planned costs,” the audit report said about the discrepancies.

Since 2019 Georgia has been fined a total of GEL 20.2 million (USD 6.9 million) for being unable to utilize foreign credit funds, with the country being fined GEL 9.6 million (USD 3.3 million) in 2020 and GEL 4.8 million (USD 1.6 million) in 2019.

Economy Minister Faces Grilling in Parliament

Economy Minister Levan Davitashvili, summoned for question time at the Parliament on May 27, faced a grilling from opposition United National Movement party MP Roman Gotsiridze over the audit findings.

Among his queries about the management of the infrastructure projects, the UNM lawmaker cited the case of Log-in Georgia, financed by the World Bank, for which the authorities spent only 8.9% of the allotted GEL 2.1 million (USD 727 thousand) in donor funds for 2021, being subsequently obliged to pay a fee of GEL 325 thousand (USD 112 thousand).

Minister Davitashvili argued in response that the implementation project was delayed as it had to be evaluated throughout Georgia. “No fine was paid by the Georgian state,” the Minister stressed, arguing the fee was instead “an interest accrued on the specific allocation as per the World Bank procedures.”

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