GEO

Operation of municipal legal entities costs Batumi more than GEL 33 million per year

17 July, 2019

The Batumi Municipality spends GEL 1,626,899 per month and GEL 19,522,796 annually on the salaries of employees of 11 non-entrepreneurial (non-commercial) legal entities (N(N)LE). In addition, GEL 13,720,200 has been allocated in 2019 for subsidizing 8 limited liability companies (LLC) of the Batumi Municipality.  

In total, the Batumi Municipality spends GEL 33,242,996 on the operation of legal entities, which amounts to 21.5% of the Budget of Batumi of 2019 (GEL 154,361,000). 

The number of employees and amounts of remuneration in N(N)LEs 

Eleven N(N)LEs of the Batumi Municipality have 2,497 employees. Despite the fact that in 2018-2019 the number of N(N)LEs has decreased by three in comparison with 2014-2015, the number of their employees has risen by 393, which increased the remuneration in N(N)LEs by GEL 612,000.  

Despite the fact that the number of municipal kindergartens in Batumi has increased from 28 to 32 and, as a result, the number of employees of N(N)LEs has risen to 1,324 since 2014, in 2018, according to official information, 600 children were left without this municipal service, because there were not sufficient places left in the kindergartens. The budget of the current year provides funds for the construction of one additional kindergarten. 

Seventeen of the employees of the Association of Kindergartens are employed in the administration. The Botanical Garden and the Division of Urban Infrastructure and Improvements are also distinguished by a high number of administrative workers. 

Expenses incurred on business trips and bonuses issued by N(N)LEs

In the years 2018-2019, the Batumi Sport Center has incurred the biggest expenses (GEL 200,000) on business trips, while the Association of Kindergartens of Batumi has been distinguished by the amount of bonuses issued.   

Amounts of fuel consumed by N(N)LEs 

The Service of Greening and Landscape Planning of Batumi has consumed the biggest amount of fuel (53,611 liters) among the N(N)LEs. 

Figures of LLCs of the Batumi Municipality

The Budget of Batumi of 2019 subsidizes 8 municipal LLCs with GEL 13,720,200. Five of these legal entities are various sports clubs that were established by the municipality.  

Out of the municipal LLCs, Batumi Auto Transport has the most employees (626), 99 of whom are non-staff employees.  

 

 

Conclusion and recommendations 

Unlike the procedure of appointment of public servants, employment in N(N)LEs does not require the announcement of a competition. Accordingly, both the mayor of the municipality – when appointing heads of N(N)LEs – and the heads of N(N)LEs make recruitment-related decisions unilaterally, which does not make it impossible to select specialists with higher qualifications for vacant positions in an environment of free competition.

A high number of employees is one of the reasons why approximately 21.5% of the expenditures part of the Budget of the Batumi Municipality is intended for remuneration. 

Spending GEL 33 million on municipal legal entities in unjustified in a situation when the municipality is failing to resolve problems related to public transport, social issues, and other municipal problems.   

In the opinion of TI Georgia, the Municipality of the Self-Governing City of Batumi should take the following steps in the nearest future:  

  • In parallel with working on the draft Budget of 2020, the Municipality should study the areas of activity whose proper implementation urgently requires the existence of a LLC or a N(N)LE and, in the case of such need, it should take steps to get certain services by means of a tender: This will both decrease administrative expenses and save budgetary funds;   

  • The Municipality should revise the existing practice and be guided by interests of the public, in order to improve the availability and quality of municipal services as much as possible with effective management and a reasonable recruitment policy;  

  • The Municipality should continue the practice of privatization of sports teams, which will help save administrative expenses and also contribute to the development of sports teams. A good example of this is the decision on the transfer of FC Dinamo Batumi with 49-year-long management rights, which the City Council of Batumi took on May 24, 2019: the City Council of Batumi allowed the  Batumi City Hall to transfer the club to the Ministry of Finance and Economy, while the Ministry made purchasing company Lamin Group obliged to pay GEL 100,000 annually to the budget, to make an investment of at least GEL 500,000, and to develop the Children’s Football Academy.