Government Grant Transparency (AM0036)

2. Accountability for grants of the government: Ensuring transparency and accountability of allocation of grants from the State Budget of the Republic of Armenia
Commitment Start and End Date Commitment Start: November 2018
Commitment End: August 2020
Lead implementing agency Ministry of Finance
Person responsible from lead implementing agency Sergey Shahnazaryan
Title, Department Head of Department for State Internal Financial Oversight and Methodology for Public Procurement
Email:
Phone
Other actors involved Other state actors involved Staff of the Prime Minister, Ministry of Justice
Public administration bodies
Civil society, private sector Armavir Development Center NGO (upon consent)
Karen Sargsyan (expert)
Issues subject to regulation The processes of allocation of grants from the State Budget of the Republic of Armenia are regulated by the Law of the Republic of Armenia “On the State Budget”, the Law of the Republic of Armenia “On procurement” and Decision of the Government of the Republic of Armenia No 1937-N of 24 December 2003 “On approving the procedure for allocation of subsidies and grants from the State Budget of the Republic of Armenia to legal persons”.
The grants and donations allocated from the State Budget of the Republic of Armenia (hereinafter referred to as “financial resources”) to non-commercial organisations (hereinafter referred to as “organisations”) shall be provided through competitive procedures only.
The obligation of an authorised body to publish the financial statement and programme report of organisations having won competitions shall be clearly defined.
The Third OGP Action Plan already included the “Accountability for grants of the government: Ensuring transparency and accountability of allocation of grants from the State Budget of the Republic of Armenia” commitment purposed by Armavir Development Center NGO. However, within the scope of the commitment, the Ministry of Labour and Social Affairs only elaborated a competition procedure, but did not apply it. The commitment was partially performed. The Ministry of Sport and Youth Affairs of the Republic of Armenia is applying an online system for the provision of state grants, which allows making state support to youth organisations more transparent and public and raising the level of effectiveness of the process.
Almost all the grants are granted in an uncoordinated manner and without a competition.
The main intention of commitment is to make compulsory the competition procedures for granting financial resources from the State Budget to Non-Governmental Organisations (CSOs) and to develop unified mechanism (reports) of accountability for all agencies.
Main objective Allocate financial resources from the State Budget of the Republic of Armenia through a competition procedure. Improve access to and addressability of information on programmes implemented within the scope of the granted financial resources and the accountability and transparency of the sector.

2. Government Grant Transparency

Language of the commitment as it appears in the action plan: [11]

Brief description: More efficient management of public resources, enhancement of public confidence, enhancement of public integrity.

Milestones

2.1 Studying the instruments and procedures that are already applied for the provision of financial resources to CSOs; defining the advantages and disadvantages; improving the existing procedures by establishing grants; giving donations (grants) only through a competition, except for cases conditioned by exclusivity. [12]

2.2 Elaborating and introducing a unified package of sample application forms, attached documents and other necessary information.

2.3 Posting the results of competitions and the reports of beneficiary organisations on the official websites of authorised bodies.

Start Date: November 2018

End Date: August 2020

Context and Objectives

A set of laws regulates allocation of grants from the state budget in Armenia. [13] However, there is a strong public perception of a lack of transparency in the distribution of funds. As highlighted in the 2016–2018 IRM progress report, research and stakeholders identified a lack of a competitive mechanism of grant distribution by most state agencies. [14] The annual budget allocation for grants and subsidies to nongovernmental organizations was about 6.5 billion AMD in 2018 [15] (approximately 13.3 million USD). The government allocated these funds in the areas of sports, culture, social protection, education, and others. However, information on grant programs has not been publicly available, and the methods of selecting grantee organizations are unknown. This scarcity of information undermines the transparency of funding distribution and raises concerns over the effectiveness of grant allocation.

The third action plan included a commitment (Commitment 2) that aimed to provide transparency of grants that were allocated through competition. It also called for the publishing of reports on state-funded grant projects. Although this commitment provided more information on projects implemented under the grants, the transparency and competitiveness of grant distribution remained unaddressed. Most state agencies did not organize any grant competition. The government allocated grants on a discretionary basis, with names of recipient organizations included in the law on budget or bylaws. [16] The lack of transparency in the grant allocation process has been discussed for several years in various reports, including the CSO Sustainability Index of the United States Agency for International Development. [17] Stakeholders participating in consultations during action plan development also highlighted the issue. [18] One of the key recommendations of the IRM Armenia Progress Report 2016–2018 called for establishing competitive and transparent mechanisms for awarding state grants and service contracts by executive agencies. [19]

The current commitment seeks to improve the procedures for granting financial resources from the state budget to organizations. It would do this by establishing mandatory competitive mechanisms, including application procedures, and developing a unified project reporting format for all agencies. While the commitment is overall verifiable, the language lacks clarity on the types of organizations to be covered. The English version of the action plan often refers to civil society organizations (CSOs), interpreted as nongovernmental organizations, in the background section. However, the Armenian version of the same section defines CSOs as nonprofit organizations. That term covers a larger scope of organizations, from religious and membership organizations to foundations and state-owned nonprofits.

Assuming that the commitment covers civil society organizations, it could contribute to improving a CSO-enabling environment. It would provide access to state funding for a larger number of CSOs through open and transparent grant provision mechanisms. The commitment could also improve public access to information on state funding distribution. In this regard, stakeholders consider this commitment as a necessary precondition for public budget transparency and improvement of public trust in public spending. Had the action plan been clearer in terms of the types of organizations covered by the commitment, it could have had a higher potential impact.

Next steps

The IRM researcher recommends improving the specificity of the commitment by clearly defining the legal types of organizations covered by the commitment and referred to as civil society organizations (CSOs).

Further recommendations include:

• Along with the application forms, the procedure and criteria of the selection process need to be clearly defined and publicly available. Interviewed stakeholders recommended involving CSO representatives in the grant selection commission (with due attention to conflict-of-interest issues). Doing so could ensure a participatory process and fair selection. Measures should be taken to provide a fair and transparent selection process and exclude biases in the allocation of grants.
• As mentioned by one civil society stakeholder, attention should be paid to ensuring a smooth transition process from noncompetitive to competitive distribution of funding. [20] For example, many CSOs had been receiving state subsidies for providing social services to vulnerable groups, but their funding was interrupted in 2019. The government justified the interruption by stating that competitive procedures are to be introduced. As a result, these organizations had to stop their activities funded by the state and terminate contracts with the relevant staff. [21] Thus, some transition period could be planned before the establishment of the new mechanisms and the announcement of competition. This would help organizations dependent on state funding continue their services without interruption before the revised approaches are introduced in practice. A transition period can also provide such organizations the opportunity to participate in the competition and continue their operations.
• The IRM researcher recommends addressing in future action plans the need for proper monitoring and reporting of the projects funded by the state budget. The mechanisms of project monitoring by state are not transparent, and the government agencies publish the reports in an inconsistent manner with sometimes poor quality. [22] Unified standards of monitoring and reporting can be elaborated with the input of CSOs and international organizations, to provide better transparency and ensure the effectiveness of the funds spent.

2. Government Grant Transparency

Completion: Limited

The Ministry of Finance developed an amendment to the government decision on state granting procedure. The ministry posted the amendment for public discussion in late 2019 and presented it to the government for approval in 2020. [35] The government eventually adopted the decision on the amended procedure on 27 January 2021, after the end of the action plan implementation period (August 2020). [36] The amended procedure does not include any unified package of application form and other attachments. The adopted decision states that the instructions for applying will be provided in the grant competition announcement, while the Ministry of Finance will develop the sample competition documents and publish them on its website. A review of the ministries’ websites by the IRM researcher showed that not all of them have published the reports on competition results and grant projects. [37]