Armenian Ministry of Finance Clarifies Spending of Funds from the Armenian Fund

The Armenian Ministry of Finance has provided clarification regarding the allocation of monetary resources donated by the Armenian Fund to the government.

"In light of the numerous inquiries received from the media during these days, we find it necessary to publish information regarding the procedure for the allocation of monetary resources donated by the Armenian Fund to the government and other details.

According to Article 15, Part 2 of the Law on the Budgetary System of the Republic of Armenia, budget execution is carried out based on the principle of a unified treasury, which requires the recording of all income and the execution of expenditures through the unified treasury account of the authorized state body.

As per Part 6 of the same article, budget revenues are accumulated in the unified treasury account of the authorized state body. According to Part 8 of Article 12 of the same law, budgetary revenues include monetary resources received by the state or local budgets. Budgetary revenues encompass the budget revenues established by law for a particular budget.

As defined in Part 1 of the same article, budget revenues refer to the monetary resources entering the state and local budgets, administered by respective state bodies and local self-governing bodies.

Per Point "e" of Part 1 of Article 17 of the same law, sources of state budget revenues include other revenues. As per Point "z" of Part 5 of the same article, other revenues include funds transferred to the state as a donation.

According to Point "d" of Article 5 of the Law on the Treasury System of the Republic of Armenia, the responsibilities of the treasury include organizing the recording of monetary resources under the administration of the Republic of Armenia and the communities and the execution of expenditures through the account of the authorized body’s treasury.

As stated in Part 2 of Article 14 of the same law, all resources assigned to the Republic of Armenia and communities are accounted for in the unified treasury account. As per Part 4 of the same article, all payments made by the Republic of Armenia and communities are executed through the unified treasury account unless otherwise stipulated by international treaties of the Republic of Armenia.

It should be noted that the unified treasury account is a key element of the treasury system, enabling the consolidation of monetary resources belonging to the Republic of Armenia and communities and ensuring an efficient public finance management system. The introduction of the unified treasury account has also provided the opportunity to maintain separate accounting of liabilities through the management of sub-accounts included in the unified treasury account.

Within the framework of the aforementioned regulations, the funds donated by the Armenian Fund (hereinafter referred to as the Fund) to the Republic of Armenia have been recorded in the unified treasury account as "Income from donations by individuals and legal entities received for financing infrastructure, social, and healthcare expenditures due to the declaration of a state of emergency, provided from internal sources" and have been utilized along with other remaining revenues of the state budget in accordance with the agreed-upon directions of the donation agreements to finance additional budgetary needs arising from military operations.

The consolidation of the financial resources in state budget revenues also implies that the execution of expenditures from these funds has been organized based on the principles underlying the budgetary system of the Republic of Armenia, including the principle of publicity. The publicity of the budget means the publication of the approved budget and reports on its execution in the press (in accordance with Article 26 of the Law on the Budgetary System of the Republic of Armenia), as well as the availability of information regarding the budget execution process.

Article 26 of the Law on the Budgetary System of the Republic of Armenia stipulates, among other things, that to ensure the publicity of the execution and control over the state budget, the Government publishes information on the quarterly execution of the state budget within 45 days after each quarter of the budget year.

Based on the donation agreements concluded between the Fund and the Republic of Armenia, the Fund has transferred amounts amounting to 52,703,113.3952 thousand AMD to the treasury account numbered 900005002135 under the condition of using this donation for the financing of infrastructure, social, and healthcare expenditures due to the declaration of a state of emergency.

The donation amount of 52,703,113.3952 thousand AMD transferred by the Fund to the Republic of Armenia has been fully recorded in the unified treasury account in accordance with the requirements and regulations of the Law on the Budgetary System of the Republic of Armenia and the Law on the Treasury System of the Republic of Armenia.

The donation amount is used and will continue to be used within the framework of the budgetary process for the purposes prescribed in the state budget for the financing of infrastructure, social, and healthcare expenditures due to the declaration of a state of emergency. Furthermore, the financing of the expenditures mentioned with the donation amount has enabled the Armenian Government to allocate the resources originally intended in the 2020 state budget for these expenditures in accordance with the regulations established by Armenian legislation to finance newly emerged expense items resulting from the state of emergency, which as of November 19, 2020, amount to approximately 100,978,491.5 thousand AMD.

Resources for financing newly emerged expenditures due to the state of emergency have been allocated through respective decisions of the Government of Armenia, and reports on their use will be published within the framework of the budget execution reports as stipulated by legislation.

Regarding the assessments related to the legality of the contracts concluded by the Fund as mentioned above in the media, it is important to consider the following: According to Article 8, Part 6 of the Law on Foundations of the Republic of Armenia, the property of the Fund cannot be used for the benefit of its founders, members of the governing bodies of the Fund, or the employees of the Fund, except for salaries of the employees and reimbursements of expenses incurred in the performance of duties by members of the governing bodies of the Fund, as well as in cases where the founders, members of the governing bodies of the Fund, and employees are recognized as beneficiaries as envisaged by the charter.

According to Part 2 of Article 4 of the same law, beneficiaries of the Fund include individuals and legal entities in favor of whom, in accordance with the charter of the Fund, specific payments may be made or services may be provided or part of the Fund's property may be transferred.

As per Point 5 of the Fund's charter, the founder of the Fund is the Republic of Armenia, represented by the President of the Republic of Armenia. According to Point 23 of the charter, the Fund manages, uses, and disposes of its property, including financial resources, in line with its purposes and the significance of its property.

According to Point 27 of the charter, the property of the Fund cannot be used for the benefit of its founder, members of the governing bodies of the Fund, or employees of the Fund, with the same exceptions as mentioned previously. According to Sub-point "z" of Point 38 of the charter, the approval of the regulations on the management of the Fund's property falls within the competence of the Fund's board of trustees.

According to Point 10 of the charter, the objectives and tasks of the Fund are: a) to assist in the socio-economic development and implementation of reforms in Armenia and other countries; b) to contribute to the improvement and enhancement of scientific, educational, cultural, social, and healthcare systems.

In this case, as noted above, the financial resources transferred by the Fund to the Republic of Armenia have been used under the conditions established by the executed donation agreements, 1. Based on legally concluded donation agreements; 2. For the purpose of financing infrastructure, social, and healthcare expenditures due to the declaration of a state of emergency; 3. With the consent of the Fund's board of trustees.

Based on the aforementioned and considering that the use condition of the donation amount established by the donation agreements fully aligns with the objectives and tasks enshrined in the Fund's charter, and that the transactions in question have received approval from the Fund's board of trustees, we find that assessments regarding their illegality are unfounded,” the clarification states.