US embassy cable - 04BRATISLAVA1059

UNCLAS  BRATISLAVA 001059 
 
SIPDIS 
 
 
STATE FOR EB/IFD/OMA LGALLAGHER 
 
TREASURY FOR OASIA/MDM JFRANCO 
 
E.O. 12958: N/A 
TAGS: EFIN, ECON, EAID, LO 
SUBJECT: TRANSPARENCY OF BUDGETS/MILITARY SPENDING 
 
REF: STATE 239929 
 
1.  THE FOLLOWING ARE ANSWERS, PER REFTEL, TO THE AUDIT AND 
REPORTING PROCESS FOR MILITARY EXPENDITURES IN SLOVAKIA 
BASED ON RESPONSES FROM THE MINISTRY OF FINANCE (MOF). 
 
2. HOW ARE MILITARY EXPENDITURES AUDITED?  ACCORDING TO 
SLOVAK LEGISLATION, THE MINISTRY OF DEFENSE (MOD), AS WELL 
AS OTHER MINISTRIES, ARE NOT REQUIRED TO SUBMIT AN ANNUAL 
AUDIT, IN THE SAME WAY THAT COMMERCIAL FIRMS DO.  HOWEVER, 
THE MOD REPORTS QUARTERLY ON THE MANAGEMENT OF BUDGET FUNDS 
TO THE PARLIAMENTARY COMMITTEE OF DEFENSE AND SECURITY.  AT 
THE END OF THE BUDGET YEAR, THE MOD COMPILES A FINAL ANNUAL 
DEFENSE ACCOUNT BALANCE, WHICH MUST BE APPROVED BY THE 
PARLIAMENT AS PART OF THE OVERALL CLOSURE OF ACCOUNTS FOR 
THE NATIONAL BUDGET. 
 
3. WHO AUDITS MILITARY EXPENDITURES?  IN ADDITION TO THE 
REVIEWS CARRIED OUT THE PARLIAMENTARY COMMITTEE, THE MOD IS 
DIRECTLY AUDITED BY THE SUPREME AUDIT OFFICE, WHICH AUDITS 
THE MANAGEMENT OF STATE RESOURCES FOR ALL DEPARTMENTS OF THE 
GOS.  ANOTHER BODY, WHICH MAY REVIEW THE MOD'S SPENDING, IS 
A SPECIAL CONTROL SECTION OF THE MOF.  THIS UNIT CONDUCTS 
RANDOM INSPECTIONS AT ALL DEPARTMENTS WITHIN THE GOS, 
FOCUSING ON SPECIFICALLY SELECTED OPERATIONS AND/OR 
PURCHASES.  THE OFFICE OF THE CABINET ALSO HAS SOME, 
ALTHOUGH LIMITED, COMPETENCE. 
 
4.  TO WHOM ARE THE AUDITS REPORTED?  THE AUDIT REPORTS ARE 
SUBMITTED TO THE CABINET, THE MINISTER OF DEFENSE, THE 
MINISTER OF FINANCE AND THE PARLIAMENT.  CIVILIANS DEALING 
WITH THE DEFENSE AUDIT INCLUDE MEMBERS OF PARLIAMENT AND THE 
CABINET, AS WELL AS OFFICERS OF THE MOD AND THE MOF. 
 
5. ARE ANY OF THE PEOPLE WHO RECEIVE THE AUDITS CIVILIAN 
AUTHORITIES?  ALL OF THE AGENCIES LISTED IN PARAGRAPH FOUR, 
EXCEPT THE MOD, ARE CIVILIAN AGENCIES.  BY SLOVAK LAW, THE 
MINISTER OF DEFENSE MUST ALSO BE A CIVILIAN.  ACCORDING TO 
THE MOD, AS MANY AS 80 PERCENT OF ITS PERSONNEL ARE 
CIVILIANS.  IN 2004, SLOVAKIA BECAME A MEMBER OF NATO, AND 
THE MOD ADOPTED A PLAN OF INCREASING ITS CIVIL MANAGEMENT. 
 
6. TO THE BEST OF POST'S ABILITY, OUTLINE ANY DEFICIENCIES 
IN THE AUDIT PROCESS.  POST DOES NOT HAVE THE RESOURCES TO 
EXAMINE THE ADEQUACY OF GOS AUDITING PROCEDURES. 
 
7. PROVIDE AS MUCH INFORMATION AS POSSIBLE REGARDING THE 
NATIONAL BUDGET PROCESS AND IN PARTICULAR THE MILITARY 
COMPONENT OF THE BUDGET.  THE STATE BUDGET IS THE BASIC 
INSTRUMENT OF GOVERNMENT FINANCIAL POLICY IN SLOVAKIA.  THE 
CABINET DEVELOPS A BASIC BUDGETARY OUTLOOK FOR THE NEW 
BUDGET YEAR, AND THEN, ON THE BASIS OF THAT OUTLOOK, THE MOF 
CREATES THE DETAILS OF BUDGETARY ALLOCATIONS FOR MINISTRIES 
AND OTHER BUDGET-FINANCED BODIES. 
 
8. THE MOD USUALLY BEGINS PREPARING ITS BUDGET NO LATER THAN 
JUNE, AFTER THE MOF PUBLISHES INSTRUCTIONS ON DRAFTING THE 
BUDGET.  LIMITS ON BUDGETARY ALLOCATIONS FOR EACH MINISTRY 
ARE OBLIGATORY.  THE MOD ISSUES INSTRUCTIONS AND SETS 
PRIORITIES FOR THE ASSEMBLY OF THE BUDGET FOR THE UPCOMING 
YEAR, WHICH IS WORKED OUT ON THE BASIS OF DETAILED ESTIMATES 
OF EXPENDITURES.  THIS DETAILED PROPOSAL MUST BE SUBMITTED 
TO THE MOF BY THE END OF JULY. 
 
9. THE BUDGET PROPOSAL IS THEN ASSEMBLED BY THE MOF AND 
RETURNED TO THE CABINET FOR A SECOND REVIEW. AFTER THE 
CABINET GIVES IT FINAL APPROVAL, THE PROPOSAL MUST BE 
SUBMITTED TO PARLIAMENT BY OCTOBER 15.  UNLIKE OTHER LAWS, 
THE STATE BUDGET DRAFT ONLY HAS TWO READINGS.  ONCE 
SUBMITTED TO PARLIAMENT, THE PROPOSAL IS DISTRIBUTED TO ALL 
PARLIAMENTARY COMMITTEES INCLUDING THE COMMITTEE FOR DEFENSE 
AND SECURITY.  IF NO AMENDMENTS ARE APPROVED, THE FINAL 
READING STARTS IMMEDIATELY WITH THE VOTE ON THE BUDGET AS A 
WHOLE.  HOWEVER, IF ANY AMENDMENTS HAVE BEEN APPROVED, THE 
DEBATE IN THE FINAL READING IS LIMITED ONLY TO THE AMENDED 
PARTS OF THE BUDGET PROPOSAL. 
 
10. IF THE PARLIAMENT IS NOT ABLE TO APPROVE THE PROPOSED 
STATE BUDGET BY THE END OF THE YEAR, THE GOVERNMENT OPERATES 
ON A PROVISIONAL BUDGET FOR THE FIRST QUARTER OF THE YEAR; 
THIS OCCURRED IN 1999.  IF THE BUDGET IS APPROVED, THE 
PRESIDENT MUST THEN SIGN IT INTO LAW OR RETURN IT TO THE 
PARLIAMENT.  IN EFFECT, THE PRESIDENT HAS LITTLE POWER OVER 
THE BUDGET. 
 
11.  THE INTERNATIONAL MONETARY FUND HAS PRAISED SLOVAKIA 
FOR ITS CONTINUED EFFORTS TO IMPROVE FISCAL MANAGEMENT AND 
TRANSPARENCY.  IN 2004, THE GOS INTRODUCED A THREE-YEAR 
FISCAL FRAMEWORK AND MADE SIGNIFICANT PROGRESS IN ADOPTING 
THE EUROPEAN UNION'S PREFERRED FISCAL REPORTING METHOD, ESA- 
95, BASED ON ACCRUAL BUDGETING.  THE GOS IS EXPECTED SOON TO 
 
INTRODUCE THREE-YEAR EXPENDITURE CEILINGS THAT WOULD BE 
SUBMITTED TO PARLIAMENT FOR APPROVAL.  THIS WOULD ENTAIL 
SPECIFYING SUB-CEILINGS ON KEY COMPONENTS OF PUBLIC SPENDING 
THAT NEED TO BE REDUCED, AND IDENTIFYING MEASURES TO 
MAINTAIN THESE MEDIUM-TERM EFFORTS. 
 
12. ARE PRODUCTIVE DEVELOPMENT OBJECTIVES PRIORITIZED OVER 
UNPRODUCTIVE?  THE TRANSITION FROM A PLANNED TO A MARKET 
ECONOMY IN THE PAST YEARS HAS FORCED STRINGENT LIMITS ON 
SLOVAK DEFENSE EXPENDITURES.  THE BULK OF MILITARY 
EXPENDITURES GO TO FINANCE BASIC OPERATIONAL COSTS AND 
MILITARY TRAINING, WHILE MODERNIZATION IS LIMITED.  DEFENSE 
EXPENDITURES HOVER AROUND 2.0 PERCENT OF GDP, THE LEVEL 
RECOMMENDED BY NATO. 
 
13. IS THERE A MECHANISM FOR BUDGET PRIORITIZATION DEBATE? 
AFTER THE CABINET SUBMITS THE STATE BUDGET TO THE 
PARLIAMENT, VARIOUS COMMITTEES DISCUSS THE BUDGET PROPOSAL 
AND PRIORITIES AND RECOMMEND CHANGES TO IT BEFORE IT IS 
SUBMITTED TO THE FULL PARLIAMENT FOR APPROVAL. 
 
14. DOES THE COUNTRY'S DEFENSE BUDGET INCLUDE ARMY, POLICE 
AND SECURITY FORCES?  DEFENSE EXPENDITURES ARE DEFINED AS 
THOSE MADE BY THE NATIONAL GOVERNMENT SPECIFICALLY TO MEET 
THE NEEDS OF THE ARMED FORCES (NATO SURVEY DPAO 2001 0590). 
THEREFORE, THE ARMY, MILITARY POLICE AND MILITARY 
INTELLIGENCE ARE IN THE MOD BUDGET.  PARAMILITARY FORCES OF 
THE MINISTRY OF INTERIOR (MOI) AND THE POLICE ARE INCLUDED 
IN THE MOI BUDGET.  THE RAILWAY PARAMILITARY FORCES AND 
RAILROAD POLICE ARE INCLUDED IN THE MINISTRY OF TRANSPORT, 
POST AND TELECOMMUNICATIONS BUDGET.  PENITENTIARY AND 
JUDICIAL POLICE ARE PAID FROM THE MINISTRY OF JUSTICE 
BUDGET. 
 
15. TO POST'S KNOWLEDGE ARE THERE SIGNIFICANT OFF-BUDGET 
MILITARY RECEIPTS?  TODAY, SLOVAKIA DOES NOT HAVE 
SIGNIFICANT OFF-BUDGET MILITARY RECEIPTS.  HOWEVER, IN THE 
PAST, THERE WERE SUBSTANTIAL OFF-BUDGET RECEIPTS, SUCH AS 
UNITED NATIONS PEACEKEEPING OPERATIONS REIMBURSEMENTS AND 
REVENUES FROM THE MILITARY AVIATION ACADEMY. 
WEISER 
 
 
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