Every year, the Supreme Audit Office (NIK) prepares for the Sejm (the lower chamber of the Polish Parliament) a comprehensive “Analysis of the State Budget Execution and Monetary Policy Assumptions”. On June 14, such an analysis regarding the budget of the year 2022 was sent to the Sejm and published in an incomplete version, i.e. without the opinion of the NIK’s College on the budget discharge that is a very important document arising from the Constitution of the Republic of Poland.
Article 226 of the Constitution says: “The Council of Ministers [the government], within 5 months from the end of the budget year, shall submit to the Sejm a report on the implementation of the Budget Act together with information on the state’s debt. The Sejm considers the submitted report and, having considered the opinion of the Supreme Audit Office, adopts a resolution on granting or refusing to discharge the Council of Ministers within 90 days from the date of submission of the report to the Sejm.”
This “opinion” was always attached to the Sejm’s publication with the “budget execution analysis”. The content of this opinion is unprecedented in the history of public finance after the economic transformation. For the first time in history (taking into account the period since 1989), the Supreme Audit Office did not express a positive opinion on the discharge for the government. Minister of Finances in the current government will be therefore remembered in history as the first minister, the author of the budget, who did not receive a positive opinion on the discharge for the government.
The Institute of Public Finance (IFP) and the associated experts have been raising the alarm for several years indicating a huge degradation of the public finance system.
In autumn 2021, before the first reading of the 2022 budget, I warned in the press: “We are dealing with a budget fraud on an unprecedented scale. Therefore, I believe that the Parliament is wasting its time dealing with this document. The Parliament should return the budget to the mobs that prepared it and demand a real budget, with a full account, with the Prime Minister Morawiecki’s spending havens exposed.”
According to data from the Ministry of Finance, the state budget deficit in 2022 amounted to PLN 12.6 billion, i.e. (0.4% of GDP) compared to PLN 29.9 billion planned in the Budget Act for 2022. In 2021, the state budget deficit was over twice as high and amounted to PLN 26.4 billion (1% of GDP). The juxtaposition of these figures may suggest that the situation of public finances is in excellent condition. Unfortunately, this is not the case, because the real state budget deficit is many times higher, as the data sent to Eurostat presents. In the report on the budget act sent to the Sejm, the government showed about 12% of the real government deficit, because the real government deficit is about PLN 101 billion.
It is the government’s “sky-high fiction”. Based on calculations at the stage of the budget plan, the scale of the deficit outside the budget was to amount to 72%, and in execution it was as much as 88%.
The Supreme Audit Office indicates that the Budget Act “did not cover many significant financial operations related to the implementation of state tasks, which had an impact on the increase of debt issued or guaranteed by the State Treasury. 2022 was another year when, by adjusting legal regulations, various solutions were constructed that disrupted the transparency of public finances. These actions significantly lowered the constitutional rank of the state budget as the central financial plan of the state. In 2022, the state’s financial economy was largely realized outside the state budget omitting the budget restrictions. (…) These activities not only affect the transparency of the data presented on public finances, but also make it impossible to compare them in subsequent years, and most importantly, they hinder parliamentary and social control over the collection and spending of public funds.”
Let’s compare this situation to a company. A company has a Management Board that receives discharge from a Supervisory Board. The Supervisory Board receives formal reports, which are prepared by the company’s accountant and approved by the Management Board. And then the auditor. Let’s imagine that this company has a chain of stores all over Poland, in each municipality, and has selected only some of them for calculations. The company’s accountant calculated the financial result in these selected stores and sent it to the Supervisory Board – the report that constitutes only 12% of the true, complete result. The rest it sent to Brussels or hung on the notice board in the cafeteria, i.e. without stamps, informally. What would this Supervisory Board do in such a case? It would reject the report, fire the Management and the accountant. A discharge based on incomplete and defective documents would be invalid. Meanwhile, the Polish government has been granted a discharge for several years for a piece of the deficit.
Is it possible to get a discharge based only on an excerpt of finances? Is the budget constitutional? In my opinion, the answer is obvious. Enough is enough. For the first time in history, the Supreme Audit Office did not express a positive opinion on the discharge for the government because the scale of off-budget operations has reached an exorbitant scale. The NIK’s analysis will in the future be the key evidence when it comes to settle the Minister of Finance, the management of the ministry for a dismantling the public finance system and sending a fictitious budget to the Parliament.
Author: Dr. Sławomir Dudek