The Budget Act

THE CHAMBER OF DEPUTIES

OF THE PARLIAMENT OF THE REPUBLIC OF CROATIA

Pursuant to Article 89 of the Constitution of the Republic of Croatia I hereby pass a

DECREE

ON THE PROMULGATION OF THE BUDGET ACT. I HEREBY PROMULGATE THE BUDGET ACT PASSED BY THE CHAMBER OF DEPUTIES OF THE PARLIAMENT OF THE REPUBLIC OF CROATIA ON ITS SESSION OF 29 NOVEMBER 1994.

No: PA4-102/1-94

Zagreb, 5 December 1994

President of the Republic of Croatia

Dr. Franjo Tuđman (signed)

THE BUDGET ACT

I. GENERAL PROVISIONS

Article 1

This Act shall govern the content and planning of the budget, the preparation, passage and implementation of the state budget, the budgets of local self-government and administration units and budgetary relations between the state budget and extra-budgetary funds, borrowing and public debt and accounting and budget control.

Article 2

For the purposes of this Act, the terms used shall have the following meanings:

a) A local self-government and administration unit shall mean a municipality, city, district, county and/or the City of Zagreb;

b) An extra-budgetary fund shall mean a legal person established on the basis of a law which is financed through an earmarked tax and/or non-tax income or contributions;

c) The budget shall mean an estimate of annual revenues and receipts and the established level of expenditure and other disbursements made by the state and local self-government and administration units approved by the Parliament of the Republic of Croatia or the representative bodies of local self-government and administration units in accordance with the provisions of the Constitution and other laws;

d) The state budget shall mean the budget at the level of the Republic of Croatia;

e) The budget of a local self-government and administration unit shall mean the budget of that unit;

f) Budget beneficiaries shall mean the government ministries and other state administrative bodies, state government agencies and others that are financed by the budget;

g) Revenues shall mean all non-repayable and non-refundable current and capital receipts with or without counter-obligation, except for non-obligatory and non-repayable receipts without obligation;

h) Grants shall mean receipts without counter-obligation, non-repayable and non-obligatory receipts from domestic and foreign units of state administration or international institutions;

i) Taxes shall mean mandatory, non-repayable receipts without counter-obligation which are determined by the state and local self-government and administration units;

j) Expenditure shall mean non-refundable current and capital payments with or without counter-obligation and grants and transfers paid out to others;

k) Counter-obligation shall mean an instance when the delivery of goods or service must occur in return for a received or paid amount;

l) Lending minus repayment shall mean a transaction in relation to claims against third parties ensuing from public policy. Lending minus repayment shall not mean transactions related to liquidity or those intended to earn interest;

m) Financing shall mean obtaining loans to fund the budget deficit or to use the budget surplus. Financing shall include principal amortization of public debt;

n) Capital expenditure shall mean payments to obtain land, intangible assets, stockpiles, non-financial and other assets whose life exceeds one year; all expenditure towards purchasing military assets and all other expenditure shall be regarded as current expenditure;

o) Capital revenues shall mean proceeds from the sale of non-financial capital assets, such as land, intangible assets, stockpiled goods and other assets whose life exceeds one year, all other revenues being regarded as current revenues;

p) Budget deficit or surplus shall equal revenues plus grants minus expenditure and borrowing diminished by repayment,

r) The Treasury shall mean an organizational unit of the Ministry of Finance. The role of the Treasury shall especially encompass budget planning and implementation, state budget control, money management and state accounting in compliance with the powers conferred to it.

II. BUDGET CONTENT AND PLANNING

Article 3

(1) The budget shall refer to the fiscal year and shall be valid during the year for which it is passed.

(2) The fiscal year shall be a period of twelve months, which commences on 1 January and concludes on 31 December of each calendar year.

(3) In the event that the Parliament of the Republic of Croatia (hereinafter: the Parliament) or the representative body of a local self-government and administration unit, as the case may be, fails to pass the budget before the commencement of the fiscal year, funding shall be done on a temporary basis for a maximum period of the first three months of the fiscal year.

(4) Within the meaning of Article 3(3) above, temporary funding shall be executed in proportion to funds utilized in the same periods in the preceding year's budget up to a maximum of one-fourth of the total revenues allocated through the preceding year's budget.

(5) Any decision on such temporary funding shall be passed by the Parliament or the representative body of a local self-government and administration unit, as the case may be.

Article 4

(1) The state budget shall be passed by the Parliament, while the budgets of local self-government and administration units shall be passed by the competent representative bodies in a manner foreseen by this Act.

(2) The budget of an extra-budgetary fund shall be passed by its competent body, as stipulated by law or a by-law of this body in a manner foreseen by these regulations and under the conditions stipulated by this Act.

(3) Unless otherwise stipulated by law, bodies legally bound to prepare budgets shall autonomously allocate total revenues and expenditure belonging to them under law.

(4) Budget expenditure shall be met by revenues and receipts defined by this Act.

Article 5

(1) All budget revenues and receipts shall be allocated, and stated by source, in the budget.

(2) All budget expenditure shall be determined in the budget and shall balance out with revenues and receipts.

(3) In the event that during the fiscal year a regulation is adopted having an effect of decreasing the planned revenues and receipts or increasing the planned expenditure, a decision shall be passed at the same time determining additional revenues needed to balance the budget.

(4) In the event that during the fiscal year due to extraordinary circumstances and needs there occurs an increase in expenditure or a decrease in revenues or receipts, the budget shall be balanced out by either lowering the planned expenditure or by finding new revenues.

(5) Budget balancing shall be done through budget amendments passed in compliance with the budgetary procedure.

Article 6

Revenues and receipts of the state budget and budgets of local self-government and administration units shall consist of:

(a) Tax revenues,

(b) Non-tax revenues, such as profits of public and state-owned companies, profit of the National Bank of Croatia, duties, fines for criminal acts and repayments on loans granted,

(c) Revenues earned on core activities of budget beneficiaries under special regulations,

(d) Domestic and foreign grants,

(e) Domestic and foreign borrowing aimed at financing the budget deficit,

(f) Borrowing by units of local self-government and administration.

Article 7

Expenditure and other outlays form the state budget and budgets of local self-government and administration units shall consist of:

(a) Current expenditure, such as salaries, allowances, outlays for goods and services, current transfers, interest payment and grants in cash and in kind,

(b) Capital expenditure, such as purchase of fixed assets, capital transfers and grants in cash and in kind,

(c) Lending,

(d) Interests in companies' capital,

(e) Debt principal repayment.

Article 8

(1) All state budget revenue, receipt, expenditure and payment transactions shall be entered into the Treasury's general ledger.

(2) The minister of finance shall open, and keep open, one or more bank accounts for the receipt, safekeeping, payment and transfer of state revenues and expenditure.

(3) The bank account referred to in Article 8(2) above shall be opened with the National Bank of Croatia.

(4) Subject to consent of the Government of the Republic of Croatia (hereinafter the Government), the minister of finance shall be authorized to conclude agreements with the National Bank of Croatia on the management of the state's banking operations and account overdrafts.

(5) Subject to consent of the Government, the minister of finance may defer the collection of a claim and allow collection in installments.

(6) The minister of finance shall be authorized to deposit all or a part of the available balance of the state budget with commercial banks on the basis of a public invitation for bids and the selection of the best bidder. Such selection shall be carried out by a Finance Ministry commission chaired by the minister of finance.

(7) The state budget shall be debited with all outlays in connection with the deposits referred to in Article 8(6) above and credited with interest receivable.

(8) The chief executive official of a local self-government and administration unit shall keep open an account for all payments related to the budget and shall be authorized, on the basis of a decision of the unit's government, to enter borrowing and lending arrangements.

Article 9

(1) No unplanned expenditure may be paid out of budget accounts.

(2) Derogating from the provisions of Article 6(1)(c), of this Act, revenues generated from service fees charged by budget beneficiaries for their core and other activities on the marketplace shall be considered revenues of such budget beneficiaries. Rules on the purpose of use of such revenues shall be laid down in the by-laws referred to in Article 54(2) of this Act.

Article 10

(1) The annual budget shall determine the manner in which budget surplus is to be used and budget deficit financed. State budget deficit shall be financed by borrowing home or abroad.

(2) Budget deficits of local self-government and administration units may be financed by borrowing from other such units, from the state budget and from the non-banking sector, including the citizens.

(3) The borrowing referred to in Article 10(2) above may be done only for the purpose of financing capital expenditure.

III. BUDGET DRAFTING AND PASSAGE

Article 11

The bases for the preparation of the state budget shall rest on the needs of economic development, macroeconomic stability and the policies and regulations adopted by the Parliament, the Government and the minister of finance in accordance with their jurisdiction and competence.

Article 12

(1) In co-operation with the state administrative body responsible for economic development, the minister of finance shall prepare a report on economic and fiscal policy in the month of July for the following fiscal year.

(2) In co-operation with the competent state administrative bodies, the minister of finance shall propose the guidelines and objectives of fiscal policy to the Government and prepare an estimate of the main types of revenues and expenditure for the following fiscal year.

(3) On the basis of an opinion of the Government, the minister of finance shall send budget beneficiaries an instruction on the method and elements of annual budget preparation in the month of September.

(4) The instruction referred to in Article 12(3) above shall lay down the basic elements of the policies which must be observed, the key parameters that must be utilized and the procedures and deadlines for the preparation of requests for the allocation of funds.

(5) The instruction referred to in Article 12(3) above shall contain the estimated amount of expenditure for each budget beneficiary.

Article 13

(1) The minister of finance shall determine the content and method of preparation of budget beneficiaries' requests for funds, as well as the procedure for the allocation of said funds.

(2) The budget beneficiaries' requests for funds referred to in Article 13(1) above shall contain:

1. Expenditure planned for the budget year (by class and sub-class), as categorized under the accounting regulations and the budget chart of accounts,

2. Expenditure planned for the next two years, by expenditure groups prescribed by the minister of finance as needed,

3. A brief overview and structure of staff and officials for whom budget funds are sought,

4. An explanation of planned requirements enabling the Ministry of Finance to approve the received requests,

5. Request proposals pertaining to future liabilities or expenditure planned for several years in advance, including investment projects, to be submitted separately from requests pertaining to expenditure projected for each following year.

Article 14

(1) The minister of finance shall consider the estimated revenues and requests for budget funds, propose necessary modifications to budget beneficiaries, and determine requirements and examine potential sources of borrowing.

(2) The minister of finance shall prepare a draft state budget for the following fiscal year and submit it to the Government by 10 October of the current year.

(3) In the event that during discussion of the proposed state budget any disagreement occurs between the minister of finance and ministers competent for particular budget beneficiaries, the minister of finance shall prepare a report for the prime minister who shall reach a final and binding decision.

Article 15

The Government shall submit the draft state budget to the Parliament for passage not later than 15 November.

Article 16

(1) The budgets of local self-government and administration units shall be prepared by their respective competent bodies in accordance with the provisions of this Act.

(2) The chief executive official of each local self-government and administration unit shall submit a draft budget for the following year to the respective executive body in the month of October.

(3) The executive body of each local self-government and administration unit shall submit such draft budget to the respective representative body for passage not later than 15 November.

(4) The representative body of each local self-government and administration unit shall pass the budget for the following year not later than 15 December.

Article 17

(1) Draft budgets of extra-budgetary funds shall be prepared in accordance with such budget accounting classification system and such budget preparation procedures and schedule as the minister of finance may specifically determine as required.

(2) Draft budgets of extra-budgetary funds shall be submitted to the minister of finance, who shall be authorized to propose amendments thereto it in accordance with the provisions of Article 12 of this Act.