Business lawyer > Accounting > Taxes > Inspections > Illegal use of budget funds, accounting procedures and penalties
The use of budget funds is based on two fundamental principles: targeted nature and targeting. It is not allowed for the budget to be spent according to arbitrary orders. However, in our society the phenomenon of misuse of public funds is by no means uncommon. This is usually due to budget overpayments. In all cases, administrative and even criminal sanctions are provided for violations in the use of budget money.
Spending beyond limits
Key provisions for budgetary funds are enshrined in regulations. The main role is given to the “Budget Code of the Russian Federation” dated July 31, 1998 N 145-FZ.
The list of financial offenses is presented:
- Excess of expenses over the approved financial and economic plan for the calendar year (for example, the purchase of building materials in excess of the required norm).
- Unlawful violation of budget classification by using some targeted funds to cover expenses for other purposes (a striking example is the transfer of funds for repair and construction work of various municipal property objects).
Exceeding the limit - Violation of budget levels, when the costs of one item must be covered by the federal (municipal) budget.
- Directing public money to expenses not provided for by the plan (for example, covering debts that are associated with extra-budgetary sources, and not the budget itself).
- Providing financial support to commercial structures that are not part of budgetary organizations and funds.
- Payment of utility costs without compensation for financial damage to the subject’s budget.
- Carrying out major repairs or construction of facilities that are not included in the state program (for example, the development of an elite microdistrict, bypassing municipal needs).
- Violations related to the issuance of subsidies and other subsidies to regions in need.
Thus, the misuse of budget funds occurs due to an incorrect interpretation of the classification of the expense item. This is largely due to the fact of corruption. But in some cases, errors are systemic in nature and must be identified by the supervisory body - the Accounts Chamber.
Our recommendations for all special account holders
We have analyzed the list of the most frequent violations that were committed by management entities, homeowners' associations and cooperatives as owners of special accounts, using the example of the practice of the GZhN body from Udmurtia. This list may be expanded or shortened depending on the region. General recommendation for all managers of buildings where the owners of the premises accumulate a fund in a special account:
- Carefully study the federal and regional requirements for maintaining a special account.
- Assign a responsible person to ensure compliance with these requirements, deadlines and necessary procedures.
- If the State Housing Inspectorate during an inspection recorded a violation that you did not commit, defend your rights with the help of claims and a lawsuit in court.
Next week we will review the violations committed by redevelopment operators and give advice on how management and homeowners associations can work with them for the benefit of the owners of premises in the house.
If in your practice there have been instructions from the State Housing Authority regarding the maintenance of special accounts, positive court decisions to challenge them, send them to us at We will select cases that are useful for house managers and review them.
You can also send us ready-made material for publication and become our author: to do this you need to take four simple steps.
Payment of wages
Financial violations in the public sector of labor are considered one of the most serious in the classification. Here we also distinguish between the factor of arithmetic errors and deliberate overpayments for the purpose of illegal appropriation of budget funds.
Undue payments may be submitted:
- inflating wages bypassing labor standards and length of service
- allowance under the guise of paying subsidies
- allowances and additional payments to existing earnings
- bonuses and financial rewards for success in work
- compensation not provided for by the staff regulations (moral or physical harm to health)
- other non-targeted cash payments
Extra bonuses
Separately, it should be noted violations in the management sphere, when management sets themselves various bonuses and additional payments from budget funds. A striking example: finances are intended to reward deserving employees of the organization, but go towards the salary of the general director or chief accountant. From a legal point of view, this is a direct violation of Art. 22 of the Labor Code (Labor Code of the Russian Federation).
Allowances, incentive payments and bonuses make up the total budgetary wage fund. According to the regulations, the boss's salary is based on the average wages of employees in the amount of five times. Consequently, overpayments to the manager are a gross violation of labor laws.
The following are also recognized as illegal payments:
- Calculation of wages for work on weekends and holidays
- incorrect calculation of average salary
- incentive payments for work according to an unspecified schedule and scope of responsibilities
- errors when accounting for allowances for work in the Far North or at hazardous sites
As a result, improper payments are associated both with an error in calculations and with deliberate overstatement of salaries.
Expenditure of funds during repair and construction work
The construction industry requires particularly accurate calculations. This is due to the fact that during repair and construction work several financial sources are involved at once. When implementing the state housing construction program, budget money is taken into account.
Construction works
Wrongful expenditure violations typically involve actual or partial payment of unfulfilled construction obligations. Before spending budget funds, control audits should be carried out and expert measurements of the scope of work should be performed. As a rule, installation problems have:
- Deliberate overestimation of construction estimates.
- Overestimation of the physical scope of repair and construction work.
- Carrying out the purchase of building materials for several financial items.
- Repeated payment for the same construction work.
- Making payments to third party contractors, etc.
On a note! When determining financial expenditures from the budget, technical standards are usually used. The documents are presented by such instructions as GESN or FER (TER).
You can avoid improper spending of the budget during construction work by drawing up documentation. It displays the following requirements:
- information on technical inspection of capital construction projects and calculation of design and estimate indicators
- the price list for future work is formed taking into account market prices and inflation (if not possible, approximate indicators at the time of drawing up the plan)
- Suppliers must provide reference to the price list used as the basis for determining material costs
- the final amount of major repairs is formed minus the cost of dismantled elements, if the latter remain suitable for further use in construction
When calculating the use of the budget, primary documentation must be taken into account: orders, invoices, estimates, price lists, etc.
Business travel violations
Going on a business trip is one of the elements of the work routine in organizations and enterprises. According to Art. 167 of the Labor Code of the Russian Federation, business travelers receive monetary allowance and retain their place of work until their return.
The employer is responsible for reimbursing the following employee expenses:
Travel funds
- Costs for travel to the place of business trip (payment for gasoline - if it is the employee’s personal car, tickets for a bus, train, plane, sea or other type of transport).
- Costs of paying for accommodation (rented apartment, hotel, dorm room).
- Daily allowances are necessary for an employee’s accommodation away from their main place of work (costs of food, rest, fuel and lubricants).
- Other expenses incurred by an employee while on a business trip: obtaining a visa, consular pass, etc.
According to the rules, expenses are reimbursed immediately upon the employee’s arrival. In order for costs to be reimbursed in full, a complete expense report must be provided. Note that the first violations are allowed here: on the one hand, the employer may doubt the legality of the expenses and not pay some of them. On the other hand, costs can be covered to a greater extent. Moreover, budget funds are used for financing.
Example: according to local enterprise regulations, business travelers must live in a rented apartment. Bypassing this rule, the employer allows his deputy to check into the hotel. Consequently, the expense portion will be reimbursed as the cost of living in a hotel room. Unjustified expenses will be included in the budget item, thereby violating the target principle.
Appealing the findings of regulatory services
Often, the position of the inspected institution does not coincide with the opinion of the authorized supervisory authorities on the issue of the legality of spending funds. Challenging the conclusions of the control service is allowed both pre-trial and directly in court. The first is usually prescribed in regulations governing the activities of financial supervisory authorities.
In particular, the inspected organization may submit written objections to the decisions of the regulatory services no later than 5 days (working days) from the date of receipt of the conclusion. In its application, the institution must indicate the specific page of the act with which it does not agree. In addition, the objection cites articles of legislation that prove the organization is right. Comments can also be presented in a table. One column will state the controllers' findings, and the other will state the position of the audited organization. If this does not have an effect, the case will be dealt with in court.
Carrying out an inspection
Timely suppression of the misuse of the budget falls within the competence of the regulatory authorities - the Accounts Chamber and the Russian Financial Supervision Authority.
When checking the intended use of budget funds, a special procedure is applied:
- The audit begins with the study of financial and other documents related to the expenditure of the budget for the needs of the enterprise:
Sign the conclusion
- founding papers
- a developed plan of financial and economic activities for the current year (and in some cases for the next)
- confirmation of budget execution within the framework of economic activities (number of employees, agreement for the use of property)
- A written and oral survey of those involved in the expenditure of budget money (general director, chief accountant, staff employees, etc.) - not only funds, but also budget property are subject to verification.
- Carrying out a complete inventory of the subject's property - assessment of the target and targeted principles, efficiency of use, safety from premature loss.
Financial accounting allows you to identify both unintentional and intentional errors in calculating the use of budget funds. Sanctions are represented by a verbal warning, reprimand, removal from office or financial compensation for damage. Identified criminal offenses are considered in court according to a special procedure.
Who is guilty?
The main culprit in violating the purpose of spending the allocated money is a legal entity, that is, the organization that received these funds. But specific officials will also be held accountable. The activities of an organization may be suspended and a fine imposed, and those personally responsible for the incident may face a fine, a ban on holding a position, forced labor, and in some cases, imprisonment.
The culprit will be the employee of the organization who signed the relevant documents on the basis of which budget funds were received or on the basis of which they were spent incorrectly. Most often this is the head of the organization or his deputy.
Responsibility for violations
Misuse of budget money entails administrative and criminal liability.
Administrative penalties in accordance with Art. 15.14 of the Code of Administrative Offenses of the Russian Federation is presented:
- imposition of a fine in the amount of 20,000 to 50,000 rubles (individuals), compensation from 5 to 25% of the amount of the unlawfully used budget (legal entities)
- disqualification (holding a position) from 1 to 3 years
Criminal penalties in accordance with Part 1 of Article 285.1 of the Criminal Code of the Russian Federation are presented:
- imposition of a fine in the amount of 100,000 to 300,000 rubles (or deductions from the income of the convicted person for two years)
- forced labor for up to 2 years with parallel removal from office for up to 3 years
- temporary restriction of freedom for up to six months
- imprisonment for up to 3 years
As practice shows, most often convicts are removed from office and forced to cover the damage they caused.
The application of criminal penalties depends on the extent of the damage. The countdown begins with major damage from misuse of the budget - from 1.5 million rubles. A much more serious, especially large size starts at 7.5 million rubles.
Thus, misuse of budget funds is a malicious violation of current legislation. Unreasonable payments are suppressed by supervisory authorities. Violations are subject to administrative and criminal liability.
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Explanations from the Ministry of Finance
In the event of misuse of budget funds identified by regulatory authorities, it is necessary to objectively, comprehensively and completely establish the circumstances in their totality. Such an order is present in the letter from the Ministry of Finance. In addition, the Ministry insists on clarifying all the reasons and conditions that contributed to the attribution of costs to certain sub-items/items in each individual situation.
