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Serbia Justice Functional Review

Internal Performance Assessment > Financial Management

Chapter Summary

  1. The judicial system in Serbia is not under-resourced, measured on either a per capita basis or as a share of GDP. In 2012, court expenditure was 0.66 percent of GDP, which is higher than any EU Member State monitored by the CEPEJ. Prosecution expenditure was 0.11 percent, which is within the range of other EU Member States monitored by the CEPEJ but is slightly lower than the average.
  2. Any increase in the judicial budget is highly unlikely in the medium to long term. Serbia faces a tight fiscal environment, characterized by a double-dip recession, high and growing public debt. The Serbian Government recognizes the need to find savings, including by reducing the wage bill and rightsizing the public sector. It would be difficult for the sector to argue for more resources, particularly given the low levels of efficiency and effectiveness in the use of existing resources. Budget cuts may be expected, and the sector may need to ‘do more with less’, including by funding innovations via savings identified within the resource envelope.
  3. The courts are partly funded by court fees, and this poses some opportunities and some significant risks.662 In 2013, the courts collected 10.22 billion RSD in fees.663 However, collection rates are low, and courts manage to collection only around one-third of the fees due. The courts are not well equipped to play the role of a collection agency, as the lack the legal tools to pursue delinquent debtors664 and lack the technical capacity to dedicate to fee collection. More concerning, court fee revenue is declining, and will soon decline rapidly.665 With the imminent transfer of verification services from courts to private notaries, court fees can be expected to decline by as much as 30 percent by next year.666
  4. Budget planning and resource allocation are not linked to service delivery needs. Rather, it is based on historical allocations of inputs, which are adjusted rarely in reaction to extraordinary events, such as the reorganization of the court network or emergencies that may disrupt judicial work. Resource allocation is not based on any caseload forecast, performance targets, or objective norms, and the resource allocation mechanism does not provide the courts and the prosecution service with the incentives or opportunities to improve cost-effectiveness.
  5. The resource mix favors personnel over all else. The large wage bill crowds out other expenditures, including in much-needed areas such as training, ICT and infrastructure. From 2010 to 2013, less than 2.5 percent of the court system’s budget was spent on capital investments, which is about half the EU average. Given the pressing need for widespread ICT and infrastructure upgrades, a more significant investment is warranted. However, disbursements on capital projects are slow due to limited procurement capacity, and funds earmarked for capital projects are routinely reallocated in supplementary budget processes.
  6. The courts are generating massive and growing arrears.667 s The main reason for accumulating arrears is poor planning in the budget preparation process and the legislative reform process. Frequently, new legislation imposes increased requirements on courts and other agencies to deliver services or fund costs of legal procedures. However, financial and regulatory impact assessments are not conducted and budgets are not adjusted. Arrears are increasingly impacting service delivery by courts, including by causing delays in hearings. Arrears also generate a significant amount of work, as court presidents and financial departments operate in a continuous crisis management mode, including the management of litigation against service providers.
  7. The lack of automation in the processing of requests for funding reallocation results in excessive budget rigidity, preventing courts and PPOs from adjust funding to business needs. This rigidity is not a requirement from the Ministry of Finance (MOF) but of the HJC, SPC and MOJ respectively, which lack both human and technical capacity to process reallocation requests and so refuse them. The problem could be eased with more modern systems and better coordination between stakeholders, consistently with the Budget Law. Without addressing this problem, it is difficult to see how the sector could unlock the funds necessary to achieve the transformation required to align with EU benchmarks.
  8. The divided management authority and lack of clear division of responsibility and accountability over judicial budget poses coordination challenges for financial management. The budget authority is split between the Councils (the HJC and the SPC) and the MOJ. While the Councils are responsible for the wage bill for judges and prosecutors the MOJ is responsible for wages for all other staff in courts and PPOs. The division of budget responsibility and accountability in other areas, such as funding for maintenance and capital investments, is not clearly defined which slows progress and disbursements on much-needed capital projects. The authority over other non-financial matters, which may have a major financial impact, is also separated from the budget authority, including decisions that affect the large wage bill.
  9. Financial systems are fragmented and outdated. Multiple financial management systems operate simultaneously, and staff are required to enter and transfer data between systems manually. The judicial system lacks a clear cost structure, and there is very little information on unit costs or data that would relate costs to outputs, making analysis of costs per case challenging. There is no alignment between case management and accounting systems, so financial management is unable to inform decision-making or support performance improvements.