Incurring municipality’s liabilities under a temporary deficit of a local government unit

Abstract

Initiatives taken by municipalities acting as part of the public finance sector units include their ability to undertake financial commitments. This is reflected by the systemic solutions laid down in the Local Self-Government Act of 8 March 1990, the Public Finance Act of 27 August 2009 and the Public Finance Act of 17 December 2004 on liability for breaches of public financial discipline. It is interesting to analyse whether the activities of the above-mentioned local authorities reveal some areas which may be regarded as signs of dysfunction, i. e. whether these activities are normatively correct. Given the subjective scope of this analysis which is set out in the title of this article, the issues to be addressed are limited to the temporary deficit of this unit. The problem under consideration must be seen in a multi-faceted way, since its effects, in addition to the obvious effects on the local community’s finances, also have a direct impact on the local community, i. e. they lead, among other things, to a reduction of the resources allocated to carrying out charitable tasks under the Social Funds. Therefore, not only should the institution of the temporary budget deficit of the municipality be considered, but a stricter framework should be established for this institution. It follows from the final conclusions that the commitments made in the context of a temporary budget deficit are limited and they especially must meet the criterion of temporary lack of funds to cover a specific commitment. Moreover, the commitment of the budget decision should be limited. Moreover, exceeding the municipal council’s mandate to incur funds in the context of the temporary budget deficit constitutes a breach of budgetary discipline.