TEMA 10: RDL 2/2004, de 5 de marzo - Ley Reguladora de las Haciendas Locales

• The provided text is about the regulatory law of local finances and the budget of the local administration in Spain, based on the consolidated text of the Law Regulating Local Finances, approved by Royal Legislative Decree 2/2004.

Introduction

• The precepts in the consolidated text of the Law Regulating Local Finances are fundamental to the financial legal regime of local administration, under Article 149.1.18 of the Constitution.
• Exceptions include Article 186, sections 2 and 3, regulations on the local tax system under Article 133, and development of state tax participation per Article 142 of the Constitution, respecting the state's exclusive powers in Article 149.1.14.
• Royal Legislative Decree 2/2004, regarding the Law Regulating Local Finances, is the reference norm.

Title VI: Budget and Public Expenditure

Chapter I: Budgets

Section 1: Content and Approval

• Local entities' general budgets represent the maximum amount of obligations they can recognize, along with the rights they expect to settle during the fiscal year.

• Includes income and expenditure forecasts for mercantile companies whose share capital belongs entirely to the local entity.

• The fiscal year aligns with the calendar year, affecting rights settled and obligations recognized during the year, regardless of the period they derive from.

• Local entities must prepare and approve a general budget annually, integrating their own budget and those of their dependent autonomous bodies.

• It also integrates expenditure and income forecasts for mercantile companies whose share capital is wholly owned by the local entity.

• Autonomous bodies of local entities are classified as administrative or commercial, industrial, financial, or analogous.

• Creation norms for autonomous bodies must expressly indicate their character.

• The general budget complies with stability principles under Law 18/2001, containing expenditure and income states for each integrated budget.

• Expenditure states include specified credits needed to meet obligations.

• Income states include estimates of economic resources to be settled during the year.

• The budget includes execution bases adapting general budgetary matters to the entity's structure, which contain necessary provisions for management, setting out precautions for spending and revenue collection without altering economic administration laws or including administrative precepts needing specific legal procedures.

• Local entities' resources, their autonomous bodies and mercantile societies, will be used to meet their obligations, except for specific income tied to certain ends.

• Rights settled and obligations recognized are applied to budgets in full, prohibiting obligation fulfillment through reducing rights to be settled or already received, unless expressly authorized by law.

• Exceptions include refunds of unduly received income declared by a court or competent authority.

• Each budget within the general budget must be approved without an initial deficit.

• A general budget is accompanied by annexes:

  • Investment plans and programs for municipalities and supramunicipal entities can formulate 4 year plans.
  • Annual action, investment, and financing programs for mercantile companies fully or majority owned by the local entity.
  • Consolidated budgets of the entity and its autonomous bodies and mercantile societies.
  • Debt forecast detailing outstanding credit operations at the start of the year, new planned operations, debt volume at year-end, distinguishing short and long term operations, capital market recurrence, operations in foreign currency, and planned amortizations.

• An investment plan coordinates with urban planning programs and includes a financial plan.

  • Outlining planned investment for each of the four years.
  • Including income from subsidies, special contributions, urbanization charges, assets, and projected income.
  • It also includes necessary credit operations, indicating upcoming costs.

• The plans and programs are presented to the Corporation Plenary during budget approval and undergo annual revisions, adding a new year to their forecasts.

• The Ministry of Finance and Public Administrations sets the general budget structure for local entities, considering the economic nature of income and expenditure, goals, and established criteria.

• Local entities can classify expenses and revenues according to their organizational structure.

• Expenditure states in general budgets apply classifications by programs and economic categories according to set criteria.

• The classification by programs consists of area of expenditure, policy of expenditure, and groups of programs which are subdivided into programs.

• This classification can be further expanded into subprograms.

• The area of expenditure and policy of expenditure levels adhere to those established for the State Administration, considering local entities' individual characteristics.

• The economic classification distinguishes current and capital expenditures.

  • Current expenditures include service operations, interests, and current transfers.
  • Capital expenditures include real investments, capital transfers, and financial asset and liability variations.

• The economic classification consists of chapter, article, and concept levels.

• It can be expanded into subconcept and item levels.

• Chapter and article levels must match those for the State Administration.

• Budgetary application is defined by combining program and economic classifications at the group or concept level, integrating the organizational classification if used.

• Accounting control of expenses is based on the defined budgetary application and fiscal control is based on the determined binding level.

• The Ministry of Finance and Public Administrations establishes the structure for budget information, to which all local entities must adhere for reporting.

• A Local Entity's budget is formed by its President and must include:

  • An explanatory memorandum of its contents and main changes from the current budget.
  • The settlement of the previous fiscal year's budget and the progress of the current year's, referring to at least six months of the current fiscal year.
  • A personnel annex for the Local Entity.
  • An annex of investments to be made in the fiscal year.
  • An annex outlining the tax benefits in local taxes, containing detailed information of the tax benefits and their impact on the revenues of each Local Entity.
  • An annex of information related to social spending agreements made with Autonomous Communities.
  • An economic-financial report including the bases used for evaluating income and planned credit operations, as well as the sufficiency of credits to comply with obligations.

• Budgets from self-governing bodies are submitted to the corresponding Local Entity before September 15 each year together with detailed documents.

• Businesses will submit their income statements to the corresponding Local Entity before September 15 each year, along with their annual performance, investment and financing plans for the following year.

• The chairperson shall prepare the general budget based on the budget and estimated income mentioned above and submit it to the Corporation Plenary before October 15 for authorization, amendment, or return.

• The approval agreement must detail all the budgets and cannot approve any separately.

• Once initially approved, the general budget is exposed to the public with notice in the official bulletin of the province or autonomous region for 15 days, during which parties can examine and make claims to the Plenary.

• The budget is considered definitively adopted if no claims are made, otherwise the Plenary has a month to resolve them.

• The Corporation Plenary definitively approves the general budget before December 31 of the preceding year it applies to.

• The definitively adopted general budget is published in the corporation's official bulletin, summarizing each budget chapter in the provincial or autonomous region's bulletin.

• A copy of the definitively approved general budget is sent to the State Administration and the corresponding autonomous community simultaneously with the bulletin publication.

• The budget comes into effect in the corresponding fiscal year once published.

• If the corresponding budget has not come into force by the start of the fiscal year, the previous one is automatically extended with its initial credits.

• The extension does not affect credits for services or programs ending in the previous year or financed by specific income.

• A copy of the budget and amendments must be available to the public for information purposes.

• Parties with standing to make administrative claims: Local residents, those directly affected even if not local residents, and officially recognized entities protecting professional, economic, and neighborhood interests acting in their own right.

• Claims against the budget can only be made on the grounds that its preparation and adoption did not follow legal procedures, or that it omits necessary credit for obligatory local entity commitments.

• A contentious-administrative appeal can be directly filed against the budget's final approval, following established norms.

• The Court of Auditors must report before the appeal is resolved if the challenge affects budget balance.

• Filing appeals does not suspend the corporation's definitively approved budget.

• Expenditure credits are strictly for their specified purpose, as authorized.

• Authorized credits are mandatory and binding.

• Commitment levels are set by State budgetary law, unless regulated otherwise.

• Payment obligations are only due from local finances when derived from budget execution, respecting credit limits or a final court ruling.

• Courts and administrative authorities cannot issue execution orders or seizure warrants against local finances, funds, values.

• Compliance with judicial rulings falls exclusively on entities, notwithstanding suspension or non-execution powers provided by law.

• Administrative authority will arrange payment within budget limits.

• Extraordinary or supplementary credit must be sought from the Plenary within three months of the judicial ruling's notification date if necessary.

• Expenditure commitments exceeding authorized credits are null and void.

• However, the availability of budgetary credits is conditional upon proof of firm commitment such as aid, subsidies from third parties, or specific purpose contributions.

• In the case that initial forecasts exist within Chapter IX of the state of income, authorization must be granted.

• Authorization or implementation of multi-year expenses is subject to credit authorized for each fiscal year from respective budgets.

• Commitments can be acquired for expenses extending beyond the current year if implemented in the current year and meet certain criteria.

  • These include investments and capital transfers.
  • Other contracts, procurement, consultancy, assistance, service, and uncommon equipment leases subject to Public Administrations Contracts law that cannot be economically stipulated for one year.
  • Leases of real estate.
  • Financial burdens of local entity and autonomous bodies' debts.
  • Current transfers from agreements between local corporations and public or private non-profit entities.

• Expenses must be applied within a number of years.

  • The number of years for this expenses cannot exceed 4.
  • Furthermore, the expenditure attributed to each of the years ahead cannot exceed certain percentages of the corresponding credit for the year in which the operation was committed.
    • 70% is the relevant amount for the next year.
    • 60% for the second year.
    • 50% for the third and fourth year.

• Irrespective of the above, commitments can be acquired for expenses that must extend to future years for investment programs.

• Plenary can expand the year count as well as elevate the percentages previously mentioned in exceptional situations.

• Commitments shall be independently accounted for.

• The credits which as of the last day of the financial year are not designated to compliance of already recognized obligations shall be automatically cancelled.

• The only exceptions to this rule are those highlighted in article 182 under this law.

• Obligations derived from new acquisitions, works, services, and other benefits only apply for the budget within the current year.

• The following obligations are used for valid budget credits at the the moment of acknowledgement: Arrears in favor of personnel and expenses duly made from previous financial years, if incorporated.

• In the event that any expense needs to made, that cannot be delayed until the next budget, and the corporation budget is lacking.

• In those said cases extraordinary credit will be granted.

• In the event that either credit be insufficient or impossible to broaden, in those said cases supplementary credit will be put in place.

• Expeditions, that must be pre informed by the Intervention, is subject to the approval of the Corporation's board.

• The same requisites that apply to the budget also apply here.

• If the existence or insufficiency of the credit arises in the budget of a self governing body, then the expedition is sent over to the Local Entity for processing as previously stated.

• The expedition must specify the increase on which the budget item goes, and the medium or resource to fund it.

• Its funding will be as follows: be charged to the fluid balance of treasury, used with new or greater income raised by total forecasts in the current budget and through lowering other expenses with existing budget, not compromised already.

• Exceptionally those that allow for the express requirement of resources effectively be used.

• When concerning credits that the budget are required to be implemented on urgent processes, this does not require prior approval to do.

• Agreements carried out for calamitous reasons are immediately executable.

• Shall any claims arise from that, these shall be resolved at the nearest time possible.

• All expansible credits that can be implemented shall be done so in the bases of the corresponding budget.

• The local entities shall regulate the system of transfers based on execution of the budget.

• This will depend on the competent body on a case by case basis.

• Corporate board is the body that regulates approval for credit transfers.

• The bodies who transfer the credits of one kind shall be subject to limitations.

• Transfers cannot affect expansive or extraordinary credits, during the course of activity.

• Credits that have been incorporated from non-committed balances proceeding from the closed budgets do not qualify.

• The previous limitations will not affect the transfer of credit that reference to unclassified programs and functions.

• New sources of income are needed to fund expenditure within the year, and the following operations are used:

  • Personal commitments.
  • Sell of assets of the Local Entity.
  • The rendering of services.

• Article 175 under the law, will allow credit to be incorporated to the credits of the expenses.

  • These are done whenever resources are sufficient.

Section 3: Implementation and Liquidation

• The implementation of credits consigned will be carried out according to the section and based on budget.

• The management of the budget in expenses is carried out in the following phases:

  • Authorization.
  • Arrangement.
  • Acknowledgment.
  • Payment Assignment.

• Local entities can also cover more phases of budget implementation in the same management setting.

• If the authorization given in these instances is more than the authority gives, then they can become personally liable.

• Functions can be delegated.

• President, can create a payment office.

• The dispatch of the payment orders will agree to the treasury's current economic standing.

• Those who authorize the payments in the Local Entities are personally liable, when not advised otherwise.

• Prior to conducting payment.

  • Before payment, proof of right needs to be validated.

• There are also payments to be justified and advances of the fixed holding.

  • Payments should be delivered 3 months upon reception.

• The budget needs to be liquidated at the end of each exercise.

  • The obligations, rights or income needs to be adjusted.

• If the current economic standing is in a state of emergency, then expenses need to be reduced if needed.

• Then, they also need to send to the state all budgets liquidated.

• Non-remittances are only authorized by the administration.