Scope of Financial Inspection
Financial inspection applies to all budget-funded organizations, including judicial authorities; all state-owned enterprises under Article 62, paragraph 3 of the Commerce Act; commercial companies with a blocking quota of state or municipal participation in their capital, as well as their subsidiaries in which they hold a blocking quota; legal entities with obligations guaranteed by state or municipal assets; legal entities under the Non-Profit Legal Entities Act and unincorporated associations in which the state or municipality directly or indirectly participates in their assets; individuals and entities financed by the state budget or EU funds; and any other persons subject to financial inspection under a special law in accordance with the Public Financial Inspection Act.
According to the Energy Act, financial inspections and audits are also conducted in energy enterprises engaged in activities under regulated, including preferential, electricity pricing. Only electricity producers operating power plants with a total installed capacity exceeding 1 MW are subject to control by the Agency.
Initiation of Financial Inspections
Financial inspections are initiated based on requests, complaints, and alerts submitted by state authorities, individuals, and legal entities regarding violations in budgetary, financial, or accounting activities of the aforementioned organizations and persons. Inspections may also be initiated at the request of the Council of Ministers or the Minister of Finance or assigned by the Prosecutor’s Office under the Judiciary Act.
Legislative Amendments and Expanded Functions
In 2011, amendments to the Public Financial Inspection Act were adopted in response to findings in the Fourth Annual Report of the European Commission (July 2010) on Bulgaria’s progress under the Cooperation and Verification Mechanism, as well as recommendations related to judicial reform, anti-corruption efforts, and combating organized crime.
These amendments introduced a new function: financial control in the field of public procurement, based on an annual plan developed through risk factor analysis and assessment. This planned approach aims to prevent and reduce the risk of uncontrolled spending of public funds, exert a disciplinary effect on contracting authorities, and provide PFIA with the legal framework to expand the scope of control and target the highest risk public procurement entities.
Inspection Focus Areas
Financial inspections cover public procurement procedures based on information from the Public Procurement Registry, the Public Procurement Agency, and the National Audit Office. They also examine the use of state aid and the spending of targeted subsidies allocated under the State Budget Act for the respective year and by decrees of the Council of Ministers.
Inspections are also conducted in response to alerts concerning violations affecting the financial interests of the European Communities, as identified by the Central Coordination Unit for Combating Irregularities at the Ministry of Interior.