In May 2016, former Prime Minister of the Republic of Armenia Hovik Abrahamyan made a decision in a cost optimization program to phase out 797 service cars.
Amount of money saved: Expert calculations
In an interview, then Chief of Government Staff David Harutyunyan said that the annual state expense to maintain one car is 1 million 200 thousand AMD.
Based on expert calculations, the monthly expense of one car is 450 thousand AMD: 150 thousand for the driver’s salary, 150 thousand for gas, and 150 thousand for maintenance. That is, if we multiply the monthly 450 thousand expense for one car by 12, the annual expense for one car is 5 million 400 thousand AMD.
Averaging the difference between the government source and private calculations (i.e., adding and dividing by 2), the annual expense for one service car is 3 million 300 thousand AMD.
If we multiply the annual 3 million 300 thousand AMD by 797 cars, it turns out that as a result of optimization the state could save about 2.6 billion AMD annually. On the other hand, auction sales of the cars could be additional revenues to the state budget.
Media.am inquired with the Department of State Property Management about, as a result of optimization, how many cars were registered with the department, how many were sold, and for how much.
And so, 427 optimized service cars were transferred to the department’s balance sheet. As of May 10, 2017, of these cars, 413 were set aside for auction. Of these, 370 were sold, 3 are in the auction process, and 40 were not sold.
The cost of the sold cars fluctuated from 2,518 AMD to 1 million 536 thousand AMD. To get an average number, we will add the lowest and highest sold prices and divide by two. This way, one car was sold for an average of 770 thousand AMD. Multiplying the number received with this methodology by the number of sold cars, 285 million AMD was expected as revenue into the state budget.
Optimization was followed by new optimization
Prime Minister Karen Karapetyan continued Hovik Abrahamyan’s optimization policy. As a result of optimizing state agencies (State Non-Commercial Organizations and Project Implementation Units), the department put aside for auction 147 cars, of which 88 were sold, 51 were not, and 8 are in the auction process. Based on the prices provided by the department, with the same logic of calculation as the result of the last optimization, about 68 million AMD should’ve entered the state budget, while the savings would’ve been about 485 million AMD.
All auctions are held according to traditional, public order. The entire auction process is video-recorded. Participants cover the auction’s organizational costs. The auctions are carried out through the Auction Center SNCO. The cars on the state agency’s balance sheet are parked on Haghtanak’s 2nd Street, at number 79, where buyers and interested parties can get acquainted with the condition of the cars, conduct inspections.
How much has the state budget eased?
The ministry informed Media.am that 157 service cars were cut in 2017, the reduction in maintenance costs of which resulted in a savings of 203 million AMD.
As for the state budget revenues from the sale of service cars removed until then, the ministry informs: “The Ministry of Finance does not have information about the money transferred to the Republic of Armenia state budget and [the cars] sold specifically within the scope of this initiative.”
The media about the removed cars
There’s no shortage of articles in the media on the optimization of the vehicles’ expenses. Journalists mainly focus on the depreciation of the cars put on the auction block, and the resulting lower market prices. Doubts related to the transparency of the auctions surface in the press.
There are no articles in the media about the savings as a result of the optimization and the reduction of cars.
What is wrong about this process?
- When the government began to optimize and cut the number of service cars, it didn’t offer a financial explanation to the public on how much money was saved and where the money will be directed.
- Years after the process, there was no official statement on to what extent the burden on the state budget has eased.
- Missing in the answers state sources provided to us are statistics — without which assessing the effectiveness of the process and the impact on the state budget is not possible.