At the 55th sitting, held on 18 September 2018 outside of the National Assembly seat in Leskovac, the members of the Committee on Finance, State Budget and Control of Public Spending were presented the report on the regulatory audit of the City of Leskovac for 2016 and the responsive report for 2017.
The sitting was attended by the Mayor of Leskovac Goran Cvetanovic and the head of the city administration and associates, as well as the President of the State Audit Institution (DRI) Dr Dusko Pejovic and associates.
Greeting the Committee members and DRI representatives, the Mayor of Leskovac Goran Cvetanovic said that this sitting in Leskovac is a clear indicator of the National Assembly and DRI’s intention, as well as that of the City of Leskovac to make their work transparent. The city administration is very responsible with the public finances and has since 2012 invested a great deal into the city and into the improvement of the people’s living standards, said Cvetanovic. He gave a brief breakdown of the investment work completed and still being conducted in Leskovac, saying that before the end of the year three new factories are expected to be opened, creating more than 3,000 new jobs. He went on to add that in 2018 NALED certified Leskovac as an example of a local self-government with a positive business environment. Cvetanovic said that the DRI Report found no misallocations or misappropriations of public funds and all the procedural irregularities noted were eliminated within the legal deadline, so last year DRI presented Leskovac as a best practice example in its responsive report.
DRI Council President Dr Dusko Pejovic then presented the report on the regulatory audit of the City of Leskovac for 2016 and the responsive report for 2017, saying that the first provides a breakdown of the irregularities noted and the second the effects of their elimination.
In the regulatory audit report the DRI gave its opinion with a reservation both for the financial reports and operational audit. The irregularities noted in the financial reports concern incorrect income, expenditure and cost entries. Both the expenditure and income contained irregularities of more than 338 million RSD which indicates faulty classification and record-keeping which resulted in incorrect income records of about 4 million RSD and consequently a lower surfeit than in actuality, said Pejovic. The DRI also noted irregularities in the organizational classification of financial reports of more than 1.73 billion RDS. Irregularities were also noted in property records - 1.1 billion RSD, and liabilities - 112 million RSD, which all resulted in the assessments being given with a reservation.
The more than 747 million RSD irregularity noted by the regulatory audit can be attributed to a faulty organizational structure, said Pejovic. Like in other local self-governments this comes from a flawed salary calculation, liabilities carried-over with regard to approved appropriations, liabilities assumed toward other sources, liabilities assumed without legal grounds, liabilities assumed without contract, public procurements conducted without due process or mishandled proceedings. Pejovic said that in general three things seem to be the key in all local self-governments: salaries, appropriations and public procurements, and in that regard Leskovac was average and the responsive reports can be deemed a good example because all the irregularities the DRI noted were eliminated and its recommendations honoured, so the DRI deemed the measures conducted satisfactory.
The Committee members also deliberated on the DRI sector reports presented atthe Committee’s 52nd sitting held in Subotica.
DRI Council member Ljiljana Dimitrijevic gave a brief breakdown of the Sector in charge of auditing the budget and budgetary fund of the Republic of Serbia saying that 47 auditing products were drafted in 2016 – 27 financial statement and regulatory audit reports and 20 post-audit reports. The audit of the budget final financial statement was performed by the Ministry of Finance (Public Debt Administration), Ministry of Economy, Ministry of Agriculture, Forestry and Water Management (Environmental Protection Agency), Ministry of Trade, Tourism and Telecommunications, Ministry of Labour, Employment, Veteran and Social Affairs, Ministry of Culture and the Media, Ministry of Health and the Security Information Agency. Indirect budget beneficiaries were also audited due to the need to audit schools, cultural institutions and similar, to gain an overview of the systemic functioning of regulations and cooperation between the direct and indirect budget beneficiaries. The DRI issued eight positive opinions on financial reports and nine on operating reports, 18 opinions with a reservation on financial reports and 18 opinions with a reservation on operating reports, as well as one abstained for the Museum of Yugoslav History. Dimitrijevic said that the flaws mainly concerned the management, control and establishment of internal audits. All in all, the flaws noted exceed 50%, Dimitrijevic said. Financial planning was a special segment of the audit and records about 72 million RSD in bad foreign debt planning, more than 56 million RSD in transferred expense liabilities by three subjects, as well as impaired budget classification and account mismanagement. Consequently the DRI recommended the amendment of a number of laws, directives and rulebooks, Dimitrijevic concluded.
Certified state auditor Zarko Riznic said that the Sector in charge of auditing the NBS, public agencies and other public fund beneficiaries Audit Sector noted the failure to pay 358 million RSD into the budget of the Republic of Serbia and a 386 million RSD base capital increase without founders’ consent and in both cases the Civil Aviation Directorate took the lead, while the Serbian Renewal Movement was the source of a faulty share record of 16.2 million RSD.
Supreme State Auditor Stojanka Milovanovic presented the report of the Sector in charge of auditing the budget of local governments saying that the Sector had drafter 203 audit products – 105 financial statement and regulatory reports, 16 responsive reports and 82 post-audit reports. 32 local self-government units in 12 cities, 16 municipalities and four city municipalities were audited. The DRI issued five positive opinions on financial statements and four negative ones, as well as three positive and seven negative on regulatory audits. 702 irregularities were noted, 800 recommendations issued and 324 charges filed. 78 of the post-audit reports were satisfactory, while four noted violations. The Sector recommended the amendments of 12 laws and one directive.
Acting Supreme State Auditor Snezana Trnjakovic presented the work of the Sector in charge of auditing mandatory social insurance organizations. The Sector completed 18 audits – 4 of mandatory social insurance organizations and 12 of health care institutions (nine on primary - pharmacies and health clinics, two secondary and three tertiary care institutions). The Sector drafted 13 post-audit reports for the audits conducted in 2016 and gave four positive, two negative and 12 opinions with a reservation on financial statements, as well as three positive, three negative and 12 opinions with a reservation on regulatory audits. It filed 49 misdemeanour charges and pointed out that no by-laws are being passed.
Acting Supreme State Auditor Slobodan Mijailovic presented the results of the Sector in charge of auditing public enterprises, companies and other legal entities founded by a public fund beneficiary or wherein a public fund beneficiary has a share of the capital or managing rights. Of the 38 auditees, nine were public enterprises, four state-owned companies, 23 utility companies, one institution and one fund. To the financial statements audited the Sector issued one positive opinion, 35 opinions with a reservation, one negative opinion and abstained in more than one auditee. As regards regulatory audits, the Sector issued two positive opinions, one negative, 33 opinions with a reservation and abstained in the case of two auditees. The sector issued 835 recommendations and all the auditees submitted responsive reports which were satisfactory in 27 cases, 10 were found to be in violation and severe violation. 70% of the recommendations (618) were followed.
DRI Council President Dr Dusko Pejovic then presented the work of the Sector in charge of audits of expediency – two reports, one concerning the efficiency and cost-effectiveness of a negotiating procedure without a public call for offers, and the other concerning the justifiability of reduced years of service for certain jobs.
The objective of the first audit was to ascertain whether the contracting authorities abide by the tenets of efficiency and cost-effectiveness in public procurements. It was ascertained that a procedure without a public call would be more cost-effective if the contracting parties focused more on research and supervision. The price to quality ratio also requires more consideration, while insufficient coordination with other bodies and inadequate evaluation leads to negotiating becoming the least favourable type of public procurement procedure.
The objective of the second audit was to ascertain the justifiability of service benefits and found that it has been stripped of its original purpose in state bodies because it did not correspond with the difficulty of the job, a misjudgement that had cost the state four billion RSD. This issue cannot be adequately addressed without the active participation of the Ministry of Labour, Employment, Veteran and Social Affairs. The recommendation here is to needs to be addressed this very specific issue systemically, concluded Pejovic.
Finally, DRI Council President Dr Dusko Pejovic presented the State Audit Institution 2017 Activity Report. Committee Chairperson Dr Aleksandra Tomic said that the previous DRI Council President Radoslav Sretenovic had presented this report to the Committee at the end of his mandate in April and proposed that the Committee members vote on it at the next Committee sitting, while DRI Council President Dr Dusko Pejovic went on to brief the Committee members on the Institution’s current and future activities.
The Committee sitting outside of the National Assembly seat was held under the auspices of project “Strengthening the Oversight Role and Transparency of the National Assembly of the Republic of Serbia, Phase Two”, conducted by the United Nations Development Programme (UNDP) and the National Assembly of the Republic of Serbia, and financed by the Swiss Agency for Development and Cooperation (SDC).
The sitting was chaired by Committee Chairperson Dr Aleksandra Tomic and was attended by the following Committee members and deputy members: Goran Kovacevic, Milan Lapcevic, Snezana B. Petrovic, Zoran Bojanic, Sonja Vlahovic, Vojislav Vujic, Zoltan Pek, Olivera Pesic, Srbislav Filipovic and Zoran Despotovic, as well as MPs Tanja Tomasevic Damnjanovic and Zarko Bogatinovic who are not members of the Committee.