At the sitting held on 16 December 2010, 14 January 2011 and 10 February 2011, the Finance Committee members were given a summary of the State Audit Institution’s audit report on the Draft Law on the Republic of Serbia 2009 Budget Final Account.

At the beginning of the Committee sitting on 16 December 2010, SAI Council President Radoslav Sretenovic handed in the Report to the National Assembly and briefed the Committee members on its basic elements.

The audit covered seven ministries, the transactions of the National Bank of Serbia relating to budgetary funds, as well as the draft final account of the Republic of Serbia 2009 Budget. He briefed the Committee members on the spheres where the audit encountered irregularities i.e. the accounting system, internal control and internal audit, annual financial statements and public debt. He also presented the effects of the audit. The audit covered more than 70% of budgetary funds amounting to more than 600 billion RSD. The accounting system audit established that the treasury general ledger, auxiliary ledgers and records of the audit subjects did not provide a full record of financial transaction and that the treasury general ledger did not contain income and expenditure data from the other sources of indirect beneficiaries of budgetary funds. The internal control system is not satisfactorily organised, while 10 audit subjects have established internal audit and 9 have not. In the balance sheet the data on the assets standing have not been adequately presented, in some cases it related to the NIP funds, there is no data on the financial assets standing and it also lacks data on outstanding liabilities for 2009. The Republic of Serbia still lacks a central assets register which according to announcements would be in place in a year. In addition, the inventory of more than 29 billion RSD worth of non-financial assets and more than 3 billion RSD worth of financial assets was not taken. The data on long-term loans in the treasury general ledger and balance sheets are not reliable as there is no information on the monitoring of long-term loan standings. There are also problems with the short and long-term claims. On 31 December 2009 Serbian public debt was 9848 million EUR or slightly more that 944 billion RSD and differs from the data recorded by NBS (lower by more than a billion EUR and it related to the arrangement made with the IMF). The irregularities discovered by the audit also deal with temporary service contracts worth more than 76 million RSD for jobs already established in the systematisation, 49 million RSD of fees paid to employees for serving in task groups coming from temporary service contracts positions and not that of salary, 303 million RSD worth of payments for services and procurement of goods without contracts, as well as an outstanding transfer of 397 million RSD of personal income at the expense of budget execution.

The basic effects of the audit are corrections of the financial statements of the budget final account (decrease of the originally stated budget deficit; decrease of stated non-financial assets standing etc.) and transfer of the more than 5 billion RSD of unspent funds from the Fund for stimulation of the development of agricultural production in the Republic of Serbia onto the evidence account of the Ministry of Agriculture, Forestry and Water Management.

The SAI Council President stated that the report has given recommendations for the improvement of the functioning of public finance in the audited subjects, and that the recommendations of the 2008 Report have been implemented so that some improvement has been noted in the functioning of internal audits. It was recommended to move to amend the Budget System Law and manage the treasury general ledger and budget accounting according to regulations. He announced that the 2008 charges have been processed (only two of the sentences are not finalised yet), that the 2009 Report was delivered to all audited subjects, the Public Prosecutors Office and Republic of Serbia Attorney General, and all the audited subjects were sent a memo informing them that they should correct the irregularities ascertained by the audit within 45 days. He announced that in the upcoming period charges would be filed against the responsible persons in the audited subjects.

In the debate on the summary of the SAI Report, the Finance Committee members asked several questions about following legal procedure in the audit, they wanted to know if harmonisation with the audited budgetary beneficiaries has been completed and if the Report contained any recommendations. The Committee members agreed to continue the sitting next week by debating the Report itself.

The sitting was chaired by Zoran Krasic, Committee Chairman.

The Committee members continued the sitting on 14 January 2011 by considering the only item on the agenda – the audit report on the Republic of Serbia 2009 budget final account and audit report on the audited subjects’ 2009 financial statements.

SAI President Radoslav Sretenovic restated that the SAI had completed the audit of the Draft Law on the Republic of Serbia 2009 Budget Final Account submitted by the Ministry of Finance to the SAI in June 2010, in line with the SAI Rulebook and Budget System Law. The audit covered 7 ministries and the 2009 budget final account. On 16 December 2010 the SAI forwarded the audit report to the National Assembly and all the audited subjects. He repeated that the SAI had not audited the Bill on the 2009 Budget Final Account.

The Committee members commenced a debate on the SAI’s audit report on the Draft Law on the Republic of Serbia 2009 Budget Final Account and Bill on the 2009 Budget Final Account forwarded into assembly procedure by the Government on 31 December 2010 and asked the SAI Council President to inform them if they differed in any way i.e. whether the unrevised Draft and the Bill in procedure differed in content. The Committee members also wanted to know whether the SAI would complete a new audit report on the Bill, whether proper procedure was followed and proposed that the Committee adopt a conclusion requesting the SAI to take a stand on whether the unrevised Draft Law on the 2009 Budget Final Account and Bill on the 2009 Budget Final Account sent into assembly procedure by the Government differed.

Following the debate, the Committee members concluded that the Committee should request the SAI’s opinion on the Bill on the 2009 Budget Final Account, and SAI Council President Radoslav Sretenovic said that the SAI would submit its opinion to the Finance Committee within seven days.

The sitting was chaired by Committee Chairman Zoran Krasic.

In the continuation of the sitting on 10 February 2011, the Finance Committee continued the debate on the audit report on the Republic of Serbia 2009 budget final account and audit report on the audited subjects’ 2009 financial statements.

Committee Chairman Zoran Krasic reminded the Committee members that in January of this year SAI was requested to submit an opinion in line with the Committee’s conclusion, which the SAI did.

The SAI Council President and auditors general reminded the Committee members of their report and briefed them on the recommendations stemming from it. From the audit the SAI determined certain irregularities in a number of audited subjects and adopted 16 recommendations for their removal inter alia recommendations relating to the introduction of an internal control system, harmonisation of the treasury general ledger with the law, recording of the NBS information on the state of the revolving loans into the budget ledger at the treasury, realisation of the NIP funds, normative regulation of the duty of long-term loan beneficiaries to inform the Ministry of Finance on any changes, adding that balance sheets should display financial assets, expressing the obligation toward the IMF per allocation of special drawing rights, harmonisation of the formulation of data on the state public debt between the NBS and Ministry of Finance.

The SAI Council President added that 13 charges have been filed against 14 persons, among them 4 ministers, 2 assistant ministers, 2 ministry secretaries and 4 directors of different administrations.

In the debate, the Committee members exchanged opinions on the SAI Report and recommendations restating their support for the SAI and its work and achieved results. They also stated that they expect that future audits would also cover public companies and local self-governments. The Committee Chairman proposed the text of the Committee’s Report that will be debated at the next sitting.

The sitting was chaired by Zoran Krasic, Committee Chairman.