Even though State Audit Institution’s overall opinion on financial activities is positive, certain irregularities and loopholes remain noticed in the n financial and compliance audit of the Ministry of Interior in Montenegro.

By Ivana Bogojević (IA)
@IA_Alternativa

The key findings of the State Audit Institution (SAI) report published in October 2015 refers to lack of compliance of the Ministry of Interior (MoI) in Montenegro with certain laws, especially with the Law on Budget for 2014, Law on Budget and Fiscal Responsibility and Law on Public Procurement.

Additionally, the MoI hasn’t reached a satisfying point in interior controls of its operation so far, mainly in the area of job classification, and public procurement procedures.

The Ministry of Interior “broke” its budget

The overall budget for the previous year equals 69.054.070,89 Euros, but according to SAI’s findings, Ministry spent 6.43% more than what was approved, which means more than 4 million Euros; money spent on previous debts of the Ministry, mostly on judicial procedures.

Consequently, this deviation from the Law on Budget for 2014 represents concern in the performance of the Ministry of Finance, which must ensure complete financial compliance of the Ministry of Interior with the Law on Budget for a certain year.

Practices like this cannot be easily overlooked, since they directly compromise the principle of transparency of the budget funds.

There are six key problems in the operation of the Ministry of Interior refer to SAI.

(i) Non-transparent financial reporting

The Ministry of Finance transferred more than 2 million Euros for the taxes and contributions on salaries in the Ministry of Interior, which wasn’t published in the Financial report of the Ministry.

(ii) Paying the unplanned debts and duties

The Ministry of Interior arranged duties against the approved budget funds for 2014, and irregularly spent 727.962,15 Euros.

(iii) Unlawful transferring of funds from one programme to another

The Law on Budget and fiscal responsibility determines allowed percentage of funds that can be transferred from one programme to another. That amount is 10%. The Ministry broke the budget limit couple of times. Namely, the programmes that received these funds are Administration and Police Administration. The latter has received over 8000 Euros against the Law, by funds allocated for the expenses for capital projects.

This leads to excessive increasement of funds for expenditure that is poorly planned within programmes, which repeatedly endangers economical budget spending.

(iv) Bad expenditure planning for certain programmes

Even though certain programmes increased their funds by transferring money from other units, it wasn’t enough to cover their expenses.
Such example is mirrored in the financial operation of the Administration, which increased funds by almost 50%. In the end, that wasn’t enough to cover the expenses of the Administration’s tasks, which consequently increased funds from over 8 million Euros up to over 10 million.

Administration increased its seminal funds by  almost 3 million, after which has broken the budget by another 2 million Euros.   

Police Administration has the same practice, and it is one of the five programmes in the Ministry for which is allocated up to 80% of the overall budget of the Ministry.

(v) Existence of certain accounts unknown to the Ministry of Finance

One of the problems found in the SAI’s audit, concerns the existence of the account, which was open for the Ministry’s housing. Namely, SAI hasn’t received evidence that Ministry of Finance has agreed to the existence of this account, where housing loans of the employees are being paid.

(vi) Vague record of the work, place and rights of the employees

Record on human resources, their work and salaries isn’t clear enough, because of the none existing internal procedures in the Ministry. This means that the Ministry doesn’t follow if some of the employees work regularly, overnight, extra hours, during the national holidays, religious holidays etc.

Additionally, more the 500 employees don’t know his/hers position in the Ministry, which should be clearly defined by the Regulation on internal organization and systematization.

Human resources unknown?

By the end of the December 2014 in the Ministry of Interior 5046 civil servants were permanently employed, among which 543 were ‘’unallocated’- meaning that 543 of them don’t have clearly defined position in the Ministry. Therefore, this 10% of the Ministry’s human resources
received payment for unknown activities.

This Institution doesn’t have an updated record of its own employees. Namely, Ministry failed to define the workplaces of the ‘’unallocated’’ employees in time and in accordance to the Regulations on internal organization and systematization of employees.

The Ministry broke deadline to determine order of civil servants and state employees according to Regulations, while the issue stays open and unresolved nowadays.

Public procurement not transparent enough

When it comes to public procurement procedures led by the Ministry, attention must be directed to the following predicaments:

• Disregard of legal procedures in public procurement;
• Irrational planning according to the real needs in public procurement.

Total amount of planned public procurements by the Ministry equals 11.050.781, 26 Euros or if we look at it from the overall perspective, 16% of the planned budget expenditure in 2014.

Ministry of Interior rightfully adopted the Plan on Public Procurement, but changed it 6 times along the way. Changes increased the seminal plan by 1.027.60 Euros, but the audit analyses shows that more than 1 million Euros of planned funds wasn’t used. This practice is worsening by the fact that MoI doesn’t apply methodology while planning public procurements and the expenditure for public procurements doesn’t agree with the real needs of the users.

Another aggravating moment concerns affairs of the Ministry of Finance in this area, since its duty is to agree or disagree with the seminal Plan on Public Procurement, but not with its additional changes.

State Audit Institution finds that responsibility partly lies in the hands of the Ministry of Finance, which should consider changing the Law on Public procurement and create obligation for the Ministry to give its approval to every change on the seminal Plan there is. This way, changing practice of the buyers could be suppressed.

Public bidding is an important part of the process and key to ensuring its transparency. MOI disregarded this principle for 7 of those public procurements (more than 1 million Euros) and for some, this malfunctioning lasts for years. This situation refers to all types of public procurement procedures.

Three negotiated procedures in providing registration labels and license plates were conducted without public bidding. Almost 50000 Euros of these public procurements was provided, without previous bidding, by the direct negotiation.

Certain goods are regularly used, and if they are to be procured without previous bidding it must be only in the times of great necessity, urgency and unpredictable circumstances, which are out of buyer’s control. Otherwise, principle of transparency, fair competition, efficient usage of public goods and economy are highly compromised.

By avoiding legal procedures of public procurements because of the ‘’urgent’’ needs, Ministry creates fruitful area for monopoly of certain companies. For example, from 2010 certain company called ‘’Data Card Corporation’’ was paid more than 7 million Euros for public procurements provided without any previous public bidding.

When it comes to irrational planning, Ministry had a bad practice of procuring goods for a bigger price than initially planned. For example, procurement of the oil, gas and fuel oil, was estimated to 1.563.693, 11 Euros, while planned funds equaled 1.541.150, 40.

Ministry did not secure sufficient finances for this type of public procurement, which is a precondition for the overall operation.

The Ministry doesn’t have a satisfying record in conducting confidentional public procurements procedures. Namely, the report on this public procurements was delivered to the Government with one month delay. Ministry conducted these procedures for those public procurements which confidential status is questionable.

Public procurements such as tires and vans were purchased through confidentional methods.

This Institution does not have a Regulation which could determine the subject of public procurements and its true nature.

The flaws of interior procedures

State Audit Institution stumbled upon certain irregularities in its first audit of the Ministry, back in 2009. Since then, the Ministry hasn’t taken recommended measures concerning its assets, especially immovable property, which namely refer to inventory of property.

Ministry hasn’t estimated large amount of its assets, since two last requests sent to the Real Property Administration, five years ago.

By doing so, the Ministry disregards the Law on State Property. Not only that the Ministry doesn’t know what it owns, but it doesn’t know the price of its own assets. There is no record on the exact location of the inventory, its size, number of cadastral parcels, license on property etc.

Additionally, some performance flaws were found in internal financial control. Ministry hasn’t been doing correspondent work in this area. Namely, according to audit findings, there are no existing controls, or plans for removing deficiencies of internal controls, there is no existing strategy for risk estimation or their management for that matter.

Ministry hasn’t delivered a Report on self-evaluation of the Financial Management Control, which should and would provide insight in recommendations and action plan for resolving flaws of the internal controls. Additionally. The Ministry doesn’t keep any record of the financial internal processes, meaning there are no audit clues on the timing, responsible officials, procedures and deadlines of certain process and activities. There is no plan on current internal controls, or strategy for risk management. According to SAI’s opinion there is no sufficient level of understanding of the internal financial control’s significance.

Finally, the biggest weakness shown by Ministry concerns planning the budget and estimating it. Without true financial plan for a certain programme or unit, this Institution can’t follow the principle of economy in its performance.

What next?

State Audit Institution gave a positive opinion on the overall financial performance of the Ministry. Nevertheless, the Ministry of Interior is obligated to report on undertaken actions according to SAI’s recommendations. Additionally, the Ministry of Finance must be informed of the previously mentioned predicaments and give its own inputs on the matter.

Ministry of Interior hasn’t approved or disapproved SAI’s findings so far, neither has rejected given recommendations. Nevertheless, media has its eyes on every action of the Ministry, given the current protests in Montenegro. Police Administration was accused by many civil society organizations of excessive abuse of force, used on protesters, among who were many older civilians.

Additionally, there is some estimation on Ministry’s expenditure during the protests, where forces of antiterrorist unit were engaged, as were Army forces. Baring in mind that from the end of September till October 13, Ministry spent more than half a million Euros on protests, we can only imagine expenses of double or even triple figures, after the happenings have had escalated on September 24. We will be able to look at the big picture during parliamentary hearings of Ministry of Finance representatives, on Final budget account of Montenegro for 2015.

Therefore, the work must be continued within institutional forces, such as SAI, Parliament and Montenegrin Government, but mostly within internal forces of the Ministry. One of those internal forces is Internal Audit Unit, which according to SAI extremely helped to state auditors in performing financial checks. Therefore, this unit should follow SAI’s recommendations and foster open and accessible operation of the Ministry.