Final Audit Report on the FS of MCYS for 2007
Description
REPUBLIKA E KOSOVËS/REPUBLIKA KOSOVA/REPUBLIC OF KOSOVA ZYRA E AUDITORIT GJENERAL/KANCELARIJA GENERALNOG REVIZORA/OFFICE OF THE AUDITOR GENERAL Document No. 21.5.1-2007-08 AUDIT REPORT ON THE FINANCIAL STATEMENTS OF THE MINISTRY OF CULTURE, YOUTH, SPORT AND NONE RESIDENTIAL AFFAIRS FOR THE YEAR ENDED 31 DECEMBER 2007 Prishtine, August 2008 TRANSMITTAL LETTER Date: 07. August. 2008 Dear, Mr. Salih Morina, Permanent Secretary in Ministry of Culture Here with please find the Audit Report on the Financial Statements of the Ministry of Culture, Youth and Sport for the year 2007, performed by the Office of the Auditor General of Kosovo (OAG). Pursuant to Law Nr. 03/L-075 on the Establishment of the Office of the Auditor General and the Audit Office of Kosovo, audit reports will be made public by the Auditor General. In accordance with Section 3.3 (e) of Law Nr. 03/L-075 on the Establishment of the Office of the Auditor General, within 30 days from the publication of the audit report, the audited entity or institution shall submit to the Auditor General a report which determines the actions the Institution or entity will undertake for implementing the recommendations given in the audit report. The day audit report is submitted to you will be considered as the ...
Informations
| Publié par | Sies |
| Nombre de lectures | 10 |
| Langue | English |
Extrait
REPUBLIKA E KOSOVËS/REPUBLIKA KOSOVA/REPUBLIC OF KOSOVA ZYRA E AUDITORIT GJENERAL/KANCELARIJA GENERALNOG REVIZORA/OFFICE OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF THE MINISTRY OF CULTURE, YOUTH, SPORT AND NONE RESIDENTIAL AFFAIRS FOR THE YEAR ENDED 31 DECEMBER 2007 Prishtine, August 2008
TRANSMITTAL LETTER
Date: 07. August. 2008 Dear, Mr. Salih Morina, Permanent Secretary in Ministry of Culture Here with please find the Audit Report on the Financial Statements of the Ministry of Culture, Youth and Sport for the year 2007, performed by the Office of the Auditor General of Kosovo (OAG). Pursuant to Law Nr. 03/L-075 on the Establishment of the Office of the Auditor General and the Audit Office of Kosovo, audit reports will be made public by the Auditor General. In accordance with Section 3.3 (e) of Law Nr. 03/L-075 on the Establishment of the Office of the Auditor General, within 30 days from the publication of the audit report, the audited entity or institution shall submit to the Auditor General a report which determines the actions the Institution or entity will undertake for implementing the recommendations given in the audit report. The day audit report is submitted to you will be considered as the day of the publication of the report, therefore you need to submit the plan for the implementation of the recommendations to the AG, no later than 08. September. 2008. Sincerely, Linda Casella Auditor General
2
TABLE OF CONTENTS I. Executive Summary II. Introduction III. Status of Prior Years Recommendations IV. Audit Scope V. Audit Opinion VI. Audit Approach VII. Key Audit Findings and Recommendations 1. Financial Statements 2. Subsidies and Transfers 3. Goods and Services 4. Capital Investments 5. Wages and Salaries 6. Revenue 7. Internal Control Annex I. The MCYS Financial Statements for the year ended 31 December 2007
3
List of Abbreviations
AG Auditor General AI Administrative Instruction IFAC International Federation of Accountants IPSAS International Public Sector Accounting Standards LPFMA Law on Public Financial Management and Accountability LPP Law on Public Procurement MCYS Ministry of Culture, Youth, Sport and None Residential Affairs OAG Office of the Auditor General SRSG Special Representative of the Secretary General UNMIK United Nations Mission in Kosovo 4
I. Executive Summary The Office of the Auditor General (OAG) has performed an audit of the Financial Statements of the Ministry of Culture, Youth, Sport and None Residential Affairs (MCYS) for the year ended 31 December 2007. In our opinion, the financial statements do not present a true and fair view, in all material respects, the financial position of the MCYS as of 31 December 2007, and the results of its operations for the year then ended in accordance with the International Public Sector Accounting Standards for “Financial Reporting under the Cash Basis of Accounting” contained in Annex 1. Our audit was carried out in accordance with international auditing standards issued by the International Public Sector Accounting Standards Board of the International Federation of Accountants and included such tests and procedures as we deemed necessary to arrive at an opinion on the financial statements. Overall the audit resulted in a total of eighteen key findings and recommendations that should be addressed immediately by the management in regard to the following: Financial Statements Subsidies and Transfers Goods and Services Capital Investment Wages and Salaries Revenue Internal Control We noted that Revenue is not always banked via the Treasury; there is a lack of checking and verification of invoices with supporting documents; there is little or no asset management and that the level of unpaid liabilities shown for 2006 but paid in 2007 was understated by over 40000 for fuel alone. The scope and the number of deficiencies we noted in regard to subsidies in particular are extremely serious and need to be addressed as a matter of urgency. The various examples of poor internal control throughout the organisation which we highlight in section 7 make us conclude that overall the level of financial control is inadequate and that this must be improved.
5
II. Introduction UNMIK Regulation 2002/18, dated 4 October 2002, established the Office of the Auditor General (OAG) in Kosovo. According to Section 3.2 of this regulation, the Auditor General (AG) is, among other things, required to conduct an annual regularity audit of all institutions in Kosovo that are either publicly owned or receive funding from, or provide dividends or other non tax revenue to, the Kosovo Consolidated Budget. Section 1 of this regulation defines a regularity audit as an attestation of financial accountability involving examination and evaluation of financial statements and other financial records and expression of opinions on: Whether the financial statements give a true and fair view of the accounts and financial affairs for the audit period; systems and transactions comply with applicable statutesWhether the financial records, and regulations; The appropriateness of internal control and internal audit functions; The probity and propriety of administrative decisions taken within the audited institution or entity; and All matters arising from or relating to the audit. In March 2003, the Kosovo Assembly approved Law No. 2003/2 “Law on Public Financial Management and Accountability” which was formally promulgated by the Special Representative of the Secretary-General (SRSG) on 12 May 2003 in UNMIK Regulation 2003/17. Section 42 of the Law states that the AG will prepare and submit to the Assembly and the SRSG a report on the financial statements of budget organizations for the previous year providing the AG’s opinion on whether or not the financial statements give a true and fair view of the finances of such budget organizations. This report is to be submitted by June 30 following the close of the fiscal year to which the annual report relates. III. Status of Prior Years Recommendations The OAG’s audit of MCYS Financial Statements for the year ended 31 December 2006 resulted in 10 audit recommendations. Our current audit determined that MCYS has started to implement 2 of the 10 recommendations regarding policies and procedures. It is important to mention that in our opinion the failure to implement 8 of the 10 recommendations is a cause for concern. By not implementing the previous year’s recommendations it is likely that the weaknesses still exist. MCYS’s Comments The followings are some additional notes in regard to the implementation of the recommendations issued in your 2006 audit report and for which you have claimed that they are 6
not being implemented. 1. The collection of public money shall be done in compliance with Articles 13 and 16 of LPFMA. COMMENT: MCYS and MEF’s Treasury Department are in the finalization of the procedure. A request has been submitted to MEF and now we are expecting to open a separate account where own source revenues generated by a number of cultural institutions will be deposited. 2. Designated grants given to MCYS’s departments, needs to be used in the function of specific program policy; COMMENT: The designated grants have been used for various programs but within certain units. For a certain project, funds-grants have been used from two different program lines, depending on the activity presented to be implemented. 3. Personnel files need to include all the documentation required pursuant to UNMIK Regulation No. 2001/36 on the Civil Service, or Article 15 of the Administrative Instruction 2003/2. The MCYS Institutions personnel shall be paid in compliance with the Administrative Instruction No. 2005/9 Payment of Contracted Employees issued by MEF’s Treasury Department, which emphasizes the need that salaries of all employees are paid through payroll in compliance with the MPS procedures. COMMENT: As far as the personnel files is concern, they are complete also based on the recommendation given by the internal auditor. As for the payment of service contract employees, we have given our explanation above and now we are waiting for a Government decision, while a number of these contracts have been terminated because of the reform within the ministry and their temporary engagement. 4. The MCYS shall strictly implement official travel procedures. The internal control of both institutions, MCYS and MEF’s Treasury Department, must b improved; COMMENT: The MCYS has implemented official travel procedures in regard to the form of the approval with an a exception of few cases where within an approved/ subsidized project, the travel or the approval for attending or presentation of individuals and institutions (artistic, experts from different areas) in conferences or festivals etc abroad, was foreseen. 5. In relation to the MCYS vehicles, all procedures need to be observed and fuel purchase needs to be performed in compliance with Law on Public Procurement; COMMENT: Fuel was purchased observing procurement procedures. The first contract was entered with company Alfa Trade in 2006 valid for 1+1 year, thus the same is valid up to 1 August 2008. 6. Expenditures must be recorded/posted against appropriate economic codes and invoices must be paid within the specified deadlines. 7. A Contract Manager must be assigned in order to avoid illegal activities such as the repair of private vehicles with public money and other potential activities not foreseen with the contract. COMMENT: The request for vehicles repair, is approved by the Permanent Secretary in consultation with the Chief of Logistics. It is possible that earlier it was a misunderstanding that alledegly private vehicles have been repaired with public money. It is true that the repaired vehicles were private vehicles, however they were used for official business by the MCYS 7
institutions in absence of the official vehicles and because the biggest volume of the work of the Institutions is on the field. Those vehicles now, are not repaired and supplied with fuel as the ones that are property of MCYS are, whereas a number of them are given for auction as instructed by the Government. 8. Ensure utilization of subsidies is conducted in accordance with actual laws and regulations. COMMENT: Subsidies now are used in compliance with departmental program policies and are signed by MCYS’s Management. 9. The MCYS through an adequate monitoring process shall keep evidence about the number of the realized movies under its production, movies co-financed with other partners, how many of them are complete and under process; COMMENT: The process of realizing a movie lasts for years even if its worked as a joint production. The MCYS has so far financed several movies, most of them have already been shown whereas other are still under process. Until now we did not have a clear progress report, however, once Kosovo’s Cinematographic Centre becomes operational, we believe, it will establish proper monitoring and report mechanisms in solving this issue. OAG’s Reply on the Comments The identified issues for 2007 which are presented in this report are identical to system irregularities and weaknesses uncovered during the audit for 2006. The recurrence demonstrates Management’s failure in establishing internal functional preventive controls, which in fact was the goal the recommendations given for the previous year were meant to achieve. Whereas the recommendations included in the MCYS comments presented above, which we also consider to have been implemented or are at the implementation stage, present only a small portion from the list of the recommendations we have given last year. IV. Audit Scope The OAG has conducted an audit of the financial statements of the Ministry of Culture, Youth, Sport and None Residential Affairs (MCYS) for the year ended 31 December 2007. The primary audt objective was to enable the OAG to express an opinion on whether the MCYS financial statements, presented in Annex I, give a true and fair view of the revenues and expenses during the year ended 31 December 2007, in accordance with the International Public Sector Accounting Standards (IPSAS) for ”Financial Reporting under the Cash Basis of Accounting”. The International Public Sector Accounting Standards Board of the International Federation of Accountants (IFAC) is responsible for issuing IPSAS. The accuracy and completeness of the financial statements and accompanying notes contained in Annex I are the responsibility of MCYS management.
8
V. Audit Opinion In our opinion, the financial statements do not present a true and fair view, in all material respects, the financial position of the MCYS as of 31 December 2007, and the results of its operations for the year then ended in accordance with the International Public Sector Accounting Standards for “Financial Reporting under the Cash Basis of Accounting” contained in Annex 1. The audit identified serious deficiencies in the MCYS’s internal controls and determined that these controls could not be relied upon. Substantive testing disclosed material misstatements and errors that have not been corrected in the MCYS Financial Statements presented in Annex I. In several instances, the MCYS did not comply with applicable laws and regulations, further adversely affecting the fairness, truthfulness and completeness of the financial statements. VI. Audit Approach Our audit of the MCYS financial statements for the year ending 31 December 2007 was conducted in accordance with international standards on auditing (ISA) issued by the International Auditing and Assurance Standards Board. The Board functions as an international standards setting body under the auspices of IFAC. The ISAs establish the international framework within which the OAG is to perform its work and covers matters such as general principles and responsibilities, risk assessments and responses to assessed risks, audit evidence, relying on the work of others, and audit conclusions and reporting. Our audit was planned and performed during the period 22/01/08 to 28/03/08. In order to fulfil our responsibilities, we: Reviewed the MCYS financialstatements against the approved budget for 2007; whether the MCYS financial statements were prepared in accordance withDetermined IPSAS “Financial Reporting under the Cash Basis of Accounting”; Undertook extensive substantive testing of financial transactions; of judgment and random sampling to select transactions forUsed a combination testing; Established materiality levels of 5 percent for uncertainties and 3 percent for errors as a threshold for assisting in determining the type opinion to render on the financial statements; Relied on a combination of interviews, analytical reviews, document reviews, and physical verification to assess the validity and propriety of financial transactions; Assessed the independence and quality of work of the MCYS Internal Audit Unit to determine if their work could be relied upon for our audit purposes;
9
10
© 2010-2024 YouScribe