1.      BACKGROUND

1.1.            In the exercise of powers given to us by the Law on audit of the financial operations of the Institutions of Bosnia and Herzegovina (Official Gazette, No. 17/99), Audit Office for auditing of the financial operations of the BiH Institutions (hereinafter referred to as: the Office) has carried out the audit of the financial reports and operations (including the leadership decisions) of the ARCHIVE OF BOSNIA AND HERZEGOVINA (hereinafter referred to as: the Archive), concluded with condition found on 31.12.2001. The financial reports are under competence of the Archive leadership. It is a responsibility of the Office to introduce our opinion on the financial reports of Archive  and, on the basis of the conducted audit, inform of the following: 

• Whether the accountings are done in accordance with effective laws and provisions,
• Whether yearly budgets represent the exact and true preview of the operations during the year and condition at the end of the year,
• Economy/thriftiness, efficiency and success in Archive’s use of resources while performing its functions. 

1.2.            Audit was planned and carried out in the period from 22.07. to 26.07.2002, in compliance with generally accepted audit standards and standards of the International Organization of Supreme Audit Institutions – INTOSAI ('Official Gazette of BiH', No. 05/01). These standards require that we plan and conduct an audit in a way to collect enough proof that would reasonably provide the guarantees that the financial reports do not contain major omissions. Audit includes the review and check-up (through the use of sampling model) of the evidences, which make the basis the amounts introduced and published in financial reports. Audit also includes the evaluation of the applied accountancy principles, important assessments of the operations as well as the evaluation of the overall preview of the financial reports.

1.3.            We find that our audit provides reasonable basis for expression of our opinion. 

2.      AUDITOR’S OPINION

According to our opinion, the financial reports of the Archive in 2001 represent the realistic and objective preview in all important aspects of the operations during and at the end of the year, except for the reserve expressed in the Paragraphs 2.1. and 2.2.

2.1.           Starting balance states in 2001 were not revised. They could, to some extent, influence the objectivity of the financial reports. Likewise, the listing of the fixed assets was not standardized with the states in the operation books. The flats are not exempted from the evidences.  

2.2.      Introduced surplus of the expenditures in the “State balance” amounting 229.478,00 KM is comprised of the surplus of the expenditures  from the previous years in the amount of 218.361,00 KM  and surplus of the expenditures from the current year, in the amount of 11.117,00 KM. Major part of uncovered expenditures refers to the unpaid obligations for salaries and compensations/reimbursement of expenses to the employees from the previous years (1998,1999,2000) that were put into evidence as other long-term obligations in the amount of 160.882,00 KM.  

3.           FINDINGS, REMARKS AND RECOMMENDATIONS OF AUDIT 

3.1. Background

Law on archive structure and Archive of Bosnia and Herzegovina (‘Official gazette of BiH’, No: 16/01) confirmed the legal status of the Archive of BiH, which is to continue with work as the institution of Bosnia and Herzegovina with Head Office in Sarajevo. 

In 2001, Archive has realized the expenditures in the amount of 130.235,00 KM, and concluded with date 31.12., it had three employees: Archive director, who was appointed by the Decision of the Presidency No: 02-111-734/92; Deputy Director, appointed by the decision issued by the Council of Ministers No: 03-111-186/97 and the Officer for use of the archive structure.

3.2. Internal control system

we have found certain weaknesses in the internal control system that primarily reflect in non-existence of the Internal Rules  that would regulate the expenditure of assets, planning, evidence keeping and monitoring of the budget means. Internal Control System of the Archive should be established by the Archive leadership as the set of procedures and measures that would provide the exactness and the regularity in the evidence of the financial transactions, their full harmony with the laws and regulations.

3.2.1. Lacking rules

Lacking rules mainly refer to: the use of the personal vehicles / cars in official purposes, use of telephones, representation expenses and other material operations. Lack of the aforementioned rules can influence the economy and efficiency of budget assets management.

We have recommended to the Archive to independently or in cooperation with the Ministry of Treasury  adopt the Internal Rules that precisely nominate the expenditure of the major sections in the budget (until the decision making at the level of the Council of Ministers).

3.2.2. Procurement procedures

Having an insight into the documentation, we have found that the procurements of the fixed assets are calculated on the basis of the preliminary invoices (No. 10/01 and 237) in the amount of 27.115,00 KM.  We have also found that there were no public announcements of tenders, nor the selection of the best bid, as stipulated in Article 16 of the Law on budget execution of BiH institutions.

Office has warned the leadership of Archive to implement and respect the procedures of procurements in accordance with the Law on budget execution.

3.3.   Budget planning and execution

Totally planned expenses of the Archive, according to the re-balance of the budget, amounted 241.723,00 KM, and realized were in the amount of 157.350,00 KM, which is for 84.373,00 KM less than planned, i.e. 65% of the plan. Planned projection of the Archive is done on the basis of six employees, but there were only three employees.

COMPARATIVE PREVIEW OF THE PLANNED AND REALIZED EXPENDITURES         IN 2001

Office finds that the problematic of planning should be more paid attention to, within the Archive, as well as on the higher levels, where the adoption is made, for the purpose of the real and qualitative budget planning.

Audit has found that Archive did not exceed in full amount the expenditures approved by the budget, however the exceeding took place in individual types of expenses in relation with the approved expenses for these purposes. The same refers to the expenses for procurement of material and services, in the amount of 1.747,00 KM.

Office has recommended o the leadership of the Agency to organize regular monitoring and control of special purpose expenditure of the budget assets according to the types, until the approved level in budget.

3.4.         Financial – accountancy operations

3.4.1.   Financial reports

In the financial report 'Balance of state', there was a surplus of the expenditures over the revenues presented, in the amount of 229.478,00 KM. The latter comprises of the surplus of the expenditures from the previous years in the amount of 218.361,00 KM and surplus of the expenditures from the current year in the amount of 11.117,00 KM. Major part of the non-covered expenditures refers to the unfulfilled obligations for the salaries and compensations to the employees in the previous years (1998, 1999, 2000), that were put into evidence as the other long-term obligations in the amount of 160.882,00 KM. Although the Leadership of the archive addressed to all relevant institutions many times in order to resolve this problem of debt redemption for the previous years , the problem is still unresolved.. 

Office has recommended to the leadership of the Archive to try to find the suitable solution together with the Council of Ministers.

Balance of state contains the evidence on fixed assets – apartments in total value of 308.195,00 KM. These assets are not covered in the listing of the fixed assets. The apartments should have been put out of evidence of the operation books, in accordance with the positive legal regulations addressing the issue of privatization of the apartments.

Archive is advised to confirm the real state of the apartments in the listing and standardize it with evidence in operation books as well as to come up with the proper decisions in order to put the apartments out of the evidence of the operation books, in compliance with the aforementioned Law.

3.5. Information system

There is no organized information system in the Archive. Three computers are used for office operations.

Leadership should come up with and adopt the developing IT strategy that would meet all the needs of the Archive for the information support, as the precondition of the future information system promotion. 

Upon establishing the information system, Archive should, for the purpose of efficient use of the IT system, prescribe the standards referring to the use of PC’s, data protection, creating the back-up copies, network operations, database and e-mail use and the IT equipment procurement and maintenance. In the existing financial software, which would be used for evidence on last year, there is no concluded state found in the last year, so the audit could not rely on the financial information from this software. 

4.        CORRESPONDENCE

Upon finalization of the audit on 26.07.2002, the Report is sent to the Archive in order to get their opinion and comments on report.

The office will inform the Presidency and Parliamentary assembly of Bah on the eventual reply. 

5.   RESUME

Findings of the audit are set according to the most important irregularities, referring to:  Internal control system, mechanisms of management and control over budget assets, irregularities in accountancy management.

• Audit has found lacks in the internal control system that influences the economy and the efficient and effective budget management. 
• Archive did not set the rules regulating the expenditure of assets for: the use of the personal cars for official purposes, telephone use (fixed and mobile network), representation use, and other material operations.
• The procedures of public announcement were not followed in compliance with the Law on budget execution.
• Obligations for unpaid salaries and compensations to the employees in previous years, in the amount of 160.882,00 KM make the major part of the presented surplus of expenditures. 

Audit hereby wishes to thank the leadership and employees of the Archive for the cooperation and assistance provided to us during the auditing.