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 COMMUNICATION REGULATORY AGENCY (hereinafter referred to as: the Agency), concluded with condition found on 31.12.2001. The financial reports are under competence of the Agency leadership. It is a responsibility of the Office to introduce our opinion on the financial reports of Agency  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 Agency’s use of resources while performing its functions. 

1.2.            In the period from 24.06.02. to 05.07.2002 audit was planned and carried out 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.            Audit Office had no opportunity to be present during the listing of the basic assets of the Agency on 31.12.2001. According to the report of the listing Committee of the Agency, the real state of basic assets in compliance with the bookkeeping state.   

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

2.       AUDITOR’S OPINION 

2.1.     according to our opinion, financial reports present the exact and true preview of the financial standings of the Agency on a day of 31.12.2001, the results of the Agency operations and the cash flow for the period concluded on the same day and in accordance with the international accountancy standards. 

Without intention to qualify our opinion, we wish to draw the attention to the Paragraph 4.1. which is to show that: 

• Telecommunication Regulatory Agency (TRA) did not carry out the listing of the basic assets on the day of joining the CRA on 02.04.2001 and the bookkeeping value of those assets on the day of joining was 163.121 KM. This could have an impact on the completeness of the transferred basic assets that Agency signed on 31.12.2001; 

3.       GENERAL REMARKS 

Communication Regulatory Agency (CRA) is an institution of Bosnia and Herzegovina, founded by the Decision of the Office of the High Representative dated on 02.03.2001, which integrates the competences of the Independent Media Commission (IMC) and Telecommunication Regulatory Agency (TRA) in order to create the communication regulator with competence over the electronic media and telecommunications. 

Practical part of integration is realized in two phases, and these are: 

• Telecommunication Regulatory Agency is transformed into the CRA with the effectiveness of operations starting on 02.04.2001;
• Independent Media Commission is transformed into the CRA with effectiveness of operations starting from 01.10.2001. 

In the period from 02.03.2001 to 30.09.2001, IMC has continued with operations without changes and under the competence of CRA with finances calculated by IMC, while waiting for the transformation of CRA. IMC management decided to extend its operations as IMC until 30.09.2001, due to the agreement for transfer of the Contracts for advisors and the employees, whose contracts were extended to 30.09.2001. This was in accordance with the clause from the decision of the High Representative that all assets received from the donors will be exempted from taxes.

4.       REVIEW OF THE PREVIOUS AUDITS 

Office has carried out audit of Telecommunication Regulatory Agency in 2000, on which there was a Report on audit prepared and sent to the Parliament of Bosnia and Herzegovina. Independent Audit Office ½Revizor½ from Sarajevo conducted an audit of TRA for the period from 01.01.2001 to 02.04.2001, i.e. concluded with the day of joining the competences of TRA and IMC (Independent Media Commission). Audit has found irregularities with TRA related to the listing of the assets, concluded with the state found on 31.12.2001 and the state found on 02.04.2001. It was found that the listing of the assets, resources, claims and obligations under aforementioned dates was not carried out.

Independent audit company ½Pricewaterhouse Coopers½ Brno, Czech Republic, has conducted the audit of the financial reports of the Agency for the period from 02.03.2001 to 31.12.2001, on demand of the donor and on the basis of internal rules (upon joining of the competences of TRA and IMC). It was found that the financial reports of the Agency, for the period above are correct and true, and in accordance with the accountancy standards.  

5.       FINDINGS, REMARKS AND RECOMMENDATIONS OF AUDIT OF ACCOUNT IN 2001 

5.1.   List of the basic assets  

Audit has found that the Telecommunication regulatory Agency did not make the listing of basic assets concluded with the day of joining into CRA on 02.03.2001 and the value of these assets, according to the bookkeeping, amounted 163.121 KM. TRA did not make the listing neither with the state found on 31.12.2001, as it was concluded in the Report on audit in 2000. 

Agency was warned that the aforementioned omission could affect the completeness of the assets transferred from TRA, which was signed by the Agency on 31.12.2001, i.e.  There is a possibility that all the assets owned by TRA would not be transferred into Agency on the day of joining.  

Listing of the fixed assets carried out by the Agency on 31.12.2001 is not adequately presented in the lists (states of accounts) in the way to naturally compare the real state according to the listing with the state in the operation books, with expressed agreements and disagreements. Such listings should be signed by the members of the listing committee that would confirm the authenticity of the signature by signing the document. 

Agency is advised to make the listing of basic assets on the lists that present the comparative data of the real and bookkeeping condition in a natural form, what is in accordance with the provisions regulating this field.    

5.2.                Budget execution 

Realized budget of the Agency in 2001 was in the total amount of 170.000 KM and it was aimed for the current expenses. With the re-balance of the budget, which was done in the end of 2001, the total budget of the Agency makes 3.500.000 KM, which actually represents the projected budget of the Agency covered by its own revenues. Audit was not in possibility to compare the planned and realized budget according to the separate categories of the expenditures since the budget was approved in total amount without classification into the individual sections/items of the expenditures like in the other Institutions of Bosnia and Herzegovina. Instead of this, the budget execution is done according to the (CRA) Agency financial plans and other internal rules and procedures such as the salaries calculations, procurements of the capital assets etc. 

In 2001, Agency has realized the total revenues in the amount of 2.119.340 KM. Out of this, the revenues from the budget for covering the communal expenses were done through the Ministry of Civil Affairs and Communications and they were in the amount of 134.259 KM.  

Agency has invoiced the revenues (incomes) for the state contribution for the use of the radio-frequent spectrum in compliance with the Decision of the Council of Ministers  on state contribution for the use of the radio frequencies (½Official gazette of BiH½, No: 30/01) to the users of the radio frequencies in favor of the BiH budget.  In 2001, the total of 6.706.269 KM was invoiced and according to data of the Ministry of Treasury – the amount 5.005.1100 KM was paid out of the aforementioned (1.701.159 KM is unpaid). 

During 2001, Agency has substantiated or realized the expenditures in regular operations, amounting 1.912.879 KM. 

• payments of salaries and compensations to the employees - 863.277 KM or 45%;
• employer’s contributions -  115.026 KM or 6%;
• Expenses for materials and services - 934.486 KM or 49%.  

Audit has advised the Agency to organize the CRA budget in the future, according to the individual sections of the expenditures, which is to provide easier monitoring of the budget execution. Likewise, Parliament is advised to clearly define the status of CRA and other independent institutions in the Law on budget execution and in other regulations, from the point of implementing the local financial, accountancy and other regulations. 

5.3.               Information system 

Regulatory Agency has an established and organized information system that helps them in daily operations and in inters office communications. Computers are interlinked in LAN (lokalna kompjuterska mreža – local computer network) and connected to the Internet through Router. They use Windows operational system and Microsoft Office application software’s with the regular license obtained. Financial sector uses the licensed accountancy software that specifies the need, according to the audit.

• Administrative – organizational structure

There are people in Agency in charged for the management and development of IT system. Audit has found that the leadership did not adopt the IT strategy and the complete informatisation was donning without previously adopted strategy and formal procedures. Non-existence of the IT strategy could cause the disharmony in management of the various IT projects, which could reflect on the efficiency of the system.

Agency is suggested to create the IT strategy that would cover all future plans for information system promotion. Besides strategy, audit has recommended to the Agency to prescribe the standards and procedures that should provide safer use of the information system and better organizational control over the system, such as:

-          PC use procedures in the network;

-          Storing rules, protection and back-up copies,

-          Procedures for e-mail use;

-          Rules on IT project management;

-          Procedures on procurement of equipment.  

6.              CORRESPONDENCE

Upon finalization of the audit on 24.07.2002, the Report is sent to the Agency in order to get their opinion and comments on the Report. Agency has replied on 30.07.2002 and informed us that they have no remarks on our Audit Report.

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