Number: 01-07-21-1/03

C O N T E N T S 

1. Introduction  

In accordance with legal obligations, Auditor General submits Report on Operations of the Audit Office of the Institutions of Bosnia and Herzegovina (hereinafter: The Audit    Office) to the Parliamentary Assembly of Bosnia and Herzegovina for previous year.

This Report encompasses an overview of major activities in 2002, in which we performed audit of public accounts in Bosnia and Herzegovina. Reports have been submitted to the Presidency and Parliamentary Assembly of Bosnia and Herzegovina, and have been published in Official Gazettes of Bosnia and Herzegovina and its entities.

The Audit Office had audited, during last year, institutions that are users of more than 85% of the administration part of the State Budget, accounts used for servicing of foreign debt, and started so called interim audit of the institutions for 2002.

Reports have had good media coverage, mainly through paper media and have had good response in public, which adds to furthering of understanding of role of public audit in strengthening of democratic processes within the society, reducing of corruption and better management of public funds.

As a full member of The International Organization of Supreme Audit Institutions, The Audit Office continued to apply INTOSAI Auditing Standards and to participate in common activities.

Financing of The Audit Office remained at the level from 2001. This fact slowed down further development of the institution.

During the year we continued cooperation with The Swedish National Audit Office (SNAO) that is providing assistance within the project of the institutional capacity building. Swedish Audit Office, as one of the best in the world, is allowing us acquisition of up-to-date knowledge and adoption of best practices in the area of audit.

Auditor General with Deputies, along with Auditors General and their Deputies from Federation of Bosnia and Herzegovina and Republic of Srpska, members of the Coordination Board of the Audit Institutions achieved significant results in relation to the adoption and application of INTOSAI standards and equalization of the applicable work methodology.

The Audit Office still does not have final solution for its office premises and is currently placed in two locations, which makes communication more difficult and influences the efficiency.

It is necessary that the Parliamentary Assembly provides/secures independence of The Audit Office, in accordance with Lima Declaration as the most significant international document regulating rules for public audit, in order for The Audit Office to be able to completely fulfill its legal obligations and fully give its part in the development of the country.

2.     Realization of plans for 2002

Among most significant results of The Audit Office, we would like to point out the following:

-        initiation of audit of the institutions of BiH in accordance with Audit Law, and according to the risk index and significance criterion;

-        reporting to the Presidency and Parliamentary Assembly, as well as to public about financial operations of the institutions of Bosnia and Herzegovina;

-        building of internal structure and capacities of The Audit Office that enabled audit results which have satisfied the INTOSAI Auditing Standards as well as other professional and ethic requirements.

The Audit Office had tried, through initiation of audit activities in the reporting period, to achieve following objectives: 

-        to enhance responsibility in use of public funds;

-        to increase transparency of use of budget funds;

-        to provide information and recommendations to both Presidency and Parliamentary Assembly of Bosnia and Herzegovina, as well as to budget users, that would influence the quality of budget management and the efficiency of the operations of the institutions;

-        to identify different digressions from legal requirements in order for relevant institutions to undertake certain activities;

-        to give recommendations for the adoption of new, and upgrading of existing regulations in order to create better legal surrounding.

3.     Audit of the institutions for 2002

The Audit Office’s mandate is defined by The Law on Auditing of Financial Operations of the Institutions of Bosnia and Herzegovina (Official Gazette of BiH number 17/99), generally accepted auditing standards and INTOSAI standards.

Article 13 of this Law prescribes that the Auditor General audits public accounts which include all the ministries, offices, courts and government bodies, public funds, enterprises and companies that are partially or completely owned, controlled or financed from the Bosnia and Herzegovina’s Budget.

While reporting about audit of public accounts, Auditor General reports:

• if reports are made in accordance with legislation;
• if annual accounts reflect accurate and truthful presentation of the operations during the year and status at the end of the year;
• on economy, efficiency and effectiveness with which organizations have been using public funds.

According to Law, reports on auditing of public accounts are being delivered to the Parliamentary Assembly and the Presidency of Bosnia and Herzegovina.

The Audit Office, in accordance with legal obligations, its mandate and its annual program of work for 2002, audited accounts for 2001 in following institutions:

·         Ministry of Foreign Affairs, within which practically six separate financial segments were audited:

-        Ministry’s HQ in Sarajevo;

-        Embassy of BiH in Amman,

-        Embassy of BiH in Canberra;

-        Embassy of BiH in Budapest;

-        Embassy of BiH in Ottawa;

-        Mission of BiH in Rome;

• Ministry of Civil Affairs and Communications of BiH;
• Ministry of Foreign Trade and Economic Relations of BiH;
• Constitutional Court of BiH;
• Communications Regulatory Agency of BiH;
• State Border Service of BiH;
• Ministry of Treasury of the Institutions of BiH, within which the BiH Budget as well;
• Ministry for European Integrations of BiH;
• Ministry for Human Rights and Refugees of BiH, within which two separate projects were audited as well:

-        Project for Immigrants and Asylum Seekers in BiH;

-        Project of Assistance to the Ministry for Reception of Refugees;

• Council of Ministers - Services;
• Common and Technical Operations Service of Council of Ministers;
• Presidency of BiH;
• Parliamentary Assembly of BiH;
• Statistics Agency;
• BiH Archive;
• Department for Civil Aviation of BiH;
• Foreign Investments Promotion Agency;
• Standards and Measurements Institute;
• Accreditation Institute;
• Veterinary Office of BiH; 

Even though audit started late, due to delays in completion of annual accounts of budget users, we managed to fully complete our plans. Audit has covered over 95% of the administration part of Budget of BiH for 2001.

During April 2002, we audited accounts used for servicing of foreign debt, opened for these purposes in the Central Bank of Bosnia and Herzegovina.

Auditor’s opinions on financial reports, main remarks and findings are given in Table 1: 

Table 1

After the audit of accounts for 2001, at the beginning of October, we started interim audit of accounts for 2002. Interim audit includes evaluation of functioning of internal controls systems, examining of more significant transactions, control of budget execution dynamics and evaluation of balance items. Its goal is to help the management with advices and recommendations in order for them to correct established weaknesses which can influence the accuracy of financial statements. This way, interim audit, as its objective, has providing of preventive assistance for management.

During this phase we performed interim audit and delivered letters to management with recommendations to following clients: Ministry of Foreign Affairs; Presidency of BiH; Parliamentary Assembly of BiH; Ministry of Treasury of Institutions of BiH; Ministry for Human Rights and Refugees; Council of Ministers - Services; Common and Technical Services of BiH Institutions.

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Internal structure and organization of The Audit Office is established and foreseen by The Rulebook on Internal Structure of The Audit Office, as well as management, expert collegiate body, planning and programming   of operations, audits and reporting, official secrecy, employment relations and public nature of the operations of The Audit Office.

Internal structure of The Audit Office was established with the objective to provide for rational organization of operations and efficient management and performing of operations implementation of established policy and adequate cooperation with the institutions of Bosnia and Herzegovina.

Tasks from The Audit Office’s mandate are being performed through following organizational units:

• Cabinet of the Auditor General and Auditor General Deputies
• Audit Sector (group of clients I)
• Audit Sector (group of clients II)
• Legal and Common Operations Service

Audit activities are organized in a following way: Audit is being performed by audit teams (senior auditor and two junior auditors). Head of the team is a certified auditor. Beside other, management duties, Auditor General Deputies also coordinate the work of audit teams.

Also, Chief of Legal and Common Operations Service participates in audit tasks, giving legal interpretations upon requests of audit teams.

The Audit Office administration is organized through Legal and Common Operations Service.

The Audit Office currently has 19 employees.

Number of employees remained the same in 2002, due to budget limitations. 

STRUCTURE OF EMPLOYEES IN THE AUDIT OFFICE:

EDUCATIONAL STRUCTURE OF EMPLOYEES

Within our regular activities, we also amended and changed normative documents collected within the internal manual “Collection of Regulations and Bylaws”. We adopted rulebooks on data entering into ISFU system of BiH; material (financial) operations; gifts and representation costs, as well as the Book of Regulations for Expert Collegiate Body.

In the area of organizational activities, we would like to stress the work of Expert Collegiate Body, which was meticulously analyzing all the activities of The Audit Office, adopting appropriate decisions and directing activities towards our objective – achieving of full transparency and effectiveness of our work. 

5. Material work conditions 

As a temporary solution, Audit Office was given premises at two separate locations:

-        location Danijela Ozme street 7, attic premises

-        location at the Presidency of BiH building, Musala street 9, 2nd floor.

The Audit Office’s operating at two locations is, from the organization point of view, neither functional nor inefficient. We are expecting final solution of this issue after either moving into the building used by institutions of Bosnia and Herzegovina or by using of premises now occupied by other BiH institutions after they move into Marijin Dvor building.

Coordination Board of the Audit Institutions consists of management of The Audit Office of BiH and entity offices. Its function is:

-          establishing of accorded audit standards;

-          providing of consistent quality of audit;

-          designating of responsibility for common activities audit, and

-          designating of representatives in international bodies.

In 2002, CB held six regular and one outstanding sessions. In these sessions, significant issues from the CB’s mandate were discussed.

-          CB formed a Commission for Harmonization of Legislation for all three SAIs in BiH. This Commission reported to CB about its work.

-          In the framework of several years long cooperation with SNAO, preparations for final part of LFA seminar were held, aiming at finalization of project document on institutional capacity building.

-          MoU was accorded between SNAO and SAIs from BiH, signing of which is foreseen for the beginning of 2003.

-          Objectives for international cooperation were defined as well as steps to be taken towards the establishing of the International Department.

-          All of the CB members participated at the 2nd Coordination Board meeting in Stockholm.

-          CB was designating delegations to participate at the international seminars and workshops. After their return these delegations were submitting their reports from these gatherings.

-          CB supported OSCE project for training of cantonal administration on establishment of internal controls and internal audits.

-          Contact was established with CAFAO management in relation to customs administrations internal audit software.

CB financing was done in accordance to financial plan and Decision about Financing of CB for 2002.

7. International cooperation

European Organization of Supreme Audit Institutions (EUROSAI)

The most significant event, last year, at the international level was joining of The Audit Office of BiH into the full membership of EUROSAI, at the 5th EUROSAI Congress held in Moscow. Our delegation participated at this event.

EUROSAI is a professional regional organization that gathers SAIs of European countries, members of INTOSAI, and members of United Nations, which, together with INTOSAI, plays an important role in promotion of policy and development of public sector audit, as well as in strengthening of responsibility and accountability in financial management of member state.

Membership in this organization is a huge sign of recognition for the supreme audit function in our country. Having in mind obligations that this membership brings along, we expect significant engagements at the international level in the next couple of years. Our Office needs organizational and technical preparations for such activities.

International Organization of Supreme Audit Institutions (INTOSAI)

Within the seminar organized by OSCE, somewhere in the middle of last year for representatives of all three parliaments, Mr. Franz Fiedler, Secretary General of INTOSAI and the President of The Austrian Court of Audit visited our Office.

This was a working visit during which we presented to Mr. Fiedler the capacities of The Audit Office and discussed all the independence elements of The Audit Office after The Law on Civil Service has been imposed. Afterwards, The Audit Office received, from the Secretariat General of INTOSAI, a letter of support intended towards further strengthening of independent function of external audit in our country.

Representatives of The Audit Office participated at the four day workshop held in Zagreb by INTOSAI Developmental Initiative – IDI. Topic of this workshop was EUROSAI/IDI Long-term Regional Training Plan – Phase II of The Workshop on Strategic Planning.

Auditors General and/or their representatives from 11 countries of South and Eastern Europe – candidate countries for EU membership participated at this workshop.

Representative of Bosnia and Herzegovina also participated at the Interregional Seminar on Audit of Government Institutions  ‘Role of SAIs in Audit of  Use of Public Funds in the Area of Agriculture’  held in Vienna and organized by UN/INTOSAI.

Swedish National Audit Office  (SNAO)

At the end of March 2002, several month long seminar, during which three supreme audit institutions in BiH and SNAO defined needs and activities that ought to be taken in order to achieve level of self-sustainability, was finished. Seminar was organized by SNAO, according to LFA matrix (model of long-term planning of activities). Its objective was full planning of second phase of bilateral project of institutional capacity building in audit.

This was a basis for designing of project document which precisely defined activities planned for following 40 months. With donor aid from SIDA, SNAO will donate IT equipment to three audit institutions in Bosnia and Herzegovina, and will continue with training of audit teams. Beside this, project includes training of management, training for performance audits, training in the area of international cooperation, IT audit, public relations, human resources management, and further development of institutional structure.

Contacts with other international organizations and institutions

Our representatives attended two-weeks seminar – ‘The Second Course on Budget Making and Control of Expenditures of Public Administration for Civil Servants of Countries – Candidates for EU Membership’ with organizational and financial support from The Embassy of Kingdom of Spain. Seminar was held in Madrid and organized by Ministry of Finance of Spain and Ministry of Foreign Affairs of Spain. Participants at this seminar were representatives of countries – candidates for EU membership – Bulgaria, Czech Republic, Hungary, Poland, Romania, Slovakia and Turkey.

In the first half of last year, The Audit Office, invited by EU representatives participated in the EU Project of Support to BiH Institutions. On that occasion, contacts were established with SIGMA agency with purpose of further planning of EU activities in the area of public administration reform.

Within the reporting period there was  significant communication with the OHR representatives in relation to The Law on Civil Service. After the exchange of viewpoints, OHR supported an original concept of independence of The Audit Office defined by The Audit Law and INTOSAI standards. 

During 2002, we have developed a firmer cooperation with USAID in BiH and established practice of regular meetings every three months during which information on projects and activities directly or indirectly related to audit are being dealt with.

The Audit Office directly participated in OSCE Mission to BiH activities, through the project of support to Parliamentary Assembly, which we consider to be a significant effort towards understanding of audit through training of parliamentary commissions in charge of handling of audit reports.

8. Financing of The Audit Office

The Audit Office was, in 2002, completely financed from BiH Budget, without foreign or local donations.

Budget of the BiH Institutions and International Liabilities of BiH for 2002 (‘Official Gazette of BiH’ number 14/02) approved funds for financing of The Audit Office in an amount of 993.377,00 BAM,  meaning significantly less than the request we submitted to Ministry of Treasury, which was 1.689.401,00 BAM. Level of funds approved for 2002 is identical to the level from 2001.

Expenditures for salaries and reimbursements for employees were planned in a total amount of 761.935,00 BAM or 76,7%, and material expenditures in a total amount of 133.442,00 BAM or 13,4%. Leftover amount of 98.000,00 BAM was foreseen to be used for capital expenditures in an amount of 80.000 BAM or 8,1% and for the operations of the Coordination Board in an amount of 18.000,00 BAM or 1,8% of total of approved budget.

Income from budget executed in 2002 was 957.426,00 BAM, meaning 95,7 % from funds totally planned for 2002.

Until December 31, 2002 an amount of  957.426,00 BAM was spend, which means 95,7% from the total amount. Within this amount, expenditures for employees were 644.650,00 BAM, which makes 67,3 % of total expenditures;

Expenditures for materials and services were 81.324,86 or 8,5 %  while the capital expenditures were executed in an amount of 73.777,00 BAM or 7,7% of total expenditures.

An overview of income and expenditures is given in Appendix.

The Audit Office is planning to initiate and perform audit of all the budget users for 2002. Audit was planned to be done through two phases.

First phase should be an interim audit that ought to be finished by the end of February 2003. After the interim audit we would be sending letters to management with findings and recommendations aimed to prevention and solution of established weaknesses, primarily in internal controls systems.

After the interim audit, we will start the final audit which should take till the end of July 2003, when we plan to submit a final report to the Parliamentary Assembly.

After the audit, The Audit Office planned to start the interim audit for 2003 which should take till the end of February 2004 and will cover all the institutions at the state level. In this phase we will be performing an interim audit and sending letters to management on findings and recommendations.

Along the audit operations we have planned intense activities related to professional education and training of all the employees of The Audit Office. Major part of this training will be held by The Swedish National Audit Office (SNAO). We plan to sign a long-term agreement on support of institutional capacity building of the audit offices in Bosnia and Herzegovina with SNAO.

Beside these training activities we are planning training activities to be held by local experts, as well as a sort of stimulation and motivation campaign through attendance at professional seminars and symposiums, as well as through stimulation for postgraduate studies.

We have also planned an intensive cooperation with INTOSAI and EUROSAI through participation in seminars organized by these organizations and cooperation with SAIs from EU and other countries.

Membership in these organizations will create numerous obligations that will require engagement of additional human and financial resources as well as adjusting of organizational structure through the establishment of the International Cooperation Department.

This year we expect solution to be found for the premises in one location. This would, together with the IT equipping and linking of The Audit Office, significantly increase the economy, efficiency and effectiveness.