1.     INTRODUCTION

1.1.           According to the authorities given by the Law on Auditing of Financial Operations of the Institutions of Bosnia and Herzegovina (‘Official Gazette of BiH’ no. 17/99) The Office for Auditing of Financial Operations of the Institutions of Bosnia and Herzegovina (hereinafter: Audit Office) has performed an audit of financial statements and operations (including the management’s decisions), of STATISTICS AGENCY OF BOSNIA AND HERZEGOVINA (hereinafter: Agency) related to financial year 2001.

1.2.           Audit was planned and performed in a period from January 23 to January 29, 2002, and from June 3 to June 12, 2002, according to generally accepted audit standards, as well as standards of International Organization of Supreme Audit Institutions – INTOSAI (‘Official Gazette of BiH’ no. 05/01). Audit activities were aimed on obtaining of reasonable ground to estimate if financial statements of the Agency represent a fair and true view of operations during the year and of the status at the end of the year. Management of the Agency is responsible for financial statements. The responsibility of Audit Office is to express the opinion about financial statements of the Agency, and based on audit performed, to report about the following:

• if the accounts have been made according to the valid legislation;
• do the annual accounts represent a fair and true view of operations during the year and the status at the end of the year;
• on economy, efficiency and effectiveness with which the institutions have been using public funds for performing their functions.

1.3              We consider that the audit we performed gives a reasonable basis for expressing our opinion.  

2.      AUDITOR’S OPINION

2.1.            Regarding the financial reports of the Agency for 2001, we express a qualified opinion, since we haven’t had a ground reliable enough to entirely, without reserve, confirm that the financial reports of the Agency give realistic and objective view of status in all significant aspects. We express reserve because of reasons stated in items 2.2., 2.3. and 2.4.

2.2.           Audit Office gives a qualified opinion for opening balances in 2001 presented, which were transferred from 2000, and which were not audited, since those balances in a certain measure could influence reality and objectiveness of financial reports in 2001.

2.3.           In addition, we express reserve regarding Balance Sheet made, because inventory of assets and resources on December 31, 2001, was not performed.

2.4.          The audit has found that the Agency has not consistently applied the Article 16. of Law on Budget Execution which regulates the issue of procurement of fixed assets, materials and services (announcing of public tenders).

3.     FINDINGS, NOTICES AND RECOMMENDATIONS OF AUDIT OF ACCOUNTS FOR 2001

3.1.    Internal control system

3.1.1.  Missing regulations and procedures

The audit has found that management’s internal control system within the Agency was not sufficiently developed and defined, as a set of activities and measures providing the accuracy and regularity of recording of financial transactions, their full accordance with laws and regulations, as well as the protection of the property. 

Non-existence of an adequate internal control system or its insufficient development have significant influence on management and control over the budget funds use, meaning the public funds intended for strictly defined purposes.

The lacks within internal control system stated relate to following:

• non-existence of certain written internal regulations and procedures which would precisely define conditions for occurrence, approval, accordance with budget approved, as well as way of recording of certain types of expenditures (PTT costs, representation costs, the employees’ accommodation costs etc.);
• weaknesses within the system of procurement of fixed assets, materials and services which were not performed in accordance with the legislative regulating this issue (public tenders were not announced);
• weaknesses within the system of monitoring of budget realization both, in its total amount and by individual budget items (exceeding of certain budget items has been found).

Audit Office has recommended to the Agency that should establish, as soon as possible, and in order to provide more efficient and rational operation, efficient internal control system that would preventively remove possible irregularities and illegalities in its functioning.

3.1.2.   Procedures on procurement of stationery

The audit has found that during the procurement of stationary (procurement in 2001 was 16.372,89 KM), the legal procedures that prescribe public announcement for tender were not respected, that represents the violation of Article 16 on Law on Execution of Budget for 2001.

Procurement without public announcement for tender could result with procurements under non-competitive market prices, and favoritism of certain contractors.

The management of the Agency is obliged to consistently apply Law on Execution of Budget, especially the Article 16, regulating the issue of procurement of fixed assets, goods and services, based on public announcement for tender, in order to provide market equality of all firms/tax-payers.  

3.2.         Budget management system

During the audit of operation for 2001, we have found that budget management was not fully sufficient, meaning the audit has found certain lacks and weaknesses within internal control system, as well as certain exceeding of individual budget lines.

3.2.1.  Budget planning and budget execution

The Agency’s budget for 2001 was 345.400,00 KM, while additional amount of 4.600,00 KM was approved by adjusted budget for 2001, that makes total of 350.000,00 KM. The Agency has realized the budget for 2001 in a total amount of 333.735,00 KM, which presents 95,35% of budget planned. By analyzing the budget execution, we have stated that there was not exceeding of total amount, on the Agency’s level, however we found certain exceeding by individual budget lines ‘Reimbursements for the employees’ costs’ and ‘Contracted services’.

Moreover, we have stated that the budget planning was performed and based on 14 employees planned, while accurate number of employees during the year was 9 that point at certain incompleteness in coordination within budget planning for 2001.  

COMPARATIVE OVERVIEW OF EXPENDITURES PLANNED AND ACTUALLY MADE IN 2001

Unreal budget planning could cause difficulties in realization of tasks planned both, in financial indicators, and in performing of the Agency’s tasks planned.

Audit Office has recommended to the Agency more thorough approach to the problem of budget planning and budget execution, with more real and qualitative parameters at all level, in order to provide more real and efficient operation of the Agency.

3.2.2.  Exceeding of budget items

By performing the audit we have found that budget management was not at satisfactory level because there were found certain exceeding of individual budget items in comparison with assets approved according to Law on Execution of Budget for 2001. Exceeding stated relate to following budget items: ‘Reimbursements for the costs of employees’ in an amount of 54.778,00 KM or 22,82% more than planned and ‘Contracted services’ in an amount of 21.303,00 KM or 19,67% more than planned (see the table).

Audit Office has recommended making of thorough and complete analysis of reasons that cause exceeding of individual budget items in order to provide prevention and neutralization of exceeding both, in total amount and by individual budget items. In addition, it has been recommended permanent monitoring over the budget execution as well as establishment of more qualitative internal control system within budget execution.

3.2.3.  Subvention from abroad

By auditing of operations for 2001 we have found that the Agency has realized incomes through subventions from abroad in an amount of 37.565,99 KM. Subventions effectuated were not realized through the Ministry of Treasury, but were directly allocated to the Agency’s account and were treated as ‘own incomes’. Incomes realized were used for current operation and payments of reimbursements for the employees engaged on certain projects (approx. 11.691,30 KM), without delivering of requests and without approvals given by the Ministry of Treasury.

Performing of this kind of transactions out of JRT (Unique Treasury’s Account) violates integral system of budget management through the Treasury. Even though it is the question of relatively low financial amounts, we would like to stress that each o subjects is obligated to perform its financial transactions through JRT (Unique Treasury’s Account).

Audit Office has recommended to the Agency’s management that in the future, it has to be obligatory for subventions realized from abroad and all other types of income to be realized only through the Ministry of Treasury according to legislative, and using of this kind of assets only after delivering of request and after obtaining of approval from the Ministry of Treasury.

3.2.4.  Report on operation of the Agency for 2001

The audit of operations for 2001 has stated that the Agency’s management did not make complete written report on operation for 2001, in which would be appointed elementary indicators of performing of tasks planned, as well as crucial problems, which the Agency met during performing its operations.

It is necessary for each of budget users to create and develop monthly operational activities in comparison with annual work schedule in order to provide control of work procedures’ efficiency. The Agency’s management should impose an obligation on regular reporting and after that to create summary comparative analysis of the Agency’s operations planned and those actually realized.

Audit Office has recommended urgent preparing of annual report on the Agency’s operation, that would include complete analysis of realization of tasks planned, as well as weaknesses stated regarding operation during last year; it has also to be obligatory for reports to be made timely both, at the end of business/financial year and periodically during the year.  

3.3.              Financial-accounting operation

3.3.1.              Inventory of assets based on status on December 31, 2001

By the audit of operation for 2001, we have found that the Agency did not make an inventory of assets and liabilities toward assets’ resources meaning that inventory at the end of the year was not performed, which is important precondition for realistic statement of operational results during the year. Aim of inventory is comparing of assets’ status and assets’ resources in the ledgers with existing status, which is being found by inventorying. Inventory of assets and their resources, besides the fact that it is prescribed by the law, contributes for the assets, liabilities and receivables to be presented in annual financial reports in a fair and true way. 

If the Agency does not perform an obligatory inventorying of assets and resources, according to the law, it runs the risk on preparing of incorrect financial reports, as well as the risk on stealing or some other misuse of assets.

Audit Office has recommended an urgent inventorying of assets and their resources according to accounting standards, as well as performing of certain recordings after the inventory was done and based on decisions brought.

3.3.2. Statement of surplus of income over the expenditures according to the Instruction of the Ministry of Treasury

During the audit we have found that within the Balance Sheet the Agency has stated non-allocated surplus of income over the expenditures in an amount of 16.889,00 KM, so that according to the Instruction of the Ministry of Treasury the liability on return of surplus of income over the expenditures presented was not created (according to the employees, they have not received the Instruction of the Ministry of Treasury).

Audit Office has recommended to the Agency to accord the way of statement and return of surplus of income with the Ministry of Treasury in order to achieve thorough application of Instruction mentioned.  

3.4.         Report on information system of the Agency

During the audit of IT system, it has been recommended to the Agency to make internal regulations on protection and control of data, and to distribute them to all users of information system.  

4.             CORRESPONDENCE

After the audit was performed, on July 8, 2001, Audit report performed was delivered to the Agency, and within the foreseen time frame the Agency has directed remarks on Report delivered on which the Audit Office gave its response.

5.              SUMMARY

Summary of most important findings and recommendations of the audit of accounts for 2001:

• Weaknesses within internal control system have been found.
• The Agency did not perform inventorying of assets and assets’ resources on December 31, 2001.
• We found exceeding within budget items ‘Reimbursements for the costs of employees’ and ‘Contracted services’.
• Procurement of stationery and services were performed without public invitation to tender.
• Subventions from abroad effectuated in an amount of 37.565,99 KM, were not realized through the Ministry of Treasury.

Audit Office wants to thank to the Agency’s management and employees for cooperation and help offered to auditors during performing the audit.