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) has performed an audit of financial statements and operations (including the management’s decisions), of THE VETERINARY OFFICE OF BOSNIA AND HERZEGOVINA (hereinafter: Office) regarding the status on 31st December 2001. Management of the Office is responsible for financial statements. The responsibility of Audit is to express the opinion about Parliament’s financial statements, 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 Office has been using public funds for performing their functions. 

1.2.           Audit was planned and performed in a period from July 1, to July 3, 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).

These standards requests planning and performing of the audit in a way that would obtain enough evidences which gives us reasonable ground to estimate that financial statements do not content significant faults. The audit includes examinations by recording of samples on which an amounts presented and issued in financial statements are based. The audit also includes estimation of used accounting principles, significant estimations of management as well as estimation of entire presentation of financial reports.

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

2.       AUDITOR’S OPINION

2.1.         In our opinion, financial statements do present fair and true view of the Office’s financial status on 31st December 2001, the results of its operation and cash flow for the period ending on that day, except the effects on financial reports which were caused by items related to the following:

• The Office did not perform regular annual inventory of assets, assets resources, receivables and liabilities presenting the status on 31st December 2001 (item 4.1.);
• The computer equipment received form the Administrative Service of the Council of Ministers of BiH, has not been recorded in the Office’s ledgers nor the conditions under which the equipment is being given were defined (item 4.1.);
• Computer and other equipment in an amount of 19.691 KM, has not been delivered by the day the audit was finished, and the procurement was performed without prescribed procedure on announcement of public tender (item 4.1.);

3.       GENERAL INFORMATION

The Office is an institution of BiH, which was found on December 18, 2000, according to the Council of Ministers’ Decision on establishment of the Office (Official Gazette BiH’, no. 31/2000). Mentioned Decision regulates the obligations and mandate of the Office till the time Law on Veterinary of BiH is brought.

The audit of the office’s operation has not been performed before.

The Director and management personnel of the Office were appointed on March 23, 2001, by the Council of Ministers’ Decision.

On 31st December 2001, the Office has had three employees. In the beginning of 2002, the Office has employed nine persons (six were employed according to public announcement while three were taken from the Ministry of Foreign Trade and Economic Relations of BiH).

Currently, the Office has twelve of thirteen employees foreseen by the systematization.

4.       FINDINGS, NOTICES AND RECOMMENDATIONS OF THE AUDIT OF ACCOUNTS IN 2001

4.1.    Internal control system

The audit has found certain lacks within internal control system in a part that relates to certain regulations regulating the inventory of fixed assets, spending of individual assets, and capital assets procurement. Internal control system is being found by the management as a set of activities and measures that provide the accuracy and regularity of recording of financial transactions and their full accordance with laws and regulations, as well as protection of the property. Lack within the system and insufficient development of this system has significant influence on management and control of budget funds use, meaning management of public funds with strictly defined purposes of use.

The audit has found that:

• The Office did not perform regular annual inventory of fixed assets and assets resources presenting the status on 31st December 2001, so that the fixed assets which bookkeeping value amounts to 81.827 KM, were not adequately verified with the status of fixed assets stated in the ledgers.

Discordance of real status with bookkeeping status could cause misuses, which include and stealing of the property.

It has been recommended to the Ministry to establish an inventory commission and to perform an extraordinary inventory of fixed assets, which would be verified by the commission, and to accord actual status with the status presented in the Office’s ledgers.

• The Office did not make certain regulations regulating spending of budget funds for use of vehicles for official purposes, transportation costs, use of cellular phones and representation. The audit has not been able to accord the business trips abroad with regular activities, which are being performed by the Office according to its mandates. Moreover, the Office did not define the criteria on amount of reimbursements for temporary service contracts.

Non-existence of mentioned regulations and criteria could influence on economy, and effectiveness of spending of taxpayers’ public funds.  

The audit has recommended to the office to precisely define internal regulations regulating individual expenditures until the time these regulations are brought by the Council of Ministers of BiH/Ministry of Treasury. In addition, it has been recommended to the Office to precisely define criteria estimating the justifiability of business trips abroad and amount of reimbursements for temporary service contracts.  

• The computer equipment that includes three computers with components forming part of them, as well as three printers received from the Administrative Service of the Council of Ministers of BiH have not been recorded in the Office’s ledgers. Moreover, the Office/Administrative Service of the Council of Ministers did not establish the equipment’s value nor they defined conditions under which the equipment is being given (with or without obligation on return, with or without reimbursement etc.). The equipment stated has not been recorded by 31st December 2001.  

This could also influence on protection of the Office’s property.  

The Office has been warned to, in cooperation with the Council of Ministers (Administrative Service), precisely define conditions under which the equipment was given/received and after that to record the equipment in the Office’s ledgers and to perform its inventorying together with complete Office’s equipment.  

• Computer equipment as well as other equipment, which have been paid but not delivered to the Office, includes seven computers with belonging components, seven laser printers, one copy machine, one scanner and one fax machine. According to the ‘Whitefield computers Sarajevo’ pre-invoice the value of equipment amounts to 19.691 KM. These assets were requested from the budget for 2001, transferred/allocated on April 24, 2002, to the Office’s account, and were paid to the contractor’s account on May 8, 2002. By the date the audit was finished, the equipment has not been delivered, but according to the contractor’s letter of confirmation, which was requested, mentioned equipment is being recorded as a liability toward the Office. The Office has collected three bids for procurement of equipment but did not perform procedure on announcement of public tender as it is prescribed and regulated by the Article 16 of the Law on Execution of Budget of Institutions of BiH.  

Procurement performed without public announcement could influence a favoritism of one contractor in comparison to the others, procurement at non-competitive prices, eventual misuse of authorizations and corruption. 

It has been drawn the Office’s attention to inform the Audit, by letter, on receiving of mentioned equipment. Moreover, the Office has been warned to respect prescribed procedure on announcement of public tender while procurement of fixed assets.

4.2.      Budget execution 

The Office’s total expenditures planned, according to adopted budget meaning the adjusted budget were 253.363 KM. The Office’s expenditures realized in 2001 were 144.539 KM, which presents amount of 108.824 KM less than planned, or 65% of plan realization. The Office’s budget projection planned in 2001 has been performed on the basis of 13 employees. However, accurate number of employees during the year was 3 employees or 70% less than number planned, which is in disproportion in comparison with expenditures that are lower for 35% than expenditures planned. Report on the Office’s work in 2001, which should present activities and operations the Office performed during the year, as well as justifiability of spending of taxpayer’s public funds were not presented to the audit. 

OVERVIEW OF EXECUTION OF THE OFFICE’S BUDGET FOR 2001 

Amounts in KM 

The audit has recommended to the Office to perform future planning of the budget on the basis of realistic needs and in accordance with its operational aims and activities that should be realized during the year.

5.           CORRESPONDENCE

After the audit was performed, on July 24, 2002, the Report was delivered to the Veterinary Office in order to obtain an opinion and comment on Report.

Audit Office will inform the Presidency of BiH and the Parliament Assembly of BiH on eventual reply.

6.         SUMMARY  

Summary of the most significant findings and recommendations of the audit for accounting year 2001:  

• The Office did not perform regular annual inventory of assets, assets’ resources, receivables and liabilities;
• The Office has not brought certain regulations regulating the spending of budget funds for use of vehicles for official purposes, transportation costs, use of cellular phones and representation. In addition, the Office has not developed criteria estimating the justifiability of business trips abroad and amount of reimbursements for temporary service contracts;
• Computer equipment received from the Administrative Service of the Council of Ministers of BiH, has not been recorded in the Office’s ledgers, nor the conditions under which the equipment is being given were defined;
• Computer equipment and other equipment in an amount of 19.691 KM, was not delivered by the date the audit was finished, while the procurement was performed without prescribed procedure on announcement of public tender;
• Budget planning has not been performed in accordance with accurate number of employees and realistic needs of the Office for 2001;
• Report on work, which presents the Office’s activities in comparison to budget funds used has not been made.

The Audit wishes to thank to the Office’s management and the employees for cooperation and help offered during performing the audit.