Financial Audit Municipality of Istog for the year ended 31 December 2007 21 C. Compliance with laws and regulations Finding # 8 By inspection of revenues earned during 2007 from kindergarten we found that all these revenues (EUR 20 per child) were collected in cash. Treasury instructions forbids cash collection of revenue each exceeding EUR 10. Recommendation Referencing to the above cases of cash collections we recommend management to strictly apply the related Treasury Instructions. Finding # 9 The municipality’s financial statements were not prepared as requested by the Administrative Instruction 2007/08 and were not sent to the Treasury Unit within the Ministry of Economy and Finance. Recommendation We recommend the management of the Municipality to establish a system for preparation and presentation of the financial statement which will be in accordance with the Administrative Instruction 2007/08. In addition we recommend the management to provide the Treasury Department within the Ministry of Economy and Finance with a copy of its financial statements for the relevant year within 30 days after the conclusion of the fiscal year, strictly following the Administrative Instruction 2007/08. Finding # 10 The Department for Geodesy, Cadastre and Property collects revenues from the following activities: issuance of certificates, field measurement, registration of real estate, as well as registration of property and transfers. Related fees applied for some of these activities are not in accordance with the Administrative Instruction no. AKK 2006/01. Recommendation We recommend the management to harmonize fees from cadastral services with the provisions of AKK Administrative Instruction no. AKK 2006/01. Finding # 11 By inspection of source evidence related to the contract for office supply from supplier Meshari, we found that contract conditions have not been followed. This represents non-compliance with article 7.2 of the financial rule and Treasury Instructions 02, Use of Public Funds. Recommendation We recommend the management to strictly follow and implement the contracts terms and conditions and to review the supply documentation before This is trial version www.adultpdf.com Financial Audit Municipality of Istog for the year ended 31 December 2007 22 any payment is made as required by the article 7.2 from the financial rule and Treasury Instructions 02, Use of Public Funds. Finding # 12 By reviewing the tender documentation “procurement of food and hygiene material” in the approximate amount of EUR 38,000 we found that there were no three responsive bids. Work licenses of two out of three bidders were expired. By this, the Municipality has breached section 30A.4 of Law on Public Procurement 2003/17 and regulation 2007/20. If there are no three responsive bidders the procurement officer should initiate new procurement procedures as requested by the PPL. Recommendation The Municipality’s management is strongly recommended to apply section 30A.4 of Public Procurement Law 2003/17 and regulation 2007/20. Finding # 13 By inspection of source documentation related to tender procedure for construction of the road Gurakoc – Istog we found certain irregularities such as: - The competitor who was awarded the contract has signed it before completion of all tender procedures, which is not in compliance with the PPL 2003/17 and the regulation 2007/20. Finding # 14 By inspection of source documentation related to completion of tender procedures for building of town roads – Istog and the replacement of windows from the gymnasium “Haxhi Zeka” we found certain irregularities such as: - The tender dossier requests that before signing the agreement with the winning entity, the winner awarded with the contract must pay an execution insurance fee amounting to 10% of the contract value with a validity of 60 days after completion of the work; - The technical acceptance was in April 2008 and the insurance was only valid till 31 December 2007; - The contract should have been completed within 48 days of signing the contract – 02 October 2007. The Municipality has breached section 60.5 from the Public Procurement Law 2003/17 and regulation2007/20. Recommendation We recommend the Municipality to strictly follow the PPL 2003/17 and regulation 2007/20. This is trial version www.adultpdf.com Financial Audit Municipality of Istog for the year ended 31 December 2007 23 Finding # 15 By inspection of source documentation related to completion of tender procedure for subsidizing project “Organizing Skiing Classes” by the Direcor of Culture, Youth and Sport, certain irregularities were identified. Namely, the Procurement Officer did not apply adequate procedures and the economic operators were not provided with the request for the contractor’s price quotation. Thus, by being denied an effective competition in the respective tender, the economic operators have been discriminated. This case is not in compliance with the sections 30, 35.3, 35.6, 35.7, 35.8, and 35.9 of PPL 2003/17 and regulation 2007/20. Recommendation We recommend the Municipality to strictly comply with sections 30, 35.3, 35.6, 35.7, 35.8, and 35.9 of PPL 2003/17 and regulation 2007/20. Finding # 16 By inspection of source documentation related to agreement of “Asphalt of City roads” we found that there is difference between amount stated in contract (EUR 182,711) and reported one (EUR 168,739) in the annual report for completed contract during the 2007. As a result, the annual report submitted to the APP was not accurate. Recommendation We recommend the management to comply with the respective laws and regulations in relation with preparation of required reports and budgets. Finding # 17 Based on the procedures performed over certain supply transactions, we found a case where services for car registration, insurance and technical control, are rendered from a suppliers with no procurement procedure (AD Burreli, Dukagjin). Recommendation We recommend the management to comply with the respective laws and regulations in relation with procurement. This is trial version www.adultpdf.com Annex I Municipality of Istog Financial Statements for the year ended 31 December 2007 This is trial version www.adultpdf.com Annex II Municipality Management’s Comments This is trial version www.adultpdf.com Finding No Municipality Management Comment Auditors Response Part A #1 We inform you that auditor’s findings for 2007 mentioned on point no VII under A where you concluded non reconciliation of revenue from license work on amounting of 2,587 Euro between client sub ledger and free balance. We inform that this non reconciliation amounting of 2,587 Euro has flow as a consequence that some owner of business after they done payments for wok license, they didn’t bring payment receipt for evidencing, and for this reason in non reconciliation with free balance, because the data in free balance are taken from bank reports, so the accurate data are from free balance. Municipality agrees with the auditor’s findings and recommendation. 12 -During the procurement it was fully applied the LPP, and Article 30 A.4. All three bids were from responsible companies, had valid licenses in the time of biding. The tender was closed date: 03.09.2007, all three licenses had validity within the tendering term: -The first biding company “Burimi-N” has the license expiring date after closure of tender deadline: 19.04.2008. -The second biding company “Jaffa” has the license expiring date on 18.03.2007- but by Procès-verbal no. 36/07 date: 12.04.2008 the license was prolonged until: 18.03.2008 ( this process has a total validity) -The third biding company, “Rina”- the license of this company expires on 24.09.2007, and by this we can conclude that by the closure all three companies had valid biding documents (especially the work license related to your remarks). Attachment- The form about the requested documents, tender opening minutes (where it is stated the opening and closing date) and all documents from three biding companies. It was applied in total the article 60.5 of LPP 2003/17 and regulation 2007/20. The Municipality agrees that during the auditors filed work no related source evidence was submitted to them. 13 Into our evidence it doesn’t appear any procurement named Gurakoc-Istog and because of this we were not able to give any comment. It has to deal with project “Ndërtimi i trotuareve ne Gurakoc”. 14 Tender “Building town roads”- has 10% execution insurance. Neither banks or insurance companies can issue a bank guaranty without the evidence for contract signing- therefore the insurance was performed after contract signing. Execution insurance means giving a guarantee on work completion – and not insuring the works after completion. Both projects were completed within the work deadline. - “Granit”-shpk- execution insurance valid until 30.12.2007, whereas the report on work completion is on 15.12.2007 and 17.12.2007. Whereas regarding the procurement “Replacement of windows from the gymnasium “Haxhi Zeka”, we would like to inform that “A-Plast” has performed the execution insurance until 07.02.2008, whereas work completion by final report was on 17.12.2007 (value of 30 000 Euro, whereas GTZ participated for the other part and the invoice is dated: 11.01.2008) thus work was completed two months prior to execution insurance expiry. The Recommendation to the municipality regarding this finding remains. This is trial version www.adultpdf.com It was respected in total Article 60.5 LPP 2003/17 and Reg. 2007/20. (your dates do not match with documents in tender files). Please find attached acceptance reports, payments and bank guaranty – for both projects. 15 Procurement Office in moment when vehicle commitment is done in module approval-expenditure is not dealing with this. Procurement Office is dealing with means commitments which are done on purchase module. As per Instruction for use from procurement officials- Purchases (maj 2006), with purchasing module are committed: Goods and Services, and Capital expenditure. We attach instruction. The Recommendation to the municipality regarding this finding remains. 16 Contract value of this contract is: 182 711 Euro. All works were completed on December 2007. Because of fund lack for the entire project the remaining of 13 971 Euro was carried to 2008. Therefore the report submitted to PPA states that the foreseen value is 182 710.00 euro, whereas contract price is 168 739.00(this amount was paid in 2007 therefore the report contains the contracts paid during that year. The remaining amount of 13 971 euro is carried to 2008 and this is why it is not part of expenses evidence for 2007). All works were completed in 2007 but because of the payments it was necessary to modify the acceptance report for the payment carried to 2008. Municipality agrees with the auditor’s findings and recommendation. 17 There is no procurement – competition for procedure on removing custom duty because there are unique custom tariffs and also unique and fixed administrative tax on car registration. The Recommendation to the municipality regarding this finding remains. This is trial version www.adultpdf.com Republika e Kosovës Kuvendi i Komunës-Isto g Republika Kosova Skupstina opstine-Istok Republic of Kosovo Municipality-Istog Annual Financial Report For the year ended 31 December 2007 This is trial version www.adultpdf.com 2 DECLARATION REGARDING PRESENTATION OF FINANCIAL STATEMENTS To: Lulzim Ismajli, Director of Treasury From: Permanent Secretary (Chief Executive Officer) In our opinion, the attached consolidated financial statements and the notes to these statements for the year ended on 31 December 2007 have been prepared in accordance with the International Public Sector Accounting Standards “Financial Reporting Under the Cash Based Accounting”, adhere to all reporting requirements of the Law on Public Finance and Accountability 2003/02 and are based on properly maintained financial records. This declaration is provided in connection with the presentation of the Kosovo General Budget financial statements of the budget organizations for the year ending on December 31, 2007. We confirm, to the best of our knowledge and belief, that: There have been no irregularities involving management or employees which could have had a material effect on the financial statements. The information provided and presented in the financial statements regarding the identification of funds and their expenditure related to the Kosovo Consolidated Budget is complete and accurate. The information regarding collection of revenues is accurate. There are no bank accounts related to the KCB other than the bank accounts specified in the financial statements and this specification is complete and accurate as of December 31, 2007. There has been no non-compliance with requirements of regulatory authorities that could have a material effect on the financial statements in the event of non-compliance. There are no (legal) claims pending that could have a material effect on the financial statements. All liabilities, both actual and contingent, and all guarantees given to third parties have been recorded and/or disclosed, as appropriate. All loans to external parties have been recorded and/or disclosed, as appropriate. There have been no events subsequent to period end which require adjustment of or disclosure in the financial statements or Notes thereto. Municipalities must send their reports to the Budget and Finance Committee in the Municipal Assemblies. In our opinion, the attached consolidated financial statements give a true and fair presentation of the finances and financial transactions for the year ended on 31 December 2007 of Istog Municipality Date: Signature and stamp: ________________ Permanent Secretary (Chief Executive Officer) This is trial version www.adultpdf.com 3 III Section 9. Budget Report Budget Report including Donor Grants Original Budget Reviewed Budget Final Budget Differences Differences Differences Description Rreg.2006/61 Admin.Dir.2007/xx KFMIS in % in % in % a b c d e=c/b f=d/b g=d/c Total Budget 2007 3,413.916 3,512.00 4,014.02 107.07 117.58 114.29 - General Grant 291.916 2,844.00 3,084.50 100.39 105.85 108.46 Own Source Revenues of 2007 500.00 500.00 608.00 100 121.60 121.60 Own Source Revenues Carried Forward from 2006 - 168.00 229.91 - - 136.85 Internal Grants - - 59.99 - - - External Grants - - 31.61 - - - Budget Report Original Budget Reviewed Budget Final Budget Differences Differences Differences Description Rreg.2006/61 Admin.Dir.2007/xx KFMIS in % in % in % a b c d e=c/b f=d/b g=d/c Total Budget 2007 3,414 3,512 3,923 103 115 112 Wages and Salaries 2,295 2,321 2,322 101 101 100 Goods and Services 438 533 671 122 153 126 Utilities 118 124 151 105 128 122 Subsidies and Transfers 70 63 99 90 141 157 Capital Investments 493 471 680 95 138 144 This is trial version www.adultpdf.com . Financial Audit Municipality of Istog for the year ended 31 December 2007 21 C. Compliance with laws and regulations Finding # 8 By inspection of revenues earned. version www.adultpdf.com Financial Audit Municipality of Istog for the year ended 31 December 2007 23 Finding # 15 By inspection of source documentation related to completion of tender procedure for subsidizing. and conditions and to review the supply documentation before This is trial version www.adultpdf.com Financial Audit Municipality of Istog for the year ended 31 December 2007 22 any