THE ROMANIAN COURT OF ACCOUNTS SYNTHESIS OF THE PUBLIC REPORT ON

Transcription

1 THE ROMANIIAN COURT OF ACCOUNTS SYNTHESIS OF THE PUBLIC REPORT ON 2008

2 TTHEE ROMANIAN COURTT OFF ACCOUNTTSS 22-24, Lev Tolstoi str. sector 1, code Bucarest, ROMANIA Tel: (+4) Fax: (+4) Website: Bucarest, January 2010 CURTEA DE CONTURI A ROMÂNIEI

3 ROMANIIAN COURT OF ACCOUNTS Foreword The Court of Accounts exerts the control on the formation, administration and use of the financial resources of the state and of the public sector, offering to the Parliament and to the deliberative public authorities of the administrativeterritorial authorities reports regarding the use and administration of these resources in full conformity with the principles of legality, regularity, economy, eficiency and effectiveness. The control function of the Court of Accounts is performed through public external audit procedures as provided by its own audit standards, developed according to the international auditing standards generally agreed. The Court of Accounts performs its activity autonomously, as per the provisions of the Constitution and of its own law on organisation and operation and, in its position of Supreme Audit Institution, represents Romania in the international organisations in the field. Within the competencies stipulated by the law, the Court of Accounts performs its specific powers over the following areas: a) formation and use of the resources of state budget, of budget of the state social securities and of the budgets of the administrative-territorial units, including the transfer of funds between these budgets; b) constitution and use of the other public funds components of the general consolidated budget; c) formation and management of the public debt and of the governmental guarantees for internal and external credits; d) use of the budgetary allowances for investments, of the subsidies and transfers and of any other forms of financial support from the state and from the administrative-territorial units; e) constitution, administration and use of the public funds by the autonomous administrative authorities and by the public institutions founded by the law as well as by the autonomous organisms of state social securities; f) statement, evolution and way of administration of the public and private patrimony of the state and of the administrative/territorial units by the public institutions, by the self managed public companies, by the national companies and firms, including concession and lease of goods that are part of the public property; g) constitution, use and management of the financial resources for the environment protection, improvement of the quality of life and labor; h) other areas where the law has established the competency of the Court. The Court of Accounts performs its activity of control and audit on the following categories of public entities: a) state and administrative-territorial units, as legal persons of public law, with their services and public institutions, self managed or not; b) National Bank of Romania; c) self managed public companies; d) trade companies where the state, the administrative-territorial units, the public institutions or the self/managed public companies alone or together, completely or more than a half of the capital share; e) self managed organisms of social securities or of any other nature that administrates goods, values or funds, in a legal compulsory regime, under the conditions that the law or their statutes provides accordingly. The institution may decide to perform the activities provided by the law at other entities that: a) benefits of governmental guarantees for credits, of subsidies or of other forms of financial support from the state, from the administrative-territorial units or from other public institutions; b) administrates, in the conditions of a contract of concession or lease, goods belonging the public or private property of the state or of the administrative-territorial units; c) administrates and/or use public funds,, the checks being made, in the sense of the present law, as far as the legality of the administration and/or use of these funds are concerned. The control on the execution of the budgets of the Chamber of Deputies, of the Senate, of the Presidency Administration, of the Government, of the High Court of Cassation and Justice, of the Constitutional Court, of the Legislative Council and of the Ombudsman is exerted exclusively by the Court of Accounts. Upon demand of the Chamber of Deputies or of the Senate, the Court of Accounts controls the way the public resources are managed by some institutions and public authorities and reports on the findings. 3

4 Chapter 1 General presentation of the results of the specific activities of the Court of Accounts 1.1 The results of the public external audit and control activities According to the new provisions of the Law no. 94/1992, as amended and completed by the Law no.. 217/2008, starting with the year 2009, the Court of Accounts has set up, as main objectives of its specific activity, the priority carrying out of financial and performance auditing missions in parallel with its traditional activity of control on the way of formation, administration and use of the financial resources of the state and of the public sector. The audit missions and the control actions carried out, according to the law, has as main objectives as follows: The financial audit on the execution accounts on 2008 of: - the state budget; - the budget of the state social securities; - the budget of the special funds: - the budget of the securities for unemployment ; - the budget of the unic national fund for social health securities. - the budget of the state tresury; - the general account of the state public debt. The performance audit on the way of formation, distribution and use of the funds at the Government disposal; The audit and control on the budgets of the administrative-territorial units; Controls carried out at companies and national trade companies, self managed public companies of national and local interest, trade companies with majority capital share of the state or of the administrative-territorial units as well as at their branches and subsidiaries; Controls performed at the entities having responsibilities in the banking field and in the capital market; Controls carried aut at the entities having responsibilities in the area of privatization ; Controls performed on demand of the Chember of Deputies or of the Senate; Controls decided upon its own initiative in various fields; Public external audit on the European Community funds. The public report on the year 2008 includes the results of the audit and control activities performed by the specialized structures of the Court of Accounts on the execution accounts and on the financial statements drawn up at the end of the financial year 2008, according to the Activity Plan on 2009 approved by the Plenum. As per this programme, the central and territorial structures of the Court of Accounts carried out a total of checks, at entities, resulting in acts, out of which: audit and control reports; statements of facts; 613 unilateral notes; 66 statements of facts for minor offences; 54 statements of facts drawn up separately for the cases where there are indications that the irregularities are committed by the infringement of the criminal law; 235 conformity certificates; decisions. It is worth mentioning that, at certain entities, along with the carrying out of an audit mission, a control has been performed, so that, during 2009, the same entity was subject of two kind of checks. 4

5 The financial audit activity has been performed at entities, out of which: 711 main spending centres, 94 secondary spending centres, 699 tertiary spending centres and 6 other public authorities and institutions. A number of 258 entities were subject to the performance auditing, respectively 231 main spending centres, 12 tertiary spending centres, 2 national companies and 2 national trade companies. The entities submitted to the control were 394, respectively 47 main spending centres, 14 secondary spending centres, 83 tertiary spending centres, 28 national companies and their branches, 74 self managed companies and their subsidiaries, 18 national trade companies, 54 trade companies of local interest, 12 banking societies and their branches and 49 other public authorities and institutions. Graphic display of the checking actions on entities is presented as follows: Main spending centres 989 Other entities 264 Secondary spending centres 115 Tertiary spending centres 794 Graphic display of the control and public external audit actions follows: Financial audit 70% Control 18% Performance audit 12% The completed audit and control actions have been carried out at entities and aimed at checking the execution accounts of their budgets on 2008, the way they used the funds allocated through the public budgets as well as the administration and management of the public and private patrimony of the state and of the administrative territorial units. 5

6 Graphic display detailing the entities subject to the checks of the Court of Accounts in 2009: Main spending centres Secundary spending centres Tertiary spending centres National Companies National Trade Self-managed regies Self-managed regies of local interest Trade companies Trade Political parties companies of local interest Banking companies Other public institutions Geographic distribution of the entities checked, on districts and development regions follows: 6

7 The Court of Accounts performs its specific activity of public external audit and control through the 9 departments at the central level and through its 42 territorial chambers of accounts (41 districtual chambers of accounts and the Chamber of Accounts of Bucharest municipality), as per the competencies set up in its own Rules of organisation and operation. In the 8 regions of development grouping various districts, the specialized structures of the Court of Accounts carried out checking actions as folows: Nord-East Region : 254 acţiuni; West Region 185 acţiuni; North-West Region: 275 acţiuni; Centre Region: 237 acţiuni; South-East Region: 285 acţiuni South Region: 354 acţiuni; Bucharest-Ilfov Region: 242 acţiuni; South-West Region: 192 acţiuni. The specific objectives of the public external audit and control programmed and performed in 2009 aimed at: o Financial auditing of the budget execution accounts on 2008; o Performance auditing of the way of formation, allocation and use of the Funds at the Government disposal; o Control on the observance of the legal provisions concerning constitution, evidence, monitoring and collection of the state budget; o Control on the situation, evolution and way of administrating the public and private patrimony of the state; o Control on the way of formation and use of the financial resources of the state; o Control on the way the social securities contributions related to the salary rights obtained through judgments pronounced in civil courts are determined and transferred (contributions for state social securities, for health and unemployment a.s.o.); o Control regarding certain rights of salarial nature offered to the employees; o Control on the observance of the legality as far as the commitment, completion, ordering and payment of the public expense. As a result of the checking actions effected, the evaluation of the irregularities found and the amounts due to the public budgets is presented as follows: No. Explanations u.m. 1 Extra income 2 Prejudices SUB-TOTAL (1+2) 3 Financial accounting irregularities TOTAL (1+2+3) Th.lei Th.euro* Th.lei Th.euro* Th.lei Th.euro* Th.lei Th.euro* Th.lei Evaluation of the irregularities found Estimated amount Th.euro* * An average rate of exchange Leu/Euro of 4,2373 for 2009 has been used. Source: National Bank of Romania. Accessories Total

8 Graphic display of the amounts due to the public budgets as estimated of the findings, follows: Extra income 50% Prejudicies 50% Further to the above mentioned information it results that to the public budgets will be reimbursed, in equal quotas, important amounts as a result of the irregularities generating extra income and of the estimated irregular payments. The Court of Accounts has also found out financial accounting irregularities that did not lead to prejudices, estimated at thousand lei, the most significant being related to: maintaining, by the General Directorate of the Public Finance Bucharest, in the analytical records and in those on contributors, including in the analytic and synthetic accounting records, the fiscal obligations of the radiated contributors, estimated at million lei (3.319 million euro); breaching the legal provisions related the administration and management of the public and private patrimony of the state and of the administrative/territorial units, quantified at million lei (3.061 million euro); deficiencies regarding the legality, regularity and reality both of the accounting records and of the accounting balance, estimated at million lei (1.304 million euro); the low quality of the budget execution accounts as well as financial-accounting irregularities, amounting to approx million lei (481 million euro). Considering the main strategic objective of the Court of Accounts, that is to obtain the assurance equally for the Parliament and for the contributor that the public money is used according to its destination in full observance of the principles of sound financial management and the public and private patrimony of the state is managed accordingly, the results obtained lead to the conclusion that, in 2009, the whole activity of the institution has been dedicated to reach this objective. The argument to support this allegation is the fact that the quantified results obtained in 2009, related to the budget execution of 2008, compared to those related to the budget execution of 2007, are evidently superior. Thus, the estimated amount of the irregularities found, including those with financial-accounting impact, increased by approximately 10 times in 2008 that estimated for 2007, as displayed in the following table: No. Indicators Year Difference 2008 compared to million lei - Difference in % 2008/ Extra income 227,6 717,6 490,0 315,3% 2 Estimated prejudices 431,4 718,3 286,9 166,5% 3 Total (1+2) 659, ,9 776,9 217,9% 4 Financial-accounting 3.779, , , ,6% 5 Amounting to (3+4) 4.438, , ,9 970,4% 6 Total number of cases , ,7% 8

9 The new legislative amendments led to reducinfg the number of the control actions by one third as a result of the degree in harmonizing the specific activity with the good international practice. Also, the turn from the classical control approach to the extended adoption of the audit concept should have been aligned to the multiannual programming of the Court s activities. This approach will allow to achieve the obligation to check all the annual budget execution accounts at least once in three years, as per the art. 27 of Law no. 94/1992. The reduction by one third of the Court s checks is explained by the increase in the audit activity compared to the control one, this supposing a more complex and time consuming activity. Thus, if for the financial year 2007 a number of 2616 control actions have been carried out, i.e. 91% of the total activity, and 259 audit missions, i.e. 9% of total, for 2008 the Court of Accounts carried out 394 control actions, i.e. 18% of total, and 1768 audit missions, i.e. 82%. This means that, starting with 2009, the Romanian Court of Accountsadopted on a large scale the modern chacking procedures practiced by most of the Supreme Audit Institutions members of INTOSAI. Also, according to the previous regulations, the Court of Accounts carried out the control activities at the spending centres which aiming at the management discharge but presently the Court carries out the financial audit on the budget execution accounts which result in the conformity certificate. In order to remedy all the irregularities stated in the acts dressed and, respectively, in the statement of facts enclosed to them, including to recover the illegal payments found, the Court of Accounts issued decisions disposing de measures according to the provisions of the Rules on organization and performance of the specific activities of the Court of Accounts as well as the follow up of the acts resulted there from (further denominated Rules). Also, based on the stipulations in the Law no. 94/1992, re-published, and in the Rules, the specialized structures of the Court of Accounts requested the checked entities to establish the extent of the prejudices and to take the necessary steps for their recovery. Of the total number of decisions issued, have been already implemented. Compared to the total number of measures disposed by the Court of Accounts, the rejected measures represent only 1,4%, that reveals the increase in quality of the audit and control acts dressed by the public external auditors of the Court of Accounts and agreement to the found deficiencies by the checked entities together with the assumption of responsibility to correct the errors and undertake the necessary steps to prevent their occurrence in the future. It is worth mentioning here that, in 54 cases, it has been found facts considered to have been done by breaching the criminal law, those cases being submitted to the institutions entitled to establish the responsibility, informing the management of the subject entities accordingly. Upon completion of the financial audit missions on the budget execution accounts of the public entities on 2008, the Court of Accounts expressed clear opinions and issued a number of 235 conformity certificates, representing 16% of the total audited accounts. This quota, compared to the percentage of management discharge recorded the previous years of 49,2% in 2006 and 45,3% in 2007, reveals the increase in the professionalism of the public external auditors of the Court of Accounts in exerting the power of auditing the budget execution accounts. The main categories of deviations and irregularities may be classified as follows: Generating extra income Deviations and irregularities Generating prejudices Financial-accounting that did not determined prejudices 9

10 The statement of the found deviations that diminished unjustified the resources of the state and of the public sector and produced prejudices to the public budgets, function of the estimated amounts, frequency and number of cases is displayed as follows: No. 1 Categories of deviations Non set-up, non-record and non-collection in full and in time the amounts provided by the law for certain budget income Estimated - thousand lei - % in total No. of cases % in total ,5% ,2% 2 Non-observance of the legality an regularity in making payments ,9% ,1% 3 Breach of the legal provisions related to the administration and management of the public and private patrimony of the state and of the administrative- territorial units ,9% 114 2,0% 4 Non-observance of the legality related to the public supplies ,6% 16 0,3% Irregularities regarding the reality and accuracy of the accounting records and balances Non-fulfilment of the financial obligations due to the public budgets Deviations concerning the activity of state fiscal and financial control exerted by the Ministry of Public Finance through its specialized organisms ,1% 70 1,2% ,6% ,1% ,7% 48 0,8% 8 The illegal use of the budget allotments ,9% 58 1,0% 9 Other deviations found ,8% 65 1,1% TOTAL AMOUNT % % Graphic display of the statement of deviations that diminished unjustified the resources of the state and of the public sector and caused prejudices to the public budgets follows: Non-observing the legality in making the expenditure: 23,9% Breaching the legal provisions related to the administration and management of the public and private patrimony of the state and of the administrativeterritorial units: 17,9% Non-observing the legality related to the public procurement: 6,6% Findings concerning the reality and correctness of the accounting records and of the balance-sheets: 5,1% Non-observing the financial obligations to the public budgets: 4,6% Deviations regarding the activity of state fiscal and financial control exerted by MPF through its specialiyed organisms: 2,7% The illegal use of the budget allocations: 0,9% Other deviations: 0,8% Non-establishment, non-record and non-collection in total and in the legal terms of the budget revenues: 37,5% 10

11 1.2 The results of the other activities of the Court of Accounts Raports requested by the Chamber of Deputies According to the art. 4 (2) of Law no. 94/1992, re-published, the Chamber of Deputies requested the Court of Accounts to control the way the public resources have been managed and to report on the findings. Upon completion of these controls, the following reports have been issued: Report on the way of administrating the patrimony of the Romanian state, corresponding to the majority capital share in the possession of the Authority for Capitalization of the State Assets (AVAS) as well as the influence on the state budget, related to the sales of debts ata SC Nicolina SA Iaşi Further to the control carried out at the above mentioned trade company, the most important findings are as follows: The special remit given to the AVAS Bucharest representative by the general assembly of the shareholders of SC NICOLINA SA Iaşi, being the base of the sales of the functional assets Factory for Building Equipments and Section for Navvy Machinery did not observe the express dispositions of the AVAS Council for Advice and Survey and the Decisions of the Managing Board of AVAS because it has been signed by AVAS Vice-President without having the related powers. According to the legal provisions, only the AVAS President has the powers in this respect and only after obtaining the approval of the AVAS Managing Board and/or of the AVAS Council for Advice and Survey; The conclusion of the Sales and payment contract for the asset Factory for Building Equipments has been made by the management of the trade company without observing the dispositions included in the Presentation File approved by the Board of Directors of SC "NICOLINA" SA Iaşi, the decisions of the Board of Directors and the Decisions of the Ordinary and Extraordinary General Assembly of the shareholders, without considering those agreed and stipulated in the statement of facts deciding sale of the respective asset. During the control, the Board of Directors of SC NICOLINA SA Iaşi, mandated the general manager to elaborate, to sign and to register at the Law Court Iaşi action in establishment of facts in view to annulment of the sales contract concluded between SC Nicolina SA and SC Concept Investment SRL Braşov related to the asset Factory for Building Equipments. The conclusion, by the leadership of SC NICOLINA SA Iaşi of the sales and payment contract of the asset Section for Navvy Machinery under suspending clause, contrary to the provisions of the statement of facts and of the Presenting File and the price agreed has been payed out by the buyer very late, that had direct influence on the financial situation of the company, which became subject to the insolvency procedure; Organization, carrying out and follow up the results of the inventory of the assets and liabilities in the company revealed that the inventory did not cover all the assets and liabilities of the company, the legal provisions concerning record in the accounting of the inventory pluses, the inventory of the fields did not consider the documents attesting their property and the location drawings and no legal steps have been taken to clarify the juridical situation of all the field surfaces in order to determine their impact on the capital share. The control act was subject to a decision and has been submitted to the prosecution. The complete report has been submitted to the commission especially set up by the Chamber of Deputies that requested the Court of Accounts to carry out the control. 11

12 Synthesis of the findings resulting from the control performed on request of the Chamber of Deputies through the Decision no. 34/2009, concerning the use of the financial resources at the Ministry of Youth and Sports (MTS) Following the checks and the information obtained from the Ministry employees that have made, signed and approved the documents related to the organization of the Youth Day, facts for which there are indications to be committed by breaching the criminal law have been identified. The main findings are: Deviations from the legal provisions concerning financing the expenses. MTS allotted and payed in the framework of the contracts concluded with two trade companies for the organization of the Youth Day on May 2, 2009, the amount of thousand lei, with thousand lei more than the expenses effectively made by the sellers (practically 2,2 times more), under the conditions that those two sellers payed to the subcontractors for the organized events only thousand lei. It has been found out that, out of the total of 1382 thousand lei, for the amount of 884 thousand lei no supply or service has been identified; Non-observance of the legislation in the field of public supplies, i.e. breaching the principle of promoting the contest between the selling companies and the efficient use of the public funds, the selection of the supply procedure without observing the value limits leading at suspicions of understandings between MTS and the suppliers aiming at the preferential attribution of the contracts. The control act drawn up upon the checks carried out at this ministry has been sent to the General Prosecution next to the High Court of Cassation and Justice in order to be considered according to its competence. Basing on the Decision no. 33 dated July 27, 2009 of the Chamber of Deputies, at the date when the Annual Public Report if the Court of Accounts has been published a control action on the repercussions of the Oil Agreement of Sterling Resources Company Ltd. over the patrimony, resources and expenses of the National Agency for Mineral Resources was under development. Also, as per the Decision of the Chamber of Deputies no. 47/ , at the date when the public report has been published, a control action was under development at the Ministry of Tourism, aiming at checking the amounts spent for promoting the tourism and the image of Romania that will be concluded with a corresponding report. Reports issued on its own decision The Report on the expenses for staff and the number of post at the local budgets between , as well as the categories of incentives the staff in the local public administration takes benefit The report included an analysis concerning the evolution of the staff expenses and of the number of posts at the local budgets, including the categories of incentives the personnel in the local public administration benefitted in the related period. The report presented an aspect that has been extended last years in the local public administration related to the establishing and paying incentives and salary rights, beyond the legal framework ruling expressly the salaries or other rights of the nature, for the benefit of the personnel employed in the administrative-territorial units. The analysis of the staff expenses and of the number of posts financed from the local budgets revealed the following conclusions: within , the staff expenses doubled, from 7,5 billion lei in 2005 to 15,3 billion lei in 2008, that is from 2 billion euro to 4,2 billion euro; the high proportion of the component incentives, indemnities, allocations or other salary rights in the category of staff expenses from 24% in 2005 to 32% in 2008, contrary to the proportion of he basic wages that decreased from 50% in 2005 to 46% in 2008; the average expense on each post increased with more than 90% from 12,5 thousand lei in 2005 to 23,8 thousand lei in 2008 (with 11,3 thousand lei); 12

13 insufficient regulation as far as the salaries are concerned and limitation of the administrative apparatus of the administrative-territorial units; the quantum of the salary rights and of the incentives approved beyond the legal framework in 2008 amounts at 953,5 million lei (259 million euro), representing 0,18% of Domestic Gross Product (DGP) being awarded at entities, i.e. at persons employed in the local public administration representing 36,4% of the total number of posts financed from the local budgets; heterogeneous practice of the contentious administrative courts when judging the cases that regard the legality of the various pecuniary rights in contradiction to the decisions of the Constitutional Court; in many cases, the decisions of the Court of Accounts aiming at recovery of the amounts related to these illegal payments have been revoked in the courts, considering that the measures disposed by the Chambers of accounts overpass their competency provided by the law; unclear formulation of certain legislative texts that leads at their different interpretation, approache and implementation. In order to cease extending of this practice and having in view the escalation of the social tensions created by the salary rights, the Court of Accounts considers necessary that the salary rights of the personnel employed by the public institutions should be established by the law within specific limits, that could not be subject of negotiations and could not be amended by collective conventions or agreements. The report has been sent for information to the Parliament, the Government, the Ministry of Public Finance, The Ministry of Administration and Home Affairs and to the Ministry of Labour, Family and Social Security. Report concerning some irregularities related to the management of the National Stamps Treasure Further to the control carried at the Romanian Post related the management of the National Stamps Treasure, a number of discrepancies and irregularities with impact on the economic financial discipline and on the quality on managing the public and private patrimony of the state have been identified, including irregularities where there are indications to be done by breaching the criminal law. The control teams found out that a part of the irregularities included in the concluded acts are due to some lacks in the legislation and, consequently, they proposed to review the legislation related to the National Stamps Treasure of Romania estimating that the found irregularities amount to approx. 250,o million lei (60,0 million euro). Also, considering the exceptional historical and cultural importance of the values deposited by the National Stamps Preserver (over 11 million stamps, including stamps boar head of 1858, unique sheets dated between having a market value estimated at about half a billion euro) and the risks these collections are subject, under the conditions that the Romanian Post is currently a trade company (self-disposing of the patrimony, the financial interests prevailing in such companies), the Court of Accounts considers that the National Bank of Romania should, in this moment become again the most appropriate depositor of these unique values of our national patrimony. Consequently, the Court of Accounts issued a decision disposing the steps aiming at correcting the found irregularities and, in case of breaches of the criminal law, the corresponding control act drawn up has been submitted for settlement to the entitled institutions. According to the provisions of art. 4 (3) of the Law no. 94/1992, re-published, the Report has been sent for consideration and action to the Parliament. 13

14 Advice on legislative bills As per the competences awarded by the law, the Court of Accounts analysed the legislative bills regarding setting up by the Ministries of specialized organisms under their subordination and issued: Favourable advice to the Ministry of Education, Research and Innovation on setting up the Credits Agency for the Students from the State and Accredited Private High Schools; Favourable advice on set up, organization and operation of the following structures subordinated to the Ministry of Administration and Home Affairs : National Archives, Directorate for Persons Evidence and Administration of the related Data Bases and the National Administration of the State Reserves and Special Matters; Favourable advice on the draft Government Decision concerning set up, organization and operation of the National Supercomputing Centre; Negative advice on the set up of three national authorities subordinated to the Ministry of Health ( National Agency for Public Health, Medical Assistance and Health Programmes; National Agency for Medical Infrastructure and Devices and the National Authority of Control in the Public Health); Negative advice on request of the Ministry for Agriculture, Forests and Rural development to set up the Management Authority for the National Programme of Rural development; Negative advice on the draft Government Decision on organization and operation of the Romanian Trade Centre, transmitted to the Ministry of Small and Medium Companies, Trade and Business Framework; Negative advice on the draft Governmenet Decision with reference to the re-organization of the National Authority for Consumers Protection. Upon request of other institutions aiming at re-organization of certain existing institutions, the Court of Accounts has also declined competency, according to the Law No. 94/1992, re-published, considering that their implementation could lead to increases in the budget expenses approved by the Law of the State Budget on Introduction of the criminal research and survey institutions Based on the stipulations of the Rules on organization and performance of the specific activities as well as the follow up of acts resulting thereof, the Court of Accounts, through its Jurisdiction Department: Introduced the criminal research and survey institutions in 35 cases regarding, mainly, cases where there are indications that offences of abuse of authority, negligence in office, false, intellectual false and use of false have been committed. 14

15 Capitolul 2 The financial and performance auditing 2.1 The main findings of the financial audit on the execution accounts of the public budgets The missions of financial auditing of the execution accounts on 2008of the state budget, of the state social securities budget, of the securities for unemployment, of the unique fund of social securities for health, of the state treasury and of the accounts of the state public debt aimed at examining the conformity of the financial statements with the laws and the rules in force, the reality and fidelity of the data included therein and the certification of the execution accounts. It has also been analysed the managerial responsibility in collecting and using the public funds, the observance of the financial-fiscal discipline, the adequate organization of the public internal control system so that to contribute to assure the data accuracy in the financial statements and a sound economic-financial management. Through its financial audit missions on the execution accounts of the public budgets, the Court of Accounts aims at: Detecting the irregularities that determine the incorrect use of the public funds and identifying the deficiencies in the operation of the management control systems of the audited entities, whose activities or inactivity may cause the effective implementation of the budgetary policy decisions and of other related policies; Assessing the reality for the annual financial statements; Identifying cases and ways of waste and non-economic use of the budget resources available; Supplying the information necessary to improve the legislation, the policies and the allocation of the public funds. The financial audit on the execution accounts of the state budget carried out at the Ministry of Public Finance, at the National Agency for Fiscal Administration and its territorial structures as well as at the de-concentrated public institutions of the Ministry of Public Finance. Conclusions Further to the audit missions carried out on the execution accounts of the mentioned budgets, have been identified a number of irregularities resulting in prejudices caused to the public funds, the non-collection in full and in time of the fiscal obligations to the public budgets and the unreal evidence of the public patrimony in the audited annual financial statements which, therefore, have not been certified. Causes The deficiencies and irregularities identified have been mainly caused by: the insufficiencies in the operation of the fiscal and state financial control; the discrepancy between the obligations recorded in the fiscal evidence and the obligation declared by the companies; the fiscal inspection organisms did not check all the fiscal obligations due by the contributors to the public budgets; illegal refunds of VAT; non-observance of the legal provisions as far as the expenses financed from the public funds are concerned; non-observance of the legal stipulations regarding the public supplies; non-observance of the legislation related to establishing the salary rights of the employed staff; breach of the legality referring to the administration and management of the public and private patrimony of the state. 15

16 Irregularities found by the auditors are in general due to the discrepancies in the organization and operation of the internal control in the entities that manage the audited budgets and the fact that they do not operate at the level necessary to assure the management under conditions of legality, regularity and efficiency of the public money and of the public and private patrimony of the state. Recommendations Based on these findings, it has been concluded that the execution of the public budgets of the central public administration could be improved by acting in the following main directions: Improvement of the activity of budgetary programming both on the income and expenses sides by their correct assessment and foundation; Monitoring the collection of income and payment of expenses during the budget execution; Strengthening the control of public expenses aiming at the economy, efficiency and effectiveness in using the public funds allocated for their financing. Based on the results obtained from the audit missions achieved by the Court of Accounts, the audited entities should: Strengthen the responsibilities of the financial accounting management in order to identify those solutions aimed at preventing the wastes; To improve the operation of the internal control systems; To pay particular attention to those expenses where the audit identifies a high level of error; To take steps for revision of that legislation which is unclear or can subject of interpretation. 2.2 The main findings of the performance auditing The Court of Accounts carried out also a performance audit on the way of formation, allocation and use of the funds at the Government s disposal, on the Budget Reserve Fund and on the Intervention Fund at the Government general Secretariat - at the Ministry of public Finance and at other main spending centres of the central public administration that benefitted of amounts thereof - respectively on the National Development Fund at the Government disposal - at the Government General Secretariat, Ministry of Public Finance and other four ministries. At the territorial level, the checks have been done in 38 districts, including Bucharest Municipality, on a sample including 94 entities, selected out of a total of 140 entities financed from the National Development Fund in 2007 and A general finding evidenced by the auditors in most cases was the lack of a sound analysis of the necessity and opportunity of the allocations from this funds, the absence of an uniform procedure and of clear criteria related to allocations from the respective funds and the absence of a monitoring and control system of their use as well. In the reports concluded, the Court of Accounts made a number of recommendations specific to each of the audited entities, pending on their role and attributions in the formation, allocation and use of the respective funds, recommendations aimed at creating a more clear an consistent legislative and procedural framework, establishing unique criteria of foundation, allocation and use of the public money provided by these funds and to assure the monitoring and control of the way their objectives have been achieved. 16

17 Capitolul 3 The main findings of the audit actions carried out in different areas 3.1 General presentation At the central public administration, the Court of Accounts audited the budget execution accounts on 2008 of the authorities and public institutions in the following areas: public and jurisdictional authorities; defence, public order and national security; education, research and entertainment services; health; transports; agriculture and safety of foods; communications and regional development and environment. The main objective of the financial audit missions was to obtain a reasonable assurance that the audited financial statements are developed, in all significant aspects, in full conformity with the financial reporting framework in force in Romania and observe the principles of legality and regularity. 3.2 Conclusions and recommendations The main findings resulted from the financial audit missions carried out in various areas The financial audit missions carried out revealed cases when the legal provisions have not been observed, discrepancies and irregularities generating either extra income to the public budgets or producing prejudices to them or to their own or state patrimony, having influence on the quality of the economic-financial management of the checked entities. The main categories of irregularities or discrepancies found in the audited areas are: Irregularities that produced prejudices to the public budgets through illegal payments, payments without supporting documents or payments exceeding the limits/quotas established by the law; Irregularities that determined identification of extra income for the public budgets; Financial-accounting discrepancies that did not produce prejudices but which are very frequent; Irregularities concerning organization and operation of the internal control and audit systems. Through the decisions issued, the Court of Accounts disposed to the audited entities managers to take the necessary steps to establish the extent of the prejudices and their recovery within the legal terms of extinctive prescription. Conclusions The aim of the audit missions carried out in different areas at entities of the central public administration was to examine the managerial responsibilities in using and administrate the public funds, the observance of the financial accounting discipline, the correction of errors and the development of efficient internal control and audit systems. The main conclusion of the completed audit missions is that there still are numerous irregularities and discrepancies in the budget execution at many of the checked entities that led to: Producing prejudices as result of the mismanagement of the public resources and of the public and private patrimony of the state; Non-transfer of the fiscal obligations to the budget, completely and in due time; Unreal record in the audited annual financial statements of the entity s own patrimony and of the patrimony of the state in its administration. It has also been found an insufficient concern of the some entities management to implement the principle of the sound management and to assure the reality and accuracy of the data included in the financial statements. 17

18 Causes The causes determining the found irregularities are mainly related to: The mismanagement of the public funds in the spending centres and the inefficient use of the budget resources; The breach of the legal provisions concerning the public finance, the public supplies, the management and the administration of the patrimony; Issue of specific regulations exceeding the expense limits provided by the general legal framework, that is set up of payment limits over those included in the laws; The unclear and ambiguous legislation, sometimes inconsistent, as well as the interpretable character of some regulations. This results in a different implementation of the same legal dispositions by different entities checked. The null and void character of certain regulations, specific to various areas, that are not in line with the current reality; Discrepancies existing in the organization and operation of the internal control and audit at the audited entities, so that there is an increased risk of inefficient management of the financial resources and misadministration of the public patrimony. Recommendations For the checked entities where discrepancies have been identified, in the documents issued on audit missions completion, the auditors formulated recommendations and informed accordingly the entity management in order to correct the found deficiencies. These recommendations refer mainly to: The proper organization of the internal control and audit system; The correction of the errors in the accounting records; Re- evaluation of the assets and liabilities and their recording in the accounting; The correct inventory of the patrimony, correlation between the factual inventory and the recorded one and recording in the accounting of the own patrimonial goods and of those belonging to the public and private patrimony of the state; Correction and recovery of the illegal salary rights; Clearance with the public budgets of the fiscal and budgetary debts wrongly established and transferred; Recovery of the amounts transferred unjustified to the suppliers of goods or services; The observance of the legal procedures regarding the public supplies; The observance of the procedures related to commitment, fulfilment, ordering and payment of public expenses; Organization, record and reporting the budget and legal commitments. 18

19 Capitolul 4 Main findings resulting from the audit/ control actions carried out at the authorities of the local public administration 4.1 The results of the specific activities of the Court of Accounts carried out at the administrative-teritoriale units The main objectives of the control/audit actions carried out by the Chambers of Accounts within their powers established by the law have been to check, at the local level, the formation, administration and use of the financial resources of the administrative-territorial units, including the administration of the public and private patrimony of the administrativeterritorial units, observing the principles of legality, regularity, economy, efficiency and effectiveness. The audit/control actions carried out to these entities aimed at auditing the execution accounts of the local budgets of the communes, towns, municipalities, sectors of and Bucharest Municipality, districts, the budgets of public institutions funded through their own income and through the subsidies from the local budgets, the budgets of public institutions funded totally from their own income, the budgets of internal and external borrows, the budgets of the external grants, the income and expenses evidenced outside the local budgets as well as the control on the management of the public and private patrimony of the administrative-territorial units being in the administration of the self managed Regis or of the trade companies of local interest, the analysis of the performance in managing the public money and the assessment of the internal control and audit systems. As per the Programme of activity of the Court of Accounts on 2009, a number of actions have been carried out, out of which 909 financial audit actions (71,0%), 243 performance audit actions (19,0%) and 129 thematic control actions (10,0%). Upon completion of the financial audit actions, 50 certificates of conformity have been issued, representing 5,5% of the total audited execution accounts and, for the rest where irregularities and discrepancies have been found, the accounts have not been certified. The graphic display of those actions follows. Financial audit 909 actions GRA Performance audit 243 actions Control 129 actions The greatest number of audit/control actions carried out is located in the districts Tulcea (52), Călăraşi, Iaşi and Maramureş (48 actions each), Suceava, Timiş şi Dâmboviţa (47 actions each), while the most reduced actions is located at the districts Vaslui and Mehedinţi ( 18 actions each), Brăila, Bacău şi Olt (20 actions each), and districts Galaţi, Covasna and Vrancea (21 actions each). 19

20 In order to carry out the control/audit actions, in 2008 a number of 1116 public entities of local interest have been subject the checks, respectively 16,2% of the total of entities existing in the competence area of the Chambers of Accounts, that is: No. Categories of entities checked Existing entities Checked entities % 1 Spending centres at the administrativeterritorial level, out of which: ,7% 1.1 Main spending centres, out of which : ,5% - District councils ,0% - Municipality city halls ,2% - Towns city halls ,5% - Communes halls ,7% 1.2 Secondary spending centres ,7% 1.3 Tertiary spending centres ,3% 2 Self managed Regis of local interest ,3% 3 Trade companies of local interest ,6% TOTAL AMOUNT ,2% Main spending centres 822 Trade companies of local interest 46 Self-managed regies of local interest 10 Tertiary spending centres 227 Secondary spending centres 11 The control/audit actions covered the locally existing entities as follows: district Tulcea (46,4%), Călăraşi (43,9%), Ilfov (29%), Dâmboviţa (28,2%), Teleorman (25,0%), Buzău (23,7%), Dolj (5,9%), Vaslui (9,9%), Neamţ (10,2%), Vrancea (10,5%), Alba and Prahova (10,7% each). Following the control/audit actions, a total number of reporting documents have been issued, that is : control/audit reports; statements of facts; unilateral notes; - 54 statements of infringements; - 31 statements of facts dressed separately when the irregularities are presumed to breach the criminal law. As per the provisions of the Rules on organization and carrying out the specific activities of the Court of Accounts, following the control/audit reporting documents have been issued 783 decisions, out of which a number of 121 have been completely or partially rejected. The decisions issued disposed measures, out of which as result of the financial audit actions, 295 resulting of the thematic controls and 122 of the performance audit actions. 20

21 4.2 The main findings resulted from the audit/control activities carried out at administrative-territorial units The actions carried out at the local budgets spending centres and at the self-managed Regies and trade companies of local interest revealed cases of irregularities generating either extra income or prejudices to the public budgets influencing the quality of the economic/financial management of the checked entity. The statement of the amounts resulted from the estimation of found irregularities that led to extra income or prejudices is presented as follows: - thousand lei - No Category Estimations income/ prejudices Accessories Total income/ prejudices 1 Extra income Estimated prejudices Total amount The main irregularities found as result of the audit/control actions carried out in 2009 at the administrative-territorial units are: A. Irregularities that led to extra income due to the public budgets are graphically displayed as follows: - thousand lei - Irregularity categories Amount Non-settling, non-recording and non-reimbursement in full and in due time of certain budgetary income ,8 Irregularities concerning the non-accomplishment of the financial obligations ,6 Findings regarding legality, reality and correctness of the accounting records and of the accounting balance 1.649,8 Breaches of the legal framework in the financial-accounting and fiscal fields 1.315,7 Breaching the legal provisions related to the administration and management of the public and private patrimony of the administrative-territorial units 1.020,9 Other irregularities found 405,2 TOTAL AMOUNT ,0 B. Irregularities producing prejudices are: - thousand lei - Irregularity categories Amount Non-observance of the legality and regularity in the expenditure ,7 Non-observance of the legal framework related to the public supplies 5.860,7 Irregularities in the financial-accounting field 4.194,0 Non-fulfilment of the financial obligations to the public budgets 2.051,2 Illegal use of the budgetary allocations 2.017,8 Breach of the legal provisions related to the administration and management of the public and private patrimony of the administrative-territorial units 1.038,9 Other irregularities found 1.242,8 TOTAL AMOUNT ,1 21

22 C. Irregularities that did not produce prejudices are mainly related to: errors in the accounting records that caused alienated income and expenditure; inconsistency between the financial statements and the analytical accounting records; patrimonial transactions not included in the accounting records; non-observance of the legal provisions regarding the annual inventory and patrimony re-evaluation; non-observance of the legality concerning commitment, fulfilment, ordering and payment of expenditure; non-observance of the legality related to the public supplies; non-settling, non-recording and non-collection in full and in due time of certain budgets income; enforcement of the budgetary assets; non-development or wrong development of the supporting documents. Aspects concerning assessment of the internal control and audit activity The assessments concerning the internal control and audit revealed a number of deviations from the regularity in force on organization and operation of theses activities at the audited entities, such as: Non-issue or non-updating the decisions on organization and operation of the own ex-ante financial control; Non-settling and/or non-completing the record including the draft transactions to be submitted to the own preventive financial control advice; The objectives of the preventive financial control have not been detailed in check lists for each transaction specific to the institution; Non-establishing of own standards related to the documents, their circuit and the persons entitled to deal with the transactions regarding the commitment, fulfilment, ordering and payment of expenditure as well as the organization, record and reporting the budget and legal commitments. Further to the checks on organization and operation of the internal control and audit it has been found that these activities are still inefficient and rarely reach the aim of their existence, that to supply the management with information about the efficiency and regularity of the subject entities activity. 4.3 Conclusions Generally, it could be concluded that the basic objectives of the activities carried out at the administrative-territorial level by the Chambers of Accounts aimed at examining the managerial responsibility in the use and administration of the public funds, the observance of the financial and fiscal discipline, to correct the errors and irregularities in order to improve the activity of the checked entities, to develop high quality and efficient internal control and audit systems, in short to assure a sound and performant management of the public money. As result of the control/audit activities carried out, it has been found irregularities producing prejudices in the management of the public resources, the non-transfer of the fiscal obligations to the budget in full or in due time as well as the unreal reflection of the public patrimony in the audited annual financial statements. The lack of clearness or the interpretable feature of certain regulations had a significant impact on the legality and regularity of the transactions submitted to auditing, many of the found irregularities being equally the result of the mismanagement of the public funds and of the lack of or insufficient knowledge of the procedures related to the formation, administration, commitment and use of the local public resources at the spending centres and other public legal persons. The irregularities and discrepancies found reveal also the fact that there still are major malfunctions in the organization and operation of the internal control and audit at the checked entities and that, in most cases, these systems do not operate at a level of quality so that to secure the management in conditions of legality, regularity and efficiency both of the public money and of the public and private patrimony of the administrative-territorial units. 22

23 The good premises an effective control of the expenditure is to develop a realistic budget, any overestimation of the income leads to a weak budget estimation and, consequently, to a similar execution. This is to explain the fact that, at the beginning of the year, based on over dimensioned resources due either to unrealistic anticipates of the own income or to probable allocations from the central administration, expenditure is committed considering potential and not certain resources which produces malfunctions in transfers in the absence of the financing sources. Starting of these findings, it could be concluded that the budget execution at the local public administration authorities needs to be improved in two main directions: improvement of the activities of the above mentioned authorities as far as the estimation of the income and the supervision of its collection during the budget execution; strengthening the control over the expenditure and create the conditions to increase the efficiency in the use of public funds and in financing the public expenditure. There is the need to find an appropriate balance between these two requests. From this prospective, the role of the auditcontrol actions carried out by the Chambers of Accounts at the level of the administrative-territorial units is: to detect irregularities implying incorrect use of the public funds and to identify the weaknesses related to the administrative controls that could put in discussion the integrity of the organization and the effective implementation of the budgetary policy decisions or of other policy decisions; to assess the reality of the reports on the budget execution and of other financial statements; to identify cases or patterns of waste or inefficiency that, once corrected, could allow the most economic use of the available budget resources; to offer trustful information on the results of the programmes implementation, as basis for the future amendments to the laws, policies and budget allocations. On the other side, based on the results of the control/audit actions, the audited entities have to: improve the survey and control systems; pay higher attention in particular to those areas where the audit continues to identify a high level of error ; create a flexible and transparent system both to found the necessary of financial resources and to distribute and allocate them on destinations; implement efficient systems to monitor and assess the operation of the administrative body and of the public services of local interest; develop systems to quantify the performance and the quality of public services. 23

24 Capitolul 5 The main findings resulting of the control activities 5.1 General oresentation Within the competence provided in the Constitution of Romania and in its own law on organization and operation, the Court of Accounts performed 264 control actions. 5.2 Conclusions and recommendations The main findings resulted of the control actions carried out at the trade companies Thematic control actions performed at some trade companies within the activity scope of the public institutions of the central public administration, including at some public authorities and institutions identified cases of non-observance of legal regulations, discrepancies and irregularities that either generated extra income due to the public and own budgets or produced prejudices to them, influencing the quality of the economic-financial management of the checked entities. A general conclusion is that the discrepancies and regularities found out at the controlled entities have been caused by actions or lack of action of their management or of the employees responsible with the fulfilment of the specific tasks as per the regulations on organization and operation of the controlled entities. 24 Causes Identifying the discrepancy or irregularity at all the controlled entities in the same area reveals the lack of clarity of the legal regulations that allowed a incorrect approach as far as the legality, reality and correctness of the accounting records are concerned with consequences on quality of the economic-financial management of the checked entities where, in most cases, it has been found that: The clauses of the contracts concluded are not observed; The recover of the debts is not properly monitored; There is no consistence between the accounting records and the regulations related to the patrimony; Lease of the patrimonial goods has been concluded without observing the legal provisions; Errors in the accounting records; The inventory of the patrimonial goods has not been followed by the corresponding record of the results in the accounting; No re-evaluation of the assets and liabilities has been carried out. The interpretable character of certain jurisdictional norms determined some entities to issue their own instructions establishing limits of expenditure and ways for its supporting. The entities sustained that the regulations do not provide clear stipulations but simply offer to those entitled to implement them the alternative to establish derogations from the respective legal norms. Consequently, as a result of the checks, the following have been found: Establishment of norms and expenditure limits beyond those provided in the basic regulations; Illegal salary rights given to the members in the General Assembly of the Shareholders or to the members of the Administration Board and their secretariats and to the members of other committees organized on different purposes; The illegal payment of the expenses for different missions, mainly for the missions abroad.

25 Frequently, the public procurement activity has been performed without observing strictly the legality and this situation led to the use of public funds in an inefficient and uneconomic manner, through: The illegal attribution of the procurement contracts for supplementary works; The subsequent modification of the prices agreed in the initial procurement contracts; Loss of the performance guarantees. Recommendations In the context of the irregularities found, strengthening the financial discipline and increasing the responsibility in the management of public funds becomes a must through the following: Additional provisions in the regulations to include stimulating sanctions determining the observance of the legality in the use of the public money; Amending the legislation in the field of public procurement to include clear and not interpretable provisions to establish less permissive rules for the contracting entities; Increasing the efficiency in the activity of the internal control and audit structures, through strengthening the responsibility in achieving their tasks as provided in the legislation. 25

26 Capitolul 6 The main findings resulted of the auditcontrol actions performed in the banking area and in the capital market 6.1 SC CEC Bank SA The Court of Accounts carried out a control action on the situation, evolution and mode of administrating the public and private patrimony of the state by the SC CEC Bank SA. During the control action, the irregularities identified are quantified as follows: - Extra income of 265,70 thousand lei, completely recovered; - The estimated value of the irregularities for which, through decision, it has been disposed the establishment of the prejudice extent and taking the steps for the recovery of 224,00 thousand lei, out of which the amount of 11,9 thousand lei have been already recovered; - Other discrepancies that did not determine prejudices estimated at 1.367,9 thousand lei. The main findings resulted of the control carried out at SC CEC BANK SA concern the internal control and audit and the preventive control and revealed a number of irregularities related to: the organization of the inventory, the evidence of fields or fixed assets in the patrimony, organization and conduct of the accounting on clients, suppliers and of other debts and obligations and the execution of the expenditure, the collection of the income and the procurement as well. 6.2 National Securities and Exchange Commission The Court of Accounts achieved a financial audit mission at the National Securities and Exchange Commission (CNVM), authority with regulating powers for the capital market funded totally of its own income, where it has been foud a number of irregularities determining prejudices and extra income due to the public budgets or financial accounting discrepancies leading to incorrect financial statements as a whole. Following the activity carried out at the above mentioned entity, the Court of Accounts issued decisions disposing the necessary steps aiming at correcting the errors revealed and recovery of the losses. 6.3 Conclusions and recommendations. Conclusions Following theses activities, it has been concluded in general that the checked entities demonstrated an insufficient concern to assure the sound economic and financial management and the appropriate accuracy of the financial information included in the financial statements. 26 Recommendations In order to correct the found deficiencies and increase the quality in the patrimonial administration, a number of steps should be implemented, such as: To organize of the internal and financial preventive control according to the law; To include, with priority, in the annual programmes of the internal audit structure, audit missions regarding the financial-accounting activity; To increase the responsibility of the entities leadership as far as the sound financial management of the public resources.

27 Capitolul 7 The main findings resulted of the control actions carried out at the entities with attributions in the area of privatization 7.1 The Authority for Capitalization of the State Assets Within its powers, the Court of Accounts carried out in 2009 a control action at the Authority for Capitalization of the State Assets (AVAS)VAS) aiming at checking the way the clauses in the privatization contracts of several trade companies have been observed. The control revealed extra income estimated at 4.712,15 thousand lei as well as amounts resulted further the implementation of certain dispositions included in the decisions issued by the Court of Accounts totalling 224,70 thousand lei. The main findings resulted are: In case of the control regarding the achievement by the parties of the clauses included in the contract for privatization of SC Combinatul Siderurgic SIDEX SA Galaţi (currently named SC ARCELOR MITTAL SA Galaţi) In the years 2005 and 2006, the investments commitments assumed by the buyer in the privatization contract concluded between The Authority for Privatization and Administration of the State Participations, in its position of Seller, and LNM Holdings NV, as Buyer, have not been observed. Further to the checks it has been found out that, within , the buyer did not accomplish neither its investments obligations related to the environment protection nor those referring to the technological improvements, as provided in the contract. During and as a consequence of the control, the Authority for Capitalization of the State Assets calculated penalties as per the contractual provisions amounting to ,725 USD, the buyer being notified accordingly. The juridical situation of some fields administrated by SC ARCELOR MITTAL SA Galaţi has not been clarified, contrary to the provisions of the contract of privatization. Thus, it has been found that two fields in total surface of ,65 sq.m. are are in dispute, their juridical situation being unclear. Also, out of the documents and materials received form SC ARCELOR MITTAL SA Galaţi, it does not clearly result if the company still has in use other fields for which did not make the necessary documentations to ask for and receive the certificates attesting the property right. According to the law, the capital of the company is increased with the updated values of these fields and the extra shares resulted are transferred to the authority having attributions in the privatization area that manages the shares belonging to the state in the company capital. In case of the control on the fulfillment of the clauses of the privatization contract of SC PETROM SA The institution having attributions in the field of privatization din not properly monitor the way the buyer fulfilled the obligation assumed through the privatization contract, that to do all the reasonable efforts to determine the company to prepare properly the necessary documentation, to apply and obtain all the certificates attesting the property right on the fields under clarification according to the law, in due time to enable the capital increase accordingly.... During the control, it has been identified fields in surface of de ,57 sq.m., which did not have a clarified juridical status and for which SC PETROM SA did not elaborate or finalize îthe documentations necessary to ask for and to obtain the certificates attesting the right of property in view of increasing the state capital with the updated related value. AVAS did also not monitor the accomplishment by the buyer of the commitments, related to the fields with status under clarification, assumed on privatization contract signature. As a result of the control it has been identified fields transferred by the Romanian state to SC PETROM SA, under its administration and use, for which it obtained the certificates attesting the right of property, but did not 27

28 increase the capital with their updated value according to the legal provisions in force and for which the resulting extra shares have not been transferred to AVAS, the manager of the state shares in the company, as follows: - The total surface of ,81 sq.m., covered by 560 certificates attesting the property right issued by the coordinating ministry; - The total surface of ,87 sq.m., representing differences between the larger surfaces covered by a number of 6 certificates attesting the property right issued by the coordinating ministry, compared to those recorded in the statements sent by the company as reflected in capital. AVAS din not monitor, in its position of majority shareholder, the observance of the average number of employees established in the Staff Strategy enclosed to the privatization contract. Thus, it has been found that in 2006 and 2007, a reduction of the average number of staff of , respectively , have been recorded compared to the Staff Strategy appended to the privatization contract. During the control, the Authority of Capitalization of the State Assets notified the buyer to take steps and correct the discrepancy and observe the contractual clauses. AVAS did not also monitor the fulfilment by the Ministry of Environment of the obligation concerning set up of a specialized organism that was supposed to undertake the Seller s obligations related to the environment issues provided for by the privatization contract as per art. 20(6) of the Law no. 555/2004 regarding some measures intended to the privatization of the National Oil Company Petrom SA Bucharest. In case of the control on the fulfilment of the contractual clauses included in in privatization contract of SC RAFINĂRIA ASTRA SA The Authority for Capitalization of the State Assets did not monitor, after conclusion of the sales contract, the juridical situation of some fields administrated by SC RAFINĂRIA ASTRA SA Ploieşti for which, at that date, they did not obtain the certificates attesting the property right. Following the checks it has been found that SC RAFINĂRIA ASTRA SA Ploieşti had, at the date of privatization, in administration and possession fields located inside town, in Ploieşti Municipality, in total surface of ,54 sq.m., with an unclear juridical status for which they did not obtain the certificates attesting the property right, so that their value has not been reflected neither in the increase of the state capital in the company not in the income received from privatization. Out of the total surface of ,54 sq.m., on the date of privatization, a surface of ,86 sq.m. has been subject to lease and other three fields in surface of 223,68 sq.m., 270 sq.m. and 950 sq.m., were subject to trials at different courts. At the same time, out of the information received from the company on the checks occasion, became not clear if SC RAFINĂRIA ASTRA SA Ploieşti has in possession and administration other field surfaces transferred from the Romanian state for which it did not draw up the necessary documentation and did not ask for or obtained the certificates attesting the property right. The decision issued by the Court of Accounts disposed the measures aiming at correcting this discrepancies found during the control actions carried out. 28

29 7.2 Conclusions and recommendations The main findings The action performed at the Authority for Capitalization of State Assets (AVAS) intended to check the fulfilment by the parties of the clauses included in the privatization contracts. Conclusions Following the control activity carried out it has been found that both the seller, respectively AVAS, and the buyers of the assets subject to privatization did not achieve the clauses included in the privatization contracts, and the findings are related to: The non- observance of the investments commitments assumed by the buyer; Non- clarification of the juridical status of some fields in view to obtain all the certificates attesting the property right on them; Non-observance of the average number of employees as set up in the Staff Strategy ; Lack of monitoring the establishment of a organism specialized in the post-privatization environment issues; Non-increase of the capital with the updated value of the fields and the non-transfer of the extra shares to AVAS. Measures As a result of the findings, the following measures have been undertook: The calculation by AVAS of the penalties as stipulated by the contractual clauses; The notification sent by AVAS to the Seller to observe the Staff Strategy; A decision issued by the Court of Accounts disposing the steps necessary to eliminate the discrepancies found on occasion of checks carried out. 29

30 Capitolul 8 The public external audit performed by the Audit Authority In view to fulfil some obligations of Romania as Member State of the European Union, basing on the provisions of Law no. 94/1992 on organization and operation of the Court of Accounts, re-published, the Audit Authority is organized and operates on: The grants offered to Romania by the European Union through the pre-accession programmes PHARE, ISPA and SAPARD; The structural and cohesion funds; The European Fund for Guarantee in the Agriculture; The European Fund for Agriculture and Rural Development; The European Fund for Fishery; The funds offered during the post-accession period. Based on the programme approved, the Audit Authority performed 65 audit missions aiming mainly the management and control systems and the expenditure declared to the European Commission. The audit actions have been carried out at over 200 entities, particularly with the aim to consolidate the management and control systems so that to significantly mitigate the risk of error and the expenditure declared to the EC should be real and accurate, aiming at recovering the unacceptable payments, upon the case. Also, through the audit certificates and reports, the Audit Authority, in its position of Certifying Authority, has the objective to obtain a reasonable assurance that the information included in the accounts transmitted to the Commission is true, complete and accurate and that the internal control procedures have been appropriately applied. The findings resulted of the audit missions carried out are presented as follows. 8.1 SAPARD Programme The objectives of the audit on using the SAPARD funds in the financial year 2008 were intended to assess if: The internal control systems of the Payments Agency for Rural Development and Fishery (APDRP) and of the Authority of Certification and Payment (ACP) within the Ministry of Economy and Finance, related mainly to the accrediting criteria specified by the Mutual Financing Agreement (AMF), offers a reasonable assurance that the use of the amounts representing the contribution of the Commission observe the Community regulations; The annual account of APDRP, drawn up for the financial year ending on December 31 st 2008 is consistent to the books and records of the Agency; The Expenditure Statements include true, complete and clear transactions effected within the programme; The financial interests of the Community are protected appropriately as far as the amounts to be collected are concerned; The recommendations to improve the systems sent to APDRP have been followed by measures intended to correct the found discrepancies. In this respect, 2 audit missions have been carried out (one intermediate mission and one final mission) at 3 entities (APDRP- central and territorial centres, ACP and MAPDR) and at 106 end-users selected through sampling. Also, the Audit Authority, in its position of Certifying Authority, carried out checks on a representative sample of payments amounting to ,8 thousand lei (66.610,3 thousand euro) and debts formed and recorded in the books of the Agency amounting to ,7 thousand lei (10.382,3 thousand euro). 30

31 In the financial year 2008, according to the annual Statement of expenditure and the records in the accounting evidence of the Payments Agency for Rural Development (APDRP), the total amount of the payments effected for the projects financed within 9 accredited measures was ,5 thousand lei ( ,8 thousand euro). The audit activity carried out related to the payments effected in 2008 within the projects, revealed a number of discrepancies with impact on the financial statements of the Payments Agency for Rural Development and Fishery (APDRP), referring mainly at: a) Irregularities found, in some cases, at SAPARD financed end-users concerning the payment authorization, expenditure recover and non-observance of the procurement procedures b) Irregularities related to the transactions carried out in the SAPARD Euro account and in the debtors account c) Discrepancies referring to the implementation of the working procedures of APDRP: Further to the above mentioned findings, the Audit Authority, in its position of Certifying Authority, recommended to APDRP to re-analyze the acceptability of the expenses refunded to the SAPARD end-users and, upon the case, the implementation of the procedure of recording and recovery of the unjustified payments. European Fund for Agriculture and Rural Development The European Fund for Agriculture and Rural Development (FEADR) represents an important financial support for Romania in view to improve and modernize the agriculture and the rural development, an instrument set up through the Council Regulation no dated June 21 st 2005 regarding the funding of the common agricultural policy and through the Council Regulation no dated September 20 th 2005 regarding the support for rural development. The main findings resulted of the audit on the European Fund for Agriculture and Rural Development The audit activity intended to evaluate the operation of the key operational controls and of the financial controls of the Payments Agency and of the other organisms involved in the FEADR carrying out, the way they assure the conformity with the requirements of the community and national regulations as well as the assessment of the transactions effected. Within the audit missions performed, the Audit Authority carried out checks on a sample of 115 financiang applications amounting to ,0 thousand lei, representing 12% of the total number of 1017 financing applications selected by APDRP by the end of FEADR financial year, amounting to ,4 thousand lei. The Audit Authoritz carried out 2 audit missions (one intermediate and one final mission) at DGDR-MAPDR, APDRP - central and 24 regional and district centres, APIA, as delegated Organism at the central level and 23 district and local centres, including 72 end-users selected by sampling. Following the audit missions, the Audit Authority developed the Report, accompanied by the Audit Certificate, that include the auditors opinion on the completeness, accuracy and reality of the APDRP annual account and of the FEADR euro account and the opinion on the management and controls systems as well. These documents have been submitted to the European Commission and to the Romanian authorities involved in the carrying out of FEADR, i.e. Ministry of Agriculture, Forests and Rural Development (MAPDR), the Coordinating Organism of the Payments Agencies, the Payment Agency for Rural Development and Fishery. The Audit Authority, in its position of Certifying Authority, through the Report and the Audit Certificate offered a reasonable assurance that the information included in the accounts submitted to the Commission are true, complete and accurate and that the internal control procedures have been applied appropriately. The audit system performed for the year 2008 revealed a number of irregularities related to the conformity of the system with the Community regulations and the observance of the accreditation criteria. Following the discrepancies identified, the Audit Authority, in its position of Certifying Authority, formulated recommendations aiming at correcting them for which the Payment Agency for Rural Development and Fishery is going to take the necessary steps and inform accordingly. 31

32 The European Fund for Guarantees in the Agriculture The European Fund for Guarantee in the Agriculture (FEGA), carried out by the Payments and Intervention Agency in the Agriculture (APIA) has been introduced by the Council Regulation no 1290 dated June 21st 2005 in order to accomplish the objectives of the common agricultural policy of the European Union and is financing, in the context of the Member States common management, the following: Refunds for export of agricultural products in extra community countries; Measures of intervention for the agricultural markets regulation; Direct payments to the farmers in line with the common agricultural policy; Community financial contribution to the measures informing and promoting the agricultural products on the community internal market and on the extra-community markets. The main findings of the audit on the European Fund for Guarantees in the Agriculture The report and the audit certificate issue by the Audit Authority, as Certifying Authority, offered a reasonable assurance that the information included in the accounts submitted to the Commission are true, complete and accurate and the the internal control procedure have been applied appropriately. The audit has been carried out at the entities involved in the technical and financial implementation of FEGA, that is: The General Directorate Budget-Finance within the Ministry of Agriculture, Forests and Rural Development, the Payment and Intervention Agency in the Agriculture (central headquarters, district and local centres), the organisms delegated designed by APIA and aimed mainly at: analyzing the working procedures elaborated by the audited entities, the documents drawn up upon internal controls completion and those related to the payment and accounting process; observing the implementation of the working procedures by the staff with specific implementing and supervising attributions; confirming the transactions by the funds end-users; analyzing the statements and the financial reports of the Agency. The audit mission consisted of visits at the central and territorial headquarters of the audited entities and at the applicants or beneficiaries of FEGA support, interviews with experts and representatives of the audited entities management, collection of information, orally or in writing, from the persons responsible with the management of the funds, checks of the arithmetic operations in the supporting documents and in the accounting records, including the examination of the internal audit reports. Thus, the Certifying Authority carried out 53 visits at the beneficiaries of FEGA support and applied the substantive procedures on 166 transactions. The Audit Authority performed the certification of the Payments and Intervention Agency Accounts (APIA) consisting of 3 audit missions at MAPDR, APIA central headquarters and 37 territorial centres (22 local centres and 15 district centres), at the State Inspection for the Wine and Vineyards control at the central headquarters (ISCTV delegated organism within the measure aimed at restructuring and reconversion of the vineyards), at 16 territorial centres as well as at 143 end-users selected through sampling. As result of the checks carried out at the European Fund for Guarantees in the Agriculture, some discrepancies referring to the conformity with the community regulations and observance of the acreditation criteria have been identified for which the Audit Authority, as Certifying Authority, formulated recommendations to APIA which is going to take the steps for correction and to inform accordingly. Through the elaborated reports and certificates, the Audit Authority offered a reasonable assurance (95%) that the information included in the accounts submitted to the Commission are true, complete and accurate, the internal control procedures have been applied apropriately. For the identification of the significant errors in the financial statements, an acceptable level of materiality compared to the total expenditure, as per the requirements of the European Commission. 32

33 8.2 The Structural and Cohesion funds For the programming period , within the objective Convergence, Romania benefits of 7 operational programmes funded through the structural and cohesion funds, as follows: - POS Increase of Economic Competitiveness (POS CCE) funded through FEDR; - POS Transport (POS T) funded through FEDR and FC; - POS Environment (POS M) funded through FEDR and FC; - PO Regional (POR) funded through FEDR; - PO Technical Assistance (POAT) funded through FEDR; - POS Development of the Human Resources (POS DRU) funded through FSE; - PO Development of the Institutional Capacity (PO DCA) funded through FSE. Out of the ,0 thousand euro, representing the total non-refundable funds allocated to Romania for the period , the amount of ,0 thousand euro will be allocated through the Structural Funds within the objective Convergence and the amount of ,0 thousand euro through the Cohesion Fund. Besides the funds allocated through the operational programmes mentioned within the objective Convergence, Romania also benefits of non-refundable funds within the objective European Territorial Cooperation. For this objective are thus carried out operational programmes for which ,0 thousand euro have been allocated (including transfers to IPS- the Pre- Accession Instrument and ENPI European Neighbourhood and Cooperation Instrument). According to the provisions of the art. 71(2) of the Council Regulation nr. 1083/2006, the Member States have are obliged to assure the assessment of the conformity of the management and control systems established for each operational programme, requirement conditioning the submission of the first intermediate payment application in view to access the European funds. With this aim, the Audit Authority, through its specialized directorates, carried out audit missions on each operational programme respectively management authorities, including certifying and payment authorities, and reported about the audit results. Thus, the Audit Authority assessed the management and control systems related to the operational programmes funded through the European Fund for Regional Development, European Social Fund and the Cohesion Fund, respectively the Sector Operational Environment Programme - POS Environment, Transport operational Programme POS Transport, Regional Operational Fund POR, Operational Programme Development of the Administrative Capacity PODCA, Operational Programme Development of the Human Resources POSDRU and are under evaluation the Operational Programme for Fishery and the Programme for Territorial Cooperation. The main missions objective was to assess the conformity of the systems with the community regulations. The discrepancies related to the establishment of the institutional structures, segregations of functions and attributions of the entities involved, set up of the working procedures and of the necessary information systems, establishing the procedures to check the financing applications and the expenses, etc., have been submitted for consideration to the organisms involved who were asked to implement the measures and terms recommended in the audit reports. The audit reports and the opinions issued related to the conformity of the management and control systems with the requirements of the community regulations have been assessed and approved by the European commission, the Audit Authority having the obligation to further monitor the implementation of the formulated recommendations. 33

34 The main findings resulting of the audit on structural and cohesion funds Operational programmes funded through the European Fund for Regional Development The Audit Authority carried out a system audit for each operational programme (OP) funded through the European Fund for Regional Development: Technical Assistance OP (POAT), POS Increasing the Economic Competitiveness (POS CCE), Regional OP (POR) and an operations audit on POAT. Related to the audit on the Operational Sectoral Programme Increase of the Economic Competitiveness (POS CCE) funded through FEDR During the system audit performed by the Audit Authority a number of discrepancies have been revealed both at the Management Authority of the programme POS CCE and at the four Intermediate Organisms POS CCE where, in some cases, the assessment and selection procedures of the financing applications for the Big Enterprises or at the Intermediate Organism for Small and Middle Sized Enterprises, the contract for assessment services (external evaluators) has not been concluded, existing the risk to block the assessment and selection process for the projects belonging to the axe 1 Big Enterprises and the results of different assessment stages have not been introduced in the Unique System for Information Management (SMIS) for all the projects as provided in the procedure for their evaluation and selection. Related to the audit on the Regional Operational Programme (POR) funded through FEDR At the Management Authority of POR and the POR Intermediate Organisms, the Audit Authority found out discrepancies concerning the audit plan for 2009 of the Internal Audit Directorate which did not provide neither assessment missions at the Intermediate Organisms nor audit missions on the information systems used, the checks according to the provisions of the Sampling Procedure related to the assessment and selection of the financing applications have not been achieved as well. At the same time, in the activity of payments authorization for some audited projects, it has been identified authorized payments that did not correspond to the respective reimbursement application, the supporting documents in case of pre-financing were incomplete at that moment and the check lists for procurement and for the reimbursement applications are not authorized or the terms provided in the procedure have not been observed. Also, information recorded in SMIS does not reflect the current situation of the projects development in the sense that, even they are recorded as being under technical and financial evaluation, in fact they are already contracted. As far as the SMIS operation is concerned it is found that this does not provide a section designed to introduce the information related to the evaluation of the Technical Project. Related to the audit on the Operational Programme Technical Assistance (POAT) funded through FEDR Deficiencies have been revealed concerning observation of the conformity with the advertising rules related to the file contraining the administrative and on the spot checks for the reimbursement application no. 1, the attributions provided in the draft Rules on Organization and Operation and in the draft manual of operational procedures of the General Inspection Department were not in line with the provisions of the Government Ordinance no. 79/2003 regarding the control and recover of the community funds as well as of the related co-financing used inappropriate and the posts provided for some structures wene not covered with staff in an important proportion. The audit on the legal way of formation, administration and use of the funds allocated, reimbursed and declared within the Operational Programme Technical Assistance (POAT) revealed non-observance of the provisions of art. 54 point 5 of the EC Regulation no. 1083/2006 according to which An expenditure co-financed of other funds can not benefit of the intervention of other community financing instrument, being identified irregular expenses amounting to 4,6 thousand lei (equivalent for 1,2 thousand euro). Related to the audit on the Operational Programme Environment (PO Environment) funded through the Cohesion Fund and the European Fund for Regional Development: Based on the provisions of the art. 62 (1) (a) of the Council Regulation no. 1083/2006, The Audit Authority carried out a system audit on the operation of the management and control system for the Operational Programme Environment, funded through the Cohesion Fund and the European Fund for Regional Development. Following the evaluation of the key requirements, defined at the level of the system authorities, the auditors formulated a number of findings of procedural nature or concerning the allocation and training of the human resources necessary to an appropriate activity of the 34

35 Management Authority, of the eight PO Environment Intermediate Organisms checked (Bacău, Galaţi, Piteşti, Craiova, Timişoara, Cluj, Sibiu and Bucharest) or of the Certification and Payment Authority. The audit conclusion was that the management and control system of the Operational Programme Environment operates so that to offer a sufficient assurance that the expenditure statements submitted to the Commission are correct and that the supporting transactions are legal and correct, but there still is need of improvements. Therefore, for the identified deficiencies, the auditors formulated recommendations to the audited entities in view to improve the operation of the PO Environment management and control system and their implementation will be monitored by the Audit Authority. It has also been found that the amendments in the system organisational structure made since the conformity advice has been obtained are not significant, so that the PO Environment management and control system maintains its conformity with the requirements of the articles of the Council regulation no. 1083/2006. The Operational Programmes funded through the European Social Fund Related to the audit on the Operational Programme Development of the Administrative Capacity funded through the European Social Fund By the end of 2008 no payments have been transferred to the end-users and no expenditure declarations have been submitted to the European Commission within the Operational Programme Development of the Administrative Capacity. Two authorities have been audited, that is: Ministry of Administration and Home Affairs, in its quality of Management Authority, and the Ministry of Public Finance, in its position of Certifying and Payment Authority. Following the system audit performed, the Audit Authority revealed some deficiencies at the Management Authority and at the Certifying and Payment Authority concerning the reduced number of occupied posts, the significant delays in the stage of technical and financial assessment of the financing applications registered in 2008 due to the absence of the external evaluators, the information related to the verified, evaluated and contracted projects have not been introduced in the electronic system of monitoring and financial reporting SMIS, inappropriate preparing and performance of the verifying missions on the spot on the operation of the management and control system and so on. The audit conclusion was that the management and control system of the Operational Programme Development of the Administrative Capacity is established according to the requirements of the articles of the Council Regulation no. 1083/2006 and of the Part III of the council Regulation no 1828/2006and operates but there are still necessary some improvements. In this sense, a number of 20 recommendations have been formulated that, once implemented, will lead to its improvement. Programme ISPA (Instrument for Structural Pre-Accession Policies) The Instrument for Structural Pre-Accession Policies (ISPA) has been established through the Council Regulation no. 1267/ in view to achieve the objectives provided by the Accession Partnership concluded between the European Union and each candidate country and accomplishment of the national programmes aiming at modernizing the environment and transports infrastructure. The Programme started on January 1 st 2000 and the beneficiary states are: The Check Republic, Estonia, Latvia, Lithuania, Poland, Slovakia, Slovenia, Romania and Bulgaria. After the accession of Romania to the European Union, according to the Article 28 of the Accession Treaty of Romania and Bulgaria, the measures that, on the accession date, have been approved according to the Council Regulation no. nr. 1267/1999, establishing an instrument for Pre-Accession Structural Policies that was not completely implemented by that 35

36 date, should be considered approved by the Commission as per the EC Regulation no. 1164/1994, by setting up a Cohesion Fund. Therefore, starting with January 1 st 2007, all the uncompleted ISPA measures are implemented in line with the rules of the Cohesion Funds as provided in the Commission Regulation no. 1386/2002 establishing both the implementing rules of the Council Regulation no. 1164/94 concerning the management and control systems for the assistance funded through the Cohesion Fund and the procedure for the financial corrections. The checks effected through sampling, as per the same regulation, must cover not less than 15% of the total expenditure made within each measure approved. The main findings resulting of the audit missions on the measures funded through the ex-ispa Programme As concerns the measures funded through the Programme ex-ispa, the specialized directorate of the Audit Authority, carried out 6 transactions audits in view to obtain a reasonable assurance that the amounts declared to the European Commission are legal, real and observe the eligibility rules, 3 audits, 3 audits on completion of ex-ispa measures and 13 follow-up audits on the way the recommendations of the previous years have been implemented. 1. Check, through sampling, of the expenses declared to the European Commission (transactions audit) for the projects in Sector Transport and Sector Environment Conclusion In 2008, for the ex-ispa measures, expenses amounting to ,8 thousand euro have been declared to the Commission, out of which the amount of ,0 thousand euro have been checked. Following the checks, the auditors identified irregularities with financial impact amounting to thousand euro and formulated reserved opinion on the amount of ,0 thousand euro. Out of the total irregularities with financial impact detected, the already declared to EC non-eligible expenses found amounted to 2.883,0 thousand euro. For the irregularities found with regard to the ex- ISPA measures in the fields Environment and Transport the auditors formulated recommendations that should be implemented and permanently monitored based on the reports received from the audited entities and the occasion of the follow-up missions. As results of the above stated main findings summary, the majority of these recommendations have been already implemented. 2. The audit actions performed by the Audit Authority on completion of the ex-ispa measures The Audit Authority next to the Court of Accounts is the organism designed to issue to statement on completion of the Community assistance, according to the provisions of art of the EC regulation no. 1386/2002, statement that should be issued after completion of each ISPA measure, accompanied by a report including all the information relevant to its justification and a summary comprising the results of all the checks performed by the national and community organisms available. The aim of the statement is to supply an independent opinion on the correctness and completeness of the information presented in the Final Certificate, in the Final Expenditure Statement and in the Final Payment Application. In this sense, the Audit Authority planned and achieved 3 audit actions on measures completion, as follows: Ex-ISPA measure no. 2000/RO/16/P/PA/002 Technical Assistance for the technical project and bid documentation for the Section Drobeta Turnu Severin - Lugoj of the National Road DN6 and the related studies (stage 2 of the project Craiova Lugoj), Romania ; Measure no. 2001/RO/16/P/PA/008 "Technical assistance for the rehabilitation of the railway from the Hungarian border to Simeria and the corresponding studies, Romania"; Ex-ISPA measure no.2000/ro/16/p/pe/001 Programme for the wastes management in Piatra Neamţ. Conclusion The checks performed in view to issue the Statements on completion for the three ex-ispa measures revealed deficiencies with financial impact in the measures implementation amounting to 1.051,5 thousand euro, the full amount being deducted of the Final Payment Application. 36

37 8.3 The Programmes PHARE 2005 and PHARE 2006, the funds carried out through the SCHENGEN Facility and the European Fund for Refugees The Programmes PHARE 2005 and PHARE 2006 The PHARE Programme PHARE (Assistance for the Economic Reconstruction of Poland and Hungary) has been set up by the EC Regulation no. 3906/1989, subsequently amended and completed, concerning the economic assistance offered to some Central and Eastern European Countries during the pre-accession period. The main findings of the audit missions on the Programmes PHARE 2005 and PHARE 2006 According to the article 10 (2) of the EC Regulation no. 438/2001, The Audit Authority carried out a number of 6 audit missions on transactions, checking at least 5% of the total eligible expenditure for each programme, based on a representative sample of approved transactions and 3 system audit missions. Thus, for the PHARE programme 2005, payments amounting to ,7 thousand euro have been checked, that represent 11,33% of the total expenditure declared to the European Commission until , and for the PHARE programme 2006, payments amounting to ,5 thousand euro have been checked, that represent 22,17% of the total expenditure declared to the European Commission until The audit covered a number of 18 authorities, that is Implementing Agencies (the Ministry of Labour, Family and Social Security MMFPS, the Ministry of Regional Development and Dwelling - MDRL and the National Agency for Community Programmes in the Field of Education and Professional Training) and Implementing Authorities (Regional Development Agencies and Regional Intermediate Organisms). The main findings resulting of the audit missions performed at the above mentioned entities for the Phare Programmes 2005 and 2006 revealed: Deficiencies regarding reconciliation between the amounts declared to the European Commission and the individual expenses recorded and the supporting documents preserved at different administrative levels and at the end-users; Non-observance, in some cases, of the legal procedures related to procurement, contracting, authorizing and payment during the projects carrying out as well as of the accounting procedures, the segregation of the staff duties in the Implementing Agencies and Authorities; Deficiencies related to the implementation of some projects; No appropriate record of the amounts to be recovered and no measures taken in this respect. In order to correct the found deficiencies, the auditors formulated a number of 162 recommendations in the annual audit report following to check subsequently their implementation. The funds carried out within the Schengen facility During , the allocations within the Schengen Facility amounted to ,0 thousand euro, out of which contracts have been signed for ,0 thousand euro, that is 9,82%. The payments effected for the concluded contracts in the mentioned period amounted to 6.340,0 thousand euro, representing 1,54%. In view to fulfil the responsibilities regarding the audit on the funds carried out through the SCHENGEN Facility, the audit Authority performed a system audit and a transactions audit, that is: The system audit aiming at checking the effective operation of the management and control system; The audit regarding the carrying out of the projects, to verify the declared expenditure based on a significant sample representing at least 10% of the total eligible expenditure declared to the European Commission. 37

38 Findings resulting of the audit on the management and control system of the Schengen Facility At the competent Authority within the Ministry of Administration and Home Affairs (ACOM): The absence of programmes to assure that the provisions of art. 32 al. 2 of the Accession Treaty are observed and an action plan of monitoring in view to observe the Inter-institutional Agreements concluded between ACOM, the Intermediate organisms and the end-users aimed at accomplishing the monitoring of the procedures implementation; No procedure related to the irregularities approach is issued; the audit trail does not provide terms for each effected transaction in view to eliminate the risk of eventual delays in implementing the Schengen Facility. At the Intermediate Organisms (OI MIRA, OI MAE and OI STS): The Rules on Organization and operation have not been approved, the post duties have not been developed and approved considering the principle of segregation of duties; The personalized working procedures have not been finalized and approved at the Intermediate Organism level and they were not submitted for advice to ACOM, at the ORP level; No measures have been taken to complete the vacancies and no analysis on the charge of duties of the executive staff has been undertook in order to determine correctly the staff needed to assure the accomplishment of the duties in good conditions and in time; The Procedure advising the payment documentation has not been amended taking into account the findings; The procedure to apply in case of irregularities has neither been developed nor submitted to ACOM for advise. The above mentioned findings are identified at the Contracting and Payment Authority, i.e Central Finance and Contracts Unit (ACP/OPCP) within the Ministry of Public Finance and at the Certifying Authority within the Ministry of Administration and Home Affairs. Findings resulting of the audit on transactions carried out within the Schengen Facility At the Competent Authority within the Ministry of Administration and Home Affairs (ACOM): The audit trail related to the projects funded through the Schengen Facility is not developed No audit mission has ben carried out to date at the institutions involved in the implementation of this facility The specialzed structure has not been appointed and they did not establish neither the development and approval of the working procedures related to the control ex-post aiming at checking the general results and the impact stated in the Indicative Plan, nor the methodology for the control ex-post, the specialized staff, the applicable check lists and the way to carry out the control. At the Intermediate Organisms (OI STS) it has been found that the working procedures do not provide the instrumentation of an eventual contestation of the end-users (OI STS); At the Contracts and Payments Unit, Central Finance and Contract Unit PHARE (ACP/OPCP) within the Ministry of Public Finance: The procedure of technical check on the spot specific to OPCP does not mention or detail the sampling methods applicable, the check lists do not provide sufficient controls, insisting on checking the existence of the documents and not on the consistence between the submitted documents and the reality on the spot and does not provide the ways to settle the disputes between the experts checking on the spot; For some procurement contracts, no measures have been disposed in order to determin the penalties correctly, to notify and to collect them from the contractor. At the Certifying Authority (AC) within the Ministry of Administration and Home Affaires, AC representatives participated, in quality of financial experts, in the bids evaluation committees of the concluded contracts or participated at on the spot checks and inspections, at the mixed committees, breaching the principle of functions segregation. Further to the found deficiencies, the Audit Authority formulated recommendations in charge of the audited entities so that to take the necessary steps to correct these irregularities. 38

39 The funds allocated through the European Fund for Refugees The European Fund for Refugees for the period January 1 st 2005 December 31 st 2010 (FER II), was established through the Council Decision no. 904/2004. The total amount granted was 405,3 thousand euro, to which should be added the contribution from the state budget of 70,1 thousand euro and the private contribuţtion of 45,5 thousand euro. The expenses effected out of this fund until December 31 st amounted to 52,5 thousand euro, to which should be added the state budget contribution of 3,5 thousand euro and the private contribution of 5,9 thousand euro. The Audit Authority performed an audit mission in view to obtain a reasonable assurance regarding correctness, legality and regularity of the expenses eligible for the 2007 Annual Programme for the European Fund for Refugees The entities audited were the authorities nominated to implement the European Fund for Refugees 2007 in the Common Order of the Minister of Administration and Home Affairs and of the Minister of the Economy and Finance no. 398/168/2008 regarding the set up of the general framework for the strategic and financial planning, management, implementation and auditing the use of the funds granted to Romania through the General Programme Solidarity and management fo the migrating flows, respectively the Schengen Department within the Ministry of Administration and Home Affairs, having the responsibility to co-ordinate the implementation of the community assistance granted through the European Fund for Refugees , the Romanian Office for Immigration subordinated to the Ministry of Administration and Home Affairs appointed in order to accomplish the function of delegated authority and the General Financial Directorate within the same ministry, having the responsibility to certify the expenditure statements prior to their submission to the European Commission. The main findings resulted from the audit activity refer to: Payment of the amount of 41,5 thousand lei from the technical assistance component, not eligible for financing through the European Fund for Refugees The use of a wrong rate of exchange when transforming the expenditure made in the national currency within into euro within the 2007 Yearly Plan for the European Fund for Refugees, in view to report them to the European Commission. In the audit report submitted to the audited entities, a number of recommendations have been formulated in order to recover the non-eligible expenses and to refund the account of availabilities in view to reimburse the amounts to the AEuropean Commission as well as to re-calculate the value in euro of the expenses made in national currency and their appropriate reporting to the European Commission. 39

40 Capitolul 9 The international activity of the Court of Accounts According to the law on its organization and operation, the Romanian Court of Accounts may take part in the activity of hte international organisms in the field and to become their member. In this context, in 2009, the Court of Accounts participated at the activities of the specialized international organisms both in its position of member of the international organizations and invited participant. The activity of the Court of Accounts as member of the international specialized organisations The Romanain Court of Accounts, as supreme audit institution, is member of the following organizations and professional associations in the field: The International Organization of the Supreme Audit Institutions (INTOSAI) since 1992; The European Organization of the Supreme Audit Institutions (EUROSAI) since 1992; The Contact Committee of the Presidents of the Supreme Audit Institutions of the European Union Member States (CC) since 2007; The Association of the Supreme Audit Institutions having in Common the Use of the French Language (AISCCUF), since The activity of the Court of Accounts as member of the Association of the Supreme Audit Institutions having in Common the Use of the French Language Established in 1994, the Association of the Supreme Audit Institutions having in Common the Use of the French Language (AISCCUF) participates actively in the International Organization of the Francophony, promoting its values, protecting the human rights, favourizing the strengthening the state of law by developing the institutions in charge of the effective control of the public finance in each of the countries where it is represented and where the French language is used at a large extent. The Romanian Court of Accounts a României is member since 1994 and between 6-8 April 2009 has been invited to take part to the AISCCUF seminar having the topic The control on the delegation of public services organized in Tunis. The seminar has been attended by 40 representatives of 29 member states and our institution has been represented by two specialists.