SUBMISSION OF THE POLICE ACADEMY DANILOVGRAD FOR 2009

Transcription

1 SUBMISSION FROM THE AUDIT REPORT ON ANNUAL FINANCIAL STATEMENTS OF THE POLICE ACADEMY DANILOVGRAD FOR 2009 Type of audit: Subject of audit: General audit The Police Academy Danilovgrad Object of audit: Annual financial statements for year 2009 Audit duration: Auditing team: 30 working days Dragiša Pešić, member of the SAI s Senate Leader of the team Milan Dabović,PhD, member of the SAI s Senate member of the team Page 149

2 1. INTRODUCTION 1.1. General information on the audited subject On the basis of the article 44 of the Law on Education ( Official Gazette of MNE no. 64/02 and 31/05), in relation to the article 6 of the Law on Adults Education ( Official Gazette of MNE no. 64/02), the Government of Montenegro has adopted Decision on establishing the Police Academy at its session held on 23 rd March status. The Police Academy Danilovgrad (hereinafter reffered to as the Police Academy) has a legal The Police Academy performs its activities as the Public Institution Police Academy Danilovgrad. Shorter name of the institution is: The Police Academy Danilovgrad. The Police Academy is organised as a public institution with internal organisational units established as follows: 1. Sector for basic police education and training, 2. Sector for organisation of education and training, 3. Sector for professional administrative and technical tasks. The main activities of the Police Academy are the following: education, training and improvement of professional practice of the Police Directorate and the Ministry of internal affairs and public administration staff; education, training and improvement of professional practice of personnel for customs control, protection of persons and property, detective activities and other activities connected with protection and security; general and developing researches in the field of criminology and security, as well as researches concerning educational system development; the organization of taking the final exam; publishing and librarian activity; cooperation with the University of Montenegro, the Ministry of internal affairs and public administration, the Ministry of education and science, as well as with police academies out of Montenegro, in order to carry out its educational program; issuing of identity papers to the students and performing other activities in order to carry out its main tasks in accordance with its Statute. Educational programs for performing tasks of the Police Academy are approved by the Ministry of Intenal Affairs and Public Administration (hereinafter refferd to as: the Ministry), according to the proposal submitted by the Council for education in charge. The managing bodies of the Police Academy are the Management Board and the Council. The Police Academy is managed by Živko Šipčić, Director Financial and material affairs Funds for establishing and operations of the Police academy are provided by the Budget of Montenegro. The Police academy realizes revenue from its own resources as well. Page 151

3 Financial and material affairs of the Police academy are managed by department in the Sector for professional administrative and technical tasks. accounting 2. DETERMINED FACTS 2.1. Accounting system The Audit has shown that the Police Academy provides the following records: records of revenues, expenditures, liabilities and receivables. Records of non-financial assets (equipment) are conducted in excell spreadsheet, as the Police Academy doesnot have an accounting software for its assets recording. According to the Rulebook on Drafting, Composing and Submitting Financial Reports on Budgets, Extra-Budgetary Funds and Local Governments (»Official Gazette of RoM«, No. 21/09 and 14/2010), the Police Academy has submitted the following financial statements to the Ministry of Finance: Cash flow statements III and Report on outstanding debts. In the course of auditing it has been determined that within its Cash flow statements III, items of ravenues and expenditures, the Police Academy has recognized only the budget funds granted as transfer in the amount of 1,363, and in the Report on outstanding debts it realized the amount of 96, The document on adoption of the Annual Financial Statements for the year 2009 has not been presented to the state auditors within the auditing procedure process. The Management Board of the Police Academy has been obliged to adopt the Annual Financial Statements for the year 2009, in accordance with the article 3 of Decision on establishing Police Academy and the Statute. The audit has proved that Police Academy has not submitted the Annual Work Report to the competent Ministry, according to the article 65 of the Book of Rules on Organization and Functioning of State Administration Non-financial assets The audit has shown that Police Academy has made property (equipment) inventory on 31/12/2009. It has been determined through the auditing that according to the written statement no /1, dated 23/04/2009, the Ministry of Internal Affairs and Public Administration has informed the Police Academy Danilovgrad that the state property, previously used by the Police High school working under the Ministry of Internal Affairs and Public Administration, has been transferred to the Police Academy Danilovgrad. The statement has neither classified the property according to its type, amount or value, nor delivered written evidence on its transfer. In March 2008 Police Academy made an estimation of tagible assets value, i.e. office furniture and equipment, specific police and military equipment, kitchen and restaurant equipment, official cars, boarding Page 152

4 school furniture and other tangible assets. The estimation of value was made by an authorized estimator. Total purchase value of equipment amounts 344,002.44, while its current value amounts 315, The Police Academy does not provide an accounting software for the analztical records of fixed assets, it is recorded off-balance, in Excel spreadsheet Current assets The Police Academy current assets amounted 103, on 31/12/2009. Table 1 The structure of financial assets. Or.No. DESCRIPTION 2008 YEAR Current assets , , Financial assets , , Trade receivables , , Receivables from employees 4.500,00 0, Trade Union receivables 3.125, , Receivables on advance payments ,07 345, Financial assets The Police academy has opened bank accounts in the following banks: Crnogorska komercijalna bank, bank account number: , Crnogorska komercijalna bank, foreign currency bank account no , Prva banka Crne Gore, bank account no: The auditing procedure has determined that the bank accounts in Crnogorska komercijalna banka have been opened on the request of the audited subject, while the bank account in Prva banka has been opened according to the approval of the Ministry of Finance. According to Article 12 of the Budget Law, Police academy is obliged to provide Ministry of Finance s approval for the opened bank accounts in CKB bank, as follows: bank account no and foreigh currency bank account no Financial assets represents cash in commercial banks accounts and cash-in-hand. The following table presents demand deposits at bank accounts, as well as cash-in-hand. Page 153

5 The Cash and Cash equivalents Table 2 The cash at the end of year 2008 and 2009 No. TOTAL The name of the bank The cash on December 31st 2008 The cash on December 31st CKB banka , ,56 2 CKB banka foreigh currency account , ,72 3 Prva banka 29,12 4 Cash in hand 1.985, , , ,91 Recorded deposits at the end of the year are in accordance with the state of bank accounts as confirmed by commercial banks. The inflow of funds is realized through the transfer of budgetary funds approved for the year 2009, amounting 1,363,443.73, and the inflows on the basis of own revenues amounting 373, Expenditures are related to current costs amounting 1,788, and capital expenditures amounting 202, Receivables The Police Academy total receivables on December 31 st 2009 amounted 86, Total receivables include : trade receivables, receivables from employees, trade union receivables and receivables on advance payments. Trade receivables amounting 83, reffer mostly to receivables from: Police Directorate, the Ministry of Internal Affairs and Public Administration, Soko Bijelo Polje, Institute for Execution of Criminal Sanctions and other buyers. All significant receivables are confirmed. Trade receivables are recorded according to the Invoices issued by the Police academy Cash Operations The Police academy accounting records provides recording of cash transactions ( cash raising from bank account and cash payments from the cash-in-hand ) which have been documented by order of transfer. Cash balance is recorded on daily basis. The insight into the General Ledger has proved that, the Police academy has raised cash in the total amount of 25, for payments in cash, during the year Cash balance on December 31st 2009 amounted to 4,501.51, which was confirmed by the list of cash holding. Page 154

6 Expenses for daily allowances for business trips in the country and abroad, the costs of accommodation, transport, entertainment expenses, fuel, material expeses, costs of catering services, fees based on service contracts for persons who are not from Montenegro and other expenses, have been paying from cash holding Liabilities to suppliers Liabilities Accounts payable to suppliers of the Police Academy amount to 98, in year 2009, and 2, in year These liabilities mostly refer to the Municipality of Danilovgrad in the amount of 90,000.00, Jugopetrol Kotor in the amount 5, and other suppliers in the amount of 3, All significant balances of liabilities have been confirmated by suppliers. 2.5 Revenues According to the Budget Law for 2009 the planned transfers for operation of the Police Academy amount 1,423,000.00, and they have been realized in the amount of 1,363,443.73, which presents 95.81% percentage of execution. Police Academy has recorded its own revenues in total amount of 393, in 2009, which presents 22.39% of total revenues. Table 3 The Structure of own revenues O W N R A V E N U E S NO. BASED ON AMOUNT PERCENTAGE 1 Trade revenues 335, % 2 Specialist Exam revenues 17, % 3 Revenues from restaurant's turnover 12, % 4 Language school revenues 2, % 5 Revenues from foreign currency accounts 5, % 6 Other revenues 20,462, % TOTAL 393, % The prices of services provided by Police Academy are determined by the Book of Estimated Services Costs (no. 216 / 1 dated on 03/02/2009), adopted by the Management Board of Police Academy. The Police Academy operates a closed type restaurant which provides meals to employees of the Police Academy, as well as to the students participating in the training courses organized in the Police Academy. Page 155

7 The audit has found that the Police Academy does not have adopted standards determining the type and amount of food needed for preparation of certain foods (meals), but it uses the experience of employees and the standards applied by the Police High School Expenditures The following table provides an overview and the structure of the planned and realized expenditures for years 2008 and Total expenditures realized in 2009 amounted to 1,991,348.44, exceeding thus the planned amount of expenditures for 7.39%. Gross expenditures for salaries and contributions paid by the employer represent the largest part of total expeses, i.e. 44% of total expenses. Supplies and services costs participate in total expenses with 34%, capital expenditures with 11%, other expenditures with 9% and finally current maintenance costs. Table 4 Review of planned and realized outflows for year 2008 and 2009 Year 2008 Year 2009 Classification Item % of accounts Plan for year Realisation Plan for year Realisation % % 2008 for year for year (7/6) (10/9) 12 (10/7) 4 Expense , ,09 102,17% , ,44 106,89% 107,39% 41 Current expenses , ,62 100,68% , ,04 107,57% 114,79% 411 Gross earnings and contr.paid by employer , ,90 99,64% , ,01 101,69% 111,59% 412 Other personal earnings , ,34 91,02% , ,95 104,27% 129,99% 413 Material and services expenses , ,05 97,98% , ,72 89,44% 93,10% 4131 Expenses for material , ,99 90,67% , ,11 72,99% 90,64% 4132 Business trips expenses , ,35 139,79% , ,62 78,05% 68,04% 4133 Representation expenses 2.500, ,14 146,37% 4.000, ,43 245,84% 268,74% 4134 Electrical energy expenses , ,98 72,27% , ,52 59,92% 73,30% 4135 Telephony expenses , ,64 66,90% , ,50 111,24% 160,27% 4136 Postal services 500,00 782,39 156,48% 1.000,00 489,93 48,99% 62,62% 4137 Bank fees and negative exchange rates 5.000, ,56 88,63% 5.000, ,05 87,94% 99,22% 4138 Transportation services , Contracted services , ,00 121,30% , ,56 127,72% 103,37% 414 Current maintenance expenses , ,82 150,44% , ,20 154,57% 183,16% 4142 Current maintenance of buildings , ,33 56,44% , ,89 208,44% 537,18% 4143 Current maintenance of equipment , ,49 236,60% , ,31 120,10% 105,75% 416 Rental expenses 0, , , ,73 746,69% 603,59% 4161 Lease of facilities 0, , , ,73 746,69% 603,59% 418 Other expenditures , ,15 167,41% , ,43 652,78% 443,10% 4181 Water supply , ,15 167,41% , ,97 121,32% 82,35% 4183 Local administrative fees , VAT and customs expenses , Capital expenses , ,47 110,82% , ,40 101,21% 68,41% 441 Capital expenses , ,47 110,82% , ,40 101,21% 68,41% The data source for planned expenditures in year 2009 is Police Academy Financial plan for year 2009, and realized expenditures are presented based on data from the General Ledger of the Police Academy SALARIES AND OTHER PERSONAL INCOMES The Rulebook on Organization and Systematization of working posts determines the Internal organization, working posts, special conditions needed for particular posts, work description and number of employees in the Police Academy. This Rule Book determines that all the tasks within the scope of Police Academy operations are performed by 81 employees. The audit has found that appointing of employees within the Police Academy was not carried out in accordance with the Rulebook. Page 156

8 Gross earnings The audit has proved that Police Academy s realized expenditure on gross earnings and contributions of employees paid by the employer in year 2009 amounted 814, Calculation of salaries in the Police Academy is conducted in accordance with the Labor Law and Collective agreement of the Police Academy. The audit has proved that in addition to regular salaries, the Police Academy employees were also paid work increased earnings based on difficult working conditions, variable part of income and overtime and night work, in accordance with the provisions of the Collective Agreement of the Police Academy. Also, the increased salary is paid to employees based on the variable part of income depending on the volume and quality of work done up to 30%, and from holding office, title and academic title in the range of 0.26 to In addition to regular salaries amounting 348,464.35, the Police Academy has paid to its employees the amount of 102, in 2009, as variable part of the income, which represents 20.39% of total expenses to net earnings. It is also proved that the sum of 44, has been paid on the basis of difficult working conditions, performance of teachers, overtime and night work, which amounts to 8.87% of total expenditures to net earnings The average salary paid to the employees in the Police Academy in 2009 has amounted The variable part of the salary is calculated on the basis of sector manager s proposal, approved by the Director of Police Academy. After examining the salary calculation it was determined that the variable part of salary has been paid each month. Individual decisions on determining the variable part of salary are not made Other personal earnings of the employees After examining the accounting records it has been determined that according to the Article 15 of the Collective Agreement, the Police Academy made payments to the employees in year 2009 on the following basis: - Monthly allowance for food during the work (meal) at 50% of the lowest work price, - Allowance for the use of annual leave in the amount of three lowest work prices, - Other fees in accordance with the General Collectice Agreement. Other employee benefits are calculated based on the lowest work price, whose value is determined by the methodology of Article 12 of the General Collective Agreement. Additional meal allowance was paid in total amount of 24, The audit has also determined that employees are provided for the food in the restaurant of the Police Academy which makes an additional expenditure amounting 36, in year Page 157

9 In the process of audit, the State auditor has noted that the Police Academy has no legal document authorizing employees to use the right to food in the restaurant, but this right is implemented in accordance with the conclusion of the Collegium of the affidavit of the person responsible PUBLIC PROCUREMENT The auditing procedure has determined that the Police Academy appointed procurement official according to the article 30 of the Public Procurement Law, and that it passed and adopted the Public Procurement Plan for year 2009, based on the article 27 of the Public Procurement Law. Table 5 The Review of performed public procurement No PUBLIC PROCUREMENT SUBJECT AMOUNT % 1 TOTAL Open call for public procurement and negotiating procedure ,47 92,24% 2 Shopping method 7.080,45 1,82% 3 Direct agreement ,14 5,94% 389, ,00% In addition to public procurement procedures implemented in year 2009, the subjects of this audit have been two open calls for public procurements conducted in 2008, relating to the purchase of five cars and one minibus through a lease for a term of five years for the Police Academy. Their total estimated value has been 140,000.00, and Contracts have been concluded in the total value of 167, Based on available records, it has been determined that according to the Contracts concluded, in addition to the basic price of the vehicles Police Academy has arranged the payment of interest amounting to 27,158.00, and the obligation of concluding a full comprehensive motor insurance policy contract with the selected insurance company for the 5 years validity period of the lease. Based on insurance expenditures, Police Academy has paid an amount of 6, in Page 158

10 On the basis of determined facts and the Statement of the audited entity, Police Academy Danilovgrad (number 2536/1 as of June 28th, 2010), on the Report of the State Audit Institution (number /17 as of June 11th, 2010), and pursuant to article 48 of the Rules of Procedure of the State Audit Institution, the Collegium authorised for performing of this audit comprising of Dragisa Pesic member of the Senate (the head of the Collegium), and Milan Dabović, PhD member of the Senate (member of the Collegium), at its session held on July 2nd 2010, has adopted the FINAL REPORT WITH POSITIVE OPINION on the audit of the Annual Financial Statements of the Police Academy for year AUDIT OPINION WITH PROPOSAL OF MEASURES AND RECOMMENDATIONS It has been determined through the audit that there are no significantly important misstatements or significant discrepancies in the officially presented finacial statements, or considerable violations of legal provisions that arrange organization and activities of the Police Academy. In addition to provided positive opinion we believe it is necessary to point out to those elements that are included in the overview of irregularities and given recommendations of the Collegium authorized for this audit, and which can significantly improve reporting efficiency, as well as the quality of work of the Police Academy in the forthcoming period. OVERVIEW OF DETERMINED IRREGULARITIES AND GIVEN RECOMMENDATIONS The audit has shown that Police Academy provides the following records: records of revenues, expenditures, liabilities and receivables. Records of non-financial assets (equipment) are conducted in excell spreadsheet, as the Police Academy doesnot have an accounting software for its assets recording. By Written Statement no.15747/2 as of Aprile 20th, 2010, the Police Academy has confirmed that it carries out its financial recording in line with the Book of Rules on Consistent Accounts Classification for the State Budget, Extra-Budgetary Funds and Municipal Budgets, (»Official Gazette of RoM«, No. 35/05, 37/05 i 81/05), that it makes its records on calculation bases, composing and submitting its Annual Financial Statements to the Ministry of Finance in accordance with the Book on Drafting, Composing and Submitting Financial Reports on Budgets, Extra-Budgetary Funds and Local Governments (»Official Gazette of RoM«, No. 21/09 and 14/2010). In the course of auditing it has been determined that within its Cash flow statements III, items of ravenues and expenditures, the Police Academy has recognized only the budget funds granted as transfer in the amount of 1,363, and in the Report on outstanding debts it realized the amount of 96, The Police Academy has not submitted the Statement on the way of usage of excess funds after the end of fiscal yeat form 6 to the Ministry of Finance, as stipulated in the Rule Book on Drafting, Composing and Submitting Financial Reports on Budgets, Extra-Budgetary Funds and Local Governments (»Official Gazette of RoM«, No. 21/09 and 14/2010). Page 159

11 Recommendation: The State Audit Institution recommends to the Police Academy to provide for a modified cash basis for its accounting records, which requires the recording of revenues and expenditures on a cash basis, and registering property, assets and liabilities on an accrual basis, pursuant to Book of Rules on Consistent Accounts Classification for the State Budget, Extra-Budgetary Funds and Municipal Budgets, (»Official Gazette of RoM«, No. 35/05, 37/05 i 81/05), and Annual Financial Statements prepared in accordance with the Rule Book on Drafting, Composing and Submitting Financial Reports on Budgets, Extra- Budgetary Funds and Local Governments (»Official Gazette of RoM«, No. 21/09 and 14/2010) Document on adoption of the Annual Financial Statements for the year 2009 has not been presented to the State auditors within the auditing procedure process. The Management Board of the Police Academy has been obliged to adopt the Annual Financial Statements for 2009, in accordance with the article 3 of Decision on establishing Police Academy and the Statute. The audit has proved that Police Academy has not submitted the Annual Work Report to the competent Ministry, according to the article 65 of the Book of Rules on Organization and Functioning of State Administration. Recommendation: State Audit Institution recommends that Annual Financial Statements for previous fiscal year need to be examined and adopted by the Management Board of the Police Academy prior to its submittance to the Ministry of finance, due date predicted by the Rulbook on Drafting, Composing and Submitting Financial Reports on Budget, Extra-Budgetary Funds and Local Governments (»Official Gazzette of RoM«, No. 21/09 and 14/2010). It is also necessary for the Police Academy to submit the Annual Work Report to the competent Ministry, according to the Article 65 of the Book of Rules on Organization and Functioning of State Administration. It has been determined that according to the written statement no /1, dated on Aprile 23rd, 2009, the Ministry of Internal Affairs and Public Administration has informed the Police Academy Danilovgrad that the state property, previously used by the Police High school working under the Ministry of Internal Affairs and Public Administration, has been given to the Police Academy Danilovgrad. The statement has neither classified the property according to its type, amount or value, nor delivered written proof on its transfer. The Police Academy does not provide an accounting software for the analytical records of fixed assets, it is recorded off-balance, in Excel spreadsheets. Recommendation: State Audit Institution recommends to the Police Academy to provide an analytical book of fixed assets by groups and methods for determination of amortization, which includes the following data: inventory number, description, location, purchase value, correction and current value, in the appropriate software program for recording of fixed assets. The State Page 160

12 Audit Institution also recommends providing a valid written document on property used by Police Academy, as well as on donated property, and to record above-mentioned property into its business books according to the document obtained. Insight into the treasury documentation during the audit, has identified the following deficiencies: Appropriate documentation needed for justification of trip orders for business trips, (such as decision on sending an employee to business trip abroad, Invitation letter, a copy of airplane (electronic) ticket, a report after the business trip, etc.), is not submitted. Justification of trip orders in individual cases has not been done in legal due time pursuant to Article 10 of Rulebook on fees and other remunerations of civil servants and State employees (»Official Gazzette of RoM«, No. 24/05,...70/06). Justification of material costs in individual cases was done by non-fiscal bills. The audit procedure has shown that the cash operations in Police Academy are conducted by a person who is not permanently employed at the Academy, but is engaged according to the contract of service. Recommendation: The State Audit Institution recommends to Police Academy to appoint permanently employed person for conducting cash operations, as this post prescribes significant financial responsibility. The Police Academy is also recommended to provide appropriate supporting documentation along with trip orders for business trips abroad, as the basis for calculating and payment of foreign daily allowances, as well as to justify travel expencies within the legal due time, pursuant to Article 10 of the Rulebook on fees and other remunerations of civil servants and State employees (»Official Gazzette of RoM «, no. 24/05,... 70/06). The audit has found that the Police Academy does not have adopted standards determining the type and amount of food needed for the preparation of certain foods (meals), but use the experience of employees and the standards applied by the Police High School. Recommendation: The State Audit Institution recommends to Police Academy to develop and adopt standards that will determine the type and amount of food needed for the preparation of certain foods (meals) according to the particular recipe. Page 161