EXCERPTS FROM INDIVIDUAL AUDIT REPORTS OF 2013 ANNUAL FINANCIAL STATEMENTS OF POLITICAL PARTIES

Transcription

1 EXCERPTS FROM INDIVIDUAL AUDIT REPORTS OF 2013 ANNUAL FINANCIAL STATEMENTS OF POLITICAL PARTIES Type of audit: Audited entity: Subject of audit: Audit duration: Auditing Board members: Financial audit Political parties: the Socialist People s Party (SNP), the Democratic Party of Socialists (DPS), the Croatian Civic Initiative (HGI), the Positive Montenegro, the Social Democratic Party (SDP), the Bosniac Party (BS), the Movement for Changes (PzP), the New Serbian Democracy (NOVA), the Democratic Parry of Unity, the Liberal Party (LPCG), and the People s Party (NS) 2013 Annual Financial Statements 120 audit days Nikola Kovačević, Senate Member, Head of Auditing Board Branislav Radulović, PhD, Senate Member, member of Auditing Board

2 I BACKGROUND INFORMATION 1. Legal basis The legal basis for conducting the audits is contained in: the Law on State Audit Institution (the SAI Law) (OGRM 28/04, 27/06 and 78/06 and the OGM 15/07, 73/10, 40/11 and 31/14); the Law on Political Parties Funding (OGM 49/08, 49/10, 40/11, 42/11, 60/11, 01/12 and 10/14); the 2014 Annual Audit Plan of the State Audit Institution (no dated 27 December 2013); Decision passed by the Auditing Board of the Sector 4 responsible for carrying out this audit (no dated 17 April 2014). The audit procedures were carried out in accordance with the following: The international accounting standards and the international government audit standards (INTOSAI standards); The SAI Rules of Procedure (OGM 50/07). 2. Audit subject matter The audit will focus on annual financial statements of political parties. 3. Audit objective The audit objective is as follows: accuracy and trustworthiness of financial statements, compliance with laws and other regulations related to organisational, financial and accounting matters, compliance with fund raising regulations, compliance with the regulations governing spending, i.e. verification whether the funds were used solely for pursuing the goals set in the political party manifesto and articles of association, and compliance of transactions.

3 4. POSITIVE MONTENEGRO The political party Positive Montenegro (hereinafter: PCG) is an independent democratic party of free and responsible members who pursue the objectives and principles of the Party. The Party was entered into the Register of Political Parties by the Decision of the Ministry of the Interior (ref.no / /1 on 14 June 2012). The President, Darko Pajovic, represents the Party and acts on its behalf. The Party is seated in Podgorica. The bodies of the Party are the following: the Congress, the Main Board, the President, the Presidency, the General Secretariat, the Statutory Commission, the Supervisory Board, the Court of Honour and the Political Council. In addition to these bodies, and for the purpose of political activity, the Party elects Vice Presidents, a Political Director and a Manager of the Party. The Congress is the highest programme, statutory and electoral authority of the Party. The Main Board adopts the Financial Plan, at the proposal of the Presidency. The Presidency decides on the allocation of funds and its remittance to the organizational party units. The Supervisory Board supervises funds raising and allocation. Each PCG member may request from the Supervisory Board to examine annual financial statements. For its operation and activities, the Party is funded through: membership fees, donations, property income, from the budget, legacies and other sources in accordance with the Law. The amount of the membership fee is set by the Presidency. The Main Board adopts the Financial Plan, at the proposal of the Presidency. The Presidency decides on the allocation of funds. The Supervisory Board supervises funds raising and allocation Accounting records Under Article 23 of the Political Party Financing Law, the Party is obliged to keep accounting records of revenues and expenditures by their source, amount and breakdown as required by the regulations of the Ministry of Finance. The audit has established that in 2013 the Party maintained business books according to the provisions of the Accounting and Auditing Law and the Rulebook on the Chart of Accounts and the contents of the accounts in the Chart of Accounts for business organisations and other legal entities and the IAS. The audit has established that in 2013 the PCG kept the following books: the transaction journal, the general ledger and the ancillary records of the cash holdings, while the records of fixed assets was provided as off balance sheet records in Excel sheets. The PCG provides records and receivables and payables in its books. The PCG has its accounting records on a modified cash basis which implies keeping records of assets and liabilities on the accrual basis, and registering revenues and expenditures on the cash basis Audit methodology While auditing, care should be taken of possible misrepresentations in financial statements, i.e. the materiality threshold as the highest allowable amount of errors. In setting the materiality by value, the materiality rate ranging between 0.5% and 2.0% was applied, in line with the set SAI methodology. The basis for setting the materiality threshold was the total spending of parties, and the materiality thresholds are set for each party separately. For the parties whose spending amounts up to 100,000.00, the materiality is set at 2% of the total expenditures, for the parties whose spending ranges between 100, and 500,000.00, the materiality is set at 1.50% of the total expenditures, for the parties whose spending ranges between 500, and 1,000,000.00, the materiality is set at 1.25% of the total expenditures, and for the parties whose spending exceeds 1,000,000.00, the materiality is set at 1% of the total expenditures.

4 4.3. Revenues In 2013, the PCG realised the revenues in the total amount of 328,730.01, as follows: the central Budget 285,245.51, the local budgets 22,834.09, contributions 6,279.00, membership fees 10,549.65, other revenues 3,738.67, and financial income Out of the total, 325, were the revenues for regular party activities, while 3, were the funds raised for the election campaign (the local elections held on 16 November 2013 in Cetinje, Mojkovac and Petnjica). The table below features the overview of all the revenues generated in 2013: No Type of revenue Revenues for Campaign regular funding operation Total % 1 Central budget ,51 285, % 2 Local budgets ,20 957,89 22, % 3 Campaign revenues 0 0% 4 Donations 4.179, ,00 6, % 5 Membership fees ,65 10, % 6 Financial income 83, % 7 Extraordinary revenues 3.738,67 3, % TOTAL , , ,01 100% The table above does not provide comparative data for 2012 given that the PCG was only incorporated in mid 2012, and the comparative table would be of no relevance. The chart below gives the shares of revenues by type: 4.4. Expenditures In 2013, the PCG generated the total of 262, in revenues, broken down as follows: supplies 7,762.50, fuel and energy 14,130.07, salaries, remunerations and other personal income 102,214.01, transportation 1,306.45, telephone 13,220.94, rent 31,039.73, advertising and propaganda 24,886.68, other services 2,427.36, depreciation and provisioning 4,292.40, nonproduction services 28,640.03, entertainment 14,854.56, payment operations costs 1,300.42, other intangible costs 9,415.00, interest payment 6.230,17, and equipment writing off Out of the total, the 223, were accrued in regular party operation, while 38, was spent on the election campaigns.

5 Below is the overview of all expenditures in No Description Regular Election Share of the Total operation campaigns total % 1 Supplies 7.607,30 155,20 7, % 2 Fuel and energy , ,00 r ,07 5% 3 Salaries and contract fees , ,00 102, % 4 Transportation 1.306,45 1, % 5 Telephone , ,00 13, % 6 Lease , ,00 31, % 7 Advertising and marketing , ,97 24, % 8 Other services 2.427,36 2, % 9 Depreciation 4.292,40 4, % 10 Non production services , ,78 28, % 11 Entertainment ,16 732,40 14, % 12 Payment operations 1.300,42 1, % 13 Other intangible costs 9.415,00 9, % 14 Interests 6.230,17 6, % 15 Writing off equipment 961, % TOTAL , , ,50 100% Based on the information presented above, it is noted that the bulk of expenses are accounted for by the salaries and payments per service agreements (39%), followed by rent (12%), then the costs for non production services (11%), advertising (9%) etc. Below is the graph depicting shares of expenditures by type:

6 4.5. Status of recommendations given during the previous years In the Audit report for the 2012 PCG Financial Statements, the SAI established a number of deficiencies and gave a set of recommendations to rectify the deficiencies, and these include: the adoption of internal documents with a view of setting up a more effective internal control system, better recording and inventorying of assets and liabilities. By auditing the 2013 Annual Financial Statements, it has been established that the auditee carried out the recommendation regarding internal documents by adopting, in addition to the Articles of Association and the 2013 Work Plan, also the Rulebook on Internal Organisational and Job Systematisation, the 2013 Financial Plan, the Decision to Restrict Telephone Bills and Fuel Costs, as well as the recommendation regarding the regular annual inventorying exercise. Hence, the auditee has followed through all the recommendations given in the previous SAI Report Assessment of facts the Opinion Pursuant to Article 4 of the SAI Law and Article 23 of the Political Party Financing Law, the SAI carried out the audit of the 2013 Annual Financial Statements of the PCG. The audit work was planned and carried out with the aim of offering reasonable assurances whether the financial statements were prepared in line with the valid legislation, and whether the operation was in line with the law and other regulations. Based on the performed audit, the determined facts and the deliberation of the audited entity s Opinion (ref. no. XI dated 29 September 2014) to the Draft SAI Report (ref. no /61 of 22 September 2014), and pursuant to Article 50 of the SAI Rules of Procedure, the Auditing Board comprised of Mr Nikola Kovačević, Head of the Auditing Board member of the Senate, and Mr Branislav Radulovic, PhD, member of the Auditing Board member of the Senate, adopted the following Final Audit Report for the 2013 Financial Statements of the Positive Montenegro OPINION The audit established that the 2013 Annual Financial Statements of the Positive Montenegro gives an objective overview of revenues and expenditures in line with the approved financial reporting framework, and that there are no material misstatements or significant deviations in officially presented financial statements; hence, the competent Auditing Board expresses an UNQUALIFIED OPINION on the 2013 Annual Financial Statements.