EXCERPT FROM THE FINAL AUDIT REPORT FOR 2013 BUDGET APPROPRIATIONS FOR FUNDING THE WORK OF MINORITY COUNCILS, DISBURSED THROUGH THE MINISTRY FOR HUMAN AND MINORITY RIGHTS AND PROJECT FINANCING VIA THE FUND FOR PROTECTION AND EXERCISE OF MINORITY RIGHTS Type of audit: Audited entity: Subject of audit: Audit duration: Auditing Board members: Financial audit and cross section audit The Ministry for Human and Minority Rights and the Fund for Protection and Exercise of Minority Rights The 2013 budget appropriations for National Councils, disbursed through the Ministry of Human and Minority Rights and the project funding by the Fund for Minority Rights Protection and Exercise 30 auditing days Nikola Kovačević, Senate Member, Auditing Board Chair Branislav Radulović, PhD, Senate Member, Auditing Board member
1. Legal basis The given audit was conducted in accordance with: 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 SAI Rules of Procedure (OGM 50/07); the 2014 Annual Audit Plan of the State Audit Institution (no. 4011 06 1540 dated 27 December 2013); Decision passed by the Auditing Board of the Sector 4 responsible for carrying out this audit (no. 40113 04 288 dated 27 February 2014). the International Standards of Supreme Audit Institution (ISSAI). 2. Information on the auditees The audit includes the following audited entities: the Ministry for Human and Minority Rights and the Fund for the Protection and Exercise of Minority Rights. 2.1. The Ministry for Human and Minority Rights Under the Decree on State Administration Organisation and Operation (OGM 05/12 of 23 January 2012 and 25/12 of 11 May 2012) the Ministry of Human and Minority Rights (hereinafter: the Ministry) is in charge of the following: to monitor the exercise and protection of rights of all minority nations and other minority communities as regards their national, ethnic, cultural, linguistic and religious identity; fostering mutual relations among the members of minority nations and other minority communities; advancing multi ethnic tolerance in Montenegro, and establishing and maintaining free contacts between members of minority nations and other minority communities with the civil society organisations and associations abroad sharing the same national and ethnic origin, cultural and historic legacy, and religious beliefs, and advancing the status of the Roma and Egyptians and their full integration, as well as other tasks within its remit. The Ministry s internal organisational units are as follows: the Directorate for Improvement and Protection of Human Rights and Freedoms; the Directorate for Improvement and Protection of the Rights of Minority Nations and Other Minority Communities; the Directorate for Relations with Religious Communities; the Gender Equality Division; the Division for Improvement and Protection of the Rights of the Roma and Egyptians; the minister s Office, and the Service for General Affairs and Finance. The Ministry is headed by the Minister, and the Secretary organises, coordinates and controls the work of internal organisational units. The Secretary to the Ministry takes care of establishing cooperation with other authorities, and performs other tasks as ordered by the Minister. 2.2. The Fund for the Protection and Exercise of Minority Rights Under Article 36 of the Law on Minority Rights and Freedoms, the Fund for the Protection and Exercise of Minority Rights was set up to support the activities to preserve and develop ethnic features of minority nations and other minority communities (hereinafter: the minorities) and their members in the area of national, ethnic, cultural, linguistic and religious identity. 3
The Fund for the Protection and Exercise of Minority Rights and Freedoms (hereinafter: the Fund) holds legal personality. Its seat is in Podgorica. The Fund bodies are the Managing Board and the Director. The Fund is funded from the central Budget and other sources in accordance with the law. The decision on the use of the Fund s money is made by the Managing Board, and the decision on the distribution of funds is taken together with the representatives of minorities, in line with the decision of the Minority Councils. The Fund uses the funds for own needs and for project funding. The project funding is apportioned based on public competition and following set criteria: the project s contribution to the preservation and development of national, cultural, religious, linguistic and ethnic identity; project compatibility with the Government policies; transparency and the possibility to monitor the project implementation, and the applicant s credibility. Nongovernmental organisations and other entities and individuals whose operation or activities are aimed at preserving and developing ethnic features of minority nations and other minority communities and their members in the area of national, ethnic, cultural, linguistic and religious identity are eligible to take part in the competition for funding. Given that the audit focuses on the budget funding for supporting projects through the Fund, below are listed the data on the projects supported through budget funding. 3. Audit methodology The audit was carried out by the combined methods of analysis of documents and audit fieldwork. Following the analytical procedures, the detailed audit techniques and methods were decided upon and applied (for instance: development of questionnaires, interviews, documentary review). The documents used as evidence for business events were also verified, as well as the calculation accuracy of financial transactions referring to the audited funds. The funds appropriated by the Ministry for the work of Minority Councils were fully audited, as well as the Fund s funding for the projects implemented in 2013 whose value exceeds 5,000.00, while the method of random sampling was used for auditing the projects under 5,000.00. When setting materiality by value, we used the materiality rate of 2%, in line with the set SAI methodology. The materiality was defined by applying the above rate to the amount of appropriations for funding the work of Minority Councils and for project funding. The materiality was defined separately for each Council and for each project subject to audit. 4. Minority Councils and projects The given audit included the budget funding appropriated through the Ministry of Human and Minority Rights for the work of National Councils and the project funding disbursed through the Fund for the Protection and Exercise of Minority Rights; hence, below is the information on the operation of Minority Councils and the projects supported through the Fund subject to this audit. 4
5. Minority Councils Article 33 of the Law on Minority Rights and Freedoms stipulates that minority nations and other minority communities and their members may, with a view of preserving their national identity and fostering their rights and freedoms, set up the Council for that given minority. One such minority may set up only one such Council. Minority Councils are elected for the term of four years. Minority Councils have no fewer than 17 members. The total of six Councils exist: Albanian, Bosniac, Croatian, Muslim, Romani and Serbian. Minority councils have a set of ex officio members: members of the Parliament and of the Government belonging to a given minority, mayors, speakers of local parliaments, presidents of the parties represented in the Parliament and in local councils who belong to the given minority. Other Minority Council members are elected by secret ballot on the electoral assembly. The state administration authority responsible for minority rights (hereinafter: the Ministry) adopts rules and guidance for the election of members of Minority Councils. The members of Minority Councils elect, by secret ballot, the President and the Secretary from among themselves. Minority Councils approve their budgets, the Articles of Association and the Rules of Procedure, governing the matters relevant for the work of the given Council. The funding for Minority Councils is provided from the central Budget. The supervision over the work of the Minority Councils is exercised by the Ministry and the relevant parliamentary committee. Minority Councils are obliged to report annually, by 31 March of the current year for the previous year, to the Ministry and the relevant parliamentary body on their activities and financial operations. 6. Funding of Minority Councils By the 2013 Budget, the Ministry appropriated 300,000.00 for funding the work of Minority Councils. The total planned annual funding per one Council is 50,000.00, or 4,166.66 a month. By examining the budget outturn data in 2013, it was established that the Ministry transferred in total 289,166.22 to Minority Councils, from the following programmes: 3621 Minority Councils 279,166.22 and 3751 EU Integration and the exercise of minority rights 10,000.00. Below is the overview of the appropriations for Minority Councils: No Name Amount % 1 Albanian Council 51,999.92 18.0% 2 Bosniac Council 51,999.92 18.0% 3 Croatian Council 51,999.92 18.0% 4 Muslim Council 51,999.92 18.0% 5 Romani Council 51,999.92 18.0% 6 Serbian Council 29,166.62 10.1% Total 289,166.22 100.0% Based on the data presented, the Ministry disbursed to the Serbian Council the total of 29,166.00, and to other councils 51,999.92 each. 5
Given that the present audit focuses on the funding for the operation of Minority Councils disbursed through the Ministry, and the project funding disbursed through the Fund, it covered the 2013 financial statements of the six Minority Councils (Serbian, Croatian, Albanian, Muslim, Romani and Bosniac) and forty (40) projects funded by the Fund under the Decision ref.no. 567/13 for the contracted value of 353,000.00. The audit of financial statements of Minority Councils established the revenues and expenditures presented below. Aggregate overview of Minority Councils revenues in 2013: No Description Serbian Croatian Albanian Bosniac Muslim Romani Total % 1 Income from the Ministry 29,166.62 51,999.92 51,999.92 51,999.20 51,999.92 72,297.00 309,462.58 75.35% 2 Income from the Fund 53,300.00 3,000.00 15,200.00 13,200.00 5,000.00 89,700.00 21.84% 3 Donations 1,000.00 410.00 1,410.00 0.34% Separated revenues from 4 previous periods 9,910.20 9,910.20 2.41% 5 Income on interests 9.27 18.79 14.49 133.34 16.11 192.00 0.05% TOTAL 93,386.09 55,428.71 67,214.41 65,199.20 52,133.26 77,313.11 410,674.78 100.00% Based on the above, it is noted that in 2013 Minority Councils received the total funding from the Budget in the amount of 399,162.58 (97%), as follows: operational costs 309,462.58 (75%) and project funding 89,700.00 (21.84%). The revenues broken down by different Councils: Serbian 93,386.09, Romani 77,313.11, Albanian 67,214.41, Bosniac 65,199.20, Croatian 55,428.71 and Muslim 52,133.26. Aggregate overview of Minority Councils expenditures in 2013: No Description Serbian Croatian Albanian Bosniac Muslim Romani Total % 1 Supplies, fuel and energy 2,238.53 3,396.25 6,156.81 937.86 1,223.85 1,488.79 15,442.09 3.51% 2 Salaries and remuneration 71,992.18 18,280.00 27,115.93 17,489.02 29,591.40 41,185.97 205,654.50 46.73% 3 Daily allowances, accommodation and transportation 6,491.14 5,670.35 13,062.00 12,463.12 37,686.61 8.56% 4 Aid and advertising 1,481.27 8,150.00 5,780.70 15,411.97 3.50% 5 Lease, postal services and maintenance 9,283.76 6,655.48 5,775.35 6,440.00 6,962.35 35,116.94 7.98% 6 Other services 11,290.78 11,290.78 2.57% 7 Depreciation 1,812.70 69.38 651.00 2,533.08 0.58% 8 Non production services 3,188.00 6,560.52 7,673.40 17,421.92 3.96% 9 Entertainment 4,615.84 851.02 3,421.90 9,841.75 18,730.51 4.26% 10 Other costs 6,406.44 19,181.35 3,400.51 564.39 2,282.90 2,574.52 34,410.11 7.82% 11 Project costs 21,306.31 25,101.48 46,407.79 10.54% TOTAL 110,828.23 56,310.93 73,727.29 63,493.77 58,432.97 77,313.11 440,106.30 100.00% Based on the information presented above, in 2013 the Minority Councils had the total expenditures of 440,109.30 as follows: Serbian 110,828.23, Romani 77,313.11, Albanian 73,727.29, Bosniac 63,496.77, Muslim 58,432.97 and Croatian 56,310.93. Given that Minority Councils provide in their books the records of aggregate expenditures, it was not possible to discern the operational from project costs. At the auditors request to make such separation of costs, the Albanian and the Romani Councils provided provisional division in the sheet with Council s aggregate costs, while the costs of other councils were stated in the total amount as recorded in the business books. 6
Based on the data presented, it is noted that the bulk of the costs of Minority Councils refers to salaries and remuneration, with the share of 46.73%, project implementation costs 10.54%, other expenditures 7.82%, travel costs 8.56%, other services 2.57%, lease and postal services 7.82%, entertainment 4.26% etc. Gross salaries and contributions borne by the employer amount to 205,654.50. The remuneration is paid to managers and collaborators of the Council and as per various service agreements (accounting, website maintenance, etc.). Out of the total costs of salaries and remunerations ( 205,654.50) the amount of 71,992.18 is accounted for by the Serbian Council, followed by the Romani with 41,185.97, then the Muslim 29,591.40, the Albanian 27,115.93, the Croatian 21,183.50, and the Bosniac 17,489.02. 7. Project funding In 2013, by the decisions of its Managing board ref. no. 576/13 of 17 July 2013 and 1349/13 of 23 December 2013, the Fund for the Protection and Exercise of minority Rights approved project funding in the amount of 727,500.00. Based on the above decisions, the Fund supported the total of 141 projects whose implementation was envisaged in 2013 and 2014, concluded agreements with end beneficiaries, and disbursed the total amount of 717,700.00 as project funding. The present audit includes the projects due to be implemented by 31 March 2014, where the contracted project value exceeds 5,000.00, and some randomly sampled projects under 5,000.00. Following the criteria thus set, the audit covered in total 40 projects of the aggregate value of 353,000.00. Below is the table with an overview of funds approved for the implementation of projects covered by the audit, and an overview of irregularities noted regarding substantiating of costs and spending. No Project implementing organisation Project name Approved funding Ineligible costs Nonsubstantia ted costs Incomplet e document ation Amount of irregulariti es Irregulariti es as a share of project budget (%) 1 2 NGO Society for Equality and Tolerance NGO Society for Equality and Tolerance Serbian newspaper 29,000.00 3,332.05 2,746.41 11,250.00 17,328.46 60% Current affairs on Serbian TV 29,000.00 4,088.00 1,722.00 15,980.00 21,790.00 75% 3 Serbian National Council Orthodox religion and Serbian legacy in Montenegro 29,000.00 5,892.58 20,290.00 26,182.58 90% 4 Serbian National Board Publishing 29,000.00 2,000.00 13,050.00 15,050.00 52% 5 Serbian National Council Days of Serbian Culture in Montenegro 24,300.00 3,142.34 1,937.98 19,219.68 24,300.00 100% 6 Serbian National Board Presence of Serbian Language and Literature and Primary and 23,000.00 2,336.20 10,350.00 12,686.20 55% Secondary curricula 7 "Bincent" Bosniac Newspapers 20,000.00 658.13 19,341.87 20,000.00 100% 8 Croatian Civic Society Croatian Herald 9,000.00 1,546.30 6,770.00 8,316.30 92% 9 NGO Centre for Culture Festival "Homeland Paths of Bihor Bihor" 8,000.00 3,286.20 3,286.20 41% 10 Centre for Regional Cooperation "Sejdefa" 8,000.00 0.00 0% 11 Bosniac Council Towards Bosniac Emigrants from Montenegro 8,000.00 8,000.00 8,000.00 100% 12 Bosniac Forum Forum 2013 7,600.00 1,066.00 1,066.00 14% 13 NGO Albanian Theatre A Scream of a Woman 7,500.00 2,850.88 4,649.12 7,500.00 100% 14 Isamic Community of Berane Allotment and pathing of the New Islamic Graveyard 7,500.00 1,200.00 1,200.00 16% 15 16 17 NGO Association of the Roma Umbrella Croatian Organisation Dux Croatorum NGO Bay of Croatian Saints Jošica Herceg Novi Radio Rom 7,000.00 2,600.00 2,600.00 37% Completion of the works on the Croatian Home in Donja Lastva Photo monograph "Croatian Sacral Buildings in Boka Kotorska" 7,000.00 0.00 0% 6,800.00 4,980.83 4,980.83 73% 18 Madrassa Mehmet Fatih Ilahijom i kasidom po Crnoj Gori 6,000.00 3,154.30 2,845.70 6,000.00 100% 7
19 NVO Medijator Rožaje Reprint Husaein Pashe Boljanić's Kuraan 6,000.00 529.00 5,471.00 6,000.00 100% 20 Nedžmedin Avdiu Wedding ceremony of Anamalji 6,000.00 3,835.00 3,835.00 64% 21 Parish Home Sv. Antun Tuzi Magayine "St Antun's Herald" 5,000.00 5,000.00 5,000.00 100% 22 "Avlija" Magazine and portal for culture, literature and social issues "Avlija" 5,000.00 1,000.00 1,000.00 20% 23 NVO Romani Cultural Centre Meet Romani Cultural Heritage 5,000.00 0.00 0% 24 NVO Islamic Educational Cnetre Islamic informational and educational service 5,000.00 290.00 290.00 6% 25 Safet Sijarić Novel "Na kraj svijeta" 2,000.00 2,000.00 2,000.00 100% 26 Dr. Gani Karamanaga Sun, Sea, Health 1,500.00 1,500.00 1,500.00 100% 27 Skender Osmani Wake Up My Souk 2,000.00 2,000.00 2,000.00 100% 28 Dževdet Luboder 29 NVO Romani Association Budo Tomović Nikšić Through small towns and mountains of Sandzak 2,000.00 1,850.00 1,850.00 93% The Beauty of Romani Folklore 3,000.00 1,460.00 1,460.00 49% 30 SPKD Prosvjeta Nowhere Land 4,000.00 4,000.00 4,000.00 100% 31 NVA Vakat zuluma Research and a Scientific Event on crimes against Bosniacs in Plav and Gusinje 1912 1913 3,600.00 3,600.00 3,600.00 100% 32 Ali Daci Mountain Fairy Rožaje 4,900.00 0.00 0% 33 Croatian Civic Society Building Bridges of Cooperation between Montenegro and Croatia 4,000.00 0.00 0% 34 NVO Harmonija Ulcinj Days of Albanian Poetry at Sas 3,800.00 400.00 400.00 11% 35 Eldar Lakota 36 NVO Association for Roma Affirmation 37 SPD Svetosavnik 38 Islamic Community Plav 39 NVO Svijesnost Ulcinj 40 NVO the Beauty of the Roma Documentary feature film "Rožaje That I Love" Standardisation of the Romani Language Preservation of religious identity through cherishing amateur choir singing Refurbishing of the library Zejnel Beg Dizdar Research and study of mosque archives within the area of Ana e Maljit Education through music, games and communication TOTAL 4,000.00 165.00 1,465.00 1,630.00 41% 4,000.00 4,000.00 4,000.00 100% 3,500.00 3,000.00 500.00 3,500.00 100% 4,000.00 378.00 1,337.00 1,140.00 2,855.00 71% 4,000.00 1,060.00 1,060.00 27% 5,000.00 1,500.00 1,500.00 30% 353,000.0 0 25,496.15 38,566.85 163,703.5 7 227,766.5 7 65% The Fund approved the total of 353,000.00 to end beneficiaries for the implementation of projects included in this audit. The audit has established that out of the total ( 353,000.00) the amount of 25,496.15 (7% of the total) was not spent for the intended purposes, the total of 38,566.85 (11%) were not substantiated, and the total of 163,703.57 (46%) were substantiated with incomplete sets of documents. 8. Final observations and recommendations Pursuant to Articles 4 and 13 of the SAI Law and the Decision of the responsible Auditing Board (ref. no. 40113 04 288) and the 2014 Annual Audit Plan, the SAI carried out the audit of the 2013 budget appropriations for the Minority Councils, disbursed through the Ministry for Human and Minority Rights and the Fund for the Protection and Exercise of Minority Rights. 8
Based on the determined facts and the auditee s response to the Draft SAI Report, and pursuant to Article 50 of the SAI Rules of Procedure, the responsible Auditing Board comprised of Mr Nikola Kovačević, Head of the Auditing Board, Senate member, and Mr Branislav Radulovic, PhD, member of the Auditing Board, Senate member, at its session held on 30 July 2014 adopted the following FINAL AUDIT REPORT of the 2013 budget appropriations for funding the work of Minority Councils, disbursed through the Ministry for Human and Minority Rights and project financing through the Fund for the Protection and Exercise of Minority Rights with an overview of noted irregularities and recommendations given: The audit of the budget appropriations for funding the work of Minority Councils through the Ministry for Human and Minority Rights and project funding through the Fund for the Protection and Exercise of Minority Rights has established the following: 1. During the auditing procedure, the Ministry failed to make available to the SAI the evidence based one which it may be concluded it supervised the compliance of the work of the Minority Councils, as set forth by Article 33 of the Law on Minority Rights and Freedoms (records of reports provided by Minority Councils, letters to prove advice given regarding possible deficiencies in reporting, proof of controls over spending of appropriated funds being done or control over actual implementation of the activities envisaged, etc.). 2. By implementing some of the recommendations given in the SAI Audit Report involving the 2010 financial statements and the Follow up Audit Report, the Fund has improved its operation by adopting the Rulebook on Criteria for Evaluation and Distribution of Funds for Funding and Co funding Projects, including as an integral part also the application form and project evaluation sheets, and by improving the quality of project funding and co funding agreements by establishing own responsibilities, and the responsibilities of beneficiaries. However, the Fund failed to provide any monitoring of the activities to implement the projects that received support, performance appraisal or proper control over spending of appropriated funds. 3. A large number of Minority Councils (Serbian, Croatian, Bosniac and Albanian) failed, under their Articles of Association, to adopt the 2013 Work Programme or the Financial Plan, as the basis for the control over their financial operations or the implementation of the planned activities. In addition, they failed to accompany the reports provided to the Ministry with any documents to substantiate costs. The of Minority Councils (Serbian, Croatian, Bosniac and Romani) paid remuneration in the amount of 85,642.54 without calculating or paying tax liabilities, which is in contravention to the Personal Income Tax Law. 4. A larger number of beneficiaries failed, under Article 7 of the Agreement, to submit the Final Project Reports including project spending, or failed to observe the deadlines for such reporting. Out of the totally disbursed amount of 353,000.00 for the implementation of 40 audited projects, the beneficiaries spent in total 25,496.00 for the purposes other than intended, failed to substantiate 42,066.85 worth of costs, and used incomplete sets of documentation to substantiate the spending in the amount of 160,253.00. Moreover, the beneficiaries paid in total 102,035.00 to individuals hired under eight projects and failed to calculate or pay tax liabilities under the Personal Income Tax Law. An overview of the irregularities noted and recommendations given 9
8.1. The Ministry for Human and Minority Rights 1. Article 33 of the Law on Minority Rights and Freedoms stipulates the supervision over the activities of Minority Councils is to be carried out by the Ministry and the relevant parliamentary committee. The same article established the obligation on the part of Minority Councils to provide activity and financial reports to the Ministry and the relevant parliamentary committee at least annually, by 31 March of the current year for the previous year. During the audit, the Ministry did not present any such evidence (any records of the reports provided by Minority Councils, any letters with advice indicative of any possible shortcomings in reporting, evidence of control over spending or control over the activities undertaken, etc.) based on which one might conclude it supervised the compliance of the Minority Council operation. Under Article 33 of the Law, the Ministry is obliged to supervise the compliant operation of the Minority Councils. 8.2. Minority Councils 1. Minority Councils submitted to the Ministry their Activity and Financial Operations Reports, with the exception of the Romani Council, which sent it to the SAI during the audit process. Together with the reports provided to the Ministry, the Minority Councils failed to provide documents to substantiate spending of the money disbursed by the Ministry, with the exception of the Serbian Council. Under Article 33 of the Law on Minority Rights and Freedoms, the Minority Councils are obliged to submit to the Ministry their Activity and Financial Operations Reports within the stipulated timeframe. With a view of more effective control over financial operations, the reports to the Ministry should be accompanied by the documentation to substantiate the spending of the appropriated funds. 2. Minority Councils (Serbian, Croatian, Bosniac and Albanian) failed, under their Articles of Association, to adopt the 2013 Work Programme or the Financial Plan, as the basis for the control over their financial operations or the implementation of the planned activities. With a view of control over the implementation of planned activities and financial operations, the Minority Councils are obliged, under their Articles of Association, to adopt the Work Programme and the Financial Plan by the end of the current year for the following year. 3. The Minority Councils provided in their books the records of all expenditures, but it was impossible to discern from these records which part of it pertained to operational costs, and which to project costs. Minority Councils should keep in their books the records of overall expenditures, operational expenditures and the project implementation costs. 4. Minority Councils performed cash payments in the amount of 126,677.50, or 29.00% of the total (Bosniac 44,385.00, Romani 35,585.50, Serbian 19,817.00, Croatian 12,203.00, Muslim 12,463.00 and Albanian 2,224.00). The SAI recommends to Minority Councils to reduce cash payments and perform payments via transfer accounts. 10
5. The Bosniac Council failed to substantiate costs in the amount of 8,568.41, and provided only partial documentation for substantiating the expenditures in the amount of 22,245.00. Minority Councils are obliged to substantiate costs using a full set of valid documentation. 6. Minority Councils failed to calculate and pay tax liabilities on remuneration paid in the amount of 85,642.54 (Serbian 50,389.00, Croatian 3,503.50, Bosniac 4,250.00 and Romani 27,500.00 taxes calculated, but not paid). When paying remuneration, Minority Councils are obliged to calculate and pay tax liabilities under the Personal Income Tax Law. In addition, the necessary data should be provided for proper tax calculation. 8.3. The Fund for the Protection and Exercise of Minority Rights 1. The Fund concluded contracts using templates without detailing the responsibilities of beneficiaries, but the beneficiary is directed to implement the contractual obligation in the scope, of the quality and with the elements defined in the project proposal. The Fund should stipulate in the agreements the detailed responsibilities of beneficiaries defining the activities, the schedule of disbursement and the project completion dates. 2. The Fond concluded two project funding agreements (ref. no. 1260/13 of 04 December 2013 and ref. no. 1290/13 of 11 December 2013), contrary to the provisions of Articles 41 and 42 of the Law on Contracts and Obligations (agreements concluded after the expiry of the project implementation term). Agreements need to be in line with the Law on Contracts and obligations. 3. During the audit process, the Fund did not present evidence that in 2013 it carried out any supervision over staged implementation of projects or over spending of the disbursed funds, but in early 2014 it has undertaken certain activities including warning beneficiaries to submit Progress Reports and Final Reports, and notified the SAI thereof by a letter (ref.no. 403/14 of 14 April 2014). Under Article 8 of the Agreement, and Article 30 of its Rules of Procedures, the Fund is obliged to supervise staged implementation of projects and spending of the funds disbursed. 4. The Fund did not warn a certain number of beneficiaries to meet their contractual obligation of providing progress reports or reimburse the funds disbursed, as envisaged by Article 9 of the Agreement, and Article 30 of the Rules of Procedure. The Fund is obliged to undertake the actions set forth in Article 9 of the Agreement and in Article 30 of the Rules of Procedure in case the beneficiary fails to meet the contractual obligations. 5. Under the decision ref.no. 1349/13 of 23 December 2013 and the Agreements concluded, the Fund disbursed full project amounts, in contravention to Article 3 of the Agreement. 11
The Fund is obliged to disburse the funds allocated in line with the project implementation schedule, or according to the schedule of payments (Article 3 of the Agreement). 6. In case of a number of beneficiaries, the Fund did not approve the funding in the requested amounts, and thus they were unable to implement all the activities presented in the project application due to reduced funding; hence, the beneficiaries needed to align the activities with the approved funding to ensure observance of contractual obligations. Before concluding the Agreement, the Fund should request from all beneficiaries where there are significant differences between the requested and the approved project budget to submit amended applications with planned activities and costing. 7. The audit has established that the Fund fails to provide electronic records of project reports, accompanying documents used to substantiate costs or project implementation evidence. It has also been established that beneficiaries submitted unsystematised documentation and improperly reported on project implementation and spending (without stipulation of the activities to which the costs refer), which only further made any control difficult, both by the Fund or other responsible entities. With a view of better and more efficient control, the Fund should ensure electronic records of the documents provided by beneficiaries (reports, substantiating costs, project completion evidence). By changing the project application form, the Fund should ensure that applicants provide detailed specifications of activities and costs, and request more precise reporting on project progress and spending. 8. The audit has established that in 2013 the Fund provided funding for the work of Minority Councils (with the exception of the Muslim Council) whose representatives were at the same time members of the Fund s Managing Board. It has also been found that the Fund provided funding for a certain number of projects implemented by nongovernmental organisations whose founders or responsible persons were members of the Fund s Managing Board. In order to avoid conflict of interest situations and possible misuse, the right of the members to the Fund s Managing Board to apply for funding should be limited, since, under the Memorandum and the Articles of Association, they decide on the funding. 8.4. Project beneficiaries 1. A large number of project beneficiaries (twenty seven) failed to provide to the Fund the Final Report on project completion and spending with the detailed description of the programme and financial implementation of the project or failed to provide them within the set deadline of 30 days after the project completion. Under Article 7 of the Agreement, beneficiaries are obliged to submit to the Fund project completion report and the financial statements on the spending of the allocated money. 2. Out of the total of 353,000.00 (for 40 projects), the beneficiaries did not spend 25,496.15 (7% of the total) for the intended purposes, failed to substantiate spending in the amount of 42,066.85 (12%), and provided only incomplete accompanying documentation for the spending of 160,203.57 (45%). 12
Under Article 4 of the Agreement, the beneficiaries are obliged to spend the money solely for the project purposes, and under Article 7 of the Agreement, the spending is to be substantiated with a full set of valid documents. 3. Beneficiaries paid remuneration to the individuals hired for the project implementation (eight projects) in the amount of 102,035.00, failing to calculate and pay tax liabilities under the Personal Income Tax Law. When paying remuneration, beneficiaries are obliged to calculate and pay taxes under the Personal Income Tax Law. 4. A large number of beneficiaries failed to observe the project implementation deadlines as set forth in the project application, thirteen beneficiaries failed to provide to the Fund proper evidence of project implementation, and four beneficiaries failed to implement the projects. Beneficiaries are obliged to observe the set project completion dates and to submit to the Fund proper evidence of project implementation (Article 7 of the Agreement). 13