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Audit Report on Annual Financial Statement of Democratic People's Party – Citizens Group "Milan Knežević"

Podgorica, 7th October 2015 - The State Audit Institution conducted a financial audit of the Annual Financial Statements and regularity audit of the Democratic People's Party (CG “Milan Knežević”), which implies compliance with legal and other relevant regulations.

Based on the conducted audit, determined facts and the statement of the audited entity  to the Preliminary Statement of the SAI (no. 40116‐042‐417/102), the competent Auditing Board comprised of a member of the Senate Nikola Kovačević, Head of the Auditing Board and a member of the Senate Branislav Radulović, PhD, a member of the Auditing Board, has given an adverse audit opinion on the Annual Financial Statement for 2014 and qualified audit opinion on regularity audit.

Financial audit has found that the Annual Financial Statement of Democratic People's Party (CG “Milan Knežević”) for 2014 had not been compiled and presented fairly and objectively in accordance with the current financial reporting framework.

With regards to identified irregularities, the competent Auditing Board has given following recommendations:

- Pursuant to the Article 4 of the Law on Accounting and Auditing, the audited entity is obliged to document all payments using valid accounting documentation.

Regularity audit has found that the audited entity had not harmonized all financial or other actions with laws and other regulations that have been identified as the criteria for the respective audit, since it had not consistently applied the provisions of the Labour Law and the Law on Obligations in the area concerning the creation of the contract with natural persons, as well as provisions of the Law on Accounting and Auditing in the area concerning the recording of the portion of the costs.

With regards to identified irregularities, the competent Auditing Board has given following recommendations:

- The audited entity, in accordance with the Labour Law and the Law on Obligations, should conclude contracts with natural persons that will clearly define: the obligations of the employees, the period of engagement, the agreed gross salary (indicating whether it is a monthly amount or the amount for the agreed period). It is also necessary to define the type of the contractual relationship (employment contract, service contract, etc.), as well as to be stamped and signed by the contractual parties and to contain the filing number and the creation date thereof.

- In order to provide better records and to rationalize the use of fuel, it is recommended to the audited entity to further document the fuel expenses, beside using fiscal bills, by providing travel orders, lists of persons who are entitled to reimbursement of fuel expenses and slips from gas stations specifying the number plates of vehicles of the person who bought fuel. It is also necessary to create an internal act to determine who is entitled to the reimbursement of fuel expenses, and the amount thereof.

- The audited entity should record the claims made by the local self‐governments in the ledgers based on the certified and reconciled documentation.

Through the audit of the Annual Financial Statement for 2013 of New Serbian Democracy, under which operations of CG "Milan Knežević" were audited, the State Audit Institution has found irregularities in contracts concluded with natural persons hired for analytical and consulting services and administrative technical jobs, given that the contracts did not contain all the essential elements identified by the Labour Law and the Law on Obligations.

The audit of the Annual Financial Statement for 2014 of Democratic People's Party CG "Milan Knezevic," has found the audited entity had not complied with the given recommendation.

The Final Audit Report on Annual Financial Statement of Democratic People's Party – Citizens Group "Milan Knežević" has been officially published at the web site.

Excerpt from the Audit Report on Annual Financial Statement of the Democratic People’s Party (Citizens Group “Milan Knežević”)

Audit Report on Annual Financial Statement of the Democratic People’s Party (Citizens Group “Milan Knežević”) (mne)