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Published Audit report of the Annual financial statement of the Movement for changes for 2019

Podgorica, 26th October 2020 – The State audit institution has performed financial and regularity audit of the Annual financial statement of the Movement for changes for 2019.

Based on the conducted audit, established factual state and Opinion of the audited entity on the Preliminary audit report of the SAI, the competent Auditing Board comprised of a member of Senate, Mr. Nikola N. Kovačević, head of the Auditing Board and president of the Senate PhD Milan Dabović – member of the Auditing Board, has expressed unqualified opinion with emphasis of matter on the Annual financial statement of the Movement for Changes for 2019 and adverse opinion on regularity audit.

The regularity audit has found that the Party did not comply all financial and other activities in all material aspects with the legal and other regulations as follows: Law on financing political entities and election campaign (former article 18), Law on prevention of illegal operations (Article 6), Law on accounting (Article 19), Law on obligations (Article 639), Rulebook on the chart of accounts and content of the accounts for companies and other legal entities, Rulebook on form, content, manner of filling of a unified form of reports on calculated and paid tax on personal income and contributions for compulsory social insurance, Decree on reimbursement of costs of the employees in the public sector as well as internal Rulebook on the use of own vehicle for business purposes.

Overview of identified irregularities:

-          In 2019, the Party made payments of the election campaign costs in the amount of 14.917,05€ from the account for regular operations in accordance with the Protocols on the comparison of the joint obligations from 2017 and 2018 between the constituents of the Democratic Front, which is not in line with the provisions of the Article 18, the formerly valid Law on financing political entities and election campaign.

-          The municipal boards of the Party did not provide records of the petty cash operations through auxiliary books, although cash withdrawals and cash payments were made for their needs.

-          The party did not respect the cash maximum (€ 2,000.00) set by the Law on Prevention of Illegal Business. During 2019, the party had cash 33 days at the petty cash register, which was higher than the legally determined limit.

-          From the insight in the travel orders, it was determined that a certain number of travel orders were signed by the same person as the instructing party and as the applicant of the order, while four travel orders were issued for several persons, for whom no evidence of cash withdrawals was presented. Reports from the official business trip were not prepared.

-          The costs of the use of own car for business purposes in the amount of € 50,425.90 were paid from the petty cash register on the basis of travel orders, without the written approval of the authorized person for the use of own car for business purposes, which is not in accordance with Article 25 of the internal rulebook of the Party on the reimbursement of per diems, engagement costs for performing activities and use of own car for the needs of the Party.

-          Forms of the reports on calculated and paid tax on personal income and contributions for compulsory social insurance were not submitted to the competent body of the Tax Administration within the deadlines determined by the Rulebook.

-          Evidence of the employment status for 8 (eight) persons engaged under service contracts was not provided. It could not be determined whether the calculation of tax liabilities was correctly performed on the paid fees.

-          Lease contracts for business premises are not certified by the competent authority as determined by Article 639 of the Law on Obligations.

-          Part of the costs in the amount of € 6,648.37 was not recorded in the appropriate accounts in accordance with the Rulebook on the chart of accounts and content of the accounts for companies and other legal entities.

-          Payments of fuel costs were documented by invoices, i.e. fiscal accounts, on the basis of which it was not possible to determine who used the fuel. The party has not defined under an internal act who exercises the right to use fuel and the limit. The party has not defined under an internal act who is entitled to the costs of representation, and based on the insight into a part of the account for the costs of representation, it was not possible to determine who used it.

-          Payment of accommodation costs was made in the amount of € 1,161.20 for three natural persons, who, according to the information from the responsible person of the Party, are not members of the Party. The payment of the mentioned expenses was not documented by the decision of the authority of the Party on approving the payment of the same, and it could not be determined on what basis the payments of expenses were made to persons who are not members of the Party. Part of the stated costs in the amount of € 763.50 was documented by pro forma invoices.

-          Payment of costs was made in the amount of € 3,750.00 (transport, catering services and advertising material), taken over from the New Serbs Democracy, in accordance with the agreements on taking over the debt, which does not define the basis for taking over the same.

-          Out of the total stated costs (€ 430,907.27), costs in the amount of € 63,789.23 were paid in cash, which represents 14.80% of the total costs.

The audit of the Annual financial statement for 2019 has covered monitoring of the implementation of the recommendations given in the Audit report on the Annual financial statement for 2018. The audit of the Annual consolidated financial statement for 2019 has identified that the Party implemented two out of eleven given recommendations, one partially implemented, five not implemented, while the implementation of three recommendations could not be determined because the Party did not participate in the election during 2019.

The Final Audit report of the Annual financial statement of the Movement for changes for 2019 with the Opinion of the audited entity on the Preliminary audit report of the SAI and response of the competent Auditing Board has been published at the official website of the State audit institution of Montenegro.