WITH DEFICIENCES OF VIEW
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The Court of Accounts of the Republic of Moldova, on May 26, examined the Financial Audit Report on the Government’s Report on the execution of the state budget for 2022.
According to the Government’s Report, the overall execution of the state budget was achieved in terms of revenues in the proportion of 99.8% or 59.2 billion lei and in expenses and non-financial assets 92.7% or 68.6 billion lei.
Given that the state budget for 2022 was specified with a deficit of approximately 14.6 billion lei, the budget exercise ended with a deficit of 9.3 billion lei, or 5.3 billion lei below the level of the specified deficit. As a result of the cash execution of the state budget, the cash balances, on December 31, 2022, amounted to 2.9 billion lei, with a decrease of 3.2 times, compared to the previous period.
The audit highlighted the significant issue related to the completeness of the reporting data on the sub-account "Shares and other forms of equity participation within the country". It should be noted that, by the State Budget Law, allocations were approved for the increase of the share capital of the State Enterprise "Moldova Railway" in the amount of up to 392.9 million lei, of LLC "Arena Nationala" up to 69.6 million lei and of JSC "Energocom" up to 6 billion lei.
Thus, financial means in the total amount of 6.3 billion lei were financed from the state budget for the increase of the social capital. The Public Services Agency registered, for 2 institutions, the increase of the social capital in the total amount of 591.6 million lei. The lack of registration of the share capital increase at the Public Services Agency, in 2022, by "Calea Ferată din Moldova" of 153.4 million lei, and by the JSC "Energocom" of 5.6 billion lei, conditioned the lack of reflection of these increases to the group of accounts "Shares and other forms of capital participation within the country" by the founder - the Public Property Agency.
Annually the Court of Accounts issues modified opinions on the consolidated financial reports of the ministries, these being mainly conditioned by the aspects related to the reporting of the balance sheet accounts. Thus, for 2022, according to the preliminary data, the errors found in the audits that are ongoing at the ministries, boil down to the undervaluation of groups of balance sheet accounts by about 710.2 million lei and the overvaluation by about 616.2 million lei.
Concerning the revenues of the state budget, the following audit observations were mentioned: for 2022, were approved revenues in the amount of 59.3 billion lei, being executed in the amount of 59.2 billion lei. The most significant contribution to the total revenue comes from VAT receipts - 48.9%, income tax - 17.9%, excise duties - 13.5%, customs duties and other import taxes - 3.2%, etc.
A problem highlighted from year to year by the audit is the non-regulation and non-application of the unique balance reporting mechanism to the "Import/export duties paid in advance" account. Thus, the data reported by the Ministry of Finance forms a divergence in the amount of 7.8 million lei compared to the revenues reported by the Customs Service.
According to the data reported by the Ministry of Finance, as of 31.12.2022, the arrears in paying taxpayers' obligations to the state budget amounted to 2.4 billion lei, including basic payments, late fees and fines, except for tax obligations taken into special account. Of the total arrears, those administered by the State Fiscal Service amount to approximately 1.7 billion lei, by the Customs Service to 0.6 billion lei, and by the Public Property Agency to 0.9 million lei. Compared to previous years, there is a significant increase in arrears of 22.7%.
The audit found that the mechanisms for recording, monitoring and reporting obligations towards the state budget, for fines and sanctions, do not allow the evaluation of the total value of the calculated obligations, and the reported value of taxpayers' claims (2.4 billion lei) does not correspond to the reality, being significantly reduced.
Another significant problem is the lack of an operational framework and an effective control regarding the monitoring of the implementation of projects financed from external sources. The level of capitalization of external resources by the budgetary institutions in 2022 constituted only 38.3%, or 3.1 billion lei of the total amount of 8 billion lei. In this context, the Court of Accounts formulated a recommendation, as it is necessary to strengthen the institutional capacities by the central public authorities related to the processes of development, management and reporting of investment projects in order to increase the level of absorption and capitalization of external resources, respecting disbursement deadlines and achieving results in project implementation.
With reference to the execution of expenses and non-financial assets from the state budget, the audit found that out of the total 68.6 billion lei are reported to: transfers to other budgets – 38.1 billion lei, personnel expenses – 9.0 billion lei, subsidies – 4.2 billion lei, fixed assets – 3.3 billion lei, other expenses – 3.0 billion lei, etc.
Problematic aspects were identified by the audit team in the execution and reporting of financial means intended for the refugee crisis in Ukraine. In total, according to the Decisions of the Committee for Exceptional Situations and Government’s Decisions, financial means in the amount of 484.7 million lei (28.5%) were distributed from the Government's emergency funds for the management of the refugee crisis in Ukraine. Additionally, 0.9 million lei were executed from the account of the redistribution of allocations within the budget amendment.
Responsible for confirming the eligibility of expenses, being the Ministry of Labor and Social Protection, and the public institutions and state enterprises subordinated to the public authorities were to present monthly to the responsible ministry the fiscal invoice for the services rendered, with the annexation of the confirmatory documents regarding the expenses incurred for their activity. Thus, the respective ministry did not present complete and exhaustive information to the Ministry of Finance regarding all expenses incurred for the placement centers.
A problem identified by the present audit, as well as by the previous audits of the Court of Accounts, concerns the financing from the state budget of self-management public institutions of state enterprises and joint-stock companies, which do not fully respect the budgetary principles and the budgetary-fiscal rules. For these categories of institutions, in 2022 allocations for subsidies in the amount of 4.6 billion lei were approved, 4.2 billion lei being executed. As a result of the execution at the end of the year, unutilized balances in the amount of 218.9 million lei were recorded from the subsidies account.
At the same time, under the budget item grants, were approved allocations in the amount of 1836.1 million lei, of which only 1325.0 million lei were allocated. Compared to previous years, there is a tendency to increase allocations for granted grants by 636.4 million lei. It should be mentioned that at the end of the year, the unutilized balances from the granted grants account are not reported.
In this context, a recommendation was formulated regarding the development of the normative framework for regulating the activity of public institutions for self-management and the development of the normative framework in order to determine clear, unique and exhaustive criteria for granting grants and subsidies from the state budget with the alignment of the way of financing, execution and reporting to the principles, rules and budgetary responsibilities.
The audit states the maintenance of a growth trend in the total expenses of transfers from the state budget to the budgets of another level, constituting in 2022 a weight of about 57.6% of the total expenses executed. The external public audit reveals the further increase in the degree of financial dependence of the budgets of other levels on funding from the state budget.
