Court of Accounts Identified Major Deficiencies in the Financial Statements of the ATU of Palanca Village

The Court of Accounts of the Republic of Moldova (CoARM) has published the Audit Report on the financial statements of the Administrative-Territorial Unit (ATU) of Palanca Village, Ștefan Vodă District, for the year ended  on  December 31, 2025.

Palanca Village is a first-level administrative-territorial unit with a population of approximately 2,000 inhabitants. At the end of 2025, the assets administered by the local public authority amounted to MDL 74.7 million. During the audited period, revenues totalled MDL 10.11 million, while expenditures reached MDL 12.6 million, the largest share being allocated to the financing of the early childhood education institution and the maintenance of the mayor’s office.

Based on the audit results, the Court of Accounts issued an adverse opinion on the financial statements of the ATU of Palanca Village, as the identified misstatements were material and the financial statements did not present a true and fair view of the entity’s financial position in accordance with the applicable financial reporting framework.

The adverse opinion was determined by material misstatements affecting the main elements of the financial statements, with an impact of approximately MDL 45.2 million on the statement of financial position, MDL 42 million on revenues, and more than MDL 1.4 million on expenditures.

The most significant issue identified by the audit concerns the accounting for publicly owned land. Although more than 510 hectares of land are registered in the Real Estate Register, they were not fully recognised in the accounting records of the local public authority. Consequently, the value of land and the related revenues were understated by more than MDL 42 million.

The audit also identified deficiencies in the recognition, measurement and accounting of investments. Capital repairs of roads and certain expenditures related to project documentation were not properly reflected in the accounting records, resulting in an understatement of investments in construction in progress by MDL 1.1 million.

Furthermore, deficiencies were identified in the accounting and management of fixed assets. The improper classification of certain vehicles and other assets, as well as errors in determining their useful lives and calculating depreciation, affected the reported value of assets. In addition, the absence of complete records and individual identification of road infrastructure prevented the recognition of assets amounting to MDL 2.74 million. At the same time, although 13 streets owned by the ATU are registered in the Real Estate Register, only nine are separately recognised in the accounting records, creating the risk of understating the value of specialised infrastructure assets.

The audit concluded that these deficiencies are neither isolated cases nor mere accounting errors, but rather reflect weaknesses in managerial processes and the functioning of internal control mechanisms. In this context, the audit also assessed public asset management, capital investments, public procurement and the use of financial resources.

Regarding capital investments, the audit identified deficiencies in the management of the sewerage system and wastewater treatment plant construction project. Although the investment is recorded in the accounting records at MDL 11.36 million, the completed works represent only 47.2% of the contractual value, while construction has been suspended since 2022 due to the discontinuation of funding. The absence of documentation relating to the implementation stages and contract monitoring prevented a comprehensive assessment of investment management. As a result, public resources exceeding MDL 11 million remain tied up in an unfinished project that has not generated the planned social and economic benefits for the community.

In the area of public land administration, the audit found that 17 out of 21 lease agreements had been concluded without competitive public auctions, while none of the agreements was based on a valuation report prepared by a certified valuer. Consequently, lease payments were not established on objective economic grounds, with significant disparities observed for similar plots of land, where annual lease payments ranged from MDL 2,350 to MDL 20,000. Furthermore, following the cancellation of the auction for leasing a 401.72-hectare agricultural land plot, the authority failed to organise a new tender, while the land continued to be used without a valid lease agreement, resulting in estimated foregone lease revenues of at least MDL 1.1 million.

In the area of public procurement, the audit identified deficiencies in procurement planning and needs assessment. All 32 public procurement procedures, with a total value of MDL 3.4 million, were conducted without adequate planning and without sufficient supporting documentation justifying the institution's needs. The audit also identified instances where similar works, with a total value of MDL 1.3 million, were split into six separate contracts, thereby reducing transparency and competition in the procurement process.

The audit also identified deficiencies in human resource management. The local public authority contracted external service providers to perform permanent functions, including accounting services, without initiating the legally required recruitment procedures. In addition, payments amounting to MDL 150,000 for accounting and legal services were made without the acceptance certificates required under the contracts, preventing proper confirmation that the services had been delivered and accepted. The audit also identified risks of additional expenditures from the local budget arising from the implementation of a court decision concerning the employment relationship of a public official.

During the audit, the local public authority demonstrated openness and took measures to remedy part of the identified deficiencies by making accounting adjustments totalling MDL 44.41 million. These measures mainly concerned the valuation and recognition of publicly owned land, the capitalisation of investments and assets, the correction of asset values, as well as the reclassification and reassignment of fixed assets, thereby contributing to improvements in accounting records and financial reporting.

Court of Accounts’ Managers Strengthen Their Skills in Team Motivation and Organizational Culture Development

The Court of Accounts evaluated the financial reporting and public resource management by the CEC