WITH DEFICIENCES OF VIEW
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On December 8, the Court of Accounts of the Republic of Moldova (CoARM) examined the Audit Report on the financial reports of the National Agency for Research and Development (NARD) concluded on December 31, 2020 and the Compliance audit report on the funding of research and innovation projects for 2020.
The purpose of the financial audit was to verify, in all material respects, that the financial statements of the NARD were presented in a true and fair view according to the applicable financial reporting framework and, as a whole, did not contain material misstatement. The compliance audit assessed the compliance of the research and innovation projects financing with the provisions of the normative framework, being oriented on the analysis of the procedures, internal rules related to each stage of the research and innovation projects.
NARD is the central administrative authority subordinated to the Government, which implements the state policy in the fields of activity entrusted to it, namely the promotion and financing of research, innovation and development.
The patrimony managed by NARD on 31.12.2020 amounted to 6.89 million lei or by 3.15 million lei more compared to the situation from 31.12.2019.
The actual expenses of NARD for 2020 amounted to 97.22 million lei, or with 74.83 million lei more than the previous year due to the financing of scientific research of self-management institutions.
The audit of the financial statements ended with the issuance of a qualified opinion, being determined by the deficiencies found in the financial statements, such as: affecting the balance sheet by 100.3 million lei, and expenses by 89.5 million lei, due to non-capitalization of expenses incurred by NARD when conducting scientific research by self-management institutions as intangible assets under execution with 99.1 million lei, etc.
The problems identified were caused by the shortcomings of an internal managerial control, especially of the accounting management.
During 2020, within NARD out of 34 approved personnel units, 13 units or 38% were vacant, of which 6.5 units were cumulated, being granted supplements for cumulating in the amount of 420.94 thousand lei, in the absence of the schedule of the cumulated hours. At the same time, 11 NARD employees were paid about 1.3 million lei from projects financed from external sources, of which 4 people were already cumulating positions, and 4 people were employed in several projects. Wage payments were to be calculated on the basis of actual working hours within European projects. Thus, the timetables related to the projects are of a formal nature and do not allow the audit to determine when the paid activities were carried out (during or over the working hours).
Insufficient application of internal managerial control also led to NARD's failure to ensure proper registration of public property. Thus, although NARD took over the management of the building from Crihana Veche village, Cahul district, with a value of 733.8 thousand lei, with an afferent land of 0.38 acres, the property/use rights over these goods are not registered in Real estate register according to NARD. The building is currently in a deplorable condition, with advanced physical degradation, although NARD has incurred expenses for its security in the amount of 107 thousand lei.
The authorities responsible for organizing the efficient and transparent management of public funds show an irresponsible attitude towards the functionality of the research and innovation system, the administration of the project financing process is carried out with deviations from the normative requirements, and the management of public funds is defective.
In determining the research topics, proposed for funding by NARD, the Research and Innovation Institutions did not develop procedures for selecting these topics, did not examine the impact and beneficiaries of previous research projects with related topics, did not request proposals for research topics to the public authorities and institutions working in the researched fields, as well as did not establish criteria for prioritizing the identified research topics.
NARD refused to provide the audit team with all information on the organization of the expertise, and the lack of information on how to evaluate the projects did not allow the audit to verify the competence, lack of conflicts of interest, integrity of selected experts and whether to the experts were explained the responsibilities they have within the evaluation procedure, so the audit was limited in the accumulation of audit evidence regarding the causes of these discrepancies.
The funding agreements concluded during 2020 between NARD and the Research and Innovation Institutions, although meeting the requirements of the regulatory framework, do not expressly regulate the obligations and rights of all parties involved in the research process, respectively in managing the risk of possible conflicts of interest and information leakage.
The audit established the presence of possible conflicts of interest within the Institute of Cardiology where employees with first degree kinship work: the father as the leader of the research project and at the same time having the position of management in the institution in the field of science, and the son – member of the research team and the administrator of the economic operator providing services in the research project. The audit mentions that 5 other scientific researchers from the nominated research project were active in 2020 at the same time as the indicated economic agent. This situation represents a possible leak of confidential information (trade secret) for which the Institute of Cardiology has not implemented specific regulations. The situation may prejudice the patrimonial interests of the state regarding the use of different know-how, created within the development of scientific research funded by the state, the patents on which may be registered by the respective commercial companies.
Another example of the lack of procedures for managing conflicts of interest was found when the Moldovan Academy of Sciences issued opinions on the annual reports of research projects.
The accounting policy of NARD and the Research and Innovation Institutions does not include clear procedures for accounting for the results of scientific research, which contributed to the use of financial means to finance ineligible expenses in the total amount of 8.91 million lei and, respectively, to non-compliant reporting of research project expenditures.
NARD and the budgetary institutions subordinated to the Ministry of Education and Research, the Ministry of Agriculture and Food Industry, the Ministry of Health, contrary to the provisions of the Order of the Ministry of Finance no. 216/2015, did not capitalize (as intangible assets or as intangible assets in progress) research costs amounting to 226.3 million lei, namely: NARD - 89.5 million lei, 21 research institutions under the Ministry of Education and Research, - 113.7 million lei, 5 institutions under the Ministry of Agriculture and Food Industry - 20.39 million lei and the institutions subordinated to the Ministry of Health - 2.71 million lei.
In this context, we note that the proper accounting of expenditures related to scientific research, namely their capitalization as intangible assets in progress is a simple and effective method of monitoring the impact of research and streamlining the use of public money.
The audit states that, in 2020, the funding of research and innovation projects was carried out by NARD on the basis of methods, techniques, tools and actions that do not fully and exhaustively meet the rigors of a management based on clear rules and coherent, predictable and transparent procedures. Therefore, the deviations and irregularities identified within the external public audit largely indicate an accumulation of shortcomings and dysfunctions in the work of the designated authority.
