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Audit activity Ministry of Infrastructure and Regional Development in the sight of the Court of Accounts

  • 30.05.2023
  • 622

The Court of Accounts of the Republic of Moldova, on May 30, examined the Audit Report on the consolidated financial reports of the Ministry of Infrastructure and Regional Development (MIRD) concluded on December 31, 2022.

In 2022, according to the MIRD Action Plan, 33 strategic objectives reflected in 234 actions were planned. Of the total number of actions, 125 have been implemented, 85 are being implemented, and 24 actions have not been implemented.

The audit certifies that the level of achievement of the Action Plan in the reference period was 53%. The procrastination or non-implementation of the 109 actions was caused by several factors, among which: the energy crisis, the refugee crisis, the insufficiency of human resources and the high turnover of personnel, at the consolidated level, out of 550 positions approved in the personnel states, 381 people were actually employed during the management period. Under these conditions, there is a 70% job occupancy rate and an average staff turnover rate of 23%.

To carry out the activities established in the strategic planning documents, the MIRD budget was specified in the amount of 6202.4 million lei, of which 2709.3 million lei or 43.7% represent financial means from external sources.

The capitalization of budget allocations for the audited period constituted 4795.6 million lei, which represents 77.3% of the total specified allocations. The lowest capitalization of the specified financial resources was recorded for those from external sources related to investments in progress for road infrastructure, from the National Regional and Local Development Fund, but also from the Road Fund. The reduced capitalization was caused by the slow progress of works on some contracts, but also the lack of financial capacity of some contractors.

In the opinion of the Court of Accounts, with the exception of the effects related to the issues presented in the Basis for the qualified opinion, the financial reports, in all material respects, give a true and fair view, in accordance with the applicable financial reporting framework.

The qualified opinion was determined by the fact that the information in the consolidated financial reports was distorted at an aggregate level by overestimating non-financial assets and underestimating expenses by about 48 million lei, the financial result of the management year being affected to the same extent.

Thus, the PI National Office of Regional and Local Development did not fully transmit to the beneficiary communities the value of the investments made with the aim of improving the conditions of activity in the educational units, although the provisions of the regulatory framework state that ,,if the central or local public authority, from the budget funds, carries out capital repair works of fixed assets, which are on the balance sheet of another authority, the volumes of the works carried out during the budget year are transmitted until the end of the management year to the authority whose balance sheet the respective fixed assets are located". A similar situation also occurs in the case of capital repair works carried out by the Technical Supervision Agency in the administrative building belonging to another public entity. This fact, at the aggregate level, overvalued the group of accounts related to buildings by 20.84 million lei.

We mention that in 2022, the PI National Office of Regional and Local Development signed documents transferring the investments made to the beneficiary communities in the amount of 174.32 million lei out of a total of 191.74 million lei, the previous recommendation of the Court of Accounts being implemented in a proportion of about 90%.

The audit pointed out that at the present moment, the value of public property roads and lands is only reflected in the accounting records of the SE State Administration of Roads without being reflected in the accounting records of the specialized central public authority, the Ministry of Infrastructure and Regional Development, or the Public Property Agency, as founder.

In order to harmonize the provisions of the applicable regulatory framework and the fundamental accounting principles, in order to ensure full control over the public property of the state at the level of the specialized central public authorities, it is necessary to inventory and fully reassess the public property roads with their appropriate accounting. On 31.12.2022, the value of roads and public lands reported by the SE State Administration of Roads constitutes 20,464.37 million lei and 16.67 million lei, respectively.

With reference to the financial means from the Road Fund, the audit team mentioned the fact that they are allocated to the Ministry of Infrastructure and Regional Development to the group of accounts "subsidies", later being administered by the SE "State Administration of Roads" which does not have the status of a budgetary institution, but is responsible for the implementation of infrastructure projects and road maintenance through joint stock companies.

At the same time, based on the purpose and destination of the mentioned financial means, they do not correspond to the "subsidies" account group because they do not represent payments made to manufacturing or service-providing entities with the aim of influencing the production process or delivery prices.

The audit mentions that although the applicable normative framework expressly provides that the conclusions of the Agency for Technical Supervision regarding the quality control of the constructions carried out be recorded in the minutes of reception of the works, it is denoted that these conclusions are missing in 17 minutes of receipt of public property road construction/reconstruction works, out of the 20 registered by the SE State Road Administration in 2022. This situation generates an additional risk of non-supervision of the quality of the works and/or the constructions carried out, which, as a consequence, may condition the bearing of additional expenses. The total value of the works received in 2022 is 4705.45 million lei, which represents the most significant part of the investments in progress made by the MIRD.

According to the framework loan agreement between the Republic of Moldova and the Development Bank of the Council of Europe, the Implementation Unit of the Housing Construction Project for Socially Vulnerable People II initiated construction works at the housing block in Rezina in 2017 (the value of the investment is 28.70 million lei) and at the residential block in the city Cimișlia in 2018 (the value of the investment is 15.78 million lei). Until now, for various reasons, contrary to the provisions of the initial joint venture contracts, the works have not been completed, and the residential blocks have not been put into operation. Therefore, there is a delay in the execution of the mentioned works, which, up to the present moment, has not contributed to the achievement of the purpose of the granted loan and has not improved the living conditions for people with low incomes from different categories in a timely manner.

The Ministry of Infrastructure and Regional Development has established an internal managerial control system that ensures an average level of functionality and effectiveness of key controls, some gaps being identified that contributed to issuing a qualified opinion for the 2022 budget year as well. The internal audit subdivisions within the MIRD, but also of the subordinate entities, were supplemented at a very low level, which, as a consequence, deprived the leaders of an instrument that ensures prudent risk management and contributes to the improvement of internal managerial control.

The Court of Accounts of the Republic of Moldova, on May 30, examined the Audit Report on the consolidated financial reports of the Ministry of Infrastructure and Regional Development (MIRD) concluded on December 31, 2022.

In 2022, according to the MIRD Action Plan, 33 strategic objectives reflected in 234 actions were planned. Of the total number of actions, 125 have been implemented, 85 are being implemented, and 24 actions have not been implemented.

The audit certifies that the level of achievement of the Action Plan in the reference period was 53%. The procrastination or non-implementation of the 109 actions was caused by several factors, among which: the energy crisis, the refugee crisis, the insufficiency of human resources and the high turnover of personnel, at the consolidated level, out of 550 positions approved in the personnel states, 381 people were actually employed during the management period. Under these conditions, there is a 70% job occupancy rate and an average staff turnover rate of 23%.

To carry out the activities established in the strategic planning documents, the MIRD budget was specified in the amount of 6202.4 million lei, of which 2709.3 million lei or 43.7% represent financial means from external sources.

The capitalization of budget allocations for the audited period constituted 4795.6 million lei, which represents 77.3% of the total specified allocations. The lowest capitalization of the specified financial resources was recorded for those from external sources related to investments in progress for road infrastructure, from the National Regional and Local Development Fund, but also from the Road Fund. The reduced capitalization was caused by the slow progress of works on some contracts, but also the lack of financial capacity of some contractors.

In the opinion of the Court of Accounts, with the exception of the effects related to the issues presented in the Basis for the qualified opinion, the financial reports, in all material respects, give a true and fair view, in accordance with the applicable financial reporting framework.

The qualified opinion was determined by the fact that the information in the consolidated financial reports was distorted at an aggregate level by overestimating non-financial assets and underestimating expenses by about 48 million lei, the financial result of the management year being affected to the same extent.

Thus, the PI National Office of Regional and Local Development did not fully transmit to the beneficiary communities the value of the investments made with the aim of improving the conditions of activity in the educational units, although the provisions of the regulatory framework state that ,,if the central or local public authority, from the budget funds, carries out capital repair works of fixed assets, which are on the balance sheet of another authority, the volumes of the works carried out during the budget year are transmitted until the end of the management year to the authority whose balance sheet the respective fixed assets are located". A similar situation also occurs in the case of capital repair works carried out by the Technical Supervision Agency in the administrative building belonging to another public entity. This fact, at the aggregate level, overvalued the group of accounts related to buildings by 20.84 million lei.

We mention that in 2022, the PI National Office of Regional and Local Development signed documents transferring the investments made to the beneficiary communities in the amount of 174.32 million lei out of a total of 191.74 million lei, the previous recommendation of the Court of Accounts being implemented in a proportion of about 90%.

The audit pointed out that at the present moment, the value of public property roads and lands is only reflected in the accounting records of the SE State Administration of Roads without being reflected in the accounting records of the specialized central public authority, the Ministry of Infrastructure and Regional Development, or the Public Property Agency, as founder.

In order to harmonize the provisions of the applicable regulatory framework and the fundamental accounting principles, in order to ensure full control over the public property of the state at the level of the specialized central public authorities, it is necessary to inventory and fully reassess the public property roads with their appropriate accounting. On 31.12.2022, the value of roads and public lands reported by the SE State Administration of Roads constitutes 20,464.37 million lei and 16.67 million lei, respectively.

With reference to the financial means from the Road Fund, the audit team mentioned the fact that they are allocated to the Ministry of Infrastructure and Regional Development to the group of accounts "subsidies", later being administered by the SE "State Administration of Roads" which does not have the status of a budgetary institution, but is responsible for the implementation of infrastructure projects and road maintenance through joint stock companies.

At the same time, based on the purpose and destination of the mentioned financial means, they do not correspond to the "subsidies" account group because they do not represent payments made to manufacturing or service-providing entities with the aim of influencing the production process or delivery prices.

The audit mentions that although the applicable normative framework expressly provides that the conclusions of the Agency for Technical Supervision regarding the quality control of the constructions carried out be recorded in the minutes of reception of the works, it is denoted that these conclusions are missing in 17 minutes of receipt of public property road construction/reconstruction works, out of the 20 registered by the SE State Road Administration in 2022. This situation generates an additional risk of non-supervision of the quality of the works and/or the constructions carried out, which, as a consequence, may condition the bearing of additional expenses. The total value of the works received in 2022 is 4705.45 million lei, which represents the most significant part of the investments in progress made by the MIRD.

According to the framework loan agreement between the Republic of Moldova and the Development Bank of the Council of Europe, the Implementation Unit of the Housing Construction Project for Socially Vulnerable People II initiated construction works at the housing block in Rezina in 2017 (the value of the investment is 28.70 million lei) and at the residential block in the city Cimișlia in 2018 (the value of the investment is 15.78 million lei). Until now, for various reasons, contrary to the provisions of the initial joint venture contracts, the works have not been completed, and the residential blocks have not been put into operation. Therefore, there is a delay in the execution of the mentioned works, which, up to the present moment, has not contributed to the achievement of the purpose of the granted loan and has not improved the living conditions for people with low incomes from different categories in a timely manner.

The Ministry of Infrastructure and Regional Development has established an internal managerial control system that ensures an average level of functionality and effectiveness of key controls, some gaps being identified that contributed to issuing a qualified opinion for the 2022 budget year as well. The internal audit subdivisions within the MIRD, but also of the subordinate entities, were supplemented at a very low level, which, as a consequence, deprived the leaders of an instrument that ensures prudent risk management and contributes to the improvement of internal managerial control.

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