Financial Audit Municipality of Istog for the year ended 31 December 2007C.Compliance with laws docx

Financial Audit
Municipality of Istog for the year ended 31 December 2007




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C. Compliance with laws and regulations
Finding # 8

By inspection of revenues earned during 2007 from kindergarten we found
that all these revenues (EUR 20 per child) were collected in cash. Treasury
instructions forbids cash collection of revenue each exceeding EUR 10.

Recommendation
Referencing to the above cases of cash collections we recommend
management to strictly apply the related Treasury Instructions.

Finding # 9
The municipality’s financial statements were not prepared as requested by the
Administrative Instruction 2007/08 and were not sent to the Treasury Unit
within the Ministry of Economy and Finance.

Recommendation
We recommend the management of the Municipality to establish a system for
preparation and presentation of the financial statement which will be in
accordance with the Administrative Instruction 2007/08. In addition we
recommend the management to provide the Treasury Department within the
Ministry of Economy and Finance with a copy of its financial statements for
the relevant year within 30 days after the conclusion of the fiscal year, strictly

following the Administrative Instruction 2007/08.

Finding # 10
The Department for Geodesy, Cadastre and Property collects revenues from
the following activities: issuance of certificates, field measurement,
registration of real estate, as well as registration of property and transfers.
Related fees applied for some of these activities are not in accordance with the
Administrative Instruction no. AKK 2006/01.

Recommendation
We recommend the management to harmonize fees from cadastral services
with the provisions of AKK Administrative Instruction no. AKK 2006/01.

Finding # 11
By inspection of source evidence related to the contract for office supply from
supplier Meshari, we found that contract conditions have not been followed.
This represents non-compliance with article 7.2 of the financial rule and
Treasury Instructions 02, Use of Public Funds.

Recommendation
We recommend the management to strictly follow and implement the
contracts terms and conditions and to review the supply documentation before
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Financial Audit
Municipality of Istog for the year ended 31 December 2007

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any payment is made as required by the article 7.2 from the financial rule and
Treasury Instructions 02, Use of Public Funds.
Finding # 12

By reviewing the tender documentation “procurement of food and hygiene
material” in the approximate amount of EUR 38,000 we found that there were
no three responsive bids. Work licenses of two out of three bidders were
expired. By this, the Municipality has breached section 30A.4 of Law on
Public Procurement 2003/17 and regulation 2007/20. If there are no three
responsive bidders the procurement officer should initiate new procurement
procedures as requested by the PPL.

Recommendation
The Municipality’s management is strongly recommended to apply section
30A.4 of Public Procurement Law 2003/17 and regulation 2007/20.

Finding # 13
By inspection of source documentation related to tender procedure for
construction of the road Gurakoc – Istog we found certain irregularities such
as:
- The competitor who was awarded the contract has signed it before
completion of all tender procedures, which is not in compliance with the
PPL 2003/17 and the regulation 2007/20.

Finding # 14
By inspection of source documentation related to completion of tender
procedures for building of town roads – Istog and the replacement of windows
from the gymnasium “Haxhi Zeka” we found certain irregularities such as:

- The tender dossier requests that before signing the agreement with the
winning entity, the winner awarded with the contract must pay an
execution insurance fee amounting to 10% of the contract value with a
validity of 60 days after completion of the work;
- The technical acceptance was in April 2008 and the insurance was only
valid till 31 December 2007;
- The contract should have been completed within 48 days of signing the
contract – 02 October 2007.

The Municipality has breached section 60.5 from the Public Procurement Law
2003/17 and regulation2007/20.

Recommendation
We recommend the Municipality to strictly follow the PPL 2003/17 and
regulation 2007/20.


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Financial Audit
Municipality of Istog for the year ended 31 December 2007




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Finding # 15

By inspection of source documentation related to completion of tender
procedure for subsidizing project “Organizing Skiing Classes” by the Direcor

of Culture, Youth and Sport, certain irregularities were identified. Namely, the
Procurement Officer did not apply adequate procedures and the economic
operators were not provided with the request for the contractor’s price
quotation. Thus, by being denied an effective competition in the respective
tender, the economic operators have been discriminated. This case is not in
compliance with the sections 30, 35.3, 35.6, 35.7, 35.8, and 35.9 of PPL
2003/17 and regulation 2007/20.

Recommendation
We recommend the Municipality to strictly comply with sections 30, 35.3,
35.6, 35.7, 35.8, and 35.9 of PPL 2003/17 and regulation 2007/20.

Finding # 16
By inspection of source documentation related to agreement of “Asphalt of
City roads” we found that there is difference between amount stated in
contract (EUR 182,711) and reported one (EUR 168,739) in the annual report
for completed contract during the 2007. As a result, the annual report
submitted to the APP was not accurate.

Recommendation
We recommend the management to comply with the respective laws and
regulations in relation with preparation of required reports and budgets.

Finding # 17
Based on the procedures performed over certain supply transactions, we found
a case where services for car registration, insurance and technical control, are
rendered from a suppliers with no procurement procedure (AD Burreli,
Dukagjin).

Recommendation

We recommend the management to comply with the respective laws and
regulations in relation with procurement.





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Annex I
Municipality of Istog
Financial Statements for the year ended 31 December 2007

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Annex II
Municipality Management’s Comments



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Finding
No
Municipality Management Comment Auditors Response
Part A
#1
We inform you that auditor’s findings for 2007 mentioned
on point no VII under A where you concluded non
reconciliation of revenue from license work on amounting of
2,587 Euro between client sub ledger and free balance.

We inform that this non reconciliation amounting of 2,587
Euro has flow as a consequence that some owner of business
after they done payments for wok license, they didn’t bring
payment receipt for evidencing, and for this reason in non
reconciliation with free balance, because the data in free
balance are taken from bank reports, so the accurate data are
from free balance.

Municipality agrees with the
auditor’s findings and
recommendation.
12 -During the procurement it was fully applied the LPP, and
Article 30 A.4. All three bids were from responsible
companies, had valid licenses in the time of biding.
The tender was closed date: 03.09.2007, all three licenses
had validity within the tendering term:
-The first biding company “Burimi-N” has the license
expiring date after closure of tender deadline: 19.04.2008.
-The second biding company “Jaffa” has the license expiring
date on 18.03.2007- but by Procès-verbal no. 36/07 date:
12.04.2008 the license was prolonged until: 18.03.2008 ( this
process has a total validity)
-The third biding company, “Rina”- the license of this
company expires on 24.09.2007, and by this we can
conclude that by the closure all three companies had valid
biding documents (especially the work license related to
your remarks). Attachment- The form about the requested
documents, tender opening minutes (where it is stated the
opening and closing date) and all documents from three
biding companies. It was applied in total the article 60.5 of

LPP 2003/17 and regulation 2007/20.

The Municipality agrees that
during the auditors filed work no
related source evidence was
submitted to them.
13 Into our evidence it doesn’t appear any procurement named
Gurakoc-Istog and because of this we were not able to give
any comment.

It has to deal with project
“Ndërtimi i trotuareve ne
Gurakoc”.
14 Tender “Building town roads”- has 10% execution
insurance. Neither banks or insurance companies can issue a
bank guaranty without the evidence for contract signing-
therefore the insurance was performed after contract signing.
Execution insurance means giving a guarantee on work
completion – and not insuring the works after completion.
Both projects were completed within the work deadline. -
“Granit”-shpk- execution insurance valid until 30.12.2007,
whereas the report on work completion is on 15.12.2007 and
17.12.2007. Whereas regarding the procurement
“Replacement of windows from the gymnasium “Haxhi
Zeka”, we would like to inform that “A-Plast” has performed
the execution insurance until 07.02.2008, whereas work
completion by final report was on 17.12.2007 (value of 30
000 Euro, whereas GTZ participated for the other part and
the invoice is dated: 11.01.2008) thus work was completed
two months prior to execution insurance expiry.

The Recommendation to the
municipality regarding this finding
remains.
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It was respected in total Article 60.5 LPP 2003/17 and Reg.
2007/20. (your dates do not match with documents in tender
files).
Please find attached acceptance reports, payments and bank
guaranty – for both projects.

15 Procurement Office in moment when vehicle commitment is
done in module approval-expenditure is not dealing with
this. Procurement Office is dealing with means
commitments which are done on purchase module.
As per Instruction for use from procurement officials-
Purchases (maj 2006), with purchasing module are
committed: Goods and Services, and Capital expenditure.
We attach instruction.

The Recommendation to the
municipality regarding this finding
remains.
16 Contract value of this contract is: 182 711 Euro. All works
were completed on December 2007. Because of fund lack
for the entire project the remaining of 13 971 Euro was
carried to 2008. Therefore the report submitted to PPA states
that the foreseen value is 182 710.00 euro, whereas contract
price is 168 739.00(this amount was paid in 2007 therefore
the report contains the contracts paid during that year. The

remaining amount of 13 971 euro is carried to 2008 and this
is why it is not part of expenses evidence for 2007). All
works were completed in 2007 but because of the payments
it was necessary to modify the acceptance report for the
payment carried to 2008.

Municipality agrees with the
auditor’s findings and
recommendation.
17 There is no procurement – competition for procedure on
removing custom duty because there are unique custom
tariffs and also unique and fixed administrative tax on car
registration.
The Recommendation to the
municipality regarding this finding
remains.

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Republika e Kosovës Kuvendi i Komunës-Isto
g

Republika Kosova Skupstina opstine-Istok
Republic of Kosovo Municipality-Istog









Annual Financial Report
For the year ended 31 December 2007






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DECLARATION REGARDING PRESENTATION OF FINANCIAL STATEMENTS

To: Lulzim Ismajli, Director of Treasury
From: Permanent Secretary (Chief Executive Officer)


In our opinion, the attached consolidated financial statements and the notes to these statements for the year
ended on 31 December 2007 have been prepared in accordance with the International Public Sector
Accounting Standards “Financial Reporting Under the Cash Based Accounting”, adhere to all reporting
requirements of the Law on Public Finance and Accountability 2003/02 and are based on properly maintained
financial records.

This declaration is provided in connection with the presentation of the Kosovo General Budget financial
statements of the budget organizations for the year ending on December 31, 2007.

We confirm, to the best of our knowledge and belief, that:
There have been no irregularities involving management or employees which could have had a material effect
on the financial statements.

The information provided and presented in the financial statements regarding the identification of funds and
their expenditure related to the Kosovo Consolidated Budget is complete and accurate.
The information regarding collection of revenues is accurate.

There are no bank accounts related to the KCB other than the bank accounts specified in the financial
statements and this specification is complete and accurate as of December 31, 2007.

There has been no non-compliance with requirements of regulatory authorities that could have a material
effect on the financial statements in the event of non-compliance.

There are no (legal) claims pending that could have a material effect on the financial statements.
All liabilities, both actual and contingent, and all guarantees given to third parties have been recorded and/or
disclosed, as appropriate.

All loans to external parties have been recorded and/or disclosed, as appropriate.
There have been no events subsequent to period end which require adjustment of or disclosure in the financial
statements or Notes thereto.

Municipalities must send their reports to the Budget and Finance Committee in the Municipal Assemblies.

In our opinion, the attached consolidated financial statements give a true and fair presentation of the finances
and financial transactions for the year ended on 31 December 2007 of Istog Municipality




Date:
Signature and stamp: ________________

Permanent Secretary (Chief Executive Officer)


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III

Section 9. Budget Report

Budget Report including Donor Grants



Original
Budget Reviewed Budget Final Budget Differences Differences Differences
Description Rreg.2006/61 Admin.Dir.2007/xx KFMIS in % in % in %
a b c d e=c/b f=d/b g=d/c
Total Budget 2007 3,413.916 3,512.00 4,014.02 107.07 117.58 114.29

-
General Grant 291.916 2,844.00 3,084.50 100.39 105.85 108.46
Own Source Revenues of 2007 500.00 500.00 608.00 100 121.60 121.60
Own Source Revenues Carried Forward
from 2006 - 168.00 229.91 - - 136.85
Internal Grants - - 59.99 - - -
External Grants - - 31.61 - - -

Budget Report

Original Budget Reviewed Budget Final Budget Differences Differences Differences
Description Rreg.2006/61 Admin.Dir.2007/xx KFMIS in % in % in %
a b c d e=c/b f=d/b g=d/c

Total Budget 2007 3,414 3,512 3,923 103 115 112

Wages and Salaries 2,295 2,321 2,322 101 101 100
Goods and Services 438 533 671 122 153 126
Utilities 118 124 151 105 128 122
Subsidies and Transfers 70 63 99 90 141 157
Capital Investments 493 471 680 95 138 144

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