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Conference: The role of Supreme Audit Institutions in Party Financing Control

Representative of Institute Alternative participated in the work of the Second Regional Conference of Supreme Audit Institutions, named “The role of Supreme Audit Institutions in Party Financing Control“. President of the Managing Board of Institute Alternative, Stevo Muk, presented the relations between the State Audit Institution and NGO sector, emphasising possibilities steming from the Strategic Plan of the SAI Development, and describing the cooperation mechanisms between the SAI and civil society organisations.

Conference was organised by the State Audit Institution, in cooperation with UNDP. Representatives of supreme audit institutions from the region, Parliament of Montenegro, parliamentarians’ clubs, and NGOs, also took part in the event.

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Financial Independence of the SAI and Implementation of its Recommendations

Questions of the reporter from the daily newspaper Dan:

1. Is there any possibility for an increase of the SAI’s budget?
2. Why the adoption of the changes to the Law on SAI has been postponed?
3. In your opinion, in which way the implementation of the SAI’s recommendations can be improved?

Answers of IA’s associate, Marko Sošić:

The smooth development and strengthening of the SAI is indirectly caused by the ensuring this institution’s independence, and by the change of the legal framework, which defines the way the SAI’s budget is formulated and adopted and other issues with respect to the independence in fund management and independence in human resource management.

The current legal solution allows the Ministry of Finance to randomly change the budget proposal filed by the SAI’s Senate and previously approved by the parliamentary Committee for Economy, Finance and Budget. It thus directly endangers the further development of the SAI.

For example, the budget which the Ministry of Finance approved for SAI’s work in 2012 is 20 percent lower than the budget proposed by the SAI and endorsed by the Committee for Economy, Finance and Budget.

Deliberation about this year’s budget made clear that the Ministry does not pay enough respect to the significance of the SAI, which would be demonstrated if the budget the SAI had asked for was approved. Besides the negligence of the SAI’s position, it appears that such attitude of the Ministry reflects the lack of political will for strengthening the independence and work of the SAI.

We remind that, apart from many other competences, the amendments to the Law on Party Financing assigned the SAI competences and duty to revise the financial reports of political parties. This expansion of competences was not followed by the increase of the budget. As a result, the SAI has to accomplish more while having the same amount of money or less money than in the previous years.

Adoption of the draft amendments to the Law on the SAI is a key prerequisite for the significant increase of the SAI’s budget in the upcoming period.

The draft amendments to the Law on the SAI entered parliamentary procedure in September 2011. The key novelties, brought by the draft amendments, aim at increasing the SAI’s organizational, functional and financial independence from the executive power. Their adoption, however, is hampered after the Committee for Constitutional and Legal Affairs issued negative opinion about the constitutionality of provisions, treating the SAI’s financial independence.

Additional effort is needed for the suitable solution to be found, which would be in line with the Constitution, while simultaneously offering higher level of the SAI’s financial independence from the executive power.

Institute Alternative launched an initiative in front of the Committee for Economy, Finance and Budget and Committee for Constitutional and Legal Affairs for holding consultative hearing on the issue of constitutional and legal framework of the SAI’s financial independence. By bringing to the table experts and representatives of relevant institutions, The initiative tries to build a consensus about the key solutions and create conditions for final adoption of the amendments to the Law on SAI.

The fact is that the draft amendments have been filed by the MPs themselves – members of the Committee for Economy, Finance and Budget. Therefore, they should employ all the mechanisms envisaged by the Parliament’s Rules of Procedure in order to find a solution to the current problem.

The audit subjects should take over the responsibility for the implementation of the SAI’s recommendations. Also, the Ministry of Finance, under the watchful eye of the Parliament, should take the responsibility for horizontal implementation of the SAI’s recommendations in the public sector.

The Committee for Economy, Finance and Budget, in cooperation with the SAI, should organize a thematic session or a consultative hearing to familiarize the audit subjects with the current degree of the implementation of the SAI’s recommendations, which are subsequently adopted as the parliamentary conclusions. This hearing, however, has been frequently delayed since the first half of the 2011.

The law should oblige the audit subjects to report about the activities they undertook in implementing the SAI’s recommendations. Yet, such provision still exists only in the draft amendments to the Law on the SAI, whose adoption is still pending.

The Brief Comment on Strategic Plan of the SAI’s Development

Institute Alternative presented the research report “The State Audit in Montenegro – Proposals for Strengthening the Impact” in 2010. We are pleased that The Strategic Plan of the SAI’s Development for the period between 2012 – 2017 incorporated significant number of our proposals. We also welcome the thorough approach of the SAI during the preparation of this strategic document. Self-assessment and external evaluation were significant efforts which resulted in a good text – the live document, systematizing measures aimed at removing the current deficiencies and problems, spotted by the SAI and its external subjects.

Representatives of other institutions, such as Parliament, Government, and civil society organizations should have also been included in the process of the SAI’s strategic planning, especially because the plan itself includes number of measures whose implementation is dependent precisely on the attitude of the afore mentioned institutions and organizations. In other words, for the SAI’s strategic plan to be implemented, Constitution, the Law on the SAI, the Law on Civil Servants need to be changed. Also the cooperation mechanisms with the Parliament, repression institutions, NGOs, academic institutions etc, need revision. We think that the wider consultations would results in a more concrete Strategy, more sustainable and realistic solutions, and possibly the new energy and innovative approach towards the certain development goals.

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Situation With the President of Senate of State Audit Institution

Questions of the reporter from daily Vijesti:

  1. 1. How do you comment information that the Government paid 250,000 euro to the former finance minister in order to help his defence during the trial against him in Italy?
  2. 2. Do you think that Ivanisevic, being a president of Senate of State Audit Institution, can still perform his duty in controlling the Government?

Answers of our associate, Marko Sosic:

The Law on SAI defines that nobody can exert influence over the member of the Senate during the performance of his duties, but also, the members themselves should avoid situations which might harm the reputation of this institution and cause a doubt in its independence and objectivity.

According to the Code of Ethics of civil servants in SAI, servant, or someone related to him or her, cannot participate in business or financial transactions or actions which might harm the public interest or reputation of the institution, or give an impression that they are in the conflict between their personal and public interests. They are also not allowed to use their working position and competences to obtain certain advantages and privileges. The SAI’s employees should protect their independence, by avoiding receiving gifts, expressions of gratitude, and any kind of relations which might influence, endanger, or threaten the audit’s ability to function indepently and to be percieved accordingly. Also, they must not use their position for private purposes, and they must avoid all the relations which include the risk of corruption or which might cause doubt in their independence and objectivity. Within the SAI, no Code of Ethics for the members of its Senate was adopted, although it was recommended by SIGMA. SAI itself recognised this problem, by including it in the Strategic plan for the development of SAI for the period between 2012 and 2017.

If the information from the daily Vijesti is correct, no matter of the amount of money allocated, the intention with which it was given, and no matter of whether it will be compensated by the third party or not, situation in which the president of the Senate is a user of the state’s financial aid might be harmful in terms of the public trust in State Audit Institution, which is, on the other hand, extremely important for the success of its work and influence at the public finances system.

As a person representing and advocating recommendations of this institution, president of the Senate has bigger responsibility in respecting the afore-mentioned rules of Code of Ethics, in their widest sense.

Here, the issue of systemic regulation of the state aid to the state and public officials, which are tried in front of domestic, foreign or international courts, is being opened. This issue is not regulated by the specific acts. On the contrary, it functions at the request to the Government and subsequent approval based on the budget reserves. That’s not the good way and we think that this issue should be regulated exclusively with repsect to the persons who have been finally acquitted.

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The Law on Parliamentary Inquiry Should Be Adopted Urgently

Institute Alternative appeals on MPs of Parliament of Montenegro to amend the Law on Parliamentary Inquiry as soon as possible. Refusing to support these amendments means refusal of the support to the strenghtening of the Parliament’s control function, because it is certain that the recently former inquiry committee cannot perform the task asigned to it unless its comepetences are more closely defined by the law. Inquiry comittee for collecting facts and information about the corruption in the privatization of Telekom of Montenegro will face obstacles in collecting information because of the imprecisely defined competences, the lack of access to classified information and the absence of legal provision which would oblige state officials to be interrogated in front of the Committee and sanction them in the case of disobedience to the calls for interrogation or in the case of giving a false testimony.

The aforementioned issues should be regulated by the law as soon as possible so the current parliamentary inquiry will give results, and the inquiry committee could proceed with its work smoothly. The changes of the Law on classified information are also needed so that the members of the inquiry committee will be granted the access to classified information.

It is worrying that the inquiry committee has so far held only one, constitutive session, on March 9, especially when bearing in mind that it received a difficult mandate to perform its task by October 1. Given that this is the first parliamentary inquiry in the last ten years, members of the inquiry committee should demonstrate additional responsibility and give contribution to the parliamentary inquiry becoming a powerful oversight instrument over the work of Government, state bodies institutions, and a control mechanism to be employed more often.

As we have already highlighted in our analysis “Parliamentary inquiry in Montenegro – Control mechanism without political support”, the special Law on parliamentary inquiry is needed to regulate in more details the scope of competences of the inquiry committee, its formation, organization and functioning, budget, conducting of inquiry, reporting to the Parliament. Consequently, this control mechanism would be strengthened.

Dina Bajramspahić

Public Policy Reseracher

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Seminar: Rule of Law in Montenegro

Institute Alternative President of Managing Board Mr Stevo Muk participated on 24 May in the lunch Seminar on recent developments in the area of Rule of Law in Montenegro, organized by Netherlands permanent representations to the EU in Brussels. Mr Muk participated in discussion on the current state of play in the areas of Rule of Law, Fight Against Corruption, Media Freedom and Anti-Discrimination policies. Debate was particularly topical in light of the publication by the European Commission of its assessment of progress in Montenegro.

Invited were delegates from the 27 EU member states participating in the working groups COWEB (Western Balkans) & COELA (Enlargement) of the Council of the European Union, as well as the EC and EEAS.

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Problems with concessions

A year after the amendments to the Law on concessions entered the parliamentary procedure, Montenegro still doesn’t have a completed and adequate legal framework in the field of public-private partnerships and concessions. The team in charge of making the amendment proposals was formed by the decision of Commission for Economic Policies and Financial System of Government of Montenegro in June 2011 and it was tasked with the submitting a proposal of the amendments to the Law on Concessions to the Government by the end of July 2011. However, the work at the changes of law has been stalled with the explanation that it was more meaningful to introduce a single legal framework for both public-private partnerships and concessions.

The Government’s announcements that Montenegro was entering the “phase of public-private partnerships”, as well as the numerous deficiencies of the Law on concessions from 2009 (lack of synchronization of provisions about competitive dialogue, procedures, certain definitions etc with the EU directives) and of the Law on private sector participation in conducting public services from 2002 should accelerate the adoption of new legal provisions. The same conclusion can be drawn based on the large number of cancelled concession contracts which, according to the work of Commission on concessions, increased even more during the first quarter of 2012.

Nevertheless, the described dynamics of the law adoption in the field of public private partnership and concessions demonstrates that it is not at the top of Government’s priorities.

It is necessary to point to the difficulties in implementing the current provisions of the Law on concessions. According to the Law, Commission on Concessions is obliged to make and regularly update the register of concession contracts at its Internet presentation. With the two years delay in completing this register, Montenegrin public is not in a position to have an insight into the list of concession contracts since the Commission’s website is out of order.

New legal provisions should extend the content of the Register on concession contracts and public private partnerships to include also the debt and repayment plans. The public should have in insight into the contracts based on which a certain concession was granted or the public private partnership formed, including the financial reports about the realization of concessions and public private partnerships. In that way, the transparency of the entire process and the quality of contracts would increase.

Jovana Marović
Research coordinator