Panel discussion “Control of Asset Declarations and Conflict of Interest – Reforms or Status Quo?” was organised within the project “Towards Qualitative Signs of the Anti-corruption Efficacy”, financially supported by the Embassy of the Kingdom of the Netherlands.
The subject of this analysis is security and defence procurement - confidential procurement. Key findings indicate that spending of public money on confidential procurement in Montenegro goes far beyond the eyes of the public and that even the basic information on these procedures, such as the documents based on which they are carried out, are often not publicly available.
Confidential procurement involves purchasing of goods, works, and services, such as weapons, ammunition, and other special equipment used for protecting the security of the state and its citizens. However, apart from being confidential, these procurements are also public. This is true primarily because they are procured using public money, i.e. the money of citizens, but also because concluding procurement contracts between the state, i.e. public authorities, and the companies which produce this type of goods, services, and works are public, state affair. Therefore, the nature of confidential procurement is somewhere between public and confidential - the public needs to know how this money is spent and whether it is well managed, but there is also the need to protect sensitive information about these procedures that could potentially jeopardize the security of the state and its citizens.
Despite frequent amendments to the rules governing this area, it is still insufficiently regulated and far from being in compliance with the EU regulations. The key shortcoming lies in the fact that these legislative solutions make the conceptual difference between the notions of “confidential procurement” and “security and defence procurement”, which also negatively affects the regulation in this area. The first is stipulated as an exception to the implementation of the law, without explanation on the basis of which law will they be implemented, while the second is regulated under the Law on Public Procurement, although insufficiently. The legislation currently in force regulates this area too succinctly. Namely, the Law on Public Procurement dedicated only two articles to this topic while the envisaged bylaws are not yet adopted, although the deadline for their adoption has passed.
Due to insufficient regulation of this area, the contracting authorities claim that they do not conduct confidential procurement as of May 2015. Despite this, expenditure for confidential procurement still exists, allegedly, on the basis of payment of obligations from previously concluded contracts. This spending for the Ministry of Interior (MoI) and the National Security Agency (NSA) amounts to almost eight million EUR for the past five years, while the Ministry of Defence refuses to provide data on its expenditure on confidential procurement.
Reports of the State Audit Institution (SAI) are a rare testimony of the manner in which contracting authorities conduct confidential procurement procedures and show that reduced transparency characteristic for these procedures is being misused. Namely, MoI, Ministry of Defence, and the NSA used these procedures to procure goods, services, and works whose purpose and essence is not the safety of the state and its citizens, such as car tires, air tickets, computer equipment, and official vehicles.
In order to improve efficiency and control in this area of public spending, it is primarily necessary to equate the notions of “confidential procurement” and “security and defence procurement” under the Law on Public Procurement. Additionally, it is necessary to precisely define the notion of “security and defence procurement” under the same law and to regulate in detail the procedures which can be applied, the method of collecting and evaluating bids, planning and reporting, and protecting the rights of bidders. The legal framework should ensure compliance with the general principles of competitiveness, equal treatment of all participants in the process, and non-discrimination, as prescribed under the European Union directives regulating this area.
Councillors in Local Assemblies Not to be Heads of Public Companies and Institutions
We call on the MPs not to support proposed amendments to the Law on the Prevention of Corruption, which foresee exclusion of councillors in local assemblies from the application of restrictions in the performance of public functions in public companies and public institutions, submitted by the representatives of the Democratic Party of Socialists, Daliborka Pejović, Marta Šćepanović, Petar Ivanović and Momčilo Martinović, on the initiative of the Union of Municipalities.
The proposed amendments seek to amend Article 12 paragraph 2 of the Law on the Prevention of Corruption which stipulates that a councillor shall not be a president or member of the management body or supervisory board of public companies, public institutions or other legal persons owned by the state or a municipality.
Specifically, it attempts to legalize the situation of, for example, DPS councillors in the Assembly of the Capital Podgorica, who in parallel with this public function also exercise managerial functions in public companies and institutions, contrary to the valid Article 12 of the Law on the Prevention of Corruption.
Adopting of proposed amendments is particularly problematic because it would undeniably place councillors in conflict of interest as they would control companies and institutions which they lead. Namely, the Law on Local Self-Governments prescribes consideration of work reports of public services founded by a municipality as one of the competencies of Local Assembly (Article 28, paragraph 1, item 24). Hence, this would undermine control mechanisms of local assemblies, as councillors could not be impartial in considering the aforementioned reports of public companies and institutions headed by them.
We recall that previously we had a situation in the National Parliament in which MPs who at the same time headed agencies, institutes or public companies, defended their own reports in front of fellow MPs or had discussions with state auditors, but this possibility has been recognized as a conflict of interest and abolished. Even though, according to the DPS logic, the ruling majority MPs do not have much work in controlling the executive on the national level, let alone the local one, persons who lead local public companies and institutions still have to be held accountable for their work by a local assembly.
Therefore, by adopting the proposed amendments, the MPs would be allowed to receive compensations from the public budget based on performance of two public functions that are in conflict of interest. In addition, single and comprehensive definition of a public official from the Law on the Prevention of Corruption that had been sought since 2004 in Montenegro would be dissolved by the proposed amendments, and councillors would be excluded from this definition as a special category of public officials.
We call on the MPs to bear in mind the aforementioned during their consideration of proposed amendments, as well as the publicly available Opinion of the Agency for the Prevention of Corruption on the currently valid Article 12 of the Law on the Prevention of Corruption, which states that ” under no circumstances can a councillor be a president or member of the management body or supervisory board of public companies, public institutions or other legal person owned by the state or a municipality”.
President of the Managing Board
Despite the Government’s praises, detailed analysis of the European Commission’s Montenegro 2018 Report shows that the grades for progress are worse in the last report than in the previous two (2015 and 2016).
Take a look at the grades for each chapter as well as our estimate of average grade for each year:
State Audit Institution cannot carry out the tasks in its current composition, legal amendments in the area of public procurement caused stagnation, while civil society should be more involved in the monitoring of Public Finance Management Reform Programme – these are the conclusions from the European Commission’s Report for Montenegro.
By fulfilling the Chapter 32 – Financial Control, Montenegro has made limited progress and is moderately prepared in this period. However, comparing to results achieved in 2015 and 2016, when there was good progress achieved in this chapter, now Montenegro backslides. In Chapter 32, areas where the good progress was made are internal and external audits.
When it comes to internal audit, noted progress is reflected in the fact that most public sector bodies set up internal audit. Progress is also reflected in strengthening the capacity of internal auditors by their attending of the training courses, aligned with international standards of auditing. Most internal audit unit have adopted strategic and annual internal audit plans. The number of recommendations and the level of their implementation are increasing. Although most public sector bodies have set up internal audits, they don’t meet the required legal requirements. The European Commission doesn’t further elaborate on this state of affairs.
When it comes to external audit, the capacities of State Audit Institution remain problematic, as the European Commission estimated, so the SAI cannot perform a large amount of work in its current composition. Some of the innovations in the SAI’s work, are noted in the report, and relate to the adoption of the new SAI Strategic Development Plan 2018-2020. When it comes to audit quality, SAI has adopted the methodology from auditing Final Budget Account of Montenegro, a new manual for auditing success, as well as guidelines for auditing quality control. The compatible ISSAI methodology, which auditors need to handle in their work, is not yet fully developed. When it comes to the impact of state audit, the European Commission points out that the SAI rarely submits individual reports to Parliament, and refers to the fact that only 5 of 41 reports were submitted to Parliament in 2016, while on the other hand there is a limited use of SAI’s report by the Parliament.
In addition to internal and external audit, in the area of financial control, ie public finance management, the European Commission also evaluates Public Internal Financial Control (PIFC). Within this area, Commission recommends further efforts to strengthen the managerial accountability of subordinate bodies in the public sector, as well as to work on medium-term strategic planning that is not linked to the government’s work program. Annual plans and reports are focused on the activity process by itself, but not on aims and measurable indicators. Internal financial control is not equally represented, although several institutions have adopted annual internal financial management and control action plans. The report states that Central Budget Inspectorate doesn’t have enough staff and is not fully operational.
The amendments of the Public Procurement Law from June 2017 are not harmonised with EU rules, so the European Commission noted backsliding. The amendments are adopted without public consultation, don’t recognise low-value procurement, as well as defence and security procurement, and introduce several exceptions which are not recognised by EU legal principles.
In this report, the European Commission noted the lack of systematic involvement of civil society in monitoring the implementation of the Public Financial Management Reform Programme 2016-2020. The European Commission also noted that budget units do not proactively publish budget information, and that it is necessary to improve budget drafts and budget accounts in terms of quality and comprehensiveness. In addition to highlighting the progress made by European Commission on budgetary transparency in Montenegro, it also emphasises the need to further strengthen transparency through Montenegro’s participation in the Open Budget Index as well as the development of a “citizen budget”.
Institute Alternative Team
‘’The Capital City Podgorica is establishing good cooperation with NGOs”, but only on paper, as confirmed at yesterdays panel discussion ”Strong Communities”, organized by the Center for Development of NGOs.
Yesterdays event, realized as a forum for citizens and marked by a discussion on the topic of civic activism, sought to answer the question: How can we, as a civil society, cooperate with local authorities and how can citizens affect decision-making in their city? Unfortunately, the answers and complaints came only from citizens and non-governmental organisations, while local authorities remained silent. The Capital City representatives yesterday confirmed that they do not know the ways citizens can be animated to participate in the decision-making process, but only know how to promote projects and investments in the Capital City.
Representative of the Local Administration Secretariat, said yesterday that the Capital announced four public invitations for cooperation and partnership with non-governmental organizations. The Institute Alternative applied to one of these four invitations and became part of the Working Group for drafting a decision on the Capital City budget for 2018. Apart from this formality, the working group did not function, and the draft of the budget was delivered to us at the same time it was published for the purposes of public debate.
According to the Secretary of the Secretariat for Finance of the Capital City, such working group ‘’did not and could not exist”.
Institute Alternative has already warned the public of this kind of pretence of cooperation by the Capital City, when our participation in the working group was stultified, and we were faced with a fait accompli.
This simulation of cooperation has shown us that there is no communication and coordination among the local administration bodies, when it comes to cooperation with the civil sector. Also, it became clear that working groups do not operate for the help and constructive cooperation with civil sector, but for raising the statistics on the openess of local authorities, in particular the Local Administration Secretariat and the Secretariat for Finance, as well as that there has not been any accountability for this behavior.
When asked if she thinks that the goal is fulfilled by publishing an invitation for the working group by the Local Administration Secretariat, although the working group did not exist, we were left without answer from the representative of the Local Administration Secretariat.
This second attempt to simulate cooperation between the Capital City and the Institute Alternative is concerning and makes us wonder – is there any use in applying for public invitations which the Capital City uses for the mere statistics, regardless of the fulfillment of the goal itself? The goal in this case is cooperation between local authorities and a non-governmental organization on an act that is essential for the citizens of our city – the annual budget.
Yesterdays discussion also showed us the lack of knowledge and ideas among local administration officers on how to raise the interest among citizens in the decision –making process on the local level.
We expect more from our local administrations, especially from the Capital City, and we hope that instead of empty phrases, the principles of openness and public participation, will be put into function of essential cooperation between local authorities and citizens.
Public policy researcher