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Audit of the Financial Statements of the National Council for Accreditation and Attestation

June 12, 2018 views 1664

The financial statements of the National Council for Accreditation and Attestation (NCAA), prepared for the 2017 budget year, were the subject of the draft Report examined on June 12th, 2018, at the public hearing of the Court of Accounts (CoA).

The purpose of the audit was to verify whether the Council's financial statements as at December 31st, 2017 are free from material misstatement and provide a true and fair view of the information presented and if the transactions have been carried out in accordance with the regulations in force.

The NCAA is an institution of central public administration in the field of evaluation and accreditation of organizations in the area of science and innovation, as well as of highly qualified scientific and scientific-didactic personnel. The management of the NCAA is performed by the president, two vice-presidents, and a scientific secretary. The NCAA is assisted by an administrative body the structure and effective limit of which is approved by Government Decision and consists of 29 units.

As a budget executor, the Council is responsible for organizing and controlling the planning, use of allocations according to the purposes set out in its own budget, performing financial operations in accordance with the general framework, maintaining accounting and reporting under the relevant regulatory framework, developing and implementing an efficient financial management and internal control system, ensuring good governance of public funds and efficient public property management, including the prevention and disclosure of errors and frauds.

In 2017, the Council managed allocations amounting to 4.1 million MDL, the level of execution being of 75.7%, the balance of unused allocations at the end of the year being of 1.3 million MDL. According to the balance sheet data, the assets managed by the Council constituted 2 million 353.4 thousand MDL, the major share of which being for fixed assets, which at the end of the year constituted 2 million 170.9 thousand MDL or 92.2%.

According to the audit findings, the NCAA did not implement a functional financial management and control system, which generated deficiencies in the management of operational processes, including financial ones, which in turn affected the reliability and credibility of the information presented in the financial reports on the 2017 budget exercise.

The activities carried out with a view to collecting sufficient and adequate evidence and the audit findings served as a basis for expressing an adverse opinion related to the Council's financial statements reported for the completed budget year.

It is shown that the financial management and control system is not functional and the Council has not taken any action to implement it, nor is the Good Governance Declaration for 2017 presented. Thus, the Working Group responsible for the system implementation was not created, the Action Plan on Implementation of the System and the Risk Register were not approved.

According to the provisions of the Accounting Law, the manager of an entity is obliged to provide an adequate internal regulatory framework for the financial-accounting field. In the context of the audit, it was found that the Council did not align its policies with the provisions of the regulatory framework and the good practices of governance of public financial resources, which determined a non-uniform application of specific principles for the recognition, assessment and accounting of accounting elements. Thus, inappropriate accounting for intangible assets in the entity's management has contributed to the distortion of information related to the NCAA assets situations.

For example, in 2016, based on a procurement contract worth 190.0 thousand MDL, the Council purchased services for creation of the Integrated Information System, including creation of a new web page, but so far it has been used the web page created in 2006. According to the contractual clauses, the Provider is obliged to provide services according to the Technical Specifications, to submit documents, elaborated under the Project, which correspond to the temporary and content specifications. The audit team noted the lack of important documents such as the project management plan, the project's timetable, the technical offer, the operating instructions, the administrator's instruction, the test report, the evidence exchange forms as experimental operation, the act of completing the drafting, the act of taking into operation, the modification proposals, the maintenance concept, the list of the functions of the software system, etc.

According to the provisions, the transfer was to be carried out on the basis of the Template Acceptance Act, approved by both parties. The Council did not comply with the contractual provisions, the transfer of funds being made on the basis of the fiscal invoice, issued 9 months before the approval of this Act. At the time of issuing the tax invoice, the services were not fully provided and the information system has not been functional yet.

The audit team was limited in obtaining substantiated evidence on the evaluation of information programs used by the NCAA at the moment. Additionally, the Council did not register the www.cnaa.md portal, which includes several modules: Information system for recording and placing in the public space of self-references and doctoral dissertations, Information system for the video-on-line transmission of PhD thesis support sessions and other NCAA events and the Database of Doctoral Leaders, Official Referees, and Specialized Scientific Council Members. Failure to register at balance, as established by the legal framework, of the respective assets caused the incomplete and untrue presentation of the information in the balance sheet.

Another deficiency found during the audit mission is the failure to substantiate the cassation of fixed assets amounting to 141.0 thousand MDL. Otherwise, the documents substantiating the cassation of fixed assets do not contain any mention of the state of the goods, as the basis for the assets’ cassation being claimed their 100% wear.

The NCAA has contracted information systems maintenance from individuals who are not developers of those systems, and the types of services provided have not been specified in the acts of receipt.

There have also been a number of other irregularities, such as:

• the unqualified and incomplete disclosure of information on fixed assets wear and  amortization of intangible assets;

• unreasonable reporting of the stock of specially owned forms (diplomas, attestations and accreditation certificates);

• diminishing the basis for calculating allowances for temporary work incapacity, which has generated the unreliable reflection of the amount of compensation paid for temporary work incapacity for the Council’s employees;

• irregular accounting of revenue received by the Council, as a result the information included in the financial statements was distorted;

• defective  management has generated numerous deviations from the regulatory framework for public procurement procedures.