WITH DEFICIENCES OF VIEW
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The Court of Accounts notes a lack of rules and procedures related to the process of managing financial resources and public patrimony by municipal enterprises in the field of communal household, institutional and financial management not aligned with the principles of good governance.
The results of the compliance audit on the management of public assets and financial resources by enterprises in the public utilities sector in 2023 were examined during the meeting of the Court of Accounts of the Republic of Moldova (CoARM) on 26.07.2024.
Public utilities services are an important sector of the national economy that improve the living conditions of citizens, and the Court of Accounts aimed to audit it, in order to assess the conformity of these services provided to citizens. The audit approach included the evaluation of several processes and activities within the profile enterprises, such as: management of immovable assets, management of financial resources, expenses related to labor remuneration, procurement of goods, services and works, and activities regulated by tariffs.
Enterprises in the field of communal household are entities founded by the local councils of the territorial administrative units (TAU) with the aim of carrying out activities of local interest in the fields of: housing, environmental protection, waste management, landscaping and sanitation of the territory, provision of utility services and relations with suppliers. According to the data from the Public Property Register of the Public Property Agency, approximately 308 entities from the field of communal household are registered on the territory of the country. As part of the audit, 8 entities from the field of the public utilities were subjected to verification, which, as of 31.12.2023, managed assets in the total amount of 1.11 billion lei.
As a result of the audit, the Court of Accounts concluded that the financial management of the enterprises in the field of the audited public utilities reflects significant deficiencies and errors regarding the management of financial resources, which are expressed by: non-compliant management of income from economic activity, with the undertaking of insufficient measures in order to debt recovery; non-compliance with the normative framework for establishing the costs regulated by the tariff and the rental payment, for organizing and conducting public procurement, executing investments and capital repairs and determining salary payments; the erroneous recording of economic transactions, which influenced the financial result of the enterprises and the qualitative characteristics of the information in the financial statements.
This way, the founders of the audited entities complied with the legal provisions when delegating communal services to the established entities. However, the Public Utilities Law No. 1402 of 24.10.2002 contains ambiguous provisions regarding the conditions for organizing public utilities. Specifically, Article 17(1) mentions that the management of these services is organized and carried out through direct management or delegated management, with the form of management chosen by decision of the local public authorities (LPA). This contradicts the provisions of Article 21(2), which stipulates that the delegation of the management of public utilities to operators must be done transparently, through a public auction organized according to the law, and only in the case of operators of public water supply and sewerage services with a majority public share capital can the delegation of service management be directly attributed to them.
The procedures for procuring goods, services, and works were executed with deviations from the regulatory framework, with non-conformities admitted in organizing and executing procurements, which in some cases led to irregular expenditures and situations of fraud.
- The audited companies did not manage assets properly, resulting in a minimum revenue loss of 626.84 thousand lei.
- Some audited entities did not ensure the planning and compliant execution of investments and capital repairs, which led to the acceptance of exaggerated and/or unexecuted volumes in the total amount of 778.5 thousand lei, as well as poor quality execution.
- The enterprises did not undertake sufficient measures regarding the compliant management of receivables and debts, the situation having an impact on the collection and recovery of receivables related to the services provided (20.77 million lei) and the compliant reflection of debts (225 million lei).
- The non-compliant application of the provisions of the normative framework in force and the lack of rigorous control on the part of the management bodies of the audited enterprises conditioned the irregular increase of payroll expenses by 1.38 million lei at some entities.
- Entities subject to audit do not keep accounting of production costs and do not calculate the cost of services provided, but reflect them directly in the expenses of the enterprise.
The asset management of enterprises in the field of communal services does not meet the legal framework's standards, being affected by irregularities and deficiencies, expressed through improper registration of property rights and asset management, lack of confirmatory documents for some assets, incomplete processes of asset delimitation and land transfer, which distorts the asset and financial situations of the enterprises and generates risks of state asset loss.
Thus, it was found:
- failure to register property rights (worth 72.79 million lei) as well as management rights (34.68 million lei) over the patrimony received under economic management;
- improper transfer of public goods from the public domain to economic management in the amount of 611.74 million lei;
- failure to record public domain assets in the accounting records of either the Founder or at the municipal enterprise, because they were transferred without confirmatory documents, valued at approximately 143.6 million lei.
- failure to separately register assets, independent assets worth 219.13 million lei;
- decrease in the value of the lands by approximately 42 million lei due to non-compliance with the regulatory framework and lack of re-evaluation;
- non-utilization of assets received under management in the amount of 5.48 million lei in order to obtain additional economic advantages;
- failure to capitalize on capital repair works worth 31.31 million lei;
- improper registration of small value and short-lived assets as fixed assets worth 5.21 million lei;
- lack of proper documentation of the results following the inventory of the assets that belong to and/or are under temporary management of the entity in the amount of 6.67 million lei, etc.
The situations found were caused by a deficit of rules, procedures and the lack of effective control activities related to the process of managing financial resources and public assets, as well as the insufficient responsibility of decision-makers in exercising their functional duties.
