WITH DEFICIENCES OF VIEW
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The results of the audit on the Government Report on the execution of the state social insurance budget (SSIB) in 2023 were examined today, May 27, during the meeting of the Court of Accounts of the Republic of Moldova (CoARM).
The state guarantees citizens the right to social protection in order to ensure the risks that occur during life, of old age, unemployment, illness, disability, through social payments such as pensions, allowances and other social insurance benefits, which are a source of livelihood for the beneficiaries of this system.
Audit evidence were collected from the institutions with tangency in policy making in the field, participating in some processes, both on the income and expenditure side, by establishing certain benefits or providing information, such as the National Social Insurance House (NSIH), State Fiscal Service (SFS), Ministry of Labor and Social Protection (MLSP), Ministry of Finance and others.
In CoARM's vision, the Government Report on the execution of SSIB provides, under all significant aspects, a fair and true picture, in accordance with the applicable financial reporting framework, the audit opinion being issued without reservations.
In the context of the audit mission, were audited the revenues amounted 38.6 billion lei from contributions and those from transfers from the state budget. Thus, state social insurance contributions that hold the maximum share of total revenues amounted 21.5 billion lei, which represents 55.7%. They were also increased by 2.9 billion lei, compared to 2022.
Expenditure, receivables and liabilities related to social benefits were assessed by the auditors through the lens of the systemic process of granting, payment and reporting, including the impact of the implementation of the recommendations previously submitted by the Court of Accounts. It was found that the majority of the financial sources were used for the granting of social benefits in the amount of 38 billion, which had a share of over 98% in total expenditure.
The audit shows that the financial pressure on SSIB remains emphasized, with a growing budget deficit recorded, which in 2023 amounted to 5.4 billion lei, 1.1 billion more than in 2022. The number of the employed population is approximately 811 thousand people, of which about 201 thousand people are both taxpayers and benefit recipients at the same time. At the same time, the estimated audit data indicate that the unemployed population represents approximately 411 thousand people. Thus, although there is a potential to increase the number of SSIB taxpayers, the reserve is maintained also due to the existence of black labor, envelope wages, unattractive wages, etc.
The insufficiency of income is influenced by the phenomenon of paying the salary "in the envelope", which is generated by financial sources in cash, including the extraction by the founders of dividends and their use for the subsequent salary and motivation of the staff. This way, in 2023 approximately 14 thousand natural persons benefited from dividends, the value of dividends paid being 12 billion lei, and the income tax withheld out of it was 734 million lei.
The Court of Accounts mentions that a public social insurance system is efficient and balanced when the expenses for social insurance benefits is covered by own revenues, collected to the budget. In this context, shall be noted that the rate of growth of expenditure incurred from SSIB (196%) in 2023, compared to 2018, exceeded the rate of growth of own revenues (168.4%) by 29.6 percentage points. In 2023, both revenues and expenditure increased by approx. 16%. Thus, the established social insurance contribution charges do not ensure the accumulation of income to cover the expenses incurred from SSIB.
Policies to decrease the share of private sector contributions, from 29% to 24%, did not have the expected impact, namely to broaden the basis for calculation and remove the labor remuneration fund from obscurity. Thus, although the calculation basis recorded an increase of 23.3 billion lei in 2023 compared to 2019, the number of employees decreased by approximately 4 thousand people.
It also indicates that, although there is a higher rate paid for employees from budgetary institutions, compared to employees in the private sector, the calculation basis for establishing the benefits is the same. At the same time, the MLSP did not present information on the impact assessment of facilities granted on the rates of state social insurance contributions. The audit estimates indicate that the facilities granted are approximately 3 billion lei in 2023.
Activities aimed at recording and collecting social insurance contributions do not ensure the full accumulation of social insurance budget revenues, registering arrears as of December 31, 2023 in the amount of 451 million lei. FSS has undertaken taxpayers' compliance actions, in order to reduce the arrears at SSIB, but the problem regarding the failure of taxpayers to honor payment obligations deadline on time, persists.
Another finding refers to the initiation of the insolvency proceedings and the formation of debts of economic agents to SSIB, which also affects the establishment of social benefits for employees. Thus, the balance of claims taken into special records by NSIH as of December 31, 2023, related to economic agents in insolvency, was about 484 million lei.
The assessment of the debts of 27 economic agents, which are in the process of insolvency, established that in the case of 102 persons, employees of these economic agents, who were to benefit from 118 allowances for temporary work incapacity, received refusals or reduction of the benefit in the amount of 230.1 thousand lei.
The Court of Accounts notes the non-implementation of the recommendation of the assessment and establishment of the electronic record register of freelancers practicing activity in the justice sector, who are obliged to transfer contributions to SSIB in a fixed amount of 27.8 thousand lei per year. Thus, the total arrears of this category of taxpayers, according to the NSIH records, amounted to 2.6 million lei and related penalties of 2.5 million lei.
With regard to the granting of monetary aid, financed from the state budget and paid through SSIB, it is noted that following the controls carried out by the State Social Inspectorate, the irregular grant was identified in the amount of 13.3 million lei or 55% of the verified amount. At the same time, the partial refund of only 339 thousand lei or 2.5% of the amounts granted for social aid and aid for the cold period of the year, directly influences the indicator "Cash aid" financed from the state budget through SSIB.
Internal controls related to the record and distribution of SPA treatment tickets granted to veterans need to be improved. Thus, while there are 8,663 people who are on the waiting list from 2017-2022, it was found that 641 beneficiaries used the treatment ticket several times, which indicates the need to intensify internal controls in this regard. In the case of 1635 decisions, the tickets were issued with a difference of up to 10 days from the date of submission of the application, and 804 of them benefited from tickets on the same day as the application was submitted. At the same time, only 6734 retiree or 1% of the total number benefited from SPA treatment, and in insured persons case, the number of beneficiaries constituted only 0.5% of the total number of employees.
With reference to old-age and disability pensions, it is noted that they have been established according to the legal framework. At the same time, the delayed receipt of information regarding the death of the beneficiaries caused unjustified expenses in the amount of 871 thousand lei. The situation was caused by the systemic process of exchanging data on the death of beneficiaries and entering death information with a delay of up to 141 days, and in some cases pensions were paid up to 5 months after the death.
It was found that although NSIH informs benefit recipients about the refusal decisions, for the establishment decisions they are informed upon request. The uncertainties of the provisions of the normative acts, as well as the lack of knowledge by the beneficiaries of the conditions and criteria for establishing and recalculating benefits, especially for pensions, cause confusion and multiple petitions. Thus, the number of appeals of citizens to the courts increased from 789 litigations on January 1, 2023 to 1,342 at the end of 2023.
To remedy the deficiencies identified, the Court of Accounts submitted 24 recommendations.
