Ministry of Defence in the attention of the Court of Accounts

The Court of Accounts of the Republic of Moldova (CoARM) examined, on June 25th, the audit report on the consolidated financial statements of the Ministry of Defence as of December 31, 2023.

In 2023, the Ministry of Defence managed resources amounting to 2.2 billion MDL, an increase of 29.7% compared to the previous year, with expenditures also increasing by 371.8 million MDL, totalling 1.2 billion MDL.

Additionally, in 2023, the Ministry of Defence administered assets totalling 5.2 billion MDL, including financial assets of 736.3 million MDL and non-financial assets of 4.4 billion MDL.

During the session, the main non-conformities and deficiencies that led to the issuance of a qualified audit opinion were presented:

• The Ministry did not account for land and buildings transferred to the economic management of state enterprises, resulting in an undervaluation of 21.3 million MDL in the account group "Shares and other forms of participation in domestic capital."
• The social capital and the assets contributed to it lack an exhaustive list, limiting the audit in obtaining sufficient and appropriate evidence to validate the reported value of 22.4 million MDL in the account "Shares and other forms of participation in domestic capital."

The Court of Accounts also reported other deficiencies that did not affect the audit opinion but involve non-compliance with the relevant laws and regulations in the registration and administration of assets:

• The Ministry did not ensure the mandatory registration of property rights in the Real Estate Registry for 98 real estate properties (buildings and special constructions) valued at 260.63 million MDL, 2 isolated rooms (apartments that were not privatized), and 6 land plots totalling 957.67 hectares, valued at 68.23 million MDL.
• Measures stipulated in the regulatory framework to exclude 101 damaged real estate properties valued at 5.44 million MDL from the accounting records were not taken.
• For several years, the Ministry did not comply with legal provisions that state-owned public lands should be transferred to the Agency for Public Property (APP). Although the Ministry manages 67 land plots totalling 3309.9 hectares, valued at 1.2 billion MDL, their transfer to the APP has not been completed.
• The audit highlighted the delay in the reorganization process of state enterprises founded by the Ministry of Defence. Although the merger of "CCM Vichi" with "Mărculești International Airport" was to be completed in 2004, the necessary registrations in the Legal Entities Registry and the dissolution of "CCM Vichi" have not occurred.
• The reorganization of two state enterprises into a single public institution, initiated in 2018, has not been completed. According to Government Decision no. 698/2018, the two state enterprises under the Ministry of Defence were to be reorganized by absorption and transformed into the Public Institution "Center for Training Specialists and Support of the National Army."

Another aspect addressed by the external audit refers to the Ministry's recorded receivables totalling 695.4 million MDL at the end of the year, including expired receivables amounting to 9.2 million MDL, and liabilities totalling 55.4 million MDL, with no expired liabilities reported. Of the total reported receivables, 672.7 million MDL, or 96.7%, represent advances paid as contributions to UNDP and foreign economic agents. These sums were immobilized in 2021-2023 for the procurement of special equipment, with delivery, according to contractual provisions, by 2025. It is worth noting that purchases of weapons, ammunition, weapon systems, military equipment, spare parts, and related accessories, and military equipment maintenance services are exceptions to the rule that advance payments cannot exceed 60 days from the receipt of the advance.

Finally, the Court of Accounts noted that although 18 recommendations were made during the previous year's audit to address the identified non-conformities, the implementation level was 55.5%, with 5 recommendations implemented, 10 partially implemented, and 3 not implemented. Some partially implemented or unimplemented recommendations are ongoing and reiterated in the current audit.

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