The Impact of Performance Auditing in Moldova

Presentation byEcaterina Paknehad, Member, Court of

Accounts of the Republic of Moldova

About Moldova About the Court of Accounts Development of Court’s Capacity to

Conduct Performance Audits and Audits of IT Systems

Pilot Performance Audits and Additional Audits

Examples of Impact of Performance Audits Questions?

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What will we cover ?

WHERE IS MOLDOVA ?

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Capital city – Chisinau (population 785.1 thsd inhabitants)

Official language – Moldovan Political system – Parliamentary Republic Independence towards USSR: - declared on 27 August 1991 - recognized on 25 December 1991 Area – 33.8 thsd. km2 Population – 3.9 mln. inhabitants (density -111

inhabitants/km 2) GDP (nominal, for 2009) – 5.403 billions EURO - per capita - 1420 EURO Member of: UN, Latin Union, Council of Europe,

OSCE, GUAM, CIS.4

About Moldova

The Court of Accounts: – was established in 1994 as a supreme financial control

institution , and since 2008 – it is the SAI of the Republic of Moldova, performing external public audit;

- has 150 staff, established Plenum (7 members, including the president and deputy president, appointed for a term of 5 years by the Parliament) and personnel with audit functions, specialty personnel and technical personnel;

- is apolitical and has organizational, functional, operational and financial independence;

- performs regularity, performance and IT audits;

- submits to Parliament, during the year, audit reports, including annual report.

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About the Court of Accounts

Strategic Development of the Court of Accounts: Switching from external control to external public

audit

developed and implemented the Strategic Development Plan for the Court of Accounts for the period April 2006–December 2010

The Court of Accounts, with support of international donors and experts

Towards October 2008, the Court of Accounts had: 3 employees trained in performance audit (IDI INTOSAI, long-term

training courses, 2004-2005)

About 25 controllers with skills of performing thematic controls in different fields (controls with elements of performance audit, 2004-2006)

12 controllers trained for 4 days in performance audit by UK NAO (2006)

5 employees had some report preparation and report writing skills, obtained from the UK NAO.

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The platform for developing performance audit skills

24 month WB funded Project Implemented by IBTCI: Performance audits and audits of IT systems. Started Oct 2008/ended Oct 2010

One week modular performance audit training program

Four day report writing/three day report review course

Extensive “hands-on” training/assistance —IBTCI consultants worked day-to-day with Court staff

Pilot audits (5 Performance/3 audits of IT systems)

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Development of Court’s Capacity to Conduct Performance Audits and Audits of IT Systems

Oncological Institute Implementation of New Procurement Law Social Aid Process (requested by the European

Commission) Primary Health Care System (requested by the

European Commission)

Assistance to Viticulture Industry

(audits undertaken late 2008 through March 2010)

5 Pilot Performance Audits

Audit title Auditees Involved staff

Man /hour used

“Major Changes Needed to Significantly Improve the Effectiveness of the Public Health Care Institution the Oncological Institute in Fighting Cancer”

1 5 2,416

“Some Objectives of the Law on Public Procurements Have Been Achieved, However Improvements Are Still Needed ”

82 14 7,326

“Opportunities Exist to Improve the Efficiency and Effectiveness of the Social Aid Process ”

7 5 3,603

“Program for Reestablishment and Development of Viticulture and Winemaking Needs Significant Improvements Whether Achievement of Envisaged Objectives is Desired”

11 7 3,683

Performance Audit Report: Primary Health Care System 10 13 5,961

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Titles of the 5 pilot audits and the relevant quantitative indicators are presented as follows:

Solid waste disposal (at the proposal of INTOSAI)

Implementation of investment projects in vine-making enterprises (Court’s initiative)

Implementation of a Cultural Project (Court’s initiative)

Procurement of Medical Equipment (requested by the European Commission)

Scientific Research (Court’s initiative)

5 Additional Performance Audits

Audit title Auditees Involved staff

Man /hourused

“Improvements needed in regulation of domestic solid waste management and disposal system in the Republic of Moldova”

5 6 2,696

“Implementation of investment projects in wine-making enterprises”

5 3 1,382

“Funds allocated to “Caravela Culturii” (Culture Caravan) project have not been used in an economic, efficient and effective way”

1 2 635

Opportunities exist for significant improvement of processes for planning, procurement, distribution of medical devices and ensuring their better usage?”

6 4 1,867

“In order to achieve the expected benefits, improvements are needed in policies and procedures of the Academy of Science of Moldova for allocation and monitoring of funds allocated for scientific research”

11 6 4,462

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Titles of the 5 additional reports and the quantitative relevant indicators are

presented as follows:

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4 IT Audits performed

4 IT audits (reviewing the general controls and the application controls)—3 of these were pilot audits;

4 staff trained in IT auditing;

Training materials;

IT Auditing Manual.

Audit title Auditees Involved staff

Man /hourused

Compulsory Health Insurance Automated Information System is at risk due to poor controls”

5 4 1,148

Audit of the Social Protection Information System implemented at the National Social Insurance Company

1 3 1,074

Audit of the Information System “Management and financial analysis of public debt” implemented in the Ministry of Finance

1 3 728

Audit of Customs Integrated Information System of the Customs Service of the Republic of Moldova

4 4 2,472

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Title of 4 IT audits and quantitative indicators are presented as follows:

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The Court of Accounts thanks Mrs. Linda Weeks and Mr. James Bonnell, Mr. Michael Bitz for their dedication and effort in development of professional capacities of auditors to conduct performance and IT audits

EXAMPLES OF IMPACT OF PERFORMANCE AUDITS

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What did we achieve?

Critical Health Care Institution—never been audited.

Performance audit found serious problems with the Institute’s systems for managing its resources.

Audit identified areas where performance could be improved: procurement, management of medications, from determining the needs through distribution and use of medications; better utilizing inpatient department; and obtaining information on the technical status of medical equipment.

Oncological Institute

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Nurse attempted to keep track of

medications using over 170 ledgers

Director and several senior staff were replaced.

Moldova Anti-Corruption Commission investigating medication issues identified by audit.

Court report is being used as a guide to improve Institute operations.

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Impact of Audit

In 2008, Moldova passed a new procurement law intended to significantly improve public procurement process.

Performance audit assessed whether the objectives of the law were being met.

Implementation of New Procurement Law

While some objectives were being achieved, improvements were still needed.

Contracting authorities were not developing procurement plans as required.

Procurements were not adequately documented.

Significant improvements needed in contract monitoring.

Government agency established for overseeing procurement process was not fulfilling mandate.

Procurement Audit Findings

Court held one day conference to discuss audit findings among key stakeholders.

Got key groups/stakeholders talking to one another.

Amendments passed to procurement law to improve implementation.

Impact of Audit

In 2008, Moldova implemented new mechanism for payment of social aid.

Audit undertaken to determine if there are problems hindering implementation of the new social aid program.

Performance Audit of the Social Aid Process

Additional staff needed to effectively implement the process.

Internal controls needed to be significantly strengthened throughout the social aid process.

Social Aid Process Audit Findings

EU accepted the Court Performance Audit as a condition for additional assistance to this program.

Court audit is being used as a guide to improve all aspects of the Social Aid Process, particularly strengthening internal controls.

Ministry of Labor and Social Protection has accepted the proposals and recommendations of the Court to improve the social aid delivery mechanism.

The Government approved the proposals for modification of the Regulation on determining and payment of social aid.

The Parliament accepted a series of amendments to the Law on social aid, which brought clarity in terms of criteria for qualification for social aid, as well as introduced a new social benefit.

Impact of the Social Aid Audit

Government established a long term program (2002-2020) for reestablishing and developing viticulture and winemaking in Moldova.

Audit assessed the effectiveness of the program.

Reestablishment and Development of Viticulture and Winemaking Audit

Identified weaknesses in program implementation, reporting of performance indicators, and management of the program’s financial resources.

The Program was developed for the long term but was not adjusted to reflect current economic conditions.

Audit Findings – Viticulture and Winemaking

Degraded vineyards were partially cut down (Pictures taken by the audit team)

Ministry of Agriculture developed a new Program for reestablishment and development of viticulture and winemaking for 2011-2020

Court requested tax inspections of economic operators which resulted in 5 mln MDL additional collections.

General agricultural census was conducted, including inventory and evaluation of the status of vineyards

The process of preparing the Viticulture Cadastre was launched

Fund to support establishment of vineyards was liquidated. Parliament approved a new subsidizing modality.

Impact of Viticulture/Winemaking Audit

Domestic solid wastes have a direct influence on environment, and their inadequate management determines pollution of soil, water, air, flora, fauna etc.

Waste management is a problem in the Republic of Moldova.

The Court of Accounts supported the proposal of the INTOSAI, WGEA Working Group and performed the environment audit, selecting solid waste management.

Performance Audit in the field of environment – domestic

solid waste management

Deficiencies of the domestic solid waste management are significant. The legal framework contains many weaknesses, gaps and imperfections.

The number of unauthorized waste storage sites increased significantly.

Serious problems found with disposing of medical wastes. Although the national program for waste recovery provides

for separate collection of wastes, this does not happen in reality.

The majority of local public authorities do not have adequate waste collection, transportation and storage services.

The mechanism for allocation of resources from the National Ecological Fund is inefficient.

Audit Findings – domestic solid waste management

Most public local authorities pay too little attention to the problem of household wastes

Some LPA manage to find solutions!!!(A good result achieved within a project of private-public partnership)

Ministry of Environment (MoE) highly appreciated the results of the audit, initiating activities to implement the recommendations.

The Government established within the MoE a section dealing with development of national policies in the field of waste management.

The Government decided to create an Agency of the Environment, which will deal with tracking, monitoring and controlling the wastes flow.

MoE developed the National Strategy on waste management expected to be approved during 2011.

MoE revised the mechanism of allocating financial resources. Civil society is involved in projects related to training of PLA

representatives, producers of wastes and public at large...

Impact of the Audit on domestic solid waste management

In 2008, Moldova implemented a new mechanism for payment of social aid.

Audit was undertaken to determine whether there are problems hindering implementation of the new social aid program.

Performance Audit of the Social Aid Process

Additional staff needed to effectively implement the process.

Internal controls needed to be significantly strengthened throughout the social aid process.

Social Aid Process Audit Findings

EU accepted the Court Performance Audit as a condition for additional assistance to this program.

Court audit is being used as a guide to improve all aspects of the Social Aid Process, particularly strengthening internal controls.

Impact of the Social Aid Audit

Moldova decided to separate Primary Health Care from hospital care to ensure greater access to health care services. Started process in early 2008.

Undertook audit to assess progress made in achieving objectives.

Primary Health Care Performance Audit

Shortages of doctors and lack of continuous training limited effectiveness.

Opportunities to significantly improve access to primary health care services.

Many care facilities do not meet standards.

Opportunities exist to improve the Ministry’s monitoring.

Audit Findings- Primary Health Care

Patients enter the facility to visit their family doctor through a hole in the wall of the unfinished building,

Minister of Health using audit report as a guide for improving program operations.

Minister of Health so impressed with the Court’s audit that he wants the Court to conduct performance audits of hospital care and emergency care systems.

Impact of Primary Health Care Audit

Winemaking is an important sector of Moldovan economy. Wine industry has a share of 20% in the GDP and involves about 27% of the labor force.

During 2002-2005, 4 large wine companies were privatized.

Buyers required to make certain capital investments in privatized companies.

The Court of Accounts performed the audit to determine whether privatization objectives were achieved and also assess effectiveness of monitoring post-privatization activities.

Performance of investment projects implemented in winemaking enterprises

Neither the investors nor the Agency of Public Property (APP) achieved objectives and the achieved benefits were not equal to those expected.

Deficiencies and weaknesses identified in the legislation. Investment contracts contained provisions which were not

clear. Buyers were not successful in the main activity and in

achievement of social aspects provided for in the privatization contracts. An impediment was the embargo imposed by Russia, as well as inadequate investment management which was focused only on export of production to Russia.

Weak monitoring by the APP.

Audit Findings –implementing investment projects in winemaking enterprises

The Agency of Public Property, the Ministry of Economy and Trade and the Ministry of Finance undertook measures to implement the Court’s recommendations.

The Government approved the modifications proposed by the APP, MET and MoF to the law and regulations governing this field.

The Parliament adopted modifications of the Law on administration and privatization of public property.

Impact of Implementing investmentprojects in winemaking enterprisers

The respective project was one of the first cultural projects completely funded from the state budget (10 mln MDL/1 mln USD).

Activities performed in all the districts of the Republic of Moldova (2005-2008).

Implementation was performed in absence of normative regulations on funding such a project from the state budget.

During audits of the Ministry of Finance and Ministry of Culture, the Court identified and raised issues concerning the use of funds and reporting by the Association responsible for project implementation.

Implementation of the cultural project “Culture Caravan”

Project objectives stated in an unclear manner and without any measurable indicators.

Objectives have not been coordinated with the Ministry of Culture and can not be found in the Government Decision on project implementation.

Association did not observe the ceilings of costs of cultural activities established by the MoC and the total number of planned activities.

Association did not provide required reports. Association did not have documentary evidence for 30% of

expenditures. Association’s reports contained erroneous data. 50% of the allocated funds have been used contrary to their

purpose, i.e. not for cultural activities, but for Association’s administrative expenditures (procurement of a car, salaries and bonuses for directors and other personnel etc.).

Findings of audit on the cultural project “Culture Caravan”

The Court of Accounts referred certain matters to the General Prosecutor’s Office for further examination.

The Ministry of Culture initiated development of methodological norms for monitoring of cultural projects.

Impact of the Audit on cultural project “Culture Caravan”

Audit was undertaken at request of the European Commission.

Performance Audit of Medical Equipment

Health system lacks a legal framework to regulate medical equipment, a Strategic Development Plan in medical technologies and equipment, minimum standards of technical equipment and a Program of technical equipment for public health care facilities.

MoH did not take into account the needs and requirements of the public health care facilities.

Procurement of medical equipment was performed without a feasibility study.

Some providers of medical equipment made excessive profits. Some expensive equipment does not operate in a digital mode,

but only in a simple mode, although the payment was made for digital installation.

Some pieces of equipment are not adequate for the medical institution. Patients are subjected to repeated irradiation, etc.

Audit Findings – Medical Equipment

Ministry of Health and the audited facilities were satisfied with the issues addressed by the audit and are undertaking measures to remediate the situation.

MoH initiated work on developing a Strategic Development Plan in the field of medical technology and equipment.

Audit results have been well publicized. The Court participated in TV programs dedicated to the respective topic, as well as radio broadcasts.

The Court recommended the Parliament expedite the adoption of the Law on medical equipment, included in the list of drafts entered the Parliament.

Consultants engaged by the European Commission appreciated the report and recommendations provided by the Court.

Impact of Medical Equipment Audit

During financial audits, the Court identified a number of issues related to efficiency, economy and effectiveness of using public money for science and innovation by the Academy of Science of Moldova (ASM) and subordinated institutions.

In particular, the Court was interested in funding and the results achieved in implementation of projects from the State Programs in the field of science and innovation.

Parliament was interested in the idea of conducting a performance audit in this field.

Performance Audit of Scientific Research

Found inefficient funding mechanisms.

Competition was not encouraged. Found incidents of conflicts of interests.

Some projects ended with no results; other projects extended with additional funding without justification.

No performance indicators established for some state programs.

There are problems with funding and monitoring of technological transfer projects.

Audit Findings of Scientific Research Audit

ASM and Agency for Innovation and Technology Transfer implementing Court audit recommendations.

ASM decided to pull ASM Assembly (Supreme forum of the scientific community) outside the ASM, which was welcomed by all the representatives of the scientific community, especially those from Universities.

ASM initiated development of the National Strategy for research, development and innovation for a period of 10 years. ASM will be assisted by experts from Romania and Germany.

Impact of Scientific Research Audit

Audit Findings of IT Autits(main issues)

Within the auditees:No strategic plans.No standards, policies and procedures developed.The top management does not get involved enough in the IT management issues.The IT-related risks are not assessed.The existing resources are not used efficiently.The IT staff has a high turnover rate and the institution depends too much on too few people.IT is designed and developed apart from other subdivisions. The user needs are not taken into account.

Impact of IT Audits

Promotion of IT auditing within the state institutions and

drawing the attention of the decision-makers to the importance of proper IT management.

The management of the Ministries responsible for IT systems reviewed appreciated the IT audit results.

The top management understood and accepted the conclusions related to the major IT risks.

The CoA recommendations are being implemented.

www.ccrm.md

Access to Audit Reports

Questions?

THANK YOU VERY MUCH FOR YOUR ATTENTION !