Monitoring group Ulcinj - MogUL

BUSSINES REPORT OF THE PUBLIC ENTERPRISEFOR COASTAL ZONE FOR 2008-2013

sigurna ženska kuća

The “Greater Government Transparency and Ac

coun

tabilit

y" Project

The “Greater Government Transparency and Accountability" project is supported by the European Union andimplemented by MANS with five project partners. This Report was developed with the assistance of the European Union.The NGO Mogul bears sole responsibility for its contents and it does not reflect the official position of the EU.

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CONTENTS

1. OVERVIEW 3

2. THE TERM COASTAL ZONE, LEGISLATIVE AND INSTITUTIONAL MANAGEMENT FRAMEWORK

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3. INVESTMENT INTO THE COASTAL ZONE FOR THE PERIOD 2008-2013 4

3.1 Total revenues and investment into the Coastal Zone 4 3.2 Total revenues and investment by individual municipalities 5

4. INVESTMENT FUNDS FOR MUNICIPALITIES REALLOCATED FOR OTHER PURPOSES 6

4.1 Nearly three million euro of cash in banks 7 4.2 Government covers budget deficits from company earnings 8

5. EXPENDITURE ON WAGES AND COSTS OF SPONSORSHIP AND ADVERTISING 9

5.1 Five million euro for wages in six years 9 5.2 Millions spent on sponsorship and advertising 10

6. ILLEGAL CONSTRUCTION ON THE RIVER BOJAN 10

7. CONCLUSIONS AND RECOMMENDATIONS 12

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1. OVERVIEW This report is part of a project implemented by six non-government organisations: Network for Affirmation of NGO Sector (MANS), Women’s Safe House, Mogul, Workers from Bankrupt Companies of Montenegro, Breznica and Association of Youth of Montenegro. Within this project, Mogul monitored the appliance of the Law on Free Access to Information by the Public Company for Coastal Zone Management, as well as the management of the Coastal Zone by this Public Company. The data used for the compiling of this report was gathered on the basis of information submitted by the Public Company for Coastal Zone Management, after requests filed in accordance with the Law on Free Access to Information. The first part of the report relates to the legislative and institutional framework for Coastal Zone management, while the second part states information about the revenues the Public Company for Coastal Zone Management generated from fees for use of Coastal Zone in the period between 2008 and late 2013, in addition to an overview of data on investment of the Public Company into the Coastal Zone. The third part of this report indicates that the Public Company for Coastal Zone Management redirected a significant part of the funds into: increases of equity capital of the company, payment of income to the Government of Montenegro as the founder, and accounts in private banks, instead of investing it into the Coastal Zone. The fourth part of this report points out the problem of illegal construction on the River Bojana as part of the Coastal Zone, with official data on the number of buildings and Google Earth images which show the actual state of affairs in the area. Finally, the last part of the report contains conclusions and recommendations, which are the result of several months of gathering and analysing of documentation on the financial operations of the Public Company for Coastal Zone Management. 2. THE TERM COASTAL ZONE, LEGISLATIVE AND INSTITUTIONAL MANAGEMENT FRAMEWORK The Law on the Coastal Zone1 defines the coastal zone as the seashore, ports, breakwaters, slips, embankments, sandbanks, beaches, cliffs, liman coasts, reefs, submarine springs, springs on the shore, estuaries, canals connected to sea, the undersea, the seabed and subsoil, inland waters and territorial waters, the living and non-living resources in them, the living and non-living resources of the continental shelf, as well as the banks of the River Bojana within the territory of Montenegro. The seashore is defined as strips of land bordered by the line of reach of the highest waves during the fiercest weather, as well as strips of land which by their nature or purpose serve in the use of sea for maritime transport and sea fishing and for other purposes in relation to the use of sea, which are at least six metres wide, including the line of reach of the highest waves during the fiercest weather. According to the Spatial Plan of Special Purpose Coastal Zone Areas2 the spatial plan of the Coastal Zone covers a total area of around 2,540 km2 of sea, the entire 310 kilometres of shoreline, as well as a narrow strip of land with an area of around 58 km2.

1 Law on Coastal Zone (Republic of Montenegro Official Gazette, issue 14/92, Republic of Montenegro Official Gazette, issue 59/92,

Republic of Montenegro Official Gazette , issue 27/94, Montenegro Official Gazette, issue 51/08, Montenegro Official Gazette , issue 21/09,

Montenegro Official Gazette , issue 73/10 and Montenegro Official Gazette , issue 40/11) 2

This planning document was adopted in 2007

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When it comes to the management, use, improvement and protection of the Coastal Zone, the Law on the Coastal Zone determines the state property over the Coastal Zone and defined that a special public company, established in 1992, will manage this Zone.3 The Company is based in Budva, and its main task is to ensure: 1) protection and improvement of the use of the Coastal Zone, 2) managing the Coastal Zone, 3) conclusion of contracts on the use of the Coastal Zone and 4) construction and maintenance of infrastructure facilities for the needs of the Coastal Zone. The Law on the Coastal Zone stipulates that the Public Company for Coastal Zone Management shall collect fees from contracts on the use of the Coastal Zone in the six coastal municipalities – Ulcinj, Bar, Budva, Kotor, Tivat and Herceg Novi. The collected fees will be invested in the protection, development and improvement of the Coastal Zone, and in the construction of infrastructure facilities. However, the 2010 Amendments to the Law on Local Self-Government Financing4 first introduced an obligation to cede 20% of the revenues from fees for use of the Coastal Zone to the municipalities, starting in 2012, while in 2013, this amount was determined as 50 percent of the overall fees for use of the Coastal Zone.

Illustration of Coastal Zone territory

3. INVESTMENT INTO THE COASTAL ZONE FOR THE PERIOD 2008–2013 Each year, the Public Company for Coastal Zone Management adopts a Plan of Activities, which outlines investments into the maintenance, planning and construction of infrastructure facilities in the Coastal Zone5. In that respect, the most important investments include: 1) utility works and development of the Coastal Zone, 2) construction and development of parts of the Coastal Zone and 3) reconstruction and maintenance of public lighting in the Coastal Zone. Most important investments into the Coastal Zone:

1. Utility works and development of the Coastal Zone 2. Construction and development of parts of the Coastal Zone 3. Reconstruction and maintenance of public lighting in the Coastal Zone

The Public Company implements investments thanks to funds collected from fees from contracts on the use of the Coastal Zone, in other words, it is obliged to invest the collected fees, minus the regular operating costs of the company, into the Coastal Zone in six coastal municipalities – Ulcinj, Bar, Budva, Kotor, Tivat and Herceg Novi.

3.1. Total revenues and investment into the Coastal Zone During a period of six years, between 2008 and late 2013, the Public Company for Coastal Zone Management received total revenues in the amount of 25,686,674 euro from fees for the use of the

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Decision of the Parliament of Montenegro from June 02, 1992 4 Law on Amendments to the Law on Local Self-Government Financing (Montenegro Official Gazette, issue 74/10)

5 Article 8, Law on the Coastal Zone

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Coastal Zone in the territory of six coastal municipalities, while in the same period it invested 12,859,287 euro into these municipalities, which is half of the overall revenues collected.6 In this way, in 2008, this company received revenues from fees for the use of the Coastal Zone in the amount of 4,661,934 euro, and it invested only 1,630,401 euro, or 35 percent of the overall sum. In the next year, it received revenues of 4,160,407 euro, and it invested 2,318,790 euro or 55.7 percent, in 2010 it received 4,787,641 euro from fees, and it invested 2,833,487 euro, which is 59 percent of the overall sum, while in 2011 it received revenues of 4,800,740 euro from fees, and it invested 2,670,935 euro, or 55.6 percent. In accordance with the new regulation from the Law on Local Self-Government Financing, the Public Company for Coastal Zone Management received 80 percent of the income from fees for use of the Coastal Zone in 2012, and the remaining 20 percent was allocated to the municipalities. The overall revenues from fees in this year amounted to 5,404,690 euro, of which the Public Company received 4,323,753 euro, and the six coastal municipalities received a total of 1,080,937 euro. However, even though it received 4,323,753 euro, the Public Company invested significantly less into the Coastal Zone, i.e. 2,697,011 euro or 62.3 percent. In 2013, revenues from fees were split into 50 percent each for the Public Company and the municipalities. In this year, the total revenues amounted to 5,904,386 euro, but the Public Company for Coastal Zone Management also invested an amount less than its total revenues into the coastal zone. It invested only 708,663 euro from the collected 2,952,199 euro, which is only 24 percent of the overall sum.

YEAR COMPANY’S REVENUES FROM

FEES COMPANY’S INVESTMENT INTO

THE COASTAL ZONE PERCENTAGE

2008 4,661,934 1,630,401 35 % 2009 4,160,407 2,318,790 55.7 % 2010 4,787,641 2,833,487 59 % 2011 4,800,740 2,670,935 55.6 % 2012 4,323,753 2,697,011 62.3 % 2013 2,952,199 708,663 24 %

TOTAL 25,686,674 12,859,287 50 %

The table illustrates the vast discrepancy between received revenues and investment

3.2. Total revenues and investment by individual municipalities

Between 2008 and late 2013, the Public Company for Coastal Zone Management received most of its revenues from fees for using the Coastal Zone from the territory of the Municipality of Budva, a total of 10,506,550 euro. However, during the same period it invested the least into this coastal municipality, a total of only 2,992,813 euro, or 28 percent of the overall received funds. The second place in the scope of revenues is the Municipality of Ulcinj, from the territory of which the Public Company received 3,810,242 euro between 2008 and late 2013, while at the same time investing 2,526,115 euro or 66 percent of the total amount into this municipality. In third place is the Municipality of Herceg Novi, from which the Public Company received 3,730,760 euro and invested 2,280,320 euro, or 61 percent into it. In the same period, the Public Company for Coastal Zone Management received 3,464,368 euro from fees in the Municipality of Bar, and it invested a total of 2,029,808 euro, or 58 percent of the overall

6 Working Report of the Public Company for Coastal Zone Management for 2009, which also contains comparative data for 2008; Working

Report of the Public Company for Coastal Zone Management for 2010; Working Report of the Public Company for Coastal Zone

Management for 2011; Working Report of the Public Company for Coastal Zone Management for 2012 and Working Report of the Public

Company for Coastal Zone Management for 2013

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sum in the Municipality. At the same time, it received revenues of 2,103,900 euro from the Municipality of Kotor, and it invested 1,691,594 euro or 80 percent, while receiving 2,070,858 euro from the Municipality of Tivat, and investing 1,338,637 euro or 64 percent of the total amount.7

NO. MUNICIPALITY

REVENUE OF THE COASTAL ZONE PUBLIC COMPANY

FROM MUNICIPALITIES 2008-2013

INVESTMENT OF THE COASTAL ZONE PUBLIC

COMPANY INTO MUNICIPALITIES 2008-

2013

PERCENTAGE

1. Budva 10,506,550 2,992,813 28 % 2. Ulcinj 3,810,242 2,526,115 66 % 3. Herceg Novi 3,730,760 2,280,320 61 % 4. Bar 3,464,368 2,029,808 58 % 5. Kotor 2,103,900 1,691,594 80 % 6. Tivat 2,070,858 1,338,637 64 %

Largest revenues from the Municipality of Budva, and the least invested into it

The following are tables of revenues from fees of the Public Company for Coastal Zone Management from the territories of coastal municipalities by year, as well as investments in the same period.

YEAR BUDVA ULCINJ HERCEG NOVI BAR KOTOR TIVAT

2008 1,880,810 575,217 790,005 643,850 412,216 359,836 2009 1,745,025 445,887 740,531 587,132 338,701 303,141 2010 1,865,971 915,231 651,526 643,325 424,986 286,602 2011 2,075,889 554,921 665,374 671,744 430,521 402,292 2012 1,643,962 853,617 560,511 531,968 290,762 442,933 2013 1,294,893 465,369 322,813 386,349 206,714 276,054

TOTAL 10,506,550 3,810,242 3,730,760 3,464,368 2,103,900 2,070,858

Revenues of the Public Company for Coastal Zone Management by individual municipality

YEAR BUDVA ULCINJ HERCEG NOVI BAR KOTOR TIVAT

2008 329,098 210,412 369,243 226,596 421,288 73,764 2009 797,274 403,508 166,303 522,152 140,045 289,508 2010 591,763 817,197 432,195 372,330 371,683 248,319 2011 411,878 593,908 610,762 350,763 400,548 303,076 2012 765,051 325,565 569,444 496,048 169,608 371,295 2013 97,749 175,525 132,373 61,919 188,422 52,675

TOTAL 2,992,813 2,526,115 2,280,320 2,029,808 1,691,594 1,338,637

Investments of the Public Company for Coastal Zone Management into individual municipalities

4. INVESTMENT FUNDS FOR MUNICIPALITIES REALLOCATED FOR OTHER PURPOSES When you subtract the regular operating expenses of the Public Company for Coastal Zone Management, which amount to just over one million per year, analysis of financial reports for the

7 Working Report of the Public Company for Coastal Zone Management for 2009, which also contains comparative data for 2008; Working

Report of the Public Company for Coastal Zone Management for 2010; Working Report of the Public Company for Coastal Zone

Management for 2011; Working Report of the Public Company for Coastal Zone Management for 2012 and Working Report of the Public

Company for Coastal Zone Management for 2013

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period between 2008 and late 2013 shows that in this period the company reallocated at least six million euro for other purposes, instead of investing them into developing the Coastal Zone. Since 2008, the Public Company keeps cash in the amount of 2.7 million euro in banks, while in 2009, it allocated 1 million euro from its retained earnings to the Government of Montenegro in order to cover the deficit in the state budget. In the same year, retained earnings were used to increase the company’s share capital by almost two million euro.

4.1. Nearly three million euro of cash in banks

Data from the Report on the Work of the Public Company for Coastal Zone Management in the period between 2008 and 2013 indicates that this company keeps a significant part of the money collected from fees for the use of the Coastal Zone as cash on accounts in private banks. In 2007, the Public Company kept 1,272,956 euro on bank accounts as cash and cash equivalents, of which the largest sums were kept in two banks, the Atlas Bank, where it kept 739,994 euro and Prva Bank, where it kept 425,290 euro. In 2008, it more than doubled the amount of cash to a sum of 2,681,725 euro,8 of which 1,461,512 euro were kept in the Prva Bank, and 1,136,943 euro in the Atlas Bank. In 2009, the Public Company for Coastal Zone Management kept 2,864,959 euro in banks, the majority of which was kept in the Atlas Bank –a total of 2.603.998 euro9, and a similar trend also continued in the following years. In this way, in 2010 it kept 2,516,657 euro10 of cash, in 2011 it amounted to 2,739,609 euro11, and in 2012 it was 2,609,719 euro12. Finally, at the end of 2013, the Public Company kept a total of 2,736,701 euro in cash, of which by far the biggest portion was kept in the Atlas Bank – a total of 2,380,609 euro, 174,528 euro was kept in the NLB Bank, 49.029 euro in the Prva Bank, 54.042 euro in the Montenegrin Commercial Bank and 28.585 euro in the Hipotekarna bank.13

2007 2008 2009 2010 2011 2012 2013

CASH

1,272,956 2,681,725 2,864,959 2,516,657 2,739,609 2,609,719 2,736,701

Atlas Bank 739,994 1,136,943 2,603,998 1,786,879 1,988,915 2,210,674 2,380,609

Prva Bank 425,290 1,461,512 82,858 51,798 50,189 49,207 49,029

NLB Bank 57,079 46,355 160,247 126,733 139,167 124,235 174,528

CKB Bank 10,320 36,915 17,856 49,231 57,923 54,201 54,042

Hipotekarna 502,016 503,415 133,634 28,585

Foreign Currency Account

40,273 0 0 0 0 37,769 49,909

At the end of 2013, cash in banks amounts to 2.7 million euro

According to the Law on the Coastal Zone, the funds the Public Company for Coastal Zone Management keeps in banks should have been allocated for investments and maintenance of the Coastal Zone in six coastal municipalities, but this has not occurred. It is also very interesting that in the yearly reports, the company officials justified the fact that they keep the money in banks instead

8 Working Report of the Public Company for Coastal Zone Management for 2008, from June 2009

9 Working Report of the Public Company for Coastal Zone Management for 2009, from April 2010

10 Working Report of the Public Company for Coastal Zone Management for 2010, from April 2011

11 Working Report of the Public Company for Coastal Zone Management for 2011, from June 2012

12 Working Report of the Public Company for Coastal Zone Management for 2012, from June 2012

13 The overall sum of 2,736,701 euro includes the funds on the foreign-currency account of the Public Company for Coastal Zone

Management; Source: 13

Report on the work of the Public Company for Coastal Zone Management for 2013, from September 2014

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of investing it by the complexity of the process of public procurement or delays in receiving construction permits.

4.2. Government covers budget deficit from company earnings During a six-year period between 2008 and late 2013, the Public Company for Coastal Zone Management registered a positive financial result at the end of each year14. Therefore, in 2008 the net profit was 1,458,829 euro, in 2009 it was 193,560 euro, in the next year it was 307,494 euro, and in 2011, the company registered a profit of 43,531 euro. In 2012, the positive financial result amounted to 212,887 euro, while in 2013 it was registered at 178,718 euro, which overall amounts to an amount of 2,395,019 euro in six years.

YEAR 2008 2009 2010 2011 2012 2013

Net profit 1,458,829 193,560 307,494 43,531 212,887 178,718

The Public Company for Coastal Zone Management each year registers a profit in its operation

When it comes to company profits, it is important to mention that the financial statement auditor stated in its report for 201215 that it questioned the justification of registering a large profit by the company, having in mind that the purpose of collecting funds from the use of the Coastal Zone is investment and maintenance of the coastal area in the Coastal Zone. In addition, analysis of financial indicators relating to the capital of the Public Company for Coastal Zone Management shows that the company has registered a very large amount of retained earnings in 200816 in the amount of 3,143,812 euro, of which 1,975,314 euro was allocated to the increase of the company’s share capital in the next year, while 1,000,000 euro was paid to the Government of Montenegro as the owner of the Public Company, in order to cover the deficit in the state budget.17

Data shows that in 2007 the total capital18 of the Public Company amounted to 1,767,270 euro, of which equity capital amounted to bio 74,481 euro, and retained earnings were 1,684,983 euro. In 2008, total capital was sharply increased to 4,028,841 euro, of which equity capital still amounted to 74,481 euro, but retained earnings were doubled to 3,143,812 euro.19 However, in 2009 the total capital was reduced to 3,058,114 euro, but its structure was changed with an increase in equity capital by 1,975,314 euro (from 74,481 euro to 2,049,795 euro) from retained earnings funds. At the same time, part of the retained earnings funds in the amount of 1,000,000 euro was paid to the Government of Montenegro as the owner to cover the state budget deficit, and a part in the amount of 168,498 euro was allocated to address the housing needs of workers, so at the end of 2009, the retained earnings amounted to 205,027 euro.

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Working Report of the Public Company for Coastal Zone Management for the period 2008-2013 15

Report on audit of financial statements for 2012 by auditor „A & C Company“ doo Herceg Novi, from June 2013 16

Retained earnings are part of the overall earnings created as a result of a company’s positive business results 17

Report on audit of financial statements for 2009 by auditor „Mont Audit“ Podgorica, from April 2010 18

Total capital includes equity capital, revaluation reserves, other reserves and retained earnings 19

In 2008, the structure of total capital first included revaluation reserves, in the amount of 802,742 euro, and they related to the

assessment of value of land and facilities the Public Company co-owned together with the Regional Water Supply Public Company

2009: Government receives 1,000,000 from earnings to cover budget deficit, the Public Company increases share capital by 1,975,314 euro

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2007 2008 2009 2010 2011 2012 2013

CAPITAL STRUCTURE

1,767,270 4,028,841 3,058,114 3,372,242 3,123,553 3,349,716 3,249,814

1.Equity capital

74,481 74,481 2,049,795 2,049,795 2,276,207 2,276,207 2,276,207

2.Revaluation reserves

0 802,742 795,486 788,228 780,972 773,715 766,458

3.Other reserves

7,806 7,806 7,806 7,806 7,806 7,806 7,806

4.Retained earnings

1,684,983 3,143,812 205,027 526,413 58,568 291,988 199,343

Increase of equity capital in 2009 to 2,049,795 euro

In the period between 2010 and 2013 there were no significant changes in the amount of total capital, so at the end of 2013 it amounted to 3,249,814 euro, of which equity capital amounted to 2,276,207 euro, and retained earnings were 199,343 euro. However, by late 2012, the management of the Public Company for Coastal Zone Management did not register the increase in equity capital into the Central Registry of Companies and the company’s statute, which was stated in the auditor’s report for 201220. In its report, the auditor indicates that in 2009 part of the retained earnings in the amount of 1,975,314 euro were allocated to the fixed-equity capital, and that in 2011 an amount of 226,413 euro was also registered. „This was done based on the decision by the management board, it was registered in the company general ledger, but the procedure was not finalised. It is undisputable that the company was established without an initial investment, and that the fixed capital is the result of positive business and conversion of parts of the retained earnings into fixed-equity capital, which is directly related with decisions by the management board to use part of the retained earnings for investments, and part of it to be paid to the founder. The company management should adjust accounting records and fully implement their decisions by registering the increase in equity capital of the company into the Central Registry and company statute”, states the auditor’s report. The auditor’s report does not reveal whether the Public Company for Coastal Zone Management really paid the amount of around two million euro for increase in capital or not, or what happened with those funds. 5. EXPENDITURE ON WAGES AND COSTS OF SPONSORSHIP AND ADVERTISING Analysis of data on wages in the Public Company for Coastal Zone Management indicates that five million euro was paid on those grounds in six years, while huge funds are allocated for sponsorship and advertising, for which around 2.3 million euro was spent in the same period.

5.1. Five million euro for wages in six years

According to data from financial reports, in the period between 2008 and late 2013, the Public Company for Coastal Zone Management paid a total of 5,031,712 euro on employee wages, of which Management Board members received a total of 400,375 euro as compensation. In that way, 753,833 euro was spent on wages in 2008, in 2009, 845,194 euro was allocated for this purpose, in 2010, a total of 843,744 euro was paid, and in 2011 slightly more, i.e. 928,108 euro. A year later, 837,795 euro was spent on employee salaries, and in 2013, they amounted to 823,128 euro.

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Report on audit of financial statements for 2012 by auditor „A & C Company“ doo Herceg Novi, from June 2013

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In 2009, the company had 38 employees, the next year there were 40 employees, in 2011 the number of employees in the Public Company for Coastal Zone Management increased to 41, and in 2012 to 44 employees, while in late 2013, the company had 51 persons on the payroll.

2008 2009 2010 2011 2012 2013

TOTAL WAGES 753,833 845,194 843,744 928,108 837,705 823,128 MANAGEMENT

BOARD 52,310 82,476 67,889 94,813 72,378 30,499

Over 800 thousand euro is spent on wages each year

Between 2008 and 2012, the Management Board of the Public Company for Coastal Zone Management consisted of members: Boro Lazović21, Selim Resulbegović22, Ivica Kalezić23 and Đuro Marić24, the Chairman was Aleksandar Tičić,25 while the Public Company was represented in this body by Aleksandra Ivanović and Ljubomirka Vidović.26 In 2013, the President of the Management Board was Xhevdet Cakulli27, and members of this body were Aleksandar Tičič, Andrija Lompar28, Željka Radak-Kukavičić29 and Zoran Kovačević30, as well as Aleksandra Ivanović and Ljubomirka Vidović who represent the Public Company for Coastal Zone Management. In 2008, members of the Management Board were paid a total of 52,310 euro as compensation; in 2009 82,476 euro was spent on compensations, and in the next year 67,889 euro. In 2011, they were paid 94,813 euro, the next year 72,378 euro, and in 2013 a total of 30,499 euro. When it comes to the wages of the Director of Public Company for Coastal Zone Management Rajko Barović, his average net salary in 2009 amounted to 2,500 euro, in 2010, he received an average 1,500 euro per month, in the next year his average net salary was 1,600 euro, and in 2012 it amounted to 1,400 euro per month.31 The salary of Barović in 2013 is unknown.

5.2. Millions spent on sponsorship and advertising In the period between 2008 and late 2013, the Public Company for Coastal Zone Management spent a total of 2,343,443 euro on costs of sponsorships and advertising, of which 1,317,313 euro was spent on sponsorships, and 1,026,130 euro on costs of advertising. 6. ILLEGAL CONSTRUCTION ON THE RIVER BOJANA Official data from the 2013 Working Report indicates that the Public Company concluded 321 contracts with owners of weekend homes near River Bojana on use of the river area and that it received a little over 1.5 million euro from this activity. Data for the year before indicates that this company concluded 336 contracts in the overall value of over 1.7 million euro. After examining the financial statements of the Coastal Zone Company for the previous years, it was detected that these revenues were not expressed in them. However, having in mind the data for 2012 and 2013, there is

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President of Democratic Party of Socialists in Budva and President of the Parliament of the Municipality of Budva 22

Vice President of the Assembly of the Municipality of Ulcinj and President of the Municipal Board of the Social-Democratic Party in Ulcinj 23

President of the State Electoral Commission of Montenegro 24

Councillor of the Democratic Party of Socialists in Herceg Novi 25

Member of the Democratic Party of Socialists and Main Board of this party, Advisor to the Prime Minister of Montenegro, secretary of

the Council for Privatisation and Capital Projects 26

Payment lists of Management Board members of Public Company for Coastal Zone Management for 2009, 2010, 2011 and 2012 from

July 29, 2013 27

Vice President of Forca party 28

Former Minister of Transport and Maritime Affairs 29

Assistant Minister for Sustainable Development and Tourism 30

Member of Municipal Board of the Democratic Party of Socialists in Herceg Novi 31

Payment lists for the Director of the Public Company for Coastal Zone Management of Montenegro for 2009, 2010, 2011, and 2012 from

July 29, 2013

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no doubt that the average annual revenue of the Coastal Zone on this basis was at around 1.5 million euro. The dynamic of collecting revenue from Bojana is not followed by an identical or even similar dynamic of investment into the protection and revitalisation of this area. The overall investments of the Public Company for Coastal Zone Management into the Coastal Zone of the Municipality of Ulcinj for the period between 2012 and 2013 amounted to half a million euro, which is significantly less than the revenue the Coastal Zone Company received just from the Bojana area. In addition, even these funds were allocated to other projects related to the Municipality of Ulcinj, and no funds at all were invested into solving the problems in Bojana. The Coastal Zone Company started collecting this revenue in 2008, after the development of the so-called catalogue of "temporary objects on Bojana" and the adoption of a Plan which recorded the existence of 420 illegally constructed buildings, of which 128 were located on the left bank, and 292 buildings on the right bank of the river. The Plan envisioned for the owners of weekend houses and hospitality facilities to pay a yearly fee for use of area in the Coastal Zone, under the threat that their buildings will be demolished if they refused to conclude contracts with the Coastal Zone Company. There is no doubt that this collection of fees for renting of space governed by this institution is illegal, having in mind that the Special Purpose Area Spatial Plan for the Coastal Zone does not account for the construction of 99% of the buildings currently located on the Bojana River, and that the Spatial Plan of Montenegro and General Concept for the Great Beach protect this area of the banks of Bojana as a bird habitat and wetland area, where any sort of construction is strictly prohibited. In addition, the official Plan of Temporary Buildings in the Coastal Zone for the period 2013-2015, which can also be found on the website of the Public Company for Coastal Zone Management prescribes that temporary buildings in this area may only be installed on three locations. One of these locations is in the immediate vicinity of the bridge connecting the land with the island and only the installation of several hospitality facilities is envisioned here. The second location is at the very mouth of Bojana, where the installation of hospitality facilities is envisioned on both sides of the river. The third location is in the island of Ada and it envisions a few hospitality facilities and buildings used for servicing of beach furniture. According to this document, which was signed by Minister Branimir Gvozdenović, only 18 temporary buildings may be installed at the River Bojana and the island, but the situation in the field is significantly different and today this area contains several hundred illegally constructed buildings of all kinds.

Extract from Coastal Zone Plan (planned buildings – left picture) as opposed to the constructed buildings legalised by the Public Company for Coastal Zone Management - Sector 11

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According to officials in the Coastal Zone Company and the Ministry of Urban Planning, which was the line ministry at the time, records of "temporary buildings" in Bojana were also supposed to be used in the so-called "conservation" of this location, i.e. prevention of further expansion of illegal construction. After the 2008 Criminal Code amendments defined illegal construction as a criminal offence for which prison sentences were imposed, it was to be expected that the devastation of the River Bojana will be at least slowed-down, if not completely stopped. Unfortunately, comparative data on the state in the field indicates that despite all this, the devastation of the River Bojana and its banks continued in full swing. One of the examples for this is the location on the so called "fork" of Bojana where the river island, the so-called "ada" is located.

Photographs from 2008 indicate that only several weekend homes were constructed on this location and that there was no access road. In the photographs from 2013, it is clearly visible that the devastators created an access road and that there are dozens of new illegally constructed weekend houses on the banks of Bojana. 7. CONCLUSIONS AND RECOMMENDATIONS Between 2008 and late 2013, the Public Company for Coastal Zone Management invested half of the amount collected from contracts on use of the Coastal Zone into the Coastal Zone itself. When you subtract the regular operating expenses of the Public Company for Coastal Zone Management, which amount to just over one million per year, analysis of financial reports for the same period shows that in this period, the company reallocated at least six million euro for other purposes, instead of investing them into developing the Coastal Zone Since 2008, the Public Company keeps cash in the amount of 2.7 million euro in banks, while in 2009, it paid 1 million euro from its retained earnings to the Government of Montenegro in order to cover the deficit in the state budget. In the same year, retained earnings were used to increase the company’s share capital by almost two million euro, but in the audit report for 2012, the auditor stated that the increase in equity capital was not registered into the Central Registry of Companies and the Company’s statute, so it is unclear whether the funds were actually paid at all. Costs of wages of employees and especially of members of the Management Board of the Public Company for Coastal Zone Management are huge, and amount to over 800,000 euro per year, and they represent the single largest category in the company expenses. In addition, huge funds are being allocated for costs of sponsorship and advertising, amounting to an average of 350,000 euro per year.

Comparison of images of Bojana from 2008 and 2013

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Recommendations:

• The revenues the Public Company gathers from fees, minus the regular operating expenses, should be fully invested in the Coastal Zone, instead of keeping the funds on bank accounts, increasing the company’s equity capital or allocating profits to the Government of Montenegro

• Expenses of employee wages and especially expenses of sponsorship and advertising should be significantly adjusted so that more funds remain for investments into the Coastal Zone

• The Management Board of the Public Company for Coastal Zone Management should include representatives of all six coastal municipalities– Ulcinj, Bar, Budva, Kotor, Tivat and Herceg Novi, in order to allocate funds into the Coastal Zone in a better and more adequate manner

• The Public Company should organise a public debate on the Plan for the use of funds at the beginning of each year in order to provide an opportunity for citizens, interested non-governmental organisations and other participants to take an active participation in the decision-making and establishing of priorities related to investments into the Coastal Zone

• The Public Company should attempt to permanently solve the problem of illegal construction on the River Bojana, especially having in mind that this is a location of extraordinary natural value.