SUBMISSION FROM THE REPORT ON CROSS-SECTION AUDIT OF ... Submission from Cross... · Annual Report of the State Audit Institution for period October 2009 – October 2010 Page 177

Annual Report of the State Audit Institution for period October 2009 – October 2010

Page 177

SUBMISSION

FROM THE REPORT ON CROSS-SECTION AUDIT OF

PUBLIC PROCUREMENTS OF INFORMATION TECHNOLOGIES FOR YEAR

2008

Type of audit: Cross-section audit Subject of audit: Secreteriat for Development Customs Directorate Property Directorate Pension and Insurance Disability Fund Health Insurance Fund Directorate for Public Procurements Object of audit: Public procurements of Information Technologies Audit duration: 60 working days Auditing team: Miroslav Ivanišević, President of the Senate – leader of Collegium

Branislav Radulović,MA, member of the Senate – member of Collegium

BBulatovic

Text Box


Page 178

1. SUMMARY

Pursuant to Article 4 of the Law on State Audit Institution, Rulebook on Work Methodology for the State Audit Institution, Rules of Procedure of the SAI and the International Auditing Standards for the Public Sector INTOSAI, the State Audit Institution has performed the cross-section audit of public procurement of information technologies for the following subjects: Ministry for Information technology, Customs Directorate, Property Directorate, Health Insurance Fund, Pension and Insurance Disability Fund of Montenegro and Directorate for Public Procurement.

This audit has included an independent examination of regularity and legality of the implementation of public procurements of information technology (hardwares and softwares) in above-mentioned subjects. .

Appropriate methods of auditing have been used during this audit, such as : review of regulations,

inspection of tender documents on the implementation of public procurement procedures, interviews with employees, etc., in order to make an evaluation based on determined facts, on the following issues:

� whether IT equipment has been procured in accordance with the Law on Public Procurement, � whether IT equipment has been delivered according to offers submitted, � whether IT equipment has been in use and whether softwares have been implemented, � whether IT equipment has been recorded in business books, � whether payment has been made in line with method of payment and due date pursuant to

contract conditions. The object of this audit has included examination of regularity and legality in implementation of

public procurements of information technology in the following subjects: � Ministry for Information Society (Secretariat for Development), � Customs Directorate, � Property Directorate, � Health Insurance Fund, � Pension and Insurance Disability Fund and � Directorate for Public Procurements. In the process of cross-section audit, the following irregularities have been determined in the

above-mentioned audited entities, regarding the implementation of the Law on Public Procurements and recording of information technology: MINISTRY OF INFORMATION SOCIETY

� Ministry of Information Society, as the legal successor of the Secretariat for Development has implemented a negotiation procedure without prior open-call to tender for the licensing of software for Microsoft technology and Microsoft technical support, which was previously approved to the Ministry by Directorate of Public Procurements. The estimated value of this procurement amounts

BBulatovic

Text Box


Page 179

€ 1.500.000,00, and the contracted value amounts € 4,551,783.30. In addition, the Ministry of Information Society has conducted a negotiation procedure without prior open-call to tender for the purchase of Oracle licenses and technical support, also previously approved by Directorate of Public Procurements. The estimated value is € 1,050,000.00, and the contracted value is € 1,526,850.00

� Implementation of public procurement procedures by direct bids method (shopping method), as well as by direct agreement, has not been performed by the Ministry of Information Society, i.e. by Secretariat for Development, in accordance with the Article 32 and 77 of the Law on Public Procurements. .

CUSTOMS DIRECTORATE

� While conducting public procurement procedure, the Customs Directorate has not consistently

respected the provisions of the Law on Public Procurements regarding the implementation of Articles 14, 29, 66, 67, and Article 70.

� Customs Directorate has made advance payment to supplier ZZI Ljubljana amounting € 62,000.00,

based on the Annex concluded on December 25th, 2007 and before signing the Agreement on implementation of the main project, which was a condition for that payment.

PROPERTY DIRECTORATE

� Property Directorate does not provide the analytical records on total IT equipment purchased by inventory number, quantity, name, purchase price, written- off value and current value. .

� While implementing the public procurement procedure, Property Directorate has not strictly abide by the provisions of Article 66 of the Law on Public Procurements.

HEALTH INSURANCE FUND OF MONTENEGRO

� For the needs of designing, maintenance and implementation of software solutions in 2008, the

Health Insurance Fund has made payment in total amount of € 449,645.00 without prior procedure of public procurement.

� For procurement of software »Application for physicians – contact«, Health Insurance Fund has

concluded the contract with supplier »MG soft» in the amount of € 397,800.00, based on a negotiation procedure without previous publication of open call, for which Directorate for Public Procurement previously provided an approval on fulfilling the conditions for the implementation of the negotiating procedure on the estimated value of € 200.000,00.

BBulatovic

Text Box


Page 180

PENSION AND DISABILITY INSURANCE FUND OF MONTENEGRO

� On the basis of Proposal for expenditure given by the Inventory Commission in 2007 and 2008 and

Decision of the management body on the approved expenditure, Pension and Disability Insurance Fund has booked IT equipment out of its business books in the total amount of € 737,049.05 at purchase price, or € 6,585.44 of its current value.

� Pension and Disability Insurance Fund has made payments amounting € 177,598.73 in 2008,

related to IT equipment maintenance costs, without previous public procurement procedure. In year 2009, Pension and Disability Fund has made correction of the said irregularity found by State Audit Institution in year 2008, and has conducted procurement of services for IT equipment maintenance in accordance with the Law on Public Procurements.

DIRECTORATE FOR PUBLIC PROCUREMENTS

� Directorate for Public Procurements has not provided an accounting program for analytical records of fixed assets by inventory number, date of purchase, purchase price, written-off and current value, but it has been recorded off-balance.

� In conducting shopping method, Directorate for Public Procurements has not fully complied with the Law on Public Procurements regarding the application of Article 74 of the Law.

� According to purchasers’ requests for IT equipment procurement in 2008, Directorate for Public Procurements has given 14 previous approvals to conducting negotiation procedure without prior publication of tender. The estimated value of these procurements has amounted to € 3,263,410.12, and total value of contracts concluded has amounted € 8,216,903.18, which indicates that some purchasers have concluded contracts in significantly increased amounts comparing to estimated value which has been approved by Directorate. .

2. GENERAL INFORMATION ON SUBJECTS OF AUDITING AND DETERMINED FACTS

Cross-section audit of information technology public procurements has been carried out in the following subjects: Ministry for Information Society, Customs Directorate, Property Directorate, Health Insurance Fund, Pension and Disability Insurance Fund and Directorate for Public Procurements.

In addition to the cross-section audit of information technology public procurements in above-

mentioned subjects, this audit has also included the obligation of Directorate for Public Procurements to provide approval on meeting the requirements for the implementation of negotiation procedure.

BBulatovic

Text Box


Page 181

2.1. MINISTRY FOR INFORMATION SOCIETY

Ministry for Information Society as a legal successor of Secretariat for Development has been established pursuant to Regulation amending the Decree on organization and functioning of State administration (»Official Gazzette of RoM«, no. 81/08) and has become operational on January 3rd, 2009. Ministry for Information Society has come to the possesion of official premises, equipment and other resources previously used by Secretariat for Development. Ministry has overtaken major part of tasks and jobs, as well as civil servants and state employees who carried out these jobs.

This audit related to the Secretariat for Development, but the Ministry for Information Technology

became the subject of the auditing procedure as a legal successor of Secretariat. Ministry of Information Society performs administrative functions relating to: proposing and implementing policies set forth in the establishment and development of information society; project management in the field of information society development; establishment, development, implementation and operation of the information system of state administration.

2.1.1. Recording of IT equipment

Ministry of Information Society has made an inventory of computer equipment on December 31st,

2008, which has been presented in the Report on the inventory. According to the aforementioned report, the value of IT equipment at purchase price amounts € 919,017.35, correction value is € 343,521.75 and the current value is € 575,495.60.

In the process of audit it has been determined that the Ministry of Information Society provides its

accounting records on the SAP system of the Ministry of Finance, so that only keeps the records on revenues and expenditures.

Ministry of Information Society does not provide an accounting program for analytical records of

fixed assets, but it is recorded off-balance in Excel spreadsheets.

2.1.2. Implemented public procurements procedures 2.1.2.1. Open call and negotiating procedures of public procurements

Tabular presentation of public procurement procedures implemented by open call and negotiating procedures No. Tender No. Subject of procurement Estimated Supplier/ Contract Contracted

value Performer No. price

Rent of lines and devices that

No. 01/08 provide internet service for T-Com No. 053-05-

1 as of 05/03/08 state authorities and public 70,000.00 Internet 237/12-08 € 68,455.00

institut. for 12 months period Montenegro

IT equipment, installation of No. 053-05-

No. 02/08 equipment,network development 500,000.00 Chip Ltd 1421/13-08 € 357,639.86

BBulatovic

Text Box


Page 182

2 as of 29/10/08 and electrical installation in

primary schools' IT classrooms Čikom Ltd No. 053-05- € 69,991.56

1421/15-08

Software licensing for

3 Negotiating Microsoft techniques usage 1,500,000.00 Microsoft MNE No. 053-05- € 4,551,783.30

procedure Microsoft technical support CT Computers 1468/11

Negotiating Oracle license and Oracle Serbia/ No. 053-05-

4 procedure technical support 1,050,000.00 Montenegro 1442/10-3 € 1,526,850.00

Analysis of current condition

5 Negotiating of IT equipment and software 55,000.00 Microsoft MNE No. 05-1467/ € 64,350.00

procedure in CDA 10-08

The audit has found that the Ministry for Information Society, i.e. Secretariat for Development has

conducted 2 (two) open procedures of public procurements in 2008 and 3 (three) negotiating procedures without previous publication of tender. The total estimated value of conducted procurements has amounted € 3,175,000.00, and contracts have been signed for a total value of € 6,639,069.72.

Method of direct bids - shopping method has been used in two cases of procurement of IT

equipment. The estimated value of these procurements has amounted €20,000.00, and contract value has amounted € 19,480.80.

The procurement of IT equipment by direct agreement has been implemented in total amount of €

116,656.58. It has been determined in the audit procedure that the Ministry, i.e. Secretariat for Development

has conducted an open procedure of public procurement by call no. 01/08 for selection of the best bidder for providing internet service. The estimated value of this procurement amounts € 70,000.00.

The audit has found that in the process of implementation of public procurements procedures, the

Ministry, i.e. Secretariat for Development has evaluated , among other, the references of bidders through sub-criterion »Quality«, which does not comply with the Law and Regulations on expressing criteria in the appropriate number of points, the manner and procedure for evaluating and comparing bids, because it violates the principle of equal rights and the competitiveness of suppliers. Members of the Committee, the Procurement officer and the person authorized by the purchaser to make decisions have not signed declarations of independence, to which they are bound by Article 14 of the Law on Public Procuremenst.

The Secretariat for Development concluded a Contract with company T-Com as supplier, no. 053-

05-237/12-08, amounting € 68,445.00 after the implementation of public procurement procedure. The audit process has determined that the Ministry, ie. Secretariat for Development has conducted

a negotiating procedure without prior publication of the invitation to tender, for the licensing of software for usage of Microsoft techniques and Microsoft technical support.

BBulatovic

Text Box


Page 183

Directorate for Public Procurement has provided approval for the assessed value of the said public procurement amounting € 1,500,000.00.

The audit has found that the Commission for Implementation of Public Procurements has not prepared tender documents with proposed terms and requirements for bidders. It has also been determined that the invitation to submission of bid sent to the company »Microsoft Montenegro« Ltd has not been defined regarding the conditions for participation in procurement procedures, and has not been provided for a detailed procurement specification list.

Two bidders, Company »Microsoft« and Company »CT Computers MNE« have submitted a joint

bid relating to:

1) licensing of Microsoft products used by public sector, 2) Microsoft consulting services, 3) Microsoft Premier technical support. The bid relating to the licensing is based on the Enterprise Agreement (EA), which consists of two

parts: (1) Software Assurance (SA), presenting new versions of products in the course of three years, is

related to 3,600 personal computers licensed according to the previous Contract and

(2) Software which has not been included in the first Contract, purschased during previous three years, as well as ongoing projects.

The bid related to the licensing has been provided in US dollars (provided that the calculation and

payment are made according to Central Bank’s USD selling rate on date of payment), which is contrary to Article 57 of the Public Procurement Law, which stipulates that submitted offer need to be presented in euros.

The bidder has not provided evidence of eligibility as stipulated in the Law of Public Procurements. The audit has found that Strategic partnership Agreement on licensing and technical support, no.

053-05-1468/11, has been concluded with the bidder, company »Microsoft« for a period of three years, without a specified amount of public procurement included.

Pursuant to accepted offer the value of public procurement amounts $ 5,583,619.69, i.e. €

4,551,783.30. According to the offer payment is made as follows: � the first installment is paid no later than December 25th, 2008, in the amount of $ 2,933,505.72

excluding VAT, � the second installment is paid no later than December 25th, 2009 in the amount of $

955,319.40 excluding VAT, � the third installment is paid no later than December 25th, 2010 amounting $ 883,499.40

excluding VAT.

BBulatovic

Text Box


Page 184

The Ministry, i.e. the Secretariat for Development has been oblidged to conclude an Agreement with the selected bidder, including the public procurement value and payment terms and conditions in accordance with accepted offer.

The audit has found that the contract price has been significantly higher than the estimated value

of public procurement which has been approved by Directorate for Public Procurements. The Plan and Amendment of public procurement for 2008 has not provided for the said procurement in the agreed amount and duration.

The Ministry maintaines records on licenses assigned to state authorities. The audit has found that there are no prescribed guidelines and procedures for the transfer of

licenses the state authorities. Licences are assigned on user’s request, after the approval by Minister or Secretary.

The audit procedure has determined that the Ministry, ie. The Secretariat for Development has

conducted a negotiating procedure without prior publication of the invitation to tender for the procurement of Oracle licenses and technical support. The estimated value of this procurement amounts € 1,050,000.00 and it has obtained the approval on implementation by Directorate for Public Procurements.

The audit has found that the Commission for Implementation of Public Procurement Procedure has

not prepared tender documents with proposed terms and requirements for bidders. It has also been determined that the invitation to submission of bid sent to the company »ORACLE Srbia & Crna Gora« has not been defined regarding the conditions for participation in procurement procedures, and has not been provided for a detailed specification of procurement.

The bidder has not submitted evidence of eligibility within its offer, as stipulated by the Law on

Public Procurements. The only document that the bidder has submitted is the Certificate on registration of the subject older than six months from the date of the call, which is contrary to Article 51 of the Law on Public Procurements.

The audit has found that after the implementation of public procurement procedure an Agreement

on licensing and technical support, no. 05-03-1442/10, has been concluded with the bidder, company »Oracle Srbija & Crna Gora« Ltd« in the amount of at least € 1,526,850.00. The audit has found that the contract price has been significantly higher than the estimated value of public procurement which has been approved by Directorate for Public Procurements. The Plan and Amendment of public procurement for 2008 has not provided for the said procurement in the agreed amount and duration.

The audit process has revealed that the Ministry, ie. Secretariat for Development has conducted a

negotiating procedure without prior publication of tender for procurement of the following services: Analysis of current condition of equipment and software in the CDA and recommendations for its improvement and the Information Society Promotion - free e-mail address. The estimated value of procurement for both projects amounts € 205,000.00.

BBulatovic

Text Box


Page 185

The subject of audit has obtained prior approval from Directorate for Public Procurements, on complying with the requirements for the implementation of the negotiating procedure without previous publication of tender.

The audit has found that the Commission for Implementation of Public Procurement Procedure

has not prepared tender documents with proposed terms and requirements for bidders. It has also been determined that the invitation to submission of bid sent to the company »Microsoft Montenegro« Ltd has not been defined regarding the conditions for participation in procurement procedures, and has not been provided for a detailed specification of procurement.

After having the public procurement implemented, the Ministry, ie. the Secretariat for Development

has concluded an Agreement only for the procurement of services related to the Analysis of the current condition of the equipment and software in the CDA and recommendations for its improvement in the amount of € 64,350.00 with supplier »Microsoft Montenegro« Ltd. Payment under the said contract was completed in 2008.

2.1.2.2. Shopping method The audit procedure has determined that the Ministry, i.e. the Secretariat for Development has

conducted procurement of IT equipment in the total amount of € 19,478.80 during year 2008, based on the method of direct call for bids – shopping method. The estimated value of aforementioned public procurements amounted € 20,000.00.

The audit has found that subject has not concluded Contracts with selected bidders after

conducting public procurement procedures under the shopping method, but payment has been made based on Invoices issued by suppliers.

After examining the procedure for public procurement conducted on the basis of shopping method,

it has been determined that no evidence of public bids opening has been presented, nor the bids have been opened before the legal deadline of three days, which is not in accordance with Article 77 of the Law on Public Procurements. The contracting authority has named the product type in the specification of the required equipment, which is contrary to Article 39 of the Law on Public Procurements. Payment on the said contracts was completed in 2008. 2.1.2.3. Direct agreement

In the audit procedure it has been determined that the Ministry, i.e. the Secretariat for Development

has procured IT equipment by direct agreement in total amount of € 116,656.58 during 2008.

BBulatovic

Text Box


Page 186

Tabular presentation of equipment purchased in 2008 by direct agreement

PC Monitor Notebook Printer Chip Ltd 75 pcs 75 pcs 26 pcs 57 pcs Informatika Montenegro Ltd 13 pcs 7 pcs - 11 pcs Čikom Ltd 4 pcs 4 pcs - 17 pcs

Tabular presentation of amounts paid for procured equipment to suppliers

Chip Ltd 81.363,05€ Čikom Ltd 20.264,66€ Informatika Montenegro Ltd 14.218,06€ Data Link 810,81€

TOTAL €116.656,58 Based on available documents the audit has found that the aforementioned subject has procured

IT equipment in the amount of € 81,363.05 from supplier »Chip« Ltd Podgorica by direct agreement method. Taking into account the object and value of purchase from the same supplier, it can be concluded that the audited subject has not complied with the Article 32 of the Law on Public Procurements, which obliges it to follow the terms and methods of procurement as stipulated by this Law according to the established values and that the object of procurement is considered a single unit and thus cannot be divided during the financial year.

2.2. CUSTOMS DIRECTORATE

Customs Directorate conducts administration affairs relating to the following: customs supervision, customs clearance; control of goods with specially regulated import or export; foreign currency control in international traffic and border traffic with foreign countries, prevention and detection of customs violations and conducting administrative and tort procedure, preventing and detecting criminal acts and financial infringements in customs procedures; prevent and detect violations of foreign exchange in international traffic and border traffic with foreign countries; processing and monitoring of statistical data on imports and exports, and other activities that under its competence.

Activities within the scope of the Customs Directorate are carried out by the following organizational units: the sectors, departments, agencies and regional offices.

2.2.1. Recording of IT equipment

The audit has determined the Customs Directorate provides an analytical records of IT equipment

by inventory number, type and quantity. It has also been determined that Customs Directorate provides centralized recording system of IT equipment.

The examination of accounting records has shown that computer equipment purchased in year

2008 has been recorded in the accounts of the Customs Directorate dated on December 31st, 2008. The

BBulatovic

Text Box


Page 187

total value of procured IT equipment (hardware) based on analytical records in 2008 amounted € 66,615.56, while the amount paid for software design and maintenance was € 322,226.17.

The total value of Customs Directorate’s IT equipment on December 31st, 2008,at purchase price

amounts € 604,539.53, written-off value amounts € 379,146.86 and current value is € 225.392,67.

2.2.2. Implemented public procurement procedures 2.2.2.1. Open and negotiating public procurement procedures

No. Tender No. Subject of Estimated Offer Supplier/ Contract Contracted

& specification procurement value € Number Performer Number price €

Informatika No. D-428/1 No. 200/52 as No. D-14295/1 Montenegro as of 17/01/08 42,251.04 1 of 25/10/2007 Hardware 50,000.00 No. D-14287/1 VG Servis No. D-530/1 2,328.30 as of 21/01/08 2,129.30 No. 300/1 No. D-4917/1 2 as of 06/03/08 Software 20,000.00 No. D-3233/1 Oracle Bgd as of 14/04/08 18,828.82 3 No. 300/43 Software 13,000.00 None Memex, No. D-14077/1 12,500.00 as of 17/07/08 Glazgow,UK as of 04/11/08 Informatika No. D-11962/2 Hardware 33,500.00 No.D-11962/1 Montenegro as of 22/10/08 27,835.22 4 No. 300/35 Digit No. D-11963/2 as of 01/08/08 Hardware 2,500.00 No.D-11963/1 Montenegro as of 22/10/08 1,690.65

Cikom No. D-11961/2 Software 4,500.00 No.D-11961/1 Podgorica as of 22/10/08 4,454.19 International

Tender ZZI No. 300/59 5 No. 300/59 Software 400,000.00 No. D-13759/1 Ljubljana as of 10/12/08 400,000.00 as of 03/10/08 No.200/20 ZZI No. 200/20

5* as of 06/03/07 Sowtware 190,000.00 No. D-3360/1 Ljubljana as of 01/08/07 211.381,52

In the process of audit it was determined that the Customs Directorate has conducted 4 (four) open

public procurement procedures for the purchase of information technology equipment in 2008, with a framework Agreement concluded for one of the procedures as being predicted. Total estimated value of procurements by these calls has been € 472,500.00 and contracted value has amounted € 460,307.23

The subject has also conducted a negotiating procedure without prior publication of the invitation,

whose estimated value has been € 13,000.00 and contracted value has amounted € 12,500.00. The procurement of IT equipment contracted by direct agreement has amounted to € 3,626.32. Total value of procured information technology equipment in 2008 amounted € 472,807.23.

In the process of audit it has been determined that the Customs Directorate has conducted an

open public procurement procedure by invitation no. 300/25 for the selection of the successful bidder for the services of repairment and maintenance of computer equipment. The estimated value of this procurement has been € 57,000.00.

BBulatovic

Text Box


Page 188

The object of procurement has been divided into 11 parties, with two of them relating to purchase of information technologies with estimated value of € 7,500.00.

The audit has found following irregularities in conducting of this public procurement procedure:

� The subject of procurement has been divided into 11 parties, which have not presented as related entities, and thus could not be procured by single tender procedure. Therefore, the subject of public procurement has not been appropriately specified. Dividing the subject of public procurement by parties has caused establisment of different criteria and sub-criteria for the evaluation by parties.

� The contracting authority has evaluated the references of the bidders, which is not in accordance with the Article 66 of the Law and Regulations on methodology of expressing criteria in the appropriate number of points and method and procedure of bids evaluation and comparison, as in this way it has limited market competition.

� The record did not include information about the submitted evidence of eligibility of the bidder,

which is not in accordance with Article 67 of the Law on Public Procurement.

� An analytical statement of the requested and submitted proof of eligibility for each bidder has not been presented in the record, which is not in accordance with the Article 70 of the Law on Public Procurements.

� Members of the Commission, the Procurement officer and the person authorized for decision-

making have not signed the declaration of independence to which they are bound by the Article 14 of the Law on Public Procurement. In the process of audit it has been determined that the Customs Directorate has conducted an

open public procurement procedure by invitation no. 300/36 for selection of the most successful bidder for purshase of computer and office equipment. The estimated value of this procurement has been € 45,000.00.

The audit has found following irregularities in conducting of this public procurement procedure:

� Customs Directorate has conducted an open procedure for public procurement with various subjects of public procurement so that common criteria and sub-criteria for the evaluation could not be established, because it does not work on non-related entities.

� Data on submitted proof of eligibility of bidders have not been presented in the record, which

is not in accordance with the Article 67 of the Law on Public Procurements.

� An analytical presentation of the requested and submitted evidence of eligibility for each bidder has not been provided in the record, which is not in accordance with the Article 70 of the

BBulatovic

Text Box


Page 189

Law on Public Procurements. In the audit procedure it has been found that the Customs Directorate has conducted negotiating

public procurement procedure without prior publication of the invitation to tender for the selection of the successful tenderer for providing services of repairment of risk analysis system. The estimated value of this procurement amounts € 13,000.00.

Pursuant to the Article 26 of the Law, for the above-mentioned procedure the Customs Directorate

has obtained prior approval from the Directorate for Public Procurement on complying with conditions for the implementation of the negotiating procedure without prior publication of invitation to tender.

During the audit procedure it has been found that in 2006 the Customs Directorate signed the

Contract with Company Charles Kendal & Partners for implementation of Risk Analysis in the Customs Directorate procedures, which was financed by World Bank loan. It has been determined that the author of software solution was Company Memex from Scotland, which was engaged by Company Charles Kendall & Partner.

As there has been a problem in using the software solution and considering that software for risk

analysis is a key tool for fighting against smuggling in the customs terminals, which can help in prevention of illegal trade and provide faster flow of goods, the Customs Directorate has concluded Agreement for providing services no. 14077 / 1 with the company Memex Technology for a period of one year in the amount of € 12,500.00. In the process of audit, the auditor has determined that the bidder did not submit the necessary proof of eligibility as stipulated in the Article 51 of the Law on Public Procurements.

The audit procedure has determined that the Customs Directorate has concluded a preliminary

Agreement for provision of maintenance services and operational security of existing application system solutions CIS (call no. 300/59). The estimated value of this procurement is € 400,000.00. The Customs Directorate has provided consent from Directorate of Public Procurements for the implementation of the said procedure.

The following irregularities have been determined within aforementioned public procurements procedure: � Bidders have not been allowed to submit offers for individual parties, although the subject of

procurement has been divided into three parties, but it has been stipulated that the subject of the public procurement has been purchased as a whole, which is not in accordance with Article 29 of the Law on Public Procurements.

� The contracting authority has evaluated the references of the bidders, which is not in accordance with the Article 66 of the Law and Regulations on methodology of expressing criteria in the appropriate number of points and method and procedure of bids evaluation and comparison. Thus it has undermined the principle of equality and competitiveness of bidders by limiting market competition.

� Reviews of submitted proofs of bidders’ eligibility have not been presented in the record, which is

BBulatovic

Text Box


Page 190

not in accordance with the Article 67 of the Law on Public Procurements.

� Declarations of Independence have not been signed by all the members of the Commission, to which they are bound by Article 14 of the Law on Public Procurements. After having the procedure implemented, the Customs Directorate has concluded the Agreement

no. 15675/1 with supplier »ZZI« Ltd, amounting € 400,000.00. In the audit procedure it has been determined that the Customs Directorate has conducted an open

public procurement procedure for selection of the successful tenderer for the provision of maintenance services, modification and improvement of application and system software (Call no. 200/20). The estimated value of this procurement amounted € 190,000.00.

After the implementation of public procurement procedure the Customs Directorate has concluded an Arrangement no. 9535/1, dated August 01st, 2007, with the bidder »ZZI« Ltd in the amount of € 211,381.50.

The audit procedure has shown that the Customs Directorate has conducted an open public procurement procedure for selection of the successful tenderer for the procurement of IT equipment (Call no. 200/52). The estimated value of this procurement amounts € 50,000.00.

After the implementation of public procurement procedure the Customs Directorate has concluded

Arrangements with suppliers »Informatika Montenegro« i »VG Servis«. The state auditor has found the following irregularities in aforementioned public procurement

procedure:

� The contracting authority has not declared an estimated value of procurement by the different parties, athough this was compulsory pursuant to Article 29 of the Law, based on which it is required that subject of public procurement should be described clearly, comprehensively and unambiguously by type, quality, price and by all other properties and conditions.

� Reviews of submitted proofs of bidders’ eligibility have not been presented in the record, which is not in accordance with the Article 67 of the Law on Public Procurements.

� Members of the Commission, the Procurement officer and the person authorized for decision-making have not signed the declaration of independence to which they are bound by the Article 14 of the Law on Public Procurement.

2.2.2.2. Direct agreement

In the process of auditing it has been stated that the Customs Directorate has procured IT and network equipment by direct agreement method from supplier »Čikom«, in total amount of € 3,626.32.

In addition to these public procurement procedures that have been implemented in 2008, the

BBulatovic

Text Box


Page 191

subject of this review are also two open public procurement procedures that have been conducted in 2007. Their estimated value has amounted € 240,000.00, and the contracted value has been € 255,960,84. On the basis of these Contracts payments have been made in 2008 in the amount of € 131,814.36.

On the basis of an international tender procedure the Customs Directorate has concluded the

Contract no. 293/47-1, LOT 1 dated December 16th, 2005, with »ZZI« Ljubljana for the maintenance services, modification and improvement of application and system solutions of Customs Information System in the Customs Directorate. The value of contracted services has been € 222,645.20. Total payment of € 208,988.52 has been completed by the end of year 2007 according to this Contract.

The Customs Directorate has concluded ANNEX no. 2 of the Contract no. 293/47-2 with ZZI - Ljubljana dated on December 25th, 2007 for development of new software solutions of Customs Information System for the Customs Directorate. The subject of the Annex has been the realization of Customs Tariff project. The contracted amount of this Annex has been € 161,692.08.

Phases of the project that should be processed as follows: � Instalation of donated applications, � Addition of functionality to maintain TARIC national data, � Adaptation of »Computer module« for TARIC NAC MNE, � Changing procedures for controlling UCD and linking the CIS and TARIC. The deadline for the completion of particular phases depended on the beginning of operations by

contractor and it has been predicted to complete the project within 8 months after the beginning of operations, which was not done on time.

The implementation of this Annex has been conditioned by signing an Agreement on donation of integrated customs tariff project by the Customs Directorate of the Republic of Slovenia. The said agreement has been signed on July 28th, 2008. In the audit procedure it has been found that according to aforementioned Annex, the Customs Directorate has made advance payment on December 25th, 2007, in the amount of € 62,000.00 and before signing the Agreement on implementation of the main project.

2.3. PROPERTY DIRECTORATE The Property Directorate has been established according to the Rulebook on Organization and

Functioning of State Administration (»Official Gazzette of RoM« no. 59/09). The Property Directorate performes the following activities and operations related to:

� initiating editing of normative-legal and other legal affairs in real estate, � development of standards in the field of geodetic surveying, real estate register, underground

utilities; conducting administrative proceedings in the field of property rights and real estate register, providing implementation and execution of legal and property regulations in Montenegro,

� real estate value estimation, � planning, design, analysis and evaluation of accuracy of works on the development of surveying,

BBulatovic

Text Box


Page 192

real estate register and mapping work, � photogrammetric aerial photography, research and publishing activities and other geodetic surveys

and production of original and reproduction of plans and maps, � development and maintenance of the geodetic network of lines, � creation, restoration, update and control the state survey, real estate register and registration of

property rights, � performing and supervising construction and maintenance of the register of water and underground

facilities, � organization and keeping records of state property, which consists of real estate, and other

activities within its jurisdiction The Section for geodetic and cadastral information system of the Property Directorate includes: the

Department of geodetic and cadastral information system, Department for Development of Information Technology and the Department of Archives and publishing data.

2.3.1. IT equipment records

In the process of audit it has been determined that the Property Directorate has made an inventory list of computer equipment on December 31st, 2008 on the basis of which the inventory report no. 02-4636 has been prepared. On the basis of physical list of equipment, the summary table reviews of IT equipment in branch offices of the Property Directorate have been made and enclosed in the attached part of Inventory report. It was not possible to determine the overall value of IT equipment as most of the funds have not been recorded as numerical value.

The audit has shown that Property Directorate has procured IT equipment in total amount of € 1.015.118,41 during 2008.

The audit has found that the Property Directorate does not provide analytical records of the total IT

equipment purchased by inventory number, quantity, name, purchase price, written-off value and current value.

2.3.2. The Review of implemented public procurement procedures 2.3.2.1. Open and negotiating procedures of public procurements

No. Tender No. Subject of Estimated Offer Supplier/ Contract Contracted

& specification procurement value € Number Performer Number price €

Multifunction A3 1 No. 05/08 laser color (printer as of 24/04/08 copier,scanner) 58,000.00 No. 02-672/7 X PRO No. 02-67/17 35,204.13 plastification device Workstations 90,000.00 No. 02-1900/11 Digit No. 92-1900/27 78,493.10 No. 06/08 Laptop 12,000.00 No. 02-1900/9 Chip Ltd No. 02-1900/33 9,976.68 2 as of 06/06/08 Tablet PC 3,700.00 No. 02-1900/8 Cikom Ltd No. 02-1900/29 2,728.50 TOTAL 105,700.00 91,198.28

Server 37,000.00 No. 02-1901/7 Chip Ltd No. 02-1901/29 33,959.00 3 No. 07/08 Blade System 15,000.00 No. 02-1901/08 Digit No. 02-1901/24 13,455.00

BBulatovic

Text Box


Page 193

as of 06/06/08 TOTAL 52,000.00 47,414.00

UPS & Printer Bw No.02-1902/39 A4 - 40 pcs 25,000.00 No. 02-1902/10 Chip Ltd 02-1902/52 21,261.20 Color Printer A3-3 pcs No.02-1902/40 21,620.59

Copier BW A3-23 pcs 32,000.00 No. 02-1902/9 Biromont 02-1902/42 No. 08/08 Scanner A4 - 15 pcs 5,000.00

4 as of 28/05/08 Ploter - 1 pcs 4,000.00 No. 02-1902/10 Chip Ltd No. 02-1902/41 3,003.60 Fax machine A4-15pcs 6,000.00 No. 02-1902/11 Telemont No. 02-1902/43 3,500.00 Projector - 11 pcs 11,000.00 No. 02-1902/10 Cikom Ltd No. 02-1902/44 7,709.13 LCD Monitor 7,500.00 No. 02-1902/10 Modro No. 02-1902/45 6,195.30 TOTAL 90,500.00 63,289.82

No. 11/08 Update of photogramm. Vekom Geo No.02-3315/13-1 111,224.00 5 as of 30/07/08 Workstations 135,000.00 No. 02-3315/7 Ltd Belgrade VAT 10,300.27

TOTAL 135,000.00 121,524.27 GPS/GLONASS Smart Vekom Geo

6 Antenna&Leica Rovere 75,000.00 No. 02-3425/6 Ltd Belgrade No.02-3425/15-1 57,610.00 Multifunction Informatika

7 Scanner AQ 100,000.00 No. 02-4513/8 Montenegro No. 02-4513/16 99,976.50 Data Storage Digit System - 4 pcs 75,000.00 No. 02-4639/9 Montenegro No. 02-4639/17 49,891.14 UPS-50pcs,Printer

8 BW A4-25 pcs, Workstations-25pcs 45,000.00 No. 02-4639/8 Chip Ltd No. 02-4639/16 29,837.85 Scanner A4 - 20 pcs TOTAL 120,000.00 79,728.99

No.02-3631/15 1 No 14/08 Oracle license 40,000.00 No. 02-3631/7 Montora Ann I-02-3631/16 39,910.64

as of 22/08/08 Software Ann II-02-3631/17 License for Autodesk,

2 No. 16/08 AutoCad 2009,Civil 3D 240,000.00 No. 02-4153/6 WINsoft No.02-4153/14 223,257.59 as of 26/09/08 2009 and MAP 3D 09 Update of sofware

3 No. 18/08 solutions used by 30,000.00 No. 02-4514/8 Elipsa,Uzice No. 02-4514/17 30,000.00 as of 17/10/08 Property Directorate Srbia Licenses for ESRI prod.

4 No. 19/08 applicative solutions 175,000.00 No. 02-4540/8 GISDATA No. 02-4540/18 144,142.19 as of 17/10/08 based on ESRI techn. Belgrade TOTAL 485,000.00 437,310.42

Property Directorate has conducted 12 (twelve) open public procurement procedures for purchase of information technologies in 2008. Total estimated value of procurements in these procedures has amounted € 1,194.700,00 and Contracs have been concluded in total amount of € 1,015,118.41.

Property Directorate has conducted procurements by direct agreement method in total amount of

€ 12,693.54.

The audit procedure has shown that the Property Directorate has conducted an open public procurement procedure for selection of the best offer for purchasing licenses for Autodesk Autocad 2009, Civil 3D 2009 i MAP 3D 2009, according to the specification list included in tender documents (Call no. 16/08). The estimated value of this procurement has amounted € 240,000,00.

This software has been used for ten years now and during this period the licenses have not been

renewed. Re-purchase of licenses has been carried out and annual software maintenance costs 15.000 €.

It has been determined in the audit process that Property Directorate has evaluated the references of the bidders through established sub-criteria, which has not been in accordance with the Article 66 of the

BBulatovic

Text Box


Page 194

Law and Regulations on methodology of expressing criteria in the appropriate number of points, and method and procedure of bids evaluation and comparison. Thus it has undermined the principle of equality and competitiveness of bidder .

After the implemented procedure the Property Directorate has concluded a Contract no.4153/14

with the supplier »Winsoft« Ltd, amounting € 223,257.59. The audit procedure has found that the Property Directorate has conducted an open public

procurement procedure for selection of the best offer for purchasing licenses for ESRI product (Call no. 19/08). The estimated value by this tender has amounted € 175,000.00.


Property Directorate has evaluated the references of bidders through sub-criterion »Quality«, which does not comply with the Article 66 of the Law on Public Procurements and Regulations on expressing criteria in the appropriate number of points, the manner and procedure for evaluating and comparing bids. Thus it has violated the principle of equality and competitiveness of bidder.

After the implementation of the procedure the Property Directorate has concluded a Contract with

supplier »Gisdata« from Belgrade, no. 4540/18 in the amount of € 144,142.19. The audit has determined that the Property Directorate has charged the bidders an amount of

€200,00 in all the procurement procedures for the purchase of tender documents. State auditors consider this amount for purchase of tender documents too high and pursuant to the Article 41 of the Law on Public Procurements, they recommend to the Administration to charged only the cost of copying and delivering the tender documents.

2.4. THE HEALTH INSURANCE FUND The Health Insurance Fund of Montenegro is an institution that provides health care rights and

health insurance. The Fund is an institution that has legal status. Synchronized operation of the Fund in the health care and health insurance system, provides

better control, rational and earmarked funds spending and more creative policy implementation. The Fund is organized as a single functional unit in order to achieve efficient, rational and

successful performance of duties within their jurisdiction and legal implementation of health insurance. In order to achieve the rights of its insured, the Fund has the organizational units in all

municipalities in Montenegro.

BBulatovic

Text Box


Page 195


The audit has determined that the Health Fund has provided analytical records of IT equipment by inventory number, quantity, name, purchase price, written-off and current value.

It has been determined through auditing that the Health Insurance Fund has purchased computer equipment (hardware and software) in the amount of € 737,390.44 in 2008, out of which an amount of €29,705.62 has been procured from the position of Health System Reform Project through the Ministry of Finance.

The insight into the Inventory report list of the audited subject has revealed that total value of IT equipment – hardware, at the end of 2008 has amounted at purchase price €717,388.36, written-off value has been € 294,560.26 and current value has amounted € 422,828.10, while total value of IT equipment software has amounted as follows: € 600,714,45 at purchase price, written-off value has been €227,426.13 and current value has amounted € 373,288.32. It has also been found that there was a depreciation expenditure of IT equipment at purchase price of € 2,559.95, written-off value of € 1,585.23, and the current value of € 974.72.

The audit has shown that recording of intangible assets investments – software for accounting

department has been carried out on the basis of invoices issued by suppliers upon partially completed works, not the total amount according to the Contracts.

2.4.2. Review of implemented public procurement procedures 2.4.2.1. Open and negotiating public procurement procedures

No. Tender no. Subject of procurement Estimated

Value € Supplier Contract Contracted

Price€

Saga Ltd Belgrade andi

Saga MNE Ltd no. 317 as of 12/02/

200862.595,00

"Chip" Ltd no. 217 as of 30/01/

20083.985,75

279.053,35 7.043,01

University

„Mediteran“ no. 02-2614 as of

03/09/2008 130.160,00

"Digit Montenegro" no. 02-2650 as of

05/09/2008 97.659,90

4. 04/07 as of 2007 Software – Design of software for

Helth Centres Pljevlja Danilovgrad,

Tivat and Rožaje

€ 200.000,00 MG Soft Ltd 1086 as of 2007 190.008,00

5.

Negotiating

procedure 29/08

as of 16/07/2008

Software – Design of software € 200.000,00 MG Soft Ltd no. 02-2379 397.800,00

"Telemont"Ltd 818 as of 19/03/08

Anex 4007

3. 24/08 as of

28/05/2008Traning of employees € 250.000,00

1.33/07 as of

08/12/2007 IT equipment € 92.000,00

2. 05/08 as of

08/02/2008Network design €320.000,00

BBulatovic

Text Box


Page 196

According to the audit findings, the Health Insurance Fund has conducted 1 (one) open public procurement procedure for purchase of information technology in 2008, as well as one nefotiating procedure without prior publication of call. The total estimated value of procurement by these procedures has been € 520,000.00 and contracted amount has been € 676,853.55.

Health Fund has carried out procurement of IT equipment by direct agreement procedure in the amount of € 36,621.36, and by shopping method in the amount of € 16,872.72.

It has also conducted an open public procurement procedure for the training of health workers,

with the estimated value of € 250,000.00, for which a contract has been concluded in the amount of € 227,819.90.

The subject of the audit have been also two (2) open public procurement procedures conducted in

2007. Their total estimated value was € 292,000, and concluded contracts valued at € 262,838.25.

In the process of audit it has been found that the Health Insurance Fund has conducted an open public procurement procedure by call 05/08 for the selection of the successful tenderer for the provision of services for local area networks in Health Centres. The estimated value of this procurement amounts € 320,000.00.

The audit has found that under this tender the works on making the installation of local area networks in health centers in 12 municipalities have been carried out. It has been shown that the Health Fund has hired an expert - the supervising authority, which has reviewed the performance of work, quality check, control, application of regulations, standards, technical regulations and quality standards, quality control of material that has been installed, the application of control measures for environmental protection and control of respect to the dates of execution. It has also made a control of the additional works approved by the investor which have not been defined by the initial technical documentation, and which needed to have been performed. As a part of this agreement a networking of General Hospital in Pljevlja has been implemented. The supervising authority has determined that the said installations can be used in accordance with their purpose, and the networking of all Health Centres was completed in December 2008.

The audit has determined the following shortcomings in the process of implementation of

aferementioned public procurement procedure: � »Payment terms and method« has been established as one of the criteria for evaluating bids,

although this sub-criterion is not defined by the Law on Public Procurement.

� The Reviews of provided proofs of bidders’ eligibility have not been presented in the records of opening and evaluating of bids, as stipulated by the Article 67 of the Law on Public Procurements.

The Health Insurance Fund has concluded Contract with supplier »Telemont« Ltd in the amount of

€ 279,053.35 after the implementation of public procurement procedure. The audit procedure has found that the Health Insurance Fund has conducted an open public

procurement procedure by call no. 24/08 for the selection of the winning bidder for the provision of training of employees in primary health care in order to be qualified to use computer standards ECDL in

BBulatovic

Text Box


Page 197

municipalities. The estimated value of this procurement is € 250,000.00. The audit has identified the following shortcomings in the part of the Law on Public Procurement

regarding the implementation of the procedure of public procurement: � The purchaser has valuated reference of bidders through sub-criterion technical and

technological advantages, which is not in accordance with Article 66 of the Law on Public Procurement.

� The Rewiews of provided proof of eligibility of the bidders have not been presented in the

record of opening and evaluating bids, pursuant to Article 67 of the Law on Public Procurement.

After the implementation of public procurement procedure, the Fund has concluded Contracts with

following suppliers: � Digit Montenegro (Contract no. 02-2650) amounting € 97,659.90, � Mediteran University (Contract no. 02-2614) amounting € 130,160.00. In the audit procedure it has been found that the Health Insurance Fund has conducted a

negotiating procedure without prior publication of the invitation to tender for the selection of the winning bidder for the procurement of software, »Application for physician - contact«. This software should present the integration of all software modules from IS Fund and the Institute for Public Health Call 29/08. The estimated value of this procurement amounts € 200,000.00, which has been provided for a prior approval from the Directorate of Public Procurement.

The project task defines the following software functions: 1. »Application for physician - contact« need to ensure connection with papers prescribed by a

doctor (recipes, refferals, doctor’s orders, as well as reports that doctors submit to the Institute, the Fund, to Health Centre’s management, etc..)

2. Cryptosystem , 3. Application for the Institute for public health with software for Microbiology, 4. Connection with the Fund for forwarding refferal instructions (of patients) to Fund Commissions, 5. Linking applications for doctors with medical device software, 6. Applications for selected doctor’s work planning – to adapt and integrate into Health Centres’

Information Systems already designed application, 7. Application for planning and contracting primary care services - primary health care service

planning, monitoring plan execution, registration of contracts with service providers, monitoring of contracts.

In addition to basic functions of software defined by Project task, the Offer no. 02-4730 as of July

30th, 2008 , contains the software for the General Hospital in Pljevlja.

BBulatovic

Text Box


Page 198

The audit has found that the Commission has invited for submition of bid to the bidder »MG Soft« without stating the estimated value of public procurement according to which the approval of the Directorate was obtained. The Commission has not drawn up the tender documents and has not signed the Declaration on nonexistence of conflict of interest.

After the implementation of public procurement procedure, the Fun has consluded Contract no. 02-

2379 with supplier »MG soft« Ltd in the amount of € 397,800.00. At the request of the state auditor a written explanation has been submitted by the authorized

person in the Health Fund giving the reasons that led to discrepancies between estimated and contracted value of the public procurement. In the opinion of the Fund it has been stated that the offered software solutions of »MG softa« have been significantly more extensive and complex in comparison to request given by the project reference of the Fund.

In addition to public procurement procedures implemented in 2008, the subject of this audit have been two public procurement procedures that implemented in 2007as the payment of obligations by the same has been performed in year 2008, which has been the regarded audited period.

The audit procedure has shown that the Health Insurance Fund has conducted an open public procurement procedure for selecting the best offer for the purchase of software for Health Centers Crikvenica, Tivat and Rozaje, reference call number 04/07. The estimated value of these acquisition has been € 200,000.00.

The following shortcomings have been identified in the part of: � »Terms and method of payment« and »Bidder's reference« have been valuated as sub-criteria

for evaluation, although these are not defined by the Law on Public Procurements.

� An analytical review of provided evidence of eligibility for each bidder has not been listed in the record of opening and tender evaluation, as well as the number of allocated points, which is not in accordance with Article 70 of the Law on Public Procurements.

After implementation of public procurement, the Health Fund has concluded a Contract with the

supplier »MG soft« number 1086 in the amount of € 190,008.00, out of which the amount of € 162,630.00 has related to creating software solutions, and the amount of € 27,378.00 has related to the maintenance of the implemented software. The amount of € 162,630.00 regarding creation of software solution as well as the amount of € 6,844.50 on behalf of the implemented software maintenance costs have been paid in 2007 while the amount of € 15,970.50 has been paid in 2008 for the purpose of maintaining software solutions.

The information system of primary health care consists of two groups of interrelated software

solutions: � Medical Information System , � Business Information System.

BBulatovic

Text Box


Page 199

The audit has found that the Administrative Committee for Project of Information System PHC, according to the Conclusion no. 04-789 as of November 02nd, 2007, has noted that the pilot project has been successfully implemented and should continue with its implementation within the remaining 15 Health Centers and three Health Stations. Pursuant to the Conclusion and Decision of the Administrative Committee, the Health Fund has concluded an Annex with the same supplier number 226 ( connected to the original Contract no. 1086 ) in the amount of € 277,290.00 for development and implementation of software while the maintenance of the implemented software, has been agreed in the amount of € 13,689.00 per month. The price of software implementation per Health Center is € 14,000.00, and per Health Station it amounts € 9,000.00. The implementation in the Health Centre includes a package of both, Business information system and Medical information system, while the implementation in Health Station only includes Medical information system. The deadline for implementation has been set as of September 30th, 2008. Maintenance costs for Health Centres amount to 400,00 € per month and for the Institute for Public Health the price is € 650.00 per month. The software is implemented and used.

Complete project documentation with the source code has been submitted to the Fund. The Fund owns the source code and is entitled to, if necessary, independently develop and improve the information system as well as to implement it within its own system only. The warranty period is 12 months.

According to the concluded Annex 226 (of the original Contract no. 1086), the Health Fund has

made payments to supplier MG soft on behalf of development, implementation and maintenance of software for a total of € 345,735.00 in 2008. Health Fund has continued to use the services of maintenance of the implemented software from the same supplier in year 2009.

The audit has determined that the said Annex of the original Contract has been concluded without prior implementation of public procurement procedure.

The audit has found that the Health Insurance Fund has conducted an open public procurement

procedure for selecting the best offer for the purchase of IT equipment, for purposes of implementing the project »Infomation system as support to primary health care reform« to other Health Centers, call number 33/07. The estimated value of this acquisition has amounted € 92,000.00.

The audit has determined the following shortcomings in the part of the Law on Public

Procurements’ application in conducting open public procurement procedure: � The purchaser has evaluated payment terms and method of payment through sub-criteria of

technical and technological advantages, which is not defined by the Law on Public Procurements.

� An analytical review of provided evidence of eligibility for each bidder has not been listed in the record of opening and tender evaluation, which is not in line with Article 70 of the Law on Public Procurements.

BBulatovic

Text Box


Page 200

The audit has also found that the Health Insurance Fund has completed the purchase of IT equipment for a total of € 16,872.72 through direct bidding procedure - shopping method. The procurement of IT equipment in the amount of € 36,621.36 has been implemented through direct agreement procedure. Payment has been made based on the Invoices of suppliers in 2008.

Inspection of accounting records has shown that the Health Fund has made a payment to supplier

»MG soft« for the purpose of implementing and maintaining software in the Health centers for a total of € 38,400.08 based on issued Invoices, and to supplier »Logate« for the maintenance services and system support in the amount of € 9,350.64, without prior public procurement procedure.

The payment of € 56,160.00 for maintaining the database and application software according to

the Contract number 01-241 signed in 2006 has also been made in 2008. Provided that the deadline agreed by the contract has expired in May 2007, the Health Insurance Fund has been obliged to conduct a public procurement procedure in order to select a preferred bidder for the maintenance of application software.

2.5. PENSION AND DISABILITY INSURANCE FUND

The Fund performs the following tasks stipulated by Law:

1. provides an effective, rational and lawful implementation of rights to pension and disability insurance, and provides professional and technical assistance in implementation,

2. keep records of policy holders and beneficiaries, as stipulated by the Law and the Statute, 3. keep records on salaries, or insurance basis on which contributions are paid, the amount of

contributions paid to the insured, as well as paid pensions, 4. submits monthly reports on paid contributions to the State authority in charge of public

revenues (hereinafter referred to as the tax authority), 5. ensure implementation of international agreements on pension and disability insurance, 6. takes measures for the regular collection of revenues of the Fund, 7. organizes activities for conducting of pension and disability insurance and provides

information technology for this issue, 8. passes regulations in accordance with the Law and the Statute, 9. performs other duties related to the implementation and realization of rights from pension

and disability insurance in accordance with the Law and the Statute 2.5.1. IT equipment records

The audit has found that the Pension and Disability Insurance provides analytical evidence of IT

equipment by inventory number, quantity, name, purchase price, value of written-off and current value. It has also been determined that records provide clear and precise data on the movement of equipment, which demonstrates a conscientious management of procured assets.

BBulatovic

Text Box


Page 201

The audit procedure has determined that in 2008 the Pension Fund has purchased computer equipment (hardware) in the amount of € 211,309.82, out of which an amount of € 96,812.75 has been procured through the Ministry of Finance from the position of Pension Reform Project - components G7.2 network structure, which has been supported by the World Bank, while the value of the purchased software is € 362,700.00.

Having examined the Report list of the subject of audit, it has been found that the value of IT

equipment (hardware) at the end of 2008 amounts € 2,121,776.15 at purchase price, written-off value amounts € 1,824,394.78 and current value is € 297,381.37, and software amounting € 108,581.41 at purchase price, € 26,117.50 of written-off value and € 82,463.91 at current value. It has also been shown that the Pension Fund has made depreciation expense of IT equipment in the amount of € 222,345.48 at purchase prise, € 216,500.04 of written-off value and € 5,845.44 at current price, and that it has booked out from its business books computer equipment amounting € 514,703.57 at purchase price and € 740.00 at current price, which has been written-off by the Inventory Commission in 2007. Decision of the Management Board on the approved expenditure of equipment does not contain information on purchase price, written-off or current value. The Pension Fund has been obliged to book the written-off equipment out of the business books in the same fiscal year and to open new balance entries of IT equipment as of January 01st, 2008, and then record new procurements.

2.5.2. A Review of implemented public procurement procedures

2.5.2.1. Open and negotiating public procurement procedures

No. Tender No. Subject of Estimated Supplier/ Contract Contracted & specification procurement value € Performer Number price €

Hardware-Workstations 1 No. 05/08 100pcs (85+15),Printers-15pcs Informatika No. 04-6067 74,989.88 as of 14/02/08 Notebook 10 pcs (8+2), accord. 95,000.00 Montenegro to Specification Negotiating Hardware-Workstations 30 pcs procedure . Notebook 2 pcs, accord.to Informatika 2 No. 07/07 Offer accepted on Tender 19,976.90 Montenegro No. 01-7341 19,976.90 as of 28/05/08 no. 05/08 Software - Software development No. 04/08 service for Pension and MG Soft and 3 as of 29/02/08 Disability Fund, according to 400,000.00 Infostream No. 01-6935 362,700.00 specification

The Pension Fund has conducted 2 (two) open public procurement procedures for the acquisition

of iformation technologies. The total estimated value of procurement by these calls has been € 495,000.00, and concluded contracts value has amounted in total € 437,689.88. It has also conducted a negotiating procedure without prior publication of call, with the estimated value of € 19,976.90 for which the contract has been signed in the same amount.

Total value of public procurement of information technologies in Pension and Disability Insurance

BBulatovic

Text Box


Page 202

Fund in 2008 has amounted € 479,041.88.

In the process of audit it has been determined that the Pension Fund has conducted an open public procurement procedure by invitation no. 05.08 for the selection of preferred bidder for the purchase of computer equipment. The estimated value of this acquisition is € 95,000.00. The auditing of the stated procedure has showed that the report of the Commission for opening and evaluation does not include analytical review of required and provided proofs of eligibility for each bidder, which is not in accordance with Article 70 of the Law on Public Procurement.

In the process of audit it has been found that the Pension Fund has conducted a negotiating procedure without prior publication of call to tender no. 07.08 for the selection of preferred bidder for the purchase of computer equipment, for which prior approval has been obtained from the Directorate for Public Procurement.

After the implementation of public procurement procedure, the Pension and Disability Fund has

concluded the Contract with supplier Informatika Montenegro Ltd in the amount of € 19,976.90. The audit has found that records of public bid opening, the minutes of review, evaluation and

comparison of bids, as well as the Report on public procurement procedures have not been made on prescribed forms, and there has been no technical specifications as an integral part of the offer.

The audit has determined that the Fund has concluded Contracts for providing services of IT

equipment maintenance with the following suppliers: � Informatika co - Belgrade and Informatika Montenegro dated on January 01st, 2000, the

agreed monthly fee amounted to DM 23,000.00, VAT not included. By Annex no. 01-1152 as of February 20th, 2002 monthly fee has been determined in the amount of € 11,580.94, and according to Annex no. 01-3486 as of September 06th, 2005, the established monthly maintenance fee was € 12,872.21. Pay-per-concluded agreement and annexes was carried out until July 2009, when the Fund requested termination of the Contract. An amount of € 167,338.00 has been paid in 2008 based on this Agreement.

Pension Fund was obligated to conduct public procurement procedures for selecting the best

suppliers for the provision of maintenance equipment after the Law on Public Procurement has been passed.

� Meridian co - Belgrade no. 01-3966 for the period 01/ 10/ 2005 – 01/ 10/2006 with montly maintenance fee of € 1,026.00. On the basis of Invoices issued under the said Agreement the Pension Fund has been carrying out payments for maintenance services until April 2009. An amount of € 10,260.00 has been paid in 2008 based on this Agreement.

After the expiry date (01/10/2006), Pension Fund was obligated to conduct public procurement

procedure for selection of the best suppliers for the provision of maintenance services.

BBulatovic

Text Box


Page 203

2.6. DIRECTORATE FOR PUBLIC PROCUREMENT

Public Procurement Directorate was established by the Regulation on changes and amendments to the Regulation of Organization and Functioning of State Administration (»Official Gazzette of RoM«, no. 72/06). The scope of the Directorate is defined in Article 42 of the Regulation. The Director was appointed on 31 05.2007, and Directorate has actually begun its operations on June 01st, 2007, until then its operations have been conducted by the Directorate of Common Affairs of State Authorities.

Directorate for Public Procurement is an administrative authority that provides conditions for cost-effective, efficient and transparent use of public funds and create a competitive and equal conditions for all bidders.

Competences in the field of public procurement have been carried out by the Public Procurement

Directorate, Ministry of Finance as the line ministry for the area of public procurement and Commission for the Control of Public Procurement in the field of rights protection.

Pursuant to Article 17 of the Law on Public Procurement and the scope specified in Article 42 of

the Regulation on Organization and Functioning of State Administration, the Directorate for Public Procurements is authorized to:

1. participate in drafting laws, by-laws and other regulations on public procurement, 2. determine the appropriate standard forms for the application of the Law, 3. monitor and analyze the implementation of public procurement, in terms of compliance with the

European Union Law and proposes measures to ensure such compliance, 4. give prior approval of clients to select the type of procedures in the cases stipulated by Law, 5. provides advisory and consulting services for the area of public procurement to clients at their

request, 6. participate and cooperate in organizing the training of personnel to perform tasks of public

procurement, 7. publish invitations to tender and the decisions on contracts awarded on the website in the cases

stipulated by law, 8. improve the system of information of purchasers and bidders on the public procurement regulations

and publish and distribute relevant literature, 9. preparing the model of tender documents and contracts for the typical public procurement ,

10. initiate and encourage the development of electronic procurement and communication in public procurement,

11. establish international cooperation with institutions and experts in the field of public procurement, 12. inform the State Audit Institution and submit reports to other authorities on cases of violation of

public procurement procedures discovered in the performance of duties within its competence, 13. collect data from contracting authorities and keep appropriate records, 14 prepare, publish and

update a list of entities bound by the law on its Web site, 15 preparing a 14. prepare, publish and update a list of entities bound by the Law on its website, 15. prepare unified bases for organizing and keeping records and official lists of bidders, on the basis

on the concluded and implemented public contracts

BBulatovic

Text Box


Page 204

16. monitor public procurement procedures and ensuring the public interest in these procedures 17. issued bulletins on public procurement, 18. submit the annual report to the Government on public procurements in Montenegro, 19. perform other duties, in accordance with the Law.


In the audit procedure it has been determined that the Directorate for Public Procurements has carried out an inventory of IT equipment on December 31st, 2008, which has been presented in the Report on performed inventory.

In accordance with the aforementioned Report on inventory, the value of IT equipment on

31/12/2008 at purchase price is € 11,502.00, corrections amount € 1,920.60 and the current value of € 9,581.40.

The audit has found that in the audited period (2008), the Directorate of Public Procurement has

not provided its own accounting and has not been associated with SAP (software of the State Treasury for managing its operations). It has also been determined that the Directorate does not provide an accounting program for analytical records of fixed assets by inventory number, date, purchase cost, written-off and current value, but it carries out its records off-balance.

2.6.2. The Review on implemented public procurement procedures The audit has found that the Public Procurement Directorate has purchased information

technologies in total amount of € 4,151.00 during 2008, implementing methods of direct bidding - shopping and direct agreement.

It has been determined by the audit that the Directorate for Public Procurement has conducted procurement of information technologies in total amount of € 3,380.00 by direct bidding - shopping method, and € 771.00 has been procured by direct agreement during 2008.

In the audit process, it has been determined that Directorate for Public Procurement has not

concluded a contract with successful bidder pursuant to Article 74 of the Law, but it has made payment on the issued Invoice from the item expenditure on equipment in the amount of € 3,380.00.

2.6.3. The Review on approvals issued by Directorate for Public Procurement

The subject of this audit is also the examination of regularity and legality of the operation of Public

Procurement Directorate in the part of the approvals given to clients to selection of the type of procedure. The audit has examined given approvals as well as documents supplied by the purchaser as proof

of compliance with conditions for the application of the chosen method of procurement, and the following facts have been determined:

BBulatovic

Text Box


Page 205

Tabular presentation of issued approvals

On the basis of tabular overview it can be concluded that some purchasers have made Contracts

after the implementation of negotiating procedure without prior publication of the invitation, at a much higher value than the estimated one at which they received prior approval from the Directorate for Public Procurement.

Public Procurement Directorate has given approval for the procurement of information technologies

by implementation of the negotiating procedure without prior publication of call to tender in 14 cases during 2008. The total estimated value of the approvals given has been € 3,263,410.12, while the contracts have been concluded in the amount of € 8,216,903.18.

Taking into consideration that this public procurement procedure is the least transparent,

competitiveness and eqality of bidders are limited and the risk of corruption and conflict of interest in this type of procedure is extremely high, we believe that approval given to purchasers on selection of this type of procedure should be kept to a minimum, which is also the position of the European Court of Justice, and to approve to this procedure only on the basis of consistently provided evidence needed by the purchaser.2

2 Mersad Mujević, Ivan Krkeljić, Sandra Krstović: Public procurements in Montenegro, Podgorica, 2009, pg. 39.

No. Purchaser Date and number Subject of audit Supplier Estimated

value (€)

Contract

value (€)

1. Pension and Disability Fund 01/822

02/04/2008 IT equipment Informatika Montenegro Ltd 20.010,12 19.976,90

2. Health Insurance Fund of Montenegro

01/1429 04/07/2008 Software MG Soft 200.000,00 397.800,00

3. Secretariat for Development 01-2285

07/11/2008 Microsoft license and technical support Microsoft Montenegro Ltd 1.500.000,00 5.784.591,46

4. Secretariat for Development

01-2284 06/11/2008

Analysis of current condition of equipment and software in CDA Microsoft Montenegro Ltd

55.000,00 64.350,00

5. Secretariat for Development

01-2273 08/11/2008 Oracle license and technical support Oracle Srbija & Crna Gora

1.050.000,00 1.526.850,00

6. Customs Directorate01-1472

07/07/2008 Risk Analysis System Repairment Memex Tehnology LTD13.000,00 12.500,00

7. Railway Company Montenegro01-1040

03/06/2008 Program package Navision Com Trade Group150.000,00 177.757,60

8. Ministry of Finance01-1971

24/09/2008/. SAP License SAP West Balkans 60.000,00 49.062,00

9. Post Directorate Montenegro01-1976

23/10/2008 Internet providing under special conditions

MN News40.000,00 40.000,00

10. Postal Directorate Montenegro 01-1353

24/06/2008 Software for cargo tracking in International traffic

UPU Postal Technology Centre

50.000,00 37.792,18

11. Post Directorate Montenegro01-1239

25/06/2008 Software for electronic communication Montex Elektronika9.000,00 9.895,35

12.Central bank of Montenegro

01-1545

21/07/2008 Technical support of international system of money transfers Oracle Srbija & Crna Gora

21.400,00 18.214,21

13.Central bank of Montenegro

01-559

06/02/2008 Support and maintenance of software aplication RTS/X

CMA Small Systems AB-Sweden

68.000,00 68.000,00

14. Directorate for Public Procurement 01-2223

27/10/2008 Purchase of electronic info stands Čikom 27.000,00 10.113,48

3.263.410,12 8.216.903,18 TOTAL

BBulatovic

Text Box


Page 206

3. COMPARATIVE REVIEW OF PUBLIC PROCUREMENT OF INFORMATION TECHNOLOGY EQUIPMENT BY AUDITED SUBJECTS

Considering that this is a cross-section audit that includes a selection of certain subjects in order to

get the audit findings in a particular area of public expenditure, the following tabular overview shows comparative figures of completed public procurement in the field of information technology by subjects.

Tabular overview of total number of completed public procurements for IT equipment by audited subjects in 2008

We have also presented tabular overview of total IT equipment by audited subjects on December 31st, 2008: Tabular overview of IT equipment by audited subjects on 31/12/2008

No. AUDITED SUBJECT Total number of employees

Employees

using computers

Number

of servers Number

of comp. Number

of notbooks Number

of printers

1 Ministry for Information Society 65 65 82 102 18 67 2 Customs Directorate 600 550 28 330 29 96 3 Property Directorate 422 363 43 371 24 182 4 Health Insurance Fund 200 174 61 212 36 110 5 Pension and Disability Insurance Fund 263 241 18 271 35 82 6 Real Estate Agency 14 11 x 11 4 11

No. Subject

Estimated value

of public

procurements IT

(hardware and

softwares) in

2008

Contracted value

of public procurements

(open call,negotiating

procedure

shopping method)

in 2008

Value of

purchased IT

By direct

agreement

In 2008

Purchased IT

without

conducted

Public procurem.

procedures

Payment of

conducted public

procurements pocedures in

2008

Payments

made in 2008

for tenders

from previous

years

1Ministry for information society € 3.195.000,00 € 6.658.540,52 € 117.001,80 x € 3.509.994,57 € 917.577,16

2 Customs Directorate €486.000,00 € 472.807,23 € 3.626,32 x € 222.644,20 € 181.298,46

3 Property Directorate €1.194.700,00 € 1.015.118,41 € € 12.693,54 x € 1.027.811,25 x

4Pension and Disability Fund € 505.000,00 € 446.102,18 € 12.962,80 € 177.598,70 € 442.396,30 x

5 Health Insurance Fund € 787.500,00 € 921.546,17 € 36.621,36 € 449.645,00 € 1.047.440,61 € 20.355,75

6 Directorate for public Procurement

€ 3.700,00 € 3.380,00 € 771,00 x € 4.151,00 x

BBulatovic

Text Box


Page 207

4. ASSESSMENT, CONCLUSIONS AND RECOMMENDATIONS

Based on determined conditions and analysing the Opinion of the audited subjects on preliminary Report of the State Audit Institution, pursuant to the Article 50 of the Rules of Procedure of the State Audit Institution, the authorized Collegium comprising of Miroslav Ivanisevićć (President of the SAI’s Senate – leader of Collegium) and Branislav Radulovićć,,MMAA (member of the Senate – member of Collegium), at its session held on October 05th, 2010, has adopted the

FINAL REPORT

on cross-section audit of public procurements of information technologies for 2008 with following assessments, conclusions and r e c o m m e n d a t i o n s:

MINISTRY FOR INFORMATION SOCIETY (SECRETARIAT FOR DEVELOPMENT)

� Determined irregularities in the part of recording and inventory of computer equipment

The audit procedure has noted that the Ministry of Information Society provides its accounting records on the system of SAP of the Ministry of Finance so that it only keeps the records of revenues and expenditures.

Ministry of Information Society does not provide an accounting program for analytical records of fixed assets, but the recording of the said is carried out off-balance . Recommendation:

� The Ministry of Information Society should provide within the corresponding application for

recording of fixed assets an analytical records of fixed assets by groups and methods for determination of depreciation, which should include the following data: inventory number, description of the asset, location, purchase price, correction, and the current value .

� Determined irregularities in part of implementation of the Law on Public Procurements

The audit process has revealed that the Ministry of Information Society, i.e. Secretariat for

Development has conducted a negotiating procedure without prior publication of the invitation to tender for the licensing of software for usage of Microsoft technology and Microsoft technical support. The estimated value of the public procurement has amounted to € 1,500,000.00, for which it obtained approval from the Directorate for Public Procurement.

In accordance with accepted offer, the value of public procurement has amounted $ 5,583,619.69,

i.e. € 4,355,223.30. The audit has found that the contract price is significantly higher than the estimated value of public procurement to which the audited subject obtained the approval from the Directorate for Public Procurement. It has also been determined that the Plan and Amendment of Public Procurement for 2008 has not predicted the procurement of the agreed amount and for a period of three years.

BBulatovic

Text Box


Page 208

In the audit procedure it has been found that the Ministry, ie. Secretariat for Development has conducted a negotiating procedure without prior publication of the invitation to tender for the purchase of Oracle licenses and technical support. The estimated value of this procurement has been € 1,050,000.00, for which an approval was previously obtained from the Public Procurement Directorate for the implementation of the said proceedings.

The audit has showed that after the implemented public procurement procedure the Contract

no.13033 has been concluded with supplier »Oracle Serbia & Montenegro« Ltd for licenses and technical support in the amount of € 1,526,850.00.

The audit has found that the contract value has been significantly higher than the estimated value

of public procurement to which an approval from Directorate for Public Procurement has been obtained. It has also been determined that the Plan and Amendment of Public Procurement for 2008 has not forseen the procurement of the agreed amount and for a period of three years. Recommendations:

� The Ministry of Information Society has to conduct the public procurement procedures with consistent application of the Law on Public Procurement.

� The Ministry of Information Society has to conclude contracts for the procurement of goods and services in the amounts which do not exceed the planned and allocated funds for the public procurement.

The audit has found that the public procurement using shopping method is not in accordance with

Article 77 of the Law on Public Procurement. Based on available records, it has also revealed that the Ministry of Information Society, ie. Secretariat for Development has procured IT equipment by direct agreement in the amount of € 83,350.82, from suppler »CHIP« Ltd Podgorica. Given the subject and value of purchases from the same supplier, it can be concluded that the Ministry has not complied with Article 32 of the Law on Public Procurement. Recommendation:

� The Ministry of Information Society has to carry out public procurements by shopping method and direct agreement in accordance with Article 32 and Article 77 of the Law on Public Procurement, which obliges it to comply with the conditions and methods of procurement set forth in this Law according to the established values, and that the subject of procurement, which represents a whole cannot be divided during the financial year.

� Determined irregularities in the part of transferring of software licenses to State authorities

The audit has found that there is no prescribed procedure for the transfer of licenses to the State

authorities. Licence are assigned at user’s request, after being approved by the Minister or the Secretary.

BBulatovic

Text Box


Page 209

The authorized person of user signs the reception of a license. Recommendations:

� The Ministry of Information Society should establish guidelines and procedures on the transfer of licenses the State authorities, as well as to harmonize its records with the records of State authorities.

CUSTOMS DIRECTORATE

� Determined irregularities in part of implementing the Law on Public Procurements

� The audited subject has evaluated the references of the bidders through sub-criterion »Technical terms and conditions« which is not in accordance with the Article 66 of the Law and Regulations on methodology of expressing criteria as it has limited market competition.

� Commission for opening and evaluation has not carried out public bid opening in due date, which is not in accordance with Article 67 of the Law.

� Members of the Commission, the Procurement officer and the person authorized for decision-making have not signed the declaration of independence to which they are bound by the Article 14 of the Law on Public Procurement

� An analytical review of requested and provided proofs of eligibility for each bidder has not been

presented in the record, which is opposite to the Article 70 of the Law on Public Procurement.

� Customs Directorate has not allowed bidders to submit bids for individual parties, although the subject of procurement is divided into three parties, but it has stipulated that the subject of the public procurement is purchased as a whole, which is not in accordance with Article 29 of the Law on Public Procurement.

Recommendations:

� Customs Directorate has to conduct public procurement procedures in line with procedure stipulated by the Law on Public Procurements.

PROPERTY DIRECTORATE

� Determined irregularities in the part of inventory and recording of IT equipment The audit has found that Property Directorate does not provide an analytical records of procured IT

equipment by inventory number, quantity, name, purchase, written-off and current value.

BBulatovic

Text Box


Page 210

Recommendation:

� Property Directorate should provide analytical records of total procured fixed assets (IT equipment) by groups and methods for determining the depreciation that should contain the following information: inventory number, description of the asset, location, purchase price, correction and current value.

� Determined irregularities in the part of implemention of the Law on Public

Procurements


Property Directorate has evaluated the references of bidders through sub-criterion »Quality«, which does not comply with the Article 66 of the Law on Public Procurements and Regulations on expressing criteria in the appropriate number of points, the manner and procedure for evaluating and comparing bids. Thus it has violated the principle of equality and competitiveness of bidder.

Recommendation:

� Property Directorate should conduct public procurement procedures in accordance with the Law on Public Procurements.

HEALTH INSURANCE FUND

� Determined irregularities in the part of implementation of the Law on Public

Procurements

In the audit procedure it has been found that the Health Insurance Fund has conducted a negotiating procedure without prior publication of the invitation to tender for the selection of the winning bidder for the procurement of software, »Application for physician - contact«. This software should present the integration of all software modules from IS Fund and the Institute for Public Health Call 29/08. The estimated value of this procurement amounts € 200,000.00, which has been provided for a prior approval from the Directorate of Public Procurement.

After the implemented public procurement procedure the Health Insurance Fund has concluded a Contract no. 02-2379 with supplier »MG soft« Ltd in the amount of €397,800.00. Recommendations:

� Health Insurance Fund should conduct public procurement procedures by implementing consistently the Law on Public Procurements.

� Health Insurance Fund should conclude contracts for the procurement of goods and

BBulatovic

Text Box


Page 211

services in the amounts which do not exceed the planned and allocated funds for the public procurement. According to the concluded Annex 226 (of the original Contract no. 1086), the Health Fund has

made payments to supplier MG soft on behalf of development, implementation and maintenance of software for a total of € 345,735.00 in 2008. Health Fund has continued to use the services of maintenance of the implemented software from the same supplier in year 2009.

The audit has determined that the said Annex of the original Contract has been concluded without conducted public procurement procedure.

Inspection of accounting records has shown that the Health Fund has made a payment to supplier

»MG soft« for the purpose of implementing and maintaining software in the Health centers for a total of € 38,400.08 based on issued Invoices, and to supplier »Logate« for the maintenance services and system support in the amount of € 9,350.64, without prior public procurement procedure.

The payment of € 56,160.00 for maintaining the database and application software according to

the Contract number 01-241 signed in 2006 has also been made in 2008. Provided that the deadline agreed by the contract has expired in May 2007, the Health Insurance Fund has been obliged to conduct a public procurement procedure in order to select a preferred bidder for the maintenance of application software.

Recommendation: � Health Insurance Fund should perform procurement of goods, services and works as

stipulated by the Law on Public Procurement. PENSION AND DISABILITY FUND

� Determined irregularities in the part of inventory and recording of IT equipment

Having examined the Report list of the subject of audit, it has been found that the total value of IT

equipment (hardware) at the end of 2008 has amounted € 2,121,776.15 at purchase price, written-off value amounts € 1,824,394.78 and current value is € 297,381.37, and software amounting € 108,581.41 at purchase price, € 26,117.50 of written-off value and € 82,463.91 at current value.

It has also been shown that the Pension Fund has written-off IT equipment in the amount of €

222,345.48 at purchase prise, € 216,500.04 of written-off value and € 5,845.44 at current price, and that it has booked out from its business books computer equipment amounting € 514,703.57 at purchase price and € 740.00 at current price in 2008, which has been written-off by the Inventory Commission in 2007.

BBulatovic

Text Box


Page 212

Decision of the Management Board on the approved expenditure of equipment does not contain information on purchase price, written-off or current value. The Pension Fund has been obliged to book the written-off equipment out of the business books in the same fiscal year and to open new balance entries of IT equipment as of January 01st, 2008, and then record new procurements.

Recommendation:

� Pension and Disability Fund should perform expenditures’ booking out of its business books in the year to which they relate to display more precise and accurate data on existing assets and in particular IT equipment that is the subject of this audit, and to perform analytical records compliance with the General book. � Determined irregularities in part of implementation of the Law on Public Procurements

The audit has found that the Pension Fund used the services of maintenance of computer

equipment from suppliers Informatika AD - Belgrade and Informatika Montenegro without a prior procedure of public procurement and that under the Contract concluded in 2000 and Annexes to this Contract concluded in 2002 and 2005, the Fund was carrying out payments of maintenance until July 2009, when it demanded the termination of the contract. On the basis of this Contract an amount of € 167,338.73 was paid in 2008.

Pension Fund was obligated to conduct public procurement procedures for the selection of the best

suppliers for the provision of maintenance equipment after the Law on Public Procurements has been adopted.

The audit has also found that the Pension Fund has concluded a Contract with supplier Meridian co – Belgrade no. 01-3966, for the maintenance of equipment. The Contract was concluded for the period 01/ 10/ 2005 – 01/ 10/2006 with montly maintenance fee of € 1,026.00. On the basis of Invoices issued under the said Contract the Pension Fund has been carrying out payments for maintenance services until April 2009. An amount of € 10,260.00 has been paid in 2008 based on this Contract. After the expiry date (01/10/2006) Pension Fund has been obligated to conduct public procurement procedure for selection of the best suppliers for the provision of maintenance services.

Recommendation:

� Pension and Disability Fund should conduct procurement of maintenance services as stipulated by the Law on Public Procurements.

BBulatovic

Text Box


Page 213

DIRECTORATE FOR PUBLIC PROCUREMENTS

The audit has determined that the Directorate for public procurements does not provide an accounting program for analytical records of fixed assets by inventory number, date, purchase cost, written-off and current value, but it carries out its records off-balance.

Recommendation:

� Directorate for Public Procurement should provide records in the appropriate program for

recording of fixed assets, providing the records by groups and methods for determining the depreciation that contains the following information: inventory number, description of the asset, location, purchase price, correction, and the current value.


by implementation of the negotiating procedure without prior publication of call to tender in 14 cases during 2008. The total estimated value of the approvals given has been € 3,263,410.12, while the contracts have been concluded in the amount of € 8,216,903.18. Recommendation:

� Only in exceptional cases should Directorate for Public Procurements give approval to

purchasers for procurements of goods, services and works using the negotiating procedure without prior publication of invitation to tender, as it is a public procurement procedure which is the least transparent, where the equality and competitivness of bidders are limited and the risk of corruption and conflict of interest are extremely high.

� According to its responsibilities as stipulated in Articles 16 and 17 of the Law on Public Procurement, Directorate for Public Procurement should provide opportunities for cost-effective, efficient and transparent use of public funds and create a competitive and equal conditions for all bidders, as well as to monitor public procurement procedures ensuring public interest in these proceedings, because otherwise in the case of non-performance of these tasks defined by the Law, its role in the part of the full implementation of the Law on Public Procurement will be senseless.

BBulatovic

Text Box


Page 214

5. FINAL REMARKS Summing up the results of this audit, we can conclude that all subjects have performed the

recording of IT equipment that was purchased in 2008 and that they listed it. It has also been found that the characteristics of the procured equipment, correspond to characteristics of the bids accepted, and that payment obligations to suppliers were conducted by the contracted time schedule.

In the part of implemented public procurement procedures, Customs Directorate has not fully

complied with the provisions of Articles 14, 29, 66, 67 and 70 of the Law on Public Procurement. In the part of implemented public procurement procedures, Property Directorate has not fully

complied with the provisions of Article 66 of the Law on Public Procurement. Health Insurance Fund and the Pension and Disability Insurance Fund have been conduting the

procurement of IT equipment maintenance services and have concluded Contracts without prior implementation of public procurement procedures.

The Ministry of Information Society and the Health Insurance Fund have carried out the

procurement of IT equipment on the basis of negotiating procedures implemented without prior public invitation and concluded contracts with suppliers at much higher amounts of estimated ones to which the Public Procurement has given approval.


by conducting the negotiating procedure without prior publication of call to tender in 14 cases during 2008, although this public procurement procedure is the least transparent, competitiveness and eqality of bidders are limited and the risk of corruption and conflict of interest in this type of procedure is extremely high.

BBulatovic

Text Box

Documents

SUBMISSION FROM THE REPORT ON CROSS-SECTION AUDIT OF ... Submission from Cross... · Annual Report of the State Audit Institution for period October 2009 – October 2010 Page 177