The Impact of Performance Auditing in Moldova May 2011

8/6/2019 The Impact of Performance Auditing in Moldova May 2011

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The Impact of PerformanceThe Impact of PerformanceAuditing in MoldovaAuditing in Moldova

Presentation by Ecaterina Paknehad, Member, Court of

Accounts of the Republic of Moldova



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ØAbout MoldovaØAbout the Court of Accounts

ØDevelopment of Court’s Capacity to ConductPerformance Audits and Audits of ITSystems

ØPilot Performance Audits and AdditionalAudits

ØExamples of Impact of Performance Audits

ØQuestions?

What will we cover ?What will we cover ?



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WHERE IS MOLDOVA ?



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Capital city – Chisinau (population 785.1 thsd

inhabitants) Official language – Moldovan Political system – Parliamentary Republic Independence towards USSR:

- declared on 27 August 1991 - recognized on 25 December 1991

ØArea – 33.8 thsd. km2 Population – 3.9 mln. inhabitants (density -111

inhabitants/km 2)

GDP (nominal, for 2009) – 5.403 billions EURO - per capita - 1420 EUROØMember of: UN, Latin Union, Council of Europe, OSCE,

GUAM, CIS.

About MoldovaAbout Moldova

http://ro.wikipedia.org/wiki/Organiza%C8%9Bia_Na%C8%9Biunilor_Unite

http://ro.wikipedia.org/wiki/Uniunea_Latin%C4%83

http://ro.wikipedia.org/wiki/Consiliul_Europei

http://ro.wikipedia.org/wiki/OSCE

http://ro.wikipedia.org/wiki/GUAM

http://ro.wikipedia.org/wiki/CSI

http://ro.wikipedia.org/wiki/CSI

http://ro.wikipedia.org/wiki/GUAM

http://ro.wikipedia.org/wiki/OSCE

http://ro.wikipedia.org/wiki/Consiliul_Europei

http://ro.wikipedia.org/wiki/Uniunea_Latin%C4%83

http://ro.wikipedia.org/wiki/Organiza%C8%9Bia_Na%C8%9Biunilor_Unite



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

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

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

-- is apolitical and has organizational, functional,

operational and financial independence;- performs regularity, performance and IT audits;

-- submits to Parliament, during the year, audit reports,

including annual report.

About the Court of About the Court of AccountsAccounts



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

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

The Court of Accounts, with supportof international donors and experts



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

training courses, 2004-2005)

About 25 controllers with skills of performing thematic controls indifferent fields (controls with elements of performance audit,

2004-2006)

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

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

The platform for developingThe platform for developingperformance audit skillsperformance audit skills



Ø24 month WB funded Project Implemented by IBTCI:

Performance audits and audits of IT systems. StartedOct 2008/ended Oct 2010

ØOne week modular performance audit trainingprogram

ØFour day report writing/three day report review course

Ø

ØExtensive “hands-on” training/assistance —IBTCI

consultants worked day-to-day with Court staff Ø

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

ConductConduct

Performance Audits and Audits of ITPerformance Audits and Audits of IT

SystemsSystems



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

Commission)

Primary Health Care System (requested by the

European Commission)

Assistance to Viticulture Industry

(audits undertaken late 2008 through March2010)

5 Pilot Performance5 Pilot PerformanceAuditsAudits



udit title Auditees Involve staff an/ ourused ajor Changes Needed to Significantly

mprove the Effectiveness of the Public ealth Care Institution the Oncological

”nstitute in Fighting Cancer

1 5 2 ,416“ ome Objectives of the Law on Public

,rocurements Have Been Achieved However mprovements Are Still Needed ”

82 14 7 ,326

“ pportunities Exist to Improve the fficiency and Effectiveness of the Social

id Process ”

7 5 3 ,603

“ rogram for Reestablishment and evelopment of Viticulture and Winemaking

eeds Significant Improvements Whether chievement of Envisaged Objectives is

Desired”

11 7 3 ,683

:erformance Audit Report Primary Health are System

10 13 5 ,961

Titles of the 5 pilot audits and theTitles of the 5 pilot audits and the

relevant quantitative indicators arerelevant quantitative indicators arepresented as follows:presented as follows:



Solid waste disposal (at the proposal of INTOSAI)

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

Implementation of a Cultural Project (Court’sinitiative)

Procurement of Medical Equipment (requested by

the European Commission)

Scientific Research (Court’s initiative)

55 Additional PerformanceAdditional Performance

AuditsAudits



udit title Auditees

Involve staff an/hourused

“ mprovements needed in regulation of domestic olid waste management and disposal system in the

”epublic of Moldova

5 6 2 ,696

“ -mplementation of investment projects in wine”aking enterprises

5 3 1 ,382

“ “ ” (unds allocated to Caravela Culturii Culture)aravan project have not been used in an, ”conomic efficient and effective way

1 2 635

pportunities exist for significant improvement, ,f processes for planning procurement

istribution of medical devices and ensuring

”heir better usage?

6 4 1 ,867

“ ,n order to achieve the expected benefits mprovements are needed in policies and

rocedures of the Academy of Science of Moldova or allocation and monitoring of funds allocated

”or scientific research

11 6 4 ,462

Titles of the 5 additional reports andTitles of the 5 additional reports andthe quantitative relevant indicators arethe quantitative relevant indicators are

presented as follows:presented as follows:



4 IT Audits performed4 IT Audits performed

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

4 staff trained in IT auditing;

Training materials;

IT Auditing Manual.



udit title Auditees

Involve staff

an/hourused ompulsory Health Insurance utomated

nformation System s at risk due to”oor controls

5 4 1 ,148

udit of the Social Protection nformation System implemented at the

ational Social Insurance Company

1 3 1 ,074

udit of the Information System

“ anagement and financial analysis of”ublic debt implemented in the Ministry

f Finance

1 3 728

udit of Customs Integrated Information ystem of the Customs Service of the

epublic of Moldova

4 4 2 ,472

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



The Court of Accounts thanksThe Court of Accounts thanks Mrs. Linda WeeksMrs. Linda Weeks andand

Mr. James Bonnell, Mr. Michael BitzMr. James Bonnell, Mr. Michael Bitz for theirfor their

dedication and effort in development of professionaldedication and effort in development of professionalcapacities of auditors to conduct performance and ITcapacities of auditors to conduct performance and IT

auditsaudits



EXAMPLES OF IMPACT OF PERFORMANCEAUDITS

What did we achieve?What did we achieve?



Critical Health Care Institution—never beenaudited.

Performance audit found serious problems withthe Institute’s systems for managing itsresources.

Audit identified areas where performance couldbe improved: procurement, management of medications, from determining the needsthrough distribution and use of medications;

better utilizing inpatient department; andobtaining information on the technical statusof medical equipment.

Oncological InstituteOncological Institute



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Nurse attempted to keep track of Nurse attempted to keep track of

medications using over 170 ledgersmedications using over 170 ledgers



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Director and several senior staff werereplaced.

Moldova Anti-Corruption Commissioninvestigating medication issues identifiedby audit.

Court report is being used as a guide toimprove Institute operations.

Impact of AuditImpact of Audit



In 2008, Moldova passed a new procurementlaw intended to significantly improvepublic procurement process.

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

Implementation of NewImplementation of NewProcurement LawProcurement Law



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

Contracting authorities were not developingprocurement plans as required.

Procurements were not adequatelydocumented.

Significant improvements needed incontract monitoring.

Government agency established foroverseeing procurement process was notfulfilling mandate.

Procurement Audit FindingsProcurement Audit Findings



Court held one day conference to discussaudit findings among key stakeholders.

Got key groups/stakeholders talking to one

another.

Amendments passed to procurement law to

improve implementation.

Impact of AuditImpact of Audit



In 2008, Moldova implemented newmechanism for payment of social aid.

Audit undertaken to determine if there areproblems hindering implementation of thenew social aid program.

Performance Audit of thePerformance Audit of theSocial Aid ProcessSocial Aid Process



Additional staff needed to effectivelyimplement the process.

Internal controls needed to be significantly

strengthened throughout the social aidprocess.

Social Aid Process Audit FindingsSocial Aid Process Audit Findings



Ø EU accepted the Court Performance Audit as a condition for additional

assistance to this program.

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

Ministry of Labor and Social Protection has accepted the proposals and

recommendations of the Court to improve the social aid deliverymechanism.

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

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

Impact of the Social Aid AuditImpact of the Social Aid Audit



Government established a long termprogram (2002-2020) for reestablishingand developing viticulture and winemaking

in Moldova.

Audit assessed the effectiveness of theprogram.

Reestablishment and DevelopmentReestablishment and Developmentof Viticulture and Winemaking Auditof Viticulture and Winemaking Audit



Identified weaknesses in programimplementation, reporting of performanceindicators, and management of the

program’s financial resources.

The Program was developed for the longterm but was not adjusted to reflectcurrent economic conditions.

Audit Findings – Viticulture andAudit Findings – Viticulture andWinemakingWinemaking



Degraded vineyards were partially cutDegraded vineyards were partially cutdowndown( ( Pictures taken by the audit teamPictures taken by the audit team ) )



Ministry of Agriculture developed a new Program forreestablishment and development of viticulture andwinemaking for 2011-2020

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

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

The process of preparing the Viticulture Cadastre waslaunched

Fund to support establishment of vineyards wasliquidated. Parliament approved a new subsidizingmodality.

Impact of Viticulture/Winemaking AuditImpact of Viticulture/Winemaking Audit



ØDomestic solid wastes have a direct influence onenvironment, and their inadequate managementdetermines pollution of soil, water, air, flora,fauna etc.

ØWaste management is a problem in the Republicof Moldova.

Ø

Ø The Court of Accounts supported the proposal of the INTOSAI, WGEA Working Group andperformed the environment audit, selecting solidwaste management.

Performance Audit in the field of Performance Audit in the field of environment – domesticenvironment – domestic

solid waste managementsolid waste management



Deficiencies of the domestic solid waste management aresignificant. The legal framework contains manyweaknesses, gaps and imperfections.

The number of unauthorized waste storage sites increasedsignificantly.

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

for separate collection of wastes, this does not happen inreality.

The majority of local public authorities do not have

adequate waste collection, transportation and storageservices. The mechanism for allocation of resources from the National

Ecological Fund is inefficient.

Audit Findings – domestic solid wasteAudit Findings – domestic solid wastemanagementmanagement

os pu c oca au or es pay oo e



os pu c oca au or es pay oo eattention to the problem of household wastesattention to the problem of household wastes



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



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

The Government established within the MoE a sectiondealing with development of national policies in the fieldof waste management.

The Government decided to create an Agency of theEnvironment, which will deal with tracking, monitoringand controlling the wastes flow.

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

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

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

Impact of the Audit on domesticImpact of the Audit on domestic solidsolidwaste managementwaste management



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

Audit was undertaken to determine whetherthere are problems hinderingimplementation of the new social aidprogram.

Performance Audit of thePerformance Audit of theSocial Aid ProcessSocial Aid Process



Additional staff needed to effectivelyimplement the process.

Internal controls needed to be significantly

strengthened throughout the social aidprocess.

Social Aid Process Audit FindingsSocial Aid Process Audit Findings



EU accepted the Court Performance Audit asa condition for additional assistance to thisprogram.

Court audit is being used as a guide toimprove all aspects of the Social AidProcess, particularly strengthening internalcontrols.

Impact of the Social Aid AuditImpact of the Social Aid Audit



Moldova decided to separate Primary HealthCare from hospital care to ensure greateraccess to health care services. Started

process in early 2008.

Undertook audit to assess progress made inachieving objectives.

Primary Health Care Performance AuditPrimary Health Care Performance Audit



Shortages of doctors and lack of continuoustraining limited effectiveness.

Opportunities to significantly improve

access to primary health care services.

Many care facilities do not meet standards.

Opportunities exist to improve the Ministry’smonitoring.

Audit Findings- Primary Health CareAudit Findings- Primary Health Care

P ti t t th f ilit t i it th iP ti t t th f ilit t i it th i



Patients enter the facility to visit theirPatients enter the facility to visit theirfamily doctor through a hole in the wallfamily doctor through a hole in the wallof the unfinished building,of the unfinished building,



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

Minister of Health so impressed with the

Court’s audit that he wants the Court toconduct performance audits of hospitalcare and emergency care systems.

Impact of Primary Health Care AuditImpact of Primary Health Care Audit



Winemaking is an important sector of Moldovaneconomy. Wine industry has a share of 20% inthe GDP and involves about 27% of the laborforce.

During 2002-2005, 4 large wine companies wereprivatized. Buyers required to make certain capital

investments in privatized companies. The Court of Accounts performed the audit to

determine whether privatization objectives wereachieved and also assess effectiveness of monitoring post-privatization activities.

Performance of Performance of investment projectsinvestment projectsimplemented in winemaking enterprisesimplemented in winemaking enterprises



Neither the investors nor the Agency of Public Property(APP) achieved objectives and the achieved benefits werenot equal to those expected.

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

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

achievement of social aspects provided for in theprivatization contracts. An impediment was the embargoimposed by Russia, as well as inadequate investmentmanagement which was focused only on export of

production to Russia. Weak monitoring by the APP.

Audit Findings –Audit Findings –implementing investmentimplementing investmentprojects in winemaking enterprisesprojects in winemaking enterprises



The Agency of Public Property, the Ministry of Economy and Trade and the Ministry of Financeundertook measures to implement the Court’srecommendations.

The Government approved the modificationsproposed by the APP, MET and MoFto the lawand regulations governing this field.

The Parliament adopted modifications of the Lawon administration and privatization of public

property.

Impact of Implementing investmentImpact of Implementing investmentprojects in winemaking enterprisersprojects in winemaking enterprisers



The respective project was one of the first culturalprojects completely funded from the statebudget (10 mln MDL/1 mln USD).

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

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

During audits of the Ministry of Finance andMinistry of Culture, the Court identified andraised issues concerning the use of funds andreporting by the Association responsible forproject implementation.

Implementation of the cultural projectImplementation of the cultural project“Culture Caravan”“Culture Caravan”



Project objectives stated in an unclear manner and withoutany measurable indicators. Objectives have not been coordinated with the Ministry of

Culture and can not be found in the Government Decisionon project implementation.

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

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

expenditures. Association’s reports contained erroneousdata.

50% of the allocated funds have been used contrary to theirpurpose, i.e. not for cultural activities, but forAssociation’s administrative expenditures (procurement of a car, salaries and bonuses for directors and otherpersonnel etc.).

Findings of Findings of audit on the culturalaudit on the culturalproject “Culture Caravan”project “Culture Caravan”



The Court of Accounts referred certainmatters to the General Prosecutor’sOffice for further examination.

The Ministry of Culture initiateddevelopment of methodological norms

for monitoring of cultural projects.

Impact of the Audit on cImpact of the Audit on culturalulturalproject “Culture Caravan”project “Culture Caravan”



Audit was undertaken at request of theEuropean Commission.

Performance Audit of MedicalPerformance Audit of MedicalEquipmentEquipment



ØHealth system lacks a legal framework to regulate medicalequipment, a Strategic Development Plan in medicaltechnologies and equipment, minimum standards of technical equipment and a Program of technicalequipment for public health care facilities.

ØMoH did not take into account the needs and requirements

of the public health care facilities.Ø Procurement of medical equipment was performed without

a feasibility study.Ø Some providers of medical equipment made excessive

profits.Ø Some expensive equipment does not operate in a digital

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

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

Ø

Audit Findings – Medical EquipmAudit Findings – Medical Equipmentent



Ministry of Health and the audited facilities weresatisfied with the issues addressed by the audit andare undertaking measures to remediate thesituation.

MoH initiated work on developing a StrategicDevelopment Plan in the field of medical technology

and equipment. Audit results have been well publicized. The Court

participated in TV programs dedicated to therespective topic, as well as radio broadcasts.

The Court recommended the Parliament expedite theadoption of the Law on medical equipment, included

in the list of drafts entered the Parliament. Consultants engaged by the European Commission

appreciated the report and recommendationsprovided by the Court.

Impact of Medical Equipment AuditImpact of Medical Equipment Audit



ØDuring financial audits, the Court identified anumber of issues related to efficiency, economyand effectiveness of using public money forscience and innovation by the Academy of Science of Moldova (ASM) and subordinatedinstitutions.

ØIn particular, the Court was interested in fundingand the results achieved in implementation of projects from the State Programs in the field of

science and innovation.ØParliament was interested in the idea of

conducting a performance audit in this field.

Performance Audit of Performance Audit of Scientific ResearchScientific Research

A dit Fi di f S i tifi R hA dit Fi di f S i tifi R h



Ø Found inefficient funding mechanisms.

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

Ø Some projects ended with no results; other projects extended with

additional funding without justification.

Ø No performance indicators established for some state programs.

Ø There are problems with funding and monitoring of technologicaltransfer projects.

Audit Findings of Scientific ResearchAudit Findings of Scientific ResearchAuditAudit



ASM and Agency for Innovation and Technology Transfer implementing Court aurecommendations.

ASM decided to pull ASM Assembly (Supreme forum

of the scientific community) outside the ASM, whichwas welcomed by all the representatives of thescientific community, especially those fromUniversities.

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

Impact of Scientific Research AuditImpact of Scientific Research Audit

Audit FindingsAudit Findings of ITof IT AutitsAutits



Audit FindingsAudit Findings of ITof IT AutitsAutits((main issuesmain issues))

Within the auditees:

No strategic plans.

No standards, policies and procedures developed.

The top management does not get involved enough in theIT management issues.

The IT-related risks are not assessed. The existing resources are not used efficiently.

The IT staff has a high turnover rate and the institutiondepends too much on too few people.

IT is designed and developed apart from other subdivisions. The user needs are not taken into account.



Impact of Impact of IT AuditsIT Audits

Promotion of IT auditing within the state institutions anddrawing the attention of the decision-makers to theimportance of proper IT management.

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

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

The CoA recommendations are being implemented.



www.ccrm.md

Access to Audit ReportsAccess to Audit Reports



Questions?



THANK YOU VERY MUCH FOR YOURATTENTION !

Documents

The Impact of Performance Auditing in Moldova May 2011