According to a 2018 report from the Kosovo National Audit Office, many Kosovo institutions, including ministries, agencies, municipalities and public enterprises, have encountered problems with the implementation of recommendations and other issues related to internal auditing by institutions themselves and within their respective Internal Audit Unit monitoring processes. 

A consultancy and inspection activity designed to monitor and improve the operation of institutions and public enterprises, internal auditing is overseen by the National Audit Office, with the office’s Internal Audit Unit, IAU, issuing auditor hirecommendations to relevant institutions upon review.

In its report, the National Audit Office concluded that there are flaws in the implementation of the Internal Audit Unit’s recommendations at the Ministry of Public Administration, among many others.

The IAU recommendations for the Ministry of Justice, for example, were also only partially implemented due to the lack of a formal monitoring of their implementation, as well as a lack of effort to ensure their implementation from the mself. 

Flaws in the functioning of the Internal Audit Unit were noted in the Regional Water Company ‘Prishtina,’ mainly deriving from the recommendations of the Internal Audit Unit being ignored. 

Meanwhile, the Ministry of Labour and Social Welfare, MLSW, implemented its annual audit report for 2018, complying with all the recommendations received from the Internal Audit Unit in regards to its internal auditing process. 

The Kosovo Privatization Agency, KPA, had its share of problems as well. Until 2019, it had not yet approved its Audit Committee, the National Audit Office report explained, yet in response to questions from BIRN, the Agency stated that the Committee was established in the beginning of the year. 

The National Audit Office found the Kosovo Academy for Public Safety, KAPS, incompliance of its Annual Audit Plan throughout 2018 as well, an institution which functions within the scope of the Ministry of Internal Affairs, MIA. In their response to BIRN concerning the functioning of the MIA’s Audit Committee, the MIA said that the KAPS filled its vacant position of internal auditor. 

According to the National Audit Office, lack of implementation of a plan for Internal Audit Units has been a key problem across the board. This failure can result in the identification of problems, but an inability to address weaknesses in internal controls that results in Kosovo institutions missing the chance to remedy the shortcomings identified in the recommendations made by the National Audit Office. 

Prishtina Regional Water Company begins implementation of internal audit recommendations

In its 2018 audit report, the National Audit Office found that there was no follow-up of implementation of recommendations provided by the Internal Audit Unit.

According to them, the IAU had not established nor does it maintain a monitoring system to ensure that the recommendations are being implemented in an efficient manner. 

The Internal Audit Unit justified this by stating that the monitoring of implementation of the recommendations provided was carried out during the next annual audit, during which the Internal Audit Unit also checked whether the recommendations were implemented or not. 

“Lack of follow-up and monitoring of the implementation of recommendations poses the risk of a lack of timely information for the Audit Committee [a section of the Internal Audit Unit] and delays the implementation of recommendations, which results in a failure to improve governance processes, administration of risks and timely control processes,” notes the National Audit Office report.

The report further noted a lack of follow-up related to the implementation of recommendations provided by the Internal Audit Unit by management officials within the company as well. During the audit, no evidence was provided by the Internal Audit Unit that systematic monitoring of the progress of implementation of the recommendations.

The report laid out RWC’s response: “The officials of the company considered that the comments given on the need for commitment to implement the recommendations given in the internal audit report for 2018, as well as the individual initiative of the relevant management to implement them, are sufficient.”

On the other hand, in a response from the Prishtina Regional Water Company provided to BIRN, the organization said that it is implementing the recommendations of the National Audit Office in regards to the Internal Audit for 2019 which is yet to be published. 

According to the company, during 2019, RWC Prishtina conducts a follow-up of the implementation process of the recommendations on a three-month basis. In their response to BIRN, the company said that: “After each audit, the management compiles an Action Plan on the findings/recommendations, which also contains the timing and responsibilities for their implementation, which is submitted to the Internal Audit Unit and afterwards the Internal Audit Unit monitors this and follows the recommendations per the Action Plan.” 

MLSW notes progress in the implementation of the annual audit plan 

The Ministry of Labour and Social Welfare, MLSW, took the recommendations of the National Audit Office into account, thus having a good performance during 2018 and implementing its annual audit plan entirely, noted the report from 2018: “[The Internal Audit Unit] for 2018 compiled its annual audit plan, in which they planned 22 regular audits and two ad-hoc ones.” 

However, the situation had been different per the findings of the report in 2017. 

The National Audit Office concluded that the MLSW’s Internal Audit Unit has provided weak documentation of its inspection. The report said that “We have reviewed the dossier of the audit report of the IAU for ‘the elderly and those without family care home in Prishtina’ and we have observed that the audit dossier provided no proof or supporting documents attached to the audit findings.” 

The KPA established its Audit Committee this year  

The Kosovo Privatization Agency, KPA, had not yet established its Audit Committee at the time of the publication of the National Audit Office report. However, in a response to BIRN, the Agency said that the Committee was established at the beginning of 2019. 

“The Agency had not established the Audit Committee in 2018. This was due to the non-existence of a Board until the end of May, but also in anticipation of the Administrative Instruction MF-01/2019 on the establishment and functioning of the Audit Committee” said the National Audit Office report. 

The KPA told BIRN that on March 29, 2019, the Board of Directors decided to establish the Audit Committee, composed of three members. 

Their answer emphasized that: “The National Audit Office recommendation has already been implemented. Apart from this, the notification on the establishment of the Audit Committee was presented to the relevant officials of the National Audit Office, during the regular reporting process on implementation of their recommendations.”

Internal audit weaknesses in the Ministry of Public Administration

The National Audit Office noted weaknesses in the functioning of the Internal Audit Unit of the Ministry of Public Administration during 2018. 

According to the report, there are a number of weaknesses related to the current operation of the Unit. “Out of seven reports, the scope of audits laid out in three of the reports focused on the previous year and the beginning of 2018,” it read. “The Internal Audit Unit deemed it necessary to review some of the issues of the previous periods.”

The report emphasized that the level of implementation of recommendations continues to be low, as only 35 per cent of the recommendations provided by the Internal Audit Unit were addressed. 

According to the Internal Audit Unit, this is a result of lack of commitment of the institutions being audited to commit to implementing the recommendations. 

The report further noted that “…from the minutes of the meetings of the Audit Committee, it is not clear whether the Committee contributed towards improving the functioning of the IAU, as it did not provide any recommendations for improvement.”

In regards to the findings of the National Audit Office, in a response provided to BIRN, the Ministry said that they have taken the necessary action for the internal audit unit’s scope to include 2019 as well, aiming for potential shortcomings in the systems to be dealt with rapidly, and not after the problems have already occurred. 

“Apart from this, measures were taken for the recommendations provided by the IAU to be addressed by the Audit Committee, which should be accountable for its oversight role and should demand continuous reporting on the implementation of recommendations,” said Zeqir Bekolli, the head of the Communications Department of the MPA, to BIRN.

Ministry of Justice only partially implemented the recommendations 

Internal Audit Unit recommendations were only partially implemented by the Ministry of Justice, MOJ, according to the 2018 report from the National Audit Office.

“The report emphasized that out of 19 recommendations provided, five were implemented, 10 were in the process of implementation and four were not implemented at all,” the report explained.

According to the National Audit Office, recommendations were not implemented at the desired level, due to the lack of satisfactory commitment from the management and the lack of any formal monitoring of the process of the implementation of recommendations. 

The report on the MoJ for 2017 also noted that the Internal Audit Unit recommendations were only partially implemented. 

“More quality and more engagement from the Audit Committee is needed to push for implementation of recommendations of audits both internal and external,” noted the 2017 report. 

According to the Administrative Instruction 01/2019 on the establishment and functioning of the Audit Committees in the public sector, the Audit Committee reviews the reports, findings, recommendations issued by the Internal Audit Unit and ensures that they are addressed adequately by the head of the public entity. 

The MIA fails to fulfil its annual audit plan 

The National Audit Office found that the annual audit plan for the Kosovo Academy of Public Safety, KAPS, which is one department within the Ministry of Internal Affairs, was not fulfilled in 2018. 

The report noted that: “According to the KAPS Internal Audit Unit annual plan, it was foreseen that five audits were to be completed during 2018. However, this Unit conducted only two audits during 2018.”

According to the National Audit Office, failure to complete the Internal Audit Unit plan may have resulted in the inability to identify and address potential weaknesses, meaning the Unit missed any chance to remedy these weaknesses.

In response to BIRN, the MIA said that the Kosovo Academy on Public Safety filled the vacant position of the internal auditor, one of the weaknesses identified in the audit report. “During the period when the position was vacant, there was no impact on the performance or the internal control of KAPS. During 2018, as a result of good performance, KAPS was accredited by the National Qualifications Authority for the professional training of Public Safety Agencies, as well as receiving international accreditation from the International Association of Directors of Law Enforcement Standards and Training  based in the USA.”

According to data from the National Audit Office, the internal audit system at the MIA and the three agencies functioning within the Kosovo Police, the Kosovo Police Inspectorate and the Kosovo Academy for Public Safety have all established their own Internal Audit Units.

These mechanisms operate with four auditors at the MIA, five auditors at the KP, one auditor at the KPSA and one auditor at the KPI. 

Municipality of Mitrovica remains without an Audit Committee 

The Municipality of Mitrovica responded to questions from BIRN, saying that its Audit Committee was established, but it had been annulled due to its composition having been made in contradiction to the law. 

It noted in its response that “with the new law, two thirds of the Committee should be external members, thus we are seeking for external members from civil society, but it is very difficult to find members from the outside who also have audit experience.” 

Nevertheless, the municipality emphasized that they are in the process of completing the Committee with full membership as soon as possible. 

On the other hand, according to the National Audit Office, not establishing the Audit Committee in accordance with applicable legislation may have an impact on the institution’s ability to follow the work of the internal auditor and the process of implementing recommendations will remain slow. 

The National Audit Office recommended that: “The Mayor should review the appointment of members of the Audit Committee and ensure that they are selected in compliance with the requirements of the law and respective regulations, and avoid the appointment of officials that may potentially be the subject of internal auditing, and all this should be done with the purpose of improving financial management and control.”

Weaknesses in internal auditing at the Municipality of Ferizaj

The National Audit Office found weaknesses in the functioning of the internal audit process in the Municipality of Ferizaj. Out of 12 planned audits, the Internal Audit Unit finalized only nine reports. 

In its findings, the National Audit Office report noted that “in one of the completed reports on ‘procurement management procedures for the period of 30.09.2017 to 15.07.2018,’ only descriptions [of procurement management] were provided, while the findings were not in line with the objectives of the audit. Out of the ten completed reports, 34 recommendations were provided, out of which 10 were implemented, 13 were in the process of implementation and 11 remain completely unimplemented.”

Meanwhile, according to the municipality, during the period of January and July 2018, the Audit Committee held only one meeting. 

“On September 26, 2018, the decision for a new composition of the Audit Committee was issued, with the Committee holding four meetings. However, they were not properly functional. This made the verification of the revision of Internal Audit Unit reports by the Audit Committee impossible,” said the report.

The National Audit Office further noted that the internal audit system is a key element of internal control, and as such, it should provide assurances on the efficiency of internal controls. 

The National Audit Office mentioned some potential risks: “An incomplete Internal Audit Unit program and a lack of implementation of recommendations decreases any assurances given to the management in regards to how well its financial systems are functioning. A non-functional Audit Committee weakens the role and the independence of internal auditing. This further limits the possibility for the management to receive assurances on the efficiency of internal control.”