Auditing Results of the RS Budget?

AIM Banja Luka, July 7, 2001

Both high international officials and the overall public were surprised by the report on special revision of budgets of Bosnia's entities carried out in the last three months in the Republic of Srpska (RS) by a special OSCE auditing team and a special auditor appointed by High Representative for B&H, in the B&H Federation. Rather rather alarming information astonished Wolfgang Petritsch, High Representative for B&H, and Robert Bickroft, Chief of the OSCE Mission. Namely, it turned out that the public authorities of both these B&H entities managed the budget funds illegally, incompetently and quite sloppily.

In their comprehensive report, the auditors warned that budget funds were used for other than planned purposes mostly backed by unlawful Government decisions (which are not published anywhere), that numerous compensatory transactions were carried out for the purpose of re-channelling the resources, that money flow was not properly documented, that fictitious documents were used, that there were frequent cases of double book-keeping, that public procurements were made without tenders and often at prices evidently higher than those that could be obtained at tenders, as well as that there was no internal control of financial transactions. "We are presenting these findings just for the sake of illustrating how easy and simple it is to bypass all controls in B&H" states the part of report relating to cases of forged documentation and double book-keeping.

Part of the report pertaining to the control of the budget of the Republic of Srpska mostly deals with the violations of the law and malversations with the Oil Industry of the Republic of Srpska (NIRS) and Oil Refinery in Srpski (Bosanski) Brod. It thus states that the former Prime Minister of the RS Government, Milorad Dodik, unlawfully exempted the Oil Refinery of customs duties whereby the RS fiscal revenues were reduced by KM 29 million and the Oil Refinery made a profit at the expense of the RS citizens. In their control of budget spending for the first quarter of 2000, the auditing team discovered some KM 20.4 million which were not shown in the budget and established that losses on account of non-budgetary expenditures amounted to KM 120 million.

According to auditors' findings, Prime Minister Dodik personally signed documents for all oil transactions, while his Cabinet approved dubious oil "donations" to organisations which were not eligible for this kind of aid. Among the beneficiaries of Government donations were: "Elektroprivreda" (Electric Power Industry), municipality of Prijedor and Directorate for Commodity Reserves, but also the municipality of Cacak and the daily "Politika" from the Republic of Serbia. It is assumed that these donations to Serbia were a part of RS assistance to Serbian opposition in election campaign.

A telling example of illegal use of budget resources was the decision of the RS Government to approve DM 16,390 for a Spanish language course at London University for the daughter of the Mayor of Prijedor. In view of the fact that the Mayor of Prijedor is Nada Sevo, a high-ranking official of Prime Minister Dodik's party (SNSD), it is clear how and for which purposes were state funds used.

The auditors' report particularly points to financial operations of the Directorate for Commodity Reserves of the RS, for which is said to be nothing else but "a blank cheque used for increasing the funds available to Ministries and their employees". The described examples of transactions, which are hard to trace and explain, point to a conclusion that the Directorate for Commodity Reserves functioned as a trading firm with special authorisation. Thus, the Directorate contracted imports of oil with foreign suppliers of the buyer's choosing. The goods and excise tax were paid in cash and the trusted buyers were allowed to pay later.

The auditing team also determined that in one case the buyer, who paid for goods in cash, did not exist, which is a usual practice of tax evasion in the RS. Also, it is interesting that the suppliers were registered in a large number of countries. Thus, oil came from a supplier in Liechtenstein, over Slovenia and the Russian oil came from the British Virgin Island.

Six months after the elections, report on special auditing of budget transaction of the RS also showed that accusations against the previous Government of Prime Minister Dodik for embezzlement, crime and corruption had been grounded. Criminal charges have already been brought against Mirko Nozica, Director of the Directorate for Commodity Reserves, Minister of Trade Nikola Kragulj and Director of the Republican Customs Office Dragoljub Trivanovic. Kragulj is a high official of Dodik's SNSD and Nozica and Trivanovic belong to the Democratic-Socialist Party, which is SNSD's coalition partner.

A month before the decision of the Council of Europe on admitting B&H to its membership, special auditing report came as a cold shower for B&H officials. Namely, it clearly shows that Governments of B&H are not capable of organising basic functioning of authorities which are the main source of corruption. Such authorities slow down economic development, block transition and lose democratic credibility, which are bad recommendations for joining European integrations.

Branko Peric

(AIM)