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ANNUAL PERFORMANCE REPORT 2012

TABLE OF CONTENTS

ADDRESS BY THE AUDITOR GENERAL................................................................................................................3

1. PERFORMANCE SUMMARY.......... ..6

2. RESULT INDICATORS 8

2.1 Audit Coverage 8

2.2 Quality of our reports 12

2.3 Impact 13

2.4 External and Internal Assessments

3. RESOURCES 18

3.1 Resources from the Kosova Budget 18

3.2 Donation of assets not any longer used 21

3.3 Human Resources 21

4. COOPERATION 26

5. COMING FOCUS 28

6. OAG ACCOUNTABILITY 30

ANNEX 1: Short Introduction To Office of the Auditor General 32

ANNEX 2: Annual Financial Statements for 2012..............................................................................................35

ANNEX 3: External Audit Opinion 2012. 41

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Our mission

Our vision

is to “Contribute to sound financial management in the public administration. We

shall perform quality audits in line with internationally recognized public sector auditing

standards and good European practices. We shall build confidence in spending of public funds.

We shall play an active role in securing of taxpayers’ and other stakeholders’ interests in

enhancing public accountability”.

is to have in place the Supreme Audit Institution (SAI), the National Audit Office of

Kosova, entirely owned by Kosovars and being regarded by its international peers and national

stakeholders as a Well Performing SAI.

With a special emphasis during the Strategic Planning Period (5 years) we

enhance the skills of professionals engaged in a positive learning-oriented approach; improve

close relationships with our stakeholders, local and international partners; participate in the

international community of SAIs; and provide reliable assurance to the citizens of Kosova and

their elected representatives regarding the economic, effective, and efficient use of public

resources.

not only to providing quality information on the use of public funds, but also

assisting our audited bodies to improve their financial management systems – adding value to

their businesses.

to assist in building good governance in the Kosova Public Administration and

being responsive to expectations.

How we do it?

We are dedicated

We are dedicated

OFFICE OF THE AUDITOR GENERAL

OAG IN BRIEF

1. PERFORMANCE SUMMARY

Audits in time, with quality and relevance

Assisting in the development of good governance and PFM

Holding into account

The audit season 2011/12

The audit season 2012/13

ended by the end of August 2012. In total, we reported 101 different

audits. In more detail we submitted:

• The Kosovo Budget (KB) audit Report;

• Eighty-six (86) regularity audit reports under the KB;

One (1) system based audit;

Two (2) performance audits;

Eight (8) management audits; and

Three (3) donor funds audits.

started in September 2012 and we plan to report 113 audits:

KB Audit Report;

Eighty-eight (88) regularity audit reports under the KB;

Two (2) regularity audit reports outside of KB;

Two (2) donor funds regularity audits;

One (1) system based audit;

Nine (9) performance audits; and

Ten (10) management audits.

We have further developed our cooperation with the Assembly. Besides the

Committee for Oversight of Public Finances (COPF) which is using the OAG reports as

an input for holding the managers to account, we have also started to work with

other committees in different ways; and

Based on our audit conclusions we have actively participated in different

interventions with the executive branch and different projects within the PFM field

creating a sound base for good governance, transparency and accountability.

We prepared the Annual Performance Reports on time and discussed it in the

Committee for Oversight of Public Finances as a base for holding the Auditor General

to account for the management the Office.

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Corporate governance modernisation

� We have started to implement the Auditor Generals Exit Strategy aiming at securing

sustainability and ownership. Amongst others this means a higher degree of internal

delegation; securing a higher understanding of the base, context and techniques of

Supreme Audit Institutions amongst all our staff; initiated up dated certification

schemes for public sector auditors; long term cooperation agreements with our

international partners; and placed ourselves as partners in international and

European cooperation amongst Supreme Audit Institutions; and

We have continuously restructured our office to stimulate professionalism and

efficiency as well as developing new tools and instruments ensuring a results

oriented approach, focus, productivity, and good management control..

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OAG Conference 2012 – staff working in groups on the second day of the conference (11 July 2012)

2. RESULT INDICATORS

We continue to use the following results indicators to measure and report on our performance. These

are linked to our strategic priorities and based on our Corporate Development Strategy.

2.1 Audit coverage – measured in terms of the regularity audits conducted under the Kosova Budget

and the number of finalised audits;

2.2 Quality of our audits and reports – continuous development of our Quality Management System;

2.3 Impact and effect – number of meetings and public hearings held by Assembly committee COPF

based on our reports and the number or percentage of recommendations addressed; and

2.4 External and internal assessments – conclusions from external and internal assessments carried

out during the year.

To enable comparison with previous years, we measure audit coverage in terms of the size of the

Kosova Budget covered by the statutory regularity audit, the number of finalised audit reports, and

the audit opinions given.

The regularity audit of the budget organisations for the financial year 2011 started in September

2011. In December of the same year an audit memo was produced for each organisation while the

final audit reports were published in June 2012. The Annual Audit Report was finalised in August

2012 marking the close of the audit season.

In September 2012 we started the new audit season by commencing with regularity audits for the

financial year 2012. Audit memos were submitted to the audited organisations in December while

the final reports will be delivered in June and August 2013.

Over recent years we have increased the coverage of the Kosova budget in our regularity audits. In

2012 we covered 100% of the revenues and 99% of the expenditures. We audited all except for one of

the first level budget organisations. The exception is the Kosova Intelligence Agency due to its legal

framework. However, this function in western democracies is part of mandate of Supreme Audit

Institutions and carried out in compliance with the principles on annual external audit.

Besides carrying out regularity audit in each individual budgetary organisation, we have also done

other types of audits and covered other organisations outside the budgetary system, especially

within Publicly Owned Enterprises (see further below).

2.1 AUDIT COVERAGE

PERCENTAGE OF KOSOVO BUDGET COVERED BY THE AUDIT

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THE NUMBER OF AUDIT REPORTS

At the end of the audit season 2011/2012 we published 101 audits:

The KB audit Report;

Eighty-six (86) regularity audit reports under the KB;

One (1) system based audit: Public Investment Program;

Two (2) performance audits: Awarding of supply contracts and Economy and

Efficiency in procuring IT equipment;

Eight (8) management audits: management Audit Reports: Efficiency in managing

water companies; KEK Revenue collection process; Oversight of the Capital

Investment Projects: Ministry of Infrastructure; Trepca follow up of previous

recommendations; FM/C Systems in RTK; Waste company “Deponimi”; Water

Company “Mitrovica” and Cadastral Agency of Kosova; and

Three (3) donor funds audits: the regularity audit of the Program “Employment

Promotion through business and skill development” (DANIDA); the final audits of the

projects Reconstruction of Skenderbeu Square Peja (UNHABITAT) and Sustainable

return in Prizren town (UK Embassy).

The audit season 2012/13 started in September 2012 and we plan to report 113 audits:

KB Audit Report;

Eighty-eight (88) regularity audit reports under the KB;

Two (2) regularity audit reports outside of KB;

Two (2) donor funds regularity audit: Program “Employment Promotion through

business and skill development” (DANIDA);

One (1) system based audit: SIGTAS System used by Tax Administration;

Nine (9) performance audits: Use of official vehicles, Scholarships for higher

education and Hospital waste management; Regional Waste Companies ”Ambienti”

Sh.Peja,” Çabrati” Gjakova, “Ekoregjioni” Prizren, “Pastrimi” Prishtina, TrainKos as

well as a report on Waste Management in Kosova; and

Ten (10) management audits: Infra Kos; Kosova Food and Veterinary Agency; Kosova

Forestry Agency; License Management in the Ministry of Trade and Industry;

Procurement management of Capital Investments in the Mitrovica and Shtime

Municipality; Kosovo Police; Kosovo Clinical University Centre; road maintenance

Infrastructure Ministry; and Kosovo Agency for Medical Products.

As in previous audit seasons, we have continued to increase the overall number of audits conducted.

The number has grown both in statutory and other types of non statutory audits. At the same time we

have reduced the number of municipality audits outsourced to private audit firms due to our higher

staff number. We will continue this trend in the coming season as we intend to employ additional

staff. Earlier capacity constraints are gradually being resolved but we will keep outsourcing some of

the municipality audits for quality and benchmarking purposes.

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Table 1 shows the trend of each type of audits throughout four audit seasons while table 2 shows

the number of audits contracted out and the cost of these audits.

.

The final audit of 11 municipalities' Annual Financial Statements 2012 is outsourced; compared to

18 last year. This demonstrates both the reduction in the level of outsourced audits and the

reduction of costs to a certain degree balancing the costs for additional staff.

In addition to the annual regularity audit we have also carried out other types of audits as showed

in the table above.

An overview of the wide range of audits undertaken allows us to present a comprehensive picture

of overall budget execution and the quality of the public administrative systems. In this way we

provide extensive information on state affairs and are better positioned to inform the Assembly

Regularity Audit

Table 1: Audits carried out

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Audit season

2012/2013

Audit season

2011/2012

Audit season

2010/2011

Audit season

2009/2010

KB

State Authorities¹

Municipalities

Contracted out)²

Independent Institutions

Outside KB

Non Statutory Audit

Donor funds audit

Management Audits

Performance Audits

System Audits

Total

Health Checks

87

1

25

37

-18

24

0

15

3

8

2

1

101

18

91

1

24

38

-11

26

2

22

2

9

10

1

113

2

77

1

24

37

-23

15

4

8

1

4

3

89

34

23

33

-29

7

2

4

1

2

1

70

57

64

1

Number of audits

Table 2: Audits contracted out to private audit firms

Audit season

2012/2013

Audit season

2011/2012

Audit season

2010/2011

Audit season

2009/2010

Number of audit firms

Cost

18

2

94,000

11

1

60.000¹

23

3

141,528 141,528

29

3

¹ At the time of this report, procurement process for outsourcing audits of 11 municipalities for AFS 2012 was ongoing. Though,

€60,000 is an estimated cost for final audits for 2012 without interim stage. For full audit of 2013 the cost is estimated to be

around €90,000.

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and other stakeholders about the reliability of Government reports and the efficiency, effectiveness,

legality and transparency of budget execution.

We actively seek to identify opportunities for upgrading public administration systems and processes

to secure better quality and lower cost and recommend options to achieve these.

Each of our regularity audits results in an audit opinion on the Annual Financial Statements (AFS). The

opinion is our conclusion whether the audited financial statements presents the financial activities

and results in a true and fair way. Thus we also conclude whether or not the AFS have been prepared

in accordance with the applicable accounting standards and Government instructions; are

comprehensive; and underlying transactions in all major respects have been carried out in

compliance with the applicable legal framework and other set criteria.

The audit opinions we give are based on the ISSAI's reporting standards.

We give unqualified opinion for the financial statements which, in all material respects terms,

present a true and fair view. If there are issues which require additional reporting to ensure that the

reader of the AFS gains a proper understanding of significant issues related to the accounts but which

are not of sufficient concern to result in a qualification, we can add an 'Emphasis of Matter'.

When AFS' have significant deficiencies in terms of the compliance with the reporting framework or

in the quality and accuracy of information included we apply a different form of opinion which may

take a variety of forms but essentially reflects a qualification of the accounts.

The audit opinions given over the last three years reflect an increasing proportion of unqualified

opinions. Table 3 highlights that other types of opinions have steadily decreased. Budget

Organisations are improving their processes supporting the production of their AFS each year. This is

to a certain extent the result of our audit advices and recommendations.

AUDIT OPINIONS ISSUED


2.2 QUALITY OF OUR REPORTS

One of OAG's strategic objectives is to produce high quality audit reports. A continuous development

of our Quality Management System (QMS) is a key goal.

We seek to achieve a high level of professionalism in our audits to ensure that our audits are

comprehensive, well documented, effectively focused and always completed on time.

To ensure quality, we apply quality review to the work undertaken at each stage of the audit. We do

this using our most experienced, professionally qualified staff.

We have developed policies and procedures to embed the understanding of quality as a basic

requirement.

The QMS contains three different layers: a) Quality Control, b) Quality Monitoring and c) Quality

Assurance.

Quality Control is the control operated for the individual audit assignment. This includes supervisory

review of audit plans, the use of standard documentation for recording the audits, supervisory

review of audit working papers and of draft audit reports, etc.

Each of the audits conducted during the audit season 2011/12 were subject to quality control

procedures. Supervision and reviews were done at all levels starting from the team leader, audit

director, through Assistant Auditors General to the Auditor General. In addition, language and legal

reviews were also part of the process.

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Table 3: Types of audit opinions given for the last three consecutive years

Unqualified opinion

AFS for the year

2011Type of Audit Opinion

AFS for the year

2010

AFS for the year

2009

Unqualified with emphasis of matter

Qualified opinion

Qualified opinion with emphasis of matter

Adverse opinion

Disclaimer of opinion

Total:

35

32

15

4

0

3

89¹

15

35

19

3

9

81

15

13

4

0

31

63

¹ In the total number of 89 audit opinions is included: the audit opinion for DANIDA program (a donor fund audit). The audit report

for Kosovo Privatisation Agency includes two audit opinions, the audit opinion for Kosovo Privatisation Agency and the audit

opinion for Privatisation Fund.

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Quality Monitoring is the process whereby our Audit quality function carries out an independent

review of individual audits. This is a corporate review of the audit before it is finalised carried though

over the planning-, execution-, reporting- and follow up stages to ensure that the audit has been

conducted in accordance with our policies and practices.

When it comes to the interim stage of the audit season 2012/13, six other audits were subject to the

mentoring jointly undertaken by our quality function and UK twinning partners.

Quality Assurance is an ex post review involving either internal or external independent assessment

of our quality control and quality monitoring systems and practices. This is done periodically. Last

time we internally had such a review was in May 2011. During the coming months we will address

quality assurance again.

Our Quality Management System has helped develop the quality of our audits, audit documentation

and reports produced. Readability and understandability of our reports is now much better.

Improvements in the audit approach, its implementation and the issuance of audit opinions is

securing better adherence to international public sector auditing standards and good European

practices. The professionalism of our staff has been further strengthened.

Progress achieved to date is a positive development but we recognise that further developments are

required to reach the standards we wish to achieve. We need to do more to close the gap. Our priority

is both to secure quality in the regularity audits and at the same time developing performance audits.

External expectations for performance audit are continuously increasing and we have prioritised

development of this area. Cooperation with the Swedish NAO is ongoing to support it.

We assess the effectiveness of our audit activities, reports produced and their actual impact based on

the views held by the parliamentarians on the quality of reports, the number of public hearings and

the level of audit recommendations addressed.

Our professional cooperation with the Assembly's Committee on Oversight of Public Finances (COPF)

has been further developed. The public trust in OAG professionalism continuous to be enhanced.

In 2012, OAG have submitted to the Assembly 103 reports, this figure includes the Auditor Generals

Annual Performance Report. These reports have provided the MP's with a solid base for decision

making, monitoring and holding public managers to account. Our annual working plan has been

thoroughly discussed with COPF on a timely basis ensuring that our mutual concerns and

expectations are properly addressed.

Over the year, 31 regular meetings and one public hearing were held by the COPF.

For the audit season 2011/12, Audit quality function has monitored 19 audits. Out of them, 17 were

regularity and two managerial audits. In addition to this, for the same period four other regularity

audits were mentored by our international partners.

2.3 IMPACT


In those meetings, COPF has handled 20 individual audit reports where the highest priority was given

to following up the process of implementation of audit recommendations. Important findings and

recommendations were discussed with the most senior accountable managers of the related audited

organizations.

In addition, two workshops and a specific public hearing were organised for all 37 municipalities. In

these events the most significant administrative challenges faced by Local Government and

opportunities for improvement identified in municipality audit reports were discussed.

In all these events, OAG representatives have contributed by providing professional expertise and

advice to MP's and others thereby helping to foster public accountability and transparency.

For the first time, the Auditor General presented the Annual Audit Report for 2011 before an

Assembly plenary session. Another important development was that the Auditor Generals Annual

Performance Report, included for the first time its audited Annual Financial Statements and the same

was discussed by the Assembly in a plenary session.

In each of our individual audits we analyse the implementation of our previous recommendations. In

2012, we undertook this analysis in (77) audited organisations covering both Central and Local

Government levels. Summary results are shown in the following table:

The number and percentage of recommendations addressed

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Compared to previous years, the implementation of recommendations by the municipalities has

slightly improved although much remains to be done. When it comes to the Central Government

level the situation with the audit recommendations is much better Indications exist on better

measures taken related to recommendations given for 2011. We will come back to this in the Annual

Audit Report later this year.

Besides the above recommendations given in our final reports, we also provided advices during the

audit process. A significant proportion of advice given is addressed immediately therefore improving

the quality of information in the AFS.

However, despite this, the number of recommendations not addressed is a concern for us. The

reasons for this vary. In some cases our recommendations have been too general and/or not specific

enough. In many cases we believe that there is a lack of willingness or ability to properly address

shortcomings. The accountability mechanisms need to be strengthened to support improving

financial management. In the current year we will focus on ensuring clear and constructive

recommendations.

In many instances, the COPF MP's have expressed their satisfaction with the way in which they have

been interacting with the OAG and the way it has submitted information such as AAR, APR and the

individual audit reports.

Fair and objective assessment is vital to promote development as a means of improving

organisational performance. In order to maximise effectiveness and credibility we should be subject

to annual independent financial audits, external peer reviews and other national assessments. In

2012 OAG has been assessed both internally and externally.

In order to set the priorities for cooperation under the new twinning project with the UK NAO and the

Court of Audit Netherlands, they assessed our current operational focus. The project will support us

in further enhancement of our operative and support processes.

The World Bank (WB) in its Country Fiduciary report published on March 2012 appreciates OAG's

increasing effectiveness and considers it as one of the key strengths of the Kosova PFM system. At the

same time the report shows the need for strengthening OAG's independence.

2.4 EXTERNAL AND INTERNAL ASSESSMENTS

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Table 4: Implementation of audit recommendations given for 2010

Audited EntitiesRecommendations

for 2010

Recommendations

fully addressed

Partially addressed

(in process)Not addressed

Nr

Central level organisation

Local level organisations

Total

366

224

590

145

40

185

%

40

18

31

Nr

141

67

208

%

38

30

35

Nr

80

117

197

%

22

52

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Similar to the WB report, the Government Action Plan on negotiation of the Stabilisation and

Association Agreement published on December 2012 highlights the importance of strengthening the

functional independence of the OAG and that this should be done through the adoption of a new law.

The Sigma Report published on March 2012 notes that OAG has a relatively good reputation among

the general public. While some of the independent oversight bodies have limited time and

opportunities to discuss their findings with the Parliament and their annual reports are treated very

formally by the Parliament, the Sigma Report recognises that the OAG is becoming an exception in

this regard.

The Commission Communication on a Feasibility Study for SAA 2012 expresses its concerns as the

OAG is part of the civil service, and the implementing legislation of the civil service law is too

prescriptive and limits in practice functional independence of the OAG regarding the implementation

of the legislation of the civil service law. It recommends strengthening the role of external audit and

specifically emphasizes the need to improve capacity in delivering performance audits.

The audit of our 2012 AFS resulted in an unqualified opinion while recommendations were given in a

management letter. Our external auditors, appointed by the Assembly, placed rather much emphasis

on compliance in our administrative processes. Some minor errors from our side was noted at the

same time as an issue of general interest was noted related to an inconsistency regarding

depreciations as required by the Administrative instruction and how depreciations are calculated in

the Treasury system. We will address these recommendations in a timely manner.

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OAG Fourth Annual Conference in Peja, summer 2012

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As part of our internal assessment we have applied different tools addressing measures that we as a

SAI need to undertake in order to operate effectively in a challenging and constantly changing

environment. This means that we have to continually re-evaluate and reassess how we carry out our

constitutional and legal mandate. We should make sure that our activities consistently meet the

highest professional standards remaining relevant to the environment in which we operate.

Furthermore, our internal auditor evaluates the functionality and effectiveness of our internal

systems and advises us of their upgrading.

Furthermore, in workshops organised during our annual conference our processes are analysed and

evaluated by our staff and our partners. Based on lessons learned, actions were identified which will

contribute to addressing future challenges. The input from our partners present in the conference

was of paramount value.


OAG Fourth Annual Conference in Peja, summer 2012

3. RESOURCES

During 2012 our funding came from several sources. The main source of funding was the Kosova

budget. The limited fees we earned were transferred to the MoF. Other resources were the

assistance financed by the European Union and the Swedish National Audit Office. In addition the

salaries for the Auditor General and his Head of Cabinet were paid through a donor fund partly

financed by the Government. Since the closure of the ICO in September 2012 this fund is

managed by the International Management Group.

As an independent institution financed by taxpayers' money our budget should be spent with great

responsibility and prudency. Under the Budget Law of 2012, OAG's approved budget was €2,009,879.

This budget is allocated in five economic categories: Wages and Salaries, Goods and Services,

Utilities, Capital Investments and Subsidies and Transfers.

During the fiscal year the following changes were made:

In the budget review the ceiling for the staff number was raised from 130 to 136. To

finance this the amount of €20,000 were transferred from Subsidies and Transfers,

€16,500 were transferred to Wages and Salaries and €3,500 to Goods and Services

covering additional equipment needed;

Under the Budget Law of 2012, to the OAG was appropriated the amount of €50,000

for purchase of new servers. During the procurement process the need for additional

€10,000 was identified and after a request, the Ministry of Finance transferred this

amount from Goods and Services to Capital Investments;

Under the decision of the Government No. 04/101 of date 14.11.2012, the OAG's

budget for Subsidies and Transfers has decreased to zero, and our budget was

reduced by €80,000; and

The Swedish National Audit Office, in order to co-finance the Annual Conference

which was held on 10th and 11th of July in Peja, has provided a donation in the

amount of €7,315.

After these changes our budget in the end of the year was €1,937,194.

3.1 RESOURCES FROM THE KOSOVA BUDGET

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In the last three years our budget has increased. The final 2012 budget was 3.8% higher compared to

2011. The difference between 2011 and 2010 was 18.78%.

These increases were mainly related to higher costs for staff; professional development via the

certification scheme; and the increase in number of the Team Leaders.

We scaled down our budget request regarding Goods and Services below the ceiling proposed by the

Ministry of Finance in the first Budget Circular. We have also had a prudent approach in general and

postponed some investments due to the scarce budget situation. The effect of this is an accumulated

need of investments in the ICT field paving the way for higher efficiency in both operative and support

activity.

As a reflection of the above, the highest cost is in the category of Wages and Salaries (64%), or 4% more

than in 2011.


Table 5: OAG Budget (in Euro 000)

Budget Report Final BudgetInitial Budget Spent Budget %

Overall budget

Wages and Salaries

Goods and Services

Utilities

Transfers

Capital Investments

2011

Overall budget

Wages and Salaries

Goods and Services

Utilities

Transfers

Capital Investments

2010

Overall budget

Wages and Salaries

Goods and Services

Utilities

2012

2,010

1,198

622

40

100

50

1,810

1,098

672

40

1,359

797

539

23

1,937

1,215

622

40

60

1,866

1,098

648

38

60

22

1,571

816

715

40

1,822

1,174

561

32

55

1,728

1,036

575

35

60

22

1,547

808

707

32

94.1%

96.6%

90.1%

80.0%

0.0%

91.7%

92.6%

94.3%

88.7%

92.1%

100.0%

100.0%

98.5%

99.0%

98.9%

80.0%

Graph 1. Budget spending in economic categories

Expenditures in Economic Categories

Wages and salaries

Goods and services

Utilities

Capital Investments

The highest cost in Goods and Services is rental costs of €168,000, or 27%. 16% is related to

stationery, mobile phones, office furniture, IT equipment, food and beverage and expenses for

organising the Annual Conference. 15% is related to the hiring external audit companies to audit a

certain number of municipalities. In 2011, these expenses presented 17% of expenditures in this

category and in 2010 they were 33%.

Graph 3 shows the trend of expenditures within the five budget categories in a three year

perspective. The costs in Wages and Salaries have increased whilst the costs in Goods and Services

constantly are decreasing over the years. Capital Investments went up due to the need for more

licenses of the software IDEA used by auditors for analysis of data.

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Graph 2. Budget spending in the category of Goods and Services

Graph 3. Budget spending of categories over the years

Travel expenses outside and inside

Proffesional trainings

Contracted audits

Maintenaces and Insurance

Fuel(vehicles,heating,generator)

Equipment and supplies

Rent

Other (publications, printing, Z-Mobile)

2011

2010

2009

1200

1000

800

600

400

200

0

Wages

& Salaries

Goods and

Services

Utilities Capital

Investments

Transfers

& Subsidies

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3.2 DONATION OF ASSETS NOT ANY LONGER USED

3.3 HUMAN RESOURCES

A number of our economically depreciated assets were assessed by our professional committee as

incompatible with our new technology. These were removed from further use and were stored in

warehouse located within OAG premises.

We decided to donate these assets to some schools which with a little investment could make these

assets usable. Continuing with the practice started in 2011, we in 2012 donated to: Secondary School

“Gjin Gazulli” (MoU No. 155/2012), Elementary School “Faik Konica” (MoU, No. 152/2012),

Elementary School “Zenel Hajdini” (MoU, no. 153/2012), Elementary School “Mihal Grameno”

(MoU, no. 156/2012), School “Perparimi” Resource Center-Prishtina (MoU no. 154/2012) as well as

to Malisheva Municipality - Health and Social Welfare Directorate (MoU no. 157/2012).

We are a continuously growing institution and at year-end 2012 we employed a total of 142 staff,

including substitutes and our two staff outside the budget.

During 2012 we recruited (18) employees. Out of these eight were hired as substitutes replacing staff

on maternity leave. Included in the figure is also the recruitment of a Deputy Auditor General, who

took up office in September 2012. During the peak audit season we also brought in four translators

for a short period to help us prepare our reports in time.

We believe in professionalism. Staff working in our office must be well educated, striving to achieve

professional certification and upgrading their professionalism continuously. We believe in mobilising

our own resources securing ownership of our own future. We believe in transparency as fundamental

in building a professional institution. This cannot be achieved without committed and curious staff

striving for continuous learning in an institution evolving in meeting new expectations and

requirements from national and international stakeholders.

In the table below we present some basic information regarding our staff.


Years Staff

ceiling

Number

minorities

Percentage

females

Number of

Directors

(females)

Average

age

Number

of Team

Leaders

Staff

turnover¹

Experience

in office

longer than

two years

2008

2009

2010

2011

2012

85

106

116

130

136

4

5

6

6

6

17.5%

24.7%

38.6%

43.7%

45.8%

1

2

3

5

5

37.4

38.5

36.8

37.0

36.7

N/A²

14

22

26

29

11.8%

13%

5.2%

3.2%

0.7%

56

59

67

73

108

¹ The proportion of employees who resign during the year out of the total number of employees at year-end

² During 2008 a system was not in place and the role of team leader rotated among auditors.

Table 6: Basic information regarding our staff

22


During the period:

• The overall number of staff has grown steadily;

We have encouraged potential candidates from different communities, but the

results are not good enough;

We have placed significant effort on establishing a good gender balance in our

institution. In this we have been successful;

We have increased the number of females into managerial positions. Further

initiatives are required for a better gender balance at these levels;

The average age shows a stable situation with no major fluctuations;

We have increased the number of audit team leaders gradually in order to carry

out more audits and reduce the number of audits contracted out and

subsequently reduce the costs for this;

The employee turnover has gone down from 12% to less than 1%; and

The continuous increase of audit experiences with each year coupled with

improved result in certification (see figures in Table 9) indicates a good base for

the future.

All in all this indicates that we have taken very good steps towards reaching our objectives. We

also annually make adjustments in the organisation in order to meet new requirements (see

Annex 1)

At the same time such rapid changes in an organisation of course have some impact on how the

organisation must be organised and managed. Especially in an environment steadily changing the

prerequisites for the handling of Human Resources, at the same time as the internationally

recognised public sector auditing standards and good European practices should be guiding the

development.

Our staff, if meeting the new requirements must have:

Capabilities;

Curiosity;

Commitment;

Communicative abilities;

Competitiveness; and

Compassion.

The adjustment to these attributes take longer time for some than others, changes in attributes

needs time and must be organised stepwise getting results. A base for this is created, but much

remains to be done in securing that everyone thoroughly understands the concepts of modern

public audit in addition to the audit techniques. Measures in this direction will be of high priority

during the coming year.

•

•

•

•

•

•

•

•

•

•

•

•

•

The table below presents the overall staff number in post on 31 December over the last three

years.

Our recruitment processes are carefully designed, fair to everyone and are based on merit.

Currently, candidates email their interests to a specific email address dedicated to recruitment.

During 2012 we had eight recruitment processes. 1035 candidates expressed an interest in our

advertisement campaigns. We invited 431 candidates to be tested, 41.6% of the total number of

candidates. Out of these 99 were interviewed.

A number of candidates have also made regularity inquiries to our processes, where most of them

have been in the office and checked their performance. Two cases were addressed to the

Independent Oversight Board Civil Service of Kosova. In both cases the requests was turned down

in favour of the OAG.

The table below provides statistics on the number of recruitments the last three years.

To improve the efficiency of existing processes we are (with assistance provided by our twinning

partners) considering a web based application system where candidates can fill in their details

directly. This will be part of our Human Resource Information System which is planned to be

installed during the 2013/14.

RECRUITMENT PROCESSES

23


Category

Table 7 Categories of staff (in post on end year)

Audit staff

Administrative staff

Total

201020112012

Actual figure

114

28

142¹

Positions Positions Positions

136

Actual figure Actual figure

98

28

126 124

86

28

114 116

Categories/Years

Table 8: Recruitment

Administrative staff

Audit staff

Recruitment

2012 2011 2010

Total

18

-

18

10

5

15

27

8

35

¹ The number of staff as per the end year is 142. The number is higher then the approved number of positions for the year 2012.

This is due to the recruitment of substitutes replacing staff on maternity leave. This increase of posts is in line with the European

Partnership Action Plan

TRAINING AND DEVELOPMENT

We have trained all of our mangers in Quality management system, trained a number of our staff

as trainers so that we have sufficient capacities to support our internal training and external new

certification scheme operated through SCAKK¹.

All staff have attended different internal training activities. 33 auditors have attended lectures in

different levels of the SCAAK programme. This resulted with 14,670 hours of training, an average

of 97 training hours per staff. Qualifications achieved by staff may be found in the table below.

Besides the total number of hours provided for trainings, a certain time was invested also by

international peers in mentoring of our staff in different fields.

We have also signed a cooperation agreement with the University of Pristina, providing internship

programme to students for a certain period of time.

56 auditors entered into SCAAK exams, the pass rate was 32.3%. 12 auditors have managed to

complete different professional exams and approximately 2500 hours of leave absence have been

granted for preparations.

At year-end 2012, the situation of auditors' certification process was as follows:

• 51.9% licensed as Certified Auditors and Certified Accountants,

• 26.9% have finished the first level; and

• 13.5 % are preparing the first level, and

• 7.7 % are Performance Auditors

Our internal auditor is licensed as per the certification scheme for Internal Auditors in Kosova and

is certified by CIPFA as a trainer for this particular subject.

24


Category

Table 9: Levels/Professional Grades

2012 20102011

Certified Auditor

Certified Accountant

Accountant Technician

Trainee Auditor

Performance Auditors²

Internal Auditor

Total:

25

29

28

14

8

1

105

24

27

20

21

4

1

97

23

25

14

21

3

1

87

¹ Society for Chartered Accountants and Auditors of Kosova

² The number of performance auditors is higher than shown in the table above, this due to the fact that several of my auditors are

enrolled into the certification program for regularity auditors.

25


HR FOCUS AREAS

New HR Strategy:

Human Resource Information System:

Time Recording:

Staff Appraisals:

New Certification Scheme for Auditors:

The introduction of a Human Resource Strategy is expected to be implemented in

2013 after the new law introducing the National Audit Office of Kosovo will be in place. This will

incorporate HR, Learning and Development and Staff deployment and utilisation.

We are in the process of building a system which shall merge

all activities associated to with human resource management into one common database through

the use of enterprise resource planning (ERP) software.

a new Time Recording and project costing system is in development to support our

activities. We plan to have this system in place in mid 2014.

We are in the process of reviewing the current staff appraisal system in order to

strengthen the quality of assessments with the purpose of providing a better support to staff.

The new audit certification scheme for regularity auditors in

the public sector will be implemented during 2013. It will be based on ISSAI standards and be divided

in different stages. The formal technical certification scheme will be delivered by SCAAK.

26


4. COOPERATION

Effective cooperation with our stakeholders is a prerequisite for the qualitative development of our

outputs and for our activity having the appropriate and necessary impact. We are focused on further

developing our cooperation with stakeholders at both local and international level.

The cooperation with the Kosovo Assembly, foremost the Committee for the Oversight of Public

Finances is a mechanism for improving accountability related to how public money is managed and

used.

Furthermore, cooperation with the local and central level institutions that we advise, support and

audit is an integrated approach. The approach used ensures a common view on facts and a

perspective focused on continuously enhancing good governance, in system design, process

implementation and corrective measures. Clear and concise recommendations in our audit reports

are a key element of this.

Our approach directed at being e pro active in strengthening Public Financial Management requires a

well-developed cooperation with, in particular, the Ministry of Finance. From a wider perspective we

are focused on supporting developments promoted by the EU such as IPA and will work with the EU to

ensure that we can support the Government in addressing the governance challenges associated

with this.

A strengthened cooperation with Investigation Authorities and Justice Bodies has resulted with

clarification of roles and timely exchange of information.

We recognise Public and Media Relations as one of the pivotal parts of our policies and strategies.

Our cooperation with Non-Governmental Organisations; Civil Society; professional associations;

private audit firms, national training providers and donors is continuously developing. We consider

that, by being perceived as transparent and fair to the public when providing information, the level of

cooperation would increase even more as will the level of understanding of the focus, benefits and

impact of our work.

We have a strong focus on professional development supported through cooperation with our

partners from the Supreme Audit Institutions of, Sweden, England, Netherlands; Estonia and

Scotland.

Bi-lateral cooperation relations are steadily built up. The cooperation with the Albanian Supreme

Audit Institution is the most developed up till now.

27


We have not managed yet to become a member of INTOSAI, as Kosova is not yet a member of the

United Nations. However, we are able to participate at working level in various networks,

conferences and seminars of regional and European character. In these meetings, we share

experiences with colleagues of other countries.

Together with the Swedish National Audit Office, we have a signed Memorandum of Understanding.

We have agreed to have a project of cooperation that will last until summer 2016. This project aims

developing the OAG capacities, particularly in the performance audit, in order to fulfil its mandate.

SNAO will also contribute in other aspects that will contribute to institutional sustainability. The

timing of the end of this project allows a flexible approach around the end of the twinning project.

The European Union has awarded a grant for a twinning project to further support our office. The UK

NAO is the lead partner and the Netherlands Court of Audit the Junior Partner. Support is also

provided by Audit Scotland and the NAO of Estonia. The overall objective is to contribute to proper

stewardship of public funds; transparency and effectiveness in public spending through the

improvement of the public financial management system; and the creation of an effective public

governance framework and building confidence in public spending by enhancing public

accountability. A 30 months project, ending in March 2015, is supporting the development of

enhanced operational activity across all forms of audit as well as core support activities and support

for the management team in preparation for the appointment of a new Auditor General.

Projects

The cooperation with the Swedish National Audit Office

Twinning Project

Mr. Leskaj and Lage Olofsson signing the cooperation agreement

28


5. COMING FOCUS

The current achievements are numerous and indicate that we are rapidly creating a strong profile

securing the interest of tax payers' money. More emphasis is required on strategic thinking at all

organisational levels, thus ensuring that the targeted long term objectives are clear to everyone in

our institution.

An external public audit institution performing fully in compliance with the internationally

recognised public sector auditing standards and good European practice is our permanent strategic

objective. Our stakeholders' expectations are increasing and that will certainly be followed by many

challenges which will require planning of adequate measures to overcome them.

The implementation of the Auditor Generals Exit strategy is a particular challenge to the OAG

securing independence, sustainability and ability of change management. The Auditor General's

mandate will end in the second half of 2014.

In order to execute our mandate we, in the mid-term period, plan to meet the following objectives:

When it comes to the first objective we

plan to carry out the following actions:

• Support in getting the new law on AG and OAG in accordance with internationally recognised

public sector auditing standards;

• Develop internal guidelines related to the new law and implement them;

• Amend the Corporate Development Strategy;

• Prepare and contribute to a swift and mature shift of the Auditor General in August 2014

without losing the momentum of enhancing good governance;

• Further develop the long term and well functioning relationship with our partners;

• Secure the implementation of a result oriented culture in which we fulfil our operational and

administrative objectives through professional, ethical, motivated employees at all levels;

• Secure peer assistance to the Trade Union in developing role and approaches in accordance

with good European practices;

• Further develop the regional cooperation amongst sister organisations and a higher degree

of participation in international networks exchanging and learning from experiences gained;

and

• Continuously strengthen and develop the internal organisational capacities in meeting

changing requirements and managing change.

In order to meet the second objective we plan to

carry out these actions:

• Consolidate the quality of Regularity Audit and improve Management and Performance

Audit;

�

�

�

Secure local ownership and institutional sustainability

Contribute in strengthening good governance

Develop and keep corporate and audit qualit

“Secure local ownership and institutional sustainability”

“Contribute in strengthening good governance”

y

29


• Develop the audit relevance further by gradually carrying out more Performance Audit;

• Develop our fee based audit of donor funds paving the way for new financial relations

between Kosova and the donor community. As such we plan to carry out 3–4 donor fund

audits;

• Putting additional focus on areas of interest for decentralised management of IPA funds;

• Further develop IT system audit;

• Address new audit areas and introduce a more focused approach on the procurement system

and how public services in other forms are carried out (PPP, POE, privatisation);

• Continue to produce the AAR in time with increased quality and effective recommendations

based on higher audit relevance and readable reports;

• Introduce new approaches, forms and measures aiming at developing and improving good

governance;

• Develop the support to the Assembly oversight function;

• Develop the cooperation with the executive in the area of Public Administrative Reform; and

• Extend the external cooperation and communication with civic society, media and projects.

In order to meet the third objective we plan to carry out these actions:

• Enhance the quality function;

• Implement the new ISSAI compatible certification scheme now basically in place starting from

July 2013;

• Introduce more efficiency in the audit via new ICT solutions;

• Introduce better managerial and administrative tools;

• Increase the number of licensed and certified auditors along new auditors employed during

2014-2016; and

• Find a feasible solution for remuneration keeping the highly professional staff developed in

our office .

“Develop and keep quality”

6. OAG ACCOUNTABILITY

Integrity assurance

Declaration of Transparency

I hereby assure that the information in the Annual Performance Report, including the financial

statements, are accurate, reliable and objective.

Lars Lage Olofsson, Auditor General

We hereby assure that our business during 2012 has been carried out in accordance with Public

Service Charter and the OAG Code of Conduct

Artan Venhari, Deputy Auditor General

Qerkin Morina, Assistant Auditor General;

Ibrahim Gjylderen, Assistant Auditor General;

Ilire Daija-Buza, Head AG Cabinet/Public Relations

30


31


ANNEXES

32


ANNEX 1: SHORT INTRODUCTION TO OFFICE OF THE

AUDITOR GENERAL

ROLE

OUR ACTIVITY

ACCOUNTABILITY PROCESS

The Auditor General is an independent constitutional institution and reports directly to the

Assembly. The OAG is assisting the Auditor General whose mandate and duties are defined by the

Constitution and the Law no. 03/L-75 on the Establishment of the Office of the Auditor General and

Audit Office in Kosova. In the beginning of 2009 the current Auditor General was appointed by the

International Civil Representative (ICR). He will end his mandate in August 2014.

In exercising and fulfilling his obligations the Auditor General is free to undertake all the needed

actions in function of his mandate. He is accountable to the Assembly.

Ensuring our objectivity and independence from the organisations which we audit is crucial. Our

objectivity and independence should be assured by a proper execution of a broad, sustainable, and

lawful mandate; compliance with internationally recognised public sector auditing standards; and a

strong internal Code of Professional Conduct.

Annually we are carrying out statutory regularity audits of the Kosova Budget and Budget

Organisations that includes the Assembly, the Office of the President, each Ministry and executive

agency, municipalities, independent bodies and other entities.

We also carry out Performance, Management and System Audits. This is within our scope, but not an

annual statutory requirement. These audits are carried out in order to assess whether the

governmental programs are being managed properly, cost-effectively and efficiently, and whether

systems for measuring and reporting their efficiency are in place.

We report on our audits to the audited entities and to the Assembly (COPF) and these reports are

published. Our reports contain recommendations in order to foster change and better practices. In

doing this, we want to provide to the Assembly, Government and taxpayers a fact based professional

and integrated audit service.

For the purpose of assisting in the implementation, development, and sustainability of Public Finance

Management, we intend to assure the taxpayers and international donors that public funds are used

economically, effectively and efficiently. We do this by ensuring that public funds are reported,

administrated, and used wisely and properly.

Our Annual Financial Statements (AFS) are prepared in accordance with the Law on Public Financial

Management and Accountability. They are in compliance with the Cash Basis International Public

33


Sector Accounting Standards and applicable modifications as decided by the Government. In order to

enable us to prove our accountability and objectivity, the Assembly should, each year, appoint an

external auditor to carry out the audit of our AFS.

The Assembly appoints our external auditors. The audit opinion on the AFS for 2012 is included in the

included in Annual Performance Report, together with the AFS. Recommendations from the external

auditors management letter are also included in short form, as our comments to them. This way we

allow the readers to get a audited picture of how we have handles our finances together with a

picture of how we used resources given and the results hereof. The reports are published on our

website¹.

Apart from external audits, the internal audits carried out by the Internal Audit Unit ensure that the

Office performs in compliance with laws and its policies.

We have done much to ensure that we follow good practice audit methodologies. We have a quality

management framework in place. Good methodologies and a quality framework provide assurance

that our audit work is in compliance with established standards² of professional practice.

We follows the standardised international system of checks in our audit work; our audits exist within

a framework of rigorous audit standards, which staff learn to use through our training programme.

The audit findings are then agreed with the audited body in a clearance process. Management review

is inbuilt in our system and further monitoring is done by a specific function within the office. Our

reports are then published and made public for open scrutiny. Afterwards, deliberations and

discussions on audit recommendations are made in the Assembly together with the Executive.

As the Auditor General, I shall – besides this Annual Performance Report focusing on how the budget

of the Audit Office has been spent – annually prepare and submit budget requests to the Assembly.

The COPF as well as the Budget and Finance Committee may call on me to explain the budget request

for the office and to discuss our report on plans and priorities, performance targets, our Annual

Performance Report, and our management practices.

The Government shall incorporate my budget request as proposed by the Budget and Finance

Committee in the draft Kosova Budget tabled in the Assembly. The budget of the office shall be

approved by the Assembly. In practice, current processes are not designed well and the practices

leave room for improvement.

WHO SHALL ASSESS OUR AUDITING METHODOLOGIES?

WHO SHALL REVIEW OUR FUNDING?

¹

² ISSAI, International Standards of Supreme Audit Institutions set forth the key prerequisites for the proper functioning and

professional performance of such institutions: www.issai.org

http://www.oag-rks.org

OAG ORGANISATION FOR 2012/13

34


Internal Audit

Legal Support

Human Resources

AUDITOR GENERAL

Cabinet

Deputy Auditor General

Foreign Affairs,

Justice and Security

Local Governance

Procurement

Systems

Central Governance

Independent

Institutions

Infrastructure

Labour, Education,

Culture and Health

Audit Support

AUDIT DIVISION A AUDIT DIVISION BInformation Technology

and Communication

Translation ServicesAdministrative

Support

Performance

Public Enterprises

Privatisation and

Public-Private Partnership

35


ANNEX 2: Annual Financial Statements for 2012

36


37


38


39


40


ANNEX 3: External Audit Opinion 2012

41


42


Për informata të mëtutjeshme, ju lutem kontaktoni:

Za vise informacija, molimo vas kontaktirajte:

For further information, please contact:

Ilire Daija - Buza

[email protected]

+381 (0) 38 25 35 121

Qëndresa Mulaj

[email protected]

+381 (0) 38 25 35 262

ZYRA E AUDITORIT TË PËRGJITHSHËM

Adresa: Rr. “Musine Kokollari” , nr 16

10000 Prishtinë, Kosovë

Telefon: +381 (0) 38 25 35 217

Faks: +381 (0) 38 25 35 122

http://oag.rks-gov.net

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