State Audit Office of the Republic of Macedonia

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State Audit Office of the Republic of Macedonia (hereinafter - SAO) — is the parliamentary body of state financial control in the Republic of Macedonia. The SAO aims at providing objective and timely information to the competent state bodies and the the public on the findings from conducted audits. The clear and effective recommendations, addressed to the public funds' beneficiaries contribute to the overall improvement of public funds management.

History of the SAO

1945-1990

The beginnings of the auditing institutions date back to 1945. The period after the World War II is marked with the emergence of the first audit institutions, which have undergone huge reforms leading up to the founding of the SAO as a Supreme audit institution.

1991-1998

In the period between 1991 and 1998, state audit was organized as Directives for Economic-Financial Revision, as an integral part of the Office for Social Accounting, later known as Central Securities Depository. After the transformation of the Office for Social Accounting into Central Securities Depository in 1994, the auditing activities were performed by the Directives for Economic-Financial Revision till 31.01.1999, when the employees of the Directives for Economic-Financial Revision as part of the Central Securities Depository were transferred to the SAO.

First law on state audit

The SAO was established in 1997 by the Parliament of the Republic of Macedonia, under the State Audit Law. The first State Audit Law was adopted in 1997. The Law provided for the scope of state audit, regulated the conditions and manner of conducting state audit on public expenditures, financial statements and financial transactions, and other matters related to the audit of state bodies, local self-government units, legal entities fully or partially financed by the Budget of the Republic of Macedonia, the budgets of local self-government units and the budgets of national funds, legal entities where the state is dominant shareholder, public enterprises, the National Bank of the Republic of Macedonia, the Payment Operations Office, the funds, the agencies and other institutions established by law. The first audits were conducted during 1998/99 and the first Annual Report on the SAO operation and conducted audits was submitted to the Parliament of the Republic of Macedonia in 2000.

1999-2009

By June 2006 there were several amendments to the SAL. The latest two amendments encompass provisions related to the audit mandate over public sector entities, the audit planning criteria (taking into account the potential management risk of the entities), publishing the audit results, staff remuneration policy, etc.

2010-nowadays

The new State Audit Law (hereinafter - SAL) was adopted in May 2010. The Law aims at strengthening operational and financial independence of the SAO and achieving greater effectiveness and efficiency in conducting state audit. In addition, the new Law implies compliance with the Lima Declaration of guidelines on auditing precepts and the Mexico Declaration on independence of Supreme Audit Institutions. The Law facilitates strengthening the position and the role of the SAO as an independent supreme audit institution of the Republic of Macedonia, responsible for conducting state audit. In fact, the new SAL denotes full compliance with international standards, European legislation and international best practice.

Legal and institutional framework

Legal regulation

Two main documents, regulating work of the SAO are the State Audit Law, which sets general principles of the state audit system, basics of its organization and powers of the SAO, and the Rulebook on the Manner of Conducting State Audit, setting forth the manner of conducting state audit (planning, executing and reporting on conducted audit). Those documents provide conditions and methods of conducting the state audit upon the Budget of the Republic of Macedonia, local budgets and in fact all the budgets included public finance.

State audit is conducted on the basis of the methodological acts harmonized with the procedures laid down in the auditing standards of the International Organization of Supreme Audit Institutions (INTOSAI), rules of INTOSAI Code of Ethics published by the Macedonian Minister of Finance and the Code of business ethics and conduct of the State Audit Office. INTOSAI standards are the basic prerequisites for the proper functioning and professional conduct of Supreme Audit Institutions and the fundamental principles in auditing of public. Codes of ethics for auditors in the public sector considers the ethical requirements of civil servants in general and the particular requirements of auditors, including the latter's professional obligations.

Relations with other public bodies

Primary beneficiaries of the results of the SAO operation are the Parliament of the Republic of Macedonia, the Government of the Republic of Macedonia and other competent institutions of the public sector. The SAO's duty is to provide those bodies with a timely information about the results of SAO operation

Cooperation with the Parliament of the Republic of Macedonia

The Parliament of the Republic of Macedonia is a governmental body, that basically determines whole activity of the SAO. The legislature not just adopts laws on state audit and appoints the head of the SAO, but also sustains consistent cooperation with it.The communication with the Parliament of the Republic of Macedonia is regarded as particularly important because the SAO is organized under the Westminster model of Supreme Audit Institution and reports on its operation to the Parliament of the Republic of Macedonia. The continuous cooperation between the SAO and the Parliament of the Republic of Macedonia is carried out in several directions as prescribed by the State Audit Law, according to which, The SAO submits to the Parliament of the Republic of Macedonia:

• Annual work program,
• Annual report on its operation and the Parliament adopts conclusions
• Final audit reports.

Cooperation with the Government of the Republic of Macedonia and the executive

In line with the SAL, the Auditor General submits to the Government audit reports on entities which are supervised by the Government. The Government has established a separate body - Audit committee, - as a permanent expert body responsible for reviewing audit reports and for proposing measures and activities for successful implementation of recommendations given by auditors in their reports. The Rules of Procedure of the Government stipulates that the Audit Committee shall submit written reports to the Government with opinions and suggestions for measures undertaken upon recommendations in audit reports, and the General Secretary of the Government shall inform the SAO on the conclusions of the Government regarding the measures undertaken by the auditees. The SAO is obliged to submit to the Ministry of Finance every audit report that includes findings in the field of finance as well.

Cooperation with the institutions, competent for initiating proceedings, based on the audit reports

In accordance with the Article 35 of the SAL, the authorized state auditor in the course of audit is obliged to inform the competent authorities immediately if finds out that an auditee made a violation or a criminal act.
The following bodies are competent for initiating proceedings based on the audit reports:

• State Commission for Prevention of Corruption,
• The Public Prosecution Office of the Republic of Macedonia
• The Ministry of Interior.

In course of the cooperation with those bodies, the SAO regularly:


• submits audit reports, information and materials on findings that initiate actions under the competence of the State Commission for Prevention of Corruption, the Public Prosecution Office of the Republic of Macedonia and the Ministry of Interior;
• provides information and materials on conducted audits on the request of these bodies; and
• obtains feedback from these bodies on previously submitted information, materials and audit reports.

International cooperation

The SAO cooperates with the international organizations of supreme audit institutions (SAIs) and other national SAIs on issues related to state auditing.
This cooperation aims at:

• exchanging knowledge, experiences, methodology materials, documents and information with SAIs, regional working groups (EUROSAI etc.), professional organizations and associations;
• harmonizing audit methodology in line with internationally accepted auditing standards;
• following current practices for development of audit vocation;
• providing information on activities, results and effects of SAO work at international forums;
• building SAO reputation and image in the eyes of other SAIs and audit organizations in Europe and worldwide.

Such cooperation takes place in the organizations like INTOSAI, European Court of Auditors, The World Bank, Netherlands Court of Audit, SIGMA and the European Commission

Organization of the SAO

The SAO of Macedonia organization

The SAO is headed by the Auditor General. As far as the SAO is a parliamentary institution, the Auditor General and his Deputy are appointed by the Parliament of the Republic of Macedonia. Their mandate lasts for nine years, without the right of reelection. They ought to:

• have citizenship of the Republic of Macedonia;
• have university degree in the field of economics or law;
• have at least seven years of experience in the field of economics or law;
• not hold any other public office occupation, nor be a member of a political party authority, Management Board, Supervisory Board or any other body of another legal entity, and;
• have not been imposed a misdemeanor sanction i.e. have not been pronounced a prohibition for performing occupation, activity or duty.
  

The Auditor General exercises usual competence for a head of public body, so he:

• presents and represents the SAO;
• provides legal and efficient performance of duties and tasks,
• manages and organizes the operation of the SAO.
  

The Auditor General and his Deputy are protected from criminal liability for performing their duties and stated views, opinions and recommendations regarding the audits.

Currently, the SAO is headed by Mrs. Tanja Tanevska, but most communications are held by the Deputy Auditor General - Naser Ademi.

The SAO consists of 3 Audit Departments that provide basic work of the Office. There are also other departments for special tasks, like Department for IT and IT audit, and for internal organization, such as Human resources management unit. Al those units are subordinated to the Secretary General, who is responsible for direct management of the SAO work. There is also Internal audit unit, that is straight under the Auditor General and his Deputy.
As for State Auditors, the SAL prescribes that for acquiring Authorized State Auditor title, the candidate shall meet the following requirements:

• have citizenship of the Republic of Macedonia;
• have university degree in the field of economics, law, information technology or other appropriate education for conducting an audit;
• have passed the exam for authorized state auditor or have a certificate for authorized state auditor, and
• give a statement that shall adhere to the INTOSAI Code of Ethics.
  

The exam shall be taken before a Commission, that consists of five members: three authorized state auditors and two experts in the field of auditing. The candidate shall have at least five years of work experience in accounting or financial operations or three years work experience in the area of auditing or financial control. Over 97% of the employees have University degree, mainly in economics and law.

Procedures exercised by the SAO

As it is stipulated by the law, auditing process is subjected to the regulation by 3 main sources: the SAL, standards of the International Organization of Supreme Audit Institutions (INTOSAI) and the rules of INTOSAI Code of Ethics published by the Macedonian Minister of Finance.

State audit shall be conducted on the Parliament of the Republic of Macedonia, the President of the Republic of Macedonia, the Budget of the Republic of Macedonia and the budgets of the municipalities, budget beneficiaries, budget spending units, public enterprises, trade companies where the state is dominant shareholder, agencies and other institutions established by law, other institutions financed by public funds, the National Bank of the Republic of Macedonia, political parties financed by Budget funds, beneficiaries of EU funds (excluding the system for implementation, management and control of the instrument for pre-accession assistance in the Republic of Macedonia) and beneficiaries of funds from other international institutions (hereinafter: auditee). State audit may also be performed, on auditees not mentioned above, and who have economic, financial or other interest and use funds that are public expenditures.

The SAO performs different activities on providing financial compliance, such as:

• examination of financial data, i.e. reports, accounting and economic documents;
• checking financial transactions
• assessment of the use of funds and measures of internal audit.
  

Following the audit procedure, the authorized state auditor shall prepare and submit draft audit report to the legal representative of the auditee and to the person accountable for the auditee in the audited period.

Auditee may submit comments on the draft to the SAO within 30 days. After that deadline the state auditor shall prepares final audit report, however, the law does not stipulate any time limit on when final report shall be provided by the SAO. According to the law, the auditee has an obligation to inform the SAO and the authority responsible for its supervision and control on the measures undertaken in relation to the findings and recommendations in the audit reports within 90 days of the date of receipt of the final report.

The last is an essential part of the system of supervision, state auditing aims at timely detecting deviations of the set standards and principles of law, effective and economical use of public income in order to undertake particular measures and steps towards preventing the opposite in the future. The SAO keeps track of the executions of recommendations given in the audit reports as part of regular auditing, special auditing and review of the executed recommendations, as well as aided by the information given by the subjects .

The SAO also prepares Annual Report on conducted audits and operation of the SAO. The SAO shall submit that report for review to the Parliament of the Republic of Macedonia no later than 30 June of the current year for the previous year. Besides, following the end of the fiscal year and prior to the adoption of the final account of the Budget of the Republic of Macedonia, the SAO shall prepare audit report on the Budget of the Republic of Macedonia and shall submit the report to the Parliament of the Republic of Macedonia.

As a prominent advantage of the system of state audit in Macedonia, an external audit of the SAO may be stated. Audit on the operation of the SAO is conducted by an audit company allowed to conduct audit in accordance with the Law on Audit. The Parliament of the Republic of Macedonia selects the audit company. The audit report shall be submitted to the Parliament of the Republic of Macedonia and to the SAO no later than 30 June of the current year. The Parliament of the Republic of Macedonia reviews the report of the audit conducted by the audit company along with the Annual Report

See also

• https://en.wikipedia.org/wiki/Audit
• https://en.wikipedia.org/wiki/Republic_of_Macedonia

Sources

• Blazevska, T. State audit: nature and function, State Audit Office. (2002).
• Dragoevikj, D. International standards for the audit of public expenditures. (1993).
• Jankulovska, C. The relationship between internal and external audit in the public sector in the country. (2011).

References

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