Microsoft word - raporti i trepces ne ang me komente1.doc

REPUBLIKA E KOSOVËS/REPUBLIKA KOSOVA/REPUBLIC OF KOSOVA
ZYRA E AUDITORIT TË PËRGJITHSHËM/KANCELARIJA GENERALNOG REVIZORA/OFFICE OF THE AUDITOR

Doc. No: 2113.2-2008-08

AUDIT REPORT OF FINANCIAL REPORTING AND ASSET
MANAGEMENT OF TREPÇA COMPLEX – STAN TERG MINE
FOR PERIOD JANUARY- JUNE 2008
Prishtina, November 2008
Adresa: Gazmend Zajmi 59-10.000 Prishtinë-Kosovë TABLE OF CONTENT
1. Financial Reports 2. Internal Control System 8. Asset Management 9. Vehicle Management Adresa: Gazmend Zajmi 59-10.000 Prishtinë-Kosovë
List of abbreviations
AG
Law on Public Financial Management and Accountability Special Representative of the Secretary- General
MLSW Ministry of Labor and Social Welfare


Adresa: Gazmend Zajmi 59-10.000 Prishtinë-Kosovë I. EXECUTIVE SUMMARY

The Office of the Auditor General has performed an audit on financial reports and asset
management of Trepca Complex, in particular Stan Terg Mine.
Our audit was carried out in accordance with international standards of auditing issued by the
International Accounting Standards Board of the International Federation of Accountants and
included such tests and procedures as we deemed necessary to arrive at an opinion on financial
reports and asset management.
During the audit of Trepca Complex – Stan Terg Mine, OAG has noticed weaknesses in
functionality of internal control system. Weaknesses are noticed especially in field of
procurement, financial reporting and asset management.
In our opinion, financial reports do not present a fair and true view, in all material aspects the
financial position of Trepca Complex from 01.01.2008 to 30. 06. 2008 and the results of its
operations for the mentioned year, in accordance with International Public Sector Accounting
Standards for “Financial Reporting under the Cash Basis of Accounting.”
During the audit, we could not obtain all records for the section regarding the northern part of
Trepca, therefore reports and financial statements are incomplete.
Our audit has identified serious deficiencies in:
- Internal Control - Engagement to establish a proper accounting system and financial reporting. - Respecting the procurement procedures - Weaknesses in Asset Management In General, audit resulted with 15 key recommendations, which should be addressed immediately by the management regarding: • Internal Control System, • Revenues, • Early pensions and stipends, • Asset Management, We recommend the Management to undertake measures in order to improve the actual level of internal control within the Organization. Adresa: Gazmend Zajmi 59-10.000 Prishtinë-Kosovë Different examples of weak internal control within the entire Organization which are underlined
in our findings and recommendations make us conclude that generally the level of financial
control is inadequate and must improve necessarily.
II. INTRODUCTION

The Office of the Auditor General (OAG) is established with Law no. 03/L-075 of Kosovo
Assembly, as an independent and permanent institution, part of Kosovo democratic framework.
OAG is administrated by the Auditor General and it reports to the Assembly of Kosovo.
The OAG audit mandate is mentioned in paragraph 3.2 of the Law no. 03/L-075, which includes
your institution as well, since it is financed from the Kosovo Consolidated Budget. The Audit of
the Budget is performed based on systematic Laws within financial field such as: “Law on
Public Financial Management and Accountability” no. 03/L-048 promulgated by the Assembly
of Kosovo, “Law on Public Procurement” no. 2003/17 promulgated with UNMIK Regulation
2004/3 as well as other relevant legal acts which include:
• Whether the financial statements give a true and fair view • Whether the financial records, systems and transactions comply with applicable Laws • The appropriateness of internal controls and internal audit functions; • The probity and propriety of administrative decisions taken within the audited • All matters arising from or relating to the audit.

III. AUDIT SCOPE

OAG has conducted the audit of financial reporting of Trepca Complex – Stan Terg Mine for
period 01.01.2008 to 30.06.2008.
The primary objective of this audit was to enable the OAG to express an opinion on whether the
Financial Reports of Trepca – Stan Terg, presented in Annex I, give a true and fair view of the
revenues, expenses as well as asset management for period January – June 2008 in accordance
with the International Public Sector Accounting Standards (IPSAS).

IPSAS are issued by the International Public Sector Accounting Standards Board of the
International Federation of Accountants (IFAC). The accuracy and completeness of the
financial statements and accompanying notes contained in Annex I are the responsibility of
Trepca- Stan Terg Mine management.
Adresa: Gazmend Zajmi 59-10.000 Prishtinë-Kosovë
IV. AUDIT CONCLUSION

The importance of the issues mentioned within the executive summary of this report, their
importance for financial reporting and asset management, we express this audit conclusion.
In addition:
• Trepca Complex – Stan Terg Mine does not perform in full compliance with applicable • We have noticed that the entity does not have an adequate accounting information system and there is no the accounting policies on which this system would be established; • Issues regarding the procurements, especially those that deal with tendering dossiers, technical specification and supplies out of contract, • Actually, internal controls are incapable to identify and minimize the weaknesses that could result in progress of activities especially those regarding the communication between the work unit of Stan Terg and Finance Department within Trepca Complex. Also, these weaknesses include weak management and supervision of assets and their use, and • The regular recruitment procedures are missing, dossiers are incomplete and evidences on employees’ qualification are missing. In the future, Trepca Complex – Stan Terg, should make proper improvements, as stated
through the recommendations of this report.

V. AUDIT APPROACH
Our audit of the Trepca- Stan Terg, financial statements for period January – June 2008 was
conducted in accordance with International Standards on Auditing (ISA) issued by the
International Auditing and Assurance Standards Board. The Board functions as an international
standards setting body under the auspices of IFAC. The ISAs establish the international
framework within which the OAG is to perform its work and covers matters such as general
principles and responsibilities, risk assessments and responses to assessed risks, audit evidence,
relying on the work of others, and audit conclusions and reporting.
Our audit was planned and realized during the period from 13.10.2008 to 30.10.2008. In order
to fulfill our responsibilities, we have:
• Reviewed Trepca-Stan Terg financial reports against the source documents which support these reports for six months period of 2008; Adresa: Gazmend Zajmi 59-10.000 Prishtinë-Kosovë • Undertook extensive substantive testing of financial transactions; • Used a combination of judgment and random sampling to select transactions for • Relied on a combination of interviews, analytical reviews, document reviews, and physical verification to assess the validity and propriety of financial transactions;
Our findings and conclusions are based upon the documentation and other information provided
to us during the course of our audit work. It is possible that additional information existed but
was not provided to us and, if provided, might have altered our findings.

VI. KEY AUDIT FINDINGS AND RECOMMENDATIONS
Our audit is focused on the review of financial reports and in performing substantive tests in
order to confirm the accuracy and validity of financial transactions. Beside those, we have
tested the asset management as well as the effectiveness of internal controls of main systems
and processes.
The management should ensure the existence of control activities, to ensure performing of the
processes under their control. They are responsible for developing adequate internal controls in
order to ensure that the risks have been minimized within the acceptable level. In our opinion,
there is weak internal control regarding the distribution of subsidies awarded by the Kosovo
Budget as well as Asset Management.
Key findings are grouped according to expenditures classification. Also, examples were given
in order to confirm our conclusions and recommendations. We have underlined different
examples of weak internal control in each part of findings by giving recommendations for
improvement of internal control.
The following are the key audit findings and recommendations resulting from our audit of
financial reports and asset management.

1. FINANCIAL REPORTS
Financial Reports (FR) should be prepared by each budget entity based on its own accounting
records and in such a manner that the statements demonstrate accountability and transparency in
presentation of records. Their format requires additional disclosures and explanations in the
form of Notes that provides information to users.
During our audit we were not provided operational and capital subsidies data for the northern
part of Trepca.
These Financial Reports should be prepared based on accounting records which should be
maintained by each Public Organization.
• Revenues of the Trepca Complex -Stan Terg Mine; Adresa: Gazmend Zajmi 59-10.000 Prishtinë-Kosovë • Outstanding liabilities of the Trepca Complex -Stan Terg Mine; • Assets of the Trepca Complex -Stan Terg Mine; • Adjustments to appropriations; • Appropriations that have been made available to the Trepca Complex -Stan Terg Mine for expenditure by means of allocated funds notices;

Financial Statements should be prepared in accordance with International Accounting
Standards.

Finding
During the audit of financial reports within Trepca Complex, we have noticed that the entity
does not have an adequate Accounting Information System, and it did not have any accounting
policies. and disclosures for financial statements .
Conclusion
Lack of accounting policies as well as lack of disclosures within financial statements has an
impact on weak presentation of financial statements in regard to fair and true presentation.
Recommendation 1

• We recommend the entity’s management to set up accounting policies, and to prepare financial statements in accordance with Kosovar and International Accounting Standards. • We recommend the Entity that during the preparation of financial statements to include the reports from northern part in order to have a fair and true presentation for financial statements of Trepca Complex – Stan Terg Mine.
Comment of Entity

In regard to the finding mentioned within the draft on missing: an adequate accounting information system and missing accounting policies…” Trepca as a business entity is registered from Ministry of Trade and Industry as an entity comprised of Mines and its other capacities in southern and central part, as well as Mines and other capacities placed in northern part of Mitrovica, respectively Kosovo. In these terms, Trepca only legally is an entity since practically it is divided in two, same as city of Mitrovica. Therefore, any attempt to establish a unique system of accounting information was impossible so far. This got rougher after 17th of February when the management of northern part of Trepca almost cancelled all contacts with management of southern part and KTA respectively PAK as a descendant of KTA. In lack of an accounting software system which we tried to obtain but without any success due to the irresistible price bids for Trepca Adresa: Gazmend Zajmi 59-10.000 Prishtinë-Kosovë – South, and lack of willingness of northern part of Trepca to anticipate in financing and use of this computer information system, an accounting system based on excel papers was established, in order to ensure sufficient records for compilation of financial reports at least for the southern part of Trepca. In regard to this, separate intern financial reports were prepared, separately for each integrated part of Trepca – South, respectively for its units. After all, it is responsibility of Trepca to compile financial statements for Trepca in general, as a business entity and not for its units only. Comment of Auditor
During the audit within Trepca Complex, we did not notice any accounting policies approved
by the Management, accounting system and evidence is built up based on Excel sheets which do
not provide assurance that the accounting records are processed in the right way and are
sufficient, as well as the financial statements for 2007 are not compiled based on the Kosovar
standards of Accounting.
Your comment does not present a convincing reason to change the finding.
2. INTERNAL CONTROL SYSTEM

The Document of Government Policies defines the Main Objectives of Financial Management
and Control (FMC) in order to ensure:
Reliability and integrity of informations; Compliance with policies, plans, procedures, Laws, Regulations and standards; Economic, efficient and effective use of sources Good governing practice requires that its activity to pay attention to: • Evaluation of reliability, adjustment and efficiency of accounting, operative and • Ensure that internal controls result with immediate and accurate registration of transactions and proper asset safeguarding. • Ascertainment whether the Trepca Complex – Stan Terg Mine is in compliance with Laws and Regulations and whether it respects the policies. • Ascertainment whether the Management is undertaking proper steps to address the prior and actual deficiencies of control and recommendations arise from the audit report.
Findings
During the audit in Trepca Complex-Stan Terg, we have concluded that there is no proper
internal control regarding the communication between the work unit of Stan Terg and
Department of Finance within Trepca Complex. This is noticed especially in non-reconciliation
Adresa: Gazmend Zajmi 59-10.000 Prishtinë-Kosovë of revenues between the Department of Finance and Stan Terg Unit. Also, they still reflect
weaknesses in asset management, use of vehicles, awarding stipends, stimulations, bonuses and
incomplete personnel dossiers.

Conclusion
Non-reconciliation of reports between relevant units and Department of Finance has impact on
true and fair presentation of reports and financial statements.
Recommendation 2
We recommend the entity to carry out the reconciliation of reports between relevant
Departments and Department for Budget and Finances

3. OWN SOURCE REVENUES
Stan Terg Mine own source revenues for period January-June are €942,171.
Trepca Complex – Stan Terg Mine provides the primary revenues from realization of final
products of Zinc and Lead concentrate. Other revenues are received from rent of premises,
Customs Terminal, other revenues (revenues from waste) and revenues from KCB.
Total amount of receipts for first six months of 2008 were € 5.434.364, where €2,465,150 are
own source revenues of the Complex, the other part of 2,969,214 are revenues from KCB.
During the audit we could not obtain the records in regard to the revenues for the northern part
of Trepca.
Table no.1

Revenues from sale of Lead (Pb) concentrate Revenues from sale of Zinc (Zn) concentrate Revenues from KCB- Operational subsidies1 1 Operative subsidies are salaries, stipends and early pensions Adresa: Gazmend Zajmi 59-10.000 Prishtinë-Kosovë
4. WAGES AND SALARIES
The Expenditures of wages and salaries for the first six months of 2008 were €2.138,809 for
Trepca Complex - Stan Terg Mine, where €102,274 were stimulations and bonuses. The
average number of employees for this period was 1.370 employees. The expenditures for
salaries only for Stan Terg Mine was €1,127,418, where €81,294 were stimulations and other
bonuses. The Average number of employees in Stan Terg mine was 598 with an average salary
of €314.
Findings

• Stimulations and other bonuses for employees in the work unit in Stan Terg were made • During the examination of personnel files, we have noticed that regular recruitment procedures are missing, dossiers are incomplete as well as the evidences for employees qualification are missing.
Conclusion

• Stimulations and other bonuses without defined criteria impacts on irrational use of means and non-stimulation of employees within the entity. • Incomplete dossiers are violations of legal provisions and they present non-transparency.

Recommendation 3
• We recommend the entity to develop clear policies and to define criteria’s in case of stimulation of employees in order to accomplish certain objectives. • We recommend the entity to apply all recruitment procedures, completion of personnel dossiers. Respectively, to implement Administrative Instruction no. MPS/DCSA 2003/11 – Procedures of Personnel Dossiers for implementation of Administrative Instruction no. 2003/2 – implementation of UNMIK Regulation no. 2001/36 on Kosovo Civil Service.
5. EARLY PENSIONS
Early pensions regarding the former employees of Trepca Complex are valued at € 80 for each
employee, where €50 are from MLSW, and the other part from Trepca Complex, which is
carried out according to Administrative Decision dated on 23.06.2004. Total amount of early
pensions for the employees of Trepca Complex for the period January - June is € 274,630,
where as the number of early pension users was 1.516 pensioners.
From the total amount of early pensions, only for Stan Terg unit we have the value of €134,610
and the number of pension users is 743. Pensions were given pursuant to Administrative
Instruction no. 02/2006 for early retirement of Trepca Complex Employees, under UNMIK
administration and mining with underground exploitation in Kosovo.
Adresa: Gazmend Zajmi 59-10.000 Prishtinë-Kosovë Pursuant to Section 2 of this Instruction, the terms and criteria’s for use of early pension are defined. Basic criteria’s are: 1. To be 50-65 years old. 2. Employees employed in the mines where the disability to work appears 3. To have a work experience for 10 years or more within Trepca Complex. 4. To have a permanent residence in Kosovo. 5. Not to be a benefiter of any other scheme financed by KCB. 6. Not to have other incomes from regular employment in Kosovo and world wide. 7. To terminate the contract with Trepca Complex as well as the other mines, and to give 8. The person should withdraw the early pension from the Bank account, personally. 9. To document the work limitation by submitting the evaluation of Medical Commission of Department of Kosovo Pension Administration that acts within MLSW. Finding
During the examination of the Early Pensions documentation, we have noticed persons who use
early pensions in amount of €30 from Trepca Complex as well as €50 from MLSW, in
meantime they are employed in other public institutions.
Conclusion
Avoiding of criteria defined for Early Pensions impacts on disrespect of criteria’s as well in damaging of the budget of Trepca Complex and State Budget as well. Recommendation 4
We recommend the entity to compile stronger policies of internal control which would impact
in preventing of gaining beneficiaries of Early Pensions and Stipends for those persons who are
employed in public or private sector, respectively they should comply with AI 02/2006 on Early
Pensions for employees of Trepca Complex
Comment of Entity
Within the draft report, in Point 5- Early Pensions – in regard to the finding that during the document examination of early pensions we have noticed persons who use early pensions from Trepca Complex amounting 30 € and from MLSW amounting 50 € and at the meantime they have been employed within Public Sector which consequently damages the Kosovo Budget. In point 6 of the mentioned Draft audit Report, the auditors have found that workers younger than 50 years old which are entitled to stipends, at this time they did not come across with any act, based on which the payment of stipends was carried out. Based on the above mentioned reasons above and in the above mentioned points, the Adresa: Gazmend Zajmi 59-10.000 Prishtinë-Kosovë explanation is given within the foreseen terms, as follows: Early pensions of Trepca employees, respectively Mines with underground mining are paid based on the Administrative Instruction of the Ministry of Labour and Social Welfare no. 02/2006 – March 2006, pursuant to the article 2 section 1 point 1 of this Administrative Instruction where are foreseen terms and the way of earning the early pension. Section 6 of article 2 of Administrative Instruction foresees that among all other terms for earning the early pension also there is a condition that the applicant should not generate any other incomes from regular employment in Kosovo or outside of Kosovo, or any other form of self employment. Due to the application for early pension, each candidate has already signed a statement with which the same one gives up from other payments from the Government or Employer as long as he receives the early pension. Trepca has no possibility and competence to verify other incomes of the pension users. MLSW with help of Tax Administration found near 200 cases of pensioners who have other incomes, and Trepca immediately removed them from the list. Time after time, MLSW performs ad-hoc controls and in all cases Trepca reacts immediately. From the mentioned above provision, it can be clearly seen that the beneficiaries of early pension do not have this privilege if they are already employed, meanwhile Trepca Management respectively its Organizational Units do not have the possibility to investigate or find cases of early pension beneficiaries who are already employed. Stipend Payments for former employers of Trepca Organizations are being paid based on the verdict of Kosovo Government of 2005, the verdict which Trepca did not receive from the former Government of Kosovo. Comment of Auditor
Trepca Complex should compile policies and procedures for removal of persons who are users of Pension scheme and works in other jobs as soon as possible. There are no convincing reasons to change the finding. 6. STIPENDS
Stipends are payments which are made to former workers of Trepca Complex in value of € 30,
for the persons under 60 years old, which are able to work and that are waiting to start working
in Trepca Complex. The total amount of subsidies for the period January- June is € 159,440
where as 92.310 € belong to southern part, and the other part in amount of € 67,130 belongs to
northern part. The number of former employees that have received stipends in southern parts
during this period was in average of 500 former employees.
For the northern part, we could not obtain the records in regard to the number of stipends users.

Finding
During the examination of cases for stipends, we did not notice any Administrative Instruction
or a special decision which determines the form and the manner of stipends awards.
Adresa: Gazmend Zajmi 59-10.000 Prishtinë-Kosovë
Conclusion

Lack of relevant decisions, forms as well as criteria’s defined for awarding the stipends will
have impact on budget.
Recommendation 4
We recommend the entity to compile criteria’s as well as the regulation of procedures and clear
regulations on the manner and form of awarding the stipends.

7. PROCUREMENT
Law on Public Procurement 2003/17 defines the standards which shall be implemented during
the use of public money within procurement activity. General Principles of LPP require an
economic price, effectiveness, equal treatment and fairness for all procurement contracts.
Total amount of expenditures for Goods and Services for capital investments regarding the first
six months of 2008 was € 3,447,030. From this value, € 164,097 was financed by KCB. From
total amount, we have selected as a sample 8 cases valued at €748,867.
During our audit, we have noticed that in procurement management, there are several weak
points that need to improve in the future. Main points that need to improve are the tendering
dossiers, technical specification and supplies out of contract.
Findings in Procurement Management

7.1. Procurement Planning
During the examination of certain cases, we have noticed that the entity does not have a
procurement plan for 2008.
Conclusion
Lack of procurement plan has an impact on failure of the entity to accomplish the objectives and
strategies defined by the entity itself.

Recommendation 5
We recommend the entity that in the future to develop procurement plan as well as purchase of
goods and service should be carried out in compliance with procurement plan and , should act
pursuant to section 8 of LPP – 2003/17.
Comment of Entity
We have submitted prior (preliminary) procurement plans for 2008 to the Public Procurement
Agency, dated 12. 11. 2007 (the attachment contains only the first page where submitting date
Adresa: Gazmend Zajmi 59-10.000 Prishtinë-Kosovë and procurement stamp can be seen) and also final plans for 2008 submitted to the PPA on
06.03.08 before the Kosovo Consolidated Budget for 2008 has been approved, several days
earlier (according to Article 7.2 of Law on Public Procurement)- a copy where PPA protocol
stamp and submitting date can be seen.

Comment of Auditor
During our work in the field, we were not provided with procurement plan, however from your
comments it is documented to us that there is a procurement plan; therefore your comment is
accepted.

7.2. Commitment of Funds
During the examination of cases, we have noticed that the entity indebted the economic
operators without committing the funds. The lack of commitment of funds has been noticed at
the contracts:
• Supply with pump for Trepca – Stan Terg Mine with ID number: ST-018/2008, valued • Supply with Explosive for Stan Terg-Artane Mine with ID number: ST+KHA- • Supply with cargo vehicles for underground Mines (underground LHD) with ID number: ST-015/08 valued at € 286,350.
Conclusion

Entering of the entity into obligations without committing the funds contains a risk that
obligations cannot be covered in the future, expenditures can be created and then cannot be
covered. Such acts are considered illegal and not allowed.
Recommendation 6
We recommend Trepca Complex to respect Section 8.2 of Law on Public Procurement- on
Availability of Funds.
Comment of Entity
There is a need for KTA explanation in regard to the budgetary allocation procedure for
“Trepca”. KTA is a carrier of budget request of all enterprises which are under its
administration and “Trepca” as well. Preliminarily, before the request for budget is submitted
to MFE, KTA consolidates all budget requests of enterprises which are under its administration.
Therefore, earlier specified request from Trepca is sent for designated programs that are
specified according to the projects.
After the Assembly of Kosovo approved the Kosovo Consolidated Budget, budget is allocated
to the KTA and than KTA allocates the budget to other spending agencies which are under its
Adresa: Gazmend Zajmi 59-10.000 Prishtinë-Kosovë administration. This means that we have started procurement procedures only after the budget
was approved, however the commitment of means could not have been made yet till the KTA
allocates budgetary means, which more likely was an administrative procedure.
Since we were aware for the projects that we have presented within the request for the projects
proposed for budget and after we received the notice from KTA that the budget was approved,
we have initiated several projects and bidding has shown that we were right since those two
projects needed a longer period of bidding and realization (tender on supply with cargo vehicle
for underground mines (LHD)-large value, with ref: ST-015/08-estimated 286.350,00 € and
supply with pump for Mine with Flotation –“Trepca” Stan Terg with ref:-018-08-estimated
97,678 whereas tender for explosives was only partially based on the financing from KCB
meanwhile the other part was based on own source revenues. However, because KTA ended its
work, commitments of means had to be made all over again, even for the projects that were
previously committed.
Comment of Auditor
Means used by PAK (KTA) are KCB means and since Trepca Complex is under PAK (KTA)
administration, in regard to their management they should act in compliance with certain Laws
and Regulations regarding the commitment of funds. Therefore, your comment is not accepted.

7.3. Lack of performance security
During the examination of these cases, we have noticed that the performance securities were
missing, in these contracts:
• Supply with different kind of oils for Trepca – Stan Terg Mine with ID number: ST- • Supply with pump for Trepca – Stan Terg with ID number: ST-018/2008 valued at • Supply with explosives for Stan Terg – Artane with ID number: ST+KHA-045/2008, Conclusion
Lack of Security Performance could impact in such manner that in case of breach of contract
by the Economic Operator, the Contracting authority would be damaged.

Recommendation 7
The Entity should request from the awarded Economic operator, to deposit a performance
security as a pre-condition for contract consignment by respecting Section 60 of PPL 2003/17.
Comment of Entity

Adresa: Gazmend Zajmi 59-10.000 Prishtinë-Kosovë Several “Trepca” procurements are planned to be financed from own source revenues. Since the
revenues generated from selling the concentrate influenced by metal price decrease, several
previous supplies were not paid because of the lack of means.
Since several suppliers have signed other contracts, which previously had unpaid contracts from
“Trepca”, by requesting a performance security from Economic Operators would have been an
additional impose (e.g. EO “Bibaj” ST-016/2008-€26,533 -for oils and “Ex-Projekt”-ST+KHA-
045/2008 valued at 71.000,00-for explosives) whereas the performance security for pump
supply ST-018/2008 valued at €97,678 is within the dossier.
Comment of Auditor
During our work in the field, we were not provided with Performance Security- subjects on
Point 7.3, however from your comments we obtained that there is a Security performance for
the subject.
Supply with pump for Mine with Flotation –Trepca-Stan Terg with ID number: ST-018/2008 in
value of € 97,678 , where the performance security is valid for period 05.12-20.01.2008 valued
at € 9, 768.76, meanwhile the contract is signed on 07.05.2008.
Therefore, your comment is not accepted, the finding remains.


7.4. Supply out of contract

During the examination of the case “supply with different kinds of oils for Trepca – Stan Terg”
with Number ID: ST-016/2008 valued at € 26,553, we have noticed that the supply with
different kind of oils has exceeded the value of contract for € 1,161.
Conclusion
Additional supplies that were made out of contract could cause problems during the payment
execution, which at the same time could impose the Entity’s Budget.
Recommendation 8

We recommend the entity that in case of supply not to exceed the defined amount in the
contract, and to be in accordance with contracted amounts.

Comment of Entity
In regard to the exceeding of the preliminary contract valued at € 1.161 (Contract on oil supply
ST-016/2008 in value of € 26.533) as an procurement office, we can give the following
explanation:
1. This might have happened since within the quantities that we have defined in the tender documents, we have specified the quantity for one type of oil based on our knowledge; however the producers’ encasement for several items has imposed the quantity to be larger. Adresa: Gazmend Zajmi 59-10.000 Prishtinë-Kosovë 2. This could be seen from the value of € 1.161, where the difference in comparison with 3. Prices are the same with the one already contracted. 4. This was not made with the approval of procurement office.
Comment of Auditor
Supplies with higher values than those in the contract present problems in execution of
payments and create unforeseen obligations.
Therefore, your comment does not present a convincing reason to change the finding, therefore
the finding remains.
7.5. The Difference between technical specification in tendering dossier and the invoice

During the examination of the case Supply with explosive for Stan Terg – Artane Mines with ID
number: ST+KHA-045/2008, we have identified the existence of lots within the invoices which
have not been in technical specification of the tendering dossier.
Conclusion
Lots in the invoices out of the technical specification of the tendering dossier could cause
unexpected expenditures for the entity, especially for these parts where are not foreseen in the
bid and contract specification, and it can damage the Entity Budget.
Recommendation 9

We recommend the entity that during the supply with goods, services or capital investments to
review the technical specifications of the tendering dossiers so they will not have invoicing of
items which are not foreseen with technical specification of the winning bid. Also, the
Procurement Department should initiate new procurement procedures as soon as possible in
order that the technical specification in tendering dossier to be comprehensive.

Comment of Entity
In regard to this point the Auditors are right but the Procurement Office was not implicated. Detonators: 700 pieces x0.70=490 € were ordered by the Kishnica Mines with Flotation responsible personnel, they were not foreseen with the Tender Document for supply with explosives. The Order was made because of the urgent intervention in the mineral smokestack between the horizon V and VI.
Comment of Auditor
The entity agrees with the Auditor’s conclusion, the finding remains.
7.6. Supply with cargo vehicles for underground Mine (underground LHD)
Adresa: Gazmend Zajmi 59-10.000 Prishtinë-Kosovë During the examination of the case, Supply with Cargo Vehicle for Underground Mine (underground LHD) with ID number: ST-015/08 valued at €286,350, we have concluded that the contractor (Economic operator) did not respect the contracting agreements. In the contract the price in value of € 286,350 was offered, out of them 5% are foreseen for reserve parts including: - Visit in the world mineral fair in Las Vegas, for two persons, - Study Visit in Sweden, for two persons, - A list of necessary spare parts compiled by Trepca, valued at 2% of total contract value. - From these terms given in the contract, none of them has been fulfilled. Also, this vehicle for load-unload in the underground mine, which was purchased in value of € 286,350 and it has not been used yet. Conclusion
Failure to respect contract terms and requirements has an impact in such manner that damages
the Entity budget, as well as impacts in non-realization of the performance within the entity.


Recommendation 10

We recommend the Entity to demand from Economic Operators, to respect terms of contract
based on which the Economic operator was awarded, and to use the equipment as soon as
possible.

Comment of Entity
According to the contract (attached copy) it was foreseen in value of 5% from the contract for
spare parts and one week training of the staff within the Mine, after the arrival of the vehicle
and no travels for Las Vegas or somewhere else. The part of the contract for spare parts is not
realized as per dynamics, since the specification – catalogue on spare parts was missing as well
as boycott held by the employees of Stan Terg Mine, when the expert from “Atlas- Copco” was
there, who was obliged to help us with the specification of most needful parts. Cargo vehicle
was released in function with delay due to the problems in obtaining the attested clams. Clams
are provided and cargo vehicle is in function in the horizon X since a month ago.
Comment of Auditor
Contracting Agreements are not realized in value of 5% of the contract for spare parts as well as
the training in Las Vegas or somewhere else.
From the physical examinations in the field, cargo vehicle was not in function; meanwhile your
comment remains to be verified in the future audits.

8. ASSET MANAGEMENT

Adresa: Gazmend Zajmi 59-10.000 Prishtinë-Kosovë 8.1. FIXED ASSETS AND INVENTORY

According to Balance-Sheet statement, the value of assets in Trepca Complex is €5,132,251,
whereas the Asset register shows the value of € 3,032,782, a difference of € 2,099,469, which
are of fixed asset and inventory in the northern part ( North Trepca)

Findings

• There is no Asset Officer, who would deal with Asset Management. • In regard to the asset evidences, we concluded that the records are incomplete. • During the audit in Stan Terg Unit, respectively, during the physical examination of spare parts of devices and equipment, we have noticed a part of machinery and equipment (inherited) which were not evidenced in the Asset register. • The assets in the northern part were not included in the Asset Registers.
Conclusion
Because the accurate asset register is missing, the Trepca Complex- Stan Terg Mine, is not able
to control and manage its assets properly, which increases the risk for misuse. Failure to register
the value of assets results with inaccurate and incomplete reporting of records.
Recommendation 11

• We recommend the Trepca Management to appoint an appropriate person who will deal with asset management, to establish controls over asset management. • Entity should create a complete Asset Registers, in order to manage the assets.
Comment of Entity

- In regard to Point 2 and 3 of the findings on asset management, “asset evidences provided are incomplete” (point 2) and that “during the physical examination of spare parts of machinery and equipment, we have noticed machinery parts and equipment (inherited) which were not evidenced in asset registers”. We have remarks as following: - In the notes presented for the financial report, only the assets which are purchased after the war are included, and for which the purchase cost is already known, meanwhile for inherited assets (which are considerable) because of the legal inability of their evaluation, we performed physical evidencing for each unit of Trepca – South and such registers already exists. Meanwhile, in regard to asset register of northern part of Trepca, unfortunately we do not have any chance to influence there, as well as at other issues relating to the Northern part. Comment of Auditor
The Entity should posses the records on quantity, respectively all assets that are in possession of
Adresa: Gazmend Zajmi 59-10.000 Prishtinë-Kosovë the Complex should be evidenced, therefore the finding remains.

8.
VEHICLE MANAGEMENT

From the audit of vehicles, we have noticed that Stan Terg unit does not have vehicle Registers,
there is only one register in Finance Directorate within Trepca Complex.
This Register contains three Vehicles: Vehicle "Veko" diesel- type Zastava NEW turbo rival
35-10, Mini bus Upto 15Pax KMFjD3 Iu479665, Toyota 4RUNNER KNZ185-0058867
Un21173
Findings
• In regard to the vehicle management, Trepca Complex - Stan Terg Mine has no policies and procedures which would determine the manner how the vehicles could be used. • The Special Dossiers for each vehicle which should contain the entire purchase documents, repair expenditures, control, the way of use, are not maintained. • Evidences on purpose of vehicle use, destination, kilometers passed, return of vehicles
Conclusion

Lack of a control over the vehicles could have impact on the l on the reporting of usage of the
entity’s vehicles and not reporting the usage of the vehicles for private purposes.
Recommendation 12

• We recommend the entity to implement policies and procedures which define the way in • To maintain a special dossier this should contain invoices for purchase of vehicles, insurances, servicing and repairs and other different evidences in regard to vehicles. • To maintain records regarding the purpose of vehicle use, kilometers passed as well as Adresa: Gazmend Zajmi 59-10.000 Prishtinë-Kosovë

Source: http://oldoag.rks-gov.net/Raportet%20Anglisht/Te%20tjera/TREPCA-Stan%20Terg.pdf