Serbia Finally Gets Its Auditors

In late September 2007, a full two years after the passage of the State Auditing Institution Law, Parliament staffed the State Auditing Institution, giving the country an agency that will oversee all state spending.

Yet the appointment did not go smoothly because opposition MPs objected to the way the SAI's staff had been chosen, contending that they were partisans and would not be able to do their job impartially and free from outside influences.

On the other hand, experts and non-government organizations welcomed the staffing of the independent SAI, a body whose formation is required by the Constitution.

The SAI Law passed in November 2005 and specified April 2006 as the deadline for appointing personnel to the SAI Council. The deadline came and passed and nothing happened. The ruling parties appeared uninterested in the SAI, aside from the occasional instance of lip service. Only at another deadline, set by the Constitutional Law, did the parties spring to action.

But they have yet to demonstrate that they truly desire change and supervision, as the job of eliminating corruption did not end when the five members of the SAI Council took their oath in front of Parliament at the end of September.

The cabinet is required by law to provide the SAI with office space, equipment, and funding. This is precisely where the next batch of problems is likely to appear. Given the cabinet's record of inaction when it comes to other anti-corruption institutions, such as the Office of the Public Information Commissioner, Public Procurement Office, Money Laundering Prevention Committee, and Office of the Ombudsman, there certainly is reason for concern. Aside from initial staffing issues and non-compliance with legal deadlines, each of these institutions lacks adequate offices and expert personnel.

Given how things usually happen in Serbia, it will take at least another six months before the SAI can start doing its job. Of course, the cabinet needs to provide the necessary equipment and money first. Then the SAI Council has to hire auditing and administrative staff, as well as put together a plan of operations within three months. Parliament has another three months to review and approve that plan. The question remains why the cabinet allowed Serbia to remain the only European country without an institution tasked with keeping tabs on the state's cash flows.

Politics Yet Again

Unofficially, sources close to the ruling parties complained in recent months about how difficult in was to find people with the qualifications needed for employment at the SAI.

As a result, changes were made to the law in July to reduce the experience requirement from seven to five years in auditing. Another provision specifying that two of the five council members must possess a degree in economics was also left out. Potential SAI auditors must not have served on the cabinet in the two years prior to seeking the position. Employment in the SAI is barred to people already working for any government body or holding senior positions in political parties or trade unions. The SAI is prohibited from hiring individuals who are members of a board of directors or supervisory board of any corporation, public company, fund, or other legal entity in which the state owns stock.

Politics eventually ended up affecting the makeup of the SAI Council. The chairman, deputy chairman, and three Council members were nominated by and belong to parties of the ruling coalition. Chair Radoslav Sretenovic is from the Democratic Party of Serbia-New Serbia coalition, and his deputy, Ljubica Nedeljkovic, is from the Democratic Party. The other members are Zoran Tamas (Democratic Party), Ljiljana Dimitrijevic Saponja (G17 Plus), and Natalija Catovic (New Serbia). Numerous experts and the opposition parties say the appointment was too political, allegations fueled by the fact that New Serbia spent weeks obstructing the Finance Committee's efforts to put together a list of candidates after its partner, the Democratic Party of Serbia, neglected to consult it on the issue. A last-minute deal saved the day, when the Democratic Party of Serbia agreed to replace one of its candidates with New Serbia's Catovic right before Parliament was supposed to debate the list.

In the two days of debate that followed, the opposition Liberal Democratic Party was strongly against Catovic's appointment. Party president Cedomir Jovanovic contended that since she was suspected of committing a crime, she was unfit for the office. "All the signers of the document to nominate Catovic for this senior position were unaware of this fact from her professional record," he said, adding that the DOS coalition had filed charges against her for violating election laws and doctoring the results of voting as an election commission member in the municipality of Topola in 2000.

The Serbian Radical Party remarked that four of the five candidates were already state officials, a clear violation of the legal requirement that candidates for the SAI Council may not have had any business arrangement with the state for at least five years.

Borka Vucic from Socialist Party of Serbia also objected to the list of candidates, adding that it would have been better to withdraw it and put together a new one, this time with representatives of the opposition parties.

"Based on the parties that make up the Finance Committee, of which I too am a member, and the way in which the list of candidates was put together, it's perfectly clear that the executive branch will use this institution to supervise itself. That's like making the same man prosecutor and judge," she said, asking how the SAI could be independent without opposition representatives.

Vucic added that Serbia needs an auditing institution because Parliament has not approved a single budget balance sheet since 2000, necessitating checks by impartial individuals. In her opinion, the entire SAI initiative is frivolous because the SAI's budget is nine million dinars, 90 percent of which is intended to cover salaries.

Radical party MP Veroljub Arsic observed that several of the Council members have conflicts of interest as they are already state employees. Chair Radoslav Sretenovic has been an outside consultant for the central bank for 15 years, whereas Ljubica Nedeljkovic, the vice chairwoman, is a senior adviser at the Finance Ministry.

The public is right to fear that partisans, experts or not, will not be able to rise to the challenges of stand up to political pressure.

Justified Doubts

Ljubisa Stanojevic, professor of accounting and auditing at Singidunum University, told the Politika newspaper that although political influences were undeniable, it would be best to wait for the selection of a state auditor before drawing conclusions.

Stanojevic added that since the SAI is in charge of auditing the national budget, local budgets, state-run funds, the central bank, public companies, political parties, recipients of EU fundings, and spending of donations and foreign aid, it will play a pivotal role in society. Pointing out that each of the above institutions is highly political, Stranojevic noted that staffing the SAI with politicians is unlawful because the law bars members from engaging in any activity that could have a negative impact on its partiality and how society perceives the SAI.

According to Stanojevic, people expect the state auditor, who is to be selected by the partisan SAI Council, to notify them if the cabinet has issued a contract detrimental to the state or if an official is abusing cabinet decisions for financial gain. Stanojevic believes that the scandal involving the concession contract for the Horgos-Pozega highway could have been avoided if the SAI had been functional at the time, adding that its first job should be analyzing the contract.

"It remains to be seen whether the state auditor will do a good job and lend credit to its basic purpose, which is to provide truthful, objective, and unbiased information on financial reports submitted by users of state money," said Stanojevic, adding that many naysayers could be right because the SAI has sweeping powers to probe officials from MPs to employees of state companies for financial misconduct.

Auditors Aren't Omnipotent

Other countries have shown that state auditing bodies need time to start doing a proper job. The UK has had an auditing office for over 100 years, but many other countries, such as Italy, have auditing institutions that can also dish out punishment. As far as thee rest are concerned, including Slovenia, Serbia's role-model when it comes to state auditing, the national auditing office's job is to scrutinize and report to Parliament.

Slovenian officials, who have 12 years' experience in auditing, stress that scams are very possible in large state purchases and projects such as highway construction, where lots of money is spent.

A national auditing organization, which in Slovenia has a president, two vice presidents and hundreds of field operatives, has a responsibility to the citizens, according to Igor Soltes, president of the Slovenian Court of Audit.

Soltes, whom several Belgrade media outlets asked for comment on the appointment of Serbia SAI Council, said that people should not expect the formation of the SAI to bring transparency and an immediate end to corruption. "We're not talking about a court-martial that orders those found guilty hanged, but a body that makes recommendations to prosecutors and police," he added.

Members of Slovenia's Court of Audit are appointed to nine-year terms by Parliament, which is political and which is why political influences are unavoidable, according to Soltes. "However, since the court operates in accordance with strict standards and the auditors themselves aren't hired by politicians, political interference is minimized. There is a danger that politics can get involved in changing which institution is to be audited, but that kind of abuse is easy to see and the person responsible loses credibility. People who choose to work for the court know in advance that they will be under public scrutiny. In any case, having us appointed by Parliament is much better than putting the cabinet in charge," Soltes added.

As for Serbia, all we can do is wait and see what the SAI and its Council will do to bolster their credibility and impartiality, as well as earn the respect of the institutions whose spending habits they are supposed to oversee.