KOSOVO: AUDITOR'S REPORT ON ASSEMBLY SEES IMPROVED

UNCLAS SECTION 01 OF 02 PRISTINA 000621 SIPDIS SENSITIVE SIPDIS DEPT FOR DRL, INL, AND EUR/SCE, NSC FOR BRAUN, USUN FOR DREW SCHUFLETOWSKI, USOSCE FOR STEVE STEGER E.O. 12958: N/A TAGS: PGOV EAID KDEM UNMIK YI KV SUBJECT: KOSOVO: AUDITOR'S REPORT ON ASSEMBLY SEES IMPROVED SITUATION IN 2006 REF: 06 PRISTINA 561 ¶1. (SBU) SUMMARY: The Kosovo Assembly has shifted from lavish misuse of government funds in 2005 to less glaring weaknesses in procedural controls in 2006, according to an independent audit released August 9. Although the Auditor General was not satisfied with the Assembly's fiscal management in 2006, this year the Assembly's Secretary General has addressed several of the main criticisms in the audit. Even so, press coverage of the new report was critical of Assembly Speaker Kole Berisha, who was unable to turn the report's relative good news to his and the Assembly's advantage. We will continue to encourage the Assembly to bring itself into compliance with international standards and await the action plan the Assembly must submit to the Office of the Auditor General (OAG) within 30 days. END SUMMARY. ¶2. (SBU) The 2005 audit of the Kosovo Assembly uncovered large-scale fiscal malfeasance under former Speaker Nexhat Daci (reftel). In March 2006, Kole Berisha took over as Speaker and committed himself to instituting reforms and cleaning house. The 2006 audit, while not without problems, shows that Berisha's efforts have made a difference. Where the 2005 report found thousands of Euros misspent on expensive personal effects and an armored vehicle that never materialized, a representative complaint from the 2006 report notes that an order for office furniture arrived late. ¶3. (SBU) Despite the contrast between the 2005 and 2006 reports, the OAG was not impressed with the Assembly's recent performance. The 2006 audit notes the lack of an internal audit unit, several irregular spending issues (pre-Berisha), weaknesses in Assembly accounting and record-keeping, use of single-source procurement, and the need for a certification officer. In conversations with USOP, Auditor General Linda Casella, an international, lamented that capacity for accounting and auditing is very low in Kosovo. (NOTE: No higher education institution in Kosovo, public or private, has any faculty teaching public finance or accounting. The only auditor training available in Kosovo is provided by the Society of Certified Accountants and Auditors in Kosovo (SCAAK),supported by the OAG. END NOTE.) Casella recommended that if the Assembly finds someone to fill the internal auditor position, that person should attend the SCAAK training program. She also recommended that the Assembly develop an administrative procedural handbook to organize its work in compliance with Kosovo law and international standards. ¶4. (SBU) The Assembly, under the guidance of Secretary General Ismet Krasniqi, is well on its way to rectifying problems cited in the report. A certification officer was appointed, and an internal auditor was hired and is currently in SCAAK training. No spending irregularities were found from after March 2006 when Berisha became Speaker. Krasniqi told us he is putting together a procedural handbook based on the public procurement law. The Reform Party (ORA) member of the Assembly Presidency has told us of ongoing efforts to procure more sophisticated accounting software and ensure its use. (NOTE: Although the Presidency often assumes an unhelpful policy role, its true mandate is to oversee the administrative management of the Assembly. END NOTE.) The Assembly must present an action plan to the OAG within 30 days; Krasniqi assured us he has already begun work on it. ¶5. (SBU) An unfortunate side-note this week has been the harsh media response to the report. One headline read "You too, Kole?" comparing Speaker Berisha with Daci despite the significant improvements. Berisha's office was caught off-guard by the report's publication and only managed to issue a statement, which received limited media coverage, stressing that the report did not find any financial abuses. ¶6. (SBU) COMMENT: We are satisfied that Assembly management is on the right track. Although more needs to be done, given the depth of corruption only 18 months ago and the dearth of PRISTINA 00000621 002 OF 002 procedural controls in institutions Kosovo-wide, there has been steady progress made since Daci's departure. Although it is not unusual for Kosovo press to inaccurately or unfairly cover events, a better media strategy by Speaker Berisha could have turned this report into a political win in the eyes of Kosovars - something both he and the Assembly badly need. It in unfortunate that Berisha was attacked when he has made such substantial progress. We will continue to encourage the Assembly to bring itself into compliance with international standards and to support its reform efforts. LASKARIS