Ms Speaker and Members of the Sejm!
The activity of the Supreme Audit Office last year focused on the priorities defined and adopted by the Council of NIK. Our planned audits covered mainly initiatives taken by the public administration to guarantee financial stability of the social security system, reduce the costs of operations of public institutions, simplify the procedures related to business activity and ensure secure operation of financial institutions.
Most processes and audited institutions in this area received our positive evaluation. However, we had a lot of objections to the Agricultural Social Insurance Fund (KRUS). KRUS officials only sporadically checked if the insured really conducted agricultural activity. The audit confirmed that this negligence may be used by persons who would like to pay smaller social security contributions.
In April 2012, NIK notified the Sejm of the activities taken by public institutions to provide the financial sector security. The key operations of the Office of the Polish Financial Supervision Authority were evaluated positively. At the same time, though, we identified minor irregularities concerning delays in implementing the methodology of banks’ inspection and supervision as well as delays in submitting post-inspection recommendations to banks and responding to their inquiries.
NIK also carried out a comprehensive audit on the implementation of the state budget based on task performance and evaluation of processes, such as: planning, monitoring and reporting. The audit results showed that the task-oriented budget is not implemented as required. Numerous institutions also have problems with proper implementation of governance control.
The Council of NIK also set additional priorities for NIK’s audit activity, such as: to enhance effectiveness of the educational system; to ensure commonly available and fully reliable healthcare; to maintain national heritage, natural resources and spatial order.
Ms Speaker and Members of the Sejm!
In 2012, the European Football Championships were organised in Poland. The Supreme Audit Office monitored preparations for that event for several years in turn. The audited institutions mostly eliminated the irregularities identified by NIK on an on-going basis. For instance, that was the case with the Police where we found that the register of foreigners covered by stadium bans, required by the Act, was not in place. At NIK’s request, the Police quickly opened such register and provided security during the Championships with the database in place.
It is extraordinarily important that more than 90 percent of audited entities: public institutions, schools, hospitals, police stations, general government units of different kinds - eliminate irregularities identified by NIK almost immediately, often in the course of the audit. During my six-year term, the heads of various institutions audited by NIK implemented more than 40 thousand of our recommendations. Every year, about 25 percent of our proposals to change the law is used by MPs or Ministers. One of NIK’s most important proposals in my whole term, was related to the fact that relations among the entities preparing flights of the President, Prime Minister and Speakers of the Sejm and Senate needed to be defined by the Act. That proposal was presented after last year’s audit of the organisation of VIP flights. However, the Memorandum that was effective at the time of the Smolensk plane crush was modified only a little after the catastrophe. These changes, according to NIK, do not guarantee smooth preparation of flights. Only the statutory provisions that will specify the duties, competences and a central institution responsible for verifying requirements and giving final approval to the flight, may define relations among entities, which as a rule, remain independent from one another.
During the audit of preparations for EURO 2012 we also drew attention to problems related to road and stadium investments. We noted an increase in road investments carried out in the past years in the largest Polish cities. We appreciated the ability to use the EU funds. On the other hand, we highlighted problems with timely task performance, which in several cases led to the loss of the EU funds. In nearly all road investments the design documentation was drafted with delay. NIK also pointed to poor quality of construction supervision which on some stretches of the road translated into noticeable problems with the road quality. Sometimes they were confirmed already after a road was handed over for use.
When screening the budget execution by the Ministry of Sport and Tourism we noted that more than PLN 5 million was illegally spent on Madonna’s concert. The funds were taken from the specific reserve intended for tasks related to EURO 2012 and popularisation of volleyball among children and youth. According to NIK, it was against the Budget Act provisions. The Ministry of Sport and Tourism received neither formal consent of the Minister of Finance nor positive opinion of the Sejm Committee responsible for the budget that would allow changes in the reserve purpose.
In 2012, NIK took under the microscope motorway investments conducted by the General Directorate for National Roads and Motorways (it was not only because of the EURO 2012). Our evaluation of the investor’s activities was positive but with irregularities. The General Directorate settled tenders mostly based on the lowest price criterion. In some cases it resulted in tendering below real construction costs. Investments were often delayed or even abandoned because the authority not always verified contractors’ financial condition. The General Directorate usually properly cared about the investor’s interests - in our opinion, though, the signed agreements did not provide required protection to subcontractors.
NIK negatively evaluated investments conducted by PKP PLK (Polish Railways). Despite the fact that the number of initiatives to modernise the railway infrastructure has risen recently, more than a half of audited investments of PKP PLK were delayed significantly. Sometimes the delays reached 29 months against the original deadlines. We warned that in this way the EU funds intended for the so-much-needed modernisation could be lost. The lags most frequently resulted from errors in the pre-design-, design- and as-built documentation. Other reasons included the need to do extra works not predicted at the stage of commissioning works and improper coordination of works by individual PKP PLK units. That is why, the chance for modernisation of the railway infrastructure was not fully used.
Another important audit concerning infrastructure dealt with the security at Polish airports. The auditors revealed that unauthorised persons may stay in the security restricted area, which is against the security rules. NIK also found some gaps in obligatory training for security guards and found out that unauthorised persons were allowed to screen passengers, luggage and loads. Other irregularities in the area near airports were related to the maintenance of safe approach paths.
Ms Speaker and Members of the Sejm!
A lot of our audits were related to health care. In the ones concerning psychiatric hospitals we identified breaches of procedures protecting patient rights. It was the case when patients were admitted to mental hospitals and when the means of coercion were used with them.
We positively evaluated hospital emergency departments. We pointed out, however, that they were overloaded because services were often provided to patients who did not require urgent intervention. According to NIK, such practices are caused by defective night and holiday health care.
We still monitor the observance of rights of the disabled. Last year a few of our audits showed one more time that the public utility facilities are still not adjusted enough to the needs of the disabled.
Undoubtedly, next to health care, another area critical for proper operation of the state is education. In 2012, NIK checked the condition of teacher training. The audit results showed that 2/3 of pedagogues take advantage of the training offer. Unfortunately, more than 30 percent of them do not raise their qualifications, disregarding their obligations arising from the Teacher’s Charter.
We were also alarmed by how the money allocated to academic research was actually used. These funds are largely dispersed. Intended for small projects, in practice it was mostly used as extra compensation for scholars. Only 12 percent of research was made with the intention of using their results in practice. Poland - as compared with other countries - does not submit many inventions to the European Patent Office. The Czech report three times more of them and the ranking leader, Germany, nearly 50 times more.
In 2012, we devoted a lot of attention to internal and external security. Our audit of the condition of the police headquarters and police stations was one of the reasons behind the 2013 investments planned by the government.
The Polish SAI positively evaluated the professionalisation process of the Polish army. In our opinion, the foundation has been lain to create a modern and professional army.
Ms Speaker and Members of the Sejm!
NIK is trying to respond to the problems of Polish citizens with its audits. The series of bankruptcies of travel agencies gave rise to the system audit of that area. We pointed to the lack of legal basis to spend public money from the marshal’s budgets to organise returns for Polish tourists. At the same time, we recommended that the amounts gathered by travel agencies in the mandatory guarantee system should be increased. The government used our suggestion and increased the guarantee amounts.
Last year it was yet another time that we audited how Poland was prepared to prevent floods. Unfortunately, there are still significant delays in building reservoirs and polders and in renovating flood banks. At the same time, we appreciated the state’s support for the flood victims. The aid was distributed quickly and efficiently.
Positive news is improving preparation of the Polish state government administration. The amended Civil Service Act serves to build a professional and apolitical body of public officials. Sadly enough, things do not look so well in the local government administration. NIK auditors discovered that officials are too often recruited from administrative posts by way of internal promotion, instead of in a public recruitment procedure.
We were alarmed again by a very difficult financial standing of the public television which stands on the verge of losing financial liquidity. According to NIK, TVP SA should quickly find a way to effectively enforce licence fees.
Ms Speaker and Members of the Sejm!
That was a very brief summary of the most important audits last year.
In 2012, we sent 185 pronouncements on audit results to the Sejm. We audited 2856 entities. We included our findings in 2930 post-audit statements. We developed 65 de lege ferenda proposals, suggesting specific changes in the law. We sent 136 reports of reasonable suspicion of a crime to the Prosecutor’s Office, and 182 notices of a breach of public finance discipline.
Financial benefits from our audits totalled more than PLN 454 million, which makes nearly twice as much as the annual budget of the Supreme Audit Office. By correcting activities of various institutions, not allowing losses, revealing them and obliging various entities to return the missing amounts we not only” earn” for ourselves but also gain additional funds for the State Treasury. On a constant basis, we correct mistakes in financial reports of different kinds and accounting books. Only last year our auditors detected formal irregularities in that area exceeding PLN 18 billion.
Ms Speaker and Members of the Sejm!
NIK lays great stress on proper specification of the areas which entail biggest threats for the state functioning. Certainly, this is the reason why our relations with different Sejm Committees are so important. In 2012, NIK representatives participated in 589 sessions of the Committees. During 74 meetings they presented the results of 93 audits. Participation at the meetings of the Sejm Committees allows us to better identify our country’s problems and listen to the MPs’ suggestions on the audit subjects.
Citizens’ complaints are also helpful in defining audit subjects. In 2012, we received as many as 5696 of them. A lot of issues addressed by citizens became part of our on-going audits. Others were used to develop completely new subjects, mainly of ad hoc audits. Last year we carried out more than 220 of such audits.
Ms Speaker and Members of the Sejm!
Presentation of audit results in the media is vital for the Supreme Audit Office. This undoubtedly has a preventive function, which is so important for the state audit. After all, in each audit we cover about 30 entities selected at random. All other entities in the audited area may learn from the media, including our website, what irregularities were identified, check if some are present in their institution and, if necessary, adjust their activity. In 2012, more than 13 thousand media releases referring to the results of our audits were published. Above 700 communications appeared in Poland-wide TV stations and nearly 850 in radio stations. The press quoted our audit results 2810 times and internet portals much more than 8000 times.
Ms Speaker, Members of the Sejm!
My six-year term as the President of NIK is coming to an end. I hand over to my successor a modern Supreme Audit Institution, full of brilliant, well-educated specialists, mostly hired after 1990. The employment level at NIK has not changed for a dozen or so years. We have 1701 full-time jobs. 1200 persons are auditors. The remaining 500 employees support audits. This group includes: IT people, lawyers, accountants, guards, employees of the training centre and internal control, persons responsible for protecting secrets, media service and providing access to public information, and also relations with citizens who file complaints with NIK. Every year about 50 people retire from NIK. In 2012, NIK announced recruitment for 46 auditor’s posts. There were more than 20 candidates for one position in external recruitment procedure. Finally, 435 persons qualified for tests. They had excellent competencies: completed master’s degree at the best universities of Poland (often also post-graduate studies) and practical experience in the general government sector. People’s interest for work at NIK shows that NIK enjoys social trust and high prestige among young lawyers and economists. I regret to say that salaries at NIK, although not that bad as compared with other public institutions, have not been raised for several years now, which makes them not very competitive. Auditors with excellent educational background who have worked at NIK for several years and passed the final exam completing NIK’s Professional Training for Auditors receive on average about PLN 5400 net. Their salary including bonuses totals about PLN 6000 per month. Please remember that our employees are usually lawyers, economists and experts in different areas. They are now going through the two-level Professional Training for Auditors. Some of them take up management studies. As many as 100 employees start or continue doctor's degree studies. Is PLN 6000 too much or too little for such high-level specialists?
I have always underlined that NIK’s employees - devoted to the state service, apolitical, high-level specialists - are its greatest value. Thanks to them all our audits meet with appreciation of independent expert communities. None of our audit findings have been questioned in the past years by independent experts dealing with areas audited by NIK. Only the auditees themselves argue with our audit results. But it does not happen very often, by the way. They have the right to do so. But independent experts, journalists, publicists and members of parliament, all accept our audit results with recognition, regardless of their political views. Not a single time in the recent years have any charges been filed against NIK of breaching the impartiality standard. Even the audit of VIP flights preparations, which was the most risky in that respect, was not accused of non-objectivism. Professional and objective findings are the greatest value of NIK audits.
Ms Speaker, Members of the Sejm!
The Supreme Audit Office also enjoys high recognition in the international arena. For three years we chaired works of the European Organisation of Supreme Audit Institutions - EUROSAI. Other member states evaluated our three-year chairmanship so well that NIK was appointed representative of EUROSAI in the Governing Board of the International Organisation of Supreme Audit Institutions - INTOSAI. We are going to represent all European Supreme Audit Institutions there for six years (2013-2019). We remain active on the international forum in many fields. We are interested above all in auditing standards, including the standards of communicating audit results to the public. No doubt, the appointment of NIK as external auditor of the European Organisation for Nuclear Research confirms the significance of NIK in the international arena.
NIK experts were invited to cooperate among others with the World Bank, NATO, Eurostat, OSCE. In the past years, NIK has conducted several cooperative audits with foreign partners. One of them, I guess the most important in 2012, concerned the management of greenhouse gases emissions. The Supreme Audit Institutions of Poland, Denmark, Finland, Lithuania, Latvia and Norway confirmed that the emissions management systems in their countries operated properly. At the same time, they pointed out that the trade in emissions needs to be regulated to eliminate the threat of VAT frauds.
It was another time that NIK was subject to the peer review. Auditors from the SAIs of Austria, Denmark, Lithuania and the Netherlands checked how the Polish SAI meets the international auditing standards. We received very positive evaluation. The way how we communicate audit results to the public was received very well. We were also given the task to work on better communication with the auditees so that they could take even greater advantage of our findings and recommendations.
Ms Speaker, Members of the Sejm!
The working conditions and equipment which NIK offers to its employees are improving. In 2012, NIK spent more than PLN 261 705 000 on that purpose. All auditors have their own laptops with encrypted connection with the headquarters databases. We have modernised the electronic document management system which is now available in the e-files for eligible employees. When preparing an audit, inspectors from different departments and regional branches from all over Poland, instead of going on a business trip, may talk via the new videoconference system or through the VOIP. This solution makes it possible to save time and money. We have finished major overhauls of the headquarters building in Filtrowa Street in Warsaw and of all branches that needed a renovation. A lot of other needs remain to be satisfied, though. In the coming years it will be essential to modernise the electronic audit management system. Its first elements are already in place. Without constantly investing in digitalisation, the Polish SAI will not be able to serve the Parliament and the citizens.
Ms Speaker, Members of the Sejm!
In one month I will hand over an office, which not only enjoys social recognition, but also is well equipped, hires dedicated and excellently prepared employees. Above all, however, NIK is an institution which retained its independence from the executive and autonomy with regard to the Sejm, as defined in the Act on NIK. In the course of works on the Act amendment some concepts appeared which threatened independence of the Polish SAI. Thanks to the understanding of the Members of the Sejm and Senators, those ideas were rejected in subsequent ballots. Let me thank you for this support very much. After all, as the United Nations Organisation put it in its resolution, an independent state audit is one of the guarantees of democracy. One of the audit bodies that wanted that provision to be part of the resolution was the Polish Supreme Audit Office which I have had the honour to chair for the past six years.
Thank you very much for your attention.
