Institute for War and Peace Reporting | Giving Voice, Driving Change

Bosnia's High-Spending Leaders Blow Hole In Budget

Reports shows presidency and other officials squandered large sums in the course of their duties
By Renata Radic

Independent state auditors in impoverished Bosnia and Herzegovina have accused top officials, starting with the country’s presidency, of squandering huge sums of public money on luxuries.


State-of-the-art official cars, business suits, lavish gifts for foreign dignitaries and endless lunches and dinners, amongst other things, help explain why the tripartite presidency cost the taxpayers an extravagant three million euro in 2003.


Questionable expenses included the purchase by presidency member Sulejman Tihic of almost 7,000 euro worth of gifts prior to a tour of Islamic states and the acquisition by his colleague, Dragan Covic, of an official car that cost 50,000 euro.


In spite of the seriousness of the findings, no one is likely to go to court, let alone to jail, as Bosnia has no laws or decrees regulating these expenses.


In the absence of regulations, officials wrote off the sums as “current expenditures”, the auditors reported. Some officials justified their expenses by saying that nowhere was it written that a business suit could not be considered a “current expenditure”.


The findings came to light as a result of a series of separate audits conducted by the Office for Auditing Financial Operations of the Institutions of Bosnia and Herzegovina on the financial operations in 2003 in 33 state institutions.


Apart from investigating the high cost of the presidency, the office found at least 250,000 euro had been lost by other ministries through poor accountancy and inefficiency - a sum equivalent to 25,000 average monthly pensions.


The auditors will release their final report on state expenses in October.


Civil servants have already dismissed the accusations, blaming the lack of laws on public procurement and precise rules on internal spending.


Members of the public who have read of the auditors’ initial findings said they were shocked by the revelations of state profligacy.


“They should all be sent to the Goli Otok [the Tito-era prison-camp in the Adriatic Sea],” Ismet Kucukovic, a pensioner, told IWPR.


“There is no money for pensions but there is money for suits and ties. They should be ashamed of themselves.”


“They don’t care, or even worry about the fact that people have nothing to eat,” commented Zoran Kristic, a technician.


Public frustration with their unaccountable officials is not likely to lead to personnel changes or resignations, however.


The auditors’ negative reports have no direct legal implications. The institutions concerned will face no sanctions, nor will any individuals be forced to resign, as they might in other European states.


Donald Hays, Principal Deputy to the High Representative, Paddy Ashdown, said individual resignations would not change much, as the problem was structural.


“There is no control over the presidency. Earlier, you had one person in the presidency and that person controlled himself,” said Hays. “The new presidency behaves in a prodigal way and the institution is mismanaged.”


Public procurement is the main source of corruption here, as in many countries worldwide. The World Bank estimates the authorities in Bosnia spend about 490 million US dollars on public procurement annually.


A recent investigation carried by several local TV and print media outlets suggested up to 30 per cent of purchases are carried out without opening tenders (though this figure has not been confirmed by any outside agencies).


Whether or not this figure is exact, the current laws on procurement is undoubtedly easy to evade.


For example, only contracts worth more than 25,000 euro have to be opened to tender. A familiar way around this benchmark is to divide sums exceeding 25,000 euro into several smaller ones.


This way, favoured companies can continue to enjoy a monopoly on state goods. Whatever state institutions need can continue to be purchased from companies on good terms with the officials, or with whom the officials can split a profit.


In addition, tenders are issued on short notice, depriving potential bidders of the time they need to prepare the required documents.


At present, public procurement in Bosnia is defined by four laws, or decrees. All have similar shortcomings; the tender procedure is poorly defined; potential bidders have little access to information; and only apply to one or other Bosnian entity, or to the territory of Brcko.


In 2002, the European Commission, EC, called for a new law on public procurement in Bosnia to be introduced at state level. But the law has not been passed, as Republika Srpska, RS, initially objected.


After the EC threatened to withdraw financial assistance amounting to 1.5 million euro from RS, it backed down.


Two new bodies, the Public Procurement Agency and the Procurement Review Body, have since been established as preliminaries to passing the law.


Emina Kadric, project manager with the EC in Bosnia, told IWPR that certain bylaws and rules needed to be adopted first, and that two million euro of foreign aid would arrive to speed the process. “This is technical assistance for the implementation of the legislation,” Kadric said.


The new law – if and when it is adopted - will give all companies equal access to tenders.


On the other hand, it is unlikely to remedy corruption or overspending in public procurement entirely, as key decisions on this will continue to be made by the same people as before.


Samir Musovic, deputy auditor general at the Office for Auditing Financial Operations of the Institutions of Bosnia and Herzegovina, said it was up to the country’s state parliament to establish stronger internal controls on spending and change the current rules to make them correspond to officials’ real needs.


“Though we are not … the financial police, we retain the right to draw parliament’s attention to things that we believe are incorrect,” Musovic said.


He said the state prosecutor’s office would investigate any of the auditors’ findings.


The auditors confirmed that the prosecutor’s office had expressed interest in the auditors’ reports on state officials’ finances and was asking for additional details.


If someone is proved to have misspent state funds and abused their position, the prosecutor in theory could launch criminal proceedings.


But no criminal proceedings were instituted following last year’s reports, which was just as damaging.


The auditors also say that while inspecting the presidency, they even received anonymous threats. Several newspapers reported last month that some of the auditors were told, “After this one, they shouldn’t count on finding a new job.”


For the time being, the auditors appear safe in their jobs. The law says the presidency can only fire the auditor general or his deputy with the approval of both houses of parliament, if they have been convicted of a crime, or if the quality of their audit does not meet standards set by law.


Before delivering their final report on all institutions in October, the auditors are to release findings on a couple of other state departments, such as the Official Gazette, which produces white papers and other documents, and Employment Agency.


No one is holding their breath for a clean bill of health in these departments. After the auditors’ damning assessment of the state presidency and other institutions, it is unlikely they will decide these bodies have controlled their purse strings more efficiently.