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Business and Economy / Politics
12.01.2011 16:50
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Auditing Body Demands Dismissal of Finance Minister (IV)

adds info on findings

Ljubljana, 12 January (STA) - Slovenia's top state auditing body has requested the sacking of Finance Minister Franc Krizanic, after finding grave violations of due care and diligence at the Finance Ministry stemming from transactions with state-owned shares in a shipping company. Prime Minister Borut Pahor has given Krizanic a week to explain his actions.

The Court of Audit said on Wednesday in a follow-up report on the audit of the sale of the state stake in Portoroz-based shipping company Splosna plovba that the Finance Ministry failed to implement appropriate remedial measures, which were important for transparency of public finance as a whole.

The auditors had previously found that the 2006 and 2007 transactions involving shares of the shipping company, conducted in the term of the previous government, had not been frugal and asked the ministry to prepare remedies.

Court of Audit President Igor Soltes explained at today's press conference that these remedial measures had broader implications than just for the transactions at hand. They were related to transparency in public finance in general, including in calculating public debt.

As part of the remedial measures, the Finance Ministry was tasked with writing up systemic instructions on accounting of transactions by legal entities acting on the state's behalf, including the state-run Restitution Fund (SOD). The ministry had to transfer these instructions into a systemic law.

According to the court, the ministry failed to do this and instead issued instructions to ministries to check the legal status for such transactions in their field of work and prepare amendments where needed.

This is unacceptable for the Court of Audit since it represents the shifting of responsibility. Additionally, partial solutions do not suffice to fix the systemic shortcomings.

Through this failure, the Finance Ministry has in effect promoted a lack of transparency in public finance, which affects reporting on general government debt and deficit, Soltes said.

He explained that only when Slovenia implements clear rules on registering such transactions will it become clear what the nation's actual debt is.

Soltes explained that in this way the Finance Ministry was responsible for a grave violation of due care and diligence.

The Court of Audit act states that the auditing body must request the dismissal of a person in charge in the event of grave violations of due care and diligence at state institutions.

Prime Minister Borut Pahor now has 15 days to respond to the court's request.

In his first reaction to the Court of Audit's request, Pahor announced he had written to Krizanic and asked him to provide explanations on the matter by next Wednesday.

The prime ministers wants to hear from Krizanic on why the Court of Audit finds that the remedial measures were not satisfactory before deciding on what to do, Pahor's office said in a statement.

In a similar situation a year ago, Pahor moved to dismiss the then Environment Minister Karl Erjavec for the ministry's failure to implement follow-up measures in building an effective system of waste management stemming from a report from 2008, before Erjavec was even the minister.

The Court of Audit had raised the case of Splosna Plovba already in 2008, when it found faults with the sale of a 29.6% stake held by the state-owned SOD and KAD funds to a German shipping company.

In addition it found faults with the way KAD and SOD had acquired the shares in Splosna plovba a year earlier, warning that the two funds could only manage state-owned shares and not own them.

This means that when the funds sold the shares a year later, the profit they generated should have belonged to the state and subsequently registered as a reduction in SOD's claim to the state, with the funds only being entitled to a commission for conducting the transactions.

As a result the Court of Audit also tasked the Finance Ministry and the government with preparing regulations settling the relationship between SOD and the state and legislation. While this was done, the problem is that state assets transferred to SOD prior to the legislation being adopted were kept as assets of SOD.

Due to the latter fact, the court found this remedial measure to be only partly satisfactory.

In the area of registering assets and liabilities of legal entities acting on behalf of the state in the national budget, as demanded by the second and key remedial measure, the changes requested by court would have a significant impact on the state's accounts.

Factoring in SOD's assets would raise budget revenues by EUR 48m over the next three years, but its liabilities would increase budget expenditure by EUR 150m, the Court of Audit said.

In the case of state-owned motorway company DARS, examined in a separate audit last year, liabilities would be even higher due to its massive state-guaranteed loans.

12.01.2011 16:50

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