Problems with accounting and reporting of financial investments in state-owned enterprises: key results of the SMS financial audit

At the meeting on August 5, the Accounting Chamber approved the Report on the results of the financial audit of the State Migration Service of Ukraine, within the framework of which the activities of its subordinate institutions and organizations (SMS Group) for 2024 were also examined. The person responsible for the control measure is – member of the Accounting Chamber Yelizaveta Pushko-Tsybulyak.

According to the results of this audit, it was established: the consolidated financial and consolidated budget reporting reliably discloses in all material aspects the financial condition of the objects of control, their financial results and cash flow for 2024.

At the same time, the auditors note that due to the improper performance by the Ministry of Finance of Ukraine of its functions in the field of state regulation of accounting, financial, budget reporting, failure to ensure the definition of unified methodological principles of accounting and the preparation of financial and budget reporting, the consolidated financial reporting of the State Medical Service does not reflect the state's financial investments in business entities in the amount of UAH 724.9 million.

Financial investments in state-owned enterprises should be reflected in the assets and liabilities of the balance sheets of public sector entities, to whose sphere of management such enterprises belong. However, since the entry into force of the National Regulation (Standard) of Accounting in the Public Sector 133 "Financial Investments" (January 1, 2015),public sector entities have not received sufficient clarifications regarding the procedures for reflecting business transactions in accounting and the practical application of the norms and provisions of this standard, which has become one of the reasons for their different interpretations; reports without reflecting these amounts are accepted without comments.

The Report also addresses other identified inconsistencies in the consolidated financial statements of the State Medical Service for 2024, in particular:

- failure to reflect information on current liabilities under internal settlements for a total amount of UAH 316.9 million;

- failure to disclose significant information about fixed assets lost as a result of the armed aggression of the Russian Federation, located on the TOT and/or in combat zones, for the amount of UAH 91.3 million;

- failure to disclose information about completely worn-out fixed assets that continue to be used by bodies and institutions of the State Medical Service Group  (in the amount of UAH 28.3 million);

– understatement of the value of fixed assets in the amount of UAH 28.8 million with a simultaneous overstatement of the value of intangible assets by this amount;

– untimely reflection in accounting and reporting of fixed assets received free of charge in the amount of UAH 11.5 million;

– deviations in accounting and reporting that did not have a significant impact on the indicators of the consolidated financial statements of the SMS Group, in the total amount of UAH 68.1 million.

REMOVING DEFICIENCIES DURING AUDIT

During the audit, the SMS bodies and divisions began to take measures and partially eliminated the identified inconsistencies, in particular:

- amendments were made to the regulation on accounting policy in the SMS apparatus – established a norm for the depreciation of fixed assets and other non-current tangible assets;

- the accounting of fixed assets and intangible assets was streamlined in the amount of UAH 28.8 million;

- other errors in the amount of UAH 6.1 million were corrected.

These steps, among other things, made it possible to bring the volumes of salary settlements with employees of the SMS system bodies into line with the actual state and expand information on the disclosure of key areas and processes of SMS activity in the consolidated financial statements.

At the initiative of the Ministry of Internal Affairs of Ukraine, a meeting was held in which representatives of the SMS, the Ministry of Finance and the State Treasury Service of Ukraine participated to develop a common position on the reflection of financial investments and interdepartmental settlements in the consolidated statements of the SMS.

«Operational response to identified shortcomings, feedback from the object of control, interest and support from the main manager of budget funds, audit results create all the prerequisites for improving the processes of managing budget funds and state property, their accounting. The greatest effect of such financial audits is to increase the trust of stakeholders and confirm the reliability of the consolidated financial statements of public sector entities»,- noted at the meeting by Elizaveta Pushko-Tsybulyak.

RECOMMENDATIONS OF THE ACCOUNTING CHAMBER

To eliminate the shortcomings identified during the audit, the Accounting Chamber provided the following recommendations:

- The Ministry of Finance, together with the Treasury, was recommended to complete the work begun on standardizing the issues of reflecting in accounting and financial (consolidated financial) reporting financial investments in public sector enterprises that fall within their scope of management (including providing public sector entities with detailed explanations regarding the procedures (mechanisms) for the practical application of the norms of relevant accounting standards);

- The State Medical Service, as an object of control, must take a number of measures to bring accounting data and financial (consolidated financial) reporting into line with the actual property and financial status of bodies and divisions of the State Medical Service, optimize internal processes and procedures, strengthen internal control at all stages of the process of managing budget funds and state property, as well as improve regulatory acts regulating key processes of the Service's activities.

The representatives of the control objects present at the meeting expressed gratitude to the Accounting Chamber for the examination and noted that they will continue to work on eliminating the identified shortcomings.

The report and decisions of the Accounting Chamber will be sent to the Verkhovna Rada of Ukraine, the Cabinet of Ministers of Ukraine, the Ministry of Finance and the State Migration Service, as well as published on the official website of the institution.

Report on the results of the financial audit of the State Migration Service of Ukraine

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