Audit Reveals Irregularities in Ministry of Defense’s Financial Statements
The State Audit Service conducted an audit of the consolidated financial statements of the Ministry of Defense and its affiliated entities. The audit examined the financial data as of December 31, 2021, along with the corresponding consolidated statement of financial results. The audit revealed certain irregularities in the payment of allowances to employees with a “secret” clearance.
In 2021, approximately 233 employees received salary bonuses based on individual administrative-legal acts in the total amount of GEL 5,160,000 including an amount of 286,672 GEL allocated to LEPLs (Legal Entities of Public Law). However, the documentation supporting these bonuses was not sufficiently substantiated. In addition, in 2021, 83 employees received allowances totaling more than GEL 160,000 for overtime work and/or the performance of additional professional duties. Although the bonuses were based on Minister’s orders, the basis for granting these bonuses, was not adequately justified. Also, the same amount of bonus was granted to employees in different months, regardless of the specific circumstances.
The State Audit has uncovered significant issues regarding the accounting data and observed that there are instances where timely and effective communication is lacking between the structural units within the Ministry. As a result, economic events occurring in the subdivisions and the ministry are reflected in different periods, leading to inconsistencies in financial reporting.
For example, in April 2022, one of the subdivisions of the ministry repeatedly submitted the nominal register of assets for 2021 in which the adjusted total value of assets was GEL 542 419 lower than the one initially submitted. The amount of the difference was recorded in the 2021 statement as an expense.
The report says that the results of the inventory conducted by the Ministry in 2021 are not reflected in the financial statements.
In August 2020, a contract (worth 96,720,000 GEL) was signed between the Ministry and “Delta Mshenebili” LLC for the construction of the “Military City” residential complex in Tbilisi. The subcontractor, “Anagi” LLC, was selected through a simplified procedure jointly by “Delta Mshenebili” LLC (worth 92,3776,460 GEL). Therefore, the audit could not obtain assurance of the competitiveness of the estimated contract value determined for the construction works. The report states that during the audit, inaccuracies in the calculation of the costs of works were identified, amounting to 430,220 GEL discrepancy. The said amount was transferred to the account of “Delta Builder” LLC.
The State Audit Office emphasizes the need for the Ministry of Defense to address these findings and implement appropriate control mechanisms to ensure compliance with the relevant legislation and accurate financial reporting.
In response to the audit report, the Ministry of Defense stated: “We explain to the public that year after year the Ministry of Defense of Georgia improves and refines the recommendations expressed in the report of the Audit Service and deserves increasingly positive assessments.” Concerning the deficiencies, the Ministry emphasized that it is actively working on their elimination, including the debts dating back to the Minister Davit Kezerashvili’s tenure as minister. On the issue of salaries, the Ministry emphasized that there had been an increase of around 40% in salaries within the defense forces over the past two years. “The said amount was given to the military personnel and employees of the Ministry of Defense in order to appreciate and encourage their effective work”.
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