Institutional considerations (leadership, coordination, sustainability, and transparency)

PFM reforms are spearheaded by the MoF and carried out in coordination with other institutions. The main stakeholders in the PFM reform management and coordination framework are the PFM Council and the PFM Working Group (PFM WG). All relevant country PFM institutions are represented.⁹ Operational monitoring is assigned to priority coordinators and measure leaders (for individual measures within a priority area). PFMRP implementation is reported at least biannually to the Government by the PFM Working Group through the PFM Council. An updated Decision on the PFM WG composition and tasks (October 2021) provides the mandate for its members to develop the new PFM Strategy, coordinate its implementation, as well as to monitor, evaluate and report progress made. As of October 2021, civil society organizations (CSOs) and representatives of development partners are included as observers in the PFM WG.

Results of the PFMRP inform policy and technical assistance dialogues with the EU and other development partners. Implementation of the PFMRP is characterized by a high degree of transparency, with the main documents (program, action plan, reports, and policy dialogue conclusions) available publicly and without restrictions. Besides providing a synopsis of progress achieved across priorities, monitoring reports single out cross-cutting issues such as donor coordination and capacities (financial, IT and human) and interested parties, including CSOs, are invited to discuss the reported progress. Measures are reported as achieved/partially achieved/not achieved and accompanied with a forward-looking risk assessment for measures under implementation. To address capacity constraints, the government is expecting support from multiple technical assistance projects in the period 2021-2023.

The PFMRP is fully costed across pillars, measures, and activities. The 2021 Action Plan shows the PFM reforms are financed just over 50 percent from national sources of funds and the remainder through donor support. The financing gap is known and is addressed through proactive dialogue with the development partners.

1.1 Aggregate expenditure outturn

The data used for calculation of expenditure deviation originates from audited final accounts of the Budget of the Republic of North Macedonia for 2018 and for 2019, and unaudited reports for 2020. The absolute deviation of the actual budget expenditures versus the approved expenditure in the last three completed fiscal years (i.e., 2018, 2019 and 2020) was between 2.8 percent and 8.2 percent. This translates into budget outturn for those years in the range between 91.8 percent and 102.8 percent.

^{Table 1.1:}

Total budget and actual expenditure (in MKD million)

Source: Assessment team calculations based on the annual budget laws and final accounts

^{Table 1.1:}

Total budget and actual expenditure (in MKD million)

	2018	2019	2020
Budget	154,324,721	163,395,691	170,241,447
Actual	141,694,691	151,517,166	174,936,364
Aggregate expenditure outturn (percent)	91.8	92.7	102.8

Source: Assessment team calculations based on the annual budget laws and final accounts

View Table

^{Table 1.1:}

Total budget and actual expenditure (in MKD million)

	2018	2019	2020
Budget	154,324,721	163,395,691	170,241,447
Actual	141,694,691	151,517,166	174,936,364
Aggregate expenditure outturn (percent)	91.8	92.7	102.8

Source: Assessment team calculations based on the annual budget laws and final accounts

Since the variations in two of the three years covered by the assessment are between 90 and 110 percent, the rating for this dimension is B.

2.1. Expenditure composition outturn by function

This dimension measures the difference between the originally approved budget and end-of-year outturn in expenditure composition, by administrative or functional classification, during the last three years, excluding contingency items, and interest on debt.

The assessment of the expenditure composition outturn is done at the administrative level, based on the twenty main budgetary votes. The variance of expenditure composition outturn by budgetary votes was 9.6 percent in 2018, 8.7 percent in 2019 and 17.8 percent in 2020. The source of variation differed from one year to the other. In 2018, the main source of deviation was under-execution of the approved budget by Ministry of Transport and Communication (51.3 percent), Ministry of Finance, (47.3 percent), and Ministry of Agriculture, Forestry and Water Economy (42.3 percent). In 2019 and in 2020, the variance was largest for the administrative head of Government of Republic of North Macedonia, due to overspending against the approved budget, largely due to measures to mitigate the impact of COVID-19.

Since the variations in expenditure composition were less than 10 percent in two of the past three years, the score for this dimension is B.

2.2. Expenditure composition outturn by economic type

This dimension measures the difference between the original approved budget and end-of-year outturn in expenditure composition by economic classification during the last three years including interest on debt but excluding contingency items.

The variance in expenditure composition by economic classification was 16.7 percent in 2018, 11.3 percent in 2019 and 18.2 percent in 2020. The variance was less than 15 percent in only one of the years assessed. Significant under-execution of capital expenditure and over-execution of transfers and subsidies were the key contributors to relatively high variances for all three years.

As the variations in expenditure composition by economic classification in two of the past three years exceeded 15 percent, the rating for this dimension is D.

2.3. Expenditure from contingency reserves

This dimension measures the average amount of expenditure actually charged to a contingency vote over the last three years.

Under the Budget Law (Article 11), permanent and current budget reserves are considered for addressing the consequences from natural disasters and other unforeseen events, respectively. The appropriations in the permanent budget reserve cannot be reduced with reallocations during the year, but they can be increased. The total volume of reserve funds shall not exceed 3 percent of the total current expenditures of the budget. The funds from the reserves are allocated to specific purpose based on a government decision.

Aggregate amount of funds spent within the contingency reserve as a proportion of the total BCG expenditure in 2018, 2019 and 2020 was at the levels of 0.04, 0.05 and 0.1 percent, respectively, while the average in the last three completed fiscal years was 0.06 percent.

Since the level of actual expenditure charged to a contingency was on average less than 3 percent in the past three years, the rating for this dimension is A.

3.1. Aggregate revenue outturn

This dimension measures the extent to which revenue outturns deviate from the originally approved budget. Total actual revenue deviated from the revenue foreseen by the annual budget laws by 7.3 percent in 2018, 7.1 percent in 2019 and 16.1 percent in 2020. The largest contributors to the variance were tax revenues, social security contributions and non-tax revenues. Tax and non-tax revenues were overestimated while the social security contributions were underestimated. Due to COVID-19 the deviation in 2020 was significantly higher.

^{Table 3.1}

BCG aggregate revenue deviation

Source: Assessment team calculations based on the annual budget laws and final accounts

^{Table 3.1}

BCG aggregate revenue deviation

	2018	2019	2020
Aggregate deviation (percent)	-7.3	-7.1	-16.1

Source: Assessment team calculations based on the annual budget laws and final accounts

View Table

^{Table 3.1}

BCG aggregate revenue deviation

	2018	2019	2020
Aggregate deviation (percent)	-7.3	-7.1	-16.1

Source: Assessment team calculations based on the annual budget laws and final accounts

Since the actual revenue deviation in two out of the three past financial years was under 8 percent of total revenue, the rating for this dimension is C.

3.2. Revenue composition outturn

This dimension measures the variance in revenue composition over the past three years. The variance in revenue composition was 12.4 percent in 2018, 13.7 percent in 2019 and 17.1 percent in 2020. The sources of variance remain the same as in the previous dimension. Namely, estimates of income and profit tax together, VAT and excise and social security contributions contributed the most to the overall misalignment of actual values with those set by the budget law. Due to COVID-19 the deviation in 2020 was significantly higher.

^{Table 3.2.}

BCG revenue composition variance

Source: Assessment team calculations based on the annual budget laws and final accounts

^{Table 3.2.}

BCG revenue composition variance

	2018	2019	2020
Composition variance (percent)	12.4	13.7	17.1

Source: Assessment team calculations based on the annual budget laws and final accounts

View Table

^{Table 3.2.}

BCG revenue composition variance

	2018	2019	2020
Composition variance (percent)	12.4	13.7	17.1

Source: Assessment team calculations based on the annual budget laws and final accounts

Since the variance in revenue composition in two out of the past three years was lower than 15 percent, the rating for this dimension is C.

4.1. Budget classification

This dimension measures whether the budget presentation, execution and reporting reflect the most important classifications, is reliable, and is consistently applied. The economic classification is defined by the two rulebooks (as mentioned above). A standard bridge table is used to map the economic classification to the classification used in the Government Finance Statistics Manual (GFSM 2014). The organizational classification is based upon several regulations, such as founding laws of individual institutions, and is defined with the annual budget. The programs within the program classification are also defined with annual budget. The functional classification directly follows the Classification of the Functions of Government (COFOG) determined by the United Nations. A detailed bridge table with fully documented methodology is used to derive the functional classification from a combination of the organizational and program classifications.

Budget formulation (the annual budget law and its adoption) is based on all the required classifications, i.e. (i) organizational classification, (ii) economic classification on a 3 digit level for presentation and approval, (iii) full functional classification (4 digit level), (iv) program classification and (v) source of funds classification,

Budget is executed through the STA and Treasury Information System (TrIS). STA, TrIS and centralized payment procedures allow for every transaction to be tracked by all classifications and reports to be generated against each classification during the year. For each transaction, a 24-digit account code is used, including: 10 digits dedicated for administrative classification, 5 digits for source of funds classification, 6 digits for the economic classification, 2 for the program classification and 1 digit is a control number. A detailed bridge table with documented methodology is used to derive the functional classification from a combination of the organizational and program classifications. Budget execution is monitored through the TrIS system.

Reporting is based on the classifications used for budget formulation. The annual Final Account report follows exactly the format of the adopted budget, i.e., it reports according to (i) organizational classification, (ii) economic classification, (iii) functional classification, (iv) program classification and (v) source of funds classification. In-year budget reports can also be produced in these formats.

Consistency of use of the classifications is supported by centralized IT systems for budget preparation (E-Budget) and budget execution Treasury Information System (TrIS).

The budget is classified by administrative, economic, and program classifications, and the functional classification is derived from the program and administrative classifications by a bridge table. The classification system allows transactions to be tracked throughout the budget’s formulation, execution, and reporting cycle according to all classifications enabling to produce consistent documentation comparable to GFS/COFOG standards. However, budget formulation is based only on the “Group” level of the GFS standard – 3 digits, hence the score B.

5.1 Budget documentation

The budget documentation for the 2021 annual budget consists of:

• The Fiscal Strategy of the Republic of North Macedonia for 2021-2023 (FS 2021-2023); adopted on July 28, 2020.

• The Revised Fiscal Strategy of the Republic of North Macedonia for 2021-2023 (with prospects until 2025); adopted on December 10, 2020.

• The Public Debt Management Strategy of the Republic of North Macedonia for 2021-2023 (with prospects until 2025) (PDMS 2021-2023); adopted on December 10, 2020¹³.

• The 2021 Budget Law Proposal; submitted to the Parliament on November 10, 2020 and adopted on December 20, 2020.

• The Final Account for 2019; submitted to the Parliament on October 13, 2020.

The detailed structure of the annual Budget Law with several thousand budget lines according to different budget classifications makes systematic comparison of revenue and expenditure estimates of the budget proposal of the current year, and outturn of the previous year very difficult for decision makers since the information is not presented for comparison in the same document.

Element/ Requirements	Met (Y/N)	Evidence used/Comments
Basic elements
1. Forecast of the fiscal deficit or surplus or accrual operating result	Y	Provided in the Budget 2021 and in FS 2021-2023 (Table 3) and in Revised FS 2021-2023.14
2. Previous year’s budget outturn, presented in the same format as the budget proposal	Y	The Final Account for 2019 (previous year) was prepared in the same format as the budget proposal. It was submitted to the Parliament on October 13, 2020, while the budget proposal was submitted on November 10, 2020 which effectively supported a decision on the budget.
3. Current fiscal year’s budget presented in the same format as the budget proposal	N	Current year (2020) data is presented in the same format as budget proposal (2021) for revenue and expenditure by economic classification. In cases of functional classification, government programs or development programs, the current year data is not presented hence no direct comparison is possible.
4. Aggregated budget data for both revenue and expenditure for all classifications used, including data for the current and previous year with a detailed breakdown of revenue and expenditure estimates	N	This data is not included in the budget documentation for all classifications used (see also basic element 3 above).
Additional elements
5. Deficit financing, describing its anticipated composition	Y	Table 4: Deficit and Sources for its financing of the FS 2021 – 2023 and Revised FS 2021 - 2023
6. Macroeconomic assumptions, including at least estimates of GDP growth, inflation, interest rates, and the exchange rate	N	Assumptions of GDP growth, inflation and exchange rate are included in the FS 2021-2023. While incorporated in the macro forecasts, the estimates of interest rates are not explicitly elaborated.
7. Debt stock, including details at least for the beginning of the current fiscal year presented in accordance with GFS or other comparable standard	Y	Within the Fiscal Strategy (chart 19) there is information for latest stock of public debt. In addition, the debt management strategy (consistent with the data of Fiscal Strategy) projects the medium-term debt path, Table I: Public Debt Trend in PDMS 2021-2023.15
8. Financial assets, including details at least for the beginning of the current fiscal year presented in accordance with GFS or other comparable standard	N	No cash balances or other financial assets and projected movements are shown in budget documentation. The information on cash balances is available from the Final Account but not on other financial assets.
9. Summary information of fiscal risks including contingent liabilities such as guarantees, and contingent obligations embedded in structure financing instruments such as public-private partnerships (PPP) contracts, etc.	N	In the Fiscal Strategy 2021-2023 risks related to fiscal projections and to guarantees are discussed. Summary information on other specific risks (related to PPPs, arrears, PEs, local governments, etc.) is not provided. Guaranteed debt is reported in the PDMS 2021-2023.
10. Explanation of budget implications of new policy initiatives and major new public investments, with estimates of the budgetary impact of all major revenue policy changes and/or changes to expenditure programs	N	The changes to revenue and expenditure caused by new policy initiatives and major new public investments are included in the projections, but new policy initiatives and major new public investments are not separately explained or quantified in the budget documentation.
11. Documentation on the medium-term fiscal forecasts	Y	Table 3: Budget of the Republic of North Macedonia 2019-2023 of the FS 2021-2023 and Revised FS 2021-2023.
12. Quantification of tax expenditures	N	Tax expenditures are not reported.

View Table

Element/ Requirements	Met (Y/N)	Evidence used/Comments
Basic elements
1. Forecast of the fiscal deficit or surplus or accrual operating result	Y	Provided in the Budget 2021 and in FS 2021-2023 (Table 3) and in Revised FS 2021-2023.14
2. Previous year’s budget outturn, presented in the same format as the budget proposal	Y	The Final Account for 2019 (previous year) was prepared in the same format as the budget proposal. It was submitted to the Parliament on October 13, 2020, while the budget proposal was submitted on November 10, 2020 which effectively supported a decision on the budget.
3. Current fiscal year’s budget presented in the same format as the budget proposal	N	Current year (2020) data is presented in the same format as budget proposal (2021) for revenue and expenditure by economic classification. In cases of functional classification, government programs or development programs, the current year data is not presented hence no direct comparison is possible.
4. Aggregated budget data for both revenue and expenditure for all classifications used, including data for the current and previous year with a detailed breakdown of revenue and expenditure estimates	N	This data is not included in the budget documentation for all classifications used (see also basic element 3 above).
Additional elements
5. Deficit financing, describing its anticipated composition	Y	Table 4: Deficit and Sources for its financing of the FS 2021 – 2023 and Revised FS 2021 - 2023
6. Macroeconomic assumptions, including at least estimates of GDP growth, inflation, interest rates, and the exchange rate	N	Assumptions of GDP growth, inflation and exchange rate are included in the FS 2021-2023. While incorporated in the macro forecasts, the estimates of interest rates are not explicitly elaborated.
7. Debt stock, including details at least for the beginning of the current fiscal year presented in accordance with GFS or other comparable standard	Y	Within the Fiscal Strategy (chart 19) there is information for latest stock of public debt. In addition, the debt management strategy (consistent with the data of Fiscal Strategy) projects the medium-term debt path, Table I: Public Debt Trend in PDMS 2021-2023.15
8. Financial assets, including details at least for the beginning of the current fiscal year presented in accordance with GFS or other comparable standard	N	No cash balances or other financial assets and projected movements are shown in budget documentation. The information on cash balances is available from the Final Account but not on other financial assets.
9. Summary information of fiscal risks including contingent liabilities such as guarantees, and contingent obligations embedded in structure financing instruments such as public-private partnerships (PPP) contracts, etc.	N	In the Fiscal Strategy 2021-2023 risks related to fiscal projections and to guarantees are discussed. Summary information on other specific risks (related to PPPs, arrears, PEs, local governments, etc.) is not provided. Guaranteed debt is reported in the PDMS 2021-2023.
10. Explanation of budget implications of new policy initiatives and major new public investments, with estimates of the budgetary impact of all major revenue policy changes and/or changes to expenditure programs	N	The changes to revenue and expenditure caused by new policy initiatives and major new public investments are included in the projections, but new policy initiatives and major new public investments are not separately explained or quantified in the budget documentation.
11. Documentation on the medium-term fiscal forecasts	Y	Table 3: Budget of the Republic of North Macedonia 2019-2023 of the FS 2021-2023 and Revised FS 2021-2023.
12. Quantification of tax expenditures	N	Tax expenditures are not reported.

The budget documentation fulfills five elements, including two of the four basic of the elements and three of the eight additional elements, and the dimension score is D.

6.1. Expenditure outside financial reports

This dimension assesses the magnitude of expenditures incurred by budgetary and extrabudgetary units (including social security funds) that are not reported in the government’s financial reports.

^{Table 6.1} above provides quantitative information on estimated extrabudgetary expenditures.

Extrabudgetary expenditure not included in ex-ante and ex-post financial reports amounted to less than 10 percent of budgetary central government expenditure in 2020, resulting in a C score.

6.2. Revenue outside financial reports

This dimension assesses the magnitude of revenues received by budgetary and extrabudgetary units (including social security funds) that are not reported in the government’s financial reports.

^{Table 6.1} provides quantitative information on estimated extrabudgetary revenues.

Extrabudgetary revenue not included in ex-ante and ex-post financial reports amounted to more than 10 percent of budgetary central government revenue in 2020, resulting in dimension score D.

6.3. Financial reports of extrabudgetary units

This dimension assesses the extent to which ex-post financial reports of extrabudgetary units are provided to central government. The annual reports should be sufficiently detailed and timely to yield a full picture of government financial operations when combined with the financial reports for budgetary central government and SSFs.

The Budget Law regulates the semi-annual and annual reports on budget execution but not the annual reports of PEs or EBUs. These are regulated by the Law on Public Enterprises, and specific legal acts establishing individual entities, respectively. Out of nine regulatory agencies, seven report to the Parliament, while the remaining two report to the Government. All reports are scrutinized by the MoF. The MoF issues an opinion before the reports are adopted by the Parliament or Government.

About 22 percent (by value of expenditure) of financial reports are submitted to the government within six months and about 55 percent within nine months of the end of the financial year.

The majority of extrabudgetary units submit financial reports within nine months of the end of the financial year, resulting in dimension score C.

7.1. System for allocating transfers

This dimension assesses the extent to which transparent, rule-based systems are applied to budgeting and the actual allocation of conditional and unconditional transfers.

More than 90 percent on average of central government grants are distributed through a transparent, formulae-based system with clear objective factors (e.g., population, pupil numbers, surface area). In addition to their shares of block grants for education, culture and social protection, LGUs receive 4.5 per cent of the previous year's VAT revenue. LGUs' own revenues include 3 per cent of the current year's yield in their respective geographical area from personal income tax. The breakdown of LGU revenues is shown in ^{Table 7.1} below.

^{Table 7.1:}

Local government revenue summary (MKD millions)

Source: Authorities

^{Table 7.1:}

Local government revenue summary (MKD millions)

	Outturn 2018	Outturn 2019	Circular 2020	Budget 2020	Supplementary Budget 2020	Outturn 2020
LGUs' Own Revenues	11,534	13,011				10,094
Loans	274	524				954
Formula-based Central Government grants	18,055	19,095	21,375	21,375	21,442	21,374
Primary education	9,423	9,830	11,113	11,113	11,144	11,144
Secondary education	4,378	4,624	5,069	5,069	5,082	5,082
Culture	250	277	297	297	324	324
Social Protection-elderly homes	46	55	55	55	55	55
Kindergartens	1,518	1,783	2,095	2,095	2,093	2,077
Fire-fighting	288	310	400	400	401	349
VAT grant	2,152	2,216	2,346	2,346	2,343	2,343
Other Central Government grants	776	861				1,323
Total Central Government grants	18,831	19,956				22,697
Formula-based as percentage of total	95.9%	95.7%				94.2%
External grants	844	698				679
Total LGU revenues	31,483	34,189				34,424

Source: Authorities

View Table

^{Table 7.1:}

Local government revenue summary (MKD millions)

	Outturn 2018	Outturn 2019	Circular 2020	Budget 2020	Supplementary Budget 2020	Outturn 2020
LGUs' Own Revenues	11,534	13,011				10,094
Loans	274	524				954
Formula-based Central Government grants	18,055	19,095	21,375	21,375	21,442	21,374
Primary education	9,423	9,830	11,113	11,113	11,144	11,144
Secondary education	4,378	4,624	5,069	5,069	5,082	5,082
Culture	250	277	297	297	324	324
Social Protection-elderly homes	46	55	55	55	55	55
Kindergartens	1,518	1,783	2,095	2,095	2,093	2,077
Fire-fighting	288	310	400	400	401	349
VAT grant	2,152	2,216	2,346	2,346	2,343	2,343
Other Central Government grants	776	861				1,323
Total Central Government grants	18,831	19,956				22,697
Formula-based as percentage of total	95.9%	95.7%				94.2%
External grants	844	698				679
Total LGU revenues	31,483	34,189				34,424

Source: Authorities

The allocation of over 90 per cent on average of central government grants to LGUs is based on a transparent and rule-based system, resulting in dimension score A.

7.2. Timeliness of information on transfers

This dimension assesses the timeliness of reliable information provided to subnational governments on their allocations from central government for the coming year.

The MoF issues guidance to LGUs in the Budget Circular which includes the amounts of government grants, and other factors to be taken into account in their preparation of the next year's budget, by the September 30^th each year as required under Article 19 of the Budget Law. The adopted budget allocation is identical to the allocation indicated within the Budget Circular (see also ^{Table 7.1} above). This deadline is respected. LGUs' budgets should be approved before the beginning of the year to which they relate, but LGUs are free in other respects to fix their own budget calendars (Law on Financing of Local Self Government Units, Articles 27 and 28).

LGUs receive guidance on prospective allocations and other factors to be taken into account in budget preparation by 30 September each year, resulting in dimension score A.

8.1. Performance plans for service delivery

This dimension assesses the extent to which key performance indicators for the planned outputs and outcomes of programs or services that are financed through the budget are included in the executive’s budget proposal or related documentation, at the function, program, or entity level.

Although North Macedonia has not formally adopted program budgeting, the budget presents some information on programs in the budget documentation and information on planned performance is presented separately by line ministries. The sample of service delivery ministries reviewed in detail that was agreed and assessed include: Ministry of Health, Ministry of Transport and Connections, Ministry of Agriculture, Forestry and Water Economy, Ministry of Education and Science.

The annual Budget Law presents the expenditures for administrative units with a breakdown by programs. Budget documentation includes description of the programs of line ministries at the aggregate level with main qualitative objectives and input and output indicators. Input indicators are standard, reflecting operational costs and are included for all programs. Output indicators are sector specific and included only for some programs.

Ministries with service delivery responsibilities, included in the assessment sample, prepare and publish three-year strategic plans and annual operational plans containing programs and activities for implementing the strategic priorities of the Government, as well as the goals and priorities of the ministry for the same period.¹⁷ Strategic plans and annual operational plans contain information on programs as presented in the budget, their objectives, costs, expected results and success indicators which combine both outcome and output indicators.

In addition, the Health Insurance Fund, the Pension and Disability Fund and the PESR publish mid-term strategic plans and annual plans that include information on planned programs and projects, their goals and targets. Although the quality of information varies from institution to institution, it is estimated that the information is published annually on the activities to be performed under the policies or programs for the majority (greater than 50 percent but less than 75 percent) of ministries.

Since information is produced annually on activities to be performed and is published for the majority of ministries, the rating for this dimension is C.

8.2. Performance achieved for service delivery

This dimension examines the extent to which performance results for outputs and outcomes are presented either in annual budget documents, or separately by each ministry in the executive’s budget proposal or in an annual report or other public document, in a format comparable to the plans.

Under the annual Budget Execution Law, specified budget users have to prepare Programs for the use of funds from the Budget and submit them to the Government within 30 days from the day of publishing the Budget in the Official Gazette. Budget users prepare and submit to the MoF semi-annual and annual reports on the implementation of programs indicating whether the announced performance targets have been achieved. However, this information is not systematically aggregated and presented in a format that would allow for comparison of achieved results against the performance indicators of planned programs and allocated funding.

The ministries included in the assessment sample, as well as social security funds, publish annual reports on implementation of the annual action plan of the mid-term strategy with the information about results achieved under each program.

Although the results framework for performance is not uniform and the quality of information varies from institution to institution, the assessed sample of ministries that includes all major service delivery ministries, such as Ministry of Education, Ministry of Health, Ministry of Transport and Communication, annually publish the activities to be performed under their policies or programs.

Since the information is not presented in a format that would allow for comparing results achieved against the performance indicators of planned programs and allocated funding, the rating for this dimension is C.

8.3. Resources received by service delivery units

This dimension measures the extent to which information is available on the level of resources actually received by service delivery units of at least two large ministries (such as schools and primary health clinics) and the sources of those funds.

The Health Insurance Fund (HIF) of North Macedonia is responsible for collecting and allocating funds to healthcare providers for provided services within the mandatory health insurance. HIF performs and documents all payment made to 108 public and a number of private healthcare institutions, and compiles and publishes reports on actual financing of these institutions by funding sources (own revenues, subsidies).

No information was provided on the level of actual resources provided to schools in the education sector.

Since no information on the level of actual resources provided to schools is made available, the rating for this dimension is C.

8.4. Performance evaluation for service delivery

This dimension examines the extent to which the design of public services and the appropriateness, efficiency, and effectiveness of those services is assessed in a systematic way through program or performance evaluations, and whether these evaluations cover all or a material part of service delivery or if they are cross-functional and incorporate service delivery functions, including the performance audits undertaken by the government’s external auditor.

The State Audit Office (SAO) has a legal mandate to conduct performance audit, alongside financial and compliance audit, under the Law on State Audit. The law also defines the concept of performance audit as an assessment of the cost-effectiveness, efficiency, and effectiveness of the operation and use of funds in a defined area of activities or programs. A performance audit manual provides the methodology for conducting such audits. Performance audits are carried out according to the annual plan for audit. The SAO carried out 19 performance audits during the last three completed fiscal years, presented in ^{Table 8.4} below.

Available performance audit reports focus on the efficiency and effectiveness of a specific function, policy or measure being implemented by BUs, not the specific institution. For example, in 2020, the Ministry of Education and Science was evaluated with regard to the effectiveness of its measures to deal with labor market risks, within the broader performance audit of 9 government agencies on the same topic; in 2019, it was evaluated with regard (i) to effectiveness of the realization of the higher education staff on the labor market as a part of broader performance evaluation covering 13 government agencies and public institutions, and (ii) to improving the conditions for sports for children from primary and secondary education, alongside the LGUs. The performance audits carried out in the last three years include reports focusing on assessing effectiveness of service delivery (e.g. Improving the conditions for sports for children from primary and secondary education - Project construction of gyms in primary and secondary schools) as well as reports which put more emphasis on assessing efficiency of government administrative functions and policies (e.g. Government planning - Effectiveness of government measures to deal with labor market risks and how to plan funds to overcome them). As reported by the SAO, average coverage of expenditures managed by the audited ministries (not disaggregated by service delivery programs) for the last 3 years is 14 percent.

Performance audits have been also undertaken by public sector internal auditors, but to a limited extent, due to internal capacity constraints. Only 4 of the 161 internal audits carried out in 2019 were performance audits (2.4 percent), as reported in the annual report on the functioning of the Public Internal Financial Control System.¹⁸

^{Table 8.4:}

SAO performance audits published in FY 2018-2020

Source: SAO website

^{Table 8.4:}

SAO performance audits published in FY 2018-2020

Title of Audit	Year of Audit	Audited entities
Effectiveness of measures and activities for issuing B integrated permits	2020	Ministry for Environment and Spatial Planning (MESP) and Ministry for Local-Self Government (MLSG) + one inspectorate+11 LSGUs and the City of Skopje.
Effectiveness of the measures and activities in function of realization of the transferred competencies that are financed with funds from block donations	2020	Ministry of Labor and Social Affairs (MLSA), Ministry of Education and Science (MES), Ministry of Culture (MC), MLSG + 3 LSGUs and the City of Skopje
Effectiveness of measures and activities for utilization of mineral resources and collection of fees	2020	MoF – Public Revenue Office, Ministry of Economy (ME) + 2 institutions on central government level and 1 inspectorate
Capital transfers to LSGUs from the Budget of the RNM	2020	Government of the RNM (GRNM), Ministry of Defense (MD), MoF, Ministry of Transport and Communication (MTC), MESP, MC, MLSG + 1 institution and 1 agency on central government level
Institutional capacities of the inspectorates in the RNM	2020	GRNM, Ministry of Information Society and Administration (MISA), Ministry of Health (MH), MC, Inspection Council + 4 inspectorates
Government planning - Effectiveness of government measures to deal with labor market risks and how to plan funds to overcome them	2020	Ministry of Interior (MI), Ministry of Economy (ME), MLSA, MES, MH, 2 state funds + 1 institution on central government level + 1 state faculty
Efficient treatment and management of plastic waste	2020	MoF – Custom Office, MESP, 2 institutions on central government level, 1 inspectorate + 12 LSGUs and the City of Skopje + 12 public enterprises on local level + 8 regional development centers
Efficiency of policies, measures and activities in granting water rights	2020	Parliament, General Secretariat of RNM, MESP, MoF, 2 inspectorates, 2 institutions on central level, Association of Units of LSG of RNM, 51 LSG, 1 City of Skopje, 64 Public Enterprises
Improving the conditions for sports for children from primary and secondary education - Project construction of gyms in primary and secondary schools	2019	MES, 79 LSG
Measures, policies and projects for protection and promotion of beekeeping in the Republic of North Macedonia	2019	Ministry for Agriculture, Forestry and Water Management (MFWM), MESP, 2 institutions and 2 agencies on central level, 1 inspectorate, 2 state faculties
Service for General and Common Affairs of the Government of the Republic of North Macedonia	2019	Service for General and Common Affairs of the Government of the Republic of North Macedonia
Realization of the higher education staff on the labor market in the Republic of North Macedonia	2019	MLSA, MES and 1 state fund, 6 public and 6 private universities, 1 inspectorate, 1 institution on central level
Cross-border cooperation program Republic of Macedonia - Republic of Bulgaria 2014 – 2020	2019	MLSG, Joint Secretariat and National Assessors
Effectiveness of policies, measures and activities in awarding public procurement contracts at the level of public enterprises of the City of Skopje	2019	2 institutions on central level, 1 court, City of Skopje and 6 public enterprises on local level
Measures, policies and projects for gasification in the Republic of North Macedonia	2018	GRNM, ME, MTC, 1 institution on central level, 1 public company, 2 public enterprises on local level
Effectiveness of policies, measures and activities in granting water rights	2018	MESP, MoF, 37 LSGUs and City of Skopje and 37 public enterprises on local level, 2 inspectorates and 2 institutions on central level
Effectiveness of policies, measures and activities in the exploitation of gravel and sand from the Vardar river basin	2018	ME, MESP, 1 inspectorate, 17 LSGUs, 1 regional planning center, 1 joint venture
Joint audit of the European Court of Auditors and 15 SAIs in Europe on “Air Quality”	2019	LSG
Effectiveness of policies and measures in construction land management	2018	MTC, 9 LSGUs and the Association of the LSGU

Source: SAO website

View Table

^{Table 8.4:}

SAO performance audits published in FY 2018-2020

Title of Audit	Year of Audit	Audited entities
Effectiveness of measures and activities for issuing B integrated permits	2020	Ministry for Environment and Spatial Planning (MESP) and Ministry for Local-Self Government (MLSG) + one inspectorate+11 LSGUs and the City of Skopje.
Effectiveness of the measures and activities in function of realization of the transferred competencies that are financed with funds from block donations	2020	Ministry of Labor and Social Affairs (MLSA), Ministry of Education and Science (MES), Ministry of Culture (MC), MLSG + 3 LSGUs and the City of Skopje
Effectiveness of measures and activities for utilization of mineral resources and collection of fees	2020	MoF – Public Revenue Office, Ministry of Economy (ME) + 2 institutions on central government level and 1 inspectorate
Capital transfers to LSGUs from the Budget of the RNM	2020	Government of the RNM (GRNM), Ministry of Defense (MD), MoF, Ministry of Transport and Communication (MTC), MESP, MC, MLSG + 1 institution and 1 agency on central government level
Institutional capacities of the inspectorates in the RNM	2020	GRNM, Ministry of Information Society and Administration (MISA), Ministry of Health (MH), MC, Inspection Council + 4 inspectorates
Government planning - Effectiveness of government measures to deal with labor market risks and how to plan funds to overcome them	2020	Ministry of Interior (MI), Ministry of Economy (ME), MLSA, MES, MH, 2 state funds + 1 institution on central government level + 1 state faculty
Efficient treatment and management of plastic waste	2020	MoF – Custom Office, MESP, 2 institutions on central government level, 1 inspectorate + 12 LSGUs and the City of Skopje + 12 public enterprises on local level + 8 regional development centers
Efficiency of policies, measures and activities in granting water rights	2020	Parliament, General Secretariat of RNM, MESP, MoF, 2 inspectorates, 2 institutions on central level, Association of Units of LSG of RNM, 51 LSG, 1 City of Skopje, 64 Public Enterprises
Improving the conditions for sports for children from primary and secondary education - Project construction of gyms in primary and secondary schools	2019	MES, 79 LSG
Measures, policies and projects for protection and promotion of beekeeping in the Republic of North Macedonia	2019	Ministry for Agriculture, Forestry and Water Management (MFWM), MESP, 2 institutions and 2 agencies on central level, 1 inspectorate, 2 state faculties
Service for General and Common Affairs of the Government of the Republic of North Macedonia	2019	Service for General and Common Affairs of the Government of the Republic of North Macedonia
Realization of the higher education staff on the labor market in the Republic of North Macedonia	2019	MLSA, MES and 1 state fund, 6 public and 6 private universities, 1 inspectorate, 1 institution on central level
Cross-border cooperation program Republic of Macedonia - Republic of Bulgaria 2014 – 2020	2019	MLSG, Joint Secretariat and National Assessors
Effectiveness of policies, measures and activities in awarding public procurement contracts at the level of public enterprises of the City of Skopje	2019	2 institutions on central level, 1 court, City of Skopje and 6 public enterprises on local level
Measures, policies and projects for gasification in the Republic of North Macedonia	2018	GRNM, ME, MTC, 1 institution on central level, 1 public company, 2 public enterprises on local level
Effectiveness of policies, measures and activities in granting water rights	2018	MESP, MoF, 37 LSGUs and City of Skopje and 37 public enterprises on local level, 2 inspectorates and 2 institutions on central level
Effectiveness of policies, measures and activities in the exploitation of gravel and sand from the Vardar river basin	2018	ME, MESP, 1 inspectorate, 17 LSGUs, 1 regional planning center, 1 joint venture
Joint audit of the European Court of Auditors and 15 SAIs in Europe on “Air Quality”	2019	LSG
Effectiveness of policies and measures in construction land management	2018	MTC, 9 LSGUs and the Association of the LSGU

Source: SAO website

Performance audits carried out comprise an average of 14 percent of total budget spending over the past three years. The number, institutional coverage and amount of expenditure covered by performance audits is less than required for a C score, and the rating for this dimension is therefore D.

9.1. Public access to fiscal information

^{Table 9.1:}

Public access to fiscal information in 2020

^{Table 9.1:}

Public access to fiscal information in 2020

Element/ Requirements	Met (Y/N)	Evidence used/Comments
Basic elements
1. Annual executive budget proposal documentation. A complete set of executive budget proposal documents (as presented in PI-5) is available to the public within one week of the executive’s submission of them to the legislature.	Y	A complete set of Budget proposal, adopted by the Government, is submitted to the legislature and published both on the website of the MoF and the Parliament within one week.19
2. Enacted budget. The annual budget law approved by the legislature is publicized within two weeks of passage of the law.	Y	Budget Law for 2021 was adopted by the Parliament on December 20, 2020. It was published in the Official Gazette No. 307 (December 23, 2020) and on the MoF website.
3. In-year budget execution reports. The reports are routinely made available to the public within one month of their issuance, as assessed in PI-28.	Y	In-year budget execution reports as assessed in PI-28 (with the economic breakdown) in a form of summary of quarterly reports are published on the MoF website (http://www.finance.gov.mk) within one month after the period completion. Narrative analysis of budget execution is provided in monthly reports for budget execution and the semi-annual budget execution report.
4. Annual budget execution report. The report is made available to the public within six months of the fiscal year’s end.	Y	Annual budget execution reports are compiled in the Final Account of Budget Execution and published with the audit conclusion within six months after the completion of the fiscal year. (see PI-29)
5. Audited annual financial report, incorporating or accompanied by the external auditor’s report. The reports are made available to the public within twelve months of the fiscal year’s end.	Y	External audit of the Final Account of the Budget Execution is routinely carried out and published with the report on the MoF website and SAO website within 12 month of the year end. (see PI-30)
Additional elements
6. Prebudget statement. The broad parameters for the executive budget proposal regarding expenditure, planned revenue, and debt is made available to the public at least four months before the start of the fiscal year.	Y	As part of the budget procedure, MoF prepares and publishes the Instructions for Budget Preparation (Budget Circular) which contains an overview of the mid-term macro-fiscal framework, planned revenues, expenditure and vertically set expenditure limits. The document was circulated and published on June 12, 2019.
7. Other external audit reports. All nonconfidential reports on central government consolidated operations are made available to the public within six months of submission.	Y	External audit reports carried out by SAO are published on the institution’s official website (https://dzr.mk/) within 6 months of submission. .
8. Summary of the budget proposal. A “citizen’s budget” is publicly available within two weeks of the executive budget proposal’s submission to the legislature and within one month of the budget’s approval.	Y	The Citizen’s Budget is publicly available through a web portal (http://budget.finance.gov.mk/) that allows access to the overview of the budget, through an interactive interface created for the citizens. It provides information about the budget revenues, expenditure and deficit, and macroeconomic indicators and usually published within one month after the budget approval.
9. Macroeconomic forecasts. The forecasts, as assessed in PI-14.1, are available within one week of their endorsement.	Y	Macroeconomic forecasts for the planning year and two following years (with the prospect of 2 more following years) are presented in the Fiscal Strategy. The Fiscal Strategy is prepared by the MoF and adopted by the Government (see PI-15). It is submitted to the Parliament alongside the draft annual budget as a part of the budget documentation. Fiscal Strategy is published on the MoF (http://www.finance.gov.mk) and Parliament (http://www.sobranie.mk) websites after adoption by the government. (See element 1 of this table)

View Table

^{Table 9.1:}

Public access to fiscal information in 2020

Element/ Requirements	Met (Y/N)	Evidence used/Comments
Basic elements
1. Annual executive budget proposal documentation. A complete set of executive budget proposal documents (as presented in PI-5) is available to the public within one week of the executive’s submission of them to the legislature.	Y	A complete set of Budget proposal, adopted by the Government, is submitted to the legislature and published both on the website of the MoF and the Parliament within one week.19
2. Enacted budget. The annual budget law approved by the legislature is publicized within two weeks of passage of the law.	Y	Budget Law for 2021 was adopted by the Parliament on December 20, 2020. It was published in the Official Gazette No. 307 (December 23, 2020) and on the MoF website.
3. In-year budget execution reports. The reports are routinely made available to the public within one month of their issuance, as assessed in PI-28.	Y	In-year budget execution reports as assessed in PI-28 (with the economic breakdown) in a form of summary of quarterly reports are published on the MoF website (http://www.finance.gov.mk) within one month after the period completion. Narrative analysis of budget execution is provided in monthly reports for budget execution and the semi-annual budget execution report.
4. Annual budget execution report. The report is made available to the public within six months of the fiscal year’s end.	Y	Annual budget execution reports are compiled in the Final Account of Budget Execution and published with the audit conclusion within six months after the completion of the fiscal year. (see PI-29)
5. Audited annual financial report, incorporating or accompanied by the external auditor’s report. The reports are made available to the public within twelve months of the fiscal year’s end.	Y	External audit of the Final Account of the Budget Execution is routinely carried out and published with the report on the MoF website and SAO website within 12 month of the year end. (see PI-30)
Additional elements
6. Prebudget statement. The broad parameters for the executive budget proposal regarding expenditure, planned revenue, and debt is made available to the public at least four months before the start of the fiscal year.	Y	As part of the budget procedure, MoF prepares and publishes the Instructions for Budget Preparation (Budget Circular) which contains an overview of the mid-term macro-fiscal framework, planned revenues, expenditure and vertically set expenditure limits. The document was circulated and published on June 12, 2019.
7. Other external audit reports. All nonconfidential reports on central government consolidated operations are made available to the public within six months of submission.	Y	External audit reports carried out by SAO are published on the institution’s official website (https://dzr.mk/) within 6 months of submission. .
8. Summary of the budget proposal. A “citizen’s budget” is publicly available within two weeks of the executive budget proposal’s submission to the legislature and within one month of the budget’s approval.	Y	The Citizen’s Budget is publicly available through a web portal (http://budget.finance.gov.mk/) that allows access to the overview of the budget, through an interactive interface created for the citizens. It provides information about the budget revenues, expenditure and deficit, and macroeconomic indicators and usually published within one month after the budget approval.
9. Macroeconomic forecasts. The forecasts, as assessed in PI-14.1, are available within one week of their endorsement.	Y	Macroeconomic forecasts for the planning year and two following years (with the prospect of 2 more following years) are presented in the Fiscal Strategy. The Fiscal Strategy is prepared by the MoF and adopted by the Government (see PI-15). It is submitted to the Parliament alongside the draft annual budget as a part of the budget documentation. Fiscal Strategy is published on the MoF (http://www.finance.gov.mk) and Parliament (http://www.sobranie.mk) websites after adoption by the government. (See element 1 of this table)

Since all the elements are published within the required timeframe, the rating for this dimension is A.

10.1. Monitoring of public corporations

This dimension assesses the extent to which information on the financial performance and associated fiscal risks of the central government’s PEs is available through audited annual financial statements. It also assesses the extent to which the central government publishes a consolidated report on the financial performance of PEs annually.

The UPEA monitors 29 entities, consisting of 21 companies registered under the Law on Public Enterprises, and 8 joint stock companies registered under the Law on Commercial Companies and for which the Government is majority owner.²¹ There is no formal list or register of PEs. Some of the 29 PEs do not meet the definition of PCs given in the GFSM 2014.²² For example, the Public Enterprise for State Roads (PESR) carries out a public mandate and is supported primarily by state revenue and from state guaranteed loans. In total, there are 10 institutional units in total which the 2018 FTE classified as EBUs under GFS which have been assessed under dimension 6.3 on financial reports of EBUs. Since they are registered as PEs under the national legislation they formally constitute fiscal risk as per dimension 10.1 criteria but are excluded in the scoring of the dimension as per PEFA Secretariat guidance.

Audited annual financial statements of PEs must be submitted to founders for approval. This is required by both laws under which PEs are incorporated. The Government is generally the founder for centrally-owned PEs, but, in some instances, Parliament is the founder. In both cases, the UPEA is requested to analyze the statement and provide an opinion to the founder. PE annual financial statements are typically audited by private auditors. PEs use International Financial Reporting Standards (IFRS) when preparing their financial statements. The quality of audits and accounting standard provides predictable information for analysis by the UPEA.

For the purpose of the PEFA, the date of publication is distinguished between (i) when the financial statement is made available to the founder, which provides an opportunity to assess fiscal risk, and (ii) when the financial statement is accessible to the public at large, which enables independent assessment of fiscal risk.

Regarding the first meaning of publication, the date when audited financial statement is received by central government is reported by UPEA, as shown in ^{Table 10.1}. For statements covering 2020 (received in 2021, the most recent year for which reporting information is available), of the 29 PEs, 13, 10 and 6 were received within 6 months, 9 months, or not received within 9 months,²³ respectively.

^{Table 10.1:}

Financial reports of public corporations monitored by UPEA for 2020 (last completed year)*

Source: Ministry of Finance * relative to total of 33 non-financial public corporations identified in public sector overview ^{table 1.1} not monitored by UPEA. ** Expenditure figures from statutory financial statements *** scoring of the dimension as per PEFA Secretariat guidance

^{Table 10.1:}

Financial reports of public corporations monitored by UPEA for 2020 (last completed year)*

	Public enterprise / State-owned companies*	Audited annual financial statement		Expenditures** 2020 (MKD million)	Percentage within 6 months	Percentage within 9 months
		Date received by central government	Within 6 or 9 months of end of statement year
1	Power plants of North Macedonia ESM, JSC - Skopje	12/08/2021	9	13,048.5		35.67%
2	Electricity Transmission System Operator of the Republic of North Macedonia, a JSC for electricity transmission and power system control, in state ownership – Skopje			3,720.0
3	Public Enterprise for State Roads – Skopje	15/07/2021	9	5,191.8		14.19%
4	Railways of the Republic of North Macedonia Transport, JSC – Skopje			3,720.0
5	Public enterprise for managing forests “National Forests” – Skopje			1,516.8
6	State owned JSC for postal traffic “Post of North Macedonia” – Skopje	02/07/2021	9	1,258.8		3.44%
7	Public enterprise for railway infrastructure Railways of Public enterprise / State-owned companies*	11/06/2021	6	1,103.1	3.02%
	Republic of North Macedonia – Skopje
8	Public enterprise for the maintenance and protection of national and regional roads – Skopje	23/07/2021	9	1,194.1		3.26%
9	Public enterprise “National Television” – Skopje	26/04/2021	6	939.6	2.57%
10	JSC for construction and management of residential and commercial property significant to the country – Skopje	05/07/2021	9	1,284.5		3.51%
11	Air Navigation service provider of the Republic of North Macedonia, JSC “M-NAV” – Skopje	16/06/2021	6	845.7	2.31%
12	JSC Water Economy of Republic of North Macedonia	21/07/2021	9	657.8		1.80%
13	Public enterprise for water supply “Strezevo” - Bitola	28/07/2021	9	464.3		1.27%
14	JSC “TEC Negotino” - Negotino	11/05/2021	6	181.8	0.50%
15	JSC “State lottery of North Macedonia” – Skopje	23/07/2021	9	263.0		0.72%
16	Public enterprise Hydrosystem “Zletovica” – Probistip	27/05/2021	6	142.3	0.39%
17	Public enterprise “National Broadcasting” – Skopje	28/06/2021	6	202.7	0.55%
18	JSC for airport services “Airports of the Republic of North Macedonia” - Skopje	01/04/2021	6	248.0	0.68%
19	„Boris Trajkovski“, state owned limited liability company established by one person – Skopje	26/03/2021	6	99.5	0.27%
20	Public enterprise for water supply “Lisice” – Veles	26/04/2021	6	85.2	0.23%
21	JSC for management of state - owned business premises – Skopje	21/06/2021	6	82.3	0.22%
22	Public enterprise “Official Gazette of Republic of North Macedonia” – Skopje	28/04/2021	6	73.1	0.20%
23	Public enterprise for water supply “Studencica” - Kicevo	24/04/2021	6	65.6	0.18%
24	Media information agency - Skopje, a state owned JSC	07/05/2021	6	56.6	0.15%
25	Public enterprise “JASEN” – Skopje	19/07/2021	9	44.9		0.12%
26	Public enterprise for management of pastures – Skopje			55.3
27	JSC for performing energy activities “National energy resources” in state ownership – Skopje			20.2
28	Public enterprise “Agro - Berza” – Skopje	07/05/2021	9	10.0		0.03%
29	State owned limited liability company established by one person “Naftovod” - Skopje			7.0
	TOTAL PEs MONITORED BY UPEA			36,582.50	11.28%	64.01%
	TOTAL PEs SCORED ON DIMENSION 10.1***			28,599.60	4.91%	48.55%

Source: Ministry of Finance * relative to total of 33 non-financial public corporations identified in public sector overview ^{table 1.1} not monitored by UPEA. ** Expenditure figures from statutory financial statements *** scoring of the dimension as per PEFA Secretariat guidance

View Table

^{Table 10.1:}

Financial reports of public corporations monitored by UPEA for 2020 (last completed year)*

	Public enterprise / State-owned companies*	Audited annual financial statement		Expenditures** 2020 (MKD million)	Percentage within 6 months	Percentage within 9 months
		Date received by central government	Within 6 or 9 months of end of statement year
1	Power plants of North Macedonia ESM, JSC - Skopje	12/08/2021	9	13,048.5		35.67%
2	Electricity Transmission System Operator of the Republic of North Macedonia, a JSC for electricity transmission and power system control, in state ownership – Skopje			3,720.0
3	Public Enterprise for State Roads – Skopje	15/07/2021	9	5,191.8		14.19%
4	Railways of the Republic of North Macedonia Transport, JSC – Skopje			3,720.0
5	Public enterprise for managing forests “National Forests” – Skopje			1,516.8
6	State owned JSC for postal traffic “Post of North Macedonia” – Skopje	02/07/2021	9	1,258.8		3.44%
7	Public enterprise for railway infrastructure Railways of Public enterprise / State-owned companies*	11/06/2021	6	1,103.1	3.02%
	Republic of North Macedonia – Skopje
8	Public enterprise for the maintenance and protection of national and regional roads – Skopje	23/07/2021	9	1,194.1		3.26%
9	Public enterprise “National Television” – Skopje	26/04/2021	6	939.6	2.57%
10	JSC for construction and management of residential and commercial property significant to the country – Skopje	05/07/2021	9	1,284.5		3.51%
11	Air Navigation service provider of the Republic of North Macedonia, JSC “M-NAV” – Skopje	16/06/2021	6	845.7	2.31%
12	JSC Water Economy of Republic of North Macedonia	21/07/2021	9	657.8		1.80%
13	Public enterprise for water supply “Strezevo” - Bitola	28/07/2021	9	464.3		1.27%
14	JSC “TEC Negotino” - Negotino	11/05/2021	6	181.8	0.50%
15	JSC “State lottery of North Macedonia” – Skopje	23/07/2021	9	263.0		0.72%
16	Public enterprise Hydrosystem “Zletovica” – Probistip	27/05/2021	6	142.3	0.39%
17	Public enterprise “National Broadcasting” – Skopje	28/06/2021	6	202.7	0.55%
18	JSC for airport services “Airports of the Republic of North Macedonia” - Skopje	01/04/2021	6	248.0	0.68%
19	„Boris Trajkovski“, state owned limited liability company established by one person – Skopje	26/03/2021	6	99.5	0.27%
20	Public enterprise for water supply “Lisice” – Veles	26/04/2021	6	85.2	0.23%
21	JSC for management of state - owned business premises – Skopje	21/06/2021	6	82.3	0.22%
22	Public enterprise “Official Gazette of Republic of North Macedonia” – Skopje	28/04/2021	6	73.1	0.20%
23	Public enterprise for water supply “Studencica” - Kicevo	24/04/2021	6	65.6	0.18%
24	Media information agency - Skopje, a state owned JSC	07/05/2021	6	56.6	0.15%
25	Public enterprise “JASEN” – Skopje	19/07/2021	9	44.9		0.12%
26	Public enterprise for management of pastures – Skopje			55.3
27	JSC for performing energy activities “National energy resources” in state ownership – Skopje			20.2
28	Public enterprise “Agro - Berza” – Skopje	07/05/2021	9	10.0		0.03%
29	State owned limited liability company established by one person “Naftovod” - Skopje			7.0
	TOTAL PEs MONITORED BY UPEA			36,582.50	11.28%	64.01%
	TOTAL PEs SCORED ON DIMENSION 10.1***			28,599.60	4.91%	48.55%

Source: Ministry of Finance * relative to total of 33 non-financial public corporations identified in public sector overview ^{table 1.1} not monitored by UPEA. ** Expenditure figures from statutory financial statements *** scoring of the dimension as per PEFA Secretariat guidance

The usefulness of timely audited financial statements to assess fiscal risks is also determined by the quality of data and the quality of analysis. While the purpose of focusing on audited financial statements is to ensure high quality and comparable data, the UPEA report does not identify if it defines expenditures in a way differently from audited financial statements. For example, 2020 expenditures reported by UPEA for PESR are not clearly aligned with those reported in the 2020 audited financial statement.²⁴ The UPEA analysis focuses on changes in financial position from the prior year, and material changes in actual revenue and expenditure compared to the PE’s annual budget.²⁵ There are no internal guidelines for UPEA to assess risk when analyzing the financial statements, nor a template for reporting its opinion to the founder. The UPEA typically has one week to submit its opinion to the founder from the date of receiving a financial statement.

By law, financial statements are to be published by PEs after approval by the founder. Auditors routinely confirm compliance with legal requirements. For 2019 financial statements, 27 of 29 PEs published audited financial statements. In addition, PEs are required to submit financial statements to the Central Registry by March 31 of each year. To meet this deadline, financial statements are not always audited. In 2021 (for financial statements covering 2020), the Central Registry reported that all but two PE financial statements were submitted to it within the deadline.

Some consolidated information on PEs is provided annually in the Fiscal Strategy. This includes a list of PEs monitored, along with income statement information for each PE for the prior year and latest available budget. There is not a comparable list by PE of balance sheet risks. Summary data on PE arrears and debt are published. However, these risks are presented by type of risk incurred by all types of entities, not all risks grouped by PEs. For example, the total of arrears for all PEs is provided in the same Fiscal Strategy table as arrears incurred by central government BUs and municipalities. Similarly, information on PE debt, guaranteed and non-guaranteed, is provided in the Public Debt Strategy 2021-23. This style of presentation makes it difficult to understand the sum of risks presented by PEs. PE arrears and debt (guaranteed and non-guaranteed) are 1.6 and 9.2 percent of GDP, respectively, as of September 2020.²⁶

Most public corporations submit audited financial reports within 9 months of the end of the fiscal year which qualifies for score C. Excluding the institutional units assessed under dimension 6.3, the majority of the remaining PCs report within 9 months, resulting in dimension score D.

10.2. Monitoring of subnational governments

This dimension assesses the extent to which information on financial performance, including the central government’s potential exposure to fiscal risks, is available through the audited annual financial statements of subnational governments. It also assesses whether the central government publishes a consolidated report on the financial performance of the subnational governments annually.

While municipalities are required to prepare annual financial reports, they are not required to have them audited.²⁷ The SAO has authority to audit local governments but does so selectively based on a risk assessment. SAO performs all types of audits of the LSG (financial, compliance and also performance audits in which financial aspects are one of the risk areas covered); private audit firms are not used for this purpose. Annual financial reports are released only after approval by the respective Municipal Council, which has a deadline of March 15 each year to do so. Municipal Councils have a strong incentive to submit their reports on time because failure to do so by March 15 is a reason for dissolution of the Council.²⁸ Municipal Councils must approve the annual financial statement in open meetings, and with a formal decision.

In 2020 for the 2019 fiscal year, all municipalities submitted their annual financial reports within nine months of the end of 2020.

• Municipalities are required to submit annual financial reports to MoF by March 31. The UBLSU summarizes the data in an annex to the BCG annual Final Account, which should be completed by March 31. In 2021 (when reporting on 2020), all municipalities provided information to MoF for MoF to complete the annex on time.

• Municipalities are required to submit annual financial reports to the Central Registry by February 28, if reporting is on paper, or by March 15, if the reporting is electronic. In 2021, three reports were submitted past the legal deadline but were reported before nine months had elapsed

A consolidated report on the financial position of municipalities is not prepared. The UBLSU does not analyze the annual financial reports submitted by municipalities for fiscal risks. The compilation of budget execution data, attached to the BCG financial statement, does not achieve the aim of highlighting fiscal risks. Information on arrears incurred by, and the total debt of, municipalities is provided annually in the Fiscal Strategy. The stock ofmunicipal arrears and debt outstanding is 0.6 and 0.8 percent of GDP, respectively, as of September 2020.

All subnational governments submit unaudited financial reports annually within 9 months of the close of the fiscal year, published on the individual municipality webpages, but the reports are not audited, the rating for this dimension is C.

10.3. Contingent liabilities and other fiscal risks

This dimension assesses monitoring and reporting of the central government’s explicit contingent liabilities from its own programs and projects, including those of EBUs. Contingent liabilities are obligations that do not arise unless a particular, discrete event occurs. For the purposes of this analysis, significant contingent liabilities are those with potential cost in excess of 0.5 percent of total central government budget expenditures and for which an additional appropriation by Parliament would be required. In the case of North Macedonia, these are shown in ^{Table 10.2}.

^{Table 10.2:}

Significant contingent liabilities and reporting on them

Source: Government reports, PEFA team meetings, and IMF staff estimates

^{Table 10.2:}

Significant contingent liabilities and reporting on them

Risk	Size	Legal basis	Who monitors	Report
Guaranteed public debt	8.3 percent of 2020 GDP	Loan covenants	MoF Debt Management Unit	Public Debt Management Annual Report; Public Debt Management Strategy 2021-23
Net exposure to financial sector	26.4 percent of 2017 GDP29	Deposit Insurance Fund Law	Deposit Insurance Fund and NBRNM	Deposit Insurance Fund annual report
Public-private partnerships (PPP)	6.4 percent of 2020 GDP30	Individual PPP agreements	No central unit for all PPPs; by BU that supervises each PPP	No consolidated report currently (although the new PPP law will likely require this)

Source: Government reports, PEFA team meetings, and IMF staff estimates

View Table

^{Table 10.2:}

Significant contingent liabilities and reporting on them

Risk	Size	Legal basis	Who monitors	Report
Guaranteed public debt	8.3 percent of 2020 GDP	Loan covenants	MoF Debt Management Unit	Public Debt Management Annual Report; Public Debt Management Strategy 2021-23
Net exposure to financial sector	26.4 percent of 2017 GDP29	Deposit Insurance Fund Law	Deposit Insurance Fund and NBRNM	Deposit Insurance Fund annual report
Public-private partnerships (PPP)	6.4 percent of 2020 GDP30	Individual PPP agreements	No central unit for all PPPs; by BU that supervises each PPP	No consolidated report currently (although the new PPP law will likely require this)

Source: Government reports, PEFA team meetings, and IMF staff estimates

Two other potential contingent liabilities did not meet the definition of significant contingent liabilities for the purpose of this dimension but warrant noting. Legal cases are typically paid by the involved BU by reallocating funds among economic class items within its existing budget and thus have no impact on fiscal policy. However, this approach potentially leads to disruption of the BU’s ability to meet the service priorities assigned to it. There is not a consolidated list of pending legal cases and their cost; actual payments made are reported in annual budget execution reports. Contingent liabilities relating to natural disasters, epidemics, and environmental catastrophes are covered, at least in part, by the Permanent Reserve Fund.³¹ Because it is planned, and budgeted, it does not constitute a fiscal risk up to the value of the Fund. However, funds can be added to the Fund during the year if needed. See PI 2.3 for a discussion of the Fund and actual expenditures in the last three completed years (2018, 2019, and 2020).

Based on data shown in ^{Table 10.2}, most contingent liabilities are quantified by central government entities in financial reports. In other words, guaranteed public debt and net exposure to the financial sector are reported officially and represent 84 percent of the total significant contingent liabilities.

Three risks have been subject to recent developments:

• Total public debt: the definition of total public debt was revised in 2019 to include non-guaranteed debt of public enterprises established by the state or municipalities and majority-owned joint stock companies. In effect, this acknowledges an implicit guarantee of PE regular debt.

• PPPs: since July 2020, the government has been drafting a new law dedicated to PPPs (a separate law on concessions is under consideration). The draft law has been released publicly. The new law will clarify measures of risk and reporting of them for proposed and ongoing PPPs.

• Guarantees: A credit guarantee scheme (CGS) is under active consideration to support small and medium-sized enterprises (SMEs) and the export sector for the purpose of mitigating the impacts of the Covid-19 pandemic. The legal character and operational design of the CGS, and thus the nature and size of risks, have not been finalized. If it becomes operational, it is prudent that a system of risk monitoring and reporting to the MoF be established.

While two of the three contingent liabilities noted in ^{Table 10.2} are reported by specialized units, there is no single report that compiles all significant risks. The Fiscal Strategy includes a section on Fiscal Risks and Sensitivity Analysis, with a focus on factors that may cause deviations from the medium-term macroeconomic and fiscal projections underlying the fiscal policy adopted by the Government. The factors that form the basis for separate scenarios are lower economic growth, lower tax revenues by 5 percent, and lower execution of capital expenditures by 25 percent. Beginning in 2020, a fourth scenario was added to reflect the fiscal impact of the budget paying all outstanding loan guarantees.

The draft new OBL includes provisions creating a Fiscal Council, under Parliament, that will monitor fiscal risks and the probability of impacting the budget and the Fiscal Strategy. Presumably, this analysis will be published and thus could be characterized as a fiscal risk statement.

Because two of three significant contingent liabilities are quantified and reported, representing over 75 percent in value, but there is not a consolidated report including all significant contingent liabilities, the rating for this dimension is B.

11.1. Economic analysis of investment projects

This dimension assesses the extent to which robust appraisal methods, based on economic analysis, are used to conduct feasibility or prefeasibility studies for major investment projects on the basis of an analysis of its economic, financial, and other effects; whether the results of the analyses are published; and whether the analyses are reviewed by an entity other than the sponsoring entity.

In North Macedonia, there is no legal framework providing policies, standards, or procedures across BUs for appraisal of major investment projects, the publication of the analyses, or review of the analyses by an independent expert or entity.

Externally funded major projects, including those implemented by PESR are subject to rigorous standards and procedures of the external funding entity imposed by the external funding entities. The details of these standards and procedures vary. Most external funding entities require appraisal by independent experts, and publication of the appraisal.

For domestically funded projects, BUs develop their own appraisal criteria. BUs often employ engineers from universities and private firms to assist in the development of preliminary engineering designs and feasibility studies. The MoTC certifies engineers who are qualified to perform such work, who then can be used by other ministries. In such cases, BUs rely on the professional competence of the expert. Project appraisals are typically not published.

For projects implemented through structured financing instruments, such as PPPs, no guidelines currently exist for economic analysis of projects. A new PPP law, currently being drafted, will likely address this issue.

Since there are no national guidelines, and appraisals based on economic analyses are conducted for some major projects (those funded from external sources), the score for this dimension is C.

11.2. Investment project selection

This dimension assesses the extent to which the project selection process prioritizes investment projects against clearly defined criteria to ensure that selected projects are aligned with government priorities. Rigorous and transparent arrangements for the selection of investment projects aim to strengthen the efficiency and productivity of public investment. The degree to which a project is “mature”, or the completeness of project description and analysis, is not considered a selection criterion for the purpose of this dimension.

There are no published standard criteria for project selection. For externally funded projects, selection criteria are established by the external funding entity. That said, the Single Project Pipeline (SPP),³⁶ coordinated by the Secretariat for European Affairs and covering all externally funded projects, uses selection criteria published under the “Support to Western Balkans Infrastructure Investment Projects in the period 2014-2020” project. There are three main criteria, supplemented by sector specific criteria: (i) compliance with plans and legal framework (4 sub-criteria); (ii) impact indicators (2 sub-criteria); and (iii) maturity indicators (4 sub-criteria). For domestically funded projects, selection criteria are established by each BU independently, some of whom follow the SPP selection criteria (e.g. MoTC). The PPP unit in the Ministry of Economy has not adopted standard selection criteria for PPPs.

Prioritization of projects for inclusion in the budget is determined most directly by the General Secretariat of the Government. The focus of the prioritization is compliance with the Government 4-year Work Program, and is communicated through the 3-year strategic plan prepared by each BU in parallel with the budget (see PI-8 and PI-16.3 for a more detailed explanation of the planning system). There are three important shortcomings of the planning system for this purpose of this dimension. First, many priorities in the Government 4-year Work Program were not subjected to technical analysis to promote efficiency and productivity. Second, since the Government 4-year Work Program is not detailed at the project level, there is substantial room for interpretation when selecting projects on the basis of the plan. Third, the General Secretariat does not assess the technical qualities, feasibility, and costing of a proposed project as part of its annual review.

Since major projects are prioritized by a central entity but not on the basis of measurable criteria for selection that are rigorous and focus on economic efficiency and productivity, the score for this dimension is D.

11.3. Investment project costing

This dimension evaluates whether the budget documentation includes medium-term projections of investment projects on a full-cost basis and whether the budget process for capital and recurrent spending is fully integrated.

In North Macedonia, the budget shows the capital cost of a project, broken down by each year covered by the medium-term, along with a remainder if the project is implemented over more than three years.³⁷ Revisions to multiyear projects cost estimates from one budget year to the next are not identified in budget documentation.

Definition of what should be included in the capital costs of a project is not stated in law or rule. It is generally understood that construction costs are included in capital costs, but there is ambiguity on other related costs. For example, should the costs of feasibility studies and preliminary design be included in the capital costs, or the costs of furniture or equipment specific to its intended purpose, such as a school or clinic. Project documents often include such costs even if they are not included in the project appropriation. A project document in this context refers to the detailed project file that accumulates documents when developing, justifying, or describing a project.

For externally funded projects, costing methods are established by the funding entity; for domestically funded projects, costing methods are established by each BU independently. As noted in PI-11.1, BUs rely on the professional judgment of engineers to apply cost estimates for the design and construction phase of the project, based on site, preliminary design, time, and materials. Treatment of major component of a project’s costs that could be included when estimating and budgeting for the total capital costs is shown in ^{Table 11.1}.

^{Table 11.3:}

Treatment of major project capital costs in project documents and the budget

Source: PEFA assessment team, based on input from authorities

^{Table 11.3:}

Treatment of major project capital costs in project documents and the budget

A. Project cost component	B. Detailed project document	C. Budget presentation38
Preliminary design and feasibility studies	Externally funded: typically included in the agreement specific to a project Domestically funded: typically not included in project document	Externally funded: either i) separate project, or ii) included in the project with other components. Domestically funded: typically funded through the special budget of the BU without specifying individual projects.
Land acquisition	In project document in all cases	Externally funded: in all cases, funded domestically. Domestically funded: paid from the basic budget to minimize price escalation and use Government authority to resolve legal challenges; not included with other project components; a single project is budgeted for all land acquisition across all active projects because of cost uncertainty case by case.
Construction	In project document in all cases	Separate project in all cases
Furniture and equipment	In project document in all cases	Externally funded: typically included in the project Domestically funded: often a separate project in the budget
Project management	Externally funded: construction supervision and Project Implementation Unit (PIU) overhead typically included in agreement specific to a project Domestically funded: construction supervision included but not BU overhead	Externally funded: included in the project Domestically funded: construction supervision costs in the project (per budget circular); overheads funded through the special budget of the BU without specifying projects.

Source: PEFA assessment team, based on input from authorities

View Table

^{Table 11.3:}

Treatment of major project capital costs in project documents and the budget

A. Project cost component	B. Detailed project document	C. Budget presentation38
Preliminary design and feasibility studies	Externally funded: typically included in the agreement specific to a project Domestically funded: typically not included in project document	Externally funded: either i) separate project, or ii) included in the project with other components. Domestically funded: typically funded through the special budget of the BU without specifying individual projects.
Land acquisition	In project document in all cases	Externally funded: in all cases, funded domestically. Domestically funded: paid from the basic budget to minimize price escalation and use Government authority to resolve legal challenges; not included with other project components; a single project is budgeted for all land acquisition across all active projects because of cost uncertainty case by case.
Construction	In project document in all cases	Separate project in all cases
Furniture and equipment	In project document in all cases	Externally funded: typically included in the project Domestically funded: often a separate project in the budget
Project management	Externally funded: construction supervision and Project Implementation Unit (PIU) overhead typically included in agreement specific to a project Domestically funded: construction supervision included but not BU overhead	Externally funded: included in the project Domestically funded: construction supervision costs in the project (per budget circular); overheads funded through the special budget of the BU without specifying projects.

Source: PEFA assessment team, based on input from authorities

Recurrent costs associated with major projects are sometimes identified in project documents but not in the budget. For externally funded projects, operating and maintenance costs may be estimated, but such estimates will vary based on standards of the external funding entity. For projects carried out by BUs, and not funded externally, operating and maintenance costs are typically not part of the project cost estimates. Since capital costs of a major project are included in each year of the medium-term budget, but recurrent costs of the project are not included in budget documents, the score for this dimension is C.

11.4. Investment project monitoring

This dimension assesses the extent to which prudent project monitoring and reporting arrangements are in place to ensure value for money and fiduciary integrity. The monitoring system should maintain records on both physical and financial progress, including estimates of work in progress, and produce periodic project monitoring reports.

Standards or rules governing project monitoring and reporting vary based on funding source. There is no legal framework for monitoring project implementation. For externally funded projects, there is a high level of compliance with the funding entity’s standards and procedures due to oversight by the funding entity, but the standards will vary by funding entity. For domestically funded projects, there are no standards, and there is no central oversight entity.

There are several aspects by which project monitoring should be evaluated: (i) if monitoring is by individual project or across all projects being implemented; (ii) if monitoring covers physical and financial progress; and (iii) if implementation information collected is published.

Each of these three aspects of monitoring is influenced by the institutional arrangements for monitoring.

• Individual project monitoring: the physical and financial progress of each major project is monitored by a PIU or a project implementation committee. For an externally funded project, detailed progress reports on physical and financial progress are prepared as required by the funding entity, which are sometimes published. For domestically funded projects, the nature of progress reports is determined by each BU independently, which are not published. PIUs retain implementation records; project implementation committees retain some records, such as minutes of meetings, while otherwise using regular administrative systems applicable to BUs, such as the treasury.

• Monitoring groups of projects:

  • Budget reports: financial progress of project implementation is reported within the year through budget execution reports, and at the end of the year through annual budget execution reports. These reports are published. However, reporting is made according to the structure of the appropriation, which may group individual projects so that the progress of individual projects cannot be discerned.

  • Government monitoring: a BCG-wide system of monitoring is managed by the General Secretariat of the Government. Every six months for major projects, and every 12 months for smaller projects, progress reports covering physical and financial progress are submitted to the General Secretariat by implementing BUs. The information is submitted through the e-Government system, which is accessible by major BUs and the MoF. The Government reviews the reports and comments received through the e-Government system, and issues decisions to remove obstacles to implementation. The decisions of Government are published, but not the progress reports.

Since the total cost and physical progress of major investment projects are monitored by the implementing government unit, but there are no standard procedures for project implementation and published annual reports address financial implementation status only, the score for this dimension is C.

12.1. Financial asset monitoring

This dimension assesses the nature of financial asset monitoring, which is critical to effectively managing the key financial exposures and risks to overall fiscal management. The main categories of financial assets for the Government include cash and cash equivalents, equity in public corporations, and receivables and loans given. Information on Government financial assets in the form of equity and shares in public corporations is available from published financial statements of public corporations prepared in line with the International Financial Reporting Standards (IFRS). Records of receivables and loans given are held in the auxiliary ledgers managed by individual central government institutions in line with the prevailing legislation and reported on their individual balance sheets issued in line with the national accounting policies. While individual reports are published, information on performance of the two portfolios are not consolidated (see PI-10 and PI-29, respectively). National accounting policies require assets to be recognized at acquisition cost.

Finally, the National Bank of the Republic of North Macedonia’s (NBRNM) holdings in monetary gold and other foreign currency reserves are reported in its published annual financial statements prepared in line with the International Financial Reporting Standards (IFRS) and audited by an independent external auditor. The statements also provide narrative on performance of the main categories of financial assets within the notes to the financial statements.³⁹ In line with the PEFA methodology, these are not considered for assessment under this dimension and the information is not reflected in the scoring.

While records of the major categories of financial assets are maintained, information on their performance is too fragmented to be considered useful for analysis and the score for the dimension is C.

12.2. Nonfinancial asset monitoring

This dimension assesses the features of nonfinancial asset monitoring, including their identification and usage. At the MoF, the Property and Affairs Administration is the main organizational units with responsibilities over privatization and lease of state-owned land as well as expropriation. It however does not maintain any centralized records of the underlying assets. The State Cadaster Office records immovable property (land and buildings) owned by the state. Earlier external diagnostics reported concerns over timeliness of reported changes to source data in the cadaster. Some government institutions maintain partial registries for some main categories of assets, such as Ministry of Economy on mineral resources. Registries of movable property in state ownership are yet to be developed, pending completion of the ongoing legislative changes.⁴⁰

Currently, records of the book values of non-financial assets are maintained in the accounting records of each budget user and presented in their individual balance sheets. Accounting recognition of value of assets is historic cost, consolidated at the level of first-level budget users but not for the budget as a whole (see PI-29 for details), with depreciation as value adjustment recorded through accounts 900/029. Valuation of non-financial assets follows the provisions of the Rulebook on Accounting for the Budget and Budget Users which regulates recognition, depreciation, and revaluation.

A register of mineral rights in the Ministry of Economy is internal to the Ministry and captures values of mineral resources and the percentage of their exploitation. Illustrative gaps in information needed to effectively monitor non-financial assets include the need to improve and upgrade the information systems in the Ministry of Environment and Physical Planning (water rights) and Ministry of Transport and Communications (disposal of land for construction).⁴¹ In other instances, the SAO has reported issues with the accuracy of inventories and asset record keeping in individual institutions in the past.

There are issues reported with timeliness of information recorded in the cadaster, the only comprehensive centralized registry of immovable property, while other comprehensive asset registries are yet to be established so the score for the dimension is D.

12.3. Transparency of asset disposal

This dimension assesses whether the procedures for transfer and disposal of assets are established through legislation, regulation, or approved procedures. As illustrated in ^{Table 12.1} above, regulations and rules are in place for disposal of movable and immovable assets. In case of sale, individual institutions propose the underlying decision to the Government, and the sale can proceed based on Government enactment. For sale and lease, announcements are published in daily newspapers ahead of electronic auctioning⁴² which is open to all interested parties who submit the required information and bank guarantee (20 percent of the value of the bid). Bidding is carried out through an electronic platform and a contract is signed with the most favorable bidder. Each budget user (BU) reports on the sales individually. In line with the Law, all operations related to disposal, including the initial valuation, are to be carried out by a commission established within each BU. Minutes are prepared recording the details of the transactions. Direct negotiations are also foreseen but limited to exceptional cases, primarily involving matters of public interest.

Transfer of immovable property may entail transfer of the “right to use” and the “right to own” between BUs and has to be approved through a Decision of the Government. Subsequently, BUs regulate the arrangement through a contract. Changes in the cadaster are made on the basis of the information contained in the Government decisions. In case of transfer of movable property, individual BUs carry out the transfer procedures without notifying the MoF Property Affairs Administration. In interviews with the PEFA team, the SAO highlighted a limited number of findings where the disposal of assets was not accompanied with reliable supporting documentation on transfers and associated receipts.

Ultimately, in addition to highly decentralized information on disposal of individual assets from transactions involving movable and immovable property, accounting information on the aggregated value of disposals of assets is reported in the in-year budget execution reports and the annual Final Account. This information, however, does not include the specific original purchase cost and disposal value.

Available information on asset disposal is highly decentralized and the information in the budget execution report limited to aggregate values, without reference at least to the original purchase cost and disposal value, so the score for this dimension is D.