The aspiration of accession to the EU: adding value to Montenegro and to external public audit — perspective from a Candidate Country SAI

European Court of Auditors
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9 min readMar 4, 2021
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Since Croatia became the 28th Member State of the European Union in 2013, the accession process has remained open to the remaining countries in the Balkans. There are five candidate countries and two potential candidate countries knocking on the EU door to become EU Member States. If there is such an interest in EU membership, there must be something of added value to becoming an EU Member State. Milan Dabović, President of the State Audit Institution of Montenegro, explains what important push and pull factors are involved in Montenegro becoming an EU member, both in financial and non-financial terms. He also explains how the efforts of his country to join the Union affect his audit institution and the work he and his staff undertake.

By Milan Dabović, President of the State Audit Institution of Montenegro

EU membership — a strategic policy priority

EU membership is the most significant strategic foreign policy priority for Montenegro, one of the five countries which are currently candidates to join the Union.(1) Although it is the most demanding and complex process the country has ever undertaken, the overall progress and results Montenegro has achieved demonstrate commitment to EU values and readiness to comply with the EU acquis and obligations on its path towards the EU. As a candidate country for EU membership, Montenegro has opened all thirty-three negotiation chapters with three chapters now provisionally closed. It is evident that Montenegro has made significant progress and invested immense efforts in the negotiation process, which is reflected in the European Commission Reports on Montenegro. But still a lot of work needs to be done.

Montenegro took on the obligation of implementing necessary reforms in different areas such as the judiciary, the rule of law, public and local administration, the fight against corruption, all of which should contribute to further harmonisation of national regulations with EU acquis and, more importantly, to improving the life of Montenegrin citizens. High quality implementation of the reforms is impossible without the strengthening of appropriate administrative structures and capacities, which are in place to ensure proper implementation, alignment with European standards and values and that we face the challenges on the road to EU membership.

To reach this goal, the Government of Montenegro adopted the Programme of Accession of Montenegro to the EU PAMNE — which is a most significant strategic document, covering the obligations from 33 negotiation chapters and concrete activities planned with the aim of establishment and implementation of a legal framework aligned with the EU acquis in all areas. This programme aims to facilitate monitoring and coordination of all planned reforms related to fulfillment of the strategic goals and provides a realistic overview of the progress made in the previous period.

For the purpose of implementing necessary reforms and investments, Montenegro has been making use of EU financial support through different instruments, most importantly through the Instrument for Pre-Accession Assistance — IPA funds. From 2007 until 2020 the European Union has provided €504.9 million in EU pre-accession funds to Montenegro in numerous areas. Around €804 million has been provided in European Investment Bank loans since 1999, while €172.9 million has been provided since 2009 in Western Balkans Investment Framework grants to leverage investments of an estimated €1.7 billion. (2)

EU accession: in itself, a comprehensive reform process

Through IPA, the EU also supported the efforts of the Montenegrin institutions in reforming the public sector, under two main headings: ‘Rule of law’ (€70.3 million) and ‘Democracy governance’ (70.9 million). This included measures such as the creation of a more transparent, efficient and service-oriented public administration, amendments to the legal framework for better public administration, establishment of the single information system for data exchange among the state registers, an increased number of electronic services and improvement of the quality of public services.

By implementing IPA projects, Montenegrin institutions have worked intensely on building their institutional capacities, implementing the reform of the judiciary, on state administration, economic development, local government, human and minority rights, regional cooperation, sustainable development as well as on the fight against corruption and organised crime.

Figure 1 — Support for key sectors for the period 2014–2020

EU membership: adding value by supporting independent external public audit

The State Audit Institution of Montenegro (hereafter referred to as SAI), the country’s supreme audit institution, has actively supported these reforms and invested significant efforts in improving the public sector’s external audit capabilities. Our development concept has always been based on medium-term strategies, aimed at the implementation of the International Standards of Supreme Audit Institutions (ISSAIs) in practice by improving our legal framework and developing appropriate auditing manuals. All of this has been achieved with the support of the EU and other donors, such as the German

Technical Cooperation Agency (GIZ) and other European supreme audit institutions (from Sweden, Lithuania, Poland and Croatia).

In 2001, for example, a bilateral project with the German Federal Ministry for Economic Cooperation and Development was launched to establish an independent external public audit body in Montenegro. Professional cooperation with the GTZ/GIZ, lasting for almost ten years, resulted in the development of the Law on the State Audit Institution, relevant by-laws, audit methodologies and training for audit staff, in addition, within the project implemented by the GTZ/GIZ, an audit authority for IPA as part of the SAI. Subsequently, in 2012, this Audit Authority was transformed into an independent audit body responsible for auditing the effectiveness and reliable functioning of the EU fund management and control system.

Our European partners (namely the European Commission and SIGMA (Support for Improvement in Governance and Management — a joint initiative of the OECD and the EU)) have strongly and continuously supported us in implementing numerous projects and programmes which were financed under the IPA instrument.

Our SAI has used the IPA-funded projects as an opportunity to launch important reforms in the area of external audit: such as adoption of the guidelines for assessing fiscal rules, guidelines for auditing the state budget accounts, audit quality control methodology, development of financial and compliance manuals, strategic development plans, communication and human resource strategies, organisation and delivery of a series of workshops and training for audit staff, etc. This capacity building represented immeasurable benefits for our SAI and contributed to the positive assessments of the work of our SAI by independent experts, such as in the Commission’s Progress Reports for Montenegro (published since 2011), and the Public Financial Management Performance Report (PEFA) assessment for Montenegro (published in December 2019), which rated the SAI with the high grade of B+(3).

The IPA-funded projects have guided and shaped the SAI into a modern public audit body. Through the support of our EU partners engaged in implementing the projects, the SAI has strengthened its professional capacities by applying a ‘learning-by-doing’ approach which ensures successful implementation of the project activities and reforms.

The significant knowledge and experience gained in various projects has contributed to sustainability of the results and achievement of the SAI’s strategic objectives. Three important projects are further specified in Box 1.

Reviewing EU added value in our audits

As relations with the EU become closer, there is rising demand for oversight of EU funds used to foster Montenegro´s development in various areas. Our SAI is mandated by law to audit all entities which use EU funds and funds of other international organisations or institutions for financing public needs. Having this prerogative, the SAI expanded the scope of its activities and assessed the use of funds granted to Montenegro for the implementation of project activities, as well as the EU funds provided in line with the partnership agreements.

Two recent examples of such audit activities are shown in Box 2 below.

Box 2 — Two examples of SAI audits related to IPA and other funds received by Montenegro

Example 1: auditing funds provided by Norway for capacity building in the Ministry of Justice and Ministry of Internal Affairs of Montenegro

In 2018, upon the request of the Ministry of Justice as a beneficiary of the IPA projects, the SAI carried out a regularity audit of the use of the donation funds from the Government of Norway granted to the Ministry of Justice and the Ministry of Internal Affairs of Montenegro for the implementation of two projects related to the strengthening of the capacities for accession negotiations for Chapters 23 and 24. The objectives of the projects were to strengthen the functional and technical capacities of the Ministry of Justice, other judicial authorities and the Ministry of Internal Affairs, as well as to establish a new anti-corruption agency and reinforce its capacities.

Following our audit, we recommended that the Ministry of Justice, in order to monitor more transparently the implementation of project activities, should clearly define for the various projects the job descriptions within individual projects and consider making it an obligation to submit reports on work performed by the persons employed. As a result of this audit, the Ministry of Justice implemented all the recommendations given in our audit report and the unspent funds, to the amount of €20 000, from the foreign currency account of the Ministry of Internal Affairs were transferred and returned to the Ministry of Foreign Affairs of Norway.

Example 2: auditing IPA funds in relation to the Partnership Agreement with Kosovo and Albania

In 2018, the SAI audited the funds — as part of the audit of the Final Account of the Budget of Montenegro for 2017 — transferred through the Ministry of European Affairs to the Republic of Kosovo and Albania, based on the partnership agreement with the Ministry of European affairs of Kosovo and with Albania on the management of technical support for the Cross-Border Cooperation (CBC) programmes within the Western Balkans.

The Montenegrin Ministry of European Affairs signed a Partnership Agreement with the Ministry of Local Government Administration of Kosovo and the Albanian Ministry of European Integration on the management of technical support for the CBC programmes within the Western Balkans. The Montenegrin Ministry, as the leading partner of the project, was obliged to transfer funds to the amount of €67 527 to the partner countries from the account intended for financing the project. These funds did not represent budget expenditure and should not have been recorded as a receipt or as expenditure in the General Ledger of the State treasury.

EU added value — also shown through solidarity in moments of crisis

The EU-funded investments bring many benefits to Montenegrin citizens. Moreover, by implementing IPA projects, special efforts have been made to improve the quality and efficiency of the work of the Montenegrin authorities. Visible results and the high number of successfully implemented IPA projects show the high level of commitment by Montenegro to European standards and values and brings us closer to the European Union.

Despite our critical findings, the audited entities fully supported the work of our SAI and recognised our high professional standards. This illustrates that the SAI has gained professional credibility and that the long-term efforts of our European partners to create external control as an indispensable segment in the public finance system are bearing fruit.

Also during the current Covid-19 crisis, the European Union stood by Montenegro, supporting its economy and health care system. The pandemic made it necessary to introduce a series of urgent and effective health, social and economic policy measures and the European Commission decided to support Montenegro financially in mitigating the economic consequences of the epidemic.

From the 2014–2020 IPA, €53 million has been provided in bilateral assistance for Montenegro to cover urgent health needs and economic and social recovery and €455 million for a regional economic reactivation package. In addition, €60 million was approved by the EU in Macro-Financial Assistance for Montenegro and the European Investment Bank is providing €1.7 billion for the region (4). The SAI of Montenegro will pay special attention to the emergency spending and measures taken during the crisis through the financial, compliance and performance audits we will conduct in the years to come.

(1) Apart from Montenegro, Albania, the Republic of North Macedonia, Serbia and Turkey are candidate countries. In addition, there are two potential candidate countries: Bosnia and Herzegovina, and *Kosovo (the designation of the latter is without prejudice to its status and is in line with UNSCR 1244 and the International Court of Justice opinion on the Kosovo declaration of independence).

(2) See for further details: https://ec.europa.eu/neighbourhoodenlargement/sites/near/files/near_factograph_montenegro_october_2020.pdf

(3) See 3.7 Pillar Seven: External scrutiny and audit, Table: Summary of scores and performance table PI-30): https://www.pefa.org/sites/pefa/files/2020-02/ME-Dec19-PFMPR-Public%20with%20PEFA%20Check.pdf

(4) https://ec.europa.eu/commission/presscorner/detail/en/IP_20_777

This article was first published on the 3/2020 issue of the ECA Journal. The contents of the interviews and the articles are the sole responsibility of the interviewees and authors and do not necessarily reflect the opinion of the European Court of Auditors.

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