Serbia Justice Functional Review

Internal Performance Assessment > Financial Management

g. Financial Controls

  1. Financial controls, especially at the level of indirect budget beneficiaries, remain weak. The most obvious manifestation of this weakness is the massive and growing arrears discussed above. While arrears demonstrate the failure to ensure compliance with the Budget System Law, they are also indicative of weak or non-existent controls over the efficiency of resource utilization. Indeed, it is difficult to identify a judicial organization or department that would be dedicated to ensuring that the courts organize their resources so as to deliver services at a minimum cost.
  2. There are concerns regarding the accounting of commitments, which the judicial system, as the rest of the public sector, carries out under the cash accounting method. Although the courts have systems for recording commitments and submit regular commitment reports, financial managers in the courts and the HJC reported to the Functional Review team that the reported commitment data is probably not accurate and up-to-date. Many courts keep track of commitments, as well as other financial information, in paper ledgers and some courts have been reported to fail to register commitments on a timely basis.
  3. Individual courts and the PPOs operate outside of the Treasury single account. Only direct budget beneficiaries execute their budgets through the Treasury single account (TSA). The Treasury ensures that transfers to the direct budget beneficiaries are within authorized appropriations and the limits set by the disbursement schedule, but the Treasury it is not involved in the substantive verification of any payments.
  4. The HJC has yet to establish an internal audit function. Although courts are occasionally audited externally, only the MOJ currently has an internal audit department. Based on the division of responsibilities between the MOJ and the HJC, the MOJ does not audit the part of the court system’s budget managed by the HJC. The quality of internal audit carried out by the Internal Audit Department of the MOJ is high. However, due to the small number of staff in that Department, they had the capacity to conduct an audit in only one court in 2013.
  5. There many are courts that have only one financial staff member. This creates fiduciary risks due to the lack of separation of duties.
  6. The judicial system generates financial data that is sufficient for compliance but insufficient from the perspective of performance management. The judicial system follows a general public sector accounting classification that is not tailored to the specifics of the courts’ and the PPO’s operations. For instance, financial compensation that the courts pay to the acquitted is categorized as ‘other contracted services.’ Accounting categories are not tailored to the judicial business processes, and the courts do not generate management accounting reports. The court system’s technology is unable to link cases to expenditures incurred in their processing. As a result, essential performance indicators, such as cost per case, are not monitored.