Pursuant to the constitutional and statutory obligation, NIK President Marian Banaś presented the Sejm of the Republic of Poland with the Report on NIK’s activity in 2020, approved by the Council of NIK. In 2020:
- NIK conducted 91 planned audits, including an audit of execution of the state budget and monetary policy assumptions. Also ad hoc audits in 63 areas were carried out.
- all in all, NIK accomplished 2007 unit audits in 1629 entities and addressed 4548 recommendations. Besides, the Polish Supreme Audit Office made 122 de lege ferenda proposals.
- NIK filed 55 reports of possible criminal activity to law enforcement bodies. The reports were also sent to Public Finance Discipline Ombudsman.
Financial results of audits
- amounts spent against the law – over PLN 345 million;
- amounts spent in the aftermath of illegal activities – over PLN 136 million;
- financial benefits – nearly PLN 12 million.
Only last year, 5577 complaints, claims and audit requests were submitted to NIK. According to NIK President Marian Banaś, this is a sign that the trust in NIK is still growing. The requesting parties were usually individuals but also members of the Sejm, senators, councillors, social organisations and trade unions. After being analysed as many as 209 cases were examined or planned to be used in audits.
A range of other cases supported the processes of designing audit activities but all of them were analysed and added to the information base of the Supreme Audit Office.
In 2020, NIK published and addressed 609 recommendations more as compared with last year.
The Report on NIK’s activity in 2020, includes the key audit findings divided into six areas of the state functioning.
1) in the area economic security of the state, NIK audits covered e.g. issues related to the system of finance, financial stability and tax system.
The audit on the management of public debt and liquidity of public finance entities proved justified in view of an increased burden for public finance, caused by epidemic prevention.
NIK also addressed the issue of supervision over State Treasury companies, purchase procedures implemented by those companies and management of State Treasury properties.
NIK also evaluated management of the capital-investment portfolio of the Industrial Development Agency [Agencja Rozwoju Przemysłu S.A.] and related entities.
2) NIK also looked into stability of the economy and conditions for its development.
NIK has monitored the condition of the Polish energy sector and safety of energy supplies in Poland for years now. It is particularly reflected in the audit on efficiency of expenditures incurred by electrical energy producers.
Audits related to transportation focused on the transport infrastructure and sustainable transport development. It was for the first time that NIK took the issue of electromobility under the microscope.
3) in the area secure, well-performing and effective state, NIK examined among others performance of development works for the ministry of national defence.
Other important audits dealt with operation of services, especially in crisis situations.
4) the COVID-19 epidemic largely determined subjects of NIK audits in the area of health protection and provision of decent living conditions.
In this area NIK examined issues related to the healthcare system operation.
When evaluating the social context, NIK looked into social welfare centres and provision of extra meals to children and youth during the epidemic.
In areas environment and climate audits dealt with the impact of pollutants on people’s health, influence of people’s activity on nature and evaluation of environmental protection projects.
NIK also verified issues related to care about education, culture and national heritage.
According to NIK, the issue of educational offer not tailored to the labour market is of special importance.
In the area of scientific research NIK pointed to poor supervision over research projects.
Analysis of execution of the state budget and monetary policy assumptions
Referring to the state budget as a constitutional value, NIK recognised the necessity to restore adequate weight of the state budget related to its special character and central position in the public finance system. That was because NIK found significant financial imbalance of the Polish state in 2020, caused e.g. by large financial operations leading to an increase in the public debt beyond the state budget. In particular, they included transfers of treasury bonds to various entities and loans instead of subsidies that would increase the state budget expenditures and deficit by nearly PLN 30 billion. Moreover, numerous financial operations were made which caused an increase in state liabilities which only apparently did not expand the public debt calculated in line with the domestic methodology. An example of that practice was e.g. the issue of bonds of Polski Fundusz Rozwoju S.A. and Bank Gospodarstwa Krajowego for the COVID-19 Prevention Fund of the total value exceeding PLN 166 billion (where the repayment and service of these bonds is guaranteed by the State Treasury).
NIK is anxiously observing falling significance of the state budget. It means that “any results could be presented in the state budget and so this plan is no longer critical to evaluate the state’s financial standing”. According to NIK President and former Minister of Finance at the same time, the state budget is a primary instrument of governance and thus of political power. It therefore sets borders for exercising that power in a state by different bodies and representatives of the public authority, including the government administration.
NIK’s cooperation with the Polish Sejm
Every year NIK analyses and acts upon suggestions on audit subjects made by the Sejm bodies with regard to NIK’s work plan.
NIK presents the Sejm and its bodies with the results of its audits. Last year it presented:
- 112 planned and ad hoc audit reports
- 99 state budget execution audit reports
- Analysis of execution of the state budget and monetary policy assumptions
- Report of NIK’s activity in 2019.
NIK President has noted that NIK operates efficiently although the NIK Council’s composition is depleted. He said: “I am alarmed by the fact that the Speaker of the Sejm does not appoint new members of the NIK Council, although I have sent 27 motions in that matter. Since the beginning of my term, I have addressed the Speaker of the Sejm six times asking to expand the Council’s composition. Sadly, the Speaker of the Sejm has appointed only seven persons since then.
The State Audit Committee issued negative opinions on candidates for the NIK Council members recommended by NIK President Marian Banaś – outstanding and recognised experts in law and economics or long-term and very experienced NIK employees. At the same time, the Committee failed to provide any substantive arguments to support those opinions. One negative opinion referred to a candidate, former NIK Council member who received a positive opinion from the Committee 3 years ago.
It is hard to imagine and accept a situation in the state of law where the Speaker of the Sejm does not appoint members of the NIK Council. Operation of that collegial body and thus of the whole NIK could be paralysed in this case.
NIK as a recognised and respected international partner
NIK is part of international teams conducting peer reviews in other supreme audit institutions. It also acts as external auditor and is involved in EU twinning projects.
As President of the Supreme Audit Office Marian Banaś was reappointed as Vice-President of the Governing Board of the European Organisation of Supreme Audit Institutions (EUROSAI) – associating 50 countries in the region and the European Court of Auditors. Besides, NIK President represents the Supreme Audit Office of Poland in the Governing Board of the International Organisation of Supreme Audit Institutions (INTOSAI) which associates 201 members worldwide.
This recognition for NIK gives it a real impact on the development of modern state audit worldwide – among others by taking part in creating international auditing standards.
NIK also chairs works of the EUROSAI Working Group on Environmental Audits where it e.g. conducts an international audit on plastic waste management. Besides, NIK is the chair of works of the INTOSAI Subcommittee on Internal Control Standards where it is responsible for developing international standards.
NIK independently runs twinning projects: in Kosovo, Jordan and Palestine. Such projects enable sharing experiences in audit process digitalisation, audit quality assurance and compliance of audit procedure with international standards of public audit – also to promote independence and objectivism in auditing.
Currently NIK also carries out an external audit of the Organisation for Economic Co-operation and Development (OECD) where it was selected by way of open competition.
NIK also has its representatives in the Board of External Auditors for the mechanism of financing EU military operations ATHENA, in the Audit Committee of the European Space Agency and the European Organisation for the Safety of Air Navigation (EUROCONTROL).
Improvements in NIK’s organisation and audit processes
In 2020, NIK adopted the Strategy of the Supreme Audit Office for 2021-2024 (the first strategy in 18 years of NIK’s history). At the same time, NIK started to develop an integrated support platform for audit processes. The point was to shorten the time of auditing, improve the quality of audits and boost their dynamics as a target.
NIK focused on the update and development of IT systems in terms of their functionality, applied technologies and performance.
NIK has prepared for digitalisation of the audit process for over a year now. The analytical and reporting system (which is under development now) will support auditors’ work among others due to multi-dimensional analysis of data coming from different sources. NIK is also going to implement digital modelling and workflow path management as well as measurement of the audit process efficiency.
NIK is also working on modernising the audit methodology based on current knowledge and broader use of risk assessment. The new Auditor’s Manual, first published almost twenty years ago, is under development now.
In 2020, the Supreme Audit Office completed efforts aimed at centralising its budget execution.
From 1 January 2021, the NIK’s budget is executed exclusively at the level of budget part user. It brings about measurable effects both in financial and organisational terms.
Centralisation of accounting allowed cutting costs of NIK operation (it was due to reducing headcount in the financial and accounting department from 54 to 30 persons). Savings were also achieved thanks to centralisation of planning and execution of public procurement.
As a result of centralisation, efficiency of NIK’s finance management increased, better supervision of budget execution processes was ensured. Also due to centralisation, organisational improvements were enabled. They helped generate savings which were earmarked for tasks specified in NIK’s Charter.
The Ad hoc Audit Coordination Department was established at NIK. That was a concept defined in the Strategy which also involved the need to simplify procedures in terms of taking up and conducting ad hoc audits.
Last year the new department coordinated and conducted (or has conducted until present) complex audits covering audit procedures in 22 entities. It cooperated also with other NIK auditing units in that area.
The auditees were not only ministries and central institutions but also state institutions responsible for the distribution of EU funds but also commercial law companies. What is important for the audit complexity, the group of auditees included companies of special importance for the state economy.
Issues covered by the audits were complicated both in legal as well as financial and accounting terms. They were related to key areas of the state activity and dealt with significant public spending.
The financial scale of irregularities identified by the Ad hoc Audit Coordination Department within several months from its establishment exceeded PLN 26 million.
All Sejm Committees which reviewed the Report – like in previous years – positively evaluated the activity and results of NIK’s work.
At the end of his speech, NIK President remarked that the Sejm –without good reason – has not accepted reports on NIK’s activity since 2016. "That situation is incomprehensible and implies that decisions of this Chamber of Parliament are not motivated by substantive reasons dealing with the way NIK and its employees perform their tasks.
On my own behalf as well as on behalf of NIK auditors and employees I would like to say that I believe that activities of the Supreme Audit Office help improve the state functioning."
NIK President Marian Banaś ended his speech by saying: "I want to thank NIK auditors and employees. These are people committed to public service and state audit. By evaluating this Report, you evaluate their hard and responsible work"
