Audit with interests? Who owns the companies selected by the Ministry of Finance to carry out financial controls at state enterprises?

Foto: CIJM
Author: Anastasia Nani
28/12/2015 19698

The government has recently approved a list of 37 audit companies, filled by the Ministry of Finance, that will audit the financial statements of state enterprises or companies in which the state share exceeds 50 percent of the social capital. One of the companies approved to make checks in 2015 is that of Ion Prisacaru, head of the State Tax Inspectorate (STI) and other companies related to former employees of Finance Ministry. The National Anti-Corruption Center (CNA) conducted a survey on the corruptibility of the draft decision of the Government in March and warned about situations of conflicts of interest. CNA also warned that companies of officials could be favored compared to other enterprises. The National Integrity Commission started its own controls and found that officials did not violate any law.

Annually, the Ministry of Finance submits to the Government for approval a list of audit companies that could perform controls at the state enterprises or companies in which the state share exceeds 50% of the social capital. These services should provide to authorities the guarantee that financial statements are readied in accordance with the law. Companies that want to be part of the list must meet several criteria, for example, they must have at least two certified auditors, and one of them must have a minimum experience of five years in the field. Another condition is that the company has not had any sanction in the last two years of activity. The enterprises choose a company from the list approved by authorities, which they pay.

Companies in the list of the Ministry

Earlier this year, the Ministry of Finance has developed a government draft decision with a list of 39 companies from 120 societies which are licensed in area (figure from the state register dated 7 December). In March, employees of the National Anticorruption Center conducted a survey of the project and concluded that most companies are owned by current or former public officials or their close relatives. Like in 2014, this year, the list initially approved by the Ministry of Finance reached Grant Thornton Audit, where Olesea Bride, the wife of Stephane Christophe Bride, Deputy Prime Minister and Minister of Economy, currently holds 49% of social capital or Ecofin -Audit-Service that was founded by Ion Prisacaru, head of STI (97.97 percent of the social capital), an institution under the subordination of the Ministry of Finance. CNA registered problems at other five companies: Valaudit, Contserv Audit (sanctioned on 10 November for non-respecting the quality of auditing works), BDO Audit & Consulting, Audit-Consulting Modern and Audit-Sedan.

For example, the company Valaudit is owned by Lidia Foalea’s husband (25% of the social capital) and mother-in-law aged 80 (75%).  Lidia Foalea is the Chief Deputy, Department of Audit and Accounting Methodology, Ministry of Finance, a subdivision that drafted the project. Moreover, according to CNA, she was founder of the company until 2008.

"The other four companies are affiliated to former employees of the Ministry of Finance. Some of them resigned one year ago", explained Cristina Chistol, inspector at the Division anti-corruption legislation and expertise at CNA, who analyzed the draft.

The author of the document notified several conflicts of interest. "These circumstances undermine the equality of the sides and cause malfunctioning of the selection procedure of the audit company and its development under a previously established winner, harming the interests of other participants. (...) Also, there is the risk of involving only aforementioned audit companies in the process due to close relations with some officials who have managerial functions of enterprises subject to audit ", reports the expertise of CNA.

Ping-pong between CNI and CNA  

Viorel Chetraru, Director of the Center notified the National Integrity Commission (CNI) by a letter about companies Grant Thornton Audit, Ecofin-Audit-Service and Valaudit. The members of CNI started checks at the Minister Stephane Christophe Bride and Lidia Foalea, not for Ion Prisacaru who over the years declared his property and interests conscientiously.

"As a Deputy Prime Minister, Minister of Economy, I did not participate in any working group, council, office or any other way to complete this project. Also, I would like to say that the working group that issued the project is not under my subordination, and I do not have direct-institutional relations with these people", said inter alia, Stephane Christophe Bride to CNI members.

The Commission did not find any infringements either in the case of the minister or official from Finance. In August 2015, the heads of CNA sent another letter where they wrote that the Ministry of Finance, as an institution, acknowledged a conflict of interest when it signed and sent the project for endorsement. "The interest pursued by the Ministry is to promote in the list of auditing societies, controllable companies with the help of their direct subordinates, so thus the activity of managing state enterprises and societies where the state share exceeds 50% of the social capital to be treated in the audit reports as positive and beneficial”, wrote Cristina Tarna, deputy director of CNA to Anatolie Donciu, president of CNI.

"I do not understand what to answer. There is still no Government decision, it is only a draft", said Donciu in the Commission’s meeting on 3 September. "Probably, CNA wants to train us into something. They have the responsibility to approve draft laws, government decisions and analyze risks. Let them do it", said Dumitru Prijmireanu, another member of the CNI.

Moldtelecom, Termocom, Tutun-CTC: customers who brag the company of the head from STI

At the last meeting of the Government headed by Valeriu Strelet, on October 28, Anatol Arapu Finance Minister presented the final list of 37 companies. Grant Thornton Audit and Valaudit representatives demanded that companies be excluded from the list. According to the briefing note accompanying the draft Government decision, the other companies mentioned in the expertise of CNA remained because CNI could not develop his view over the conflict of interests. "In turn, the Finance Ministry has no legal basis to exclude them" reads the note signed by Anatol Arapu.

Though the Ecofin-Audit-Service appears in government decision, Ion Prisacaru claims that his company was removed from the list because it does not have the necessary category to exert controls over state companies. "When I managed it, it had all categories. Now, no", explained the Head of the State Tax Inspectorate.

The customers of Ecofin-Audit-Service are the stock-companies Moldtelecom, Termocom, Tutun-CTC, state enterprises Fiscservinform, Fintehinform, Center of Special Telecommunications etc.

Expert: “Integrity means not to go beyond common sense”

Mariana Kalughin expert at the Center for Analysis and Prevention of Corruption believes that the inclusion in the list of companies that have ties to current or former officials is not the most appropriate solution. "It feels the solid affiliation of companies and some officials or ex-officials of the ministry which are close to financial field. Though there are no express legal provisions that would prohibit this, this relationship of affiliation will cast doubts on how impartial, objective and correct the audit was conducted, or this is not for the public convenience. We are interested that any audit to be conducted by an independent company, which has no affiliation with any state structure and its results to be credible. Integrity involves more than accurate tracking of the provisions of the law. Integrity means not to go beyond common sense that is not stipulated by documents but it should be respected", said Mariana Kalughin.

According to data from the Public Property Agency in the Republic of Moldova on 1 January 2015, there were registered 244 state-owned enterprises and 80 joint stock companies where the state share exceeds 50% of social capital.

This investigation is carried out within the Project „Shining a Light on Corruption in Moldova” carried out by the Center for investigative Journalism and Freedom House, with the financial support of the Norwegian Ministry of Foreign Affairs.


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