June 9-12, 2015

 The RA Law «About Procurement» (No-206-N, dated December 22, 2010);  The RA Government Decree № 168-N «About Organization of Procurement Process», dated February 10, 2011;  The RA Government Decree № 1370-N «About Approval of the Procedures for Implementation of E-Procurement», dated December 5, 2013;  Order № 1169-N of the RA Minister of Finance «About Approval of Sample Review of the Specifications for Procurement Items Approved by the Employers; Approval of Bidder Qualification Requirements and Procedures for the Analysis of Procurement Data and Maintaining of Electronic Guide», dated December 25, 2012;  Order № 181-N of the RA Minister of Finance «About Approval of the Procedures for Registration of Procurement Transactions, which Generate Commitments/Liabilities for the State», dated April 1, Before April 4, 2014 the Order № 451-N, dated June 3, 2013 «About Approval of the Procedures for Risk Assessment» was in force.

According to the RA Law about Procurement, Employers Are the Following Entities:  Public administration and local governance bodies, public or municipal institutions, as stipulated by the RA Constitution and RA Laws;  Central Bank of Armenia;  Public or municipal non-commercial organizations;  Organizations with more than 50% of the State or Municipality share;  Legal entities, which receive donations from the State or Municipalities, or the RA Central Bank, or non-commercial or municipal organizations, or organizations with more than 50% of the State or Municipality share– in respect of procurement financed by the funds received as donation;  NGOs. There are about 4000 Employers in the Republic of Armenia, as stipulated in the RA Law «About Procurement», of which 75 are the bodies of public administration and state institutions.

Monitoring is carried out in two stages: Stage I is the organization of procurement process. Stage II is the entry of signed contracts and procurement process reports into electronic system. I STAGE OF MONITORING The I stage of monitoring is implemented by the «Procurement Support Center» State Non-Commercial Organization (PSC), which reviews published announcements and invitations to bid, specifications of procurement items in respect of their compliance with the RA Law «About Procurement». The PSC reviews specifications of procurement items approved by the Employers and Bidder qualification requirements published in the invitations in respect of their compliance with requirements to ensure competition and non-discrimination as prescribed by the RA Law «About Procurement».

Employers and procurement procedures are monitored on sample basis. In case of the public administration bodies and state institutions, the Ministry of Finance controls also the process of procurement planning. Particularly, before approval of the annual Procurement Plans, the Employers shall agree with the Ministry of Finance procurement procedures, as well as changes and amendments in the Procurement Plans taking place during the budget year. Quantitative Indicators of Reviewed Procurement Procedures During 2014 the PSC reviewed 1583 announcements and invitations: simplified, open, pre-qualification procedures, as well as framework agreements, which make 21,47% of the total number of announced procedures. The number of reviewed announcements-invitations more than twice doubled indicators of In case of the public administration bodies and state institutions, the PSC in 2014 reviewed 40,77% of the total number of announced procedures; in respect of the other Employers this indicator amounted to 13.09%.

Announcements-invitations, reviewed in 2014 N/NProcedure Including, the bodies of public administration and state institutions Total Published procedures Reviewed procedures Procedures with some deficiencies Published procedures Reviewed procedures Procedures with some deficiencies Simplified procedures Open procedures * Prequalification procedures Framework agreements Total *2 reviewed procedures were published in 2013

The Main Deficiencies Revealed in the Reviewed Procedures In 2014, deficiencies weгe revealed in 302 out of the reviewed 1583 procedures, which amounted to 19,07% of the total number of monitored prоcedures Below are the main deficiencies revealed in the reviewed invitations:  Qualification criteria are not clearly specified in the invitations.  Sometimes the properties of goods to be purchased are not defined in technical specifications; in some cases they are defined in foreign language, and sometimes there is a reference to the brand names of the goods.  There are inaccuracies in the delivery plan (at least 30 working days).  Selection of a wrong procedure.

Measures, Taken by the PSC in Case of Detected Violations In case of procurement transactions, which generate commitments for the State, the PSC, based on the results of review of compliance of the procedures published by the Employers with the RA legislation requirements, shall publish a positive or negative conclusion on the site with indication of the publication date. In case of procurement transactions, which do not generate commitments for the State, the PSC shall send a negative conclusion to the Employer on the date of the review. Not later than in three working days after the negative conclusion is published or sent, the Employer shall submit to the PSC a written explanation on detected discrepancies. PSC accepts the Employer’s explanations, if:  1) the Employer justifies inaccuracy of detected discrepancy based on the RA procurement legislation;  2) the discrepancy relates to the organization of the procurement process and the Employer has eliminated the discrepancy;  3) the Employer agrees with the discrepancy and confirms that detected discrepancies will not lead to the change of the procedure or its results, neither it will lead to infringement of the interests of the procurement process participants.

About Results of Submitted Explanation Discussions  In case of procurement transactions, which generate commitments for the State, the PSC shall post on the site the scanned copy of the original explanation submitted by the Employer, as well as the PSC’s conclusion with indication of the publication date.  In case of procurement transactions which do not generate commitments for the State, the PSC shall send to the Employer and its authorized governance body the scanned copy of the original explanation submitted by the Employers, as well as the PSC’s conclusion. Procurement Transactions Generating Commitments for the State:  In case the clarifications are not accepted, the Employer can present the issue for consideration to the RA Government. Decisions of the RA Government shall be final for the RA Ministry of Finance and the PSC.  Failure to submit explanations regarding the negative conclusion of the PSC or failure to accept the justification of the Employer by the PSC will lead to suspension of the contract financing until the acceptable justification is submitted or relevant decision is made by the RA Government.

II Stage of Monitoring The 2 nd stage of monitoring is implemented by the RA Ministry of Finance. The Ministry of Finance does electronic monitoring of all the contracts signed by the public administration bodies. After the contract is signed, the Employer enters into the electronic system the report on the procurement process and the contract copy, which results in the system automatically blocking the possibility of further financing of the contract. Relevant Division of the Ministry of Finance shall assess the compliance of the report and the contract with the requirements of the RA procurement legislation, and within 7 working days a positive or negative conclusion shall enter into the system. Documents (contracts) are reviewed on the basis of the following criteria: 1) compliance of the applied procurement procedure (type) and contract data with the Procurement Plan; 2) with the purpose of contract signing, availability on the sites and/or of information related to the organization and implementation of the procurement procedure, except procurement containing the state, official or bank secrecy; 3) availability of the main requirements in the signed contract as prescribed by the RA legislation about procurement; 4) compliance of information, required for review, as prescribed by the Order of the RA Minister of Finance № 1169-N, dated December 25, 2012 and the RA legislation about procurement.

Quantitative Indicators of Reviewed Procedures During the monitoring period from January to December of 2014 the RA Ministry of Finance reviewed procurement contracts, submitted to the RA Ministry of Finance for registration. Registration of 3093 or 15.2% of the total number of contracts was rejected because of detected deficiencies. After elimination of the deficiencies the contracts were registered. It should be noted that over 2014 there was a tendency for improvement. Particularly, while during the first half of 2014 the number of contracts rejected because of detected deficiencies was 2180 out of 6808 reviewed transactions, in the 2 nd half of 2014 there were 913 rejected contracts out of reviewed transactions. First halfSecond halfTotal Number of reviewed transactions Number of rejected contracts Share/specific weight 32 %6.7% 15.2%

Measures Taken by the Ministry of Finance in Case of Detected Violations In case of the contract rejection the Ministry of Finance shall send a written request to the Employer to present explanations. The Employer shall submit written explanation no later than within 3 working days from the date of receipt of the letter.

Relevant division of the Ministry shall discuss and accept the Employer’s explanations within 5 working days, if: 1) the Employer justifies inaccuracy of detected discrepancy based on the RA procurement legislation; 2) the discrepancy is related to the procedure of contract drafting and the Employer corrects it with explanation submission; 3) the Employer agrees with the discrepancy and confirms that detected discrepancies will not lead to the change of the procedure or its results, neither it will lead to infringement of the interests of the procurement process participants. In case the clarifications are not accepted, the Employer, after being notified by the Ministry of Finance, can present the issue on compliance of the contract with the RA procurement legislation for the RA Government’s consideration. Decisions of the RA Government shall be final for the RA Ministry of Finance. Failure to submit the report to the RA Ministry of Finance or detection of incompliance with the RA procurement legislation, or failure to accept the justification submitted by the Employer will lead to suspension of the contract financing until the report is submitted or a relevant decision is made by the RA Government.

REFORMS The system of e-procurement ARMEPS has been in operation in Armenia since 2012, the main objective being an effective and transparent implementation of public procurement processes with the help of automated procurement processes. ARMEPS has automated the following phases of procurement process:  Publication of announcements;  Issuance of invitations;  Acceptance and evaluation of applications/bids;  Recognition of the successful bidder. Currently the processes of procurement planning, contract management, and reporting are not automated, due to which an effective and transparent implementation of procurement processes, as well as effective control and monitoring of procurement processes are not ensured. This led to initiation of purchase of three modules of ARMEPS e- procurement system, related to procurement planning, reporting, and contract management. It is planned to start operation of these modules in October of 2015.

Purchase of the modules will enable automation of all the processes of procurement and establishment of an integrated e- procurement system, which will provide for automated data exchange with appropriate existing systems of the Ministry of Finance. Procurement planning module. When organizing procurement process at the stage of publication of announcement, invitation or contract signing, this module will allow for comparison of procurement item data entered by the Employers into the electronic system with Procurement Plans and for control over the funds saved in the result of the procurement process. Contract management module will provide an opportunity to control the contract implementation (supply) and payment at all stages of procurement process, as well as to receive dynamic reports on procurement procedures. As a result, the integrated system of e-procurement will ensure the most transparent implementation of procurement processes and effective monitoring of the state budget funds.

DEVELOPMENT STAGES  ESTABILISHED IN 1996 within the structure of the National Assembly of Armenia  INDEPENDENT STATE BODY SINCE 2008 based on constitutional reforms LEGAL FRAMEWORK  Constitution  The RA Law on “Chamber of Control”

EXTERNAL AUDIT ● State and municipal budget funds and revenues ● The utilization of the state and municipal property TYPES OF AUDIT ● Financial audit ● Compliance audit ● Performance audit ● Environmental audit

SUBMITTED TO  the Parliament  the President  the Government  Available on the website:  The Prosecutor General’s Office in case there are suspicions about criminal and legal violations FOLLOW UP The Chamber of Control ‣ follows up the “recovery” process ‣ gives recommendations on further shortcomings’ prevention and legal improvements

RECOMMENDATIONS WERE RELATED TO THE FOLLOWING TOPICS: ● improvement of legal framework ● implementation of e-procurement system ● improvement of pricing and budget estimation mechanisms OUTCOME: ● Complex review of legal acts ● More detailed pricing and budget estimation mechanisms SINCE PUBLIC PROCUREMENT AUDIT IS RECOGNIZED AS THE MAIN PRIORITY AUDIT TOPIC

- High prices - Intermediary suppliers - Inefficient planning - Unjustified budget estimation As a result: $ 736 mln AMD saved only in Healthcare in 2014

 INTOSAI member since 1998 Member of The INTOSAI Task Force on Procurement Contract Audit The Task Force aims to develop universally accepted common approaches and procedures of procurement contract audit and is based on the potential of Supreme Audit Institutions which have diverse experience in that field  EUROSAI member since 2000  ASOSAI member since 2007

THANK YOU!