Serbia

Information on procedures on disposal of assets is transparent, but further information on the proceeds of the disposals is open only to the State Audit Institution.

Disposal of real estate and movable property is conducted in accordance with the Law on Public Property. Final decisions on disposal are taken by the Minister Of Defence or a nominated official; however, while available to officials in writing, these justifications are not made public. (7, pp 58-59)

Following the December 2011 publication of a critical 2010 SAI Report, MoD introduced the Information system on assets. Improvements have been made by adopting (and drafting) rulebooks (1), (2), (3) that will arrange usage, management, maintenance of and evidence on access to assets (4). Internal audit reports are not public, but SAI have access to them in drafting their (publicly available) report, but this is not done on annual basis (5). However, the SAI report for 2012 (6) found that a sum on approximately 3 732 036 000 RSD was not properly reported –this was the case of Military Medical Academy and Military Technical Institutes own revenues used for allowances. This shows that independent control (SAI) is effective.

Disposal of assets is regulated by several laws and bylaws. (1), (2), (3), (4). Internal audit performs scrutiny over assets disposals, but their reports aren’t publicly available. Rather, their distribution is limited to: a) subjects of audit, b) their superiors, c) the SAI and d) Central unit for Harmonization at the Ministry of Finances.(5) In the words of a SAI representative, “internal audit is underdeveloped in most state institutions.” (8)

The SAI, being ‟an independent state authority” (6), has presented results of its first-ever audit of MoD’s finances in December 2011, and second one in 2013 for 2012 year (7). Data for asset disposals was only provided in the form of one sum for the entire MoD. The SAI reports are publicly available. As mentioned in question 15, there are concerns about the SAI's resources and the scope of transparency of its reports.

RESPONSE TO GOVERNMENT REVIEWER: Relevant information incorporated and changes within the internal audit unit noted. However, criteria for score 2 still fit the situation best: there is evidence that audit is conducted, but its findings aren't publicly available (the publicly available SAI reports only contain very basic information on asset disposal). Since the audits are not public and the SAI has not audited internal MOD structures recently, the degree of independence and effectiveness is unclear.

The Budget of the Ministry of Defence for 2012 was around 467 million euros. 81 million euros of the budget was spent on procurement, out of which 32% was marked as confidential meaning. (1) The budget of the Serbian civilian security-intelligence agency – SIA - in 2013 was around 38 million euros. The budget of the Serbian MoI in 2013 was 63 million euros, out of which 5% was spent on procurement (public and confidential). 66% of the procurement was realized through confidential procedures. (4)

If the MOI, MOD and SIA are taking together as the defence and security sector, then secret spending (including the intelligence budget and confidential procurement expenditure) represents over 8% of the total budget.

RESPONSE TO GOVERNMENT REVIEWER: Challenge accepted and calculations amended accordingly, The score however is maintained.

Budgets of military security and intelligence agencies fall within the scope of Security Services Control Committee, which has not considered budget proposals for the two agencies so far. It is also indicative that in 2012 the members of this committee criticised the practice of budget breakdown separately showing budgets of MSA and MIA, pledging for a less transparent presentation of the budget (10).

Previous budget proposals have shown only aggregated expenses of categories that might contain spending on secret items (1, 2, 3).

According to the Public Procurement Law (PPL) art. 127, plans for secret item acquisitions in the field of security and defence need to be presented directly to the Government that approves them upon consulting the parliament (4). There is, however, no legislative scrutiny over the procurement plans for procurements in the field of security and defence regulated by article 128 of PPL. They are subject to the internal oversight mechanisms and audits performed by the State Audit Institution. The PPL and the relevant bylaw that regulates the security and defence procurements mandate that annual reports on all secret item spending should be presented to the adequate parliamentary committee before March 31st each year. The form of these reports is regulated by the mentioned bylaw. (5)

The Security Services Control Committee (SSCC) has explicit jurisdiction re. the oversight of these kinds of acquisitions carried out by the security services. So far, it has used this mandate once, in discussing the report on the SIA for 2013. (5,6) SSCC has in the past discussed the audit report on the acquisition of secret items by Security Intelligence Agency made by Supreme Auditing Institution (7,8).

The Committee on Finance, State Budget and Control of Public Spending has discussed several of the reports on the secret item spending in 2015. (9)

RESPONSE TO GOVERNMENT REVIEWER: Score 2 for this year reflects a big change upward compared to the 2013 Index, when the score for this question was 0. This reflect changes brought about by the 2013 Public Procurement Law, adequate bylaws adopted in early 2015, and the new parliamentary Rules of Procedure affecting the work of the committees since the 2012 convocation.

Because the new practices have only been introduced recently, more time is needed to assess their effectiveness. There is still no evidence on how the (rare but still existing) opportunistic and ad hoc defence and security procurements are reported, and it is not clear whether they affect the budget process. This is why the score remains 2, despite evident changes in legislature and practice.

The Security Services Control Committee has a mandate to consider and scrutinise audit reports of the security services. (1) The Defence and Interior Affairs Committee (DIAC) has a mandate to consider and scrutinise spending of the budgetary resources necessary for the activities of the Serbian Armed Forces (SAF). It is not explicitly stated that DIAC also scrutinizes spending of budgetary resources for Ministry of Defence (MoD) as whole and for the MoI. (2)

The State Audit Institution (SAI) delivers all of their reports to the parliament (3). However, it still has insufficient capacities and resources to perform comprehensive audits of financial reports and regularity of operations of all security institutions on annual basis. Since 2009, the SAI performed 5 audits of the security institutions in total. (4) In 2012, the SAI performed audits of MoI and MoD, but only of parts of their financial reports, parts mainly dealing with salaries. In 2013 full audit of Security Information Agency (SIA) was performed. The full audit reports of the MoI and MoD from 2011 were not considered by the relevant committee, while the audit report on the SIA from 2013 was. (5) The law stipulates that the SAI audit reports are to be considered by the parliament, but reports relevant to DIAC were never considered. Making DIAC competencies more precise in this regard (explicitly stating in National Assembly Rules of Procedure that DIAC considers SAI audit reports of relevant institutions) would be an improvement upon this current practice.

The is no reason to believe that relevant Parliamentary committees do not receive detailed versions of reports.

No evidence was found that could suggest that Republic of Serbia’s laws allow for off-budget expenditures. Republic of Serbia’s defence Law states that the country has a budget to finance tasks and obligations in the area of defence. (1) The Law also prescribes that the defence Minister organizes financial work within the MoD and SAF in accordance with the material and financial business regulations of budget recipients. (1) The latter does not provide further detail on the above mentioned budget recipients’ regulation.

The issue of 'simulated businesses' - i.e. legal entities that the Military Security Agency was permitted to establish and manage - which had constituted a risk of off-budget expenditure, is now regulated through the provisions of a new Criminal Procedure Code and appears to be well-controlled.

There is no evidence, either in official documents or in media reports, that the country has off-budget defence expenditures.

All income financing defence sector, including donations, own revenues and income from sale of real estate, is recorded in the budget for the MoD, albeit in cumulative amounts for each income category (1). The most recent report by the State Audit Institution (SAI) lists various expenses by the MoD, however it does not mention off-budget military expenditures. It does list number of expenses which are not fully in line as pointed within the report. (2) There is no evidence either in official documents or in media reports that the country has off-budget defence expenditures.

The Law on Data Secrecy was adopted in 2010 (1); it lays out a policy of secrecy for all state actors. Necessary bylaws (2) (3) (4), defining mechanisms for classifying information, were adopted in the autumn of2013. Oversight of security policy can be enforced by authorized members of the Office of the Council on National Security and Classified Information Protection (National Security Authority), the Ombudsperson and the Commissioner.

Yet the Ministry of Defence (still) acts in accordance with several bylaws that regulate data secrecy in an older system of national defence. The reason is that the Law on Data Secrecy defines a time period of two years in which all classified data is to be declassified or reclassified in accordance with newly adopted four levels of classification (5). MoD reports (6) suggest that this area is not properly regulated yet. An indicator of the lack of effective scrutiny is that only data which has been classified in accordance with the Law on Data Secrecy and those received from NATO require security clearance certificates. The “older” classified data (which are not reclassified in the standards imposed by Law on Data Secrecy) does not require such certificates, hence are not subject to effective scrutiny.

An example of this is data in the Information booklet of the National Security Authority: 170 such certificates for access to classified data were issued to civil servants (throughout civil administration), and further 225 certificates for access to NATO classified data. It is hard to imagine that the necessity to access NATO classified data than to access classified data within civil administration in their everyday work is not urgent, (7) suggesting than the bulk of access to classified data did not require certificates, being of the “older type” and their access wasn’t recorded through issued certificates.

In early 2015, a clash between the Military Police and the defence Minister on one side and the Ombudsman revolved around the Ombudsman's access to potentially classified documents. It has been reported that the defence Minister denied the existence of documents which were later shown to have been in possession of the security services. This suggests that in some cases, classification of documents could be influenced by individual decisions.

Defence institutions have ownership of significant commercial businesses which are publicly declared, though details of their operations and finances are not transparent. The MoD controls the following:

a.tAircraft Institute ‟Moma Stanojlovic” (overhaul of aircraft, aircraft engines, rocket systems, etc.)(1);
b.tTechnical Overhaul Institute ‟Kragujevac” (overhaul and maintenance of arms, ammunitions and weapons systems)(2);
c.tTechnical Overhaul Institute ‟Cacak” (overhaul, maintenance, repair and production of weapons, weapon systems, vehicles, etc.)(3);
d.tTourism-leisure-services oriented military owned institutions ‟Tara” (two hotels)(4); ‟Morovic” (hunting grounds) (5); ‟Dedinje” (a total of 7 restaurants and one conference hall) (6).

MOD businesses also include a group of seven companies manufacturing weapons: “Prvi partizan”, “Krusik”, Sloboda, Milan Blagojevic-namenska, Prva iskra – namenska proizvodnja, Zastava oruzje, and Prva petoletka namenska. These factories are bicameral joint stock companies constituted in accordance with the Companies Law (9). Interests of Serbian State are ensured by representation of MoD members in managerial boards. A final balance sheet, for these enterprises, is produced in accordance with the Law on Accounting and Auditing (10) and it is delivered to Serbian Business Registers Agency (11) whereupon this data becomes publicly available.

These businesses are subject to internal MOD oversight. The results of this oversight are made available only to the SAI, and reporting is done only in aggregated sums (incomes). Thus the details of the operations and finances of such businesses cannot be seen as transparent. The SAI report for 2012 (7) stated that approximately 4% of the MOD budget came from its own revenues and selling of non-financial assets. In 2013 (until November) the MoD acquired 5.5% of its budget from its own revenues (8). This data was obtained using the Act regulating free access to information of public importance; it was not publicly available prior to this request.

RESPONSE TO GOVERNMENT REVIEWER: Score 1 maintained as the businesses can be considered 'major'.

As profit generating entities, military-owned businesses are bound to be subject to some scrutiny by the MoD’s Accounting Centre (1), as well as the Defence Inspectorate (2). However, control performed by these units of organization cannot be understood as auditing, since it is not in line with contemporary auditing standards; rather, it is closer to legal control. The SAI performs control in accordance with international standards (INTOSAI Audit Standards), yet it has so far not specifically addressed the income and operations of military owned businesses, other than in reporting aggregated sums.

Establishing a system of internal audit in the MoD is a work in progress; the MoD recently adopted the Charter of internal audit and the Ethical Code of internal audit. Internal audit should have 5 employees, and in 2012, 2 were employed with estimation that they will be able to meet their given tasks (3). Additionally, 2 more persons were employed in 2014, but it was recognized that this number of employees is not sufficient (4) for effective control. In March 2014 a request was submitted for certificates for access to “top secret” level of classified data as to enable auditors to have access to all relevant documents – meaning that until March they weren’t able to fully perform their tasks.(4) The results of this oversight are made available only to the SAI, and reporting is done only in aggregated sums (incomes).

RESPONSE TO GOVERNMENT REVIEWER: Score 1 maintained as concerns regarding the effectiveness and transparency of scrutiny remain.

Ownership of an enterprise, founding a company and pursuing private business are prohibited by the Law on the Civil Servants (1), which applies to civilian employees of the MoD. Until the amendments in early 2015, those activities were also sanctioned as breaches of discipline by the Law on the Serbian Armed Forces (LSAF) (2). The disciplinary measures applicable according to the LSAF ranged from salary cuts to dismissal from work. In 2012 and 2013, no disciplinary actions were taken for these breaches in the Armed Forces (3). The current version of the Law allows professional military officers to pursue outside employment within the confines of the Law and following authorisation by the Chief of the General Staff or an officer identified by him in the Serbian Armed Forces. Approval can also be given by the Defence Minister, or the manager of an organizational Ministry of Defence unit (4). However, the law does not state what the prescribed limits actually are, apart from the approval of supervisors. Furthermore, it ought to be noted that a bylaw preventing conflict of interest in the MoD and the Serbian Armed Forces is still missing.

There is no publicly available evidence suggesting that individual personnel do own commercial businesses.

RESPONSE TO GOVERNMENT REVIEWER: Unauthorised private enterprise is outlawed, but the limits of what remains permissible are not clear. Score 2 maintained.

The Defence Minister and various other officials have expressed an interest in and commitment to the anti-corruption measures. The MoD took a cooperative approach to the TI Government Defence Anti-Corruption Index, publishing its comments to the Transparency International GI Assessment 2013. (1) In early 2014, the Ministry of Defence, the United Kingdom Defence Academy and Transparency International United Kingdom, proposed anti-corruption training course for SAF peace operations staff, agreed on building cooperation and considered investing in Serbia’s defence sector institutions and teaching staff’s education. (2) In April 2014 the MoD underlined its commitment to the fight against corruption risks. (7) In September 2014, the Minister of Defence gave a keynote speech at the Partnership for Integrity in the Security Sector Conference, organised by Belgrade Centre for Security Policy, in which he declared the MoD’s commitment to building integrity. (8)

However, during 2014, MoD and SAF officials did not make (publicly available) any reference on a regular basis to the anti-corruption commitments, when explaining their respective MoD activities. Between 3 May 2014 and 1 January 2015, MoD News Archive had 254 media articles in total and 2 dealing specifically with the anti-corruption measures. In the rest of the cases, MoD and SAF high officials pointed to operating in harsh economic conditions, challenges of peace operations, military cooperation and various other themes. However, while discussing the above mentioned topics, the MoD officials did not make publicly available references to the fight against corruption. (3-6)

RESPONSE TO GOVERNMENT REVIEWER: Agree. Score changed to 3 in light of information provided.

Corrupt practices such as abuse of office, giving and taking bribes, embezzlement and influence peddling are criminal acts according to the Criminal Code of Serbia (1). In the course of 2012 and 2013 a total of 27 criminal complaints were submitted against employees of the MoD and members of the Army of Serbia for abuse of office; in addition, there were two criminal complaints for taking bribes and one criminal complaint for malpractice (2). According to the MoD press release, five criminal complaints were filed in 2014 and the first half of 2015 for criminal offences involving corruption. (3) Whereas the MoD has increasingly made efforts to publish results of corruption investigations, there is little information coming from the judiciary on outcomes of judicial proceedings.

The Law on the Serbian Armed Forces sanctions the following activities as breaches of discipline: abuse of office, taking an additional job non-compliant with the law, taking gifts or services against the conditions set by law, and failing to report an interest with regard to an official decision in whose making a member of the Armed Forces is involved. The disciplinary measures foreseen for these breaches range from salary cuts to dismissal from work (4). Civil servants working in the MoD are subject to the Law on Civil Servants. The Law sanctions a range of corrupt practices (abuse of employees’ rights, accepting a gift or service against the conditions prescribed by the Law, founding or owning a company, pursuing business, illegal disposal of public funds etc.). The sanctions spans from a salary cut of 20% to dismissal from work (5).

RESPONSE TO GOVERNMENT REVIEWER: Based on cases quoted, the score has been raised to 3.

The Whistleblowers Protection Law was adopted by the National Assembly of the Republic of Serbia on November 25, 2014. (1) The adoption of this law is one of the obligations foreseen by the Action Plan for Chapter 23: Judiciary and fundamental rights - for the EU accession negotiation process, as part of the legislative framework regulating prevention of anti-corruption in Serbia. (2)

Because the law came into force in June 2015, there is still insufficient data to assess its true effectiveness. It remains to be seen if the whistleblowing protection will be taken seriously by the institutions and the judicial system. It should be noted that there are no encouragement provisions in the law or any active calls in support of whistleblowers from the government to encourage whistleblowing. Despite its intention to fully regulate the field of whistleblower protection the true effectiveness of the legislation came under some criticism from the civil sector. (3)

The other relevant piece of legislation that affects this field is the Law on the Anti-Corruption Agency of Serbia and Rules on Protecting Persons Reporting Suspicion of Corruption (4).

Apart from these two laws, there are some specific mechanisms in place in the security sector institutions. Employees of the military security agencies can report cases of corruption and violation of regulations directly to the Inspector General, Minister of Defence, the Government and the Security Services Control Committee (SSCC) without consequences for his status (5). All personnel involved in procurement processes are obliged to report cases of corruption to the Public Procurement Office, Anti-Corruption Agency and the prosecutor. In the event of a complaint the complainant cannot be fired or transferred to another workplace (6). Moreover, the Freedom of Information Law stipulates protection for the persons who provide information of public importance (7).

No other known specific mechanisms exist to protect whistleblowers within the Ministry of Defence and within Serbian Armed Forces.

There is public information regarding an MIA employee who complained that he was harassed because he reported some work violations within MIA (8). This case was resolved in favour of the employee only after the intervention of the Ombudsman (9).

RESPONSE TO GOVERNMENT REVIEWER: Even though important legislation was adopted, we don't think that there is yet sufficient rationale for the score to change from 2 to 3.

The Ministry of Defence (MoD) has two bylaws that regulate the screening of its employees, which is carried our by the Military Security Agency (1). It involves full and comprehensive background checks of candidates and rotations of employees in sensitive positions every two to four years.

During 2014, the MoD was to perform an identification of specifically sensitive workplaces in context of building integrity and addressing corruption risks. MoD states that the list of sensitive positions was submitted to the organizational units of the MoD for review and eventual updating in first half of 2015. There is no evidence yet that this list has been finalized and adopted within MoD. (2)

New standards were also introduced in procurement; these include qualifications of the members of the public procurement committee (3) and standards for certified procurement officers (4).

RESPONSE TO GOVERNMENT REVIEWER: Although the MoD made positive steps in 2014 and 2015, there is still not enough evidence that would suggest continuous and systemic attention to personnel in sensitive positions. Besides the process of identification of specifically sensitive workplaces that is being developed in 2015, there is no information yet on the rules that would regulate &quoute;special attention&quoute; for specific categories of sensitive position fillings. There is also no indication that this list will be publicly available. Score 2 maintained.

The bylaw “Pravilnik o kriterijumima za utvrđivanje podataka o Vojsci Jugoslavije”, (1) defines the issue of number of personnel in the Military as a secret data. This information is not publicly available. There are sporadic estimations in the press about number of soldiers varying from 28,000 – 33,000 soldiers. (2), (3)

RESPONSE TO GOVERNMENT REVIEWER: While the percentages are useful, the base number they refer to is still unknown and considered an official secret. Therefore, the score remains 0.

Pay rates for all civilian and military personnel are openly published on the MoD’s web site (1), however, information on allowances may not be available. Pay rates and allowances are defined by specific bylaw (2), which sets out the criteria used to calculate monthly salaries. In SAI's 2012 report (3), the criteria for basic salaries and criteria for compensations and allowances for different categories of employees of MoD and SAF are further confirmed; the report also suggested that rules are obeyed.

Score 3 was selected to reflect some uncertainty over changing salary and allowance levels for some personnel on overseas missions, and the inability to calculate the total amounts spent on salaries and allowances. (4)

The system for payment is specifically regulated by bylaws (1, 2) prescribing the procedure and requirements for calculating monthly payments (salary, various allowances, mortgages etc.). In Article 38 of the Rulebook on Financial Operations (1), it is stated that salary must be paid at least once a month, by money transfer to the recipients` bank account. Further elaboration of the procedure is given in Annex 1 of this rulebook.

There are at least two cases that undermine good practice. The first can be found in the SAI report for 2012, where Military Medical Academy and Military Technical Institutes` own revenues were used for allowances and weren’t properly reported (3). However, after this case, their revenues have begun to be transferred to the state budget. The other dubious case has its roots in the 1999 war and unpaid daily allowances for conscripted reservists. Some reservists received their allowances; 30 reservists sued Serbia in the Strasbourg court and won the case, followed by further 8,500 whose cases were rejected “as they didn’t used all domestic (judiciary) assets at disposal”. (4) It remains unclear whose task is to pay all those allowances, whether Ministry of Defence or Ministry of Labor, Employment and Social Policy – as stated by (at the time) Minister of Labor, Employment and Social Policy. (5)

RESPONSE TO GOVERNMENT REVIEWER: Payments are regular, in line with the law. The problem is in the unresolved consequences of previous 15 years (bad practice of governments at the time) burdening military budget. In last 15 years SAF paid around 22 billions RSD on various damages suffered by members of armed forces, commercial entities and similar. This legacy is burdening military budget, and recently Minister of Defence announced that a large portion of such costs has been settled. (6) Score 3 maintained.

There is an established system for selection of military personnel at top level, but there is evidence of shortcomings in practice, in particular when it comes to appointment of civilian MoD officials.

A Lieutenant Colonel can be appointed to the Colonel rank and position duties if he/she 1.finished general staff training or Phd studies, 2. has grade average at the 'very good' or 'distinction' levels 3. successfully performed in his/her job duties in past three years (2 out of 3 years at least in commanding or management duties) 5. has knowledge and speaks one of the internationally recognized languages and which is prescribed by the internal regulation act.(1a) To get promoted to the higher ranks, military officers have to have relevant expertise and appropriate evaluation grades; promotion is not limited to these requirements solely (1b).

However, there is no independent mechanism, outside the chain of command, which would regularly oversee the process. According to the interview with a Serbian Armed Forces (SAF) member, political connections are encouraged and constitute an important condition for obtaining a high-ranking official appointment. Additionally, there is some evidence that this may also impact attendance at relevant professional development courses. (2) When it comes to appointment of MoD officials, assistant ministers are appointed without positions being advertised, in direct contravention of the Law on Civil Servants (3).

RESPONSE TO GOVERNMENT REVIEWER: Score maintained as there are still concerns about the extent to which regulations are adhered to in practice, and there is no regular oversight by independent personnel.

Criteria for the promotion and appointment to high-ranking positions are well regulated. Nonetheless, commanding officers have considerable leeway in making final decisions. A decision on promotion is usually made by one person (“commanding officer in charge of promotions”) at the behest of a directly subordinate officer. The law leaves open the possibility that the decision will be made by advisory bodies that would determine a list of candidates, but the only advisory body available in practice is the Personnel Council of the Minister of Defence, which determines candidate lists for the rank of colonel, provides counsel on the promotion of generals and considers nominations for extraordinary promotion to higher ranks. (1) Furthermore, there are no independent mechanisms outside the chain of command that would oversee the promotion process. In interviews with BCSP, SAF members argued that the system of promotion had worsened in the previous years, especially when it came to the promotion of Non-Commissioned Military Officer. It was pointed that the promotion of Non-Commissioned Military Officer was limited with the formation rank. (2) (3)

RESPONSE TO GOVERNMENT REVIEWER: Until the new Regulation has actually been adopted and implemented, it cannot be considered as relevant. Score maintained.

Although still prescribed by law (1,4), compulsory conscription has been suspended by a National Assembly decision. (2) Adult men still have to register in military records and they are considered to be conscripts.(2,3) However as of January 2011, they have freedom to decide whether they want to join the armed forces or not.

The Serbian Armed Forces are professionalized. After 6 months of serving in the army, conscripts are eligible to qualify for becoming professional soldiers.(1,2,4) There is no anti-bribery regulation which is publicly available and designed to specifically address risk of bribery in this area. However, bribery as such is addressed within the Criminal Code. The Criminal Code defines both bribery and facilitation payments under Serbian term “mito’’. Penalties against bribery range from 6 months up to 5 years of prison sentence, while for facilitation payments it goes up to three years.(5) The Serbian Armed Forces (SAF) Code of Honour also states that military officers cannot accept gifts unless gifts are regulated by protocol. (6) There is no known case of corruption or bribery connected to SAF officials and the conscripts' enrolment within SAF records or enlistments.

It appears that voluntary conscription is present in Serbia as it targets eligible citizens of a set age, to be for a defined period and involve defined activities, and no sanctions are envisaged if an individual does not answer the call.

Republic of Serbia’s Criminal Code states that promises, gifts or other advantages can be characterized as bribery offenses if their purpose is to influence on public official. (1) The Serbian Armed Forces Code of Honour forbids officers from accepting presents unless they are regulated by protocol (2); however, this is a strictly ethical code imposing no sanctions.

The law still prescribes compulsory conscription (3,4), but in 2010 the National Assembly adopted the decision which suspended military service obligation (5). After 6 months of voluntary army service, citizens are given chance to pass an exam and to qualify for becoming professional soldiers. (5). However no MoD policy publicly designed to address the problem of bribes in this context is available. The Country’s criminal code, on the other hand, criminalizes active and passive bribery in the public sector through the articles 367 and 368.

RESPONSE TO THE GOVERNMENT REVIEWER: It appears that the regulations do correspond to the concept of voluntary conscription. Score 2 maintained.

The exact number of soldiers is classified information. However, they receive their salaries through bank accounts (1), not directly in hand, so it is unlikely that such activity may occur. There are no known court cases or media reporting regarding such activities, and in the past two years, according to official web presentation of Military Security Agency (2), no such cases were recorded. The SAI report for 2012 focused on salaries and allowances with very few problems encountered. Most notably, employees of Military Medical Academy and Military Technical Institute received increased salaries, and increase came from their own revenues (total amount being around 3 million RSD - (approximately 26,000 EUR) (3) and this change was consequently evidenced by SAI, proving that external oversight is in place.

Officers, NCOs and soldiers receive their salaries into their bank accounts, paid by the accounting service of MoD that calculates basic salaries and various allowances. Commanders are not included in the salary chain (as direct providers of salaries, in cash), but they do have influence over it. They give data to accounting services on working hours, travels, bonuses, penal points or various allowances that determine amounts of salary, needed for calculation, but they do not oversee specific monetary allocation.(1), (2)

There is a Code of Honour for Members of the Serbian Armed Forces (SAF), including separate codes of honour for soldiers, non-commissioned officers, officers and civilians working for the Armed Forces (1). The separate codes include guidance with regard to conflict of interest, but no explicit guidance with regard to bribery, gifts (except for officers) and hospitality and post-separation activities.

The general Code of Honour prescribes only vaguely that a member of the SAF should harmonise their personal interests with &quoute;common interests“ (1). Further guidance with respect to gifts, bribery and conflicts of interest is provided indirectly, through potential lists classifying breaches of discipline (The Law on SAF) (2) or infringements of workplace obligations (The Law on Civil Servants) (3).

Law on the Anti-Corruption Agency and the Rulebook on Public Officials’ Gifts issued by the Agency

Restrictions and control of gifts and other benefits are governed by the Law on the Anti-Corruption Agency, which stipulated the officials may not accept gifts unless they are defined as 'appropriate' by relevant procedures. However, the Law mostly applies to high-level officials. (4)

RESPONSE TO GOVERNMENT REVIEWER: The Directive on the Protocol mentioned by the Government Reviewer is not publicly available. However, the Code of Conduct itself does not provide the guidance in regard to acceptance of gifts, except for officers. Score 2 maintained.

The Code of Honour of Members of the Serbian Armed Forces is an ethical code, which foresees no sanctions and imposes only moral responsibility to the members of the SAF. Breaches of discipline, including corrupt behaviour, are only addressed in accordance with the Law on the Serbian Armed Forces or (in case of civilian personnel in the MoD) the Law on Civil Servants (please refer to Q35).

Whereas the MoD has increasingly made efforts to publish results of corruption investigations, there is little information coming from the judiciary on outcomes of judicial proceedings.

Anti-corruption training is not provided on a regular basis. A relatively small number of MoD employees have so far taken part in training sessions and seminars on building integrity organised by NATO and DCAF (1). In the first half of 2015, two workshops related to integrity building in procurement and finances were organised on the MoD premises, in cooperation with foreign partners (Transparency International UK and Institute for Managing Defence Resources from Monterey, USA). (2) (3) Overall, training is too dependent on cooperation with foreign partners and most often limited to selected personnel with good English skills.

RESPONSE TO GOVERNMENT REVIEWER: On the basis of information provided, score raised to 2.

There is little information in the media on the prosecution of MoD and SAF personnel for corrupt activities. The MoD and the Military Security Agency do not usually publish outcomes of prosecutions. This information is basically available upon request, especially since military personnel are tried by civilian courts. However, Serbian courts still do not have databases of trials available online. Overall, there is no policy of making outcomes of prosecutions public, and the outcomes only are sporadically published in the media – usually in high profile cases.

A prominent case where prosecution outcomes were followed by the media were charges against the former defence minister of Serbia and Montenegro who has stood six different trials for abuse of office (1) and has so far been acquitted in four, with one acquittal overturned by the Court of Appeal into conditional discharge (2). All of the cases were characterized by lengthy trials, with frequent delays. The most prominent case against the former minister, the so-called &quoute;Satellite Affair“ (with two former high MoD officials also-accused) is still awaiting closure, nine years after signing of the controversial contract for which the charges were brought, five years after the beginning of investigation and nearly four years after the beginning of the trial (3).

Artile 368, point 1 of the Penal Code defines what bribery is and specifies penalties (3 months up to 5 years of prison sentence). Point 2 of the same article defines facilitation payments, but with slightly milder penalties (up to 3 years of prison sentence).

Reception of gifts is banned by (2) Law on Anti-Corruption Agency (art. 39-42), yet these are applied only to officials (i.e appointed officials), and not to all public servants. Also, the Code of Honor of the Serbian Armed Forces (3) only mentions that “they do not accept gifts apart from protocol ones”, with no penalties envisaged for breaches. The MSA official web presentation news section details a 2012 case when a LtCol was arrested for bribery, in joint operation of MSA (4), the Military Police and prosecutor, and turned over to the investigating court. In the 2010-2012 period, 31 disciplinary proceedings were held against employees of MoD for acts in relation to corruption, and 10 of them were sentenced.(5)

The Serbian Armed Forces (SAF) Military Doctrine does not address the issue of corruption (1). The Doctrine names types of SAF operations, explains multinational operations and lists multinational operations in which the SAF can participate: those which are organized to preserve peace and prevent conflicts in countries worldwide. (2)

In January 2014, Assistant Minister of defence and representatives of defence Sector units initiated talks with the United Kingdom Defence Academy representatives about an integrity building program. On this occasion, it was proposed that an integrity building course should be prepared specifically for SAF units going on peace operations, which indicates that the SAF are aware that corruption is an issue on operations. It was further decided that there would be a focus on education of Serbian military teaching personnel and investments in Republic of Serbia military institutions, so that later the Serbian defence sector can develop and implement education programs in the area of integrity building on its own. (3) Thus far, the Ministry of defence has participated in four integrity building training sessions in Sarajevo, Sofia, Oberammergau and Belgrade. (4) Moreover, the Ministry of defence underwent Self-Assessment process in the framework of NATO Building Integrity program and NATO suggested that Serbia should consider designing a NATO-based education module which could specifically target operational deployment staff as well as allow for their anti-corruption education.(1)

According to information available at the time of writing, the Serbian defence sector does not have a systematic anti-corruption training program. However, it plans to develop one.

To date, there have been 4 instances of training sessions on the subject of building integrity and a small number of MoD personnel attended these courses: 2 MoD representatives in Oberammergau, Germany (November 2013.), 2 MoD representatives in Sarajevo (22-24.3.2013.), 2 MoD representatives in Sofia (23-25.4.2013.) and 26 MoD and Serbian Armed Forces (SAF) representatives in Belgrade (18-20 .6. 2013.) (1).

However, Serbia’s Ministry of Defence and Military Armed Forces do not have a systematic pre-deployment training which prepares SAF staff for tackling corruption risks abroad. There is no training for SAF staff on temporary contracts either although they could be employed in future to support SAF regular units. Illustrative of SAF lack of training in the integrity building area is the fact that SAF units abroad are not given the responsibility for managing their own independent procurement. Instead SAF logistic is integrated within multinational logistical frameworks. (2)

In January 2014, however, the Defence Minister's Assistant and representatives of Defence Sector units held talks with the United Kingdom Defence Academy representatives about a potential integrity building program. On this occasion, the building of an integrity course specifically for Republic of Serbia’s Military Armed Forces going to the peace-keeping operations was proposed. There were also considerations of educating Serbian military teaching personnel and investing in Serbian military institutions, so that later they can on their own develop and implement relevant educational programs in the area of integrity building.(3)

In the official self-assessment document of the MoD submitted in response to queries by the assessor, it is reported that there is no specific anti-corruption training provided and consequently no professionals are deployed with monitoring corruption issues. (1) Furthermore, in 2012-2013 there was no specific course on anti-corruption measures held at the SAF Centre for peacekeeping operations.(2)

RESPONSE TO GOVERNMENT REVIEWER: This information is nor publicly available, as an armed forces contingent is only deployed in a few missions (platoon and company sized ones), whereas in other missions we have Military observers and medical teams. The public was not informed about the presence of the Military Security Agency in the field. Score raised to 1 to reflect uncertainty.

There is no systematic training for anti-corruption awareness for either civilians or military representatives in operations. The potential risk of encountering corruption during operations is also understood not to be emphasized during training prior to deployment. In particular, there is no training for personnel engaged in contracting that would in the future be engaged in support of the Serbian Army. This information can be interpreted from the fact that the logistics of the Serbian Army deployed overseas is incorporated in multinational logistics framework, and that these units are not responsible for independent procurement. (1)

So far, however, four training programmes were conducted in the field of building integrity and a small number of MoD personnel attended those courses: 2 MoD representatives in Sarajevo (22-24.3.2013.), 2 MoD representatives in Sofia (23-25.4.2013.), 26 MoD and SAF representatives in Belgrade (18-20 .6. 2013.) and 2 MoD representatives in Oberammergau, Germany (November 2013) (2). This is not a systematic approach, yet it could serve as starting point for capacity building.

Contracting during the engagement in operations abroad or peacekeeping missions is reportedly carried out by internally prescribed procedure of the Center for Peacekeeping Operations.

RESPONSE TO GOVERNMENT REVIEWER: Existence of such guidelines was previously unknown. However, we cannot assess how thorough the principles are on addressing corruption risks; we only know that they cover &quoute;basic principles of public procurements&quoute; and we have no track record of activities. Yet, the lack of systematic approach is evident in modest presence of MoD/SAF representatives in such training sessions. Score is changed to 2.

There is no evidence that the Armed Forces engage PMCs in their operations.

The Serbian military has operated in 11 missions abroad. In each mission PMCs were represented as part of another country’s parent contingent. If they do cooperate with PMC's in the field, those PMC are then contracted (and thus controlled) by the parent contingent (1).

The Code of Conduct defines that “private security might be engaged to provide security for MoD…” and they specify mandatory security checks “in accordance with the law on private security” (2). The Law on Private security was adopted in November 2013 (3), so there are no more legal obstacles for such cooperation. Furthermore, new amendments to Law on defence (still a draft) envisage extension of public-private cooperation to services of private security. (4) Yet, no practice of contracting PMCs exists so far. Oversight should be done by Ministry of Interior, yet the bylaw specifically defining these tasks are still missing, so it is unknown whether MoI’s Internal control or the local police stations will be in charge of oversight mechanism (5).

Score 3 selected to reflect lack of prohibition on the employment of PMCs and the presence of regulations to control them.

According to the 2013 Public Procurement Law (PPL) there are two categories of procurement in defence and security: 1. Public procurement in defence and security, and 2. Procurement in defence and security that is exempted from PPL.(1)

PPL, Article 12,7 defines what the public procurement in defence and security is, and prescribes two types of procedures (restricted and negotiated procedure with call for competition) that are to be used in these procurement processes. The law also obliges the Government of Serbia to pass a bylaw that would more closely regulate public procurement in defence and security, and to make a list of goods, services and works that are to be procured in defence and security. This bylaw, titled Regulation on the Procurement Procedure in the Field of Defence and Security, was passed in August 2014. It regulates public procurements that contains data classified as &quoute;restricted&quoute; and &quoute;confidential&quoute;, prescribing that tender documentation containing classified data should not be publicly available. It also lists gods, services and works that are to be procured in accordance with this Regulation.

The same Law in article 128 defines which procurement processes in defence and security are exempted from PPL. They are as follows: 1) if the contracts are concluded in accordance with international agreements between Republic of Serbia and another state or international organization; 2) exclusively dedicated to intelligence activities; 3) procurement processes implemented abroad, when military or police forces are deployed outside Serbian territory and if operational needs require that contracts are concluded with legal and state owned entities in the area of operations; 3) within the international programme of cooperation in the field of research and development of new products which are realized jointly by Republic of Serbia and one or more states or international organizations; 5) in the cases when the use of open procedures would reveal information important for security (the Government is responsible for approving such cases).

Since the Government of Serbia was late passing the above described Regulation, the MOD was implementing an old bylaw and thus trying to work in a legal vacuum. However, this was unlawful since this bylaw had been passed for the purpose of further regulating the previous PPL and is thus not in accordance with the new PPL. (2)

As for independent scrutiny of confidential procurement, only the SAI checked if the procurement in the three major security institutions were conducted in accordance with the law. However, this has been done only once and without questioning whether procured goods and services were procured rightfully during the confidential procedure. Parliament’s committees have never scrutinized procurement in the defence and security sector.

The PPL contains anti-corruption provisions, regulating, among other issues, conflict of interest of the decision-making personnel. (5)

RESPONSE TO TI REVIEWER: Information updated in light of new regulations.

RESPONSE TO GOVERNMENT REVIEWER: There is limited transparency of procurements that are to be conducted in accordance with Regulation, since some call for bids will be public but tender documentation (central part of procurements) will not be publicly available. A higher level of civilian control was formally introduced, since the Government and the National Assembly were given new powers in regard to control of defence procurements. However, concerns remain due to the overall lack of effectiveness of parliamentary oversight (see Q1-Q2) and high levels of corruption among political organisations such as parties. (3, 4)

Score 1 has been selected due to the fact that the new PPL hasn't been fully implemented in the assessment period, as well as due to fact that Government was late in passing the Regulation on the Procurement Procedure in the Field of defence and Security. As a consequence, some security institutions were implementing old bylaws that were not in accordance with newly passed PPL. Score maintained.

There have been improvements in the defence procurement cycle transparency since the new Public Procurement Law (PPL) was enacted, but only in certain aspects. Since 2011, when the MoI, Ministry of Defence (MoD) and Security Information Agency (SIA) started publishing procurement plans, the practice became regular. (1)

Since 2013 new rules on procurement plans demand that they contain comprehensive information about all planned acquisitions, along with the reasons and justifications for each procurement and the manner of determining the estimated value (2,3). These provisions reveal the &quoute;surface&quoute; rationale behind assessment of needs within the institutions, but the process of tying planned procurement with internal plans and strategic documents is not not yet fully transparent. Only State Audit Institution (SAI) has a mandate to scrutinize this process during its audits (4). The MoD is using its right, based on the PPL, of not disclosing estimated values in its procurement plans.

Public procurement law in article 55 defines mandatory public procurement notices: prior notice; invitation to submit bids and applications; notice on dynamic procurement system; invitation to design contest; notice on recognizing qualification; notice on concluded framework agreement; notice on initiation of negotiated procedure without invitation to bid; notice on awarded public procurement contract; notice on the results of tender; notice on cancelling of public procurement procedure; notice on deadline for bid submission extension; decision on the changes in the procurement contract; notice on the submitted request for the protection of rights; notice on the annulment of the procurement process. (5) All these procurement process documents are published via Public Procurement Portal (6) and institution website.

Separate procurement plans for items concerning defence and security are to be presented directly to the Government which approves them upon consulting the parliament (7).

Asset disposal processes in the MoD are regulated by a bylaw (8). Final decisions on disposal are taken by the Minister Of Defence or a nominated official; however, while available to officials in writing, these justifications are not made public. Public information is available mostly upon request. (10, pp 58-59)

RESPONSE TO GOVERNMENT REVIEWER: MoD states that &quoute;the needs of the Ministry of Defence for Procurement (equipping) are available for public inspection through the Strategic Planning documents issued at the level of the Republic of Serbia&quoute; and that they &quoute;are publicly available on the website of the Ministry of Defence&quoute;. This does not appear to be correct, as the mid-term and short-term planning documents of the MoD are not publicly available via the MoD website. (9) Without these documents the public cannot know if the procurements are in accordance to the strategic plans of the MoD. The score would be higher if these documents are made available to the public. Score 2 maintained.

The new law on public procurement sets up a variety of effective anti-corruption oversight mechanisms within the process of public procurement, with some that are yet to be fully implemented. These mechanisms are: protection for whistleblowers pointing to the corruption in procurement; mandatory internal anti-corruption plan for large beneficiaries; mandatory internal act regulating the control of the whole procurement cycle; conflict of interest clauses; duty of reporting possible corruption in procurement; wider transparency of the cycle; civic oversight over big procurements. (1) All documents concerning public procurement are to be available to the public.

Additional oversight mechanisms for sensitive and confidential defence and security procurement is regulated via a bylaw that the Government adopted in July 2014 and which came into force on January 1, 2015. (2) Defence and security procurements are to be approved by the Government, and reports on this spending is submitted to the Government and the appropriate parliamentary committee. (3) All classified reports are available to the State Audit Institution (SAI).

Other oversight mechanisms are the Internal Audit Unit of the Ministry of Defence (MoD) (4), State Audit Institution (SAI) (5), Public Procurement Office (6), parliamentary committees for defence and internal affairs and control of security services (7), Inspector General of the military security and intelligence agencies (8) and Defence Inspectorate (9).

The work of MoD internal organs is not fully transparent due to the practice of classifying internal MoD communication, sometimes without proper rationale. There is also evidence that the Internal Audit Unit and Inspector General are understaffed institutions (10). Although the media reported several successful anti-corruption cases stemmed from the inside MoD (11), in our opinion, there is still insufficient evidence to corroborate the real effectiveness and independence of these internal MoD organs.

RESPONSE TO GOVERNMENT REVIEWER: Agree. Score 3 selected to reflect improvements in oversight combined with some continuing shortcomings.

As far as regulation goes, part of defence procurement (public procurements) is made available to the public through public procurement plans (1), documents made available during the process of public procurement implementation (2) and also through quarterly reports on public procurement sent to the Public Procurement Office. All this information is available to the public by law (3).

Current plans and reports on sensitive defence procurement (called security and defence procurement, regulated by Articles 127 and 128 of the PPL), are confidential and are not available to the public, although they are scrutinized by the government, Parliament and the State Audit Institution, along with MoD internal oversight mechanisms whose work is also subject to external scrutiny. A new bylaw precisely lists the goods that fall into the category of defence purchases by Article 127, so only these can be procured. Procurements regulated by Article 128 (of higher level of confidentiality classification) are not listed. Incomplete implementation of the Law on Secret Data Protection remains a problem in this regard.

Nevertheless, due to its value and potential political gain, potentially important (classified) defence purchases, including purchases made via donations, modernization programmes and overhauls, are often leaked to the media. This is often done with approval from the government or a ruling political party, mainly for political reasons. Good illustration for this is the announced procurement of 2 helicopters from the Russian Federation and 2 from the EU (4).

The PPL also introduces an obligation for the government to publish information on forward purchases above a certain threshold annually. (9)

In the previous period the public was exposed to speculation on possible air force purchases (5, 6, 7). The public can get informed on the validity of confidential defence purchases via the State Audit Institution audit reports that include evaluation of these acquisitions (8).

RESPONSE TO GOVERNMENT REVIEWER: Score 3 maintained as it does not appear that all purchases are made public.

The new Serbian Public Procurement Law regulates defence and security procurements as a separate category (articles 127 and 128), and stipulates certain requirements for companies to bid in these procurements. (1)

In July 2014 the Government of Serbia adopted a bylaw that regulates more closely the conditions and criteria that companies are to fulfil in order to take part in restrictive and negotiation types of procurement process within defence and security procurements (for procurements regulated by articles 127 and 128 of PPL). This bylaw came into force on January 1, 2015. (2) This Regulation relates to the procurement of arms and military equipment according to the Decision on Establishing the National Control List of Weapons and Military Equipment, as well as the works and services to be procured for the needs of MoD, and contain protected information.

For participation in public procurement procedures in the field of defence and security, companies should fulfil the conditions stipulated by the Data Secrecy Law (&quoute;Off. Gazette of RS&quoute;, no. 104/09), which refers to the certification of the company for access to classified information (basic level of security checks to access information classified &quoute;confidential&quoute; and &quoute;restricted&quoute;) and to meet the organizational and technical conditions for safeguarding of classified information, which will be delivered on the basis of the contractual relationship. These two areas are regulated by the Regulation on the Content, Form and Method of Delivery of Certificates for Access to Classified Information and the Regulation on Special Measures for Protection of Classified Information, relating to the determination of fulfilment of organizational and technical conditions on the basis of the contractual relationship.

Certification creates conditions for companies to participate in procurement procedures in defence and security sector, both with other public authorities in the Republic of Serbia or in other countries with which the Republic of Serbia has concluded and ratified international agreements on mutual exchange and protection of classified information. Certification of companies is carried out by the Office of the Council for National Security and Protection of Classified Information (NSA). (3)

As per the 2012 NATO Expert report which was based on old Public Procurement law, companies were not required to have compliance programs and business conduct programs and there was no relevant procedure in that regards. Ministry of Defence could ask companies to fulfil additional conditions and to adopt ethical programmes though. (4)

RESPONSE TO GOVERNMENT REVIEWER: Relevant information incorporated and it is acknowledged that security/information confidentiality checks can also have the effect of addressing corruption risks. However, the focus of the question is not on security of confidential information, but rather on compliance and business conduct programmes whose explicit goal is managing corruption risk and building integrity. No information re. these programmes has been found. Score 1 maintained.

There is no publicly available national strategy guiding the formulation of procurement requirements. Current strategic documents – the National Security Strategy (2009), Defence Strategy (2009) and White Paper on Defence (2010) contain very broad formulations that cannot be used for defining procurement requirements. These documents can also be considered to be somewhat outdated in the current context. Examples in sources 4-7 (discussed in detail in Q63) illustrate an ad hoc nature of purchases.

RESPONSE TO PEER REVIEWER 2: The very fact that various strategic documents exist isn’t enough evidence that procurements are grounded in them. Of greater importance is the content of these documents. For instance, defence White Paper of 2010 envisaged modernization of armed forces and improvement of (work and living) standards, but little (if anything) has been done in this respect so far.
In the link suggested by peer reviewer, the defence minister states: “Purchase of these assets (new war planes) is not planned in the budget for this year, but they remain a part of the plan.” This sentence clearly illustrate how procurements are planned and executed. A lot of information is on the list, but what and when will be bought depends on political decisions and not previously adopted plans.

There is no connection between strategies, budgets (state and MoD), and procurement plans. Moreover, most of strategic documents were passed in 2009/2010 and since than political, social and economic context has change significantly.

RESPONSE TO GOVERNMENT REVIEWER: THE National Security Strategy was passed in 2009, and hasn't been changed since. Argument of government reviewer that “The National Security Strategy is a dynamic document and its constant improvement and adjustment is a permanent task of the highest competent state authorities” leads to the question of whether newer versions of the document exist, but are not available to the public. The defence Strategy was updated, but in contrast to previous Strategy (2009), the current document isn’t publicly available. Therefore, argument of government reviewer could not be verified.

However, score 1 was selected to reflect the existence of strategic documents, even if outdated, and some guidance on procurement, even if very generic.

The Serbian MoD has not carried out any large procurements for years. The last instance of significant procurement was in 2008 when a batch of Land Rovers were procured. Smaller modernization projects started back in 2010, but are not relevant for this assessment. Due to a poor economic situation, the MoD and the Military are mostly procuring consumables and spare parts for day-to-day functioning.

The new PPL that entered into force on April 2013 regulates procurement planning in an improved manner and imposes stricter control over this process than previous legislation. This should prevent failures in procurement due to poorly undertaken requirements assessments which had happened in the past in a case of procurement of bulletproof vests and helmets, and one regarding the rent of military satellite.

RESPONSE TO GOVERNMENT REVIEWER: The procedure described does indeed seem detailed and appears to reflect formulation of requirements. However, major defence purchases still largely depend on decisions of Prime Minister and Minister of Defence who decide what, when and in what quantities will be purchased. For instance, after the deadly crash of MI-17 helicopter defence minister announced that Serbia will finally buy new helicopters and stated that two Russian and two German helicopters would soon be bought. The Minister of Defence along with the Prime Minister and the Finance Minister decided on quantities and on types of helicopters, and there was no evidence of a needs assessment being carried out. The situation is similar with airplanes. Requirements are often unclear or have been constantly changed: for instance, one year the priority is purchase of new airplanes, while another year is repair and overhaul of nine MIG 21s. Upon the visit of Prime Minister Aleksandar Vucic to air force base &quoute;Batajnica&quoute; in April 2015, it was decided to repair and overhaul, as well as to buy spare parts for MIG-29s and MIG-21s aicrafts in order to extend their service life. Four days after prime minister's visit Government of Serbia approved additional financial resources in amount of 600 milion Dinars for this purpose. Thus the repair of MIGs occurs as a consequence of decision of prime minister, and not as a consequence of planning and work of institutions. (2-5)

All these facts indicate that some procurements are opportunistic. Score 2 maintained.

The Ministry of Defence conducts public procurements and two types of defence and security procurements (regulated by Public Procurement Law articles 127 and 128). (1) The PPL enshrines the standard of competitiveness in procurement. (12)

According to official reports, the majority of all public procurements in Serbia are conducted in an open competition. In 2014, the percentage of conducted procurements with negotiated procedures without invitation to bid (single sourcing) fell from 17% to 5%, and the percentage of open competition rose from 66% in 2013 to 85% in 2014. (2)

Defence and security procurements regulated by articles 127 and 128 of PPL are conducted as closed procedures with some or no competition. The bylaw which regulates these procurements has been in force since January 1, 2015, so there is still no relevant data to discern the level of competition per call. (3)

Nevertheless, these procurements are done with oversight from the Government, State Audit Institution (SAI) and relevant parliamentary committees. They have the right to perform external scrutiny over it, and review plans and reports of these procurements. (4,5)

SAI conducted audits for all security institutions for 2012, 2011 and 2010. The findings indicate that the majority of confidential acquisitions were done through single-sourcing, but also that there are no significant violations of the regulations and no lack of justification. (6,7,8) However, data on these types of procurement is not published and therefore it is not possible to ascertain the exact level of single-sourced procurement. (12)

In the &quoute;interregnum&quoute; period in which the new public procurement law came to force and before defence and security procurement bylaw came to force (April 1, 2013 - January 1, 2015), the Ministry of Defence procured no confidential items. (9)

However, in spite of the competitiveness clauses within the regulations, there is a negative trend in public procurement concerning the average number of bidders per procurement. The Public Procurement Office states in its report for 2014 that the average number of bidders per procurement in Serbia is 2,6. In 2011 this number was 3,2. (2) Quarterly reports on procurements made by the MoD in 2014 states that from 808 realized procurements 279 (or 35%) had only one bidder. (10) This may indicate that there is a problem with compiling too restrictive tender prerequisites within MoD, but can also be the indication of the condition of Serbian economy.The score has been selected on the basis of the estimated proportion of the total value of contacts which are single-sourced.

The 2012 PPL enshrines competition as a principle of public procurement, and tender boards are used in competitive procurement procedures.

Tender boards or Public Procurement Committees (PPC) are bodies established within contracting authorities for purposes of initiating and conducting the public procurement. One of the three mandated members of the PPC has to be either a public procurement officer or a person with a high education degree. For all procurement whose estimated value is three times higher than the low-level public procurement bar the president of the PPC has to be a public procurement officer. All members of the PPC have to sign a statement for every procurement decision to the effect that they are not involved in any conflict of interest (1). After the contract is granted the PPC has to file a written report on expert evaluation of bids that shows the justification of every step in the process of public procurement in question (2).

All employees working on public procurement, including the PPC members, are obliged to refuse to act upon an order which contravenes legislation (3)

The Law also mandates that large beneficiaries (Ministry of Defence and MoI) need to adopt a bylaw (the 'Internal Act') that will regulate the responsibilities in the procurement process, especially with regard to anti-corruption measures. (4). The Public Procurement Office issued the model for this bylaw in February 2014. (5) The MoD states that the provisions of Internal Act are implemented within their Rulebook for Material Resources Management Management. (6) However, the provisions within this Rulebook do not fully correspond to the Internal Act Model provided by the PPO.

All tender board decisions are subject to an independent audit of the State Audit Institution and to the scrutiny of internal audit unit and relevant parliamentary committees. The Government reviews reports on security and defence procurements. (7) Nevertheless, the practice shows that the most relevant external scrutiny, performed by the State Audit Institution, is not done regularly due to the lack of resources within this institution.

The Law for Protection of Competition contains a general clause which prohibits conclusion of restrictive agreements between business entities competing in a free market. These restrictive agreements have been defined as: contracts, certain clauses of contracts, explicit or silent agreements, matching practices, as well as all forms of association of competitors. (1)

The new Public Procurement Law mandates a number of preventive and responsive measures for ensuring competitiveness and integrity of the procedure. (2) Bidders can file a complaint to the Republic Commission for the Protection of Rights in Public Procurement Procedures that can abort the procedure until the issue is resolved. (3) Since the new law was enacted, requests for protection of rights have significantly increased. Nevertheless, there are still issues with the resources of the Commission and Administrative court that impede efficiency of this mechanism in preventing or punishing collusion of bidders. (4)

There is no clause in any law that specifically addresses collusion in the context of defence and security contracts.

In spite of some indications (prices in bidding, market sharing) there is insufficient evidence to support a conclusion of collusion in defence procurement and/or a prosecution.

RESPONSE TO GOVERNMENT REVIEWER: The existence of laws and procedures that prohibit consultation in the procurement process is a first step, but it is not enough to prove that provisions are or will be consistently applied. There is no basis for awarding the highest score.

In a round of questioning, done by BCSP, directed towards the security and defence institutions of Serbia, the Ministry of Defence (MoD) has stated that it has 45 certified procurement officers working on procurement. (1) The MoD also stated that the number of allocated procurement officers matches their needs and that there are no obvious staff shortages in this field.

All procurement officers are trained by the Public Procurement Office (PPO), which has been established as the training, certification and oversight/monitoring centre for public procurement procedures and contracts (PPL Article 136). They are also subject to the anti-corruption mechanisms of the new Public Procurement Law (2). Also, the new Law now obliges institutions to send more extensive reports to the PPO every three months, including the reports on execution of public procurement contracts (3). For reporting purposes PPO developed reporting software (available free on their website) that enables beneficiaries to meet their obligations in this field more easily (4).

The law also mandates that large beneficiaries (MoD and MoI) need to adopt a bylaw - the 'Internal Act' - that should regulate the control over public procurement planning, conducting and implementing in detail (5). MoD states that they consider that the provisions of Internal Act are implemented within their Rulebook for Material Resources Management. (6) Provisions within this Rulebook do not fully correspond to the Internal Act Model provided by the PPO.

RESPONSE TO GOVERNMENT REVIEWER: The Rulebook for Material Resources Management doesn't fully correspond to the Internal Act Model of PPO. In our opinion there is more room for improving control over these processes.

Formal mechanisms are in place to allow companies to complain about perceived malpractice in procurement. These mechanisms are being used more and more frequently.

The Republic of Serbia’s Public Procurement Law in the Article 24 requires any party who has knowledge of corruption to inform Public Procurement Office, the state body responsible for combating corruption, and the prosecution. Each individual reporting possible irregularities is protected by the Law and should not bear consequences for such action.(1a) The former Public Procurement law foresaw a procedure allowing bidders specifically to call upon the protection of their rights against irregularities. If bidders believed that their rights were being violated, they could file the request to the Ministry of defence. By deciding to that, a bidder could suspend full public procurement process.(2) However, according to the new Public Procurement Law (in force since 2013), a bidder can submit request for protection of its rights to the Commission in charge of Rights Protection (the Commission) and forward it to the purchaser or contracting authority. This request halts other purchaser’s (contracting authority's) activities within the public procurement procedure until the Commission decides on the request. (1b)

Between 2011 and 2014, there appeared to be an increase in number of complaints. In 2011, there were 6 complaints and Commission decided to support 4 cases, while the other 2 cases were under evaluation as of November 2012. (2) In the period between 01 January 2012 and 30 November 2013, there were 10 cases of bidders calling upon the protection of their rights, but the bidders did not express suspicion against potential corruption activities.(3)

The mechanism for complaints is becoming more known and popular and there is no evidence to support claims that companies find it disadvantageous or dangerous to use them.

In 2012 Serbia passed the new Public Procurement Law, which came into effect in 2013. According to the Law, a contracting authority could reject an offer by a bidder who had engaged in specified activities violating integrity of a procurement procedure within three years prior to the procurement. Nonetheless, after the amendments to the Law in 2015, contracting authorities are not obliged to reject such bidders, but rather it depends on their arbitrary decision. (1) Furthermore, the same amendments effectively abolished the list of negative references assigned to suppliers who were reported by contracting authorities for corruption and malpractice. (2) This list was maintained by the Public Procurement Office, but it is unclear whether from now on there will be any formal procedure for debarment of suppliers for corrupt activities.

There is some evidence that criminal complaints are filed against bidders that have resorted to corrupt activities. For instance, in December 2014 criminal complaints for bribery were filed against two persons working for bidders who participated in a tender for medical equipment. (3) However, there is no sufficient evidence that sanctions for corrupt activities on behalf of supplier are consistently or effectively applied.

RESPONSE TO GOVERNMENT REVIEWER: Agree. Score changed to 2.

There is no evidence of a plan, strategy or any legally binding document setting principles or rules of conduct regarding offset contracts. The MoD has yet to adopt a (Financial) Risk Management Strategy (1), which would include provisions on undertaking due diligence procedures in event of procurement of goods or services, or, large scale investment or purchase of immobility. In official self-assessment document it is reported that the law doesn’t allow Government agencies to use offset contracts (2).

It has been verified that the Law on Public Procurement defines in Annex 1, point 11 that offsets (&quoute;poravnanje&quoute;) are not permitted by this law. There is no evidence of pre-existing offsets.

In the official self-assessment document , provided by the MoD, it is reported that the law does not allow Government agencies to use Offset contracts (1).

It has been verified that the Law on Public Procurement defines in Annex 1, point 11 that offsets (&quoute;poravnanje&quoute;) are not permitted by this law. There is no evidence of pre-existing offsets.

In the official self-assessment document , provided by the MoD, it is reported that the law does not allow Government agencies to use Offset contracts (1).

It has been verified that the Law on Public Procurement defines in Annex 1, point 11 that offsets (&quoute;poravnanje&quoute;) are not permitted by this law. There is no evidence of pre-existing offsets.

The new Public Procurement Law (PPL) introduced a number of anti-corruption measures (1) that are set to limit corruption risk in the procurement cycle (especially for large beneficiaries (2)). However, there are no explicit anti-corruption rules that can be applied to the use of agents and intermediaries. Their use is allowed, but not regulated with explicit anti-corruption rules or clear policy on this matter. It appears that lawmakers consider the general anti-corruption rules sufficient to keep corruption in this field in check.

The newly adopted Law on Foreign Trade on Weapons(Official gazette RS 104/2014) and Law on Foreign trade of dual use goods (Official Gazette RS 95?2013) included activities of brokering. They are under the same regulations as import and export, and prone to same licenses issued by Ministry in charge of foreign trade. As of late 2013, (when first of these laws was introduced) there were no SAI audits of such enterprises.

Neither procurement plans (1) nor reports produced by security institutions (2) contain details of the financing package. Indicators of the existence of financing packages can be found in the awarding of points for particular criteria (the bidder with the greatest number of points wins the contract): budget beneficiaries have adopted the practice to award more points to bidders offering better payment timelines.

The Law on Public Procurement was changed in 2012, yet the same principle remained: the budget beneficiary may call for procurement only if
a.tprocurement in question was listed in the annual plan,and
b.tfunds are available in the purchaser’s budget.(3)

The newest procurement announcement is the purchase of 4 helicopters. The Prime Minister, as well as the Minister of Defence, only declared that &quoute;Government will buy 2 helicopters by the end of 2015, ad another 2 in 2016&quoute;, and that two will be Russian made ones, whereas other two will be German ones. No other data on financial assets or terms of payment. (4)

There is no requirement for contractors to have an anti-corruption program. The main contractor is, however, required to provide proof that its subcontractors are enrolled in appropriate registers and that they have fulfilled their respective tax obligations. (1a) However, there is no reference to the subsidiaries and subcontractors being required to adopt anti-corruption program. All public procurements parties are obliged to inform the Public Procurements Office and other relevant anti-corruption institutions if they identify corruption cases. (1b)

On the other hand, the Purchaser (contracting authority, in this case the MoD) is required to adopt an internal act which regulates the public procurement process, especially the public procurements planning process (criteria, rules, public procurement assessment value etc.). This internal act needs to be in the line with the public procurement law and its objective is to prevent corruption from occurring. The Public Procurement Office determines closer form of internal act and Purchaser needs to follow Public Procurement Office’s guidelines. (1c) Nevertheless, the MoD has not adopted the internal act yet and it is only relying on the Rulebook for Material Resources Management to regulate procurement, which does not entail any requirements towards contractors. (2)

RESPONSE TO GOVERNMENT REVIEWER: The information above leads us to conclude that there is no formal requirement regarding subcontractors; the obligation to report instances of corruption does not constitute that requirement. Score 0 maintained.

By procuring particular equipment, security institutions become dependent on spare parts, maintenance services or future repeated procurement of the same product, which makes them more exposed to influence from the original selling company.

Serbia has an aging inventory of mostly domestically and Soviet-built weapons and weapons systems. Due to financial restraints, the most recent and most valuable acquisitions were small in number as well as relative value (when compared to other countries in the region). Apart from acquisition of Land Rover Defenders in 2008, no major procurement has been realised.

On the other hand, donation of 17 Humvee vehicles from the US Government was a part of Foreign Military Financing (FMF) scheme (1). This donation, in effect, could turn Serbia towards US market in order to standardize its equipment, provide maintenance, spare parts etc. So far, costs for training of mechanics have been avoided ( cost at market price at least), as mechanics from the MoI Counter terrorist Unit that operates on Humvees offered their expertise in maintaining those vehicles. In September 2013, the MoD received another donation form USA – “MILES” system (1.160.000 USD) for simulation. According to statement of the US Ambassador, “Serbia selected to participate in multinational operations, and USA will support that path” (2).

RESPONSE TO GOVERNMENT REVIEWER: Score 2 maintained. Sources 3-6 indicate that some procurement processes are opportunistic, and this constitutes a weak safeguard against influence of selling nations. This reinforces the conclusions.