CEDIS has provided a detailed response to all findings of the State Audit Institution (DRI) for 2022 and considers that the adverse opinion does not reflect the actual situation in light of the standards applied by that institution to date. A review of previous audits published on the State Audit Institution (DRI) website leads to the conclusion that the DRI has not previously issued a double adverse opinion on findings and recommendations of this kind, and we believe that our company should not be an exception.
Regarding the recommendation that CEDIS continue activities with its founder (EPCG) to resolve the property-law status, we note that the Company cannot influence implementation of this recommendation, since these activities fall exclusively within the remit of its founder (EPCG).
Regarding the recommendation on the calculation of deferred tax assets and deferred tax liabilities, we stated that, in accordance with IAS 12, deferred tax assets/liabilities are amounts of income tax that will be paid in future reporting periods in respect of taxable temporary differences.
Accordingly, these are not “actual” liabilities, or liabilities owed by the Company to the state, but rather a “liability” of the current period to some future accounting periods.
As a regulated business entity overseen by REGAGEN, CEDIS is required to maintain regulatory accounts. Expenses/income arising from deferred tax assets and liabilities are not recognised as part of the regulatory allowed revenue (RAR), which places the Company at an additional disadvantage. In our opinion, the rates set out in Article 28 of the Law can unequivocally be applied to the calculation of current corporate income tax.
In accordance with paragraphs 47 and 49 of IAS 12, deferred tax liabilities are measured using the income tax rate expected to apply in the period when the asset is realised or the liability settled. As we have already stated, the temporary differences arising on this basis are not expected to reverse in the near future reporting periods.
The Tax Administration conducted an inspection and verified the accuracy of the calculation, reporting and payment of taxes and other duties, the timeliness and completeness of other records, and the existence of unreported income, covering 2022 as well. No irregularities were identified.
Regarding the recommendation on responding to suspicions of irregularities and fraud by appointing a person to handle such suspicions within the entity, we informed the DRI that CEDIS adopted a Procedure for Handling Whistleblower Reports and that a person had been appointed by decision.
Regarding the recommendation that, pursuant to Article 5 of the Labour Law, the Rulebook on Internal Organisation and Job Classification be amended because the existing document is imprecise, we informed the DRI that a draft of a new rulebook had been submitted to the Board of Directors for consideration, but that the document had been challenged by the trade union organisation. A new document is therefore being prepared, setting out all requirements in accordance with the law, including the number of employees, as recommended by the DRI.
Furthermore, regarding the recommendation to improve the Procedure for Planning, Forecasting and Reporting in the area of reporting, and to ensure, together with the founder, the timely adoption of annual financial statements and their submission to the competent public administration body within the prescribed deadline, we informed the DRI that we had fully accepted the recommendation.
The DRI recommended that recruitment be conducted through public advertisements and that the services of an agency for the temporary assignment of employees be used only for temporary work. Our position is that we recruit in accordance with the Labour Law, based on the requirements of work processes and the initiatives of managers of organisational units.
The procedure for engaging persons through an agency was introduced following the decision to discontinue outsourcing. These persons were engaged on projects in order to significantly reduce the number of engaged personnel (by 150).
Regarding the DRI recommendation that service contracts should be concluded only for work involving the independent creation or repair of a specific item, we note that we conclude contracts in accordance with the Law on Obligations. All contracts concluded are for physical or intellectual work.
Regarding the DRI recommendation to comply with the Public Procurement Law and not divide procurement subject matter, we note that simple procurement procedures were used for the procurement of meters, construction works in the regions, electrical materials and concrete enclosures.
Although we respect the DRI’s position that the Public Procurement Law must be fully complied with, we note that it contains shortcomings and that our customers are the ones who suffer most as a result.
