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					                          “Balkan Anti-
                         Corruption Civic
                            Initiative”
Project financed by EU Commission within IPA Programme.
Project implemented by Partnership for Social Development Croatia,
Open Society Fund Serbia, Centre for Development of Non-Profit
Sector Serbia, Romanian Academic Society Serbia and Open Society
Fund Bosnia and Herzegovina
                 BACCI
    Balkan Anti-Corruption Civic Initiative
Conflict of Interest Research on Local Level with
       the emphasis on Local Administration
                    City of Split




                                     Project financed within EU IPA 2008 Programme
   Civil Society Facility: Support to Partnership Actions “Fight against Corruption, Organised Crime and Trafficking”
  Conflict of Interest and Corruption:
Phenomenon and level of influence on
 public administration’s work and public
   interest in the Republic of Croatia.
Understanding corruption and conflict of interest
is a pre-condition for fight against them.


Simplification of transfer of legal solutions,
individual measures or organisational systems
on corruption suppression, without prior defining
of the state of affairs and national or local
diagnostics of the phenomenon, leads to eternal
frustration due to eternal fight without visible
results.
 EU Commission in its Progress Reports
for Western Balkan countries continuously
    states that “conflict of interest is not
         understood on all levels”


  What is it that we don’t understand?
   Conflict of interest is conflict between one or more
    interests in a venture, where a less important interest(s)
    or a less principled interest(s) overcomes the most
    important or most principled interest(s) and in doing so
    venture suffers damage or its effectiveness is reduced.
   Corruption is every activity which lies on misuse of
    public powers for private gain or use by official(s) or
    person deciding on public interest.
   Conflict of interest, even though not representing
    corruption per se, it represents the basis of organised
    and systemic corruption.
   By reducing corruption to bribery, we, by ourselves, are
    reducing potential impact of measures for suppression of
    corruption.
Effective corruption suppression, i.e. conflict
     of interest suppression, is based on
        transparent public sector work,
    availability of data and possibility to
  distribute these data and give opinion on
    public sector’s work so the public can
    make judgement on how certain public
          bodies and officials work.
                                  Corruption Ratings
7


6


5


4

3


2

1


0
    1999-   2001   2002    2003     2004    2005   2006   2007   2008    2009     2010
    2000
              Croatia                  Serbia                Bosnia&Herzegovina
              Montenegro               Albania               Macedonia
              Kosovo

                                  World Bank Indicators
                                    Democracy Score
6


5


4


3


2


1


0
    1999-    2001     2002   2003    2004      2005   2006   2007     2008      2009   2010
    2000
            Croatia                   Serbia                        Bosnia and Herzegovina
            Montenegro                Albania                       Macedonia
            Kosovo



    World Bank – democracy scores, 1999/2000–2010
Last 10 Years of Fight against Corruption in
Balkans
   Period 2000-2003 coincides with big changes in Balkan
    countries and adoption of the first package of basic laws for
    suppression of corruption (Freedom for Access to Information
    Act, improved public procurement laws, Law on Suppression
    of Conflict of Interest).
   After the first uplift of reforms, all parameters measuring
    development of democracy, freedom, human rights and fight
    against corruption had been stagnating up to 2007/2008,
    when a negative trend started which continued even till today.
   Even a superficial data analysis shows that the money, work
    and resources spent haven’t produced expected results and
    that it is needed to seriously consider the reasons which are
    making fight against corruption stagnating.
    Freedom for Access to Information Act (FOIA)

                                          Nr. of
                                                   Complete Incomplete Requests
INSTITUTION / CITY                      requests
                                                   answers    answers  rejected
                                                                                No answer
                                          sent


City of Zagreb                            11          2         5         2         2
City of Split                             11          7         3         0         1
City of Sisak                             11          7         2         1         1
City of Osijek                            11          2         1         0         8
City of Čakovec                           11          6         2         0         3
Ministry of the Interior                   9          2         2         1         4
Ministry of Administration                 9          4         0         4         1
Ministry of Health and Social Welfare      9          5         4         0         0
Ministry of Finance                        9          5         4         0         0

TOTAL                                     91         40        23         8        20
FOIA (in total 91 requests for information)

   44% of answers       to   requests   were
    incomplete

   In 31% of cases, access to information
    was not possible

   25% of answers to requests were
    incomplete, data requested for research
    was not delivered (e.g. names of members
    of committees for public procurement)
Law on Suppression of Conflict of Interest


   Law on Suppression of Conflict of Interest,
    with its new amendments, holds its focus
    on officials’ assets and not on detection
    and sanctioning of conflict of interest and
    as such, it will not bring relevant changes
    in relation to current state of affairs
Conflict of Interest and the New Law
   Committee, or political subjects via Committee, remain the
    only parties empowered to start investigations on conflict of
    interest. Based on claims Committee can, but doesn’t have to
    start investigations.
   Small number of officials are obliged to abide by the law on
    national and local level, which leaves a lot of space for
    manoeuvre for political and/or organised corruption via those
    deciding on public interest and those responsible for
    protection of public interest.
   Example: one of crucial institutes responsible for protection of
    public interest on Croatian Radiotelevision (HRT) – almost
    completely out of the scope of the Law (HRT Management as
    executive body of HRT).
   Amendments         don’t     follow   Council     of     Europe
    recommendations regulating conflict of interest, i.e. difference
    between real, potential and spurious conflict of interest, and
    material and immaterial advantage deriving from them (the
    Law deals with property and ownership).
Conflict of Interest and the New Law -
sanctions
   Annulment of legal acts deriving from conflict of interest
    is possible only in public procurement procedures while
    employment, appointment or other legal acts adopted in
    conflict of interest remain in force.
   Removal of or paying for damages deriving from conflict
    of interest is not defined by law.
   Sanctioning of untrue data on property/assets in
    Declaration of Assets is possible, but sanctioning of
    untrue data tied to interests and potential immaterial
    advantage for officials is not possible.
Conflict of Interest and the New Law -
sanctions
   Sanctions for breaking the Law tied to
    property/assets, gifts, fees, other work,
    membership in managing bodies and
    committees, limitation of business activities
    for enterprises and obligations to inform
    about gaining assets are:

    warning notice, suspension of one part of
    monthly salary (2.000 – 40.000 kuna) for a
    maximum time limit of 1 year, publishing
    of Committee’s decision
Conflict of Interest and the New Law -
sanctions
   Only in cases when an official rejects to execute
    Committee’s decision about correction of Declaration
    of Assets, the Committee can make a proposal to
    remove the official from his/her office.
   Responsible body within which the official in question
    is working is not obliged to implement this proposal.
   Possibilities for removal of an official in cases of
    conflict of interest don’t exist.
   Request for removal of an official – Committee can
    ask for his/her removal only in cases tied to non-
    fulfilment of Committee’s requests related to data in
    Declaration of Assets. – Similar opportunities related
    to conflict of interest don’t exist.
Conflict of Interest and the New Law
   Conflict of interest management mechanisms (what to do when a
    potential conflict of interest arises) cannot provide answers to real
    situations of officials.
   Sole clear regulation of conflict of interest lies in public procurement
    procedures when they include direct conflict of interest, while the
    rest of procedure is more or less outside the scope of efficient legal
    acts.
   Transfer of rights (owner’s share in enterprises) on someone else is
    only temporary and it doesn’t prevent the enterprise to get rich
    during the mandate, i.e. the official is not prevented to indirectly get
    rich during his/her mandate after he/she returns his/her share in the
    enterprise after his/her political mandate.
   Limitation to conclude agreements only applies to enterprises in
    which officials gained share up to 2 years before his/her mandate.
   In short, the Law is not based on practice and issues related to
    conflict of interest in Croatia, but on solutions taken from other
    countries which function within completely different legal framework.
Conflict of Interest and Media and Civil Society
   Research in Croatia as well as in other countries in the region,
    according to all analysed indexes and results of conflict
    interest analysis, point to media captured by political interests
    as well as by private capital interests and personal
    (immaterial) officials’ interests.
   Affairs like FIMI media (and a lot more similar models of
    influence on media), state of affairs on HRT, prosecution,
    firing and attacks on investigator journalists as well as
    complex relationship between officials and private media
    groupings on national level disable the basic assumption of
    fight against corruption – distribution of information for the
    public and formation of adequate public judgement on
    officials’ morale.
   Research showed that local media are financially, politically
    as well as by ownership depending on political establishment.
   Conflict of interest related to media, media ownership, media
    financing as well as other relations, has been detected in all
    analysed cities.
Conflict of Interest and Civil Society
   There are only few CSOs working in the field of fight
    against corruption, they are often under capacitated and
    mainly operate on national level. In most local
    communities they don’t even exist.
   Tendency of the state to “capture” even this small
    number of CSOs is visible in ministries (public
    procurement) as well as in public enterprises.
   “Cooperation” between civil society and the state in fight
    against corruption gets down to “showing” CSOs on
    conferences and projects which don’t have any real
    effect on problem of corruption.
   Voices criticising the work of the state and local
    administration are often not welcomed thus the fight
    against corruption is left outside the scope of public
    criticism and judgement (except in rare cases related to
    lower level of state management).
      Research Results in Croatia:
      Ministry of Finance, Ministry of
  Administration, Ministry of the Interior and
    Ministry of Health and Social Welfare
Financial Management, Public Procurement
           and Conflict of Interest
   Ministries’ budgets: budget reporting – non
   transparent items
        In total - items "Other" from 2008-2009 budgets: Ministry of Finance, Ministry of Administration, Ministry of the Interior.
                                                 Ministry of Health and Social Welfare


                                                                          608.144.946,73 kn;
                                                                                3,61%


                                                                                                                                      Items "Other"



                                                                                                                                      Rest of the
                                                                                                                                      Budget




                     16,235,287,373.42 kn;
                            96.39%

Source: official website of State Audit Office and Ministry of Finance
   Ministries’ budgets: budget reporting – non
   transparent items
        In total: Intelectual and Personal Services in 2008-2009 budgets: Ministry of Finance, Ministry of Administration,
                                   Ministry of the Interior, Ministry of Health and Social Welfare


                                                          247.791.125,95 kn;
                                                                1,47%



                                                                                                                       Intelectual and
                                                                                                                       Personal Services

                                                                                                                       Rest of the budget




                   16.595.641.194,20 kn;
                          98,53%


Source: official website of State Audit Office and Ministry of Finance
   Ministries’ budgets: budget reporting – non
   transparent items
          In total: Current donations in 2008-2009 budgets - Ministry of Finance, Ministry of Administration, Ministry of the Interior,
                                                    Ministry of Health and Social Welfare




                                                                      56.755.125,34 kn;
                                                                           0,34%



                                                                                                                                     Current donations


                                                                                                                                     Rest of the
                                                                                                                                     budget




        16.786.677.194,81kn;
              99,66%




Source: official website of State Audit Office and Ministry of Finance
  Ministries: Potential conflict of Interest in
  Public Procurement Procedures
         Concluded contracts per contractors in 2008-2009: Ministry of Finance, Ministry of Administration, Ministry of
                                      the Interior, Ministry of Health and Social Welfare




                                                                                     480,497,361.86 kn;
                                                                                          56.87%



                                                                                                               Contractors


                                                                                                               Rest of Public
                                                                                                               Procurement




364,455,550.08 kn;
     43.13%


Source: Quantitive – Ministry of Economy, Labour and Entrepreneurship; Qualitative – media analysis and interviews
   Ministries: Differences in Published Contract
   Value – Credibility in Reporting
            Difference in PP contracts value in 2008-2009 for: Ministry of Administration, Ministry of the Interior, Ministry of Health
                                                               and Social Welfare



     400,000,000.00 kn

     350,000,000.00 kn                                                                                                  PP according to Ministry of
                                           271,124,467.13 kn                                                            Economy, Labour and
     300,000,000.00 kn                                                                                                  Entrepreneurship data


     250,000,000.00 kn                                                                                                  PP according to the State Audit
                                                                                                                        Office
     200,000,000.00 kn

     150,000,000.00 kn                                                                                                  Difference in value

     100,000,000.00 kn
                                                                            21,207,273.43 kn
      50,000,000.00 kn

               0.00 kn
                                  2008                            2009


Source: Ministry of Economy, Labour and Entrepreneurship and official website of State Audit Office
Ministries’ Budget Reporting


   In total, cca 900 million kuna or 5,5% of
    the total budget resources are not
    available for the public in the reports.
   Ministry of Finance: Budget Reporting – non
   transparent items
             Items "Other", "Intellectual and Personal Services" and "Current Donations" in Ministry of Finance Budget for 2008-2009


                                                      3,933,720.29 kn; 1.17%
                                                                                   39,117,797.27 kn; 11.64%
                                                                                                 1,250,000.00 kn; 0.37%

                                                                                                                              Other


                                                                                                                              Intellectual and Personal
                                                                                                                              Services
                                                                                                                              Current Donations


                                                                                                                              Rest of the Budget




                    291,641,439.25 kn; 86.81%




Source: official website of State Audit Office and Ministry of Finance
Ministry of Finance: Officials and Conflict of
Interest
   Customs Director Mladen Barišić arrested and under investigation because
    of “FIMI media” affair, however there has been no investigation and
    sanctions related to conflict of interest.
   According to interviews and media articles – employments and
    appointments in Directorate Generals within Ministry of Finance were
    influenced by politics (political parties within the ruling coalition) and
    sometimes by personal interests of officials (e.g. appointment of Ante
    Šimunović in Financial Agency (FINA) under the influence of former minister
    Šuker)
   Distribution and advertising of Personal Identification Number (OIB)
    (Ministry of Finance Project) via Croatian Post Office, without public
    procurement tender, with the contract with Croatian Post Office for media
    campaign of OIB, which included even the broadcasting via news even
    though the OIB Project was the project of Ministry of Finance.
   Contract on adverstising was signed with MASSOL ltd. which is connected,
    according to the media, with Ratko Maček, former Spokesperson of the
    Government and one of leaders of pre-election campaigns for HDZ.
   This kind of situations apparently successfully avoid the radar and, organs
    of criminal prosecution and Law for Suppression of Conflict of Interest, and
    also the public didn’t have a chance to be informed on affairs tied to
    Croatian Post Office. Even though available data with names of potential
    witnesses (insiders) were forwarded to USKOK, there is still no epilogue.
   Ministry of Administration: Budget Reporting –
   non transparent items
            Items "Other" and "Intellectual and Personal Services" in Ministry of Administration Budget in 2008-2009


                                                               1,024,661.34 kn; 2.85%
                                                                             2,571,302.31 kn; 7.16%




                                                                                                         Other



                                                                                                         Intellectual and Personal Services



                                                                                                         Rest of the Budget



                    32,314,419.36 kn; 89.99%


Source: official website of State Audit Office and Ministry of Finance
   Ministry of Administration: Differences in
   Published Contract Value – Credibility in
   Reporting
                          Ministry of Administration: difference in published contracts in 2009




      12,000,000.00 kn
                                                                                                      PP according to Ministry of
      10,000,000.00 kn                                                                                Economy, Labour and
                                                                                                      Entrepreneurship data
       8,000,000.00 kn                                                                                PP according to the State Audit
                                                                                                      Office data
       6,000,000.00 kn                                   3,883,974.92 kn
                                                                                                      Difference in published PP
       4,000,000.00 kn                                                                                contracts

       2,000,000.00 kn

               0.00 kn
                                            2009



Source: Ministry of Economy, Labour and Entrepreneurship and official website of State Audit Office
Ministry of Administration: Officials and
Conflict of Interest

   According to research methodology,
    researchers weren’t able to detect conflict
    of interest of Ministry’s officials
   Ministry of Interior: Budget Reporting – non
   transparent items
              Items "Other", Intellectual and Personal Services" and "Current Donations" in Ministry of the Interior budget for 2008-2009



                                                 489,572,416.30 kn; 5.73%        56,264,669.21 kn; 0.66%

                                                                                                 3,460,000.00 kn; 0.04%


                                                                                                                             Other


                                                                                                                             Intellectual and Personal
                                                                                                                             Services

                                                                                                                             Current Donations


                                                                                                                             Rest of the budget




                                  7,994,601,192.62 kn; 93.57%


Source: official website of State Audit Office and Ministry of Finance
   Ministry of Interior: Public Procurement –
   credibility in reporting
                          Ministry of the Interior: difference in published contracts in 2008



                                                                                                      PP according to Ministry of
                                                                                                      Economy, Labour and
  250,000,000.00 kn                                                                                   Entrepreneurship data

                                                                                                      PP according to the State Audit
  200,000,000.00 kn                                                                                   Office data
                                                    139,390,437.07 kn
  150,000,000.00 kn
                                                                                                      Difference in published PP contracts

  100,000,000.00 kn


   50,000,000.00 kn


            0.00 kn


Source: Ministry of Economy, Labour and Entrepreneurship and official website of State Audit Office
Ministry of Interior: Officials and Conflict of
Interest
   During project implementation, Minister tried to
    make a direct pressure on this research by
    sending answers to offical requests for
    information to private address of M.P. via
    Foreigners Office instead to PSD address which
    is a legal carrier of the research!
   Also, the Ministry has completely answered to
    only 2 out of 9 requests
Manifestations and Impact of Conflict of
Interest in Managing Public Goods
   During research, we have connected Minister Tomislav
    Karamarko with ownership of 4 enterprises: STABILIS
    CONSULTUM d.o.o., DORON NET d.o.o., IPPON SECURITY
    d.o.o., SOBOLI d.o.o.
   As these enterprises are not listed in Minister’s Declaration of
    Assets, we went to Court Register to search for legal acts on
    transfer of rights (management rights), but nothing was there,
    except documents stating that Minister is no longer the owner
    of these enterprises.
   When asking Court Register clerks about missing documents
    they told us that they didn’t know but that those documents
    should have been there and they asked us to come back the
    next day.
   Next day, clerks told us that those acts are missing but
    everything is “in accordance with the law”.
Minister Karamarko is also the Vice president of Basketball Club Zagreb. In its assembly there are also:
   Davor Jelavić (City of Zagreb), suspect in affair related to changes of documents of urban planning
   Željko Čović (Pliva); Josip Petrović (Agrokor & Ina) – participants in “Verona” affair, together with Ivo Sanader
    related to selling of Pliva to American Barr
   Marijan Hanžeković – the wealthiest Croatian lawyer with large contracts for state companies and institutes
   Branko Vojnović; Geoprojekt and Zagrebgradnja, under USKOK investigation due to malversations with
    properties in Zagreb
   Ninoslav Pavić, co-owner of EPH and one of the biggest media owners in Croatia. Suspect in GRUPO & HYPO
    affairs. Tomislav Karamarko, while not in the Office, was in close business relations with Ninoslav Pavić.
   Ivica Toljan, HEP, suspected by Regional Attorney’s Office for “Flats” affair for damages to HEP amounting over
    8 million kuna.

   Basketball Club Zagreb is one of the wealthiest clubs in Croatia, for which often Minister Karamarko takes
    credit stating how this is due to private, not public money. Sponsorship list is long, and some of
    sponsors are:

   Pavo Zubak, PZ auto – media questioned acquisition of cars for Ministry of the Interior corresponding to PZ
    auto (Škoda cars).
   DALEKOVOD, under investigation due to construction of electric power stations for HAC (Croatian
    Highways) amounting over 1 billion kuna.
   HEP – under investigation for damaging contracts on electricity selling - TLM, Stanova, DIOKI and other
    smaller affairs.
   Croatia Osiguranje & Hrvatska Lutrija, under investigation for FIMI Media affair and lots of other affairs.
   City of Zagreb, under constant suspicion and criminal claims without epilogue. According to media, over
    250 claims are currently in State Attorney’s Office.
   INA – under investigation because of privatisation (Ina & Podravka affairs) where Ivo Sanader and Damir
    Polančec are suspects
   Jamnica, Ivica Todorić (owner)- suspect in HYPO credit affair
   KAMGRAD
   These data are also nowhere to be found in Minister’s Declaration of Assets
Public Procurement and joint interests
   Just prior to “Podravka” affair (Spice affair) , PODRAVKA transfered over 3 million
    kuna to SOBOLI, for consultancy services!
   Research detected that during the time of “HAC” affair, SOBOLI produced an Safety
    Estimate for HAC.
   According to that Safety Estimate, later the same enterprise won a public
    procurement tender for works (services) of several million kuna, which is forbidden by
    the Public Procurement Act.
   One of owners of DORON NET is Luka Gašpar, former Executive Board member in
    Ericsson Nikola Tesla, and today the President of the Executive Board in Emerson.
   Emerson is often a sub-contractor for Nikola Tesla. Nikola Tesla is one of the biggest
    contractors for ministries. Relationships between DORON NET and other enterprises
    formerly owned by Tomislav Karamarko and enterprise Emerson and Nikola Tesla
    was not possible to determine within the methodology of this research.
   INA and HEP are sponsoring Basketball Club Zagreb, but are also main clients of
    Emerson (Luka Gašpar).
   KAMGRAD is one of sponsors as well. KAMGRAD worked on construction of new
    building for Central Intelligence Agency. Tomislav Karamarko, before becoming a
    minister acted as the Director of this Agency.
   However, as stated earlier, it was not possible to determine the relationship between
    minister Karamarko and enterprises which he had co-owned prior to his minster
    duties.
   All these situations pass under the radare of Law on Suppression of Conflict of
    Interest and are not subject of investigation or other actions by relevant bodies,
    discipline ones or penal ones.
New Law on Police
   New Law wants to hold appointed individuals on
    their positions for at least 5 years under the slogan
    of depolitisation and harmonisation with EU
    benchmarks.
   However, it is important to point out that according
    to the new Law, current minister completely
    controles     employment       and      appointment
    procedures (minister appoints the commission
    which for its work answers to the minister), without
    influence or insight of the public in procedures
    which are marked with the official secret status!
   With this kind of system for appointment of
    management structure, minister will completely
    control the Police for 5 years!
   Ministry of Health and Social Welfare: Budget
   Reporting – non transparent items
                   Items "Other", "Intellectual and Personal Services" and "Current Donations" in Ministry of Health and
                                                   Social Welfare Budget for 2008-2009




                                                   149,837,357.16 kn; 1.89%
                                                                              52,045,125.34 kn; 0.66%
                        113,614,148.80 kn; 1.43%



                                                                                                          Other

                                                                                                          Intellectual and
                                                                                                          Personal Services
                                                                                                          Current Donations


                                                                                                          Rest of the Budget




                                      7,612,184,070.90 kn;
                                            96.02%
Source: official website of State Audit Office and Ministry of Finance
   Ministry of Health and Social Welfare: Public
   Procurement – credibility in reporting
                      Ministry of Health and Social Welfare: difference in published contracts in 2008-2009



  160,000,000.00 kn

  140,000,000.00 kn
                                          131,734,030.06 kn                                                   PP according to Ministry of Economy,
  120,000,000.00 kn                                                                                           Labour and Entrepreneurship data


  100,000,000.00 kn                                                                                           PP according to the State Audit Office
                                                                                                              data
   80,000,000.00 kn
                                                                                                              Difference in published PP contracts
   60,000,000.00 kn

   40,000,000.00 kn

   20,000,000.00 kn                                                   17,323,298.51 kn

            0.00 kn
                                   2008                            2009


Source: Ministry of Economy, Labour and Entrepreneurship and official website of State Audit Office
Ministry of Health and Social Welfare : Officials
and Conflict of Interest
   Journalist Nataša Škaričić wrote about minster’s call to all media
    editors in Croatia in order to agree on “the strategy” how to report on
    the health care reform. Afterwards, she was fired from the EPH.
   During his duties as Vice Head of the County, he was parallely
    acting as the Director of Gospić Hospital thus receiving both salaries
    (together with his hospital attendances) (in total around 45.000
    kuna)
   Media wrote about minister’s “stalling of public procurement process
    for purchase of 128 ER vehicles”, i.e. not respecting the criteria of
    the lowest price but asking for additional reports.
   Also, there are articles about the minister and his ministry’s
    “donation” amounting 20.000 kuna to association Youth Sings,
    organiser of a music festival on which minister’s daughter won.
   Independant Traffic Union (NCS) is asking for investigation on
    legality of enforcement of local rates payments by HAC, one of
    these enforcements is started by community Gospić. According to
    NCS, ministers Milinović and Kalmeta are “buying votes in their
    counties and communities”.
   Part of interviewed people thinks that appointments and
    employments within the ministry are done exlusively according to
    politics or private interests.
Committee for Supression of Conflict of Interest has rejected claims
against minister Milinović. However, the question arises, will the
Committee check in detail minister’s assets according to the new Law.
Picture: newly built house of minister Milinović in Gosppić
     Research Results in Croatia:
   Zagreb, Čakovec, Split, Osijek, Sisak
Financial Management, Public Procurement
           and Conflict of Interest
  City Budgets: Budget Reporting – non
  transparent items
                         In total items "Other" in 2008-2009 budgets - Zagreb, Čakovec, Split, Osijek and Sisak
                                                                                   3,050,070,697.96 kn;
                                                                                         16.29%




                                                                                                                  Item "Other"



                                                                                                                  Rest of the budget




  15,670,677,550.27 kn;
         83.71%
Source: official website of State Audit Office and Ministry of Finance
  City Budgets: Budget Reporting – non
  transparent items
               In total items "Intellectual and Personal Services" in 2008-2009 budgets - Zagreb, Čakovec, Split, Osijek and Sisak


                                                                    282,263,390.47 kn;
                                                                          1.51%




                                                                                                                        Intellectual and Personal
                                                                                                                        Services


                                                                                                                        Rest of the budget




18,438,484,857.76 kn;
       98.49%

Source: official website of State Audit Office and Ministry of Finance
  City Budgets: Budget Reporting – non
  transparent items
                    In total items "Current Donations" in 2008-2009 budgets - Zagreb, Čakovec, Split, Osijek and Sisak

                                                                          1,392,053,516.95 kn;
                                                                                 7.44%




                                                                                                                         Current Donations


                                                                                                                         Rest of the budget




 17,328,694,731.28 kn;
       92.56%


Source: official website of State Audit Office and Ministry of Finance
City Budget Reporting


   In total 4.724.387.605 kuna or in average
    25,24% of total budget resources is not
    available to the public in the reports of
    analysed cities in Croatia.

   These items are most often used for
    corrupt, political or private purposes within
    the work of public administration.
   Cities: Public Procurement- credibility in
   reporting
                       Difference in value of published contracts for 2008-2009 - Zagreb, Čakovec, Osijek



1,800,000,000.00 kn

1,600,000,000.00 kn
                                                                                                            PP according to Ministry of
1,400,000,000.00 kn                                                                                         Economy, Labour and
                                                                                                            Entrepreneurship data
1,200,000,000.00 kn
                                                                                                            PP according to the State
1,000,000,000.00 kn
                                                                                                            Audit Office
 800,000,000.00 kn

                                    369,176,766.28 kn                                                       Difference in value
 600,000,000.00 kn

 400,000,000.00 kn
                                                                       60,455,559.40 kn
 200,000,000.00 kn

            0.00 kn
                            2008                             2009


Source: Ministry of Economy, Labour and Entrepreneurship and official website of State Audit Office
   Cities: Public procurement- potential conflict
   of interest in procedures
          Contractors in relation to Public Procurement in Zagreb, Čakovec, Split, Osijek and Sisak for 2008-
                                                         2009


  1,114,254,158.04
     kn; 43.41%                                                                          1,452,853,865.89
                                                                                            kn; 56.59%




                                                                                                                Rest of PP


                                                                                                                Contractors




Source: Quantitive-Ministry of Economy, Labour and Entrepreneurship, Qualitative- media articles analysis and interviews
       Research Results in Croatia:
               City of Split
Financial Management, Public Procurement
           and Conflict of Interest
       Freedom for Access to Information Act (FOIA) –
                                  City of Split

INSTITUTION /   Nr. of requests   Complete    Incomplete   Requests
                                                                        No answer
      CITY              sent        answers      answers     rejected


City of Split         11             7            3           0            1
   Compared to last research, Split shows most
    movement in area of access to information.
   2008/2009: complete answers to 5 out of 14
    requests
   2010/2011: complete answers to 7 out of 11
    requests
   Even though, access to information based on
    FOIA is better than during previous research,
    journalists as well as councillors think that for
    them access is limited and that the proactive
    informing via official gazettes is cancelled.
   This situation is worrying and asks for urgent
    reaction by responsible state bodies.
City of Split – budget reporting –
non transparent items
    Share of items – Donations, the Rest, and Intellectual and Personal Services
                          – in City Budget for 2008-2009




                                                              The Rest

                                                              Donations
                                                              Intellectual and Personal
                                                              Services
                                                              Remainder of the
                                                              Budget
   Compared to last research, there is progress in
    budget reporting as well:
   Items ‘the rest’ has, in 2008 and 2009,
    amounted 4,96% of budget reporting, and in
    2006 was 7,11%
   Overall sum of non transparent items, in 2008
    and 2009, is 15,68% i.e. 291.238.439,00 KN
   In budget reporting, attention should be made to
    management of liquid donationas which were
    9,43% of the budget.
City of Split – Public Procurement

   Signed contracts with the City of Split in 2008-2009 – per contractors
   Based on methodology, 33,4% of public
    procurement, i.e. 66.006.983.96 KN in
    years 2008 and 2009 can be tied to
    apparent, potential and real conflict of
    interest.
City of Split: Employments and
appointments and conflict of interest

   First problem has structural nature. The sole fact that the
    Mayor is family with the President of City Council is
    disputable in sense of functioning of democracy and
    political control which loses its sense with this structure
    and there is no political and administrative justification
    for this. It is important to emphasise that unfortunately
    this situation is legal.
Split – employments and
appointments – conflict of interest
   Estimation by interviewed is that since Mayor Kerum has
    come in power, there has been around 50 new
    employments in public bodies, on key positions in the
    city and city enterprises, in order to gain control over
    them.
   While doing that, it is estimated by the interwieved,
    instruments of non existent working and operative
    positions have been used, such as ‘advisors’ to the
    director, and new enterprises have been founded as well
    - Split Gradnja (Split Construction) & Splitska Obala
    (Split Coast).
Journalist Petranović, in Objektiv states around 20 tied individuals:
  Ivica Livaja – kindergardens, company Taho Keramika
  Joško Svaguša
  Tomislav Gruica – city utilities, former manager of caffe bar in Joker
  Đeni Vuković-Stanišić – advisor for social activities, girlfriend of Fani’s brother
  Ante Mladineo
  Aleks Kvarantar – director of Splitska obala, son of Kerum’s skipper
  Željka Kerum – Head of Economy Section, former employee in Joker
  Držislav Brčić – enterprise Promet, former manager of Mayor’s restaurant on Marjan
  Željana Klein – Splitska kupališta, former commercialist in ˝Kerum˝
  Duško Mucalo – HNK – Croatian National Theatre
  Marko Pecotić – Theatre Council
  Sanja Quien – Theatre Council
  Marko Tomasović – Sea Museum, Managing Board of Park - Forrest Marjan, unofficial bodyguard
   of Kerum
  Ilija Šundov (Vice Mayor’s son) – Supervisory Board of Čistoća
  Alenka (Vice Mayor’s niece) – managing boards in Tourist office, Museum of City of Split,
   kindergarden Grigor Vitez
  Daliborka Bečić- Supervisory Board of Čistoća
  Dunja Matković – managing board kindergarden Cvit Mediterana, daughter of Nevenka
  Marica Šarić – Supervisory Board of Vodovod i kanalizacija, Mayor’s cousin
  Zoran Jeramaz – President of Council for Urban Planning, Kerum’s ˝house architect˝
  Damir Karaman – organisation of many lucrative city manifestations, manager of Kerum’s election
   campaign
   HOTEL MARJAN
   January 2008.- amendments to the Urban Plan, large
    increase in the size of Hotel Marjan
   Jerko Rošin – designer of Hotel Marjan (president of
    Council for Urban Planning)
   Branko Poljanić – main urban planner in Split, former
    Director of Rošin’s urban planning office
   Today, there are conversations about West Coast
    design. By designing it, Hotel Marjan project gains on
    value, on the other hand some consider that West Coast
    should be renewed. So, everything would be in order if
    the public and private project wouldn’t have been
    managed by the same person. But, like this, it is and it
    will be a suspicion in conflict of interest.
   * CONSTRUCTION ON MARJAN – LATEBRA
   According to data by Civil Initiative Split:


   Start in 2006 – development of the Urban Plan – developers put an area classified as artificial bathing area
    with a permission to construct a hospitality object of 200 square metres per hectare.
   DISPUTABLE – this area consists of a large part of old Marjan forrest → PROTECTED AREA OF PARK -
    FORREST MARJAN!!!
   In this area, LATEBRA bought a property for construction of a hospitality object.
   property WASN’T offered to the state, region or City of Split according to the right of pre-emption in line
    with the Law on protected areas of nature.

   Latebra (Fani Horvat) on 22 July 2008 concluded a contract for buying 3 properties with 12 former owners
    – paid 1,2 MEUR!

   Ownership of this property looks as follows (in total 15 thousand square meters):
   Fani Horvat (5 500 square meters)
   City ownership
   Sea wealth
   2. Mayor’s acts (around 11 October 2010) – Kerum gives to Latebra task of organising urban-architectual
    tender for coast design
            ↓↓↓
   Direct favourising of Latebra → in the moment of publishing tender for concession over beach, Fani
    Horvat will have the advantage beacuse she will be the only one familiar with the idea of its design!
            ↓↓↓
   Conflict of interest in legal terms as well!!!
   Tender published in Vjesnik, low distribution!

   If we return to analysis of Law on Suppression of Conflict of Interest, this Mayor’s action, i.e. City’s
    administration will not have any serious sanctions because according to the Law, legal acts in this
    business cannot be annuled because they’re not subject of public procurement.
Conflict of Interest and Media
   Aside his ownership of Television,
    interviewed people say that Mayor is
    possibly conditioning his marketing capital
    coming from his private companies (not
    only the money coming from the City
    Budget as in other cities), which can
    influence the objectivity and criticism in
    reporting on work of the city
    administration.
Football Club Hajduk
   Same model of management structured in
    city administration and city enterprises,
    Mayor and co-owner of Hajduk, transfers
    to Hajduk as well.
Mayor Kerum sanctioned according
to the law
   ‘CoI Committee’ issued 2 sanctions for Željko
    Kerum amounting 30.000 kuna.
   But for not replying to Committee’s request to
    deliver data.
   Especially this constitutes the key weakness in
    the law, legal solutions in relation to similar
    cases will not change and improve and secure
    suppression of CoI, i.e. adequate sanctions for
    CoI.
 Journalists: “Kerum has, with his incidental
  behaviour, created a barrier so noone
  asks him anything serious!”
 “Trend of making politics VIP is worrying,
  because conflict of interest issues are not
  coming to the surface.”
Public policies for suppression of conflict of
      interest in Croatia, even after the last
      amendments don’t correspond to real
  manifestation of the problem, i.e. do not
suppress that private interests prevail over
                             the public ones.
Conclusion:
   Indicators for measuring conflict of interest, as well as concrete
    examples in Croatia imply that most of public functions of the state
    can be considered to be imprisoned by private interests, i.e.
    financial, economical, political, or personal ones.
   Situation on local level is quite worse than situation on national
    level, and adopted policies for suppression of conflict of interest and
    fight against corruption do not have the solution for this growing
    problem.
   Access to information is still not ensured, and the possibility to
    disseminate information and opening the public debate on political
    responsibility of officials is on its lowest level in the last 10 years.
   Except for the shift toward limitation of officials’ influence in public
    procurement, other real progress in the Law for Suppression of
    Conflict of Interest does not exist.
   Conflict of interest is still in the grey zone of the systemic corruption,
    for which there is still no adequate solution.
Recommendations:
Media and Civil Society:

   Necessity to ensure respect of media liberties and independence of
    media from political influence. Introduction of censorship as a
    criminal act as well as system for protection of journalists’ integrity.
   It is necessary to protect the public service HRT from influence and
    repression of politics and HRT management on journalists.
   Creating obligation to finance and establish independent non-profit
    media.
   Rigorous application of the Law on Media, and its part defining
    publication of media owners and public media financing.
   Creating fair and transparent market for civil society projects in the
    area of fight against corruption.
   Allocation of funding to civil society only via public tenders and
    respect of perscribed code for all public bodies.
   Implementation of special instruments of protection including claim
    for damages for investigator journalists, civil society activists and all
    citizens that report corruption in good faith.
Recommendations:
Freedom for Access to Information Act:
 Strengthen      individual     responsibility    in
  implementation, including the obligation of
  starting a procedure in front of the Civil Servants
  Court for those civil servants that infringe the
  Act.
 Secure implementation of legal court decisions
  related to the Act by introducing criminal
  prosecution for officials not respecting court
  decisions or by introducing high penalties for
  those not respecting court decisions.
Law on Suppression of Conflict of Interest
   Declaration of Assets form should be improved in order to ensure declaration of officials’
    interests before his/her coming to the office, instead of only properties’ declaration (sports
    clubs, associations, artistic projects, membership in secret societies).
   All items in the form should be available to the public.
   Obligation to declare interests should be applied to all those deciding on public interest
    issues, especially on local level, and not only to officials as described in the current law.
   Form should be declared as a public document, and in case an official represents his
    properties and interests falsely, the law should introduce a provision for criminal
    prosecution instead of just disciplinary sanctions.
   The public should be able to start a procedure in front of the Committee in order to protect
    the public interest.
   There should be an obligation for the Committee to start a procedure based on a claim,
    with an obligation to response to the individual making this claim and ndividual’s right to
    appeal to the Committee’s decision.
   Possiblity to ban from the office those officials for who conflict of interest is detected should
    be introduced, and not only for those who don’t comply to Committee’s decision about
    Declaration of Assets.
   Introduce an obligation to annul all administrative/legal acts created within conflict of
    interests situation instead of only public procurement contracts.
   Introduce a possibility to start a procedure to claim damages created by conflict of interest
    for private and legal entities who consciously and purposely participate in conflict of
    interest.
   Introduction of Integrity Audit Agency which would investigate potential conflict of interest
    on lower levels with jurisdiction of State Audit Office related to finances and an obligation to
    start an investigation in cases when a public body neglects Agency’s recommendation.
   Ensure that Agency’s decisions and findings are public.
   Ensure with the Public Procurement Act that public procurement contracts are able to be
    monitored from planning (budget) to contract execution.
Partnership for Social Development, Lomnička 1, 10 000 Zagreb,
 tel.: 00 385 1 60 55 668, e-mail: info@psd.hr, web: www.psd.hr



             Thank you!

				
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