STATE AUDIT OFFICE
Press Release -
Skopje, 20 November 2025
Unresolved and recurring weaknesses in the operations and irregularities at the Film Agency
The contracts signed for production of feature and short fiction, documentary, and animated films, as well as festivals, show a consistent and significant increase, particularly from 2022 to 2024. The ratio of approved budget to project liabilities is 1:5, indicating that the Agency regularly assumes obligations exceeding its approved budget
The State Audit Office conducted a financial and compliance audit of the Film Agency of the Republic of North Macedonia (the Agency) for 2024.
Based on this audit, an adverse opinion was issued regarding the fairness and accuracy of the financial statements and the compliance with legal regulations, guidelines, and policies in place.
The audit findings for 2024 show that issues identified in the Final Report of the Authorized State Auditor for 2021, as well as in previous audit reports, are recurring and unresolved.
In 2024, continuous changes in the management structure affected the Agency’s operations and its core purpose.
The Agency consistently faces staffing shortages, particularly in qualified and trained personnel crucial to its activities, which impacts task quality and overall functioning. This shortfall is often addressed by engaging individuals on service contracts without verifying their qualifications or meeting procedural requirements.
Liabilities for unpaid projects funded by the Ministry of Culture and Tourism's approved budget—related to production of feature and short films, documentary and animated films, as well as festivals—continue to rise significantly, especially from 2022 to 2024, with a ratio of approved budget to project liabilities 1:5. This indicates that the Agency continuously assumes obligations that exceed the approved budget.
The significant increase in the Agency's liabilities violates the requirements of the Law on Financial Discipline and the principles of sound financial management stipulated by the Law on Budgets, potentially leading to legal proceedings and interest costs.
An inventory of the Agency’s assets, receivables, and liabilities has not been performed, nor has reconciliation between accounting records and the actual situation been carried out, despite previous directives. The lack of such an inventory in previous years also reflects poor financial management.
The Agency has not developed a Strategy for the Development of Film Activities, resulting in a lack of clear long-term goals and priorities. Officials also fail to submit semiannual reports on the Agency's activities to the Government, hampering transparency and accountability.
No updated records exist for film producers, distributors, cinema exhibitors, or films produced with public funds, nor is there a record of films distributed or screened in domestic cinemas.
The audit found that the Competition for Financing Film Projects (feature, documentary, and animated) was canceled without legal justification, violating procedural rules.
Weaknesses in the application processes for film projects and festivals were found, along with the absence of formal procedures governing these processes, due to the revocation of the previous Support for Film Projects Rulebook.
The Agency lacks comprehensive and timely controls over the implementation of film projects and festivals. Missing documentation from production companies proving that requirements have been met raises concerns over fund misuse.
Auditors also identified weaknesses in monitoring film projects’ implementation timelines and payments, which creates a risk of ineffective allocation and use of budget funds.
Additionally, a contract was signed to finance project activities of associations in the field of film activity, without legal authorization, breaching legal requirements.
The Agency has not established or organized an internal audit unit, as mandated by law, limiting its ability to perform internal controls and improve the quality of operations.
Regarding revenues, the outdated Methodology for determining fees from 2015 is still used despite regulatory changes.
The Agency’s decision to set an administrative fee for film projects submitted through competitions lacks legal backing and does not comply with current regulations.
The Agency also fails to keep updated records of legal entities from which it should collect revenues, impairing financial reporting accuracy. Decisions on fee calculations are often delayed, leading to delayed collection and inefficient revenue management.
Internal processes lack mechanisms for reconciliation between decision-making departments and accounting, risking financial data inconsistencies.
Producers who have received funding through competitions for films that have been completed and premiered have not submitted full documentation to prove their gross profits, preventing the Agency from claiming its 50% participation in profits.
In the section Other Matters, auditors emphasize the need to further regulate the Law on Film Activity, particularly regarding qualifications for Film Council members, defining who qualifies as a distinguished individual in film and culture, and setting standards for bank guarantees from film producers.