STATE AUDIT OFFICE
- Press Release -

Skopje 14.08.2025

Public Enterprise National Forests with Low Production Plan Realization, Increased Debt, and Reduced Liquidity

The public enterprise for management of state forests “National Forests” – Skopje, in 2023, achieved only 66% of the planned physical volume of technical and firewood production. With accumulated liabilities amounting to 1,074,644,000 denars, or approximately 17.5 million euros, and a continuous reliance on a revolving short-term loan for salary payments, the enterprise is facing serious financial difficulties, reduced liquidity, and risks to the sustainability of its operations.

 

The State Audit Office conducted an audit of the financial statements in conjunction with a compliance audit of the public enterprise for management of state forests “National Forests” – Skopje for their operations in 2023.

The audit identified conditions, irregularities and instances of non-compliance in the operations of the public enterprise. Due to the material significance of these findings, the audit resulted in an adverse opinion regarding the truthfulness and fairness of the 2023 financial statements, as well as compliance with the legal regulations, guidelines and established policies.

Biological assets have not been valued at their fair value, meaning that they have not been written down or impaired for the areas located within the boundaries of Shar Planina National Park, which are managed under special forest management plans, as well as for the areas affected by forest fires where the forest resources have been completely destroyed.

At the end of 2023, the enterprise reported liabilities to the State Budget for extended reproduction amounting to 450,844,000 denars (7,307,000 euros), while no separate account was opened and no funds were paid for simple reproduction, amounting to 250,186,000 denars (4,055,000 euros). At the same time, the enterprise claims receivables from the state in the amount of 164,275,000 denars (2,662,000 euros) for its participation in the “Tree Day” campaign.

The audit determined that 95% or 37,672,000 denars of receivables from employees originate from the period prior to 2018 and relate to the following: shortages of technical and firewood, uncleared advances, unremitted daily sales revenue, the use of hospitality services, and other items. Due to the lack of measures taken for collection and the statutory limitation period, there is significant uncertainty regarding the collectability of these receivables. Specifically, the amount of 36,460,000 denars (590,920 euros), aged five years or more, is at a high risk of non-recovery.

                          

In the financial statements of the Public Enterprise “National Forests” as of December 31, 2023, it was found that the actual status of material assets in preparation was not determined, and investments amounting to 16,463,000 denars were improperly recorded.

Investment expenditures amounting to 2,226,000 denars, originating from previous years before the establishment of the enterprise, relate to investment objects in the subsidiaries “Bigla” Demir Hisar (an underground fuel reservoir) and “Ravna Reka” Pehčevo (an unauthorized construction of a forestry house). These investments lack reliable documentation, the actual status has not been verified, and no assessment has been made regarding the justification for continuing the investments.

Furthermore, seven greenhouses with a value of 12,785,000 denars, although in use since 2004, are incorrectly recorded as assets under construction, with no depreciation being calculated. Additionally, the peat procured in the amount of 1,452,000 denars has been classified as an investment, instead of inventory which is not in line with accounting principles and standards. These weaknesses undermine the principles of accuracy and reliability of the financial statements and directly affect the financial result of the enterprise.

The Public Enterprise “National Forests” – Skopje also invested 7,374,000 denars in the establishment of two affiliated companies, which separated from the public enterprise in 2005.

The Company for Sawmill Production and Wood Processing has not been listed in the Trade Register since 2020. Regarding the Company for Fish Farming and Production, following its separation from the enterprise, several transformations occurred, including a transfer of the investment shares, a change of the company’s name and it is now owned by a different private legal entity.

The public enterprise does not have the files related to that procedure in its archive; however, upon review of the Cadastre Register (AKN), the transfer of the real estate was registered in 2016, with ownership rights recorded in Land Book No. 243 for Parcel No. 375/1 in the cadastral municipality of Klenoec, Kičevo, in favor of the private legal entity.

The audit identified irregularities regarding compliance with the provisions of employment contracts. Of the total 355 permanent employees, 73% or 259 employees hired for positions as fallers, wood haulers, stackers and forest workers do not perform the tasks stipulated in their contracts but carry out administrative duties and tasks at the headquarters or subsidiaries.

In 2023, at the Forest Management Subsidiary “Shumarstvo” – Sveti Nikole, based on a request from the head of the subsidiary and an authorization granted, a contract for the sale and purchase of standing timber assortments (oak firewood and logs) in the amount of 2,561,000 including VAT was concluded. The contract was signed in a non-transparent manner, without established criteria for selecting the legal entity, and without requesting or verifying the required documentation for performing silvicultural activities. This represents a deviation from the standard procedure and carries the risk of entering into contracts with entities that lack the appropriate capacity, knowledge, or expertise for the proper and efficient management and exploitation of forest resources.

The significant deviation in the realization of the production plan for technical and firewood timber, as well as the financial plan for revenues from the sale of technical and firewood timber is related to insufficient and outdated machinery, a limited number of skilled and technical personnel, limited accessibility of forest complexes, and the remoteness of sites.

Additionally, the enterprise carries out only 42.45% of the felling phase, 34.04% of the hauling phase, and 32.13% of the transportation phase using its own resources, which means that over 50% of the production process depends on engaging external contractors.

Although the electronic system for monitoring timber volume, procured at a cost of 32,518,000 denars with ongoing monthly maintenance of 167,000 denars, has been in use since 2017 and is technically installed on the platform of Macedonian Telekom AD Skopje, with VPN access provided to the Public Enterprise "National Forests" Branch Office – Skopje, it is not being utilized in practice by the relevant entities (the State Forestry and Hunting Inspectorate and the Forest Police), nor have all phases of timber volume monitoring been implemented. This limits the ability for control, traceability, and transparency in the management of timber volume – from felling to final sale.

The audit also reported insufficient forest protection measures (implementation of appropriate activities for the prevention and management of risks related to forest fires) and systematic weaknesses in addressing risks from diseases, fires and illegal logging. Additionally, there was partial realization and limited efficiency in the use of funds from the Forest Extended Reproduction Program for 2023.

Forests damaged by pine bast scale

        River Gardenichka                                                                                 Karaslari

Forests damaged by fire

                   Delchevo                                                                                         Berovo

 

 

 

 

 

Financial indicators for 2023, specifically the total liabilities amounting to 1.074,644,000 denars (17,417,000 euros), and the continued reliance on the revolving short-term loan for salary payments indicate that the enterprise is exposed to an increased liquidity risk. Therefore, it is necessary to adopt a financial stability plan, assess liquidity risks, define a repayment timeline timeframe for outstanding liabilities, reduce reliance on short-term loans, ensure priority collection of receivables, and optimize expenditures, in order to ensure long-term stability and sustainability of the public enterprise’s operations.

To address the identified issues, recommendations have been made for the responsible institutions and individuals to take appropriate measures and actions.

 

Press contact:

Albiona Mustafa Muhaxhiri +389 72228 203 [email protected] 
Mijalche Durgutov +389 70 358 486 [email protected] 
Martin Duvnjak    +389 75 268 517 [email protected]