29 January 2021 16:17

Statement on the external auditor's opinion on the consolidated financial statements of the Agency

  In accordance with Article 4.5.18 of the Charter of the State Agency on Mandatory Health Insurance (Agency), the Agency engages an external auditor to independently audit its activities. Guided by the requirements of the Charter, the Agency has entrusted the audit of the annual financial statements for 2019 to PwC Azerbaijan LLC, one of the audit companies included in the “big four.”

In accordance with the requirements of the Law of the Republic of Azerbaijan “On Accounting,” an external auditor's opinion on the consolidated financial statements has been posted on the official website of the Agency, emphasizing the importance of ensuring transparency in its activities.

The current consolidated financial statements for the year ending on the 31st of December 2019 have been prepared for the Agency and its subsidiaries (collectively referred to as the Group) in accordance with the International Standards of Financial Reporting. Please note that, in accordance with paragraph 2(c) of the International Accounting Standard 20 Accounting for Government Grants and Disclosure of Government Assistance, the funds received from the state budget are not recognized as revenue of the Agency and, therefore, these funds are not recorded in the consolidated income or loss statement and other statements of total income of the Agency. These funds are included in the other reserves section of the capital section of the consolidated report on the Agency's financial standing.

The main operating income of the Agency is considered to be made up of collected mandatory health insurance premiums, and, according to the audit, losses were recorded due to non-collection of insurance premiums in 2019, as well as non-recognition of funds received from the state budget. At the same time, there was an increase in salaries and bonuses of medical and non-medical staff working in medical facilities in the areas where mandatory health insurance is applied. In addition, the material and technical bases of these medical facilities have been improved.

Recognized revenues in 2019 amounted to only 1,874,000 manat, which includes revenues from the provision of medical services, which are not covered by the basic package (package of exceptions) and from exemptions. According to the report, in 2019, the cost of medical services used by citizens in the pilot areas amounted to 35,776,000 manat, and the total and administrative costs of the Agency amounted to 22,961,000 manat. 

According to the external auditor, by the end of 2019, the authorized capital of the Agency amounted to 9,565,000 manat, the total capital of the Group amounted to 168,667,000 manat. Also, the Group's assets amounted to 174,226,000 manat, of which 50% were long-term assets. At the same time, the Group's long-term liabilities amounted to 848,000 manat, and short-term liabilities amounted to 4,750,000 manat. 

It should be noted that in the areas where mandatory health insurance was implemented as a pilot project in 2019 (Mingachevir city, and the Yevlakh and Agdash districts), medical services were provided free of charge to 343,800 residents within the basic package. Mandatory health insurance premiums were not collected during that period. This is one of the important factors influencing the excess of expenditures over revenues in the report.

We would like to inform you that, due to the fact that the funds received from the state budget for the years were not recognized as income, the Agency was considered to have ended the relevant years with a loss.