Around 160 Million Dram Violations Recorded at Zinarr LLC

The Republic of Armenia's State Audit Office has summarized its findings from the inspection of Zinarr LLC. Violations of approximately 160 million drams were recorded during the assessment of the company’s operations from 2017 to 2019. This information has been provided by the State Audit Office.

Zinarr LLC was established under the RA Government's decision No. 908 dated December 31, 2000, regarding the establishment of Zinarr closed joint-stock company. All shares of the company are owned by the Republic of Armenia, and the authority of the founder is reserved for the Ministry of Defense. The purpose of the company is to generate profit through economic activities, including wholesale and retail trade and domestic service operations within military subdivisions and areas.

The violations primarily pertain to the inspection of the activities conducted by the company in shop-tea houses, with around 82 million drams recorded in violations specifically due to breaches in the calculation of rental fees. As a result, the company's revenue was less than it should have been. Additionally, operations were conducted in shop-tea houses without contracts or any legal basis, and the calculated rental fees were less than those stipulated in the contracts.

Employees of the production and service combination owned by the company were paid around 7.7 million drams in salaries, despite the fact that no production activities were conducted during the same period and another company operated in that area. Furthermore, Zinarr LLC paid around 1.2 million drams for utility services on behalf of the organization that actually conducted the operations.

During 2017-2018, as an actual expense, an excess of about 50 million drams was reflected or profits were calculated to be less than they should have been. This resulted in a deficit of approximately 32 million drams in net profit and a reduced profit tax payment to the state budget of around 8 million drams.

In 2017-2018, around 12 million drams of expenses documented from cash withdrawals and account payments were found to lack supporting documents, with positions including that of a authorized representative contradicting the provisions of the RA Law on Joint-Stock Companies. Furthermore, the salary of around 4.5 million drams paid to the authorized representative was unsupported.

The processes regarding the installation of coffee vending machines and the operation of shop-tea houses in military bases were not regulated. The allocation of spaces for the installation of coffee vending machines by the company was not justified. In 2019, 15 coffee vending machines operated across 10 military bases without contracts or legal foundations, leading to a shortfall in the company’s revenue.

The requirements of the RA Law on Procurement were not adhered to, resulting in the purchase of goods, works, and services costing around 91 million drams by the company between 2017 and 2019 under such circumstances. Based on the outcomes of the inspection and the allocated resources, it has been suggested to cease the activities of Zinarr LLC, transferring the same functions to the relevant subdivisions of the Ministry of Defense.

Based on this information, the Military Prosecutor's Office of Armenia has initiated a criminal case under part 2 of Article 308 of the RA Criminal Code (abuse of official authority leading to serious consequences), which has been forwarded to the Investigative Committee of the Republic of Armenia for preliminary investigation.