Aiming to stabilise the financial situation in the state-owned enterprises managed by the Ministry of Culture in the crisis caused by COVID-19 pandemics, the Cabinet of Ministers allocated six million euros to the Ministry of Culture from the state budget program “Contingency Funds” for partial defrayment of remuneration expenses in the state-owned enterprises in June 2020. During the audit, the State Audit Office has concluded that the funding was used for the intended purpose, that is, compensate the part of remuneration expenses from April to September, as the total remuneration expenses were 15.1 million euros for 13 state-owned enterprises that received additional funds in this six-month period. However, the State Audit Office outlines that the distribution of the allocated funds among 13 out of 15 state-owned enterprises managed by the Ministry of Culture was performed according to unclear and untraceable principles. Therefore, looking at new allocations of state budget funds in 2021, the State Audit Office calls for the assessment of already existing experience both in reducing expenditure and in motivating the state-owned enterprises to look for new ways of earning income.
The ban on organising public events in both spring and late 2020 and the restrictions on gatherings had a negative impact on the cultural sector, including theatres, concert organisations, opera and ballet, the circus because a part of their revenue came from ticket sales and premises for rent.
Without questioning the fact that the state-owned enterprises managed by the Ministry of Culture needed additional financial support to stabilise their financial standing and acknowledging that the state-owned enterprises used the additional six million euros received from the state budget to cover remuneration expenses, the State Audit Office points to significant proportion of the state budget allocation in funding of those enterprises even before the COVID-19 crisis, which has accounted for more than half of all revenue traditionally. In 2019, the annual general state budget grant to the state-owned enterprises managed by the Ministry of Culture accounted for 58% of their total revenue, with a significant increase in the amount of the grant in 2020 even before the crisis. One had planned initially that it would account for 66% of their total revenue. As a result, with the additional allocation due to the COVID-19 crisis and other redistributions of state budget funds, the state budget funding constituted 40.8 million euros for 15 state-owned enterprises managed by the Ministry of Culture in 2020, which accounted for as much as 89% of the total revenue of those state-owned enterprises. In their turn, own revenues from tickets and premise rentals amounted to five million euros.
The calculations that the Ministry of Culture submitted on the required funding for state-owned enterprises due to the COVID-19 crisis do not provide a clear answer to the State Audit Office’s question about the principles of money distribution. During the audit, the State Audit Office compared the amount of additional financing allocated to each state-owned enterprise with various financial indicators of those enterprises and did not find any correlations.
In 2021, the annual state budget grant allocated to the state-owned enterprises managed by the Ministry of Culture amounts to 37.2 million euros, but if the restrictions of the emergency continue, a situation may arise when the need for additional state budget funds is considered. Therefore, the State Audit Office calls on the Ministry of Culture to ensure as equal distribution of the state budget funds allocated in addition as possible motivating to cut the costs and increase income by allocating additional state budget funding to the state-owned enterprises in the conditions when the problems of the cultural sector are exacerbated and raise the public awareness on the intention.
The audit has also discovered that state-owned limited liability company “Latvian National Opera and Ballet” also received additional funding of 262,000 euros to eliminate the consequences of COVID-19 for urgent repairs and improvements of the building in 2020.