During the audit, the State Audit Office of Latvia detected a series of problems regarding the activities carried out by the Ministry of Transport, state-owned “Autotransporta direkcija” Ltd (Road Transport Administration) and the Public Transport Council to develop public transport services on routes of regional significance. The audit evidence shows that the responsible institutions elaborate public transport routes without a unified approach, do not comply with the legal framework on the scope of state-guaranteed services, implement decisions incompliant with the laws and regulations on the routes where services are provided free of charge, and set partially justified demands for the quality of public transport services. In addition, the current arrangement does not facilitate the transfer of passengers from their private transport to competitive public transport to a planned extent.
BRIEFLY
- A 15% lower passenger turnover rate (825.1 pas/km) than planned (975.6 pas/km) was achieved in passenger bus transport in 2023.
- A total of 1.5 million trips are performed annually in regional transportation with 1,060 buses.
- 62.8 million euros was allocated from the state budget for compensation of losses to carriers for the performed bus journeys.
- The need for routes is justified in general, and there is no data to confirm that the developed route network meets the needs of the population. In addition, the number of journeys on 38% of the routes is set higher and it is set lower than the law stipulated on 25% of the routes.
- Additional funding is regularly requested for the provision of transportation, but the scope of the regional route network is not reviewed at the same time.
A total of around 1.5 million journeys are carried out in regional bus transportation per year. The state grant for compensation of losses to carriers for providing this service was 62.8 million euros in 2023. On average, the largest amount of grant per passenger in bus transportation on regional routes was in Latgale Region in 2023 by reaching 4 euros per passenger. To deliver the respective journeys and contracts, the carriers need 1,060 buses, moreover, 87% of the buses will be replaced with new ones during a 10-year period of the contracts. So far, residents have been provided with many opportunities to travel in comfortable buses, although the demand is low and it costs the country dearly.
“Mobility and accessibility are essential factors for the balanced development of the country and the availability of services. Moreover, the population is most dependent on a reliable transport system in the regions in particular. However, the current planning and provision of public transport services is not user-friendly and does not motivate to change habits such as using a private car less often and choosing public transport instead. One should emphasise that the provision of a well-thought-out public transport service and the increase in its use among the population would increase its profitability and the state would have to spend less taxpayers’ money on the grants for public transport operators. Traffic jams and emissions caused by transport would also decrease, which are important in the context of the Green Deal,” stressed Mr Oskars Erdmanis, Council Member of the State Audit Office.
The bus route network developed by state-owned “Autotransporta direkcija” Ltd and approved by the Public Transport Council does not follow a clear and transparent approach. The lack of data-based indicators, which would be used to assess the movement needs of population between settlements, does not allow to make sure that the route network meets these needs. Such information is essential in making impartial decisions and explaining the decisions made to the public. State-owned “Autotransporta direkcija” Ltd justifies the need for routes in general, without referring to the criteria defined in the laws and regulations. The justifications also contain outdated information inter alia about routes that were already closed in 2018.
The amount of services subsidized by the state and provided by buses shall be provided with at least eight or four trips per weekday on weekdays if the profitability is at least 25%. The minimum amount of service guaranteed by the state is two journeys per working day regardless of profitability. In its turn, the audit findings show that the number of journeys provided on at least 38% of the routes did not meet the profitability threshold set by the law, while the minimum amount of service was not provided on 25% of the routes.
In the opinion of the State Audit Office, there is no consistent approach in planning the route network and the procedures stipulated by the law are not adequately implemented in practice. In 2023, the assessment for the maintenance of service provision on routes whose profitability was below 10% in 2022 was carried out only for 749 journeys instead of all 2,342 journeys. The explanation why only journeys with profitability below 10% and not below 25% were evaluated and what were the quantitative values of the evaluated criteria, at which a specific journey would be recognized as closed was not received.
“The legislator has determined how broad the travelling options will be, but we found discrepancies between the statutory and actual implementation during the audit. If implementing the requirements set by the legislator is impossible in practice, then the responsible institutions such as the Ministry of Transport and state-owned “Autotransporta direkcija” Ltd must take data-based and motivated decisions to amend the law accordingly. The lack of a unified approach in the operation of state-owned “Autotransporta direkcija” Ltd and the Public Transport Council complicates the administration of public transport services even more. Therefore, it is necessary to create a simpler regulation by reviewing the roles of those responsible in planning and providing this service,” explained Mr Erdmanis.
Public transport service is not provided with buses of equivalent quality. Passenger transportation in various parts of the route network is carried out by buses of different quality and equipment. The reason is that concluding new contracts in time was impossible due to the expiring terms of the previously concluded long-term contracts. To ensure the continuity of transportation, short-term contracts were concluded which included lower quality requirements for buses, for which 5 million euros was paid more in total than paying for public transport services with higher quality buses under long-term contracts.
In addition, the set quality requirements are not effectively controlled. Controls are not carried out in a planned way by using incorrect information from the internal database. For example, 13 buses are listed in the database as being equipped to transport persons with special needs, although they do not have such equipment. The mechanism of contractual penalties also does not motivate carriers not to commit new violations of quality requirements, which is evidenced by the increase in the number of violations by 178% last year and the application of the specified contractual penalty in a smaller amount or not at all only by issuing a warning instead.
The scope of the public transport service exceeds the possibilities of the state budget because no decisions are made about changes in the route network in accordance with today’s needs and demand. In the last three years, there were 206.7 million euros allocated from the state budget for compensation of losses to carriers for the provided public transport services. A significant part thereof, that is, 98 million euros, were allocated from the state budget program “Contingency budget”. From 2021 to 2023, it was 47% or 33 million euros per year on average. However, the request for additional funding is not justified by unforeseen circumstances, but mainly by emphasizing the insufficiency of the initially allocated funding.
State-owned “Autotransporta direkcija” Ltd has calculated a forecasted financing required for public transport journeys annually taking into account the contractual obligations with carriers and by pointing out an already known projected funding insufficiency to the Ministry of Transport, but they have not applied the provisions on the volume of state-guaranteed transportation provided by law at the same time. In their turn, the activities of the Public Transport Council after the allocation of insufficient funding have not been aimed at reviewing the planned network of routes of regional significance in accordance with the budget possibilities.
O. Erdmanis indicated, “Such a practice is unjustified because the allocated funds do not correspond to the situation of an unforeseen event and it also reduces the possibility of financing truly unforeseen events. In addition, knowing that the requested funding will be insufficient when requesting funds but not conducting a review of the volume of public transport services at the same time relying on the fact that the missing funding will still be found at the end of a year shows a lack of decisiveness in making relevant decisions and inadequate state budget planning.”
During the audit, the State Audit Office of Latvia obtained information that additional funding of almost 13 million euros would be also needed in 2024 although a fare was increased and there were changes in the route network, about which the Ministry of Transport already informed the Cabinet of Ministers.
The passenger turnover rate in bus transportation is negative, but future forecasts are too optimistic. On regional routes, an increase in the volume of passenger transportation (in passenger kilometres) in trains is planned by 47% until 2027, while its decrease in buses is planned by 12%. When developing transportation by rail, the role of bus transportation remains where there is no rail transportation or it is necessary to supplement train transportation.
However, in the Transport Development Guidelines 2021-2027, an intermediate passenger turnover indicator planned for 2023, which was one of the indicators for the planned policy result “Improved mobility opportunities”, was only partially achieved. In passenger transportation by buses, the planned passenger turnover rate of 975.6 pas/km was not reached last year, as only 825.1 pas/km were reached. It did not allow to achieve the overall planned passenger turnover indicator, although this indicator was achieved in passenger transport by rail (target value – 603 pas/km, achieved value - 612 pas/km).
The State Audit Office of Latvia considers that future forecasts of passenger turnover in bus transport are also too optimistic because the passenger turnover will not increase without changing the policy of passenger transport and its implementation instruments, which envisage limiting the availability of the service currently taking into account the criterion of profitability.
Recommendations of the State Audit Office of Latvia #PēcRevīzijas
By implementing the 12 recommendations provided after the audit, the audited entities (1) will ensure the implementation of the policy of passenger transport by observing the principles of development planning established in the country; (2) justify the state-guaranteed volume of public transport services on the route network of regional significance approved annually under the established principles of the establishment of the network of public transport service routes and the volume of services; (3) will ensure compliance with the law and economically justified actions with state budget funds by determining a scope of public transport services; (4) will ensure equivalent quality in buses and trains and reduce the number of violations for non-compliance with quality requirements.
Additional information: audit summary
About the State Audit Office of Latvia
The State Audit Office of the Republic of Latvia is an independent, collegial supreme audit institution. The purpose of its activity is to find out whether the actions with the financial means and property of a public entity are legal, correct, useful and in line with public interests, as well as to provide recommendations for the elimination of discovered irregularities. The State Audit Office conducts audits in accordance with International Standards of Supreme Audit Institutions of the International Organization of Supreme Audit Institutions INTOSAI (ISSAI), whose recognition in Latvia is determined by the Auditor General.
100 years of AUDIT STRENGTH
On 16 August 2023, the State Audit Law turned 100 years old. With the adoption of this Law, the State Audit Office from a formal de facto institution founded on 2 December 1918 became a de jure independent, collegial supreme audit institution of the Republic of Latvia. The State Audit Office is one of the independent state institutions enshrined in the Satversme (Constitution) of Latvia. The Constitution was signed by Roberts Ivanovs as the secretary of the Constitutional Assembly, who was then confirmed as the Auditor General. He worked as the first Auditor General for 12 years. His signature confirmed the text of our Constitution alongside that of Jānis Čakste.
Additional information
Mr Ivo Valdovskis
Communications Advisor to the Auditor General
Phone number: 23282273 | E-mail: Ivo.Valdovskis@lrvk.gov.lv