During a focused compliance audit, the State Audit Office of Latvia concluded that the additional funding requested by the Ministry of Welfare for the targeted grant for the payment of the guaranteed minimum income (GMI) allowance to local and regional governments was not justified in 2023 and 2024. Significant and comprehensive irregularities in the planning of additional funding requested for the payment of the targeted grant have been identified. The Ministry of Welfare has calculated the additional funding required for the co-financing of GMI allowance expenses in a significantly larger amount than was necessary in fact. The reason is both an incorrectly determined number of allowance beneficiaries and a calculation approach used. Although significant errors in funding planning have been identified, local and regional governments have spent the allocated funding in accordance with laws and regulations in general.
BRIEFLY
- The GMI allowance is one of the basic social assistance allowances provided for by law as material support in monetary terms for the payment of minimum daily expenses, which is granted by a social service of local and regional governments to low-income households.
- The additional funding requested by the Ministry of Welfare for the payment of the GMI allowance in 2023 and 2024 was not justified, as it was calculated in a significantly larger amount than was necessary in fact. The main reason is the wrongly estimated number of GMI allowance beneficiaries.
- Additional funding was allocated to the Ministry of Welfare for the payment of targeted grants to local and regional governments: 2.376 million euros for the six months of 2023, 6.128 million euros for 2024 and 7.232 million euros per year for 2025. Out of this sum, only 996,538 euros were spent in the six months of 2023 and 1.359 million euros in the first half of 2024.
“At a time when the state budget funds available for development expenses are limited, the State Audit Office of Latvia urges the Ministry of Welfare and other state institutions to monitor the justification and use of each requested additional euro for development expenses more responsibly. Social domain has many needs. During the development of the state budget for 2023, the Ministry of Welfare drafted 27 applications for the priority measures, but the Cabinet of Ministers supported only eight applications, including the targeted grant to local and regional governments from the state budget for the payment of GMI allowance in an increased amount from 1 July 2023. During the audit, we found that the Ministry of Welfare had calculated the additional funding required for the co-financing of the GMI allowance for 2023 by 58% or 1.38 million euros larger amount than was actually necessary. In its turn, the non-fulfilment of funding is already 56% or 1.70 million euros only in the first half of 2024,” indicated Ms Maija Āboliņa, Council Member of the State Audit Office of Latvia.
The funding default is mainly due to the wrongly estimated number of GMI allowance beneficiaries.
Although 10% fewer persons received the GMI allowance already in 2022, compared to 2021, when developing the state budget request for 2023-2025 at the beginning of 2023, the Ministry of Welfare planned a number of GMI allowance recipients with a significantly increasing trend for each subsequent year without considering the actual trends. Moreover, although the increase in funding was planned by considering the already planned increase in GMI thresholds, the estimated funding was further increased by the consumer price index forecasts by Ministry of Finance for 2022 and 2023 by 25.8% in total. The funding request also included support for the Ukrainian civilian population by assuming that 531 people (1.33% of the planned Ukrainian civilian population of 40,000) would be assisted, although funding for the payment of the GMI allowance to this target group was also planned in the budget of the Ministry of Smart Administration and Regional Development.
Also in July 2023, when developing the state budget for 2024-2026, the Ministry of Welfare used the same approach in the calculation of the funding required for the co-financing of GMI allowance expenses by updating it with the GMI thresholds planned for 2024 and the following years and the consumer price index planned for the relevant year. This time, the calculation of the funding did not include the support needed by the Ukrainian civilians.
The State Audit Office of Latvia emphasizes that if the approach used so far in funding planning will not be changed for 2025 and 2026, funding for the payment of targeted grants to local and regional governments for the co-financing of GMI allowance expenses will be allocated in at least 7.8 million euros larger amount than is actually needed.
Recommendations of the State Audit Office of Latvia #PēcRevīzijas
After the audit, there are two recommendations issued to the Ministry of Welfare, the implementation of which (1) will change the approach to the calculation of GMI allowance expenses, that is, the actual execution will be taken into account, thus creating an opportunity to finance other current needs; (2) social service specialists of local and regional governments will be informed and trained about changes in the legal framework in a more timely manner and work with the SOPA software, thus eliminating inconsistencies in the allocation of the GMI allowance found in the audit, which were not significant compared to the total allocated funding.
Additional information – audit report 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. Upon discovering deficiencies, the State Audit Office of Latvia provides recommendations for their elimination, but it informs law enforcement authorities about potential infringements of the law.
Additional information
Ms Gunta Krevica
Head of PR and Internal Communication Division
Ph. 23282332 | E-mail: Gunta.Krevica@lrvk.gov.lv