The State Audit Office has completed 26 financial audits of the 2020 accounts in ministries and central authorities. When summarising the provided opinions, the State Audit Office concludes that results for the year 2020 are more positive if compared to previous years. From 26 audit opinions on the accuracy of the annual financial statements, one is a qualified opinion, while from 18 provided opinions on the compliance issues, one is a qualified opinion, and one is an adverse opinion. During the Covid-19 pandemic, the State Audit Office refocused its work by devoting a large part of the institution’s resources to auditing the use of public spending directly related to curbing the pandemic by identifying it as a key audit matter. Having completed the audits and publishing their results, the State Audit Office acknowledges that, in general, the ministries and state institutions have used the additional allocated funds for the purposes of their allocation. Yet, some measures do not show a direct link between state aid and curbing the Covid-19 crisis, and the criteria defined for granting the aid have not been justified sufficiently economically, as well as other shortcomings.
Some discrepancies identified in the audits of the use of Covid-19 funding have already been addressed, and work is ongoing to address the remaining issues.
Having audited 92% of 967 million euros actually spent to curb the Covid-19 crisis, the State Audit Office published a large part of the audit results of the 2020 annual financial statements already last year by dividing them into 25 interim audit reports, which the State Audit Office published and issued 34 recommendations and 5 proposals. Thus, immediately after the completion of the audits, the state institutions had the opportunity to make the necessary improvements and rectify the deficiencies and information on the intermediate results of the audits was available to the public.
When summarising what has been done so far, the State Audit Office can conclude that several support instruments have now eliminated unequal conditions for beneficiaries, reduced administrative burdens and simplified aid administration mechanisms, and improved transparency of processes. For example, unequal requirements for potential beneficiaries of downtime benefit have been reduced, the range of beneficiaries has been reviewed, and the possibility of receiving support by individuals working for several employers affected by the crisis has been provided. In addition, residents with an equal income level are provided with opportunities to receive equal support from their municipality. Unequal conditions for support for creative people have also been eliminated. Fair conditions of remuneration for healthcare and home affairs employees working in conditions of increased workload and risk posed by Covid-19 have been achieved.
Although the funds allocated for curbing the Covid-19 crisis were used in general according to the purpose of their allocation, in some cases, the planned support measures were not directly related to the mitigation of the Covid-19 crisis, and the criteria for support were not justified sufficiently economically. The eligibility criteria have been unclear and open to different interpretations, but the mechanisms for administering support have created unnecessary administrative burdens and costs. The auditors have concluded that support has often been provided in violation of the established criteria and without ensuring transparent use of state budget funds.
Measures to curb the Covid-19 pandemic are ongoing, and in the first four months of 2021, the Cabinet of Ministers has supported the allocation and redistribution of 1.342 billion euros in additional resources to curb the pandemic crisis which is already 100 million euros more than in 2020 as a whole. Therefore, the State Audit Office calls on the government to agree on common principles for state support and assess the merits of sectoral aid requests carefully, the impact of the crisis on the sector or group of society to be supported, and the solidarity of the aid provided.
Accounting is improving
The State Audit Office concludes that the quality of accounting and annual reporting has improved compared to 2019. However, the State Audit Office has issued only one qualified opinion on the 2020 annual financial statements. It refers to the Ministry of Culture and involves significant scope limitations, namely, the auditors could not ascertain the museum collections at the disposal of the Latvian Ethnographic Open-Air Museum and their value indicated in the balance sheet of the consolidated financial statement of the Ministry of Culture because not all exhibits are listed in the museum collections. Furthermore, there is no uniform approach to the accounting of collections at the disposal of the museum.
The auditors have not indicated any discrepancies in 19 reports out of 26 financial audit reports in total. Seven audit reports reveal information on various irregularities, deficiencies, problems, and uncertainties, and the highest proportion of irregularities is related to the accounting for long-term investments and accruals for service pensions. Thanks to the auditors’ work, errors of 185.8 million euros have been corrected in the annual financial statements.
After the 2020 financial audits, the State Audit Office has made 75 recommendations to the audited entities in total, most of which, 41 recommendations relating to the key audit matter – public spending and support for curbing the COVID-19 pandemic crisis. In addition, five proposals have also been submitted to the Cabinet of Ministers on this issue.
The Salaspils Nuclear Reactor and the newly introduced support system for administrative violations procedure have been subject to compliance audits again
Compared to previous years, the 2020 financial audits by the State Audit Office focused less on compliance issues, as a significant part of the resources was channelled to auditing the use of the additional funding allocated for overcoming the crisis caused by the Covid-19 pandemic. During the financial audits for 2020, the State Audit Office assessed 18 compliance issues specific to 12 sectors to ascertain whether the allocated funding of 65.5 million euros has been spent as intended. From 18 opinions on compliance issues, one opinion was issued with reservations regarding the collection of administrative fines imposed by the Ministry of the Interior. In contrast, an adverse opinion was given regarding the implementation of decommissioning measures of the Salaspils Nuclear Reactor.
Concerning the enforcement of administrative fines imposed by the Ministry of the Interior, the State Audit Office has established that there were 7.69 million euros not collected until March 2021 out of the 28.1 million euros fined in 2020 (27%), which is a higher percentage than in comparable previous periods. Such a situation had arisen with the new Administrative Liability Law taking effect on 1 July 2020, when a new support system for administrative violations procedure began to operate in the enforcement of administrative fines imposed by the institutions subordinate to the Ministry of the Interior. Its introduction aimed to reduce the amount of manual work and administrative resources required in the process as much as possible. However, when assessing the results of the first six months of the system’s operation, the State Audit Office has concluded that the manual work on controlling the enforcement of fines imposed has even increased. In addition, the newly introduced system has significant problems with both the quality of the data and the functionality of the system itself. As a result, the responsible authorities cannot obtain complete and accurate information on the payment of fines.
This is the fourth year in a row when the State Audit Office issues an adverse opinion on the compliance issue “Implementation of the decommissioning measures of the Salaspils Nuclear Reactor” because the state budget funds allocated to it are spent for other, initially unplanned measures every year. As a result, the state budget funding of 9.6 million euros given in five years (since 2015) has been redistributed systematically, and the decommissioning of the reactor has proved to be postponed, although its maintenance costs at least another 150,000 euros every year. The year 2020 was no exception when more than one million euros of state budget funds were allocated for the decommissioning of the nuclear reactor, of which 83% were spent on other, initially unplanned and non-decommissioning measures.