In 2023, the State Audit Office of Latvia has completed 41 audits, of which 28 were financial audits [1], 10 were performance audits [2], 2 were compliance audits [3], and 1 combined audit [4]. Within the framework of financial audits, two interim audit reports have been published this year. The auditing continues in the framework of 40 audits, of which 14 are performance audits, 1 is an investigation and 25 are financial audits.
Audits published during the year:
- In JANUARY, an audit was published, which assessed the reformation of the institution of forensic science. It was concluded that the reformation was not conducted in accordance with the decision of the Cabinet of Ministers, and the successful establishment of the unified forensic examination institution was threatened by a departmental approach and insufficient monitoring of the reform.
- In MARCH, there was an audit published on management of state real estate. There were significant deficiencies found in both policy-making and property management because real estate management was carried out without a unified sector policy and systemic approach, while the centralization of management in sectors was partial and inconsistent, there was a lack of complete, true, up-to-date and aggregated data, etc. in its turn, during the audit on management of mineral resources in Latvia, one concluded that they were not managed sustainably and that did not contribute to the development of the national economy. The main reasons were a lack of a comprehensive strategy, lack of complete, high-quality and timely information, lack of structured data and risk-based inspections, laws and regulations on the recultivation of mineral extraction sites were incomplete. Another audit was published assessing whether the prerequisites were created in Latvia for achieving the UN Sustainable Development Goals systematically at the national and municipal levels. Although Latvia had undertaken to implement them and had approved them already 7 years ago, significant improvements were needed at all levels to evaluate and demonstrate our country’s contribution and to actually achieve the goals.
- In MAY, there were 27 financial audits published on annual reports of state institutions for previous reporting period, that is, 2022. Two problem blocks have been identified: planning and use of funding for priority measures, as well as implementation of the remuneration system reform. The law requires the State Audit Office of Latvia to conduct financial audits in ministries and central government institutions, and in cooperation with sworn auditors engaged by local and regional governments in local and regional governments.
- An audit published in JUNE concluded that citizen participation was an untapped opportunity for high-quality decision-making in local and regional governments. In other words, local and regional governments do not provide for citizen participation in many issues important to citizens, as a result of which a series of low-quality decisions are made with a high risk of negative consequences in the long term. An audit was also published, which assessed whether and how the newly created regional governments evaluated the participation in municipal enterprises after the administrative and territorial reform. In general, the assessment was not conducted in accordance with good practice and the law. In its turn, the financial audit of the accuracy of the financial statement of the Ministry of Defence for 2023 concluded that the procurement of logistics services for food supply for the needs of the NAF was organized in violation of the procedures established by the Ministry of Defence for procurement planning and organization.
- In JULY, the publicized audit of the National Archives of Latvia concluded that an effective management system that would ensure the receipt and storage of electronic documents, especially data stored in the information systems of state institutions, was not yet been established.
- In AUGUST, an audit was published on how LEADER and community-led local development was managed and implemented in Latvia. After the audit, the State Audit Office of Latvia called on the Ministry of Agriculture to promote the activity of local action groups more actively, and also called on citizens to be more interested in the opportunities provided by the EU measure LEADER.
- In SEPTEMBER, there was an audit published assessing whether the prerequisites for assessing the responsibility of those working in state administration were created. Conclusion was made that responsibility was assessed, but the assessment did not “reach” all employees of state administration equally. There were harsh conclusions after the audit on oncology, as the measures implemented by the Ministry of Health did not ensure the early detection of oncological diseases and the reimbursement of necessary medicines for patients currently. It has a significant impact on public health indicators in Latvia, which do not improve for a long time, although this area of healthcare is one of the national priorities.
- In OCTOBER, there was the opinion on the annual consolidated financial statement of the Republic of Latvia for 2022 (ACFSS) published. Although that is a qualified opinion as every year, the homework to be completed is very clear, including work on improving the State Revenue Service tax report should be continued. But the audit of the NAF reserve force system concluded that after the introduction of the professional military service in 2007, other development priorities of the NAF were in the foreground and until now targeted steps for the further development of the reserve force system were missing. An audit on innovation support measures implemented in the country was also published concluding that the achieved results had little impact on the productivity and competitiveness of enterprises although the support for business innovations was extensive.
- In NOVEMBER, there was an audit published that evaluated how effectively local ang regional governments involved population in physical activities. It was concluded that although local and regional governments in Latvia had great opportunities to influence the participation of citizens in physical activities, they had so far failed to reach population of all ages and target groups. An audit was also published on how adult education was currently organized in Latvia, whether it achieved the goals set for it and met the needs of the labour market? It was concluded that state support reached already well-educated people mostly, and not the critical target groups that needed to learn the skills needed for the labour market the most. In addition, the functions of the institutions responsible for education such as the State Employment Agency and the State Education Development Agency overlapped.
- In DECEMBER, an audit was published, which assessed whether the actions of the Rēzekne City Municipality in terms of budget and financial management complied with legislation. The audit concluded that several violations were committed in the elaboration of its budget for 2023. In general, the State Audit Office of Latvia gave an adverse opinion.
The State Audit Office of Latvia meets with the Public Expenditure and Audit Committee of the Saeima regularly (almost every Wednesday) to discuss audit findings by focusing on the recommendations given to audited entities mainly, their implementation status and progress. In 2023, the State Audit Office of Latvia participated in 37 meetings of that Committee, where 19 questions about the audit results, 13 questions about recommendations and 9 other important questions were considered. Also, the State Audit Office of Latvia met with 9 other Saeima Committees this year.
How are recommendations being implemented?
After each audit, the State Audit Office of Latvia provides and coordinates recommendations with the audited entity. The audited entity is responsible for the implementation of the recommendations, which is obliged to report the progress to the State Audit Office of Latvia periodically. The State Audit Office of Latvia checks and recognizes a recommendation as implemented if changes have taken place in practice, for instance, a deficiency has been eliminated, the existing situation has been improved, a problem identified during an audit has been resolved, etc.
The State Audit Office of Latvia informs the Public Expenditure and Audit Committee of the Saeima about the situation in a specific sector or regarding a specific audit regularly. Also, the Platform for Implementation of Recommendations of the State Audit Office contains information about the provided recommendations/implementation status. The information is updated twice a year, on March 1 and September 1. On the platform, you can familiarize yourself with recommendations from audits that contain at least one unimplemented recommendation.
As a result of the implementation of the recommendations provided by the State Audit Office of Latvia, a financial return is constantly achieved. It was 5.6 euros in 2022[5] [6] for every euro invested in the activities of the State Audit Office of Latvia. It manifests itself as an increase in budget revenues or a decrease in expenditure, or as a direct benefit to citizens, for example, if a fee for a public service decreases. In addition to the impact achieved as a result of the implementation of the recommendations, the public may also have other significant benefits that cannot be measured in money, for instance, the public service may become more accessible or of higher quality, or the administrative process may become more open or efficient by reducing bureaucracy.
How are audit topics determined?
The State Audit Office of Latvia is required to conduct financial audits by law, while the State Audit Office of Latvia selects the topics of performance audits and compliance audits based on the risk assessment of the audit areas. The risk assessment of the audited areas depends on the vision of the State Audit Office of Latvia on irregularities in policy implementation, financing, implementation, management and monitoring of reforms, and also takes into account the public interest and received complaints. In total, the State Audit Office of Latvia carries out risk assessment in 112 areas by choosing audit topics mainly in high-risk areas and balancing it with the resources at its disposal. The aspect of whether a specific topic/matter can affect public trust in state administration is also assessed.
Significant contribution in the professional development of our institution and other supreme audit institutions
- On 1 January 2023, the requirements of the State Audit Office Law entered into force, that a Head of Sector of an Audit Department may be a person who has a certificate for conducting audits, and that an audit group can be led by an auditor who has a certificate or a Head of Sector. This year, another 20 auditors of the State Audit Office of Latvia obtained certificates for conducting performance audits. In its turn, in the 2023 recertification, the terms of financial audit certificates were extended for 32 employees and the terms of performance audit certificates were extended for 16 employees.
- This year, the Manual of Local and Regional Governments has been updated and supplemented with a new section “Building an internal control environment for IT security management”. The Manual is intended for heads of local and regional governments, councillors, auditors, accountants, and managers of state-owned and municipal enterprises.
- This year, the State Audit Office of Latvia provided training to 532 participants at the Local and Regional Government Training Centre, the Ministry of Environmental Protection and Regional Development, and in cooperation with the State Chancellery.
- A cooperation agreement was signed among the Supreme Audit Institution of Dominica (SAI), the Caribbean Organization of Supreme Audit Institutions (CAROSAI) and the INTOSAI Development Initiative (IDI) for the 1st stage support project for the SAI Dominica for 2023-2025.
- For the exchange of experience, the State Audit Office of Latvia organized an international workshop “Innovations in a supreme audit institution and auditing”, with the participation of colleagues from Sweden, the Netherlands, Norway and Belgium, in whose supreme audit institutions this culture has been relatively long and diversely developed.
- Auditors of the State Audit Office of Latvia learnt the experience and practice of performance audits of the National Audit Office of the United Kingdom in a specialized training.
In cooperation with law enforcement and other competent authorities, for the application of liability, the State Audit Office of Latvia has the authority to examine how public funds are spent, as well as to make recommendations to improve their management. The State Audit Office does not have the right to punish, but the violations found during the audits must be reported to the responsible authorities and their examination must be monitored in accordance with the law. This year:
- Based on the audit findings, law enforcement institutions have initiated five criminal proceedings for potential fraud, falsification of documents, abuse of official position and other potential criminal offenses; 44 criminal proceedings are ongoing (including 14 in trial), which were initiated after audits in previous years;
- One conviction entered into force, by which the official was sentenced to imprisonment for three years and a fine of 8,600 euros for abuse of official position, depriving him of the right to hold public official positions for four years;
- Investigations have been started for 9 potential administrative violations; 7 officials have been brought to administrative responsibility;
- Proceedings continued in 19 previously initiated proceedings regarding the compensation of damages caused as a result of illegal actions found during an audit.
Since 2019, the State Audit Office of Latvia has been assigned the function of recovery of losses, and so far, 88,366 euros have been recovered back to the state budget. Moreover, in 18 cases, state or municipal budgets have reimbursed losses in the amount of more than 18,251 euros as a result of illegal actions found during an audit, without starting the compensation process. In 2023, there were 22,086 euros recovered to the state budget, in addition, damages of 1,751 euros caused as a result of illegal actions detected during an audit were compensated without starting the compensation process in 4 cases.
TOP achievements/ events
- The State Audit Office of Latvia celebrated the centenary of the institution, by organizing the conference “100 years of AUDIT STRENGTH”, planting an oak tree in the Centenary Avenue, organizing a discussion with Auditors General and officials from other countries.
- We won gold in Sustainability Index 2023! This is a significant leap from 2022, when the State Audit Office of Latvia participated in the competition for the first time by winning bronze.
- This year, the State Audit Office of Latvia engaged in the MISSION POSSIBLE school program READY FOR LIFE. The State Audit Office team visited 21 schools throughout Latvia by conducting 28 lectures and meeting 938 young people.
- In July, the Public Council of the State Audit Office of Latvia started working in new membership. Professor Iveta Reinholde was elected as the Chair of the Council.
- The State Audit Office of Latvia, as a member of the EUROSAI Governing Board in Brussels, organized a forum on cooperation between supreme audit institutions and internal auditors in cooperation with the Confederation of European Institutes of Internal Auditors.
- The Saeima (Parliament of Latvia) elected Mr Edgars Korčagins as Auditor General for a four-year term. He took office on 14 December 2023.
Additional information
Ms Signe Znotiņa-Znota
Head of PR and Internal Communication Division
Ph. + 371 67017671 | M. + 371 26440185 | E-mail: signe.znotina-znota@lrvk.gov.lv
[1] The State Audit Office of Latvia is required to conduct financial audits by law, and they are carried out in ministries and other central government institutions (except local and regional governments) every year. After financial audits, the State Audit Office of Latvia issues opinions on the accuracy of the annual financial statements of ministries and state institutions. In financial audits, compliance issues are also assessed on a random basis in order to gain confidence about the use of funding in accordance with the purposes and legislation.
[2] A performance audit is an internationally recognized method where, in addition to accounting, financial and legal audits, the achievement of results, as well as economy, efficiency, and effectiveness of the impact of the achieved results are assessed.
[3] Compliance audits examine whether activities, actions of officials, financial transactions and information comply in all essential aspects with legislation, planning documents and nationally or internationally recognized best practices.
[4] A combined (compliance/ performance) audit is a compliance audit that also evaluates performance issues, or a performance audit that also evaluates compliance issues.
[5] In the current year, the impact of recommendations introduced in 2022 or earlier is calculated. More information on page 44 of the Public Annual Report 2022 of the State Audit Office of Latvia 2022.
[6] Examples of the impact created as a result of the introduced recommendations (40.6 million euros): (1) a unified legal regulation was developed, which ensured that the number of persons who were entitled to apply for the housing allowance increased, as well as the amount of this allowance increased for some persons, in total, creating a significant benefit for the population of 12.3 million euros; (2) When reassessing the support provided to electricity producers within the framework of compulsory procurement, the State Construction Control Bureau of Latvia detected the provision of unjustified support, as a result of which the businesses had to repay the unjustly received compulsory procurement state support in the total amount of 2.23 million euros in the collection proceedings initiated in 2022.