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Friday 22.02.2019 | Name days: Rigonda, Adrians, Ārija
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Corruption watchdog asked to look into Ventspils City Council’s and Ventspils nafta termināls’ EUR 2.5 million deal

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Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RULatvia’s State Audit has asked Finance Ministry and Corruption Prevention and Combating Bureau to investigate the deal worth EUR 2.5 million between SIA Ventspils nafta terminals and Ventspils City Council, as noted in the report from State Audit’s inspection of the 2017 report on state and municipal budgets’ completion.

Ventspils municipality’s consolidated budget section on donations mentions revenue of EUR 2.5 million from Ventspils naftas terminals, which according to the Law on Prevention of Conflict of Interest in Activities of Public Officials is not an uninvolved person.

According to information from the municipality, the aforementioned amount is not considered a donation even though it is listed as such. In 2017, the municipality received EUR 2,501,500 from the company. This amount was intended to be used for activities associated with improving residents’ welfare and healthcare, city landscaping and infrastructure development, as well as education, culture, healthy lifestyle and sports activities, tourism development and environment protection projects.

State Audit notes that the two sides had entered a legal dispute during the accounting period regarding the deal signed by the city council and Ventspils naftas terminals on 19 September 2003, which covered the termination of transportation of oil and oil products through the city’s territory. As of 21 June 2017, the case is ceased.

The company’s payments of EUR 2.5 million, which are classified by the municipality as donations, were performed with reference to the agreement between the city council and the terminal signed 18 May 2017. This agreement states that VNT had transferred to the city council finances in a specific amount in 2017. This money was to be used for specific goals. The city council was to have specific duties before the company. After looking at the text of the agreement, auditors did not find any evidence to suggest the agreement was signed in accordance with requirements of the law.

The sworn auditor hired by the municipality did not object to the municipality classifying payments as donations. At the same time, he did not check the legality of those payments and their compliance with restrictions imposed on donations. The sworn auditor did not mention anything about compliance of this deal with requirements of the law in his report or the report to the government, SA notes.

To assess the legality of donations and their economic purpose, as well as to determine whether or not the deal was signed in accordance with requirements of regulations, SA has asked the municipality to provide additional information and explanations in regards to budget impact. In its response, the city council mentions that the agreement signed between it and the company details no donation requirements. Additionally, payments performed as part of it are not donations. The city council believes that it was a voluntary environmental agreement, which is a special kind of public law contract that is governed by the Environment Protection Law. In its explanations for the voluntary environmental agreement, the municipality referenced the rights mentioned in the aforementioned law for certain state institutions to sign such agreements, as well as the differences between a donation agreement and an environmental agreement.

SA concluded from the city council’s explanations that the municipality had made a mistake in classifying received payments worth EUR 2.5 million. As a result of this, there is a risk that information regarding this money is not appropriately listed. Additionally, an explanation from the Environment Protection and Regional Development Ministry is needed to further assess the deal.

State Audit notes that considering the controversial information regarding the municipality’s deal with the company, there is a risk of the city council receiving inappropriately classified income from said donations. The matter has been forwarded to CPCB. Finance Ministry has been asked to explain if such income is permissible.


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