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State Audit warns – situation with use of development funding critical in Latvia

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A critical situation has emerged in Latvia in relation to planning and use of development funding, as concluded by State Audit (SA) in its annual report on correctness of institutions’ accounts for 2018.

As explained by SA Public Relations and Internal Communications Office manager Līga Krapāne, after analysing accounts from ministries and state central institutions, auditors concluded that the money allocated in Latvia for development rarely reach their goal.

In the audit of annual accounts SA primarily focused on correctness of accounting records. 2018 generally shows that the quality of accounts and reports in institutions has not changed when compared to previous years and remains satisfactory, says Krapāne.

However, in addition to correctness of accounts, SA also performs so-called compliance checks, in which auditors study how well and in accordance with set goals allocated funding was used by surveyed institutions. Auditors ask institutions to report if funding helped yield the desired result. The result of checks, unfortunately, made SA sound the alarm and invite responsible officials to turn their decisions and actions more towards public interests.

SA performed inspections and submitted 50 reports on matters of compliance and in at least 50% of cases auditors concluded that it is necessary to act immediately in order to fix problems and reassess the usefulness of many activities.

According to SA, the situation is especially critical with planning and use of development funding – major problems were found in 88% of surveyed cases. On top of that, at least nine million euros has been spent inappropriately, impeding accomplishment of set project goals.

Development expenditures encompasses the additional funding allocated to different institutions for the implementation of priorities deemed important by the government in a situation of insufficient finances at the expense of other sectors.

According to SA, every year institutions compete with one another to get additional state budget funding for priorities in different sectors. There is never enough money to satisfy all needs. This is the reason why all requests for funding are reviewed separately and compared with one another. However, this evaluation is performed only during the budget development process. This creates advantages for applicants whose request titles are strong and convincing to prevent the government from declining funding requests.

However, according to SA, institutions that receive additional funding often bounce back, saying that it is not possible to use funding for one reason or another, or that the requested funding was too large or no longer needed because priorities have changed, which results in requests to the government to divide money again. But the government does not analyse requests for division of funds from a state priority perspective. This means neither initially detailed priority goals nor priorities of other industries are achieved as a result of this back-and-forth, auditors conclude.

In most cases allocated funding is left with original recipients and is spent on office repairs, tenders, increase of wages and other immediate needs, SA explains.

Auditors say that officials should keep in mind that by acting in such a way in 2018, for example, funding was denied to important social priorities.

Additionally, such an approach basically allows circumventing budget planning and assessment order detailed in legislative acts, because all submitted activities are not evaluated using a unified approach – focus is put on government priorities, SA explains.

Auditors say political will is needed in order to change the established order on leaving allocated funding in the hands of the recipient, at the same time prohibiting the use of allocated funding on recipients’ own needs without a repeated evaluation.

 


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