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Annual report – 1997

On 4 December 1997 Mr.Raits ?ernajs was reelected as Auditor General for the next seven years.
On 21 May 1997 Parliament confirmed Dzidra Ceihnere as the fifth member of the Council of the SAO. Her duties are in the field of audit methodology and coordinator of operations of the four audit departments. The mandate to audit local government authorities was initiated by amendments to the Audit Act in 1996. Therefore on 3 March 1997 the Local Authorities Audit Department commenced operations.
In 1997 there were four audit departments — the Audit Department for the State Budget, the Audit Department for State Economic Activities, the Audit Department of the Privatization Process and the Audit Department of the Local Government. In 1997 236 audits have been carried out by the State Audit Office (excluded are 34 individual audits for an audit task, which was started in 1996 and completed in 1997; 24 individual audits for two audit tasks of 1997).

Diagram 1

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In 1997 the SAO imposed surcharges on auditable organizations in respect of illegal transactions totaling Ls 1 387 588. In 1997 the surcharged amounts collected were Ls 884 782.

Diagram 2

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In 1997 audit documentation and information on audit results was forwarded to judicial bodies in 45 cases. As a result 7 criminal cases have been initiated.

Diagram 3

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Reviewing audit results for 1997 most of the audited bodies (public bodies, public enterprises and companies, local government bodies) contravened requirements in operation with state budget resources and state assets, as well as not observing the requirements of the Act on accounting and Regulations “On accounting in public bodies”. According to the Audit Department for the State Budget, the State Treasury, the State Chancellery and the Academy of Music were the only institutions where the use of state assets was in accordance with legislative requirements. It can be also said about the public stevedoring company “Rīnūži”.

Material problems were found in the use and control of special budget resources by public bodies. State budget resources were transferred into special budget amounts without appropriation and were not used for targeted purposes.
It was noted that in 1997 many responsible officials of auditable bodies did not provide information requested by auditors, even though required to do so by legislation.
More than 80 public enterprises to be privatized were audited by the State Audit Office to ensure that their privatization process is legal. In many cases was found that lease contracts with the option to purchase, entered into by Ministries of Agriculture, Finance and Transport and the State Property Fund and private enterprises in 1993 — 1995, do not correspond to requirements of the Act “On lease contracts with the option to purchase”.
According to legislation, the payment for privatization objects has to be made in Ls (LVL) or by privatization vouchers, but it can not be made by investments which reduce the purchase price of a privatization object. However, the Ministry of Finance and Ministry of Economic Reforms adopted explanations which allowed interest free loan agreements and reduction of purchase price by the amount invested in the privatized enterprise.

In the opinion of the State Audit Office, the adopted explanations were not in accordance with legislation. On 29 October, 1997 the Council of the SAO decided to submit to the above matter for decision by the Constitutional Court.
The Constitutional Court decided that the explanations of the Ministry of Finance and Ministry of Economic Reforms contravened Article 64 of the Constitution and declared them void as from 11 March 1998.
In March of 1997 a grant agreement was signed by the World Bank (the International Reconstruction and Development Bank) and the State Audit Office. The grant amounting to USD 245 000 was allocated from the Institutional Development Fund to assist the SAO in implementing staff development and upgrading office equipment.
To improve the quality of public audits, most of the financial resources are being used for auditors’ training both in Latvia and abroad.
On 6 October of 1997 the State Audit Office and the international audit company “Coopers & Lybrand Latvia SIA” entered into an agreement to provide training for auditors and preparing an audit manual. Under this agreement 115 auditors of the SAO had training for 3 weeks. The Audit Manual will be completed in the near future.
Part of the grant amounting to USD 50 000, allocated by the World Bank for improvement of our technical equipment, was used to purchase 11 personal computers, licensed software, 1 printer, as well as a modern telephone exchange.
Not only was the SAO financially supported by the World Bank, but also by the Carl Duisberg Arbeitskreis. As per the co-operation program between the Sate Audit Office and the Carl Duisberg Arbeitskreis two of our auditors had study-visits in the Carl Duisberg Arbeitskreis during 1997.