- State Audit Office of Latvia - http://www.lrvk.gov.lv/en/ -

Substantial changes need to be made to the local government members’ remuneration system

It is necessary to make changes to the local government members’ remuneration system, making it fairer, simpler and clearer and diminishing the administrative burden in local governments.

The State Chancellery, which has taken the responsibility from the Ministry of Finance for issues regarding public sector remuneration policy, shall assess the possibility to change the current burdensome procedure for determination of remuneration. The State Audit Office has concluded that in the audit of the report of the financial year 2017. By carrying out selective audits in 30 local governments as part of that, different violations in determining local government members’ remuneration were identified. Also the analysis of experience of other countries shows that the local government members’ remuneration system requires changes

The State Audit Office offers changes

In order to improve the remuneration system while promoting local democracy and at the same time make it more simple, the State Audit Office offers to establish clear principles for determination of local government members’ salaries and minimum and maximum wage restrictions on a national level, taking into account the amount of local residents and other factors affecting the amount of work, e.g. the area or the amount of parish administrative institutions, budget or tax income and other. The application of a unified framework to the local situation would be left in the competence of each local government.

“A local government members’ remuneration system which is clear, easy-to-apply and suitable for the local situation would reduce the obstacles for a more active involvement of residents in the municipal administration. At the same time, it would facilitate the openness of the actions of the local government and it would strengthen the confidence in the local government as the local power,” Auditor General Elita Krūmiņa explains the necessity of changes.

The nature of the execution of a government member’s duties is specific: on the one hand, in most cases it is combined with another full-time job, on the other hand – it requires unlimited involvement timewise. In each local government, the council establishes the procedure for members’ remuneration, however the municipal council has to comply with the law on remuneration when determining the remuneration for local government members, including time accounts for the time worked.

The State Audit Office offers to waive the obligation of time accounts, which is administratively difficult and not suitable for the duties of a local government member, to those members who do not occupy a paid post in the council. Instead, an amount of remuneration and the list of standard duties included in it determined by the municipal council could be applied, which is justified with an objective assessment of the necessary workload (work and time).  Besides, this basic amount could be reduced if the member does not fulfil its duties, e.g. does not attend council or committee meetings.

Incomplete or false time accounts

In the audit it was found that in five of the audited local governments time accounts for the local government members have not been done to a full extent. That is why the auditors of the State Audit Office did not obtain assurance whether the expenses of these local governments in the amount of almost 550 thousand Euros comply with the legal requirements.

Different interpretation of law – unjustifiably calculated remuneration

Also, local governments interpret remuneration restrictions for members who do not occupy a paid post in the council, which are laid down in the Law on Remuneration, differently. The State Audit Office has found that seven of the audited local governments comply with the maximum hourly rate as it is laid down in the law, but in 19 local governments it is exceeded. By not complying with the restrictions laid down in law, i.e. by determining an inadequately high hourly rate, in these local governments at least 368 thousand Euros have been paid unjustifiably in members’ remuneration and in addition at least 87 thousand Euros have been paid as the employer’s compulsory social security contribution.

Unjustified financial prizes

By violating the restrictions laid down in the law on remuneration, eight local governments have awarded and paid bonuses and monetary awards to council members in the amount of at least 5000 Euro. Although the inadequate awarding of financial prizes was pointed out to local governments already in the audits of previous years, state auditors still find unjustified awards for public officials’ contribution to the attainment of objectives of the institution.

In the audit of local government budgets, this year the State Audit Office included 30 local governments: six cities – Daugavpils, Jelgava, Jurmala, Liepaja, Riga, Ventspils, as well as 24 municipalities – Aizpute, Akniste, Aluksne, Amata, Baltinava, Cesvaine, Ergli, Grobina, Iecava, Ikskile, Ilukste, Jaunpils, Lubana, Nica, Ogre, Olaine, Rauna, Rucava, Eja, Skriveri, Varkava, Vecpiebalga, Ventspils, and Zilupe.