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

The Budget Money Allocated to the Priorities Is Flowing to Other Needs

In its annual audit on the accurateness of the national annual report, the State Audit Office has found unacceptable trends in the planning, using, and monitoring of national development-related spending.

Development spending is one of the most significant expenditure items, which is distributed during the budget planning process, which in the opinion of the State Audit Office is still not transparent. Such management outside the legal framework undermines the quality of the state budget, as almost half of the support measures in 2018 has been proposed not by the ministries but by the working group of the cooperation partners of the government- forming coalition.

The State Audit Office concluded during the audit that the process of application assessment and selection of eligible activities is not transparent because 40% of all supported activities for a total amount of 66.5 million euros are not offered the ones offered by the ministries or central state authorities as required by law but by a working group of cooperation partners of the coalition forming the government. In addition, the public is deprived an opportunity to trace the justification of such decisions, as minutes of the working group meetings assessing and selecting priority eligible activities are not publicly available. The respective informative reports also fail to set out the arguments and the Cabinet of Ministers supports the proposals of the working group led by the Minister of Finance without any objection.

“Part of the state budget, development spending, is the funding that we all as taxpayers are allocating to the crucial improvements and national development priorities. As the financial resources available for development spending are limited and never sufficient to meet all needs, planning and using them in the most transparent and efficient way possible are of utmost importance. Unfortunately, one must conclude that after deciding to which measures the development budget is allocated, the government does not actually care anymore whether the funds are being used for the purposes initially set. This existing practice should be stopped immediately,” emphasises Auditor General Elita Krūmiņa.

Concerning the use of funds allocated for priority measures, the State Audit Office approached the government with information as early as May this year that at least 9 million euros had been spent incompliant with the initially set objectives out of the randomly audited 30.6 million euros in 2018. Therefore, the government must make a political decision urgently on whether to keep funding allocated to development purposes at the disposal ministries under the conditions of insufficient funding that is used for current needs traditionally or to change the usual approach radically.

Unfortunately, the usual practice of allocating money shows the opposite. If the measure planned for the current year is not implemented to the planned extent, it can be implemented cheaper, or it is not relevant anymore, the Cabinet of Ministers usually allows the funds to be used for other needs of the same ministry department. Also in the process of spending revision under the pressure of ministries, the Government maintains the funding for measures whose relevance and efficiency in the view of the State Audit Office is questionable.

So, the budget authorities feel fairly certain that once-won funding will not disappear anywhere even if it will not be needed for the purposes initially set anymore. One uses the funding for priorities of its own choice most frequently such as repairs to office space, procurement of fixed assets, salary increases, and other current needs.

The State Audit Office is of the opinion that such a situation is unacceptable, because the unified procedure for planning and assessing development spending, which is aimed at selecting and supporting the most significant measures of national importance under the underfinancing conditions, is circumvented. Therefore, the recommendations of the State Audit Office indicate that one should improve monitoring of the use of funding allocated to priority measures. In its turn, pertaining to the under-implemented measures, one should assess carefully whether the funding allocated should be left at the disposal of the ministry concerned at all.