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

The risk of efficient use of 20 million euro for fare relief is still high

The electronic identification system for recipients of fare relief on regional routes planned two years ago, which should have been launched already in January 2021, may be significantly delayed. Such a scenario will not result in any future savings in public budget funds granted for compensation of planned public transport services.

The financial audit 2018 of the Ministry of Transport carried out by the State Audit Office identified significant and comprehensive inconsistencies in the progress of this project because the information system has not been developed, the necessary financing has not been reasonably determined, and the Ministry of Transport has not paid sufficient attention to the supervision and control of this project.

Several passenger categories are eligible for public transport fare relief in all 1,059 regional intercity and local bus routes and 11 train routes in Latvia. To compensate the public transport service providers for the losses related to the fare relief, the state spends at least 20 million euro from the state budget a year.

In 2017, the Cabinet of Ministers instructed the Road Transport Directorate to establish a national information system for the registration of beneficiaries of fare relief and to determine the electronic identification solution for the recipients of fare relief in order to mitigate the risks of fraud in the recording of the beneficiaries of fare relief and to ensure reasonable use of budget funds by 1 January 2021. By establishing and implementing such recording system, the state budget resources will be saved, the shadow economy will be reduced, and accurate accounting will be ensured, as the information system will ensure accurate electronic identification of the beneficiaries of fare relief and recording of the trips made.

The delay in setting up a system of fare relief recording is due to the lengthy harmonisation of the regulatory framework to provide a legal basis for the establishment and use of the information system. The Latvian Employers’ Confederation, the Latvian Association of Large Cities, and the Latvian Association of Passenger Carriers objected to that.

The actual supervision by the Ministry of Transport over the performance of the Road Transport Directorate in the implementation of the system recording the beneficiaries of fare relief, as well as the reduction of obstacles related to the achievement thereof have not been sufficient.

The State Audit Office has doubts that the amount of financing necessary for the development of the information system has been defined credibly and that the supervision by the Ministry of Transport over the use of funds for the development of this information system was sufficient.

When concluding the audit, the State Audit Office recommends the Ministry of Transport to take measures to improve the monitoring of the development and implementation of the information system by applying sound project management practice and guidelines. Likewise, the Ministry of Transport is advised to identify the credible amount of financing required for the establishment of the national information system for the recording of the beneficiaries of fare relief and to monitor its use. Already today, the surplus of funds of 143 thousand euro in the accounting system of the Ministry of Transport that is provided for the establishment of the above said system was not traceable in 2018.