By assigning the performance of certain administrative tasks and the provision of certain services to the municipal commercial companies, the Jurmala City Municipality has not ensured compliance with the requirements of the State Administration Structure Law, i.e., to organise governance as effectively as possible, continuously inspecting and improving the institutional governance system, the State Audit Office (SAO) has concluded in the audit.
Inefficient governance of capital companies, by not specifying performance targets, tasks and governance principles for the capital companies and not conducting an analysis of the financial and economic performance of the capital companies, has encouraged unjustified and uneconomical action with the resources of the local government and its capital companies.
As a result of uneconomical activities of the capital companies themselves that did not conform to the requirements of regulatory enactments, the recipients of the services – Jurmala people – have overpaid by at least LVL 402,000 for various services. Invoices for the services of the capital companies contain economically unjustified prices, formed by the unjustified high remuneration of the employees of the capital companies, expenses arising from failure to observe public procurement procedure and the cost of the use of service vehicles for private needs and other expenses, the SAO has found.
During the audited period, inefficient spending of local government and capital company funds in the amount of at least LVL 1.2 million has taken place. Local government budget funds of LVL 768,000 have been invested in the equity capital of Ltd. Jurmala Development Projects, even though it has not completed a single construction project in eight years but has used up 75% of the funds invested by the local government. Failing to comply with the prohibitions established in the regulatory enactments, the local government capital companies have unjustifiably calculated and paid out staff remuneration in the amount of at least LVL 218,000.
It was also found during the audit that the local government has inefficiently used the profits of the capital companies in the amount of LVL 1.81 million, as the decisions regarding the distribution thereof were adopted without prior assessment and an appropriate substantiation. The local government has adopted decisions to allocate the profit to cover the losses of the preceding years, although no losses are indicated by the company performance results for the business year, and to the development of the capital companies or to increasing the equity capital, without specifying a purpose for the use of the funds.
The SAO has also found unjustified spending of more than LVL 120,000 on compensation in 11 local government capital companies by setting compensation for board members and representatives of the holder of capital shares that does not comply with the regulatory enactments and paying out bonuses, as well as replacing board members on multiple occasions without a valid reason. Over two years, 67 officials have been removed before the expiration of the period of authorisation, with loss of trust being cited as the argument in 39 cases, or citing no arguments at all in 28 cases, and they have been paid the compensation provided for in the contracts.
The SAO has notified the Prosecutor’s Office on the violations of regulatory enactments detected during the audit.