Having finalised the annual financial audits of ministries and central government institutions, we have issued 24 opinions on the annual financial statements, two of which are qualified opinions to the Ministry of Culture and the Ministry of Education and Science due to significant limitations of scope.
- Summarising the opinions provided by the State Audit Office on the annual financial statements of ministries and central government institutions, we conclude that the quality of annual financial statements remains at the level of previous years. The Ministry of Culture and the Ministry of Education and Science were issued qualified opinions.
- There were 85% of the funds spent to curb the COVID-19 crisis audited, with no significant irregularities detected. However, proposals for necessary improvements are provided.
- The most common irregularities were found in terms remuneration during the audits.
- There are 56 recommendations provided, including 18 during the audits of COVID-19 issues.
Limitations of audit scope in the Ministry of Culture are related to the unfinished assessment of the exhibits collection of the Latvian Ethnographic Open-Air Museum, which did not allow the State Audit Office to obtain sufficient audit evidence of a part of the balance sheet value of the museum’s collection, which totalled to 61 million euros. By the end of 2021, most exhibit collections have been assessed and listed. The State Audit Office did not obtain sufficient and appropriate evidence from the Ministry of Education and Science and could not determine the amount of necessary corrections for material funds and payments made of 12 million euros. Ten institutions have not carried out an annual closing inventory.
At present, we do not yet publish information on the annual financial statement of the Social Integration Fund, as it was not submitted to the State Audit Office within the term specified by law, while the Central Election Commission has exercised its right to challenge the Audit Department’s decision. We will also inform the public about this audit later.
The amount of corrections of errors made in the annual accounts is significant this year, which was possible thanks to the audits performed by the State Audit Office. The errors are mainly due to incorrect economic classification of expenditure, which can lead to misconceptions about the financial situation of institutions. Audits identify errors and help rectifying them every year, and they were at least four times higher than usual while drafting the financial statements for 2021 amounting to almost 1 billion euros in monetary terms.
In 2021, the State Audit Office continued extensive audits of the funds allocated and spent to overcome the COVID-19 crisis. As part of our financial audits, we audited 85% of the 1.94 billion euros actually spent. Although, similarly to the previous year, the funds have been spent for the intended purpose and the State Audit Office has not identified any significant irregularities, improvements are required in some areas. More detailed information on the audits of COVID-19 spending is available HERE.
There were 18 compliance issues assessed (audits to ensure that the funds allocated to certain tasks had been used legally and for the intended purpose). Of the 18 opinions, 13 are unqualified opinions, three are qualified opinions (Ministry of Welfare, Ministry of the Interior and Ministry of Health), and in one case, we have refused to give an opinion to the Ministry of Education and Science, and one opinion of the Ministry of the Interior is adverse.
The Ministry of the Interior has received an adverse opinion on the use of funding allocated to the Information Centre of the Ministry of the Interior to increase the remuneration of ICT specialists, as, contrary to the plan, the remuneration of ICT specialists has not been increased and more than one million euros have not been spent to strengthen the institution’s capacity. The auditors also found that the Information Centre had spent only two thirds of the budget allocated to the institution in the reporting year and that no projects significant for the home affairs sector and worth more than 10 million euros had been implemented. More detailed information on the findings of the financial audit in the Ministry of the Interior is available HERE.
The key audit matter considered in the Ministry of Environmental Protection and Regional Development was the increase in revenue from the Natural Resources Tax (NRT). By increasing the NRT rates and changing the distribution between the part of the tax to be paid to a municipal budget and the state budget, one planned to increase revenue in the state budget by less than 11 million euros in 2021. Of this, more than 4 million euros was allocated for purposes unrelated to the purpose of collecting the tax (preservation of the quality of the environment and sustainable use of natural resources), namely, funding was allocated to cover the expenditure of the Ministry of Culture, the Social Integration Fund, and the Ministry of Environmental Protection and Regional Development. It has covered expenditure related to, for example, the improvement of the ICT platform and the implementation of football infrastructure projects. In addition, of the almost 9 million euros allocated to the Ministry of Environmental Protection and Regional Development, tracing the exact use of 2 million euros was impossible during the audit, as 1.5 million euros was allocated without reasonable estimates and there was no records for spending the funding of a half a million euros.
Audits have revealed irregularities this year as well, about which the State Audit Office will address the responsible institutions, calling for action within their mandate and assess the liability of officials.
For instance, Prisons Administration of the Ministry of Justice has paid 57.5 thousand euros in illegal premiums. The main precondition for granting the premium was the existence of vaccination against COVID-19, but the law did not provide for such a premium. Irregularities related to remuneration costs have also been identified in other ministries In the Ministry of Welfare and the Ministry of Health, there are cases detected where employees have received COVID-19 benefits who were not entitled to them by law. In its turn, in the Ministry of Education and Science, irregularities refer both to premiums in educational institutions and to unreasonably paid scholarships for students.
After auditing the annual financial statements for 2021, there are 56 recommendations made, four of which have already been implemented during the audits, forty-six recommendations will be implemented by the end of the next financial audit, and five recommendations within two to three years. The implementation of the recommendations will improve the accuracy of the accounts, improve the procurement processes, improve the accounting, internal control systems and the remuneration system, as well as address other deficiencies that hinder the efficient use of public funds.
Mr Ivo Valdovskis
Adviser to the Auditor General
Phone number 67017543 | GSM 29274446 | E-mail email@example.com