In general, prerequisites have been created for assessing disciplinary liability and civil liability of public sector employees. Yet, the conditions for assessing and applying disciplinary liability depend on the type of legal employment relationship and the legal framework for assessing liability is fragmented, as finding out the circumstances of a violation in a timely and complete manner and make decisions are not always possible to promote the liability of public sector employees and determine what improvements an internal control environment needs. In practice, the distinction between the status of an official and an employee does not always correspond to the legal framework, and the boundaries between these positions and types of employment are blurred. These are major conclusions after the audit, in which the State Audit Office of Latvia assessed whether prerequisites have been created for assessing the liability of public sector employees and responsible work done.
BRIEFLY
- A different regulation of disciplinary liability for civil service officials (25% of those employed in direct state administration) and other employees in state administration does not ensure uniform assessment and application of disciplinary liability.
- The regulation of disciplinary liability provided for in the Labour Law for assessing the liability of public sector employees is not effective and may be an obstacle to the application of liability. Laws and regulations also do not provide procedures for assessing disciplinary liability of heads of institutions.
- Institutions mostly assess disciplinary violations committed by employees, but the audit has also found cases where non-compliances were allowed in the projects co-financed by the EU structural funds, which had to be financed from the state budget, but the liability of employees for the committed violations was not assessed.
- The practice of applying civil liability is still being developed. Mostly, public sector employees compensate those losses that do not arise from the claims of individuals (damaged property, wrongly paid compensations, etc.). In the audited period (2020 - 2022), not a single case has been found where public sector employees have compensated for losses caused to the state in connection with claims of individuals against the state, although the prerequisites for compensation are being assessed.
- Taking into account the complexity of damage recovery cases and the long case review processes, the limitation periods for damage compensation claims (two and four years) might be insufficient for the application of civil liability.
“Trust in state administration is related to citizens’ perceptions of the ability of public sector employees to take responsibility, assess, and admit mistakes if they have been made, as well as to perceptions of individual liability for the quality of work, the compliance of decisions, and actions with regulations and public interests. Therefore, it is important that in situations where violations are detected in the actions of public sector employees, an institution acts consistently: assesses violations comprehensively and impartially, makes a fair decision, determines a proportionate punishment and, as necessary, improves the institution’s internal control environment,” indicated Ms Kristīne Jaunzeme, Council Member of the State Audit Office of Latvia.
The focus of the auditors’ attention was the legal regulation of disciplinary liability and civil liability and its application in direct state administration, however, the extensive regulation analysis carried out within the scope of the audit also applies equally to local and regional governments, other derived public entities, and intermediate administrative institutions.
ASSESSING DISCIPLINARY LIABILITY
The biggest differences in the legal framework for assessing liability are between state civil servants and employees. In 2022, there were ~ 46.2 thousand employees in direct state administration, of which 11.2 thousand civil servants or 25%. The job descriptions of employees and civil servants are similar and cannot always be clearly distinguished. The audit found that the status of an employee was also determined for positions that were positions of civil servants by nature and to which the regulations intended for civil servants applied.
Although most public sector employees are in legal labour relations, the regulation of disciplinary liability is not effective. The one-month term for the assessment of disciplinary liability established by the Labour Law might not be sufficient for a high-quality investigation of the case and the application of punishment, especially in complicated and large-scale cases related to the use of a public entity’s financial resources or management of property. Although this situation has been known for a long time, the deficiencies have still not been eliminated and the legal framework has not been improved. Likewise, the regulation of suspensions, types of disciplinary punishments and trade unions in relation to employees in state administration in legal labour relationship does not contribute to a comprehensive assessment of liability and proper application of liability for committed disciplinary violations. “Assessment of disciplinary responsibility should not be a race against time to assess all the circumstances related to the violation within one month and apply a penalty, or to search for creative solutions to balance on the edge of compliance with the regulation to prevent greater damage to state administration or to not jeopardize the possibilities of applying liability,” emphasized Ms Jaunzeme.
In general, state institutions assess disciplinary violations, but not in all cases. The audit detected that the institutions assessed committed disciplinary violations, as during the audited period (2020 - 2022), 4,564 cases of disciplinary violations were assessed in 167 direct state administration institutions and disciplinary penalties were applied in 3,954 cases. At the same time, the audit also found inconsistencies in the projects co-financed by the EU Structural Funds and the Cohesion Fund causing additional expenses for the state budget, but the liability of public sector employees was not assessed in all cases. Out of 33 non-compliance cases included in the audit sample, the reasons for non-compliance and the actions of those responsible have not been evaluated in 17 cases. The State Audit Office of Latvia stresses that it is essential to assess the cases of inappropriately performed expenditures and violations to both assessing the liability and identifying, eliminating deficiencies in an internal control environment, and preventing similar violations in the future.
Laws and regulations do not specify the procedure for assessing disciplinary liability of heads of institutions. Currently, there is no regulation and no clear algorithms for assessing liability in situations where an impartial assessment of disciplinary liability in a state institution is impossible, that is, if a potential disciplinary violation has been committed by or involved a Secretary of State or a head of a state institution that does not have a supreme authority, or a number of employees of such an institution, including management officials of the institution. In such cases, ad-hoc solutions are needed, the assessment of disciplinary liability is ‘taken’ outside the institution and entrusted to an independent assessment commission. Uncertainty about how to act in such situations and the absence of clear algorithms create risks that liability will not be assessed at all or its assessment will not be unbiased. The need for regulation was clearly demonstrated by the assessment of the liability of those involved in the planning and implementation of food logistics procurement of the National Armed Forces of Latvia.
ASSESSING CIVIL LIABILITY
With regard to the application of civil liability, it was established that those damages are compensated which do not arise from the claims of individuals (e.g., damaged property, incorrectly paid compensations), but the audit did not find a single case (in the audited period 2020-2022) when an employee in state administration would compensate losses caused to an individual due to an illegal administrative act or illegal actual conduct of a state institution, in a criminal proceeding or administrative violation proceedings due to an illegal or unjustified action of a state institution. In general, as part of the assessment of the liability of employees, their civil liability was assessed, but no prerequisites for its application were found, therefore there was no basis for demanding compensation for damages from officials. Based on the decisions of Latvian courts and decision-making bodies, the state has paid out a compensation totalling to 2.92 million euros to individuals and legal entities over the last three years, of which 2 million euros were paid to one foreign legal entity based on the ruling of an international arbitration court.
In its turn, civil liability for the damages caused to a state institution, which do not arise from a claim of an individual, is assessed and the employees compensate the damages voluntarily or are subject to recovery in the recourse procedure. It was established that from 167 state institutions, from which information was requested during the audit, the state suffered losses of 261,672 euros in 574 cases due to the illegal, culpable actions of their employees. The employees have compensated the losses.
Currently, no institution in Latvia collects information on compensations paid by the state. State institutions that have paid compensations present them in their annual and quarterly reports, which are not conveniently and easily accessible to the public. Likewise, no one collects information on the findings of civil liability assessment cases, which would allow analyzing the application of civil liability of public sector employees, identifying the problems of application or legal framework, and best practice. “Since the assessment of civil liability is a legally complicated task that requires a lot of resources, collecting and analyzing the application practice are important by identifying both shortcomings and best examples,” indicated K. Jaunzeme.
The State Audit Office of Latvia also continues building up the practice of applying civil liability in relation to losses that occurred due to illegal actions detected during audits and which the State Audit Office of Latvia has the right to recover for violations found in audits that were started after 1 August 2019. Until now, the Council of the State Audit Office of Latvia has initiated 19 cases to initiate the compensation of damages of 199,633 euros caused because of illegal actions detected during the audits. During the three initiated proceedings, 66,280 euros have been recovered in the state budget with audited entities ensuring the recovery of funds. In 14 cases, the assessment of liability for clarifying the obligation to compensate for damages and for the recovery of damages is carried out by the audited entities or their supreme authorities. In two cases, recovery of damages takes place in criminal proceedings and civil proceedings. Likewise, damages caused by illegal actions, which the State Audit Office of Latvia had established during the audits, in the amount of 16,500 euros have been reimbursed to the state and municipal budgets in 14 cases, without initiating the compensation proceedings.
The two- and four-year limitation periods provided for in the legal framework currently might not be sufficient for the application of civil liability and the raising of claims for compensation of damages if a dispute regarding the application of a disciplinary penalty is examined in court, as well as in cases where liability is assessed in criminal proceedings.
Regarding the regulation of civil liability, the auditors have identified deficiencies and provided proposals for improving the regulation, i.e., (1) regarding time limits for filing claims to be sufficient for assessing liability, (2) establishing a minimum threshold for filing claims to effectively manage public resources, and (3) evaluating and eliminating differences in the civil liability of prosecutors and investigators, as they perform similar investigative functions.
RESPONSIBILITY FOR THIS AREA
When facilitating the responsible conduct of public sector employees, establishing and improving the liability assessment system is the area of responsibility of the State Chancellery. However, the audit has established that the State Chancellery does not take sufficient measures to implement this responsibility. Although deficiencies in the legal framework regarding the disciplinary responsibility of public sector employees have been identified more than 10 years ago, they have still not been eliminated. Likewise, the current planning documents do not set goals and tasks related to the improvement of the system of disciplinary liability of the employees in state administration.
State Audit Office recommendations #PēcRevīzijas
The audit provided five recommendations to the State Chancellery and three proposals to the Cabinet of Ministers. The deadline agreed with the State Chancellery for the implementation of the recommendations is January 2027.
About the State Audit Office of Latvia
The State Audit Office of the Republic of Latvia is an independent, collegial supreme audit institution. The purpose of its activity is to find out whether the actions with the financial means and property of a public entity are legal, correct, useful and in line with public interests, as well as to provide recommendations for the elimination of discovered irregularities. The State Audit Office conducts audits in accordance with International Standards of Supreme Audit Institutions of the International Organization of Supreme Audit Institutions INTOSAI (ISSAI), whose recognition in Latvia is determined by the Auditor General.
100 years of AUDIT STRENGTH
On 16 August 2023, the State Audit Law turned 100 years old. With the adoption of this Law, the State Audit Office from a formal de facto institution founded on 2 December 1918 became a de jure independent, collegial supreme audit institution of the Republic of Latvia. The State Audit Office is one of the independent state institutions enshrined in the Satversme (Constitution) of Latvia. The Constitution was signed by Roberts Ivanovs as the secretary of the Constitutional Assembly, who was then confirmed as the Auditor General. He worked as the first Auditor General for 12 years. His signature confirmed the text of our Constitution alongside that of Jānis Čakste.
Additional information
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Head of PR and Internal Communication Division
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