Although the COVID-19 pandemic changed the sporting events significantly, including the postponement of the Tokyo Summer Olympics to 2021, the Association “Latvian Olympic Committee” (LOC), a permanent partner of the Ministry of Education and Science (MES) in the sports sector, was allocated a total of 13 million euros of state budget funding in 2019 and 2020. It also includes a donation of 1.3 million euros from the state-owned enterprise “Latvijas valsts meži” and additional funding of 2 million euros to mitigate the consequences of the COVID-19 pandemic. In the audit, the State Audit Office has ascertained that the state budget funds allocated to the LOC as per the purpose of allocation in general, including supporting the best athletes of Latvia to train for the Olympic Games and performing organisational work to ensure participation in the Olympic Games. However, the auditors have significant objections to the LOC’s monitoring of the use of funding allocated to sports federations, and it is not always possible to claim that sports federations have used the funds allocated to them reasonably. The auditors also did not have the opportunity to determine whether the LOC and the sports federations consequently had acted effectively with the allocated state budget funding because the deliverables in the planning stage of sports development were too vague. At the same time, the State Audit Office welcomes the measures that the LOC took already during the audit to improve internal processes and optimise resources, where the practical benefit such as transparent financial flow and reduction of LOC administrative expenses should be provided in the nearest future.
The LOC receives state budget funds every year. It must also ensure the implementation of national sports policy tasks. The planned activities of the LOC relate to the tasks of the national sports policy, which it fulfilled in the planned extent in 2019 and the extent allowed by the epidemiological situation in 2020. However, assessing whether the allocated state budget funds have been used effectively is impossible because the MES has not determined the specific deliverables for the LOC, and the LOC has not defined them for sports federations sequentially.
When assessing the regularity of the use of state budget funds during the audit, the most significant objections are related to the LOC’s monitoring of the use of funding allocated to sports federations, which is insufficient. In 2019, there were 2.1 million euros channelled from the LOC to sports federations, organisations, and Olympic centres and 3.7 million euros were allocated in 2020. The State Audit Office has no doubts about the necessity of expenses of sports federations, for example, by purchasing equipment and inventory for athletes, providing training and competition work for athletes or organising competitions. Nevertheless, the lack of monitoring has led to the detection of various discrepancies and problems. For instance, one had identified cases when sports federations transferred funds to legal entities whose founder or board member is also a member of the board of the sports federation. Such situations indicate a potential conflict of interest and should not become common practice in the auditors’ view, so one should consider separately whether and in what specific cases it would be permissible. Similarly, the current funding model for the sports sector, when sports federations receive funding from several sources simultaneously, runs the risk of sports federations obtaining double financing. The audit has found that four sports federations when reporting on the use of the received funding in 2019 and 2020 to both the LOC and the Latvian Sports Federations Council, attached the same documents justifying the expenses to the reports, thus obtaining double financing.
Concerning the additional 2 million euros allocation from the state budget to the LOC to mitigate the effects of the COVID-19 pandemic, the auditors have concluded that the funding allocated to 21 sports federations was consistent, traceable, and in line with MES approved procedures and criteria. However, support has not been provided to the sports federations affected by the Covid-19 pandemic primarily, as it has been granted without assessing whether sports federations have experienced a reduction in private funding because of the Covid-19 pandemic. Funding has been awarded based on only one aspect that is the greatest potential for achieving outstanding achievements in the top-level competitions and the number of athletes in sports federations in the Latvian Olympic team. Thus, the audit findings suggest that the additional funding was not allocated with an aim to mitigate the consequences of the unpredictable and unplanned Covid-19 pandemic but as annual state support for top athletes.
As part of the audit, the State Audit Office has provided seven recommendations to the LOC to improve and streamline the internal processes, cost optimisation, and control environment. At the same time, the State Audit Office has also developed proposals for the Ministry of Education and Science related to the development and implementation of both national sports policy and the sports sector financing strategy.