The State Audit Office of Latvia has completed the financial audits of ministries and central government institutions for 2024. All opinions on the accuracy of the annual financial statements are unqualified this year as well or for the second year in a row. It means that the annual reports of the ministries have been drafted in accordance with the statutory requirements by providing a clear and true picture of their financial position.
IN BRIEF
- For the second year in a row, the opinions provided by the State Audit Office of Latvia on the annual reports of ministries and central government institutions are unqualified. We are publishing 25 out of 26 audit reports, as the Ministry of Transport has contested part of the information included in the audit report and opinion.
- In two financial audits, at the Ministry of Economics and the Ministry of Climate and Energy, we also assessed compliance issues this year. The results of the assessment are not encouraging because the Ministry of Climate and Energy received an adverse opinion on the 8.9 million euros allocated in the budget, while the Ministry of Economics received a qualified opinion on the use of 24.2 million euros due to shortcomings in the internal control system.
- Inconsistencies and irregularities characteristic of several ministries have also been identified. Information about them is not included in the audit reports, but in letters to the heads of institutions.
- On 23 April 2025, the State Audit Office of Latvia will host an informative workshop on financial audits for finance employees of ministries and central government institutions.
“The fact that all opinions on the accuracy of the annual report are unqualified for the second year in a row indicates the high quality of accounting records, as well as successful cooperation among state institutions and public sector auditors. Thanks to this cooperation, institutions have already corrected 96% of the errors found by auditors during audits. In their turn, finding errors was helped by both the access provided to auditors to the accounting systems of state institutions and the automated auditing tools developed by the State Audit Office of Latvia, which allow for the review of a larger volume of data,” emphasised Ms Ilze Bādere, Council Member of the State Audit Office of Latvia.
While auditing the annual reports, non-compliance with laws and regulations, failure to resolve issues identified in previous audits, and untimely allocation of budget funds were found in certain ministries.
Although the opinions on the accuracy of annual reports were provided unqualified, violations of laws and regulations were found in certain ministries. For example, when assessing the cases of students of one group of vocational education curriculum at the Riga Style and Fashion Technical School during the audit of the Ministry of Education and Science, potential fraud was found, that is, fictitious students. In their turn, auditors discovered during the audit of the Ministry of Justice that the Court Administration had applied the laws and regulations incorrectly that determined the calculation of average earnings. Namely, the calculation included wages (bonus and/or cash prize) unreasonably paid in a month when the employee did not fulfill his or her duties but was in justified absence. Consequently, the average earnings were increased disproportionately and the employee’s real income was not presented adequately. The auditors calculated that thus 13,000 euros were overpaid to three employees, of which 7,600 euros were refunded to the state budget during the audit.
The Ministry of Culture is still continuing its work on the appropriate accounting of exhibits in accounting, for which the State Audit Office of Latvia had provided a recommendation already in 2021. As indicated in the Ministry’s report, they intended to attract an expert who was familiar with both the fields of cultural heritage and construction. In accordance with that expert’s assessment, a decision will be made on which account group the exhibits will be accounted for. In its turn, the Ministry of Education and Science has not acted to harmonise the approach to applying the provisions of the Value Added Tax Law to foreign transactions, which the auditors drew attention to during the audit last year.
The audit of the Ministry of Climate and Energy has found that changing the financing model for the costs of mandatory electricity procurement by transferring it from end-users of electricity to the state budget has created additional expenses of 1.2 million euros. These expenses arose because public trader Limited Liability Company “Enerģijas publiskais tirgotājs” (Public Energy Trader) borrows the necessary financing to cover actual costs from holding company JSC “Latvenergo” under the current financing arrangements by paying interest on the loan, as it does not receive compensation for expenses from the state budget in a timely manner.
Significant irregularities have been identified in the assessments of compliance issues
This year, the State Audit Office of Latvia assessed two specific compliance issues in two ministries, namely, the Ministry of Climate and Energy and the Ministry of Economics. It was examined whether the funding for specific measures was spent in accordance with the purpose of allocation, in compliance with the applicable laws and regulations and achieving the planned results.
The Ministry of Climate and Energy received a negative opinion on the issue of compliance – the ministry had not ensured a responsible request for state budget funds. Of the 8.9 million euros received in 2024 for professional services and research in the field of climate and energy, the ministry had initially planned to use only 1.1 million euros or 13% of the requested amount, but in fact only used 313 thousand euros or 3.5% of the allocated funding. Part of the funds was returned to the state budget at the end of the year, but more than 3.4 million euros were redistributed to other purposes. In addition, a similar practice with an unreasonably large request for state budget funds will continue in 2025. This year, the State Audit Office assessed two specific compliance issues in two departments – the Ministry of Climate and Energy and the Ministry of Economics. It was determined whether the funding for specific measures was used in accordance with the purpose of allocation, in compliance with the applicable legal acts and achieving the planned results.
The Ministry of Climate and Energy received an adverse opinion on the compliance issue, as the ministry had not ensured a responsible request for state budget funds. The ministry had initially planned to use only 1.1 million euros or 13% of the requested amount out of the 8.9 million euros for professional services and research in the field of climate and energy received in 2024 but it spent only 313,000 euros or 3.5% of the allocated funding in fact. Part of the funds was returned to the state budget at the end of the year, but more than 3.4 million euros were redistributed to other purposes. Moreover, a similar practice with an unreasonably large request for state budget funds continues in 2025.
There was confidence gained in the Ministry of Economics that it had spent the allocated funding for energy efficiency measures in business in accordance with the purpose of allocation by achieving significant program results. That is, the indicators planned for the support scheme have been achieved, that is, 94% of the total planned CO2 emission savings, which should be achieved by 2026 by spending 45% of the allocated 24.2 million euros and exceeding the planned total funding of supported projects. However, the State Audit Office of Latvia issued a qualified opinion, as inconsistencies were found in the ministry’s internal control and accounting system (including the exchange of information with JSC “Attīstības finanšu institūcija Altum” (Development Financial Institution Altum). Thanks to these findings, the Ministry of Economics made significant adjustments to the recognition of support scheme management costs and the indication of potential liabilities in off-balance sheet items. The audit also estimated that approximately 2 million euros would be sufficient to achieve the CO2 emission reduction target while JSC “Attīstības finanšu institūcija Altum” had more than 11 million euros at its disposal at the end of the year, which could be directed to the implementation of other support schemes.
“Both assessed compliance issues helped to reveal the practice of creating financial “pockets” so we hope that the results of these audits are already helping in the budgeting process,” stated I. Bādere.
The audits identified inconsistencies and irregularities that are typical of several ministries and other matters that we drew attention to.
“When concluding financial audits every year, other auditors’ findings, observations and challenging issues remain outside audit reports, which we want to draw the attention of the audited entities to resolve. We discuss these issues with the heads of institutions already during the audits and we record them in letters addressed to the heads of institutions upon concluding audits,” explained Ms Bādere.
Inaccurate calculations in employee remuneration in average earnings and bonuses, tax accounting were detected in several ministries during financial audits this year which did not comply with laws and regulations or did not match the data of the State Revenue Service of Latvia. Besides, errors were found in the accounting of long-term investments and depreciation calculations, for example, inappropriate terms of use were set for vehicles. In several ministries, one also drew attention to a large number of unused vacation days, which exceeded 61 days for some employees and reached as much as 317 days for one employee. This indicates a systemic problem in the organization of work. Therefore, the State Audit Office of Latvia calls on state institutions to ensure that employees have the opportunity to take annual leave, as this is not only an employee’s right, but also an employer’s obligation.
The State Audit Office of Latvia drew the attention of the Minister of Welfare to the lack of action in the establishment of the special budget reserve fund of social insurance. The unregulated accumulation of the special budget surplus of social insurance in the State Treasury (even in term deposits, for which interest income is also received) poses a risk that these funds may be subject to political decision-making to increase existing pensions or services or used for other expenses, thus affecting the sustainability of the pension system. At the same time, attention was also drawn to the need to raise the issue of reviewing service pension system not to create an increasingly significant burden on future taxpayers.
From now on, there will be only one audit report on the accuracy of an annual financial statement of the Republic of Latvia.
This is the last year when the State Audit Office of Latvia issues 27 separate financial audit reports and opinions (14 ministries, 12 central government institutions and the annual consolidated financial statement). From May 2025, the new approach to financial audits will be implemented in full, with only one audit report on the accuracy of the ACFSS being provided in the future, marking a new stage in financial auditing.
The State Audit Office of Latvia will host an informative workshop for responsible employees of state institutions on the results of the 2024 financial audits and changes in financial auditing on 23 April 2025.
Recommendations of the State Audit Office of Latvia #PēcRevīzijas
In general, the State Audit Office of Latvia has provided six recommendations to the ministries, five of which will be implemented by the end of 2025, and one recommendation will be implemented by the beginning of 2026. Compared to previous years, the number of recommendations provided is decreasing.
Financial audit reports on the accuracy of the annual financial statements of state institutions for 2024 are available in section “Completed Audits” on the website of the State Audit Office of Latvia www.lrvk.gov.lv.
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. Upon discovering deficiencies, the State Audit Office of Latvia provides recommendations for their elimination, but it informs law enforcement authorities about potential infringements of the law.
Additional information
Ms Gunta Krevica
Head of PR and Internal Communication Division
Ph. 23282332 | E-mail: Gunta.Krevica@lrvk.gov.lv