TALLINN 31 October 2013 - The National Audit Office advises Tartu City Council and City Government to review the principles of paying money to undertakings associated with the city in order to guarantee consistency and improve transparency. The National Audit Office also finds that the city should distinguish between payment of support and ordering services, and analyse whether a competition should be organised in the case of services in order to guarantee that all service providers have equal opportunities.
Tartu City is the sole owner of six and a shareholder in one commercial undertaking, the founder of 17 foundations and a member of six non-profit associations (without the inclusion of apartment associations). Similar to other Estonian local authorities, many undertakings and foundations of Tartu City were established in 1997, when the municipal companies of the time were transformed into commercial undertakings.
More than 4 million euros per year was allocated to undertakings related to the city from the city budget in 2011 and 2012. The current practice of distributing money is largely based on tradition, but it has not been consistent or transparent to the general public or applicants. Tartu City Council has failed to take a clear position on whether and in which cases to allocate support to undertakings itself or when to delegate allocation to the city government.
The National Audit Office found that Tartu City has, under the label of paying support to undertakings, paid ca. 776,000 euros for services ordered from the undertakings (e.g. to OÜ Anne Saun for the provision of sauna services to disadvantaged people and to SA Tartu Sport for granting the use of premises with a discount). Service providers should be given the chance to compete freely when services are ordered. At least 80,000 euros from the city’s reserve fund, which is meant for contingencies, was paid to undertakings related to the city to cover expenses which, in the opinion of the National Audit Office, cannot be considered contingencies. As applying for money from the reserve fund is easy and some undertakings have used this opportunity, it raises a question as to the equal treatment of everyone else who applies for money.
The support allocated to the city’s undertakings has mostly been used for its intended purpose. However, the National Audit Office must point out that the general principles of payment of support are not adequate to manage the risk that support may be misused. The city government also lacks the resources required for inspection of reports on the use of money.
The National Audit Office also advises Tartu City to analyse whether the operating format of the undertakings related to the city is justified and whether the operations of undertakings are linked with the performance of the duties of a local authority.
Background
The National Audit Office audited the payment of money from the city budget to commercial undertakings, foundations and non-profit associations where Tartu City is a founder or shareholder in 2011 and 2012 and assessed the lawfulness of financing. In three of the audited undertakings (OÜ Anne Saun, SA Tartu Kultuurkapital and SA Tartu Sport) the National Audit Office analysed whether the support had been used purposefully.
Toomas Mattson
Head of Communication Service at the National Audit Office
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Posted:
10/31/2013 3:48 PM
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Last Update:
8/16/2015 12:17 AM
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Last Review:
8/16/2015 12:17 AM