Local governments should reduce corruption risks better and focus on their own companies in particular

Toomas Mattson | 6/12/2017 | 12:00 AM

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TALLINN, 12 June 2017 – The National Audit Office finds that local governments should start giving more attention to the threats of corruption – they understand corruption as a phenomenon, but are unable to or don’t want to see the risks when thinking about their own undertakings, not to mention systematic management of these risks.

The audit revealed that the activities of the managers or management of the organisations is usually not covered by control measures. However, this is the very level where risks are higher, because the people among the managers are often related to private entrepreneurs, and the risk is even higher in the undertakings of local governments. For example, 93% of the managers of the commercial undertakings and foundations of local governments (412 in total) were directly related to a private undertaking in 2015.

A control system that prevents corruption in the audited organisations also needs improvement in general, as the necessary system only existed in a few work sections of the organisations.

Conflicts of interest and problems in compliance with the Anti-corruption Act were found in two-thirds of the audited units (in 12 of 18, i.e. 66% of the auditees). Mostly, an official had participated in a purchase transaction with their private undertaking in a manner that allowed them to influence the circumstances or consequences of the transaction (e.g. selection of the transaction partner, drafting of the contract). The Public Procurement Act had also been breached in most of these cases, because purchases from the official’s company had been made without a procurement and without obtaining comparable tenders. The heads of six organisation had determined their own remuneration. Weak procedures were the problem in the use of official cars in some organisations, as they did not give the reassurance that the cars were not unreasonably used for private purposes; identifying any direct breaches was impossible.

The problem is that organisations do not inspect the activities of officials or raise their awareness, even though they’re obliged to do so. The National Audit Office emphasises that the identified breaches would have been fairly easy to prevent, because they were driven by the inadequate acknowledgement of obligations, convenience, etc., rather than the desire to take advantage of one’s position of power. 39% of the auditees (7 audited units) had carried out inspections to some extent. Unfortunately they were more formal than substantive and usually, nothing at all had been done in the last couple of years. The situation in raising awareness was almost the same.

The National Audit Office admits that the developments initiated in the anti-corruption strategy have not progressed as expected. Last year, the state was supposed to prepare risk management and internal control guidelines as well as produce an e-tool, which would allow everyone to see with whom the local government has concluded transactions. “It’s also a pity that the opportunity to come out with these tools before the administrative reform is being lost,” said Audit Manager Tambet Drell. “Everyone knows that the time of structural reforms is the best moment for giving a good start to new solutions.”

The National Audit Office advised the Minister of Justice as the person in charge of the implementation of the anti-corruption strategy to be more demanding in respect of the goals and take measures to ensure that the promised tools for preventing corruption more effectively are prepared as intended.

Background

The emphasis of the audit carried out by the National Audit Office was on the compliance with the Anti-corruption Act by local government undertakings. The reason for this was that public and local government undertakings alike have been given little attention in terms of preventing corruption. Another incentive of the audit was to study the effect of the principal amendment made to the Anti-corruption Act, which calls for more awareness in recognising corruption. In areas at risk of corruption, we checked whether taxpayers’ money had been used to make purchases from or pay support to one’s own company, or pay wages to oneself. Using official cars as one of the main benefits was also studied. All of this was reviewed about activities carried out from 2015-2016.

Seven local governments with all of their agencies and 11 local government undertakings (plus nine local governments that own them) were audited. The auditees were: Hiiu, Järvakandi, Käina, Mooste and Raikküla municipalities, Tõrva and Viljandi towns, AS Maardu Vesi, AS Narva Vesi, AS Rakvere Soojus, Huvitegevuse ja Noorsootöö SA (Harku), OÜ Kadrina Hooldekodu, OÜ Kadrina Kommunaal, OÜ Kehtna Elamu, OÜ Maardu Linnavarahooldus, OÜ Pandivere Vesi (Väike-Maarja), OÜ Põltsamaa Vallavara and OÜ Tartu Valla Kommunaal.

 

Toomas Mattson
Communication Manager of the National Audit Office
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  • Posted: 6/12/2017 12:00 AM
  • Last Update: 6/12/2017 12:19 PM
  • Last Review: 6/12/2017 12:19 PM

The emphasis of the audit carried out by the National Audit Office was on the compliance with the Anti-corruption Act by local government undertakings. The reason for this was that public and local government undertakings alike have been given little attention in terms of preventing corruption.

Corbis/Scanpix Baltics

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