National Audit Office published eight audits of the role of European Union support in the various areas of the functioning of the state

Toomas Mattson | 12/6/2017 | 10:15 AM

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TALLINN, 6 December 2017 – The National Audit Office published eight audits today, which focus on the role of European Union support in the various areas of the functioning of the state of Estonia, and a report that summarises them all. The annual report of the National Audit Office submitted to the Riigikogu in early November highlighted that the state should prepare for the situation where EU support will decrease in the new budgetary period – according to the Ministry of Finance by ca 40% or 1.5 billion euros without considering the impact of Brexit.

Observations made by the National Audit Office during the general audit:

  • According to the ministries, 90% of the activities currently funded with EU support will remain necessary after 2020 as well. The state has functions and activities that have partly been funded with EU support instead of using the state’s own revenue. A good example is the development of the road network, which will be financed with EU support to the extent of ca 36% from 2014 to 2020. The implementation of the capacity for work reform has also mainly been funded with EU support and it is also used to finance the provision of several labour market services. Approximately 85 to 90% of the funds used to support entrepreneurship and regional development also come from EU funds.
  • The ministries hope that the necessary activities will be financed from the state’s other revenue after the decrease in EU support. The activities that in the opinion of the ministries will remain necessary in the future are financed with EU support in the amount of 3 billion euros in the current period.
  • According to the ministries, a significant decrease in the funding of the activities financed from EU support that will remain necessary in the future would concern many functions and goals of the state.

Full texts of the sectoral sub-reports for downloading:

1) Financing of the area of labour, social affairs and health from European Union support (full text in Estonian, pdf-file)
The Ministry of Social Affairs pointed out to the National Audit Office that some of the public and local government services have been financed from EU support. These include welfare services for the elderly and special needs people that must be provided pursuant to law. If the necessary EU support or additional funds from the state budget will not be received in the next EU budgetary period and it becomes evident that local governments cannot continue providing the services offered with EU support, then one of the possible consequences is a decrease in the volume of services.
The Ministry of Social Affairs also noted that, for example, if there is less EU money in the next period, but it is necessary to make additional investments in health or special welfare infrastructure, then they must be made from the service providers’ own funds. However, there appear to be no significant opportunities for increasing the sources of income of major hospitals and special welfare service providers.

2) Financing of education and research, the development of skills required on the labour market and activities promoting integration and adaptation from European Union support (full text in Estonian, pdf-file)
According to the representatives of the Ministry of Education and Research, the main problem in the case of a decrease in funding is the deterioration of the quality of education at all levels, i.e. general education, vocational education and higher education. The deterioration of quality has the biggest impact on research and higher education. The sustainability of research is an important factor in the achievement of economic growth and welfare. According to the ministry, the number of young people who choose to study natural and exact sciences may decrease in the future, unless we deal with the problem of sustainability of research.
In the opinion of the officials of the Ministry of Education and Research, the disappearance or decrease of funding would also have an adverse effect on the development of lifelong learning. The return of adults to formal education would decrease and supporting participation in studies would no longer be possible. The officials say that the accessibility of quality and relevant in-service training and retraining would also decrease.

3) Financing of entrepreneurship from European Union support (full text in Estonian, pdf-file)
At present, supporting entrepreneurship depends on European Union funds to the extent of 90%. According to the Ministry of Economic Affairs and Communications, a significant decrease in EU funds would have an adverse impact on the development goals of Estonia, e.g. research and development, and innovation in companies. The termination of export development and tourism support would reduce Estonia’s competitiveness on foreign markets and attractiveness as a tourist destination.

4) Financing of regional development from European Union support (full text in Estonian, pdf-file)
The Ministry of Finance as the implementing agency of regional development support pointed out that the disappearance of the necessary funding would, among others, reduce the competitiveness of (rural) regions and the creation of jobs, and migration to centres would accelerate further.

5) Financing of the area of the environment from European Union support (full text in Estonian, pdf-file)
The experts of the Ministry of the Environment find that if Estonia will not receive enough support funds for the continuation of the present activities in the next budgetary period of the EU and money for covering the expenses is not found in the state, the achievement of many of the environmental objectives set in EU directives would have to be postponed, such as achieving the good state of bodies of water or stopping the decline of biodiversity. In the worst case, the state of the environment may become worse due to excessive environmental pressure and inadequate mitigation measures.

6) Financing of the readiness for environmental emergencies from European Union support (full text in Estonian, pdf-file)
The Ministry of the Interior is of the opinion that the reaction speeds of rescue commands may become longer should funding decrease. The risk of a vehicle that has exceeded its useful life becoming unusable will increase considerably.
Pollution control capacity will remain at the present level (2.4 km2/24h), which is two times lower than recommended by HELCOM. Vessels that have exceeded their useful lives will also have to continue their service and more money will have to be invested in repairing them. The gaps in the accessibility of the surveillance plan due to scheduled maintenance and possible repairs will remain the same, i.e. there will be no patrol flights and possible pollution may go unnoticed at the right time.

7) Financing of the reconstruction and construction of transport infrastructure from European Union support (full text in Estonian, pdf-file)
Among others, the Ministry of Economic Affairs and Communications pointed out that should the financing of the area of transport decrease after 2020, the consequence of this would the deterioration of the road and rail network. Inadequate investments in railway may cause a decline of the quality or accessibility of passenger train services.

8) Financing of the IT area from European Union support (full text in Estonian, pdf-file)
Inadequate financing of the IT area may, in the opinion of the Ministry of Economic Affairs and Communications, lead to the deterioration of the quality of e-services or the insufficient development of services that reduce the administrative burden.

Please note! The National Audit Office emphasises that the opinions of the impact of the reduction of EU funds on various areas were provided by the ministries, not the National Audit Office.

You can download all eight audits with the so-called umbrella audit here: Financing public functions from the European Union funds (full text in Estonian, pdf-file)

The purpose of the audits of the National Audit Office was to assess whether the state has made preparations to guarantee the performance of public functions when the EU support decreases. The National Audit Office prepared a questionnaire, which covers the activities currently financed from European Union support. The National Audit Office asked for the following opinions from the area of government (implementing authority) responsible for the implementation of an activity:

  • which activities currently funded with European Union support should continue in the next budgetary period of the European Union?
  • what is the estimated amount of money required for these activities?
  • what are the plans for financing the activities when the amount of support decreases?
  • how would achieving the sectoral goals of the area of government and/or guaranteeing the provision of public services be affected if a necessary activity would have to be terminated or the funding would have to be reduced?

The National Audit Office finds that the Ministry of Finance should provide a detailed explanation, schedule and action plan in the state’s budgetary strategy for 2019-2022, which would show how the state is preparing for the probable decrease in European Union support and which processes are used. The state’s needs, possibilities and cost alternatives in the case of decreasing foreign support must be analysed and treated in a comprehensive and understandable manner. The Riigikogu should also be included in the planning of the next budgetary period of the European Union in order to set more broad-based priorities.

Background

The state of Estonia has received billions of euros worth of non-refundable foreign aid since its independence was restored. During the 2014-2020 budgetary period the European Union is supporting Estonia from its structural and investment funds to the value of 4.4 billion euros. Approximately 3.5 billion euros of this amount is earmarked for the development of education, enterprise, transport, the information society and the environment as cohesion policy support and around 900 million euros for agriculture and fishery. The overview prepared by the National Audit Office does not touch on agriculture and fishery, since support for these fields is determined on a separate basis that is not linked to the country’s GDP or GNI indicators.

In the last 10 years, approximately one half of the public sector investments and ca 11% of the state budget expenditure of Estonia have been covered from foreign aid, mostly the support of the European Union.

Estonia will probably have significantly less support funding at its disposal in the budgetary period of the European Union that starts in 2021. The amount of money to be allocated to Estonia is not known yet, but even if the impact of the United Kingdom’s withdrawal from the European Union is not taken into account, support funds will decrease by up to 40% or around 1.5 billion euros compared to the current budgetary period according to the initial estimates of the Ministry of Finance.

 

Toomas Mattson
Communication Manager, National Audit Office
+372 640 0777
+372 513 4900
toomas.mattson@riigikontroll.ee
press@riigikontroll.ee
www.riigikontroll.ee

  • Posted: 12/6/2017 10:15 AM
  • Last Update: 12/21/2017 12:09 PM
  • Last Review: 12/21/2017 12:09 PM

During the 2014-2020 budgetary period the European Union is supporting Estonia to the value of 4.4 billion euros.

Markus Waechter / Caro / Scanpix Baltics

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