Opinion of the SAO: problems in economic activities of the Estonian Agricultural University

8/5/2003 | 12:00 AM

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TALLINN, 5 August 2003 - The SAO audited the economic activity of the Estonian Agricultural University (EAU) in 2002, concluding that there were some shortcomings in the management of the economic activity of the University. This opinion was based on the following observations among others.

More than 600 students who had failed to pay their tuition fees on the due date, in total of 5 million kroons, were not asked to pay a fine for delay. Likewise, the University did not claim the debts (about one million kroons) from students who had transferred from a fee-paying student place to a state-commissioned student place, or had left the University.

Two fee-paying students did not have to pay their tuition fees. One of was them a University employee, the other’s parent was a University employee. Such practice is in accordance with the law, but in such cases a fringe benefit tax must be paid, which the University has failed to do.

Concerning the sale of registered property, the University has offered buyers the possibility of payment in instalments, thereby acquiring additional financial risks. The SAO found that several buyers indeed had solvency problems. The SAO does not consider it reasonable to sell property by payment in instalments, which means, in essence, granting loans to buyers, because a solvent buyer may always apply for a bank loan.

The University has about 44 million kroons on its bank account, 32 millions of which have been invested with a 3 % rate of return. At the same time, the University has borrowed about 44 million kroons with a 4 to 10 % interest rate. Hence, the interest costs exceed the interest income. If the loans were to be repaid with the existing funds, it would be possible to economise because, e.g., in 2002, the University’s interest costs exceeded the interest income by 1.2 million kroons.

The audit discovered that the University balance sheet includes fixed assets that are not owned by the EAU according to the state assets register, but by the Ministry of Agriculture or the Ministry of Education and Research. The value of such assets is over 25 million kroons in total. As the assets are not legally owned by the University, it is not correct to record them on the balance sheet.

The audit manager Tõnis Saar added that it is important to draw attention to the danger to the education quality: "The EAU has repeatedly accepted more students than is considered possible by the Board of the University. The most characteristic situation concerns the specialty of Accounting and Financial Management where the Board had planned 45 places, but in reality there were 53 students in the full-time and 68 in the distance education. Although this is a way to get more income, disregarding the decisions of the Board may directly lead to a lower education quality."

The EAU is a legal person in public law under the area of government of the Ministry of Education and Research, and in 2002 was financed from the state budget with about 95 million kroons, i.e., about 60 % of the income. The SAO focused its audit on the operating income (incl. support from the state budget), operating costs, and fixed assets accounting.

Sven Soiver
Press Representative of State Audit Office
Telephone: (372) 640 0787
GSM: (372) 53 414464
E-mail: [email protected]

  • Posted: 8/5/2003 12:00 AM
  • Last Update: 10/2/2015 5:09 PM
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