Local government associations make the same errors in their economic activities as municipalities, towns and cities

Toomas Mattson | 5/10/2012 | 11:31 AM

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TALLINN, 10 May 2012 - The audit carried out by the National Audit Office indicates that the economic activities of local government associations are characterised by the same problems that the National Audit Office has found when auditing municipalities, towns and cities – there are omissions in the budget discipline, the legitimate organisation of purchases and payment of fees.

The reason for this is that the associations and local authorities are managed by the same people, and as associations and local authorities both have to proceed from the same requirements, the reasons why they err against them are also the same.

The National Audit Office found that remuneration or compensation had been paid to management board members, managing directors or employees without a resolution of a competent managing body or the managing director in seven county associations. The total amount of remuneration and compensation paid out in such a manner during the audited period was ca. 60,000 euros. There were a few cases where local government association leaders had made the decision to buy goods or services from companies associated with themselves, or to allocate support to companies associated with themselves. Another shortcoming is the failure to adhere to the good procurement practice arising from the Public Procurement Act in the organisation of public procurements, and the National Audit Office found that seven local government associations had not made the effort to find several tenderers in order to obtain the best purchase terms.

The importance of county government associations for the population must be seen as something broader than just interest in the proper use of the money entrusted to the associations. Associations make it possible for local authorities to organise the performance of their functions together, and this should also improve the accessibility and quality of the public services provided to the population.

The National Audit Office notes in its overview of the activities of county government associations that cooperation within the scope of the activities of county government associations has been largely project-based. Associations have not been trusted with the organisation of the most important functions. This shows that even in the present conditions, associations have not taken advantage of the opportunities they have, which means that it is necessary to find ways for making mutual agreements more durable. Leaders of local government associations say that reaching agreements is a problem and political differences also make cooperation difficult. This is why the leaders of local government associations have raised the issue of the association’s status in public administration.

Looking forward, the leaders of local government associations see county associations as legal entities in public law, and being a member of this association is mandatory for local authorities. The leaders of local government associations also noted that the role of the association overlaps partly with the role of county governments that also have to ensure the balanced development of counties.

However, the volume of the activities of county associations is small when measured in money and compared to county governments, and the National Audit Office believes that the extent of the conflict in roles cannot be big from the viewpoint of public interest. The more important question in the big picture is how to utilise the associations better in the future, so that local authorities start cooperating more in the performance of their functions. The National Audit Office believes that the future of local government associations as the oldest format of cooperation between local authorities requires discussion and a clear and understandable basis. The National Audit Office finds that the “Regional Development Strategy until 2022”, which is being developed at the initiative of the Regional Minister, offers a good option for this.

The National Audit Office would like to emphasise that prevention of the errors found in the economic activities of the associations depends on the better organisation of their work and knowledge of laws, and it is not associated with questions about the status and role of the associations in the performance of public functions in the future. The National Audit Office made several recommendations to county associations in order to strengthen their internal control system and avoid errors in economic matters.

The audit focussed on the activities of county associations from 2008 to 2010. The National Audit Office assessed the correspondence of economic activities to the most important laws and whether all of the measures permitted by law had been taken to guarantee the legitimacy of economic activities. The audit also took a look at the objectives of the associations during the period, how much labour and money had been used to achieve them, which activities did the associations undertake and in which areas, and what were the problems they encountered in organising their work. The National Audit Office has not given an opinion of the associations with regard to these issues due to the limitation of its competency, but only presented an overview of this in the first chapter of the report.
Every county in Estonia has a local government association, which operates as a non-profit organisation.


Toomas Mattson
Head of Communication Service, National Audit Office
+372 640 0777
+372 513 4900
toomas.mattson@riigikontroll.ee

  • Posted: 5/10/2012 11:31 AM
  • Last Update: 11/10/2015 5:35 PM
  • Last Review: 11/10/2015 5:35 PM

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