Financing ERR requires clarity and linking to development plans

Toomas Mattson | 6/7/2016 | 11:00 AM

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  • It is unclear which activities of ERR are financed from basic state budget funds and which are financed on the basis of one-off additional applications (major sports events etc.).
  • Financing the activities of ERR via other agencies that receive money from the state budget (ca 850,000 euros in 2015) causes instability and threatens editorial independence.
  • Management and administration of the area of IT, which is important for ERR, has been irregular.
  • Most information systems were missing correct documents in 2015. No operating guidelines, roles or areas of responsibility for information security incidents or emergencies had been written down.
  • The National Audit Office did not identify any significant omissions in the management of assets or conclusion of transactions.

TALLINN, 7 June 2016 – The National Audit Office is of the opinion that Estonian Public Broadcasting has used the money allocated from the state budget purposefully, lawfully and prudently. However, the transparency of financing the public broadcaster and its ties to development documents should be increased.

In 2016 the Riigikogu allocated Estonian Public Broadcasting 32.8 million euros, which covers 91% of the public broadcaster’s total expenses, but no agreement was made as to which functions and activities will be financed from the annual state budget allocation and which ones on the basis of one-off additional applications. For example, ERR requested additional funds for 2016 in an amount that is 3.5 times bigger than in 2013. In 2013 it requested 1.6 million euros in addition to the basic budget, but the amount requested in 2016 is 5.9 million euros. Additional funds have mainly been requested for covering labour costs, broadcasting major sports events, developing existing programmes and in 2016 for a TV channel in Russian. It is therefore difficult to assess whether the financing provided to the public broadcaster is adequate, hold substantive budget discussions or plan the organisation’s long-term development.

The transparency of financing the public broadcaster is decreased by government grants not included in the basic financing, which are given by other agencies financed from the state budget, and reporting that does not make it possible to compare expected and achieved results. For example, in 2015 the public broadcaster received income in the amount of 853,556 euros from other agencies financed from the state budget. For example, television programmes Rakett 69, Kapital and Meie inimesed were financed by agencies funded from the state budget. The departments of educational, life and political programmes has received the most money via state agencies. For example, 51% of the expenses of educational programmes in 2014 depended on money received from agencies outside ERR. Various state agencies have covered 20% of the costs of political programmes.

The National Audit Office is of the opinion that a programme produced in the course of a cooperation project depends financially on the state agency and ERR cannot therefore be sure that production of the show will continue. On the other hand, the programmes commissioned by state agencies can influence the editorial independence of ERR.

Auditor General Alar Karis finds that the budget of ERR should be a composite whole allocated by the parliament and not depend on project funding received from someone else, like an agency financed from the state budget. “It would make sense if the money, which various agencies currently pay to the public broadcaster for programmes, was moved directly from the state budget to ERR’s budget in order to guarantee stable financing and protect editorial independence and freedom,” said Karis.

Planning the development of Estonian Public Broadcasting in the long term requires the public broadcaster’s development plan and the report on its implementation to becomes more substantive than before, and they should be the baseline documents according to which the allocation of money from the state budget is decided. The development plan of the public broadcaster is not used as an input when money is allocated from the state budget, because the manner in which goals have been phrased and tied to the money required for the performance of functions and development is too general.

The reports of the public broadcaster should also be better connected to its goals, results and the use of money. For example, the reports do not indicate which goals were not achieved and why, and what will happen if they will not be achieved in the near future either.

The public broadcaster should pay more attention to the development of IT systems and guaranteeing their continued functioning. Developing the public broadcaster’s information systems has been left in the background in the organisation’s strategic documents and they do not set out specific goals, actions or the necessary resources. Management and administration of the area of IT has been irregular. Most information systems did not have correct documents, and such systems have usually been created or modified by the broadcaster’s own employees. No operating guidelines, roles or areas of responsibility for information security incidents or emergencies had been written down.

The National Audit Office also advises to increase the transparency and balance of the public broadcaster’s supervisory board. One representative of each fraction of the Riigikogu and four recognised experts in the field are appointed to the supervisory board of the public broadcaster. Although this requirement should guarantee the independence of the supervisory board, it may become difficult if there are more or less than four fractions in the Riigikogu. The law should be changed to guarantee that the supervisory board is in balance. The audit also revealed that the members of the supervisory board have not always been elected in a manner that would allow the general public understand the considerations behind the appointment of one or another candidate. The Cultural Affairs Committee of the Riigikogu usually does not give the reasons why a candidate was considered suitable or unsuitable.

The audit also revealed the public broadcaster has largely acted purposefully and lawfully in the possession, use and transfer of assets.

The National Audit Office advised the minister of culture and the minister of finance in association with the management board and supervisory board of ERR to develop a methodology, which makes it possible to calculate the amount of money required for the performance of ERR’s functions, to guarantee that financing the functions assigned to ERR by law is as independent, stable and adequate as possible. The parties agreed with the recommendations and confirmed that a methodology for making the manner in which ERR is financed clearer and more transparent is being developed in association with the representatives of the Ministry of Culture, ERR and Ministry of Finance.

The National Audit Office also advised to prepare the development plan and budget in a comparable manner, so that it’s clear which functions will be performed and which development actions will be undertaken, how much they cost and by what time they will have to be completed. The parties agreed that the development plan of ERR should become the basis on which money is requested from the state budget and the budget of ERR is prepared, and make it possible to subsequently assess the use of money.

In order to ensure that the development of IT is sustainable, the National Audit Office advised to develop the fundamentals of managing IT in ERR and write them down in the IT strategy;

and in the future, add information to the development plan of ERR about the goals and functions that will be implemented in the development of IT, how much money will be used for it, where it will come from and the date by which they will be completed.

Background:

A public media organisation has an important role to perform in society. Acting in public interests, Estonian Public Broadcasting develops democracy and social self-awareness via free, diverse and balanced journalism.

According to the principles of financing public media organisations laid down by the European Broadcasting Union, a state must guarantee that funding the media organisation is free from political interference, stable and adequate, and transparent for the general public.

Independence – the reliability or independence of the public media organisation may not be damaged or placed in doubt by its financing model, which is why financing may not depend on political favour.

Stability – financing a public media organisation must be stable and predictable to allow for long-term strategic planning in the organisation.

Adequacy – financing a public media organisation must be adequate for the performance of its functions. Financing from the state budget should be based on a clear methodology, which makes it possible to calculate the amount required for the provision of the public service.

ERR receives the majority of its income (91% on average in the last eight years) as annual allocations from the state budget for covering its operating expenses and for development activities or investments. The remaining 9-10% is received from sales of products and services, and assigned allocations and donations. The majority of these allocations and donations are project support and revenue received via state agencies. The proportion of other operating and financial income in the revenues of ERR is marginal – 0.14% on average.

 

Toomas Mattson
Communication Manager
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toomas.mattson@riigikontroll.ee
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  • Posted: 6/7/2016 11:00 AM
  • Last Update: 6/7/2016 11:06 AM
  • Last Review: 6/7/2016 11:06 AM

Estonian Public Broadcasting develops democracy and social self-awareness via free, diverse and balanced journalism.

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