Procurement and use of state’s vehicles could be more reasonable

Toomas Mattson | 8/30/2016 | 2:00 PM

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TALLINN, 30 August 2016 – An audit carried out by the National Audit Office has indicated that the management of vehicles in state agencies could be made more reasonable by optimising the quantity of the vehicles, cross-using vehicles in the interests of efficiency (e.g. in areas of government) and save money by organising joint procurements, streamlining the regulation of the acquisition and use of the vehicles and using a common practice.

Existing vehicles are underused. At present, the vehicles are not being used as much as was planned when they were leased or acquired, i.e. the vehicles are leased even if their actual use is small, or lease payments are made for greater mileage than they actually record. This applied to approximately 70% of the vehicles inspected during the audit.

The National Audit Office is of the opinion that in order to guarantee that taxpayers’ money is used economically, it is important to carefully consider whether a vehicle is actually necessary and will get enough use before it is purchased.

The age of vehicles should depend on necessity. Although state agencies consider the economic life of vehicles to be 10 years, they replace them often (usually every 3-5 years) and therefore end up spending more money than they would by using the vehicle for a longer period of time. The National Audit Office finds that they should determine cases where the frequent replacement of vehicles and the incurring of higher costs is justified and where it would be possible and practical to use vehicles for longer.

Regulations need to be updated and harmonised. In order to guarantee that the state’s money is more economically used, the National Audit Office considers it necessary to establish a central standard for the acquisition of vehicles which, among other things, outlines the technical specifications of the vehicles required for the performance of the duties of a certain position (from ministers and state agency managers to state agency specialists). The regulation of the acquisition and use of the vehicles must also be reviewed and streamlined, and a common practice must be developed: principles for the acquisition and use of the vehicles in state agencies and standard forms of lease contracts should be established while also updating the Government regulations of 1997 which currently regulate the area and are obviously outdated.

Joint procurements would save money. The National Audit Office is of the opinion that every agency procuring vehicles individually may not be the most reasonable option, as the opportunity to save money that a joint procurement would provide is not being used, and neither is the opportunity to save money on the administrative costs related to the organisation of procurements. In the audit, the National Audit Office advises state agencies to procure vehicles centrally, where possible – for example, by gathering the necessary competence in the State Shared Service Centre and offering the service to areas of government. In such cases, the central procurement unit would have know-how that covers the organisational side of public procurements, complemented by the specific requests of agencies providing the best knowledge of their everyday needs. One of the roles of the central procurement unit as an expert outside of the ministries should be to find the common part of vehicle requests and eliminate any excessive technical requirements of the vehicles. At present, the technical specifications of the vehicles procured by state agencies differ considerably in the level of detail, starting from around 20 requirements and going up to almost 100, which are justified by the need to consider the specific requirements of the agency’s operations.

Financing the acquisition of vehicles from the state budget requires streamlining. The National Audit Office is of the opinion that a decision should be taken as to the financing model on which to base the leasing or purchase of vehicles. In both cases, the necessary funds must be planned in the state budget. At present, state agencies are undertaking commitments for the state in a manner that does not comply with state budget acts. The National Audit Office therefore finds that the Ministry of Finance must develop principles that allow state agencies to decide which financing model to use for the acquisition/use of vehicles and when to use it, and to justify these decisions.

The impact of some contracts on financing statistics has not been considered. When analysing contracts during the audit, the National Audit Office found that some capital lease contracts had not been recognised as liabilities in accounting, which means that the liabilities had not been considered in financial statistics. In addition to the audit report, the National Audit Office has also prepared a memo in which it analysed how the vehicle lease contracts of local authorities and their companies affect debt burden (link to memo sent to local authorities).

The National Audit Office analysed the use of vehicles in Rae Municipality to identify the typical problems that local authorities face when regulating the use of vehicles and compensating their use (link to audit report).

Auditor General Alar Karis said the following when commenting on the audit results: “The state’s vehicles, especially those of more senior officials or ministers, have been in the spotlight at times, since many people find them more interesting than complicated projects costing hundreds of millions of euros or expensive policies. However, we must turn our attention to this topic. The amounts spent on vehicle maintenance may not be the main cost item in the budget, but the management of vehicles – their acquisition and maintenance, keeping account of vehicle use and dealing with everything else concerning them – requires considerable resources from many officials. The audit of the National Audit Office gives an overview of the area and covers the problems that should be dealt with in this area. I am pleased to say that the Ministry of Finance started using the audit results while the audit was still being carried out and that it has taken on board many of the suggestions made by the National Audit Office in order to streamline the area. I hope this will become more than a plan and that fundamental decisions will be made which will help optimise the state’s vehicle fleet and its operation, so that we have the kind of cars we need and they are acquired and used in a reasonable manner.”

Background

As at the end of the audited period (30 June 2015), state agencies had 6400 vehicles in total, plus the 4344 vehicles in the vehicle register of the Defence Forces and Defence League which were not registered in the Traffic Register and which did not form the basis of the analysis performed in the audit.

The acquisition and use of vehicles by state agencies is regulated with the State Assets Act, the State Budget Act and the Public Procurement Act, as well as regulations of the Government of the Republic that were established around 20 years ago and which clearly do not meet the requirements of the present circumstances.

The National Audit Office audited whether state agencies (ministries and agencies in their areas of government) manage their vehicles prudently and in compliance with the requirements set forth in the State Assets Act, the State Budget Act and the Public Procurement Act. The National Audit Office therefore checked how state agencies plan the acquisition of vehicles, find financing methods, organise public procurements and use vehicles within the legal framework established by the state.

All ministries and the agencies in their areas of government (i.e. state agencies), excluding the Estonian Internal Security Service, the Estonian Information Service, constitutional institutions and the Government Office, were audited. Information concerning all of the vehicles used in state agencies from January 2013 to June 2015 was analysed during the audit. The audit was carried out from August 2015 to April 2016.

 

Toomas Mattson
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  • Posted: 8/30/2016 2:00 PM
  • Last Update: 8/30/2016 2:08 PM
  • Last Review: 8/30/2016 2:08 PM

A year ago, state agencies had 6400 vehicles in total, plus the 4344 vehicles in the vehicle register of the Defence Forces and the Defence League.

Tairo Lutter / Postimees / Scanpix Baltics

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