Local authorities breach laws and conclude transactions presenting risk of corruption

Toomas Mattson | 11/5/2012 | 10:30 AM

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TALLINN, 5 November 2012 - The National Audit Office finds that the local authorities’ awareness of prevention of corruption is seriously lacking and the state needs to give them more assistance. Local government officials often fail to perform their obligations when they conclude transactions, which gives rise to the risk of corruption. The interest local government leaders have in preventing the risk of corruption is small.

The National Audit Office audited economic transactions in ten local authorities and found that eight of them had breached the Anti-corruption Act in the conclusion of transactions. Officials had used local government assets to conclude transactions with companies that were related to them. Participation in such transactions is strictly prohibited for officials in order to prevent misuse of public power in private interests. An official may also not decide on whether transactions like this are concluded at all or on the terms and conditions of such transactions. Officials in the audited local authorities had also erred against this requirement. Some of them had breached the law and concluded transactions for tens of thousands of euros in just a couple of years. The National Audit Office sent the information about prohibited transactions and conflicts of interest to the police for further proceedings.

The heads of all agencies are obliged to create an appropriate organisation of work and check that officials adhere to effective requirements in order to prevent breaches. Only one of the ten audited local authorities had assigned its officials the task to inspect this and the inspections had been carried out in a manner that gave them reassurance that it was working. In the other local authorities, inspection was based on practices and carried out randomly.

The National Audit Office also found that the heads of most agencies were not aware of most of the companies that are related to their officials. The National Audit Office is of the opinion that random inspections and the lack of a comprehensive overview of the companies that are related to officials make it impossible to prevent corruption effectively. This is why local authorities need to review their present organisation of work in these issues.

The Minister of Justice should issue clearer guidelines on what the heads of agencies should consider in the creation of an internal control system in order to prevent corruption.
The National Audit Office also found that the activities of local authorities are not sufficiently transparent. At present it is difficult for the general public to obtain information about transactions that local authorities conclude with officials, their relatives or companies related to them. The law also does not stipulate that information like this must be disclosed in any case. The National Audit Office finds that the law should establish this obligation in order to increase transparency in local authorities and prevent corruption better with the help of the general public.

The Minister of Justice and the state should educate local authorities about measures that prevent corruption on a larger scale and more systematically. The breaches identified during the audit are mainly a sign that local authorities are not adequately aware of the essence and necessity of the measures that prevent corruption.

This is also indicated by the earlier audits carried out by the National Audit Office, which took a look at the prevention of corruption in certain areas. Awareness has not improved over time and the state needs to interfere more decisively in order to change the situation. The Ministry of Justice is currently developing a new anti-corruption strategy and the National Audit Office is of the opinion that improving the awareness of officials should be set as a separate goal in the strategy.

As a result of the audit, the National Audit Office made recommendations to the Minister of Justice and the audited local authorities. The Minister of Justice agreed to implement the recommendations and also promised to develop guidelines on how agencies should inspect that officials adhere to the anti-corruption restrictions imposed on them by law. However, the minister said that the guidelines will probably not be completed in 2013 as recommended by the National Audit Office and it will take more time. As recommended by the National Audit Office, the Minister of Justice also plans to analyse options to stipulate, on the level of law, the obligation of local authority to disclose transactions with officials and other transactions presenting corruption risk.

The minister also agreed to cooperate with local government associations when planning training, and pay more attention to improving the awareness of local authorities in the new anti-corruption strategy.

Eight of the nine audited local authorities that were advised to establish in their organisation of work how the officials’ adherence to valid restrictions is inspected agreed to implement the recommendation. All chairmen of councils in the local authorities where the National Audit Office found breaches agreed with the National Audit Office’s proposal to discuss assigning the audit committee the task of also inspecting adherence to restrictions in the local authority in the next year and submit the results to the council for discussion.

The National Audit Office audited the economic transactions carried out in 2010 and 2011, and the organisation of work created for prevention of corruption in Avinurme Municipality, Elva Town, Karksi Municipality, Kose Municipality, Kullamaa Municipality, Kuusalu Municipality, Kärla Municipality, Laekvere Municipality, Rae Municipality and Viljandi Town. The National Audit Office also organised a similar audit in local authorities in 2009, but the auditees were different back then.

Toomas Mattson
Head of Communication Service, National Audit Office
[email protected]

  • Posted: 11/5/2012 10:30 AM
  • Last Update: 11/10/2015 5:30 PM
  • Last Review: 11/10/2015 5:30 PM

Officials had used local government assets to conclude transactions with companies that were related to them.

Corbis/Scanpix Baltics

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