TALLINN, 22 February 2005 - The State Audit Office (SAO) has found that the Estonian Motor Vehicle Registration Centre (EMVRC) and the Ministry of Economic Affairs and Communications have not properly dealt with the correction of deficiencies identified by the SAO in its previous audit of the fiscal year 2002, so as to ensure the full-scale inflow of government levies to the state budget.

Although the EMVRC is installing and improving information systems, proper collection of government levies and performance of procedures and their disclosure in the books have not been managed by now. However, observance of the Public Procurement Act by the EMVRC has remarkably improved compared with the earlier period.

The major shortcomings in the activity of the EMVRC in the collection of and accounting for government levies include the following: inadequate supervision of the third parties collecting government levies, insufficient monitoring of the receipt of government levies, lack of an information system which would allow ongoing verification of government levies receipts and their accrual basis recording in the books.

By the time of the audit, contracts with the private limited companies Liivi Teenindus and Varantes had been terminated, but in the EMVRC service bureaus, in spite of the adverse experience with OÜ Liivi Teenindus, it was still possible to pay government levies to OÜ E-Kindlustus Online, who is a legal person governed by private law with a share capital of EEK 40,000 and the asset value amounting to EEK 2.4 million. The SAO is of the opinion that collection of government levies by a private limited company is too risky because the company is not able to recover the damage caused to the state in case of deficit.

Further, the contracts concluded by the EMVRC with the collectors of government levies are very general in terms and do not duly stipulate the obligations and liability, and that is why the transfer to the state budget of all government levies collected by these companies may not be ensured. Although it was agreed in the concluded contracts that the EMVRC is authorized to inspect the performance of required tasks and procedures, the EMVRC had never exercised this right in respect of government levies in the audited period.

/Background information: Two years ago the SAO found that the EMVRC had provided services for an amount exceeding the corresponding levies received by the Tax Board by EEK 7.2 million. The subsequent investigation carried out by the Central Criminal Police showed that Malle Kram, Chief Accountant of OÜ Liivi Teenindus, had purloined over EEK 12 million of government levies collected by the EMVRC that were to be transferred to the accounts of the Tax Board. Three weeks ago the Tallinn City Court sentenced the accountant to imprisonment./

In the EMVRC servicing bureaus, the traffic register procedures are performed upon submission of a duplicate/print-out of the payment order or any other document confirming the payment of the government levy, i.e. without anybody verifying that the money really is on the bank account. This may bring about the risk that no money is in fact paid or that several procedures are performed for only one fee. Further, there are no relevant procedural rules on the check of receipts and respective control is within the discretion of each customer service representative.

The agency has failed to introduce a unified information system, which could consolidate the receipts and payments on the EMVRC settlement accounts with different banks after a certain interval and which would be accessible by all those concerned. The introduction of such information system could inter alia help prevent the performance of procedures without the charges paid. It would also allow accrual basis recording of government levies.

Although the EMVRC has conducted several analyses and organised different meetings, the best possible solution has yet not been found. The Ministry of Economic Affairs and Communications has dealt with the problem by no final solution had been worked out by the close of the audit.

Compared with 2002, the EMVRC has improved its performance as regards the ratio between the number of compulsory public tendering procedures and the number of those actually carried out. In the previous audit it was identified that public tenders were often not invited or use was made of unannounced negotiated bidding process creating suspicion as to its reasonableness, but in 2003 the situation has improved. In 2003, the agency had purchased products and services for EEK 1.4 million without inviting public tenders (in 2002, the amount was EEK 12.4 million) and had exceeded the amounts stipulated in the contracts for the acquisition of IT products/services entered into as a result of public procurement procedures by EEK 1.1 million.

In addition to the issues related to government levies and public procurement, the SAO detected several shortcomings in the internal control structure that refer to the weak control environment.

The SAO acknowledges the Ministry of Economic Affairs and Communications who, concurring with the findings and proposals of the SAO, has admitted the existence of problems in its reply and has proposed corrective action with definite deadlines. The EMVRC, however, has evaded making clear and unambiguous promises in their reply.

In the second half of 2004, the SAO conducted a follow-up review of major issues identified in the course of an audit of the 2001 annual report and the report on the state budget implementation by the EMVRC. The audited period covered the time span from 1 January 2003 to 31 August 2004. The audit focused on the collection of and accounting for government levies and organisation of public procurement.

Toomas Mattson
Communication Manager of National Audit Office
Telephone: 6400 777
Mob: 51 34900
E-mail: [email protected]

• Posted: 2/22/2005 12:00 AM
• Last Update: 9/22/2015 10:24 AM
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