TALLINN, 18 September 2002 - Today, the State Audit Office disclosed the report on the administration and preservation of state assets. The summary report includes the assessment of the government’s most important report - report on the implementation of the state budget - and also reflects the most important audit results achieved by the State Audit Office this year.

The State Audit Office has formed an opinion that the scope and materiality of errors highlighted in the report shall not prevent the Parliament from endorsing the report in its current form. Nevertheless, the State Audit Office has to note that the Government activities can improve a lot to provide for more rational long-term planning of the state’s performance, exhaustive and credible reports and well-managed cash flows.

It is the constitutional obligation of the State Audit Office to submit the summary report to the Parliament by September 1 each year. The Parliament shall listen to the State Auditor’s presentation when processing the report on the implementation of the state budget and as a separate report on the administration and preservation of state assets over the previous financial year.

Assessment to the report on the implementation of the state budget

Although the State Audit Office has formed an opinion that the government report can be endorsed in its current form, while the accuracy of the number can be admitted the same does not apply to the substance of the report - the report has not become into a document where the Government explains how the tasks given by the Parliament were fulfilled within the framework of the given budget and how did this change the financial status of the state. There is very little information enabling the reader to assess whether the goals have been reached. Chief Auditor of the Financial Audit Department Ms Kaie Karniol: "The changes recommended by the accounting reorganization work-group shall be implemented only as the report on 2003 is being drawn up. Therefore, it can be expected that the report on 2002 shall not be better than the former reports."

In addition the fact that the report fails to show what’s behind the numbers, there’s a lot of information concerning the taxpayers’ wallet that has not been revealed at all - there is no information about government invested enterprises, foundations established by the state and bodies governed by public law although they use the state assets for billions of kroons.

The State Audit Office’s Observations about the Administration of State Assets

The findings of a number of audit missions show that the planning is not being harmonized. The short-term plans of state agencies are not being integrated with the national strategic plans on continued basis. The linkages between the plans and budget procedures are also weak.

Regardless of weak planning the Government started to pay performance wages in 2001. As there were no explicit rules about what should the performance be and ho is it assesses the performance wages paid over the last year had no relation whatsoever neither the improved performance of institutions nor the achievement of strategic objectives established by the state. The State Audit Office considers it is essential to start performance management only after strategic plans, resources and expected results are in place.

Weak planning has also strong influence on the state’s investments. Each year, substantial changes are introduced to the state’s investment program - even in theory, the state has no opportunities whatsoever for the implementation of these plans. This would provide the state agencies with security that the planned investments shall be provided the financing in reality and they don’t have to start looking for more expensive and disreputable ways for the implementation of their plans. Such a search for the back roads has forced the ministers’ to prefer extensive securing, loan and leasing operations. This is in contradiction with the constitution stating that only the Parliament is allowed to take on long-term liabilities to be backed up by the state. Such a behavior is also economically inefficient as the loan money used by the state agencies is often very expensive.

The principle of avoiding losses and increasing revenues has not always been complied with as transactions were made with state assets. For example, the state assets have been made a subject to a commercial lease at a price that is low without any grounds; institutions have gained assets that bear no relations to their main operating areas and that are not used for the purpose of making income.

Public procurement remains to be a problem. Although public procurement would enable the state to buy goods and services at the most favorable conditions, there are many cases where the public procurement conditions have not been fulfilled for very odd reasons. There was a case where furniture was bought for 5 million kroons, giving reference to state secret.

The Government has no clear picture of the utilization of allocations made for specific purpose. The ministries are required to conclude contracts with all the beneficiaries receiving allocations made for specific purpose and demand implementation reports from the beneficiaries, but this requirement is not being complied with in all the cases.
The principles for the development of government information systems should be reviewed for maintaining the sustainability of government’s information technology systems. At the moment the information systems are being fragmented between different institutions, common management system is missing.

As the quality of the report on the implementation of the state budget depends on the quality of reports submitted by the ministries and the institutions within their administrative area the work performed by internal auditors is of major importance. Unfortunately, the State Audit Office is forced to admit that internal auditors are not able to provide for the accuracy of the reports as they are dealing with single problems instead of systematic analysis of the financial accounting of the institution or its administrative area.

The ministers’ capacities to administrate supports and subsidies have not improved. The rules and criteria used to choose the beneficiaries and define the options what the support can and cannot be used for are often unclear. There are many problems with checking the information being used as the grounds for the payment of the support. The situation is not much different in the area of activity permits and licenses.


Sven Soiver
Press Representative of State Audit Office
Telephone: (372) 640 0787
GSM: (372) 53 414464
E-mail: [email protected]

• Posted: 9/18/2002 12:00 AM
• Last Update: 10/15/2015 9:56 AM
• Last Review: 10/15/2015 9:56 AM