Local authorities and their undertakings disregard the Public Procurement Act in the procurement of cars

Helerin Kõrvemaa | 10/24/2011 | 9:30 AM

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TALLINN, 24 October 2011 - The National Audit Office audited the acquisition (i.e. purchasing as well as leasing) of cars in three local authorities, their agencies or the undertakings belonging to them, and found that nine out of ten auditees had not adhered to the Public Procurement Act in the procurement of cars. The National Audit Office also assessed whether the auditees have recognised the obligations associated with leasing in accordance with the General Rules of State Accountancy and found that most of the auditees had done so.

The National Audit Office approached the subject because taxpayers expect officials who perform public duties to use the money they get from the taxpayers prudently and perform their duties with the help of vehicles whose price and qualities are in accordance with the duties, so that spending unreasonable amounts of money on vehicles is prevented. Also, incorrect recognition of car leasing expenses may affect the correctness of the accounting indicators of the entire public sector.

All local authorities and their undertakings paid for car leasing and compensated the use of personal cars to officials for 6.6 million euros on average from 2008-2010. The average fuel expenses were 16 million and insurance expenses 1.2 million euros per year. The National Audit Office compared the acquisition data of all cars of local authorities and their undertakings entered in the Traffic Register of the Road Administration with the Public Procurement Register. When the National Audit Office compared the two registers, it found more than 100 local authorities or their undertakings that had acquired cars, but not registered these acquisitions in the Public Procurement Register.

The National Audit Office found that ten auditees had often accepted the standard terms and conditions of leasing companies, which did not meet the declared terms and conditions of the procurement. Having made purchases below the public procurement limit, the auditees were often unable to explain the criteria on the basis of which the car was selected and how they took advantage of competition. As the process had also not been properly documented in many cases, such practice involves the risk that some vehicles were intentionally purchased from a specific car dealer and any competition was precluded.

Local authorities and their undertakings have usually wanted to take the cars on operating lease, but have been unable to negotiate with leasing companies in such a manner that the terms and conditions of the contract would have fully met their requests. The Ministry of Finance that should be monitoring the financial capacity of local authorities and analyse the contracts signed by local authorities and their undertakings for this purpose has not taken any interest in car leasing contracts. The reports that local authorities are required to submit do also not guarantee that the information reaches the Ministry of Finance, which causes a lot of confusion in accounting that concerns car leasing.

The councils of local authorities or the supervisory boards (general meetings) of the undertakings belonging to local authorities had generally not agreed in the general principles for using cars, which would prevent the occurrence of relationships exposed to the threat of corruption. Leasing a car from oneself or a company related to oneself means that an official is in breach of the Anti-corruption Act. The National Audit Office found that in at least one undertaking, an official had used a car on the basis of a contract entered into with an undertaking related to the official.

The audit sample included the Tallinn Municipal Police Department; Valga City Government; Jõelähtme, Vaivara, Mäetaguse and Tähtvere Municipality Governments; AS Emajõe Veevärk; OÜ Järve Biopuhastus; Narva Vesi AS and Läänemaa Hospital Foundation. The auditees had purchased 56 cars with the total cost of over one million euros during the period of review (2008-2010).

Helerin Kõrvemaa
Assistant to Communication Manager
National Audit Office
+372 640 0704
+372 5344 3704
[email protected]

  • Posted: 10/24/2011 9:30 AM
  • Last Update: 11/10/2015 5:46 PM
  • Last Review: 11/10/2015 5:46 PM

Kia Cee'd, the most acquired car model in audited local authorities and their ssociations.

Postimees/ Scanpix Baltics

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