TALLINN, 22 November 2013 – The National Audit Office analysed the submission of data by local authorities for national databases and found that local authorities perform a national function. Money for this should come from the state budget, but this is largely not the case at present. The expenses incurred by local authorities in submitting data to the seven audited important databases alone amount to a million euros per year in their own estimates. 

The National Audit Office is of the opinion that data submission is mainly a national function, but the database managers disagree. The submission of data is mandatory and done according to the rules established by the state, so local authorities cannot choose how to perform the function. This is one of the main features that differentiates national functions from local ones. The National Audit Office sees other signs as well, but in general, it is possible to say that collection of data in such a manner clearly expresses an interest that is national, not narrowly communal. National interest is also characterised by the diverse use of this data in national statistics and elsewhere, and the state has usually also made an effort to obtain the data from local authorities.
However, database managers argue that local authorities also benefit from the collection of data or that the submission of data for databases is so closely related to the other work of local authorities that it cannot be regarded as a separate national function. The National Audit Office is of the opinion that the potential benefit to local authorities is just a nuance in the whole matter that does not outweigh the others. The National Audit Office also finds that the submission of data cannot be regarded in an uninterrupted connection with the other functions of local authorities, because the performance of these other functions usually does not depend on the submission of data. For example, in the case of planning permission or authorisation for use of buildings, reviewing the applications and issuing the relevant documents is in no way influenced by whether or not the data of the documents have been entered in the State Register of Construction Works. 
The dispute may seem like nothing more than a legal tug of war, but the submission of data generates significant expenses for local authorities. Local authorities make hundreds of entries in the databases reviewed during the audit and this takes quite a lot of money. 
The National Audit Office investigated the size of the expenses incurred by local authorities in relation to the submission of data to the audited databases. In order to determine the size of the expenses, the National Audit Office asked local authorities how much time they spend entering data in the information system. The National Audit Office also asked database managers for their estimates of the time they think local authorities spend on data submission in order to obtain a balanced overview of the opinions of the parties. Although the estimates of local authorities and database managers of the amount of time spent entering data were different, the labour costs related to the submission of data to the audited databases amounted to ca. 934,000 euros in the estimates of local authorities and ca. 658,000 euros in the opinion of database managers. Another ca 15-20% should be added to this as expenses related to the management of assets such as IT equipment, maintenance of buildings etc.  
Looking at the finances of local authorities, we see that they have not yet been compensated for these expenses on such a scale. Money has been given from the state budget only for registration of births and deaths in the Population Register (17,500 euros in total in 2013). Local authorities also get money for acts related to the Register of Economic Activities in the format of state fees, but that is all, and these two example represent the only two ways in which the submission of data is financed. Local authorities are not paid any money for acts related to the remaining audited databases.
Allegedly, state fees are also used to cover the expenses of acts related to the State Register of Construction Works, and in the database of the Register of Social Services and Benefits the expenses are covered with the support received from the state, but there is not a single piece of legislation that clearly states this and neither have any calculations been made to see whether this money is sufficient for the register acts.
The National Audit Office advises the ministers in whose area of governments the audited databases are maintained to agree on the principles of financing the function related to the submission of data with local authorities. The National Audit Office is of the opinion that the precise compensation of the expenses of the national functions performed by local authorities should be discussed every year in the state budget negotiations between the local governments and the Government of the Republic. The National Audit Office advises the Minister of Finance to amend the State Budget Base Act in relation to this.
In addition to the above the National Audit Office also found serious problems related to the quality of data in some databases and recommended improving the organisation of data collection.

 Background

The National Audit Office analysed the information system of the Address Data System (responsible processor: Land Board), the Estonian Education Information System (Ministry of Education and Research), the Register of Economic Activities and the State Register of Construction Works (Ministry of Economic Affairs and Communications for both), the Register of Social Services and Benefits (Minister of Social Affairs), the National Register of Roads (Road Administration) and the Population Register (Ministry of the Interior).
The problem is actually much more far-reaching than the topic of the databases covered by the audit and concerns the classification and financing of the functions of local authorities on a broader scale.
In his speech delivered in the Riigikogu on 6 November, Auditor General Alar Karis said: "It is necessary to clarify what the functions of local authorities will be in the future and what the budget for their performance is.” He added that the issue of money is probably the main reason why the government is so reluctant to discuss the topic of local authority financing and the functions to be performed. “The central government is obviously not interested in giving local authorities grounds for invoicing the state for the performance of national functions, for which at present they are not compensated,” said Karis.

Toomas Mattson
Head of Communication Service, National Audit Office
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• Posted: 11/22/2013 10:38 AM
• Last Update: 9/25/2014 2:18 PM
• Last Review: 9/25/2014 2:18 PM