National Audit Office: Financing ERR requires improved development plan and consolidated budget

6/7/2016 3:37 PM
Category: News

The National Audit Office said that Estonian Public Broadcasting (ERR) had used its funds purposefully, lawfully, and prudently. However, the transparency of how ERR is financed as well as how this is tied to its development plan needed revision.

Subsidiary funding through other state agencies could threaten editorial independence

In 2016 the Riigikogu allocated €32.8m to Estonian Public Broadcasting (ERR). This funding covered 91% of total expenses, but no agreement was made as to which functions and activities would be financed from the annual state budget allocation, and which ones on the basis of one-off additional applications.

For example, additional funds requested by ERR are 3.5 times above the amount requested in 2013. While back then it requested €1.6m, in 2016 it requested €5.9m.

These additional funds were requested mainly for covering labour costs, broadcasting major sports events, developing existing programmes, and in 2016 for the Russian-language channel ETV+.

This distribution made it difficult to assess whether the financing provided to the public broadcaster was adequate, hold substantive budget discussions, or plan the organization’s long-term development, the National Audit Office wrote in a statement on Tuesday.

As ERR also receives government grants not included in the basic financing, but allocated by other agencies financed from the state budget, there was an issue with overall transparency, the statement went on to say. This made it impossible to compare expected and achieved results.

For example, in 2015 the public broadcaster had a total income of €853,556 from other agencies that themselves are financed from the state budget. For example, television programmes “Rakett 69”, “Kapital” and “Meie inimesed” were financed by agencies funded from the state budget.

The departments of educational, life and political programmes received the most money this way. For example, 51% of the expenses of educational programmes in 2014 depended on money received from agencies outside ERR. Various state agencies covered 20% of the costs of political programmes.

The National Audit Office is of the opinion that a programme produced in the course of a cooperation project depends financially on the state agency, and ERR therefore cannot be sure that production of the show will continue. Also, programmes commissioned by state agencies can influence the editorial independence of ERR.

Karis: Consolidate all state payments into a single budget

Auditor General Alar Karis finds that the budget of ERR should be a composite whole, allocated by parliament and not dependent on project funding received from someone else, such as an agency financed from the state budget.

“It would make sense if the money that various agencies currently pay to the public broadcaster for programmes was moved directly from the state budget to ERR’s budget in order to guarantee stable financing and protect editorial independence and freedom,” Karis was quoted saying.

Budget planning and reporting: National Audit Office recommends improvements

The National Audit Office also criticized the basis of ERR’s budget in its statement. The broadcaster’s development plan was formulated in too general terms, which made it difficult to base the allocation of money to its goals.

Similarly, it also criticized ERR’s reporting of how its funds are used. The reports should be connected to goals, results, and the use of money, the National Audit Office stated in its press release. For example, the reports didn't indicate which goals were not achieved and why, and what would happen if there was no improvement in the near future.

The public broadcaster should pay more attention to the development of IT systems and guaranteeing their continued functioning. Developing the public broadcaster’s information systems had been left in the background in the organisation’s strategic documents, and there were no specific goals, actions, or necessary resources mentioned.

The management and administration of IT had been irregular. Most information systems were usually created or modified by the broadcaster’s own employees. No operating guidelines, roles or areas of responsibility for information security incidents or emergencies were written down.

Increase the transparency and balance of ERR's supervisory board

One representative of each parliamentary group of the Riigikogu as well as four recognised experts in the field are appointed to the supervisory board of the public broadcaster. Although this requirement should guarantee the independence of the supervisory board, this may become difficult if there are more or less than four fractions in the Riigikogu. Thus the law should be changed to guarantee that the supervisory board is in balance.

The audit also revealed that the members of the supervisory board have not always been elected in a manner that would allow the general public understand the considerations behind the appointment of a candidate. The Cultural Affairs Committee of the Riigikogu usually does not give reasons why a candidate was considered suitable or unsuitable.

The audit showed that the public broadcaster had largely acted purposefully and lawfully in the possession, use and transfer of assets.

Recommendations of the National Audit Office

The National Audit Office advised the minister of culture and the minister of finance in association with the management board and supervisory board of ERR to develop a methodology that would make it possible to calculate the amount of money required for the performance of ERR’s functions, to guarantee that financing the functions assigned to ERR by law is as independent, stable and adequate as possible.

The parties agreed with the recommendations and confirmed that a methodology for making the manner in which ERR is financed clearer and more transparent is being developed in association with the representatives of the Ministry of Culture, ERR, and the Ministry of Finance.

The National Audit Office also recommended to prepare the development plan and budget in a comparable manner, so that it would be clear which functions would be performed and which development actions undertaken, how much they cost, and by what time they would have to be completed.

The parties agreed that the development plan of ERR should become the basis on which money is requested from the state budget and the budget of ERR is prepared, and make it possible to subsequently assess the use of money.

In order to ensure that the development of IT is sustainable, the National Audit Office recommended to develop the fundamentals of managing IT in ERR and write them down in the broadcaster's IT strategy, as well as in the future add information to the development plan of ERR about the goals and functions that will be implemented in the development of IT, how much money will be used for them, where it will come from, and the date by which they will be completed.

ERR receives the majority of its income (91% on average over the last eight years) as annual allocations from the state budget to cover its operating expenses and develop activities and investments. The remaining 9-10% come from sales of products and services, and assigned allocations and donations. The majority of these allocations and donations is project support and revenue received via state agencies. The proportion of other operating and financial income in the revenues of ERR is marginal, at 0.14% on average.

Editor: Dario Cavegn

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