The National Audit Office found in its report that Estonian ministries lack an overview of the cost of investments and pending investments in their area of administration, while the socio-economic impacts of completed projects are also not being assessed.
The National Audit Office found in its report published on Wednesday that there is no country-wide perspective of investment management that would reach further than four years. The Ministry of Finance and several other ministries lack a comprehensive overview of completed and pending investments, and they are not aware of the cost of investments in their area of governing. Socio-economic impacts of completed projects, that is, the actual benefits of expensive investment projects, are not being assessed.
Generally, ministries also do not have detailed information on investments made by companies, foundations and public universities in their area of government. Larger state companies, universities and hospitals have usually better planning and execution of investments than ministries, the National Audit Office said.
"On several occasions, we found that answering the simple question of how much the five most expensive investment projects of a single ministry or institution cost was anything but simple," Auditor General Janar Holm said. "In one case, when we asked the ministry about its investments in recent years and how much they had cost, we were directed to the Ministry of Finance that in turn directed us to state real estate company RKAS. Later, however, the Ministry of Finance said that the RKAS' data were not correct," he added.
According to the National Audit Office, the figures of the ministry and its subdivision could also have been different. In another case, the Ministry of Justice and RKAS provided contradictory information on whether the construction of Tallinn Prison had been completed or not. The International Monetary Fund (IMF) has suggested that Estonia set up a database to provide an overview of its investments.
There is a comprehensive and accurate overview of the projects financed by the European Union, as the data of these projects are collected in the Structural Funds Information System. There is no equivalent information on investments made by Estonia using its own money. "The movement of funds from Estonia must be monitored as closely as the use of funds granted by the European Union," the auditor general said.
The process of selecting potential investment projects has been up to the ministries' decision and the practice of ranking and selecting potential investments varies. The Ministry of Finance organizes and coordinates the state budgeting process, in the course of which ministries submit additional applications for covering all kinds of expenses, including investments. The eligibility and reasonableness of these applications is assessed by the Ministry of Finance, but potential investment projects of the ministries are not compared or ranked. There are no cross-sector evaluation criteria established for this purpose, the National Audit Office said.
A multi-year cross-sectoral investment plan would help ministries prepare projects in the longer term and provide greater confidence that the investment will be funded until the project is completed. The IMF has also drawn attention to Estonian investment planning being overly short-term oriented, and recommended a 15-year investment plan covering all sectors.
Approximately 40 percent of all completed projects submitted to the National Audit Office exceeded their initial budget during implementation. The project executors themselves say that cost overruns and exceeded time schedule of projects are mostly due to poor planning.
Of the 11 billion euros in the state budget, around one billion euros is invested every year. A survey conducted by the National Audit Office showed that over the last five years, the most expensive investments worth more than 100 million euros have been made in energy and healthcare sectors.
The most expensive investments in progress are the construction of the Rail Baltic railway and the eastern border of Estonia, and the development of wind energy. The five most expensive investments made by various institutions ranged from 75,000 euros to €1.1 billion euros, excluding VAT, over the period under review. Out of 89 projects submitted to the National Audit Office over the last five years, 58 were implemented by companies, universities and hospitals and 31 by ministries.
Editor: Helen Wright