Auditor general: We can't talk orderly finances when state budget unclear

Auditor General Janar Holm speaking at a sitting of the Riigikogu State Budget Control Select Committee.
Auditor General Janar Holm speaking at a sitting of the Riigikogu State Budget Control Select Committee. Source: Priit Mürk/ERR

In an appearance on ETV's "Esimene stuudio" on Thursday night, Auditor General Janar Holm criticized Estonia's current activity-based budget (ABB), noting that there can be no talk about the state's finances being in order as long as MPs interested in the matter don't understand the state budget.

Looking at the state budget, you don't learn much, Holm said; you can find info about revenues, but not about the allocation of expenditures.

"No one activity- or expenditure-based budget can be guilty of anything," he noted. "If you're looking for someone to blame, then it's the people drawing up the state budget who are to blame, and in my opinion, regardless of whatever-based it is — the quality of a budget is reflected in whether it's clear to whom and for what money is allocated and whether it's possible to verify later whether things went as planned. Right now this isn't the case."

The auditor general said that the current situation is a golden time to work as a permanent secretary, as an activity-based budget provides tremendous flexibility compared with before.

"For example, I suggest looking in the law or letter of explanation for the budget of a ministry as an institution — not an area of government, but an institution; you won't find it," he explained. "But you should be able to. Especially in a situation where we're talking about how operating expenses should be either frozen or limited."

There still has to be a practical document for running the house, he added.

According to Holm, whether we want a transparent state budget or not is a matter of a political decision.

"I think that when it comes to politicians, interest [in this] depends on whether you're in the opposition or the coalition; if you're in the coalition, then it's definitely a secondary issue," he said, adding that in the absence of an overview, it isn't possible for the opposition to conduct a budgetary control either.

He also raised the question of whether parliament — the Riigikogu — can fulfill its role and make substantive amendments under the current budget format — an issue that has been pointed out by the chancellor of justice as well.

Audit institution reaches solution with Interior Ministry

The National Audit Office announced Monday that they were unable to verify the Ministry of the Interior's labor costs in the course of their audit of the 2022 annual accounts because the ministry prevented them from being audited.

"While I've previously said that we initially don't understand where the money goes but later still find out, [this time] we got a little stuck with that [part] too," Holm said, adding that a quarter of public sector labor costs went unaudited as a result.

"What actually bothers me the most in all of this is the fact that they weren't completely honest regarding why this information wasn't given to us," he noted. "We had a very constructive meeting with the ministry permanent sector today, and they also admitted that they weren't actually really briefed on the info we provided today."

According to the auditor general, many of the interior minister's statements are tied to the fact that he was misled.

"I can assure the public that the National Audit Office has never requested security police officers' data," Holm said, referring to officers of the Estonian Internal Security Service (ISS/KAPO). "We don't have it, in case you're interested. The register from which we wanted to get data doesn't contain any state secrets."

In the past, whenever information has been withheld, there has always been a specific reason for doing so that has also been revealed in subsequent examination of the documents. Holm doesn't believe that to be the case this time.

External funds going unused

The auditor general isn't sure, however, whether the state budget can be considered an ABB at all.

He said that the state has to manage with the money provided by the budget, but that in reality, Estonia also has external resources at its disposal that it isn't utilizing quickly enough.

"One period ends this year," Holm said. "We are indeed currently facing a situation where for quite possibly the first time, we won't manage to use up that money. The new period has been underway for several years, and the money hasn't been used. This money is sorely needed in the economy."

According to Holm, the Estonian state has taken on too many obligations, citing as examples tuition-free higher education, free public transport and the care reform.

"These aren't the types of things that you do once for free and then it's done; they constantly require additional money," he highlighted. "It's not a question of us having little money, but rather how demanding we are — what we want in return. For €17 billion, you can get exactly €17 billion worth of stuff."

The auditor general confirmed that there's nothing wrong with the state's finances, adding that the state's accounts are in good order. But as long as MPs interested in the matter don't understand the state budget, he continued, there can be no talk about the state's finances being in order.

Regarding planned new taxes, Holm said that it's understandable for taxes to have differing motives; what's important is that the tax also impacts the behavior it's targeting. He also added that there's no need to be ashamed when a tax's goal, such as that of the planned car tax, is to implement a budget.

Constitutional institutions, he went on, must request supplementary funding from the minister of finance. According to Holm, he hasn't done so on five out of six occasions, as he can't picture a situation in which the audit office requests money from an auditee.

"That we'll close the doors and discuss," he commented. "And if it's claimed later that you didn't notice that because you were given money or we paid too close attention to something because we didn't receive money — absolutely no one needs a situation like that. I believe that's abnormal."


Follow ERR News on Facebook and Twitter and never miss an update!Holm added that in Latvia and Lithuania, for example, the budget of the state audit office is determined by parliament, as is the case in many other countries.

Editor: Aili Vahtla

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