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Finance ministry: Audit office criticism on funds allocation needs 'clarification'

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The "Super Ministry" building, which houses the Ministry of Finance, in Tallinn. Source: Siim Lõvi /ERR

The Ministry of Finance says it cannot understand a National Audit Office (Riigikontroll) assessment to the effect that ministries should not allocate money to municipalities by means of orders.

The audit office says instead that all such allocations should be contained within the state budget. As things stand, the ministry says it is not planning to make any changes until the above criticism form the audit office has been clarified.

In searching for additional funding for teacher wage increases within her ministry's purview, Minister of Education Kristina Kallas (Eesti 200) allocated an additional €5.35 million to municipalities, for that purpose.

According to the National Audit Office, however, this was not a legal act, as the state budget adopted by the Riigikogu for 2024 stated that the amount of support was to be €485.5 million.

The auditor general meanwhile said that ministries should not be able to alter the state budget without this being processed by the Riigikogu.

If the Riigikogu has provided for a set amount for anything in the budget, only the Riigikogu itself should be able to amend that. The National Audit Office also forwarded its criticism to the ministries.

Regina Vällik, head of the financial department of the Ministry of Finance, said that while she understands what the audit office is trying to say, its criticism still remains somewhat incomprehensible.

Vällik said: "At present it is not clear to us how our current practice, which has been as it is for many years, runs contrary to the law or is not correct, by any nuance."

More specifically, according to Vällik it is quite common for ministries more generally to allocate money to municipalities for various reasons, and this model is quite common.

In addition to the allocations from the Ministry of Education, she also points out, for example, the Ministry of Economic Affairs and Communications, and the Ministry of Culture, the latter of which supports cultural activities in municipalities in this way.

Vällik said she could not state exactly how much money the ministries and the ministers provide to local governments each year, but says she views the amount as "quite considerable."

The Ministry of Finance says it is is now planning to analyze and respond to the criticisms which have from the National Audit Office. "We are trying to find out first what the National Audit Office wanted to say and which provision or section the office thinks we have applied incorrectly," Vällik said.

"Then we can continue to discuss whether we disagree that in our opinion everything is allowed. Or we really come to the conclusion that there are multiple interpretations and it is necessary to correct either the practice or the wording in some section of the law," added Vällik.

According to Vällik, if a conclusion is reached that in the future, ministries should not allocate money to local governments without the approval of the Riigikogu, for example, significantly more work would need to be done when preparing the state budget for the next year, and potential allocations should be included ahead of its adoption.

Or, as another alternative, all amendments of this type should be processed at the Riigikogu as an amendment to the State Budget Act.

Come what may the Ministry of Finance says it expects a broader discussion or discussion with the audit office on the topic of allocations of funds..

In a memo sent on January 12, Auditor General Janar Holm stated to the finance minister as well as to the education minister and the regional affairs minister, that the above issue is not merely a formality or a technical matter, but is a fundamental, essential one.

Holm said that allocating money from ministries over and above the state budget sum allocated to them renders the budget itself more and more trivial.

This in turn renders the legislature itself increasingly trivial given that it is this institution which passes the state budget.

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Editor: Andrew Whyte

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