In June, Minister of Regional Affairs and Agriculture Hendrik Johannes Terras (Eesti 200) signed a decision to initiate a special audit at Eesti Post to assess how the company's management decisions from July 2020 through the end of May this year have affected its financial performance and position.

Auditor General Janar Holm told ERR that, based on publicly available information and the reasoning provided, conducting such an audit is, in his view, neither necessary nor reasonable.

"The minister has publicly justified the audit by citing the risk of insolvency this fall. The management board has stated that such a risk does not exist. I have no information as to whether the risk is likely or not, but even if the insolvency scenario were probable, the planned audit would do nothing to prevent it," Holm said.

He added that, if anything, the audit-related expenses would more likely accelerate the onset of the insolvency feared.

"First, the audit would be of no practical use because the terms of reference specify that the final report is expected in six months — after the feared autumn period. Secondly, the audit questions, which focus on how the state-owned company has been managed from July 2020 to the end of this May, and whether issues raised in a similar audit five years ago have been resolved, are irrelevant to the minister's stated concern," Holm explained.

According to Holm, if answers to such questions are needed, the minister should turn to the responsible officials within his ministry or, as the shareholder, to the company's supervisory and management boards.

"If the problem is an acute risk of insolvency, the real question is whether it's worth spending even a single working hour on what happened in 2020," he emphasized.

Holm noted that even without a special audit, it is well known that the cost of providing the universal postal service assigned to Eesti Post has for years exceeded the revenue it generates by millions of euros. The funding model for the universal service is broken, and as a result, the company has operated at a loss — something ministers responsible for the sector have been aware of for years.

"Ministers have promised amendments to the Postal Act for years to help avoid such losses. This hasn't happened, and that too is part of the answer the minister is seeking," Holm said.

He acknowledged positively that Terras, on June 19, finally sent out long-awaited amendments to the Postal Act for interministerial coordination.

Still, Holm warned that publicly announcing a special audit sends a serious message, which also affects the company's reputation.

"A special audit should not become a substitute for effective corporate governance. Its purpose is different from outsourcing a retrospective review of how a company has been managed," he stressed.

Holm believes a major issue with state-owned enterprises is that ownership-level interest in their operations often only arises when serious problems begin to emerge. This can give the public the impression that the audit is being used to deflect attention from previous inaction or to assign blame rather than find solutions.

Eesti Post, which operates under the Omniva brand, is a state-owned company responsible for delivering letters and other postal items both within Estonia and internationally. It also holds the license to provide the universal postal service.

--

Follow ERR News on Facebook, Bluesky and X and never miss an update!