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Audit office: Local governments should better reduce corruption risks

National Audit Office logo.
National Audit Office logo. Source: National Audit Office

The National Audit Office finds that local governments should start giving more attention to the threats of corruption, noting that they understand corruption as a phenomenon but are unable or do not want to see the risks when it comes to their own companies.

The audit revealed that the activites of organizations' managers or management is typically not covered by control measures, according to a National Audit Office press release. This is, however, the very level on which risks are higher, as those people among the management are often related to private entrepreneurs, and the risk is even higher in the enterprises of local governments.

For example, 93 percent of managers of the commercial businesses and foundations of local governments, or 412 in total, were directly related to a private business in 2015.

A control system that prevents corruption in audited organizations also needs general improvement, as the necesssary system only existed in a few sectors of these organizations.

Issues found in two-thirds of auditees

Conflicts of interest and issues with compliance with the Anti-Corruption Act were found in 12 of 18, i.e. two-thirds, of audited units. In most cases, an official had participated in a purchase transaction with their private business in a manner that allowed them to influence the circumstances or consequences of the transaction, e.g. selection of the transaction partner or drafting of the contract.

The Public Procurement Act had also bbeen breached in most of these cases, as purchases from the official's company had been made without a procurement and without obtaining comparable tenders. The heads of six organizations had determined their own remuneration. Weak procedures were the isssue in the use of official cars in some organizations, as they did not provide reassurance that the vehicles were not unreasonably used for private purposes; identifying any direct breaches was impossible.

According to the National Audit Office, the issue is that organizations do not inspect the activities of their officials or raise their awareness despite their obligation to do so. The audit office emphasizes that the breaches identified would have been fairly easy to prevent, as they were driven by the inadequate acknowledgement of obligations, convenience and so on rather than the desire to take advantage of one's position of power. 39 percent of auditees, or seven units, had carried out inspections to some extent. Unfortunately, these inspections were more formal than substantive and often nothing at all had been done in the last couple of years. The situation in raising awareness was almost the same.

Anti-corruption strategy initiatives not going as planned

The National Audit Office admitted that developments initiated in the Estonian Anti-Corruption Strategy 2013-2020 have not progressed as expected. Last year, the state was supposed to draw up risk management and internal control guidelines as well as produce an e-tool which would allow everyone to see with whom the local government has concluded transactions.

"It's also a pity that the opportunity to come out with these tools before the administrative reform is being lost," said audit manager Tambet Drell. "Everyone knows that a time of structural reforms is the best moment for giving a good start to new solutions."

The National Audit Office advised Minister of Justice Urmas Reinsalu (IRL) as the person in charge of the implementation of the Anti-Corruption Strategy to be more demanding with respect to its goals and take measures to ensure that the promised tools for preventing corruption more effectively are drawn up as intended.

Audit emphasized anti-corruption compliance

The audit carried out by the National Audit Office placed the emphasis on compliance with the Anti-Corruption Act by local government businesses, as public and local government businesses alike have been given little attention in terms of preventing corruption.

Another incentive of the audit was to study the effect of the principal amendment made to the Anti-Corruption Act calling for greater awareness in recognizing corruption. In areas at risk of corruption, the audit office checked whether taxpayers' money had been used to make purchases from or pay support to one's own company or pay wages to oneself. Using official cars as one of the primary benefits was also studied. All of this was reviewed on the basis of activities carried out from 2015-2016.

Seven local governments together with all of their agencies as well as 11 local government businesses and nine local governments that own them were audited. The auditees included Hiiu, Järvakandi, Käina, Mooste and Raikküla Municipalities, the towns of Tõrva and Viljandi, AS Maardu Vesi, AS Narva Vesi, AS Rakvere Soojus, Huvitegevuse ja Noorsootöö SA (Harku), OÜ Kadrina Hooldekodu, OÜ Kadrina Kommunaal, OÜ Kehtna Elamu, OÜ Maardu Linnavarahooldus, OÜ Pandivere Vesi (Väike-Maarja), OÜ Põltsamaa Vallavara and OÜ Tartu Valla Kommunaal.


To read the full audit report, click here (link to PDF in Estonian).

Editor: Aili Vahtla

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