STATE AUDIT OFFICE OF THE REPUBLIC OF LATVIA … ENG/Audit report/2014/2.4.1-9... · 3 Legal basis...

STATE AUDIT OFFICE OF THE REPUBLIC OF LATVIA

Fifth audit department _______________________________________________________________________________________________________

50 SKANSTES STREET, RIGA, LV – 1013

Phone 67017619, 67017507, fax 67017673, e-mail: [email protected]

Riga

01.04.2015. No 2.4.1-9/2014

Informative report

MUNICIPAL FINANCIAL RESOURCES FOR CULTURE, RECREATION

AND SPORT ACTIVITIES ARE SPENT WITHOUT

EVALUATION OF ACHIEVED RESULTS

2

Content Legal basis of audit ................................................................................ Error! Bookmark not defined.

Goal of audit ........................................................................................... Error! Bookmark not defined.

Responsibility of State Audit Office auditors ......................................................................................... 3

Responsibility of auditable institution ..................................................................................................... 3

Scope of audit ......................................................................................... Error! Bookmark not defined.

Short description of auditable sphere ..................................................... Error! Bookmark not defined.

Summary of statements and conclusions made during the audi ............................................................ 11

1. Planning of development. ................................................................................................................ 12

2. Documents of institution management and planning of activities. .................................................. 14

3. Budget planning and control, linking to the planning of development ............................................ 17

4. Monitoring of activity. ..................................................................................................................... 19

5. Costs ................................................................................................................................................. 21

5.1. Costs of business trips .................................................................... Error! Bookmark not defined.

5.2. Costs of transport ............................................................................ Error! Bookmark not defined.

5.3. Procurements and outsorcing ......................................................... Error! Bookmark not defined.

5.4. Costs for projects of non-governmental organizations ................... Error! Bookmark not defined.

5.5. Costs of representation and feeding services ................................................................................. 23

5.6. Prices of charged services provided by municipality are not ecomonically justified.………..…...23

Suggestions expressed in the result of audit and improvements already achieved during the audit ..... 23

3

Legal basis of audit

1. Pursuant to the section 2 of State Audit Office Law, work plan of State Audit Office for

year 2014 and audit task No 2.4.1-9/2014 of State Audit Office First audit department,

dated on April 7, 2014, regulatory audit on expediency of the use of Cesis region, Talsi

region, Bauska region, Tukums region, Limbazi region, Dobele region, Salaspils region,

Sigulda region, Ergli region, Skriveri region, Nicas region, Balvi region and Rezekne city

council (hereafter referred as Municipalities) financial resources for culture, recreation and

sport activities and their conformity to the requirements of legal acts has been performed.

Goal of audit

2. Audit was executed in order to get sufficient confidence, whether Municipalities had

ensured expediency of the use of financial resources for culture, recreation and sport

activities and conformity to the requirements of legal acts within time period from January

1, 2013 till December 31, 2013.

Responsibility of State Audit Office auditors

3. State Audit Office auditors are responsible for the provision of report based on respective,

sufficient and credible audit evidences acquired during the audit.

Responsibility of auditable institution

4. Municipalities are responsible for observation of legal acts and accuracy of the information

provided to auditors.

Scope of audit

5. Audit has been performed according to the international audit standards acknowledged in

the Republic of Latvia. Audit is planned and executed in a way to get reasonable

confidence on expediency of the use of financial resources for culture, recreation and sport

activities and conformity to the requirements of legal acts.

6. Inspections on economy1, efficiency

2 and productivity

3 of the operation of auditable

institution were executed within the regulatory audit. Evaluation4 of one or several aspects

of regulatory audit can be made during the regulatory audit (see, image 1).

1 Economy – low cost preservation. According to Audit standards „economy” means reduction of costs used for

the provision of operation by maintaining respective quality at the same time. ISSAI 3000, Standards and

guidelines for performance auditing based on INTOSAI’s Auditing Standards and practical experience

(pieejams: http://www.issai.org/media/13517/performance_audit_guidelines_e.pdf) page 15 (viewed on March

2, 2015). 2 Efficiency – effective use of current resources. According to Audit standards „efficiency” can be related to the

economy. Upon the evaluation of efficiency, current resources were considered and in what amount forwarded

goals can be achieved with current resources. ISSAI 3000, Standards and guidelines for performance auditing

based on INTOSAI’s Auditing Standards and practical experience (available at

http://www.issai.org/media/13517/performance_audit_guidelines_e.pdf) page 15 (viewed on March 2, 2015). 3 Productivity – use of available resources. According to Audit standards, productivity is related to economy.

The main issue here is also related to the use of resources. Main issue is the following: if those resources are

used optimally and satisfactory, if it would be possible to achieve results with the same quality and time

schedule, using less amount of resources. Can we achieve the best result – by means of quality and time – with

the same investments and performed activities? The question is about the proportion between quantity and

quality of provided services and costs needed for their production in order to achieve the best result. ISSAI

3000, Standards and guidelines for performance auditing based on INTOSAI’s Auditing Standards and

practical experience (available at http://www.issai.org/media/13517/performance_audit_guidelines_e.pdf)

page 15 (viewed on March 2, 2015). 4 ISSAI 3000, Standards and guidelines for performance auditing based on INTOSAI’s Auditing Standards and

practical experience (available at http://www.issai.org/media/13517/performance_audit_guidelines_e.pdf)

page 15 (viewed on March 2, 2015).

4

Image 1. Economy and efficiency in regulatory audit.

7. Audit was executed for the period from January 1, 2013 till December 31, 2013 by the

evaluation of efficiency and economy aspects in the action of Municipality.

8. Audit procedures were executed in Municipalities and their institutions which receive

financing from budget functional category 08.000 „Recreation, culture and religion”.

9. Several Municipality institutions acting in the sphere of sports were not included in the

scope of audit because they realize the function of education and receive the greater part of

financing from functional category 09.000 „Education”.

10. Scope of audit does not include the issues on the implementation of culture policy by the

Ministry of Culture as state administration leading institution in the sphere of culture

because in year 2013 intermediate and final influence evaluation5 of long-term policy

guidelines “National culture policy guidelines for 2006-2015 “National country”” was

made upon the request of the Ministry of Culture and this evaluation included the

information on the realization of culture policy in year 2013.

11. 13 audit reports have been drawn up in the result of audit, as well as this informative report

which includes information on common problems and characteristic shortages in the

operation of Municipalities in goal indication process, activity and budget planning, as well

as execution of tasks in the sphere of culture, recreation and sports.

12. In order to get confidence that Municipalities use financial resources for culture, recreation

and sport events in economic and effective way, the following was inspected in the audit:

5 Intermediate evaluation of cultural policy guidelines,

http://www.km.gov.lv/lv/doc/dokumenti/NV_starpposma_novertejums.pdf (viewed on January 30, 2015).

Goal Goals stated in municipality

development planning and industry

policy planning documents

regarding the sphere of culture,

recreation and sports. For example,

attractive culture, recreation and

sports environment and availability

of events have been provided.

Efficiency

Result Numeral and measurable

indicators, characterizing the

result. For example, number of

events and visitors, number of

facilitated areas and infrastructure

objects (Qty) and area (m2),

increase of the number of satisfied

inhabitants in %.

Activities Actions and tasks stated in

development and policy planning

and institution management

documents (strategies of

institutions and annual work

plans).

Investment

Financial resources of 08.000

functional category „Recreation,

culture and religion” granted in the

budget of municipality.

Eco

nom

y

5

12.1. if organization of development planning system in Municipalities, activities

indicated in planning documents6 and actually performed actions ensure the

achievement of goals stated regarding the sphere of culture, recreation and sports,

and if those goals have been determined by studying problems existing in

Municipality and needs of inhabitants;

12.2. if planning of Municipality budget and development of budget request meets the

requirements of legal acts7, namely, if budget resources are prevised for the realization

of goals indicated in development planning documents and if finance resource

application control are performed;

12.3. if the activity of Municipality institutions in the sphere of culture, recreation and sports

is economic and correspondent to the requirements of legal acts, namely:

12.3.1. if financial resources of Municipality budget prevised for remuneration – by the

purchase of outsourcing, are used due to the requirements of legal act8 and in

economic way;

12.3.2. if financial resources of Municipality budget prevised for business trips are used

due to the requirements of legal act 9

and in economic way;

12.3.3. if financial resources of Municipality budget prevised for transport are used due

to the requirements of legal act 10

and in economic way;

12.3.4. if financial resources of Municipality budget prevised for the purchase of goods

and services, necessary for the provision of the course of planed events, has been

used due to the requirements of legal acts11

and if respective purchase

procedures have been applied;

12.3.5. if Municipalities have acted due to the requirements of legal acts12

upon granting

the financing to non-governmental organizations for realization of various

activities in the sphere of culture, recreation and sports;

12.4. if institutional system developed by Municipalities are optimal for the achievement of

goals indicated in Municipality development planning documents and execution of

tasks.

Short description of auditable sphere

Regional cultural policy up to 2014 realized by the Ministry of Culture and its results

13. Ministry of Culture is state management leading institution in the sphere of culture which

develops culture policy, as well as organizes and coordinates its implementation13

.

6 Municipality policy planning, territory development planning and management documents – activity, work

plans, investment plans, strategies and event plans developed by institutions. 7 Section 2 and 17 of Law “On budgets of municipalities”, section 6, part 3 of Development planning system

law. 8 Section 3 and 9.

1 of Law on prevention of squandering of the financial resources and property of the State and

local governments. 9 Section 3 of Law on prevention of squandering of the financial resources and property of the State and local

governments, provisions No 969 “Procedures for reimbursement of expenses relating to official travels” issued

by the Cabinet of Ministers (hereinafter referred as CM) on October 12, 2010. 10

Section 3 and section 5.2, part 2 of Law on prevention of squandering of the financial resources and property

of the State and local governments. 11

Section 3 of Law on prevention of squandering of the financial resources and property of the State and local

governments, Public procurement law, section 46, part 1 of Law „On budget and financial management”. 12

Section 3 of Law on prevention of squandering of the financial resources and property of the State and local

governments. 13

Provisions No 241 „By-law of the Ministry of Culture” issues by CM on April 29, 2003.

6

14. According to National cultural policy guidelines for the promotion of culture development

in regions per 2013, the following goal was stated „To promote balanced development of

culture processes and availability of culture in whole territory of Latvia by providing

rights to qualitative living-space for all inhabitants of country” and medium-term priority

„Development of regional cultural policy”14

.

15. Upon realization of strategic goal15

of cultural policy, nine courses of activity were

determined for the Ministry of Culture, including:

15.1. performance of systemic researches on processes of culture in regions of Latvia and

logic municipalities;

15.2. formation of regional and local cultural policy oriented to balanced territorial

development, strengthening of the identity of heritage regions and local culture by

advancing availability of equal culture service in whole territory of Latvia;

15.3. renewal and modernization of Municipalities’ culture infrastructure;

15.4. establishment of favourable conditions for the development of non-governmental

organizations activity in Municipalities;

15.5. promotion of the availability of professional art in whole territory of Latvia.

16. In 2013 the evaluation16

of intermediate and final influence of Cultural policy guidelines

was performed. It was stated that inter alia17

the Ministry of Culture:

16.1. has not directly initiated the performance of researches about influence of culture on

the development of territory. Digital culture map of Latvia has been developed and

after its complete implementation it would be the basis for acceptance of cultural

policy decisions, summary of statistics in the sphere of culture and also the basis for

further researches18

;

16.2. has ensured that in main national development planning documents the culture has

been included as one of conditions for sustainable development of territories, as well

as basket19

of culture services due to population level, but national and municipal

cultural responsibility and functions have not been precisely separated, as well as no

information is available on activities performed by the Ministry of Culture regarding

the promotion of development and implementation20

of regional culture program;

16.3. realizes several regional activities in order to provide availability of culture services

for population, but those activities are single and non-systematic;

14

„National cultural policy guidelines 2006–2015. National country”” (valid till July 29, 2014.), approved by the

order No 264 “On long-term policy guidelines “National cultural policy guidelines 2006–2015. National

country”” issued by CM on April 18, 2006. Chapter V of Cultural policy guidelines „Vision, strategic goals

and priorities of cultural policy” and Chapter VI „cultural policy courses of activity, prior tasks for medium-

term and achievable results”. 15

„To promote balanced development of culture processes and availability of culture in whole territory of Latvia

by providing rights to qualitative living-space for all inhabitants of country”. 16

Evaluation of cultural policy intermediate,

http://www.km.gov.lv/lv/doc/dokumenti/NV_starpposma_novertejums.pdf (viewed at January 30, 2015.). 17

Evaluation of cultural policy intermediate, evaluation of 4th

strategic goal. Up to 2014, the following amount

from 32 main tasks of the course of activity targeted to the development of regional cultural policy has been

executed: complete execution of 11 tasks, partial execution of 10 tasks and 10 non-executed tasks, but

information about one task has not been included in intermediate influence evaluation. 18

Evaluation of cultural policy intermediate, 4.1.evaluation of the course of activity. 19

Basket of culture services due to each population level has been defined in guidelines of cultural policy

„National cultural policy guidelines 2006–2015. National country””, as the result of policy (page 46). Basket

of minimal culture services has been integrated in Culture policy guidelines „National cultural policy

guidelines „Creative Latvia 2014–2020”” (Appendix 3). 20

Evaluation of cultural policy intermediate, 4.2.evaluation of the course of activity.

7

16.4. realizes functional supervision of museum and library sphere as the monitoring

instrument by the application of accreditation, but such supervision is not realized

regarding the culture centers, as well as concept on the development of culture centers

activity21

has not been developed;

16.5. has not promoted development of activity of the culture non-governmental

organizations in Municipalities, because it is stated that this action is not direct

competence of the Ministry of Culture, although the realization of tasks of the course

of activity22

does not require execution of direct activity of the Ministry of Culture23

.

17. According to the intermediate and final influence evaluation24

of Cultural policy

guidelines, new medium-term cultural policy planning document – „National cultural

policy guidelines „Creative Latvia 2014–2020””25

was developed.

Role of Municipalities in realization of cultural policies

18. Larger part of culture institutions are located outside the capital and are in charge of

Municipalities, wherewith the supervision of those institutions and formation of local

cultural policy is not direct competence of the Ministry of Culture. Ministry of Culture can

ensure support by drawing up the respective legal acts and policy documents, providing

methodic support and ensuring predictable and targeted financial support26

linked to the

priorities of cultural policy.

19. As, up to 2014 the Ministry of Culture had not made researches on processes of culture in

the regions and local municipalities of Latvia, actual problems and needs of inhabitants of

regions and municipalities which had to be solved by municipalities in 2013 for

development and implementation of regional cultural policy have not been stated.

Particular tasks for Municipalities were not defined regarding the promotion of

achievement of strategic goal „To promote balanced development of culture processes and

availability of culture in whole territory of Latvia by providing rights to qualitative living-

space for all inhabitants of country” and medium-term priorities „Formation of regional

cultural policy”27

.

20. According to the information28

provided by the Ministry of Culture, generally

Municipalities provide to inhabitants the services included in the basket of minimal culture

services, as well as ensure the activity of amateur performance collectives and Song-

festival movement. Ministry of Culture does not intervene in the work of Municipalities by

defining events which must be organized because Municipalities themselves can better

evaluate the needs of inhabitants. In the opinion of the Ministry of Culture the justification

for event organization is subjective wherewith it is not possible to draw up criteria for the

evaluation of the quality of events.

21


„Formation of favourable conditions for the development of activity of culture NGO in municipalities”. 23


Evaluation of cultural policy intermediate (available at

http://www.km.gov.lv/lv/doc/dokumenti/NV_starpposma_novertejums.pdf) (viewed on January 30, 2015). 25

Although cultural policy guidelines were still valid and prevised activities till 2015.gadam, new medium-term

cultural policy planning document „National cultural policy guidelines „Creative Latvia 2014–2020””

(approved by the order No 401 „On cultural policy guidelines 2014-2020 „Creative Latvia”” was developed

and issued by CM on July 29, 2014). 26


Chapter V of Cultural policy guidelines „Vision, strategic goals and priorities of cultural policy”. 28

Minutes of interview made by State Audit Service, dated on September 4, 2014.

8

21. Ministry of Culture simultaneously points29

that by the organization of events,

Municipalities must try to develop their own identity in order not to have uniform events in

several Municipalities.

22. Municipalities point that cooperation with the Ministry of Culture and subordination

institutions mainly is related to the accreditation of museums and libraries, as well as

activity of amateur performance collectives, however individual Municipalities would like

to get greater support for renewal and modernization of culture infrastructure, and

promotion of availability of professional art.

23. According to the law30

, 22 autonomous functions have been stated for Municipalities,

including:

23.1. taking care on the culture and promotion of the preservation of traditional values

of culture, as well as development of people’s art (organizing and financial

support for culture institutions and events, support for the preservation of cultural

monuments, etc)31

;

23.2. promotion of healthy lifestyle of inhabitants and sports32

.

In order to ensure promotion of the development of culture, recreation and sports sphere,

the goal, task and action must be defined33

in development planning document, but

medium-term priorities and totality34

of events necessary for their implementation – in

medium-term territory development planning documents.

24. In development planning documents, Municipalities must forward goals and achievable

results related to the respective policy or territory, describe recognized problems and

previse their solutions, make evaluation of possible influence of those solutions, as well as

to plan activities35

required for the further implementation of policy and evaluation of

results.

25. Wherewith Municipalities must state goals in the sphere of culture, recreation and sports in

territory planning and policy documents, but particular activities, actions and tasks must be

determined in development planning activity documents (development program) and

management documents of institution (strategies of institutions and annual work plans of

institutions).

Characteristics of Municipalities

26. According to data of the Office of Citizenship and Migration affairs, 13 Municipalities

included in the scope of audit on January 1, 2013 there was 250 568 inhabitants; larger

number of inhabitants was in Rezekne city municipality – 32 439, but the smallest number

of inhabitants was in Ergli region municipality – 3385.

27. Financing granted for the sphere of culture, recreation and sports in 2013, significantly

differs among Municipalities (see image 2).

29

Minutes of interview made by State Audit Service, dated on September 4, 2014. 30

Law „On municipalities”. 31

Section 15, part 1, clause 5 of Law „On municipalities”. 32

Section 12, part1, clause 6 Law „On municipalities”. 33

Section 6, part 2 of Development planning system law. 34


Section 3, part 2, section 4, section 13, part 3 of Development planning system law.

9

Image 2. Financing granted by Municipality regarding the sphere of

culture, recreation and sports.

28. Rezekne city municipality had larger financing in functional category 08.000 „Recreation,

culture and religion” in year 2013 – 13 042 890 euros, but the lowest financing in this

category was for Skriveri region municipality – 257 887 euros, however we must consider

that within this time period Rezekne city, Cesis and Talsi region municipalities has made

significant capital investments in culture infrastructure objects.

29. Larger maintenance costs36

towards total maintenance costs of municipality included in

functional category 08.000 „ Recreation, culture and religion” was for Tukums – 13%,

Limbazi – 12% and Talsi – 12% region municipalities, but the lowest maintenance costs –

Balvi, Dobele, Nica, Sigulda and Skriveri region Municipalities – 8% (see Table 1).

Table 1

Characteristic indicators of cultural life of Municipalities in 2013

Region/ city Number of

inhabitants

Number37

of

Municipality

institutions acting

in the sphere of

culture

Inhabitants

involved in

amateur

performance

collectives (%)

Proportion of

maintenance

costs towards the

financing of

basic budget (%)

Maintenance

costs per one

inhabitant

(EUR)

1 2 3 4 5 6

Talsi region 32 895 50 5 12 83

Rezekne region 32 439 7 2 11 77

Tukums region 31 704 33 5 13 98

Bauska region 26 488 31 4 9 67

Dobele region 23 135 19 3 8 63

Salaspils region 22 728 6 4 10 58

Limbazi region 18 719 29 6 12 84

Cesis region 18 699 6 3 9 80

Sigulda region 17 990 10 3 8 68

36

Costs for payment of employees’ remunerations, taxes, business trips, payment communication and communal

services, maintenance and repair of buildings and houses, administrative expenses, as well as purchase of

various goods and materials. 37

Museums, libraries, culture houses, meeting houses, leisure time spending centers, interest centers, public

centers; cinema “Auseklis” in Talsi region, concert-hall “Cesis” in Cesis region, Latgale representation “Gors”

in Rezekne city, concert-hall “Baltais Fligelis” in Sigulda region.

13

04

2 8

90

8 1

49

81

0

7 4

92

34

1

4 7

37

34

8

3 0

88

80

6

1 6

97

36

2

1 5

06

05

3

1 3

80

81

3

1 3

55

00

5

1 2

94

86

2

32

1 2

08

28

5 5

65

25

7 8

87

2 4

79

47

4

1 4

97

40

2

2 7

21

69

1

3 1

33

18

1

1 7

60

59

5

1 5

81

86

8

1 4

56

53

4

1 3

26

77

4

1 0

79

13

9

1 2

30

78

1

22

3 1

46

25

4 9

67

24

6 8

63

0

2 000 000

4 000 000

6 000 000

8 000 000

10 000 000

12 000 000

14 000 000

Kopējais

finansējums

funkcionālajā

kategorijā

„Atpūta, kultūra

un reliģija”

(EUR)

10

Region/ city Number of

inhabitants

Number37

of

Municipality

institutions acting

in the sphere of

culture

Inhabitants

involved in

amateur

performance

collectives (%)

Proportion of

maintenance

costs towards the

financing of

basic budget (%)

Maintenance

costs per one

inhabitant

(EUR)

1 2 3 4 5 6

Balvi region 14 778 23 8 8 73

Skriveri region 3 883 3 7 8 64

Nica region 3 725 4 8 8 60

Ergli region 3 385 9 10 10 75

In average: 5 10 73

30. Tukums region municipality had larger maintenance costs of institutions per one inhabitant

in 2013 – 98 euros, but lowest in Salaspils region – 58 euros (see Table 1). Upon

evaluation of maintenance costs towards the amount of inhabitants, it was stated that most

of financial resources of functional category 08.000 „Recreation, culture and religion” for

maintenance costs were used in Tukums, Limbazi, Talsi, Cesis, Ergli region and Rezekne

city municipalities.

31. In order to ensure execution of functions and volunteer initiative of municipality stated in

legal acts regarding the sphere of culture, recreation and sports, 256 institutions were

established by Municipalities, including, administrations of Municipalities and their

structural units (Culture administrations, Sports administrations), agencies of

Municipalities, libraries and their structural units, Culture centers and structural units –

Culture and Meeting houses, Public centers (see Table 2), as well as are shareholders in

capital companies (Olympic sports centers, multifunctional concert-halls).

Table 2

Number of Municipality institutions acting in the sphere of culture

Region/ city

Number of Municipality institutions

Museum Library Culture

house38

Total

1 2 3 4 5

Talsi region 1 26 23 50

Tukums region 8 14 11 33

Bauska region 3 19 9 31

Limbazi region 4 16 9 29

Balvi region 1 11 11 23

Dobele region 1 12 6 19

Sigulda region No 5 5 10

Ergli region 2 4 3 9

Rezekne region 1 3 3 7

Salaspils region 1 3 2 6

Cesis region 1 3 2 6

Nica region No 2 2 4

Skriveri region No 2 1 3

38

Including meeting houses, leisure time spending centers, interest centers, public centers; cinema “Auseklis” in

Talsi region, concert-hall “Cesis” in Cesis region, Latgale representation “Gors” in Rezekne city, concert-hall

“Baltais Fligelis” in Sigulda region.

11

Summary of audit statements and conclusions

Image 3. Shortages in activity of Municipalities in the sphere of culture, recreation and sports.

• Medium-term budget planning has not been realized, financing has not been linked to particular activities directed to the achievement of goals (subsection 1.3. and 3.1.).

• Within one municipality there is no joint order for budget planning (subsection 3.1.).

• There is no sufficient explanations in budget explanatory note, goals of financing has not been particularly stated in budget requests (subsection 3.1.).

• There is no efficiency control of budget execution (subsection 3.2.).

• Supervision of activity has not been made due to the order stated in planning documents (subsection 4.1.).

• Supervision documents have not been prepared (subsection 4.1.).

• Timely recognition of problems and provision of sugestions for improvement of activity have not been made (subsection 4.1.).

• Measurable resultative indicators characterizing the results of activity (subsection 4.2.).

• Operation strategies and annual work plans of institutions have not been drawn up (subsection 2.1.).

• Annual work plans have been drawn up as calendar plans of events without inclusion of tasks specified in other planning documents (subsection 2.1.).

• Management documents of institutions have not been linked to the higher level planning documents (subsection 2.1.).

• Management document of institutions does not include terms, responsible persons and financing (subsection 2.1.).

• Planning of events not always is linked to the particular goals, priorities have not been defined, number of visitors has not been determined (subsection 2.2.).

• Planning documents have not been developed and updated (subsection 1.1. and 4.1.).

• Goals do not meet actual needs of inhabitants and activities are not linked to the achievable goal (subsection 1.2.).

• Cost for the achievement of goals has not been calculated and analysis of alternative solutions has not been made (subsection 1.3.).

• Particular terms and responsible persons have not been stated (subsection 1.4.).

1. Planning of development,

goals and results

2. Management documents of

institutions and planning of

events

3. Budget planning, linking with development

planning

4. Supervision, control

During the audit we have got a confidence that financial resources of Municipalities in

the amount of 44,5 mln euros for culture, recreation and sports events (function category

08.000 „Recreation, culture and religion”) have been spent in possibly effective and

economic way, ie., goals defined by Municipalities in the sphere of culture, recreation

and sports have been achieved in the most complete way and with possibly less expenses

using the granted financial resources, because the activity of Municipalities regarding the

sphere of culture, recreation and sports was not planned and organized due to previously

developed planning documents, activities specified in development planning documents

was not realized or only partial realization was executed, issues on the planning of

development, budget and operation of institutions and control of execution was not

observed (see Image 3).

Shortages in the internal control system of Municipalities, including, the draw up cost

justification documents, did not allow to get confidence that financial resources in the

amount of at least 543 thousand euros have been used justly, ie., they have been

necessary for implementation of tasks related to the sphere of culture, recreation and

sports.

12

1. Planning documents are not complete, in order to use them in the planning of activity

and financing, as well as for evaluation of activity results.

1.1.Planning documents have not been developed and updated.

32. Within auditable time period, long-term and medium-term development planning

documents, ie., development strategies, development programs of regions, were developed

and valid in Municipalities, except Talsi39

and Skriveri region municipalities.

33. Only one – Rezekne city municipality – out of 13 Municipalities had developed

both planning documents of culture40

and sports41

industry, Cesis region had

developed planning document42

of culture industry, but Sigulda and Salaspils region had

developed planning documents43

of sports industry.

34. Development planning is the drawing up of principles, goals and activities necessary for

their achievement, aimed to the realization of politically defined priorities and provision of

society and territory development. The goal of development planning system is realization

of priorities and provision of development planning linking to financial planning and

mutual coordination44

of decisions taken by institutions.

35. Development planning documents are policy planning documents, management documents

of institutions and territory development planning documents. Management documents of

institutions are operation strategies and annual work plan45

of institution.

Table 3

Development and industry planning documents of Municipalities in 2013

Region/ city

Long-term

planning

document

Medium-term

planning

document

Planning

documents of

culture industry

Planning

document of

sports industry 1 2 3 4 5

Balvi region No Yes No No

Bauska region Yes Yes No No

Cesis region No Yes Yes No

Dobele region Yes Yes No No

Ergli region Yes Yes No No

Limbazi region No Yes No No

Nica region46

Yes Yes No No

39

Talsi region development program for 2014-2020 (approved by decision No 130 of Talsi region municipality,

dated on March 1, 2012, Minutes No 4, dated in January 31, 2012, final wording). Talsi region development

program39

for 2014–2020 includes Strategy for 2012–2013 with activities which were planned to be realized in

the period from 2007 till 2013, as well as the Strategy for 2014–2020. 40

Report on Rezekne city cultural tourism research. Development concept of cultural tourism, accepted by

Rezekne city council on September 28, 2012, by signing acceptance-conveyance deed to the contract

No 3.1.1.-4.2/5. 41

Sports development guidelines of Rezekne city for 2009 – 2015, approved by decision No 136 taken by

Rezekne city council on September 28, 2009 (clause 3 of Minutes No 10). 42

Culture strategy of Cesis for 2008.–2013. 43

Sports and leisure activities development strategy of Sigulda region for 2012 – 2017, approved in the Meeting

of Sigulda region council on May 16, 2012 (clause 2 of Minutes No 9) and Sports concept of Salaspils for

2013–2018. 44

Section 3, part 1 and 2 of Development planning system law. 45

Section 6, part 1 of Development planning system law, Section 22 of provisions No 1178 “Provisions on

drawing up of development planning documents and evaluation of impact” issued by CM on October 23, 2009

(valid till 12.12.2014.), Section 20, part 1 and 3, section 23, part 1, 3 and 4 of Public agencies law. 46

In 2013 planning documents were valid in the following districts of Nica region – Development program of

Nica parish for 2009–2015 (approved by decision of Nica region council dated on July 16, 2009. (clause 12 of

Minutes No 3)), Socially economic development strategy of Otanki parish for 2008-2023 (approved by

decision of Otanki parish council dated on September 18, .2008, clause 10 of Minutes No 10).

13

Region/ city

Long-term

planning

document

Medium-term

planning

document

Planning

documents of

culture industry

Planning

document of

sports industry

Rezekne city No Yes Yes Yes

Salaspils region No Yes No Yes

Sigulda region No Yes No Yes

Skriveri region Yes No No No

Talsi region47

No No No No

Tukums region No Yes No No

1.2.Planning documents does not state goals arising from actual needs of inhabitants and

activities are not linked to the achievable goal.

36. In development planning documents Municipalities had described the current situation and

stated strong and weak points, options and risks48

of the sphere of culture and sports,

however Municipalities not always had described particular problems which impact was

planned to be prevised or decrease, and actual satiable needs of inhabitants by realization

of tasks required for achievement of prescribed proprieties and strategic goals.

37. For the promotion of development of the sphere of culture, recreation and sports,

development planning documents drawn up by Municipalities must include goals and

results achievable in particular sphere of policy or territory, describe stated problems and

previse their solutions, evaluate possible impact of those solutions, as well as plan further

activity49

required for implementation of policy and evaluation of results.

38. Upon planning of the development of sports and leisure activities industry and describing

recognized problems (see Image 4), goals justified with problem-analysis were defined by

Rezekne city50

and Sigulda region51

municipality.

Image 4. Identification of problem and definition of goals.

47

Talsi region development program for 2014-2020 (approved by decision No 130 of Talsi region municipality,

dated on March 1, 2012, Minutes No 4, dated in January 31, 2012, final wording). Talsi region development

program for 2014–2020 includes Strategy for 2012–2013 with activities which were planned to be realized in

the period from 2007 till 2013, as well as the Strategy for 2014–2020. 48

For example, part I of Balvi region development program for 2011–2017 „Current situation and analysis of

SWOT” and part 4 of Culture strategy of Cesis for 2008–2013 – Characteristics of culture industry in Cesis

city. 49

Section 3, part 2, section 4, section 13, part 3 of Development planning system law. 50

Sports development guidelines of Rezekne city for 2009 – 2015, page 49, page 51 – 54, page 65. 51

Development program of Sigulda region for 2011 – 2017, approved on March 9, 2011 (clause 8 of Minutes

No 5), page 21 and page 24.

Identifies the problem, need

•In Rezekne city municipality: Inhabitants of municipality are not going in for sports sufficiently which could worsen the condition of inhabitants' health, and Municipality has no sufficient sports infrastructure for the provision of option for

doing sports; •In Sigulda region municipality: Infrastructure of leisure activities – cycle-roads, roads for rollerblading, running tractes – not in sufficient amount.

Definition of goal, according to the identified

problem

•In Rezekne city municipality: To develop the infrastructure of sports industry;

•In Sigulda region municipality: To develop the infrastructure of sports and leisure activities.

14

39. Goals stated in development and industry planning documents of Municipalities in the

sphere of culture, recreation and sports mainly were general, for example:

39.1. „preserved and developed the unique cultural and nature environment”;

39.2. „attractive environment of culture and sports”;

39.3. „to become an attractive place for leisure time spending”.

40. Upon evaluation of priorities, activities, courses of actions and tasks subordinate to those

goals, not always it was possible to conclude the achievable result.

41. Upon evaluation of activities mentioned in development program investment and work

plans of Municipalities, it was stated that particular activities were not prevised for

achievement of all stated goals, as well as it is not possible to get confidence about

activities applied for the performance of all other tasks defined in the development

programs and how their execution will impact the achievement of stated long-term and

medium-term priorities and goals regarding the sphere of culture, recreation and sports.

1.3.Cost for the achievement of goals has not been calculated and analysis of alternative

solutions has not been made.

42. Information how financial resources available in short-term and medium term are

considered by choosing particular activities and tasks, in order to achieve goals stated in

planning document, was not stated in planning documents of Municipalities. Information

and planning documents provided by Municipalities do not give clear concept on

performed activities in order to justify that realized activities will be most economic and

effective.

43. Upon drawing up development planning documents, resources forcasted in current and

medium-term and possible alternatives for problem solving must be evaluated, as well as

most economic and effective solutions must be proposed regarding the costs52

required for

achievement of stated goals.

1.4.In planning documents particular implementation terms are not stated for all activities

which did not provide an option to control their execution and to link the planned action

with the budget of current year.

44. In planning documents of Municipalities there were activities for which particular terms

had not been stated or they were inaccurate or general – determined as several years

period, for example, the term „year 2013 or 2014”, „year 2013 – 2019”, including

activities which cannot be realized within several years.

45. Municipalities pointed that in development planning document formation process,

methodic recommendations53

developed by the Ministry of Regional development and

municipality issues were considered, which state the following: strategy must include real

and sufficiently detailed time schedule.

46. In order to provide linking of development planning and budget planning, clear and precise

terms must be stated for exact planning of finances for respective activity. Besides without

the statement of particular terms it is not possible to provide control of activity execution

and evaluate the impact of activity implementation on the achievement of goals.

2. Management documents54

for all institutions acting in the sphere of culture, recreation

and sports have not been developed – operation strategies and annual work plans of

52

Section 3, part 2, section 4, section 5, part 2, clause 5, section 13, part 3 of Development planning system law. 53

Clause 100 of methodology “Methodic recommendations for drawing up of development programs in regional

and local level” issued by the Ministry of Regional development and municipalities issues, dated on September

23, 2010.

15

institutions were not hierarchic and consecutively interlinked and connected with

higher level planning documents.

2.1.Municipality institutions act without management documents – operation strategies and

annual work plans of institutions. Calendar plans of events were used as the annual work

plans.

47. Only all institutions of auditable sphere in Rezekne city, Cesis and Ergli region

municipality, out of 13 Municipalities, had developed annual work plans in year 2013 and

acted according to them. In other Municipalities only several institutions had developed

annual work plans.

48. However by the evaluation of annual work plans of Municipalities and their institutions, it

was recognized that they were not drawn up due to all requirements of legal acts55

. Work

plans by their content were calendar schedules of public events in the sphere of culture,

recreation and sports realized by respective Municipalities which do not include

information on other activities which need to be performed for implementation of functions

of this sphere. Task execution terms and persons responsible for their implementation were

not determined.

49. Due to the competence of respective institution, management document of institution

(operation strategy and annual work plan) states mutual connection of development

planning and budget planning, and provides successive implementation56

of development

planning document.

50. In cases when Municipality establishes agencies for the provision of particular services,

medium-term strategy for three years and work plan for the current year must be

approved57

for the supervision of their activity.

51. Annual work plan is developed for the implementation of operation strategy of respective

institution, execution of policy guidelines documents and other tasks, and it also includes

tasks and events performable in particular year, terms of their execution and responsible

structural units or officials58

.

2.2.Priorities and targeted audience were not clearly defined regarding the planning of events

in the sphere of culture and recreation, events not always were linked to the particular

achievable goals, statistics data on evets and number of visitors was not compete and

credible.

52. Events prevised in the sphere of culture and recreation were not precisely planned in

Municipalities, as well as priority of events for the achievement of goals forwarded in

development planning documents was not valuated and justified.

53. During the audit, complete and credible information on the number and attendance of

events organized by Municipalities was not always provided because Municipalities has

not stated the order for gathering the information on the number of event visitors,

54

Section 6, part 3 of Development planning system law, clause 26 of provisions No 1178 “Provisions on


(valid till December 12, 2014), section 20, part 2, clause 1, 2 and 3, section 23, part 1, 3 and 4 of Public

agencies law. 55

Section 6, part 3 of Development planning system law, clause 26 of provisions No 1178 “Provisions on


(valid till December 12, 2014), section 20, part 2, clause 1, 2 and 3, section 23, part 1, 3 and 4 of Public

agencies law. 56


Section 20, part 2, clause 1, 2 and 3, section 23, part 1, 3 and 4 of Public agencies law. 58

Clause 26 of provisions No 1178 “Provisions on drawing up of development planning documents and

evaluation of impact” issued by CM on October 23, 2009 (valid till December 12, 2014).

16

especially in free-of-charge events. If we compare data59

available in statistic reports

regarding the sphere of culture which gave been filled-in and stored in electronic database

“Digital culture map of Latvia”, and data60

summarized by Municipalities themselves, the

auditors have concluded that storage of complete and credible statistics data regarding the

sphere of culture has not been provided in digital culture map of Latvia.

54. Number of activities and visitors indicated in digital culture map of Latvia significantly

differs, for example, number of visitors in 2013 towards the year 2012 (see Table 4).

Besides digital culture map of Latvia:

54.1. does not include data on the number of events and visitors organized by Rezekne

city municipality capital-company „Austrumlatvijas koncertzale”, Ltd. in 2013;

54.2. does not include data of Ergli region municipality per 2012;

54.3. current information testifies that in 2012 Nica region municipality had organized

seven events which were attended by two visitors;

54.4. states that in 2013 Cesis region municipality had organized 145, but report61

per

2013 submitted by municipality agency „Cesis culture and tourism center”

indicates that 130 events were organized in Cesis region.

Table 4

Changes in the number of event visitors

Region/ city

Average number of

visitors of one event

in 2012

Average number of

visitors of one event

in 2013

Average change of

the number of visitors

of one event (%)

1 2 3 4

Ergli region No data 90 x

Nica region 0,29 123 42 921

Cesis region 133 273 106

Sigulda region 113 215 90

Skriveri region 179 251 40

Salaspils region 99 115 17

Balvi region 95 103 9

Tukums region 162 155 -5

Talsi region 82 77 -7

Dobele region 97 82 -16

Bauska region 146 120 -18

Limbazi region 168 107 -37

Rezekne region 357 154 -57

59

Clause 3 of provisions No 1074 „Provisions on summary of national statistics in the sphere of culture”, issued

by CM on September 22, 2009. 60

For example, data on amateur performance collectives of municipalities and number of their participants,

culture institutions of municipalities, events organized by them and number of visitors. 61

Events organized by Culture and Tourism center of Cesis in 2013 (approved by director of municipality

agency „Culture and Tourism center of Cesis”).

17

55. Upon evaluation of plans regarding the events organized by Municipalities, it was stated

that Municipalities have organized events which take place already several years, however

they were similar to the events62

of other municipalities and not always highlights the

identity of each municipality in the scale of Latvia. Sigulda festival of opera music and

Cesis festival of art can be mentioned as positive examples.

56. Municipalities have not developed criteria for determination of priority planned events and

target audience, in order to achieve goals stated in planning documents, for example,

competition of vocalists or beer festivals.

3. Upon budget planning, financing was not linked to particular activities directed to the

achievement of goals stated in planning documents: efficiency controls of budget

application were not executed.

3.1.Budget linking to activities stated in planning documents was not made.

57. Municipalities did not ensure budget linking to the goals, priorities, actions and events

stated in development planning documents, because the budget was not planned for the

realization of particular tasks and activities, including, events organized in the sphere of

culture, recreation and sports, stated in planning documents.

58. Budget planning and management of finances without linking the application of financial

resources to the particular result does not meet principles stated in legal acts63

, is directed

only to the application of granted financial resources, but does not provide an option to

evaluate and justify:

58.1. if goals which need to be achieved due to the development planning documents,

have been reached by means of financial resources granted in functional category

of the budget of Municipality, namely, if the action of Municipality has been

effective;

58.2. what were the costs of particular actions, their totality and activities – if costs of

the execution of those actions and activities have not been excessive, namely, if

the action of Municipality has been economic.

59. Development planning system established in Municipality must provide64

linking of

development planning to the planning of finances, and during the budget planning process

Municipality must define65

and justify the amount of resources necessary for the execution

of functions, tasks and volunteer initiatives stated by the law within the time period for

which those resources have been prevised (see Image 5).

62

For example, city and regional festivals. 63

Section 3, part 2 of Development planning system law, Section 2 of Law „On budgets of municipalities”,

section 6, part 2 of Law on budget and financial management. 64


Section 2 of Law „On budgets of municipalities”.

18

Image 5. Scheme of budget and development planning.

60. Resources prevised in the budget of municipality can be granted or received by

municipality institutions according to the goals and scope66

approved in the budget of

council (municipality).

61. Explanatory note67

must be attached to the budget project which must include information

on economic and social situation, tasks of municipality for the next economic year and two

following years, as well as the information on the amount of resources planned for

expenses in each budget classification category, and information on each goal of financing.

62. In 2013 internal legal acts which state the order and requirements for drawing up

Municipality budget of the current year were developed in Sigulda, Limbazi, Bauska,

Balvi, Cesis, Dobele, Tukums, Talsi region and Rezekne city municipalities, but in

Salaspils, Nica, Ergli and Skriveri region municipalities there was no such documents.

However the developed legal acts did not state the order and requirements whether each

institution and activity must have calculations, how detailed the goal of financing and

justification of scope must be specified, what information must be disclosed and in what

degree of detailed elaboration upon drawing up the draft of budget and in budget

explanatory note.

63. During the audit Municipalities not always were able to submit documentation attesting

that amount of resources necessary for the implementation of the tasks of particular

institution has been studied within the budget planning process, for example, for office

items and inventory, materials for institution maintenance or administrative expenses,

including, seminars, courses, announcements and advertisements, transport and author’s

fees.

64. In contrary to the liability stated in legal acts68

regarding the justification of the amount of

financial resources necessary for the execution of tasks within the time period for which

those resources were prevised, actually the planning of Municipalities budgets was

66

Section 6, part 2 of Law on budget and financial management. 67

Clause 17, part 1, clause 1 and 2 of Law „On budgets of municipalities”. 68

Section 3, part 2 of Development planning system law, clause 2 of Law „On budgets of municipalities”.

2. Definition of goals

3. Analysis of alternatives

(possible solutions)

4. Development of strategy,

activity and investment plans

5. Development of

annual activity plans

(definition of tasks)

6. Supervision and

control of execution

Planning of finances

1. Determination of problems,

needs of inhabitants

19

distribution of the total amount in positions per functional categories, institutions and

economic classification codes.

65. Complete information was not included, as well as justification on required amount of

financing for particular activities and tasks, including, activities and tasks for current years

and for two following years, mentioned in planning documents was not stated within the

budget planning process and in documents, including, explanatory note69

.

66. Only the Culture management budget request of Sigulda region municipality identified the

tasks forwarded in municipality planning documents which will be provided regarding the

sphere of culture and recreation, by realization of budget programs and application of

financial resources prevised for the events of culture, for example, „preservation of

cultural history heritage”, „projects and support activities in 2014 related to the European

capital of culture”.

3.2.In order not to exceed the amount of available resources in economic classification coded,

budget execution control was made, but without evaluation if expenses are related to the

achievement of goals stated in planning documents.

67. Only superficial budget execution control directed to the control of cash flow according to

the amount planned in economic classification codes was made in Municipalities, without

evaluation of the achievement of activity goals financed by the budget. Such control does

not provide the option to inspect the economy and efficiency of budget application.

68. In order to ensure the control over the budget execution, in 2013 Municipalities have

prepared monthly reports on budget execution which include comparison of planned

expenses to the actual execution, namely, it was checked if cost limitation of respective

economic classification code specified in the budget has not been exceeded by the

application of stated economic classification codes.

69. Methodic instructions were not developed in Municipalities for the provision of joint

approach and order for the preparation of cost calculation and reports related to the events

organized by municipality institutions in the sphere of culture, recreation and sports.

70. Budget execution controls mainly were made by structural unit responsible for the

development and execution of municipality budget, however during the audit

Municipalities in most of cases could not submit cost justifications determined in the plans

of activities which would allow to evaluate the connection with particular event and its

goal.

4. Evaluation of planned results of activity was not performed, was not performed in stated

terms or was formally performed – without evaluation of task execution, achievement of

initially forwarded goals and planned results, efficiency of spend financial resources, as

well as without giving explanation on derogations from stated resultative indicators; it

was not possible to use defined resultative indicators for the evaluation of achieved

results.

4.1.Supervision of activity due to the order stated in development planning documents was not

performed and supervision documentation was not made which resulted in unduly

recognition of problems and suggestions for the improvement of operation was not

provided.

71. Municipalities had not developed control system for the implementation of supervisory

activities stated in development program, wherewith there is high-level risk that goals

defined regarding the sphere of culture, recreation and sports will not be achieved.

69

Clause 17, part 1, clause 1 and 2 of Law „On budgets of municipalities”.

20

72. Without evaluation and analysis of the indicators of task execution implemented for the

achievement of goals stated in development planning document by comparing them with

previously planned initial values and values planned to be achieved, Municipalities cannot

evaluate efficiency of the operation and state the degree in which forwarded goals have

been achieved and defined problems have been solved, thus justifying the amount of

financial resources spend within the accounting period, as well as cannot get information

and data for the update of planning documents.

73. Although Municipalities have been stated the order for development supervision, only

Sigulda, Tukums, Balvi, Dobele and Salaspils region municipalities have been performed

evaluation of their operation (activity) due to the order stated in planning documents or

internal legal acts and have prepared reports.

74. Upon evaluation of informative and supervision statements prepared by Municipalities70

,

auditors have recognized that those statements include information on the implementation

of projects prevised in separate activity and investment plans, but the impact of

implemented actions, events and activities on the execution of priorities and achievement

of strategic goals has not been evaluated, not always the amount of financial resources

invested in the achievement of goals and conclusions on results related to the

implementation of development planning documents have been stated by the explanation

of derogations from previously stated resultative indicators.

75. Evaluation of impact, as well as supervision and submission of reports on achieved

results71

must be ensured within the development planning and implementation of

development planning documents in all management levels. Municipality must draw up72

informative report and this report must include evaluation of the execution of planned

tasks, achievement of initially forwarded goals and planned results, identification of the

amount of resources invested in the achievement of goals, as well as the explanation on

derogations from previously stated resultative indicators.

76. In order to ensure that society can follow-up the execution of indicators stated in the

development program, it is advisable for Municipality to prepare annual supervision

statement73

simultaneously with the annual public report or within the scope of its

development.

4.2.Measurable resultative indicators characterizing the results of activity were not stated.

77. In order to state and measure the degree of achievement of goals related to the sphere of

culture, recreation and sports, development planning documents must specify achievable

results – products and services developed by municipality institutions, as well as changes

attained in society and national economy which are characterized by resultative

indicators74

.

78. Different indicators were stated in development planning documents of Municipalities,

however the understanding of the role of resultative indicators and their quality

substantially differs, for example:

70

Sigulda, Tukums, Balvi, Dobele and Salaspils region municipalities. 71

Section 5, part 2, clause 7 of Development planning system law, Section 3 of Territory development planning

law. 72

Clause 52 of provisions No 1178 “Provisions on drawing up of development planning documents and

evaluation of impact” issued by CM on October 23, 2009 (valid till December 12, 2014). 73

Clause 153 and 155 of “Methodic recommendations for drawing up of development programs in regional and

local level”, issued by the Ministry of Regional development and municipalities issues, dated on September 23,

2010, www.raplm.gov.lv/uploads/filedir/.../Metodika_AP_izstradei.doc. (viewed on 09.12.2014.). 74

Section 4 and section 11, part 7 of Development planning system law, clause 2, 5 and 22 of provisions No 979

“Order of the result and resultative indicators system operation”, issued by CM on September 1, 2009.

21

78.1. Development program of Cesis region for 2013–2019 included the system of goal

indicators and supervision indicators75

by specifying achievable indicators of goal,

their initial values and values attainable in 2019, which provide an option to make

objective and numeric evaluation of achieved issues;

78.2. Development program of Salaspils region for 2012–2018 included resultative

indicators, applicable for the evaluation of achievements related to the sphere –

„number of occurred culture events”, „increase of museum services”, „increase of

sport hobby groups diversification”, however numeric evaluable value was not stated;

78.3. Activity “promotion of healthy leisure events” for the achievement of strategic goal

“provision of the availability of sports and healthy leisure services” was stated in the

development program of Balvi region for 2011–2017. Five activities76

with equal

planned resultative indicator of the outcome “promotion of healthy way of life for the

needs of inhabitants and students of region” were organized within this goal, which do

not characterize the degree of goal achievement.

5. Shortages of the internal control system do not allow to get confidence on the

connection of the application of financial resources in the amount of 542 809 euros

(business trips, transport, feeding and representation, procurements, outsourcing) with

the tasks related to the sphere of culture, recreation and sports.

Image 6. Types of costs for the achievement of goals.

79. In contrary to the issues stated in legal act77

that all economic transactions of company

must be clearly reflected in the accountancy and accountancy must be organized in a way

that the initial point of each transaction is recognizable and its course is traceable,

Municipalities have made payments on the basis of source documents (waybills, invoices),

which do not state complete description, scope and units of measure for received goods or

services, as well as other shortages in the operation of Municipalities were stated, and

therefore it was not possible to determine if the costs at least 542 809 euros are spend

expediently, ie., for the provision of tasks and achievement of goals related to the sphere of

culture, recreation and sports with possibly lower expenses.

75

Development program of Cesis region for 2013–2019 (approved by decision No 130 of Cesis region council,

made on March 14, 2013, clause 39 of Minutes No 4), part 2 – Strategic part, paragraph 2.4 – Strategic

development courses of Cesis region, and part 5 – Monitoring of development program realization. 76

Organisation of competitions of untraditional sports and national sports; organisation of national skiing in 4

stages; organisation of cycling in national class in 2 stages; organisation of competitions for disabled

inhabitants; day and night orientation in nation class. 77

Section 2, part 1 of Law „On accountancy”.

22

5.1. Costs of business trips

80. There is a risk that financial resources for business trips in the amount of 108 978 euros

have been spend inexpediently, because before business trips their necessity not always

was evaluated in municipality institutions78

in the sphere of culture, recreation and sports,

precise business trip work tasks79

arising from municipality functions in the sphere of

culture, recreation and sports were not stated, as well as submitted business trip reports

does not provided clear idea on work tasks executed during the business trip, obtained

additional knowledge or improvement of professional skills of employees80

.

81. Municipalities81

did not ensure the preservation of experience obtained during the business

trip and transfer to the other employees in order to use it for the improvement of the work

of municipality.

5.2. Costs of transport

82. During the audit it was not possible to get confidence that financial resources of

municipalities82

for the transport in the amount of at least 1117 euros have been spend

lawfully and financial resources of municipalities83

in the amount of 181 837 euros have

been spend expediently because:

82.1. in contrary to the issues stated in legal act84

, vehicles were used in days when due to

the working time table employees do not executed work obligations, and employees

were purchased the fuel in days when due to the data stated in reports on vehicle

usage, they have not used the vehicle;

82.2. goal of vehicle usage, work task and precise trip (object or address) was not stated in

reports on vehicle usage, as well as substantially different distance driven in one and

the same route was stated.

5.3. Procurements and outsourcing

83. There is a risk that financial resources in the amount of 90 253 euros have been spend

inexpediently because for the provision of events organized by Municipalities85

different

services86

were purchased without application of procurement procedures stated in legal

act87

, as well as guidelines of competent institution about the organization88

of public

procurement prevised for organizing of municipality centralized procurements (mainly

within the scope of regions) were not considered.

84. Upon the conclusion of agreement with the providers of outsourcing on event organization

services which partially were included in job descriptions of employees, municipality

agency „Cesis culture and tourism center” had not documented the evaluation of

legitimacy and expediency of the decision for the necessity of such agreement, therefore

78

Balvi, Dobele, Limbazi, Nica, Sigulda, Tukums region and Rezekne city municipality. 79

Balvi, Cesis, Dobele, Limbazi, Nica, Sigulda, Tukums region and Rezekne city municipality. 80

Balvi, Cesis, Dobele, Limbazi, Nica, Sigulda, Tukums region and Rezekne city municipalities. 81

Balvi, Dobele, Ergli, Limbazi, Nica, Sigulda, Tukums region and Rezekne city municipalities. 82

Balvi and Sigulda region municipality. 83

Balvi, Bauska, Cesis, Dobele, Limbazi, Nica, Salaspils, Sigulda, Talsi, Tukums region and Rezekne city

municipalities. 84

Section 5.2, part 2, 3 and 5 of Law on prevention of squandering of the financial resources and property of the

state and local governments, section 2 and 7 of Law „On accountancy”. 85

Balvi, Bauska, Cesis, Sigulda region and Rezekne city municipalities. 86

For example, feeding services, sound and light technique provision services for events, transportation and

installation services of stage at places of events. 87

Public procurement law. 88

Guidelines for the performance of municipality centralized public procurements. Procurement supervisory

board. Riga, 2010, available at http://www.iub.gov.lv/files/upload/Vadlinijas_centr_310111.pdf (viewed on

11.07.2014.).

23

there is a risk that municipality agency „Cesis culture and tourism center” had not provided

economic application of financial resources in the amount of 28 060 euros.

5.4.Costs for projects of non-governmental organizations

85. During the audit it was not possible to get confidence that financial resources granted by

municipalities89

for the various events organized by public organizations and individuals

and realization of projects in the amount of 47 032 euros have been spend expediently

because precise criteria for the evaluation of project applications were not defined,

evaluation how those project influences the achievement of goals stated in development

planning documents regarding the sphere of culture, recreation and sports was not

executed, as well as control activities were not executed in order to get confidence that

granted financial resources have been spend according to the goals.

5.5.Costs of representation and feeding services

86. During the audit it was stated that Municipalities have spent financial resources in the

amount of at least 85 532 euros for the purchase of various representation issues and

feeding services, although accounting organization documents and legal acts of

Municipalities did not state feeding and other services and their amount which are

permissible for the provision of events, criteria for the purchase of feeding and

representation services was not defined in order to achieve goals stated in development

planning documents regarding the sphere of culture, recreation and sports.

87. Attestant documents, corresponding to legal acts90

, about use of representation materials

and other services were not drawn up (excluding Balvi region municipality) because they

did not include detailed information on the visitors of events, date, place and goals of the

event organization, and use of materials and goods.

88. As upon the procurement of representation issues and feeding services, Municipalities did

not define the necessary amount and in deeds on cost write-off did not state the date, time,

goal and visitors of organized events, and use of materials and goods, as well as paid for

representation costs due to invoices which, in contrary to the requirements of legal act91

,

did not include the information of economic transaction, there is a risk that in contrary to

the legal act92

Municipalities have not achieved goals with the less application of financial

resources.

5.6.Prices of charged services provided by municipality are not economically justified.

89. Legal act93

states: if the council of municipality or its institutions provide services which is

not the subject of municipality tax according to the law „On taxes and fees” and if payment

must be taken for those services, separate accounting must be arranged, and payment of

taxes and other mandatory payments must be executed for such services according to this

Law and laws of particular taxes.

90. During the audit planning stage it was recognized that payable services, according to price

lists approved by Municipalities, are provided by various institutions which operate in the

sphere of culture, recreation and sports.

91. Costs of Municipalities have not been accounted and registered in a way that they could be

applied to each provided service or event organized by municipality or institution

established by municipality.

89

Salaspils, Sigulda, Skriveri and Talsi region municipalities. 90

Section 2, part 1 of Law „On accountancy”. 91

Section 2 and 7 of Law „On accountancy”. 92

Section 3, clause 1 of Law on prevention of squandering of the financial resources and property of the state

and local governments. 93

Section 12, part 3 of Law „On taxes and fees”.

24

92. Auditors of State Audit Office conclude that payment for services provided by

Municipality institutions was not economically justified because:

92.1. accounting of those institutions did not include costs on service types and price of

services was stated without calculation of action expenses;

92.2. methodology for proportional ascription of costs on payable services was not

developed.

Suggestions expressed in the result of audit and improvements already achieved during

the audit

93. Upon the implementation of suggestions, the following issues was provided to

Municipalities and their institutions:

93.1. development and budget planning of Municipalities and their institutions will be

improved by the inclusion of performance of respective problem analysis and

definition of goals arisen from this analysis, conformity of developed management

documents to the requirements of legal acts and their update will be ensured, as

well as supervision of institutions and evaluation of achieved results will be

improved;

93.2. controls for the prevention of risks regarding the inexpedient and unjustified

application of financial resources will be implemented.

94. 115 suggestions were expressed in the result of audit, but during the audit Municipalities

have already improved their activity regarding the planning of development and budget,

and execution control by drawing up 26 legal acts which would ensure the option to

provide controls on lawful, effective and economic application of financial resources

granted to the sphere of culture, recreation and sports.

95. During the audit National culture center of Latvia94

had developed guidelines for the

operation of municipality culture centers95

. Those guidelines include methodic instructions

on planning of the development of the operation of municipality culture centers, including,

development of the plans of organized events and definition of target audience, budget

planning, etc.

Director of departament A.Erglis

94

Subordination institution of the Ministry of Culture. 95

Guidelines for the operation of municipality culture centers. Published in website of National culture center of

Latvia, 29.09.2014. http://www.lnkc.gov.lv/par/sabiedribas-lidzdaliba/izstradats-metodiskais-materials-

vadlinijas-pasvaldibu-kulturas-centru-darbibai/ (viewed on 16.01.2015).

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