National Audit Office: Internal control in Kohtla-Järve is weak and overlooks the city government’s activities

TALLINN, 29 April 2024 - Internal control in Kohtla-Järve is weak and overlooks the activities of the city government and city departments, the National Audit Office finds in its recent audit report. In addition to the city institutions like schools, sports centers etc, the leaders of Kohtla-Järve should also have the city government itself and its departments audited, as their economic activities have not been analysed in detail in recent years.

Although several internal auditing measures were carried out during the period covered by the audit, mainly by the auditors of the Kohtla-Järve City Government and less frequently by the Audit Committee of the City Council, these audits took place almost exclusively in the agencies managed by the city. "It is unjustified that the city government, which has the largest procurements and the majority of the spending of the city system, including more than 60% of the management costs, has remained essentially untouched by internal control measures," says Ines Metsalu-Nurminen, Director of Audit of the National Audit Office.<_o3a_p>

The problem with the city institutions is that they are inspected, but city leaders do not take the shortcomings they find seriously, thus the same mistakes are constantly repeated.<_o3a_p>

The National Audit Office audited the internal control system of Kohtla-Järve in comparison with the recommended guidelines for organisation of internal control systems of local governments, which summarise the accepted views on the internal control system of a local government. Compared to the guidelines, Kohtla-Järve has problems primarily with the key elements of the control system - risk assessment, transparency of activities and their monitoring.<_o3a_p>

According to the National Audit Office, there is essentially no risk assessment in Kohtla-Järve, but a well-considered development of the internal control system is not possible without it. The functioning of the system has not been analysed in Kohtla-Järve, so the city leaders do not have a comprehensive view of its shortcomings.<_o3a_p>

The National Audit Office finds that the set of rules established in Kohtla-Järve to mitigate corruption risks is inadequate compared to the guidelines. For example, there are no rules in the city's internal procedures specifying how to avoid delegating a decision or an action to a subordinate in the case of a conflict of interest, or how to avoid a situation in which an employee performs an important task alone, is not supervised, and is not assigned a substitute because he or she rarely takes vacation. <_o3a_p>

The National Audit Office considers that the lack of competition in transactions with city property is a risk area. In the case of the largest procurement (€12.5 million) and the largest sale of city property (€0.6 million) in the period audited, only one tender was received in each case. The National Audit Office did not assess the lawfulness of the transactions, but looking at the terms and conditions of the procurement and other circumstances, a comparison with the practice of other local governments raises the question of whether Kohtla-Järve has done everything necessary to take advantage of competition.<_o3a_p>

For example, in order to promote competition in this procurement, the object of the procurement could have been divided into parts on the basis of both content and territory within the same procurement procedure, as recommended by the Public Procurement Act. However, in the case of the sale of city property in question, the intention to sell could have been announced in national publications or online portals.<_o3a_p>

The National Audit Office advises Kohtla-Järve city government to merge the purchases of the agencies it manages and carry out centralised procurements through the public procurement register to attract more tenders. Currently, for example, the city's 19 educational establishments each buy food, office supplies and other similar items separately, although the content of the purchases is the same from one institution to another. The audit showed that, in most cases, the procuring authorities have not examined the market beforehand and have not requested several tenders.<_o3a_p>

The National Audit Office advises the Kohtla-Järve City Council to develop internal control procedures or an operating model that follows the principles of the recommended guidelines for organisation of internal control systems of local governments. The municipalities of Viimsi, Saku and Lääne-Nigula, for example, have such procedures in place, and the development of these procedures is a good opportunity to think through the guidelines in the context of one's own work organisation and give them practical meaning. The Kohtla-Järve City Council promised to take the advice on board and also submitted a detailed action plan to the National Audit Office to solve the problems identified in the audit.<_o3a_p>

Background<_o3a_p>

According to the Local Government Organisation Act, a local government must have an internal control system. Its existence must be ensured by the municipality or city council, and the municipality or city government is responsible for its implementation and effectiveness.<_o3a_p>

The laws do not specify exactly what a local government has to do to set up and implement an internal control system, but the "Recommended guidelines for organisation of internal control systems of local governments" were prepared on the order of the Ministry of Finance in 2018.<_o3a_p>

To generalise the guidelines, an internal control system is a comprehensive set of measures that covers both the lawfulness and appropriateness of activities and ensures (a) verification of compliance with legislation; (b) protection of assets against damage that could result from waste, misuse, mismanagement and the like; (c) the expediency of an agency's activities in the performance of its functions; and (d) the collection, storage and disclosure of accurate, timely and reliable information about an agency's activities.<_o3a_p>

The structure and functioning of the internal control system Kohtla-Järve were assessed in the audit on the basis of the guidelines. The structure was assessed by the National Audit Office as at the time of the audit. The National Audit Office tested the performance of the system on the basis of the activities and transactions (procurement, transfer and making available of property) for the period January 2022 to June 2023. The activities of city-owned companies (for example, the city is one of the two founders of the Ida-Viru Central Hospital, which employs ca 1300 people) were not analysed in the audit.<_o3a_p>

Priit Simson
Communication Manager of the National Audit Office
+372 640 0777
+372 5615 0280
[email protected]
[email protected]
http://www.riigikontroll.ee/<_o3a_p>

• Posted: 4/29/2024 11:00 AM
• Last Update: 4/29/2024 10:57 AM
• Last Review: 4/29/2024 10:57 AM

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