Auditor General: This is embarrassing

Janar Holm. Photo: Tairo Lutter

The National Audit Office report “Accuracy and legality of transactions in state accounting in 2020” that was published on Tuesday revealed that all summary accounts of costs, expenses, investments and financing transactions in the 2020 state budget that was approved by the Riigikogu are false because the Ministry of Finance has made hundreds of millions of euros worth of calculation and budgeting errors.

Postimees asked Auditor General Janar Holm about the report.

How worried should we be about state finances?

Luckily, there has been nothing criminal. Rather, it’s just embarrassing.

Reading the audit, one gets the feeling the budget needs to be taken back to the drawing board for anyone to be able to make sense of what’s in it.

It is clear that a document approved by the Riigikogu that includes €365 million worth of accounting errors is useless. The text is meaningless. The Riigikogu needs to be presented with a functional budget bill every line in which has meaning.

People who do not spend their days reading legislative texts and other political documents imagine that documents passed in the Riigikogu have a point! We believe that agencies have made serious efforts and politicians contributed political capital. How can it happen that such an important document is suddenly just so much paper?

It is not a political issue. No one has deliberately tweaked the budget. It is not a problem of sums getting lost. The budget has simply been miscalculated. Whereas the sum, the extent of it suggests we do not really want to have an overview of where the money is and what expenses are aimed at.

MPs say that the budget bill is illegible and unclear. It is hoped that at least the ministry knows what it includes in the budget and what it says. Now, we learn that even they cannot make sense of it! It begs the question of whether anyone anywhere can read and understand the budget?

It is not a problem of not being able to determine where the money is going after doing a little investigating. We can do that. The situation has been created by the process of switching to an activities-based budget where we have back-to-back reforms and end up with thousands of spreadsheets in different places, while the budget includes both monetary and non-monetary expenses that amounts to a gigantic mess no one can make heads or tails of at the end of the day. This gallimaufry is ultimately useless as no one uses this kind of information. It is clearly a problem and one we cannot afford. We need to look at the entire state budget structure and go back to the drawing board if needed.

Members of the Riigikogu could still make sense of the budget a few decades back, even though it was difficult already then. I suppose even raising the question is pointless these days?

The situation today is that MPs need not bother picking up the text because it is impossible to understand. Whereas the explanatory memo is not much help. We have learned quite a few facts. For example, the audit reveals that investment figures can be so different that the actual volume of investment, income and expenses and what they become in the explanatory memo etc. cannot be divined. However, the main question is where do allocated sums end up? We cannot see that either! For example, looking at the Ministry of Justice’s share in the explanatory memo. They have reached the highest level in terms of it being utterly impossible to understand where money ends up. While we can read about where money could theoretically be used, there is nothing on where it actually ends up.

That said, you are not suspecting foul play?

No! That is not what we found.

However, there is no comprehensible overview of the budget that would allow us to monitor and analyze how to move forward with state finances? I suppose you expect the government to say what they plan to do in this situation?

We initially expect the budget document to be fixed. We want there to be no such mistakes next year. The situation is not normal.

Auditors general before me have said that the state budget bill needs to give the Riigikogu the chance to decide something. Because, generally speaking, it is up to the Riigikogu to decide where money is to be spent to a sensible degree of detail, of course. Secondly, MPs need to have a clear overview and idea of where the budget aims to invest. This change needs to happen. Pointing to what is an abnormal situation did not start with this audit, rather, it suggests we are now in big trouble. Would we simply settle for the first five sections of some other law being wrong?! No one wants to even imagine that. Spelling mistakes alone are enough to render the process embarrassing. While we are talking about the state budget bill that is said to be the most important state document!

Who is to blame?

Let me assure you it is not a political problem. No, it is purely a bureaucratic issue. We have no data to suggest money has gone missing. The current model entails no danger of misappropriation.

It seems the mess has been contributed to by many governments?

Making the process out to be political would be the worst outcome as it would lead to a hunt for a culprit. It is a systemic error that needs to be corrected.

However, does the key to solving the problem lie with the government?

In the end, it is the Riigikogu that decides what kind of a budget Estonia gets, not the finance ministry. The State Budget Act is a framework act that describes the process. Therefore, if the ministry refuses to fix the problem, the Riigikogu will have to.