The State Audit Office has completed the 2024 financial audits of ministries and central government institutions. While all opinions on the accuracy of annual reports were unqualified, two institutions received negative or qualified opinions regarding compliance issues: the Ministry of Climate and Energy (KEM) and the Ministry of Economics (EM), where auditors found instances of excessive and unjustified budget funding requests—dubbed the creation of “financial pockets.”
The overall assessment is that ministries’ financial statements were prepared in accordance with regulations, providing a true and fair view of their financial position, said Audit Office board member Ilze Bādere.
She noted that for the second consecutive year, all institutions received unqualified audit opinions, reflecting high-quality accounting and effective cooperation between institutions and auditors.
She highlighted that 96% of errors detected during audits were corrected on the spot, aided by access to institutions’ accounting systems and automated auditing tools developed by the Audit Office.
However, despite accurate reporting, violations of legal regulations were identified in several ministries.
For instance, in the audit of the Ministry of Education and Science (IZM), a review of student records at the Riga Style and Fashion Technical School revealed potential fraud involving fictitious students.
In the Ministry of Justice, auditors found that the Court Administration had misapplied legal provisions regarding the calculation of average earnings, by including bonuses and financial rewards paid during periods of justified absence, which led to overpayments. In total, three employees were overpaid 13 000 euros, of which 7 600 euros was repaid to the state during the audit.
The Ministry of Culture continues to address the proper accounting of the exhibits, which was already recommended by the State Audit Office in 2021. According to the Ministry’s report, it is planned to involve an expert with knowledge of both cultural heritage and construction to assess and determine the appropriate accounting classification.
The IZM still has not taken steps to harmonize VAT rules for international transactions, despite being flagged in last year’s audit.
In the KEM audit, it was found that shifting the mandatory electricity procurement costs from end users to the state budget created an additional 1.2 million euros in expenses. These arose because the public trader SIA “Enerģijas publiskais tirgotājs” borrowed funds from its parent company Latvenergo, paying interest while awaiting compensation from the state.
This year, the SAO assessed two specific compliance issues in two audits (KEM and EM). It examined whether funding for specific measures was used in accordance with the purpose for which it was granted, in compliance with the relevant legislation and to achieve the planned results.
KEM received a negative compliance opinion. Of the 8.9 million euros allocated for professional services and research in the climate and energy sector in 2024, only 1.1 million euros was originally planned for use, and only 313 000 euros (3.5%) was actually spent. Some funds were returned, while 3.4 million euros was redirected for other purposes. A similar overrequest is planned for 2025.
In contrast, EM used its funding effectively, allocating 45% of 24.2 million euros for energy efficiency programs, achieving 94% of the planned CO2 emission savings goal (by 2026) and exceeding the planned total funding for supported projects. Nevertheless, the audit revealed internal control and record-keeping weaknesses, especially in coordination with the development bank ALTUM, prompting EM to revise cost allocations and disclose potential liabilities.
It was also estimated that only two million euros would be needed to meet the CO2 reduction goal, while ALTUM had over 11 million euros in unused funds—resources that could be reallocated to other programs.
“Both compliance issues assessed helped to expose the practice of ‘financial pockets’, so we hope that the results of these audits will already help in future budget planning,” says Bādere.
As Bādere points out, each year, when financial audits are concluded, there are also other findings, observations and problematic issues of the auditors outside the audit reports, which the State Audit Office wants to draw the attention of the audited entities to. “We discuss these issues with the heads of the institutions already during the audits and, at the conclusion of the audits, we note them in letters addressed to the heads of the institutions,” explains Badere.
A recurring issue was the large number of unused vacation days, with some employees accumulating over 61 days, and one individual reaching 317 days—a sign of poor organizational planning. The Audit Office reminds institutions that ensuring employees take vacation is both a right and an obligation.
Attention was also drawn to the lack of action in creating a special reserve fund within the social insurance budget. Currently, surplus funds are stored in the State Treasury without clear regulation, which may expose them to political use, threatening the long-term sustainability of the pension system.
The need to reform the service pension system was also raised, to avoid increasing the future burden on taxpayers.
This is the last year the Audit Office will publish 27 separate financial audit reports—covering 14 ministries, 12 central institutions, and the consolidated annual report. From May 2025, a new approach will be implemented, with only one consolidated audit report issued annually.
A seminar for institutional staff will be held on the 23rd of April 2025, to discuss the 2024 audit results and changes in methodology.
In total, six recommendations were issued, five of which are to be implemented by the end of 2025, and one by early 2026. The number of recommendations is lower than in previous years, indicating gradual improvements.