A significant portion of the Port Development Fund’s resources has been used inefficiently, and in some cases, unlawfully, according to the State Audit Office, which has stated that law enforcement authorities will be informed.
In a performance audit of the fund, the State Audit Office concluded that the main responsibility lies with the Ministry of Transport (MoT). Auditors pointed out that most of the fund’s financed tasks essentially duplicate the Ministry’s own functions, and that the fund has primarily served to provide additional compensation for ministry employees, cover travel costs, and pay for representation expenses.
The fund was established in 1994 under the Port Law. Its current purpose is to manage financial resources to protect state interests in port development and to enhance the reputation of Latvian ports. Although four objectives are defined, only two are actually funded in practice.
Auditors found that the fund does not finance joint port development projects or maintain state-owned assets in smaller ports.
The fund’s financial resources come from contributions made by Latvia’s three largest port authorities Riga Freeport, Liepāja Special Economic Zone, and Ventspils Freeport with an average annual budget of 231 000. The largest portion of expenditures 819 666 or 68% (from 2019 to 2023) was allocated to the Secretariat of the Latvian Ports, Transit, and Logistics Council, which in 2022 and 2023 employed an average of 16 Ministry of Transport staff. Auditors stressed that this is an unusual practice, as similar high-level councils in Latvia are typically supported by ministries using fewer resources from their own budgets.
According to the fund’s regulations, expenditures are planned and managed by the council’s secretariat. Although the council approves the budget and reviews annual spending reports, it does not monitor day-to-day use of funds. The secretariat is granted broad discretion within approved expenditure categories creating a favourable environment for both inefficient and unlawful use of resources, the auditors said.
The audit found that between 2019 and 2023, at least 97 644 was paid to secretariat staff for compiling and analysing information for reports that, contrary to legal requirements, were never finalized as formal documents.
At least 40 057 was spent on promotional events, including travel and representation expenses such as gifts, gift cards, food baskets, alcohol, and meals in restaurants without decisions from the council’s Advertising Committee, which was created to oversee such spending.
Another 23 562 was spent on expenses without legal justification or relevance to the fund’s mission. These included individual English lessons, vehicle use, and the purchase of assets for contractual orders.
Additionally, 507 was recorded as fund expenditures without any supporting documentation illegally, according to the auditors.
Gatis Litvins, a member of the State Audit Office Council, stressed that these issues result from legal framework shortcomings and a lack of oversight. He noted that the Ministry of Transport is chiefly responsible, as it manages the sector’s regulations and assigns its staff to the council secretariat.
Auditors concluded that the Ministry failed to prevent double financing and illegal use of its own budget resources.
There were instances where the Ministry approved employee travel funded by the Port Development Fund, even though other employees attended the same events with costs covered by the Ministry itself an inefficient use of public funds.
Additionally, the audit found cases where employees were on official duty for the secretariat but failed to record their absence properly, while continuing to receive salaries from the Ministry. Between 2022 and 2023, this led to at least 7 290 in improper salary payments. There were also five cases in which an employee received per diem allowances for the same trip from both the fund and the Ministry resulting in unjustified expenses totalling 865.
The State Audit Office found the fund’s legal status unclear due to regulatory gaps. This ambiguity hinders legal compliance, transparency, and oversight. The fund is not listed in any business register but is registered with the State Revenue Service as a structural unit of the SJSC Latvian Maritime Administration a designation it does not meet. In the auditors’ view, the fund should be considered a public foundation, although it has not been part of the state budget since 2010.
Following the audit, the State Audit Office recommended finding a more cost-effective way to pursue national interests in port development within the framework of the state budget.
During the audit, Prime Minister Evika Siliņa (New Unity), who also chairs the council, was informed of the findings. In a written response, she suggested that the Ministry of Transport could handle the secretariat’s functions using its own resources, allowing fund money to be redirected to joint port projects or promotional efforts.
Finally, the State Audit Office stated that it will refer all violations and legal breaches to law enforcement authorities. “In its current form, with its current mandate and operations, the fund lacks a rational and meaningful reason to exist. If the fund is to continue, it must undergo significant restructuring with a clearly defined legal status, improved governance, and effective financial control,” said Audit Office council member Gatis Litvins.