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SA: using foundations, Riga City Council wasted at least EUR 20 million

Over the course of three years, Riga municipality has wasted more than EUR 20 million of city residents’ money using foundations and associations, as concluded by State Audit.

In its audit of Riga municipality’s provided grants to associations and foundations State Audit focused mainly on two foundations – Riga Tourism Development Bureau of Riga.lv.
 

Auditors concluded that the associations in the municipality received very generous grants from the budget only to then waste this money in questionable donation schemes, confusing use of trademarks, as well as wages paid to possibly fictively employed persons. Auditors are also confused about the principles used to provide funding to associations for implementation of different projects.
 

The audit revealed significant flaws in relation to processes associated with allocation, planning and supervision of finances provided to foundations and associations. This leads to the conclusion that in three years Riga municipality has waster more than EUR 20 million.
 

Of the audit’s total surveyed amount of EUR 26.5 million allocated by the municipality for associations and foundations, EUR 20.9 million was received by Riga Tourism Development Bureau and Riga.lv.
 

State Audit tried to find out if foundations financed by the municipality were able to achieve the goals for which funding was requested and if formation and sustaining of those foundations was even necessary.
 

The audit revealed that the municipality had provided Riga Tourism Development Bureau the amount they had requested even without any explanations. Between 2016 and 2018 the bureau received EUR 17 million from the municipality. The largest portion of this money was invested in promotion of two trademarks – Live Riga and Meet Riga. Neither is owned by the municipality or the foundations. Instead they are owned by Air Baltic Corporation and are currently pledged off.
 

According to SA, Riga Tourism Development Bureau also performed the role of a mediator, performing the municipality management’s organized donation and gifting scheme. Between 2016 and 2018 Riga Tourism Development Bureau was used to process municipality’s donated and gifted finances worth nearly EUR 1 million.
 

The audit also concluded that Riga Tourism Development Bureau may have been used to fictively employ people. Seven jobs were liquidated as a result of State Audit’s investigation. Additionally, after looking at Riga Tourism Development Bureau’s lists of posts and wage amounts, auditors concluded that wages there exceed wages paid to equal level municipal public servants.
 

Looking into Riga.lv, auditors found that in the past three years the municipality has allocated grants worth more than EUR 4 million to it. Although statutes state the municipality is supposed to approve Riga.lv budget, this was not done in 2016, 2017 or 2018. On top of that, Riga.lv financial reports detail false financial data.
 

Release of the municipality’s newspaper is named as one of the goals behind the foundation of Riga.lv. However, a year after its foundation the decision was made to cease release of the newspaper, State Audit reports. On top of that, the foundation’s prepared information can only be received by purchasing other newspapers, which means Riga’s residents pays double for it, State Audit explains.
 

The audit concluded that members of Riga.lv basically perform re-publication of information from other information sources. Signed contracts for author work are not enough to confirm how much work was done or how much it cost.
 

Contracts for the promotion of www.riga.lv on other websites were signed with no rational explanations. On top of that, the municipality paid more than EUR 500,000 for broadcast time on television and radio, SA notes.

Additionally, State Audit could not find any explanations as to why the municipality decided to even form Riga.lv in 2013.
 

The audit also uncovered that officials and structural units responsible for supervision of the foundations – the CEO, Riga City Council chairman’s office, Public Relations Office – basically do nothing of the sort.
 

State Audit has also outlined the fact that the leading officials of foundations and other workers combine posts in the city council and administration.
 

The audit was performed for the period of time between 1 January 2016 and 30 June 2018.

BNN/LETA

13-05-2019
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