The document discusses the strategy of the SAI of Latvia for auditing COVID-19 related expenditure. The SAI modified its annual audit plan to focus on emergency spending allocated for COVID-19. It conducted financial audits and compliance audits of key institutions receiving emergency funds. Some examples of completed audits examined procurement of PPE, contingency funding, and support programs. The SAI faced challenges due to the urgency of the situation and lack of documentation, but was able to identify issues and make recommendations to improve pandemic response.
2. 1
Emergencies – whether SAIs should react immediately? If yes, how?
Situation during the first 2-4 weeks after the first patients were
identified -
Confused governments and parliaments (balancing between the
need for urgent measures and limitations of legal framework /
administrative procedures)
Desperate need for advice – internal or external
A SAI seen by decision makers and general public as a ‘leader by
example’ and one of respected advisers
3. 2
Should a SAI respond to the situation?
We are auditors – our ‘business’ usually hold the ex-post character
We lack information and experience to give a professional advice
Limited timeframe (days!) for management decisions by SAI
‘Holding back’ and monitoring seem much more easier and could be
justified, however –
How about remaining relevant (ISSAI 12 and not only)?
4. 3
How should a SAI respond to the situation in order to ‘remain relevant’?
Accepting ‘trade-offs’ between the role of watchdog and more active
adviser to the government
(Publish reports from just completed audits and/or suspend on-going
audits to let the government to focus on pandemic? Proceed with audits,
just modify working methods? Urgently modify annual audit plan to focus
on emergency expenditure? Etc., etc., etc.
Offering the ‘product’ we, as a SAI, know how to produce – audit
reports, just differently
Look for off-line partnership with other SAIs
5. 4
Screen shot from SAIs webpage (information published in April 2020)
https://www.lrvk.gov.lv/en/news/the-state-audit-office-calls-for-responsibility-and-
mutual-support
6. 5
What was the modified Annual Audit Plan focused on?
Area of intervention 1*: Auditing at least 90% of ‘emergency’ spending
allocated to address COVID-19 (Contingency funds and COVID-19
related budget reallocations) – achievement of objectives in a
compliant manner
Area of intervention 2: Auditing expenditure of so called priority
measures (new initiatives by the government included in 2020 year’s
budget before pandemic) – achievement of objectives in a compliant
manner
Area of intervention 3: efficiency of savings in ‘regular’ expenditure of
public institutions
Area of intervention 4: Audits originally included in the Annual Audit
Plan 2020 of the SAI Latvia.
* Covid-19 related expenditure for 2020 ~ 2 billion euro.
7. 6
Audited entities
All the institutions having received the major part of emergency
expenditure. For example, ‘emergency’ funds allocated for:
employment support schemes (idle time schemes for employees
affected by COVID-19).
procurement of PPE
ensuring the remote learning process in schools
financing studies related to the mitigation of the COVID-19 effects
all kinds of social allowances administered by welfare sector
ensuring public awareness-raising COVID-19 related topics
construction of roads
increase of equity of the SoEs in area of transport
increase of equity of major hospitals
compensation of additional workload for medical practitioners and
other employees, etc.
8. 7
Audit types used by SAI Latvia for auditing COVID-19 related
expenditure
1) Financial auditing of 2020 financial statements of public institutions
COVID-19 expenditure considered as a compliance verification within a
financial audit with a distinct audit approach; audit results summarized in
an interim report, issued separately and not waiting for finalization of
financial audits); in fact, - financial audits turned into combined
financial/compliance audits – since compliance verifications ‘go beyond’
ISSAI 2250 ‘Consideration of laws and regulations’
2) Compliance auditing on specific subject matters
9. 8
COVID-19 expenditure audit - progress
https://www.lrvk.gov.lv/en/covid-19/auditing-covid-19-emergency-
spending/completed-audits
17 COVID-19 related audit reports issued; 13 still pending
Slightly behind the schedule, while currently catching-up (‘1 report in 2 weeks
regime’)
10. 9
Examples of COVID-19 related expenditure topics already covered
Delivery process of personal protective equipment in health sector (20.07.2020.)
Procurement system established by the Ministry of Defense and the procurements made
during the emergency to limit the spread of COVID-19 (17.08.2020.)
Use of contingency funding allocated to the Ministry of the Interior for the purchase of
personal protective equipment and disinfectants (02.09.2020.)
Providing a distance learning process during an emergency (30.09.2020.)
Use of contingency funding for bonuses for home affairs officials directly involved in
curbing the spread of COVID-19 (13.10.2020.)
Use of contingency funding allocated to the Ministry of Welfare for payment of continued
parent benefit, extraordinary bonus to national family benefit for disabled child, and
increased childcare benefit (26.11.2020.)
Use of contingency funding allocated to the Ministry of Justice for bonuses for the Prison
Administration staff who have been directly involved in curbing the spread of COVID-19
(14.12.2020.)
Use of contingency funding allocated to the Social Integration Fund and the National
Electronic Mass Media Council for media support to ensure that the public has access to
information on overcoming the COVID-19 crisis, as well as to provide the security of the
national information space in commercial electronic mass media (22.12.2020).
Assessment of investment of MEUR 190 into the equity of joint-stock company
“Development Financial Institution Altum” to support economic operators in difficulty due to
the outbreak of COVID-19 (15.01.2021.)
Use of contingency funding allocated to the Ministry of Health to provide bonuses to
medical practitioners in the healthcare sector for working in high-risk and hyper dynamic
environment (10.02.2021.)
…
11. 10
Examples of compliance auditing of Covid-19 related expenditure to be
further demonstrated
«Delivery process of personal protective equipment in health
sector - may insufficient regulation justify hasty decisions?»
(20.07.2020.)
«Procurement system established by the Ministry of Defense
and the procurements made during the emergency to limit the
spread of COVID-19» (17.08.2020.)
12. 11
Audit example 1: “Delivery process of personal protective equipment in
health sector - may insufficient regulation justify hasty decisions?”
Background:
Process of purchasing PPE was performed by National Health
Service (NHS) and Emergency Medical Service (EMS)
Time period – beginning of March until April 2, 2020 when the
procurement obligation was taken over by the sector of defense
5.7 million euros were spent and five suppliers contracted
13. 12
Audit example 1: “Delivery process of personal protective equipment in
health sector - may insufficient regulation justify hasty decisions?”–cont 1
Answers to the following questions were sought for by auditors:
Was the Civil Defense System overall prepared to ensure the required
amount of PPEs in emergency situations?
Was the Ministry of Health prepared to act immediately and
compliantly to ensure PPEs?
How was the procurement process organized in the Ministry of
Health?
How was the PPE ‘needs assessment’ performed by all sectors?
How was the compliance of delivered PPEs tested?
N.B. ‘Propriety’ rather than ‘regularity’ audit
14. 13
Audit example 1: “Delivery process of personal protective equipment in
health sector - may insufficient regulation justify hasty decisions?”–cont 2
Main findings –
1) Provisions of the Public Procurement Law ‘frozen’, while guidelines
on procurement during the emergency made available by the MoF
and Public Procurement Bureau almost two months later (April 29) –
resulting in the officials’ acting based on their understanding of their
rights/duties and lack of transparency
2) A number of decisions on PPE technical specifications, delivery
processes and selection of suppliers were taken unilaterally –
‘another ‘two eyes’ were missing, thus causing a high risk of
corruption
3) Actions and decisions of decision-makers were not documented even
in the slightest amount during the entire process
4) The list of tenderers was not made public thus limiting opportunities
of the market players to ‘red flag’ potential cases of abuse in terms of
exaggerated prices and delivery opportunities
15. 14
Audit example 1: “Delivery process of personal protective equipment in
health sector - may insufficient regulation justify hasty decisions?”–cont 3
SAI’s challenge No.1 – compliance audit criteria
Relevant legal framework – ‘frozen’ or suspended
Lack of other guidelines for both audited entities and auditors
No access to good practices in similar situations
SAI’s challenge No. 2 – processes not documented (audit methods?)
Another challenge – parallel investigation by ‘analytical media’
16. 15
Audit example 1: “Delivery process of personal protective equipment in
health sector - may insufficient regulation justify hasty decisions?”–cont 4
The approach taken –
Criteria – (1) based on professional judgement of auditor, how the
audited entity had to act in the given circumstances; (2) partly derived
from the guidelines issued ex-post by the MoF and Public
Procurement Bureau
Auditing methods – interviews, verification of e-mails and even –
WhatsApp messages; to the extent possible reconstructing processes
based on outcome from interventions
17. 16
Audit example 2: Procurement system established by the Ministry of
Defense and the procurements made during the emergency to limit the
spread of COVID-19 (17.08.2020.)
Background:
As of April 2, 2020 the procurement of PPEs was taken over by the
Centre subordinated to the Ministry of Defense
The Centre was entrusted with the task to procure PPEs centrally
based on the list of priority needs of the institutions, as well as ensure
the storage of PPEs after their delivery
On April 21, 2020 the government allocated MEUR 45 for the said
procurement
By the date of completion of the audit, the Centre had signed 29
supply contracts for MEUR 38.9 in total
18. 17
Audit example 2: Procurement system established by the Ministry of
Defense and the procurements made during the emergency to limit the
spread of COVID-19 (17.08.2020.) – cont 1
Answers to the following questions were sought for by auditors:
1) Whether the centralized procurement procedure established in the
Ministry of Defense complies with the legal framework and guidelines
issued by MoF and Procurement Monitoring Bureau and
2) Whether the PPEs were procured in compliance with the established
procurement procedure
N.B. ‘Regularity’ rather than ‘propriety’ audit
19. 18
Audit example 2: Procurement system established by the Ministry of
Defense and the procurements made during the emergency to limit the
spread of COVID-19 (17.08.2020.) – cont 2
Main findings –
1) the centralized procurement procedure established in the Ministry of
Defense complies with the legal framework and guidelines issued by
MoF and Procurement Monitoring Bureau, however
2) the established procurement procedure comprised provisions similar
to the ‘frozen’ Public Procurement Law, resulting in lengthy, heavy
and bureaucratic process (contracts signed 15-30 days after
selection of suppliers)
3) Ministry of Defense failed to proactively modify the originally
established procedure when the situation in terms of epidemiological
safety stabilized and market was already able to satisfy the demand
(focus on ‘EEE’ was neglected)
4) Due to backlogs imposed by the complicated procedure, auditors did
not obtain assurance that PPEs were procured based on
economically most advantageous offer
20. 19
Audit example 2: Procurement system established by the Ministry of
Defense and the procurements made during the emergency to limit the
spread of COVID-19 (17.08.2020.) – cont 3
SAI’s challenges:
Audit criteria easy to define (compliance of procedure with the law;
compliance of actions with procedure), however, the volumes of
documents – overwhelming
Performance audit (‘EEE’) aspects ‘came into the game’ during the
auditing process
21. 20
Audit example 2: Procurement system established by the Ministry of
Defense and the procurements made during the emergency to limit the
spread of COVID-19 (17.08.2020.) – cont 4
Recommendations:
Immediate development of the National Civil Protection Plan (not
existing for the last 3 years) and updating of the National Disaster
Medicine Plan
Update of the centralized procurement procedure applied by the
Centre to ensure ability of the system to respond to constantly
changing epidemiological environment and being able to ensure
adherence to ‘EEE’ principles
22. 21
Additional steps taken by the SAI after completion of 3 PPE audits in
different sectors (health, defense and interior)
In addition to sending individual audit reports to audited entities and
Prime Minister, SAI had offered to help to see all the ‘playground’,
conceptualized findings to serve as the road map for the next
emergencies
https://www.lrvk.gov.lv/en/news/state-audit-office-submits-proposals-to-
the-prime-minister-after-audits-of-covid-19-related-procurements
23. 22
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