Latvia's Silver Lady

Auditor General Inguna Sudraba, who’s surname means “silver” in Latvian, is probably the nation’s most popular state official. Every month her office reports on new cases of taxpayers’ money being wasted by civil servants. This makes Sudraba a sort of information pipeline to the Latvian society. Despite a number of offers to be nominated for the Prime Minister’s post and to head the parliamentary election list, she has managed to stay out of politics.
The Baltic Times sat down with this caped crusader to talk about Latvian bureaucracy and how much civil servants’ carelessness has cost taxpayers.

Mrs. Sudraba, in October 2008, the State Audit Office calculated that during the previous four years, Latvia has lost at least 490 million lats (700 million euros) due to civil servants’ negligent attitude towards taxpayers’ money. Has the situation changed since then, especially considering recent drastic cuts in the public sector and the sharp decline of the economy?
Well, to be honest, not at all. I’d also like to note that, in reality, this number is larger than 490 million lats, but it is not possible to calculate it because even government and municipal agencies, as well as ministries, do not register all their incomes and expenditures. For this reason we are going to exert every effort to change the legislation to be able to punish dishonest people. We failed to change Latvian officials’ ways of thinking by carrot, so we will have to do it by stick. I do not like such a policy, but it turns out that there is no other way. There have to be several precedents when the careless attitude towards tax payers’ money is labeled as a crime and guilty officials are punished. Perhaps others will act more professionally after such cases.

Could you tell us about the most flagrant cases of taxpayer money spending in your practice?
There are dozens. For example, consider the state agency Jaunie Tris Brali (The New Three Brothers), which was responsible for building the National Library and the Concert Hall [on the Daugava river bank]. How could you explain that the agency’s accountants had to fly to Canada, to Toronto, in order to test [in] some wind tunnel? Some of the communications specialists flew to a Persian Gulf investor meeting in Dubai, all this on the taxpayers’ account, of course. Jaunie Tris Brali tried to persuade our auditors that this was for the good of the library.

Overall, at least 20 million lats were spent on shady purposes. This is a very good example of how Latvian civil servants care about the budget money. They are sure that paper bleeds a little. The same precedents happen in healthcare. Everybody has heard of hospital administrations always complaining that there is no money, and scare the government that if there is no additional financing people will die in the streets, arrange pickets and so on. Our office decided to check if any of this is true, and we discovered many interesting facts. It emerged that hospitals made several deals with private companies, the owners of which were the members of the same hospital boards. Overall, at least 2.7 million lats were spent via this scheme.

I became especially indignant when we had made an audit of the State Employment Agency. It turns out that the taxpayers’ money is spent on teaching unemployed people the most non-demanded skills. For example, 411 people attended the agency’s salesmen courses, while, according to their own statistics, there were 21,994 unemployed salesmen in the entire country.  Also, 7,815 people received unemployment benefits while they were working. Overall, more than 1.4 million lats were lost on these useless activities, while Latvia is suffering from almost 17 percent unemployment.

What can you say about the South Bridge construction? How is it even possible that it cost 570 million lats?
We made an audit of the South Bridge construction, because there were many reports and stories in local press about this. We found that there were many violations. I cannot state if it was just a “don’t care attitude,” or a thought-out crime, but as a result Riga City Council lost at least 27 million lats. I suppose, in reality, this amount is larger, but that is all we were able to calculate. For example, steel construction cost 6.5 million lats, but as Riga Council took out a loan, taxpayers will have to return 12 million lats. The South Bridge is extremely expensive and people will have to pay for it over the next 15 years. The State Audit Office submitted this case to the Prosecutor General and I hope that the guilty will be punished.

Why do such incidents keep happening in Latvia? For example, speaker of the British parliament, Michael Martin, had to resign last year after a defalcation of taxpayers’ money. It seems that this is a common practice in Latvia, however, nobody gets punished.
Perhaps one of the reasons is our Soviet Union past, where “everything belonged to everybody.” Nobody cared about the profit and just spent a certain amount of money for any purpose. Our officials still have not outgrown those times.

You gave advice to the government considering Latvia’s budget and development strategy. Have they listened to you?
Unfortunately, no. The saddest thing in this situation is that we still have not got any realistic plan on how to defeat the crisis. By “realistic” I mean a list of necessary measures, our goals and all financial resources that we have to achieve them. It has already become a tradition to create some weird and completely useless plan. We already have dozens of such documents. If we are going to continue setting goals like “to spend 30 million lats,” instead of “to decrease unemployment rate from 17 to 10 percent,” this country will never live better.

Firstly, we have to set priorities on how exactly we are going to raise our economy. It would be quite irrational to think that we are able to compete with China in producing technical [products] or clothes. Our salaries are still much higher than they are there. We have to look at Latvia in the scope of other countries and find something that China, or anybody, else does not have. For example, fresh air and plenty of land suitable for agriculture. If we decided to set farming as Latvia’s priority, then we would have to launch special supporting programs for the industry’s enterprises, to make sure there are a lot of possibilities to get an agricultural education, etc. But nothing like that was ever done in Latvia.

What about the structural reforms? The government has promised to lessen Latvian bureaucracy for years. Is it still too large, in spite of all the dramatic cuts in the public sector?
Definitely. Our public administration is too big, considering the size of Latvia’s economy. We cannot afford to finance just the process of something when there is no goal. The process of writing documents, the process of arranging meetings, the process of buying stationary... Firstly, we have to make a list of every function that the state provides and then decide which ones we should keep, which ones would be more efficient to delegate to the private sector, and which functions should not exist at all. This is not extremely difficult, but still, it has not been done. Instead of something sensible, we have some weird “methodology of analysis,” a “methodology of calculating.”

Many political analysts are sure that the government is so slow with the structural reforms because, after implementation, many political parties’ members will lose their jobs. Basically, that would mean demolition of the parties’ system, as most of the state and local government agency officials are generous donators to politicians. Do you think this theory could be correct?
Yes, there is certainly a grain of truth to it. During the past years many well-paid civil servants got their jobs not because of their perfect education or brilliant skills, but in gratitude for being some party’s member or donor. Some of them were also “situated” because of [having] their relatives in politics. Also, some positions were created especially for a particular person, with no regard to its necessity for the taxpayers.

How can this situation be changed and how long will it take?
Actually, it is not too difficult. All Latvia needs is about 50 highly qualified professionals to take the most important positions. This will help a lot, because sometimes it only takes one person in an institution to change everything. For example, when the parliament elected me as the Auditor General, in 2004, the Office was not working efficiently enough, but, I hope, I managed to fix it. Considering that it is the prime minister and the other Cabinet members who are responsible for the state’s personnel policy, and there are always too many parties who cannot agree on the issue; perhaps we should think about the empowerment of the president. Many political analysts suppose it would make sense to vote for the head of the state, directly. To my opinion, we should seriously discuss this idea, because Latvia desperately needs a strong leader.

Surely you must have had offers to go into politics, but why haven’t you?
I am not ready to support any present political party. Nobody has been able to fulfill their promises. I am sure that actions speak louder than words, but I have not seen these actions so far. I will agree to become prime minister and take responsibility for the state only if I am elected from a completely new political party. It is not possible for me to work with people whom I do not trust. I need my own highly qualified team.