EC suspicious of Latvian audit results

RIGA - From Nov. 1, 2010, Latvia has not been receiving funding from the European Union’s Cohesion Fund, said European Parliament (EP) member from Latvia Ivars Godmanis (Latvia’s First Party/Latvia’s Way), to the LNT morning show ‘900 sekundes’ on May 27, reports Nozare.lv. Godmanis pointed out, however, that the implementation of projects confirmed by the fund has not stopped, and the Latvian government continues to fulfill its tasks even at the expense of the budget deficit.
Since November, Latvia has not received 120 million lats (171.4 million euros), therefore the state budget deficit has increased to 278 million lats during the first four months of 2011. When the international loan program will come to an end, the lenders will see the budget figures and could demand to increase the budget consolidation amount, explained Godmanis.
He believes that the funding was cut because the European Commission was dissatisfied with the quality and structure of the audit of the utilized funding.

The Finance Ministry admits that Latvia at the moment is not receiving funding from the European Union’s Cohesion Fund; however, this was Latvia’s own decision. By now, Latvia has not received 135.6 million lats in total.
The Finance Ministry says that the EU funds have not been lost, but only temporarily halted - and not by the European Commission but by Latvia itself, taking into account a change in the Commission’s opinion on the management and supervision system for EU funds in Latvia.

The current situation will in no way affect implementation of EU-funded projects in Latvia - the companies and organizations that are implementing these projects will continue to receive financing, as the Finance Ministry’s Communication Department head, Baiba Melnace, said. The amount by which Latvia’s budget must be consolidated will also not be changed, because “this is a question of money flows, not changes in state budget revenue,” she said.
The Finance Ministry has decided to temporarily halt declaration of expenditures and claiming funds from the European Commission until agreement is reached with the Commission on the necessary improvements to the system. When the problem is resolved, the State Treasury will resume declaration of expenditures, including declarations for the withheld amount, says the Finance Ministry.

The total amount of undeclared expenditures for the period from Sept. 1 last year to May 27 this year is 135.6 million lats, and this same amount has not yet been requested from the European Commission, said Melnace.
According to the Finance Ministry, Latvia’s management and supervision system has been approved and accredited by the European Commission for the 2007-2013 planning period, and the change in the Commission’s opinion was unexpected. A repeated Commission audit will be conducted in June to make sure that the system has been upgraded pursuant to the Commission’s requirements.

The Finance Ministry is confident that the repeat audit in June will establish that the management and control system has been upgraded as per the Commission’s requirements, after which Latvia will continue to receive due funding.
The Ministry notes that the money invested by companies and organizations implementing projects co-financed by the EU is first repaid from the state budget. After that, Latvia hands in to the Commission declarations of project costs, and the respective amounts are paid into the state budget.