In view of violations of financial management principles established at Rezekne City Council, the Finance Ministry has turned to the Prosecutor General’s Office and other law enforcement authorities, prompting them to assess responsibility of Rezekne Mayor Aleksandrs Bartasevics (Together for Latvia) and council employees for the financial situation in the municipality, representatives of the ministry informed LETA.
On Wednesday, October 11, the Finance Ministry’s committee for examination of local governments’ applications for stabilization and harmonization of projects for stabilization of local governments’ finances held a meeting, which examined financial documents submitted by Rezekne municipality. Bartasevics and Rezekne City Council employees responsible for the municipality’s finances were also invited to the committee’s meeting.
Representatives of Rezekne City Council have confirmed that, when the city’s 2023 budget was adopted, not all spending items were in the budget plan. The total amount of unprojected spending was EUR 2.1 million.
The Finance Ministry explains that therefore Rezeke City Council jeopardized the municipality’s ability to meet its obligations and ensure performance of its autonomous functions. The municipality signed several contracts for ambitious investment projects, without budgeting the funds necessary for fulfilment of these obligations. The Finance Ministry has documents proving that the council employees responsible for this deliberately disregarded laws and regulations on financial planning principles.
In response to information about the possibility of financial stabilization process at Rezekne City Council, the Finance Ministry turned to the Latvian Association of Certified Auditors, asking that quality control inspection be carried out at certified auditor of Rezekne City Council. According to information provided by the municipality, it has been cooperating with Auditorfirma Skibele Un Partneri for a lengthy period of time.
The Finance Ministry will also inform the government about the exceptional financial situation in the municipality. Solutions will be proposed for possible actions to normalize the financial situation. At the same time, results of an audit carried out by the State Audit Office is important, which will make it possible to better identify the actual financial situation at Rezekne City Council.
If the municipality is not ready for constructive cooperation and taking measures to improve its financial situation, the finance minister may take a decision to initiate a stabilization process at the municipality. If new facts come to light making the financial situation at Rezekne municipality worse, including information concerning implementation of projects co-financed by the European Union, the launch of the stabilization process will be inevitable.
The aim of the stabilization process is for a municipality in extreme financial difficulties to be able to ensure performance of its autonomous functions as defined by law in the long term and not take on new liabilities that it cannot afford financially.
A municipality subject to the stabilization process is still governed by its municipal council, but its financial performance is supervised by a state-appointed stabilization supervisor. The work of the municipality is done in strict compliance with the stabilization plan approved for the municipality, and it has to report the Finance Ministry on a quarterly basis on implementation of the plan.
As reported, Rezekne City Council was on September 11 instructed to submit an updated application for financial stabilization process so that the Finance Ministry could assess full information and reasons for financial stabilization process. Rezekne municipality’s report was received on September 19.
In the report, Rezekne City Council states that the city’s 2023 budget does not foresee the necessary funding to cover all obligations of the municipality. In the ministry’s opinion, this is a gross violation of financial management principles as well as of the regulatory framework.
Rezekne City Council is currently short of EUR 2.1 million to cover all of its obligations.
According to this year’s state budget law, Rezekne municipality cannot borrow more money as it is already unable to honor its obligations to creditors. As of August 31, the municipality’s arrears stood at EUR 1.7 million, an increase of EUR 800,000 from July 31.
“In a situation where the municipal budget is amended on September 21 and its deficit is increased, this is considered blatant irresponsibility on the part of the councilors,” said Jarockis.
At a meeting on September 21, Rezekne City Council supported increasing Rezekne budget deficit: the revenue projection was raised by almost EUR 1 million to EUR 48.36 million, while the spending projection was upped by EUR 2.14 million to EUR 58.7 million.
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