Supervising Officials Responsible of Public Resources (LV0022)

Status quo: The actions of public officials with state or local government property and funds, and transactions carried out by public institutions should be assessed on their compliance with legislation in order to detect mismanagement, abuse of office, abuse of authority for personal unearned gain or for that of other persons. To monitor the prevention of the conflict of interest in the actions of public officials and compliance with prohibitions and additional restrictions set out in legislations in regard to public officials. Main objective: To counter corruption by force of law and public support, to achieve that public power is used with integrity in the interests of the state and community. Where violations of the Law “On the prevention of the conflict of interest in the actions of public officials” are detected, to prosecute public officials administratively – hold administrative hearings, enforce liability for violations of corruption prevention provisions, seek damages from officials in respect of loss resulting from their actions.
The following tasks have been set:
• Consider a possibility for enabling public access online to information on all contracts signed by public authorities on the supply of good and services, and other deals, and develop recommendations for ensuring such measures;
• Consider a possibility for introducing more effective supervision or enforcement mechanisms to control the activities of public officials responsible for handling public fonds, i.a., administrative liability for misuse (wasteful spending) of public property and funds by officials;
• Analyse risks of misuse of funds and corruption in the below-threshold public procurement and purchases not covered by external legislation and provide recommendations for risk reduction.
Assess legislation on criminalizing corruption and, in accordance with the problems identified in practices of the application the law, to produce draft legislation seeking a more effective application of liability provisions regarding unlawful actions with public funds and property.

5. Introduce more effective supervision or enforcement mechanisms of control over the activities of the officials responsible for handling public resources

Commitment Text:

Status quo: The actions of public officials with state or local government property and funds, and transactions carried out by public institutions should be assessed on their compliance with legislation in order to detect mismanagement, abuse of office, abuse of authority for personal unearned gain or for that of other persons. To monitor the prevention of the conflict of interest in the actions of public officials and compliance with prohibitions and additional restrictions set out in legislations in regard to public officials.

Main objective: To counter corruption by force of law and public support, to achieve that public power is used with integrity in the interests of the state and community. Where violations of the Law “On the prevention of the conflict of interest in the actions of public officials” are detected, to prosecute public officials administratively – hold administrative hearings, enforce liability for violations of corruption prevention provisions, seek damages from officials in respect of loss resulting from their actions. The following tasks have been set:

• Consider a possibility for enabling public access online to information on all contracts signed by public authorities on the supply of good and services, and other deals, and develop recommendations for ensuring such measures;

• Consider a possibility for introducing more effective supervision or enforcement mechanisms to control the activities of public officials responsible for handling public funds, i.e., administrative liability for misuse (wasteful spending) of public property and funds by officials;

• Analyse risks of misuse of funds and corruption in the below-threshold public procurement and purchases not covered by external legislation and provide recommendations for risk reduction.

• Assess legislation on criminalizing corruption and, in accordance with the problems identified in practices of the application the law, to produce draft legislation seeking a more effective application of liability provisions regarding unlawful actions with public funds and property.

Responsible institution: The Ministry of Finance, the Corruption Prevention and Combating Bureau

Supporting institution(s): Ministry of Justice

Start date: 2014....................   End date: 2018

Context and Objectives

Corruption is one of the most difficult issues to grasp and prove. The State Audit Office points to ministries and institutions that could have used public funding more effectively. ^{Official government portal, http://m.lvportals.lv/visi/viedokli?id=277754?show=coment.}  For example, a large investment project for creating a digital space for school management, costing 3.5 million euros, was halted and proven ineffective in 2015 after showing no results. ^{School management portal, https://www.e-klase.lv/lv/zina/zinas/aktualitates/portala-skolaslv-projekta-zaudeti-35-miljoni-eiro/.}  No one has been found guilty of corruption and there are no systemic approaches in place to eliminate such practices. The head of the State Audit Office, Elita Krūmiņa, stated that there are no precise figures on corruption available, ^{Official government portal, http://m.lvportals.lv/visi/viedokli?id=277754?show=coment.}  but cited other examples of the misuse of funds. ^{Media (TV) report, http://skaties.lv/zinas/latvija/sabiedriba/neprofesionalitate-un-neieinteresetiba-tie-ir-galvenie-iemesli-valsts-lidzeklu-izskerdesanai-secina-vk/.}  There are demonstrated cases of unlawful activities, such as fees paid for services without verifying their delivery, fees collected without the necessary supporting documents, and money transferred to private bank accounts for services received from a legal entity. ^{Official Government portal, http://m.lvportals.lv/visi/viedokli?id=277754?show=coment.}

To deal with these issues, the commitment seeks to establish legal and technical measures to eliminate risks for the misuse of public funds. The Corruption Prevention and Combating Bureau (CPCB) offers four courses of action to do so:

• Achieve greater transparency of procurement contracts at the national and local levels of government by making these contracts public.
• Provide an enforcement mechanism that requires public officials who misuse funds to pay back the estimated loss to the state budget.
• Analyze the risks of low-price procurement contracts and develop suggestions on how to eliminate these risks.
• Improving the legal framework for ensuring liability for the ineffective use of public resources.

In this cluster of actions there is only one activity that has a public-facing element — the publication of procurement contracts, which is relevant to access to information. The other actions, while meant to increase the effective use of public resources, have no clear connection to OGP values of access to information, civic participation, or public accountability. The milestones are directly related to holding government officials accountable, but they do not specify channels through which the public can participate or monitor government activity. As a result, the commitment is only relevant to access to information.

The specificity of the commitment is low because it is not clear how the milestones will be met. Their timelines are not defined, there are no starting points for the activities, and the actions lack concrete deliverables to be achieved during the period of the action plan. For example, the government does not specify how it will analyze the risks of misuse of funds, criminalize corruption, or develop recommendations for increased public access to contracts. Since it is possible to construe the general direction of the proposed actions, the IRM researcher considers the specificity of the commitment to be low.

Even if fully implemented as written, the proposed activities would amount to only minor improvements in the management of public resources. This is largely due to the vagueness of the expected outcomes. For instance, two milestones call for the development of recommendations, without specifying if or how they could be implemented. Furthermore, the milestones are written in such a way as to not promise concrete results. They begin with “consider a possibility,” “analyse risks,” and “assess legislation.”

The IRM researcher believes that the enforcement mechanisms and criminalization of corruption proposed in the second and fourth milestones would have greater effect if more cases of misuse of funds were disclosed. This would require complementary measures to strengthen the CPCB’s investigative capacity. Although the first milestone calls only for developing recommendations for the publication of contracts, the disclosure of contracts itself would bring about greater transparency and data for journalists and the general public. All contracts already exist in digital form, hence, publishing them should not be difficult. 

Completion

In interviews with a CPCB officer, ^{Interview with Sintija Helviga Eihvalde, Corruption Preventing and Combating Bureau, 18 August 2016.}  the IRM researcher ascertained the following progress:

• The publishing of all contracts has not yet started. The deadline for implementation has been postponed to the end of December 2020. 
• The milestone on administrative liability is being developed further by the State Audit Office. The office has proposed amendments that allow institutions to claim refunds of misused public resources from corrupt officers. These amendments are currently being debated in Parliament and are not publically available. The deadline for implementation is the end of December 2017.
• The CPCB insists that, in order to control resources spent for public procurement, the threshold for the application of the Public Procurement Law must not be lowered. The bureau’s comments on the draft Public Procurement Law were not taken into account by the Cabinet of Ministers. The CPCB officer interviewed asserts that the bureau will make the same arguments again when the draft is discussed in Parliament.
• Amendments to the criminal code were developed by a working group led by the Ministry of Justice. The amendments clarify the meaning of “significant damage” for holding government officials criminally liable for the misuse of funds. The amendments came into force on 3 December 2015 and are published on the Official Law database in Latvian. ^{Official Law portal, http://likumi.lv/ta/id/277894-grozijumi-likuma-par-kriminallikuma-speka-stasanas-un-piemerosanas-kartibu-.}

According to information provided by the CPCB, all of the activities are on schedule. The CPCB officer interviewed revealed that almost 30% of contracts under the existing threshold of public funds are potentially at a high risk for abuse. If the threshold is raised, as proposed in the draft Public Procurement Law, the CPCB claims the amount of public resources under risk will increase. The CPCB’s solution is to maintain the threshold and/or apply simpler procedures for procurements under the threshold.

During development of the action plan, NGOs insisted on including the first activity in the commitment. However, given the lack of progress, there have been no comments. Regarding the other activities, Delna discussed and commented on draft amendments at the Cabinet of Ministers and participated in parliamentary committee meetings. Delna representatives also do not have opinions that differ from those of the CPCB.

Early Results (if any)

It is too early to discuss results for the first three milestones. There have been no applications of the amendments to the criminal code as yet. Representatives from both the CPCB and NGOs agree that the amendment was a minor — though decisive — step in applying criminal liability in cases of serious damage.

Next Steps

The first milestone is relevant to OGP and should be included in the next action plan. This is important because it is an NGO priority for the current plan.

The IRM researcher notes that a separate activity, aimed at eliminating the misuse of public funds by NGOs, was included in the first action plan. This was criticized by NGOs since the proposed CPCB measures would apply to all NGOs regardless of their use of public funds. The activity is not included in the second action plan, but is still on the CPCB’s agenda and should be further discussed with NGOs.

Commitment 5. Public Finances

Commitment Text:

Introduce more effective supervision mechanisms of control over the activities of the officials responsible for handling public resources

The compliance of actions of public officials with state or local government property and funds, and transactions carried out by public institutions should be assessed in order to detect mismanagement, abuse of office, abuse of authority for personal unearned gain or for that of other persons. To monitor the prevention of the conflict of interest in the actions of public officials and compliance with prohibitions and additional restrictions set out in regulatory enactments in regard to public officials.

Main objective: To counter corruption by force of law and public support, in order to ensure that public power is used with integrity in the interest of the state and community. To monitor the prevention of the conflict of interest in the actions of public officials and compliance with prohibitions and additional restrictions set out in legislation in regard to public officials. Where violations of the Law “On the Prevention of the Conflict of Interest in the Actions of Public Officials” are detected, to prosecute public officials administratively—hold administrative hearings, enforce liability for violations in the area of corruption prevention, seek damages from public officials according to the procedures established by law in respect of loss resulting from their actions.

To achieve these objectives, specific tasks have been set in the “Corruption Prevention and Combating Guidelines for 2015-2020” (hereinafter—the Guidelines) approved by the Order of the Cabinet of Ministers of 16 July 2015:

• Consider a possibility for enabling public access online to information on all contracts signed by public authorities on the supply of goods and services, and other deals, if any, and develop recommendations for ensuring such measures (deadline for implementation in the Guidelines: 31.12.2020);

• Consider a possibility for introducing more effective supervision or enforcement mechanisms to control the activities of public officials responsible for handling public funds, incl. to determine administrative liability for misuse (wasteful spending) of public property and funds by public officials (deadline for implementation in the Guidelines: 31.12.2017);

• Analyse risks of misuse of funds, as well as risks of corruption in the below-threshold public procurement and purchases not covered by external legislation and provide recommendations for risk reduction (deadline for implementation in the Guidelines: 31.12.2016);

Other measures:

• Assess legislative acts on criminalising corruption and, in accordance with the problems identified in practises of the application of the law, to produce draft legislation seeking a more effective application of liability provisions regarding unlawful actions with public funds and property.

• Improvement of the mechanism for the prevention of the conflict of interest.

Responsible Institutions: Corruption Prevention and Combating Bureau, Ministry of Finance

Supporting Institution:

Start date: 2015..................... ...................... End date: 2020

Editorial Note: The commitment text above is drawn from the updated version of the action plan, published in October 2016 and available at http://bit.ly/2EK34dH. The original version of the action plan is available here: http://bit.ly/2ptZ0sq. To see the changes between the two versions, visit http://bit.ly/2FPvK4r.

Commitment Aim

The commitment seeks to establish legal and technical measures to eliminate risks for the misuse of public funds. In the original version of the second action plan, the Ministry of Finance and the CPCB offered four courses of action to reduce the possibility of misuse of public resources:

• Achieve more transparency of procurement contracts at the national and local government levels by making these contracts public.
• Provide an enforcement mechanism requiring public officials who misuse funds to pay back the estimated loss into the state budget.
• Analyse the risks of low-price procurement contracts and develop suggestions on how to eliminate these risks.
• Set thresholds to apply criminal liability for the ineffective use of public resources.

In the revised version of the second action plan, the government proposed an additional fifth milestone related to improving the mechanisms that prevent conflicts of interest. However, the fifth milestone does not specify which mechanisms will be improved or how, or if the public will be involved in the process. For these reasons, the milestone is considered to be vague and lacking relevance to OGP values, in the same manner as three of the four original milestones listed above (the first milestone, which aims to disclose public contracts, is the only milestone that is relevant to OGP values). The revised version of the action plan also included timelines for each of the previous milestones, reflected in the commitment text above.

Status

Midterm: Limited

The following reflect the commitment’s status as of mid-2016:

• The publishing of all contracts had not started. The deadline for implementation was postponed to the end of December 2020.
• The State Audit Office was carrying out the milestone on administrative liability. The office had developed amendments to the Law on State Audit, which were being debated in Parliament. The amendments proposed allowing institutions to claim refunds of misused public funds from the responsible officers. The deadline for implementation of this milestone was the end of December 2017.
• The CPCB insisted that to keep under control the amount of resources spent on public procurement, the threshold for the application of the Public Procurement Law could not be increased. This position is reflected in the CPCB comments submitted to the draft Public Procurement Law that were not considered by the Cabinet of Ministers or the Saeima.
• The Ministry of Justice led a working group that developed amendments to the criminal code. The amendments explain how to measure severe damage caused by a public official who is subject to a criminal penalty. The amendments also criminalise the misuse of public resources if the damage is more than the equivalent of 10 minimum wages. This milestone was considered complete.

For more information, see the 2015–2016 IRM midterm report. ^{Open Government Partnership, Independent Reporting Mechanism (IRM): Latvia Progress Report 2015–2016, https://www.opengovpartnership.org/wp-content/uploads/2001/01/Latvia_Progress-Report_2015-2017_for-public-comment_0.pdf.}

End of term: Substantial

This commitment extends beyond the two-year implementation period. There were significant developments in the implementation of the commitment during the second year of the action plan, and they all are in line with the responsible institutions’ calendars of activities. According to information provided by the CPCB, all tasks planned for July 2015 – June 2017 were fulfilled.

1. Parliament passed amendments to the Public Procurement Law (Article 60 [10] and 1[23]) and the Law on Procurement of Public Services. ^{“Public Service Providers Procurement Law,” Legislation of the Republic of Latvia, official law portal, https://likumi.lv/doc.php?id=288730.} As of 1 March 2017, the Public Procurement Law requires the publishing of not only plans for procurement but also all procurement documents. As of 1 January 2019, electronic submissions of bids and tenders will be required for all procurement procedures. In addition, the Cabinet of Ministers passed regulations on electronic public procurement that will require the publication of procurement-related information in an open data format (Article 3.10). ^{“Public Procurement Rules,” Legislation of the Republic of Latvia, https://likumi.lv/doc.php?id=289087.} In accordance with the regulations, the Public Procurement Office has started releasing data on historical procurements and contracts on the open data section of its web page ^{“Procurement Monitoring Bureau Open Data (Open IUB) Service,” Open Data Service, Procurement Monitoring Bureau, http://open.iub.gov.lv/.} and on the beta version of the open data portal built as part of the first commitment. Although all contracts have not been published, this milestone called only for considering “a possibility for enabling public access online to information on all contracts.” For this reason, the milestone is considered complete.
2. Still in Parliament are amendments to the Law on State Audit that establish an administrative liability for officials who misuse public funds. The amendments were reviewed by the responsible commission, debated in plenary, and are on track for a final debate in plenary. ^{“Amendments to the Law on State Control,” Parliament, http://titania.saeima.lv/LIVS12/SaeimaLIVS12.nsf/0/9C377236DD263414C225808A004A0A56?OpenDocument.} As a result, the implementation of the activity is on time.
3. The Procurement Monitoring Office, in cooperation with the Ministry of Finance, developed guidelines for acquiring public services that are under the procurement threshold regulated by law ^{“Iepirkumu Vadlinijas Sabiedrisko Pakalpojumu Sniedzejiem,” Ministry of Finance, http://m.esfondi.lv/upload/0_vadlinijas.pdf.} and by the Cabinet of Ministers. ^{“Provisions on Public Procurement Contract Value Thresholds,” Legislation of the Republic of Latvia, https://likumi.lv/ta/id/289083-noteikumi-par-publisko-iepirkumu-ligumcenu-robezvertibam.} The guidelines describe simple procedures—such as publishing the intent to sign a contract—that can ensure equal opportunities for all service providers. The guidelines are not legally binding but are used as a reference by auditing authorities. Therefore, institutions have an incentive to obey them. In addition, the CPCB developed amendments to the Public Procurement Law requiring government institutions to publish on the Procurement Monitoring Office database information on all acquired services above 500 euros and construction works above 1,000 euros. However, the amendments were rejected by Parliament. ^{CPCB, written communication, 13 September 2017.}
4. Parliament passed amendments to the Criminal Law (Articles 320 and 321) ^{“Criminal Law,” Legislation of the Republic of Latvia, https://likumi.lv/doc.php?id=88966.} that were developed by the Ministry of Justice and established higher fines and an easier burden of proof in cases of misuse of public resources. The amendments were not in force by the end of the action plan, but nonetheless entered into force on 1 January 2018.
5. According to the CPCB, it developed an amendment to the Law on Conflicts of Interests of Public Officials (Article 18), ^{“Prevention of Conflicts of Interest in the Activities of State Officials,” Legislation of the Republic of Latvia, https://likumi.lv/doc.php?id=61913.} which was approved by Parliament. The CPCB reported that the amendment defines actions involving public resources, therefore making it easier to apply administrative liability. However, the amendment to Article 18 of the law was adopted on 21 May 2015 and entered into force on 17 June 2015, prior to the submission of this milestone in October 2016. Moreover, the article that seems most in line with the information provided by the CPCB is Article 20(8), ^Ibid. which stipulates that the Cabinet of Ministers will issue regulations on internal control mechanisms to reduce the risk of corruption and conflicts of interest. The corresponding regulation, Cabinet Regulation Nr. 630 “Regulation on main requirements of internal control system for corruption and conflict of interest prevention in public institutions”, was indeed adopted. ^{Official Law portal, https://likumi.lv/doc.php?id=294518} However, it was issued on and entered into force on 17 October 2017, after the close of the action plan.

Did It Open Government?

Access to Information: Worsened

Before the new regulations passed as part of this commitment, there was no system of electronic procurement in place. Prior procurement data, if available, were obtainable only by searching various files on the Procurement Monitoring Office website. However, the names of the actual beneficiaries of contracts could not be gleaned from public procurement documentation. ^{Janis Volberts, “Delna: Ko Latvija var Mācīties no Panamas Papīru Skandāla,” Diena, 7 April 2016, https://www.diena.lv/raksts/latvija/viedokli/_delna_-ko-latvija-var-macities-no-_panamas-papiru_-skandala-14136331.} At the time, the requirement to disclose procurement documents applied if acquiring goods and services were above 4,000 euros or if construction works were above 14,000 euros. Information on procurements and contracts above these thresholds had to be published on the Procurement Monitoring Office website, as well as on the contracting institution’s website.

This commitment aims to fight corruption and the misuse of public funds in several ways, but only one of its milestones—the disclosure of public contracts—had a public-facing element corresponding with the OGP value of access to information. ^{For more information, see the 2015–2016 IRM midterm report.}

The commitment led to mixed results. On the one hand, the government launched an electronic procurement system. ^{“Caution! Use of the E-tendering System for Procurement Procedures Commenced on 01.10.2017,” Procurement Monitoring Bureau, https://www.iub.gov.lv/lv/node/705.} Launching this system steadily improves the accessibility of procurement information, even though the system is not applicable in assessing changes to government practice by the end of the action plan period (1 July 2017), since the system was launched on 1 October 2017.

The government also passed regulations that expand the amount of information to be disclosed for some contracts, which is an important achievement. However, these new requirements apply only to goods and services above 144,000 euros and construction works above 5,548,000 euros. ^{“Provisions on Public Procurement Contract Value Thresholds,” https://likumi.lv/ta/id/289083-noteikumi-par-publisko-iepirkumu-ligumcenu-robezvertibam.} The new government guidelines on good practices ^{“Iepirkumu Vadlinijas Sabiedrisko Pakalpojumu Sniedzejiem,” http://m.esfondi.lv/upload/0_vadlinijas.pdf.} recommend publishing contracting information for goods and services above 42,000 euros and for construction works above 170,000 euros. Contracting information for contracts that do not meet these thresholds are not required to be published on the Procurement Monitoring Office website. Instead, this information could be compiled and displayed elsewhere, such as on an individual government institution’s website. This means that a significant amount of contracting information above the old thresholds (4,000 euros for goods and services and 14,000 euros for construction works) will no longer be available for public access in a centralised location.

Nonetheless, it is important to mention that over time, the release of more contracting information will be required. Beginning on 1 April 2018, the thresholds for required disclosures of information will be lower: public construction works' contracts (170,000 euros – 5,548,00 euros); public delivery or public services contracts (42,000 euros – 144,000 euros. The thresholds will be further lowered on 1 January 2019: public construction works' contracts (20,000 euros – 170,000 euros); public delivery or public services contracts (10,000 euros – 42,000 euros). Despite this positive trend over time, fewer contracting documents were required to be published at a central location at the close of the action plan (July 2017) than at the beginning. Moreover, even once the electronic procurement system is completely introduced, thresholds will be higher than at the beginning of the action plan.

Anticorruption experts from Delna, the site of the local chapter of Transparency International, insist that the high thresholds increase the risk of corruption and reduce the level of transparency in the procurement process. ^{Janis Volberts, “Increasing the Public Procurement Threshold Will Increase the Risk of Corruption,” Par Likumu un Valsti, 24 October 2016, http://www.lvportals.lv/visi/viedokli/282763-publiska-iepirkuma-slieksna-celsana-palielinas-korupcijas-riskus/.} A significant proportion of public procurement transactions are now not subject to openness procedures, compared to the status quo before the passage of the new regulations. The CPCB expressed these concerns and informed the researcher about them during interviews for the midterm report, but neither the Cabinet of Ministers nor Parliament took the bureau’s suggestions into consideration.

Ultimately, the new system of e-procurement, together with the requirements to publish planned procurements and release open datasets, have the potential to improve transparency in the long term. However, in the short term, a greater proportion of transactions will not be easily available for public scrutiny as the thresholds for disclosure have increased. For this reason, the IRM researcher believes that, at the close of the action plan period (July 2017), the implementation of this commitment worsened the level of access to information in the country. Lastly, although the other milestones of the commitment (related to administrative liabilities, the criminalisation of corruption, and conflicts of interest) could ensure a better use of public resources, they are internal measures that are not directly linked to OGP values and therefore did not change the level of government openness.

Carried Forward?

The next action plan includes a commitment on public procurement transparency. Specifically, the commitment focuses on improving the transparency of procurement information that falls under the new threshold for mandatory disclosure mentioned above, as well as the transparency of concluded contracts and their amendments.