Audit finds Estonia artists union controls failed to prevent fraud

An audit by Estonia’s Ministry of Culture found that the Estonian Artists’ Union had inadequate controls over creative grants and artist salaries, ERR reported. The union’s accounting rules were outdated and its document management also requires modernisation.

The ministry reviewed how the union had used creative grants and artist salaries this year, focusing on a fraud case that came to light in May. The audit aimed to establish the facts and assess how the non-profit organisation operates.

Auditors found that the grants and salaries had been paid to eligible recipients on the basis of decisions and contracts, apart from the fraud in which a total of 680,051 euros was transferred to accounts belonging to unidentified people.

The union will cover unpaid grants and artist salaries for this year from its own funds, including a loan secured against real estate and the sale of real estate and artworks.

The review found shortcomings in the organisation of grant and salary accounting, while internal financial controls were insufficient. The union also lacked formally approved principles for paying creative grants, as required by law and its statutes.

Its internal accounting rules did not meet legal requirements, allowing accountants to make bank payments without approval from another person. The union also did not make sufficient use of information technology, meaning payments could be initiated without an underlying accounting document.

The audit said the union’s document management must be updated and its arrangements for protecting personal data improved. Data protection and information security measures also need strengthening.

The Ministry of Culture gave the union until December to correct the deficiencies. It also recognised the union’s management of the crisis caused by the fraud and its swift implementation of changes.

“The risk that materialised meant the sale of fixed assets, the taking of short-term credit and the reorganisation of key processes, which will continue in 2026 and beyond,” the ministry said.

The union accepted the findings but said it already had principles for paying creative grants that complied with the law. It said the missing element was a written operating procedure approved by its council.

The union said it had modernised several activities between May and August. However, it said the requirements related to document management, data protection and information security were extensive for an organisation financed mainly from its own income and membership fees, and would require additional investment.

The union told the ministry that, as a strategic partner of the Ministry of Culture and a user of public funds for their designated purpose, it understood that high standards applied to its administrative procedures and data handling. However, it noted that strategic partners in civil society did not receive the same state support in these areas as state foundations.

The union suggested that the ministry could support its partners through measures such as training, saying the fraud case had highlighted the administrative vulnerability of medium-sized and small cultural institutions.

The Estonian Artists’ Union is organising a benefit auction to partly cover the losses caused by the fraud. An exhibition of the 162 works being auctioned will open at the ARS art campus on Friday and remain open from September 19 to October 7. The auction will take place on October 8, 9 and 10.