Aruande edastamine

Internal Audit Department, Ministry of Climate, Republic of Estonia Audit No 2/2025

1

AUDIT REPORT Date: 19.02.2026 Prepared by: Maarja Kilter (Head

of Internal Audit Department)

Reference nr:

A1-8

Title Audit on the Use of Modernisation Fund Support in Estonia (costs up to 31.12.2024)

Objective The audit was conducted in accordance with Article 16(4) of Implementing Regulation (EU)

2020/1001, which requires Member States to carry out an audit every two years on the use of

amounts paid from the Modernisation Fund by the Member State or the scheme managing

authority to project proponents or final recipients of the Modernisation Fund support.

Scope The audit covers the use of support amounts paid from the Modernisation Fund to project

applicants or final recipients during the period 1 January 2023 – 31 December 2024. The audit

examines eligible costs related to the implementation of projects by final recipients (Muhu

Municipal Government, Hiiumaa Municipal Government, Saaremaa Municipal Government,

Põltsamaa Municipal Government, Riigi Kinnisvara AS), the administrative costs of

implementing measures by the State Shared Service Centre, and the costs of dual-system electric

trains incurred following the tender process conducted by AS Eesti Liinirongid under the

respective procurement contract. The scope of the audit also includes verifying the compliance of

public procurement procedures related to the support with applicable requirements.

Scope

limitation

The audit does not include:

➢ An assessment of the Ministry of Climate’s management and control systems (MCS) for

submitting Modernisation Fund investment proposals and reporting;

➢ An assessment of the MCS of responsible ministries in developing regulations for measures

financed by the Modernisation Fund, consolidating reports on the use of funding, and

submitting them to the Ministry of Climate;

➢ An assessment of the MCS of the State Shared Service Centre in processing project

applications and reporting for these measures;

➢ An evaluation of the impact of investments on energy efficiency and the modernisation of the

energy system.

Summary The audit was carried out in accordance with the principles and guidance set out in the Global Internal

Audit Standards Framework issued by The Institute of Internal Auditors (IIA), including Domain II:

Ethics and Professionalism, which defines the ethical principles and professional conduct requirements

for internal auditors. Throughout the engagement, we adhered to the principles of independence,

objectivity, and ethical conduct, while considering the expectations of the audit client. Although no

external quality assessments have been performed regarding the Ministry of Climate’s internal audit

activities, we consciously align our work with the International Standards for the Professional Practice

of Internal Auditing and apply appropriate ethical and professional practices.

In accordance with the Internal Audit Department’s Statute No. 1-2/23/338 dated 09.08.2023, the

following principles apply: (1) The Internal Audit Department is a structural unit of the Ministry of

Climate reporting directly to the Minister. (4) The Department is functionally independent from other

structural units of the Ministry and from agencies within its area of governance. (5) The Department

does not participate in the management processes of the auditee, nor in the development or

implementation of control procedures, and does not assume responsibility for management decisions

when performing assurance or advisory engagements. The Audit Lead has confirmed their objectivity

with respect to the internal audit subject under review and their obligation to immediately inform the

head of the institution if a conflict arises with the signed objectivity confirmation and/or if a potential

risk to objectivity emerges.

In preparing the report, we relied on the documentation available to us, as well as the information and

explanations provided by the auditee during the audit. We conclude that all data submitted to us, along

with other oral and written information, accurately reflect the activities performed and correspond to

reality, and are sufficient for forming an opinion. If additional information, not disclosed or unknown

to the auditor, had been available, the auditor’s conclusions might have been different.

We thank the auditees for their pleasant cooperation.

Maarja Kilter (CGAP), /digitally signed/

Internal Audit Department, Ministry of Climate, Republic of Estonia Audit No 2/2025

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Introduction The Modernisation Fund is an EU financial instrument established for the period 2021–2030 to support

the modernisation of energy systems and the improvement of energy efficiency in 13 Member States

with the lowest average income. The Fund was created under the EU Emissions Trading System (ETS)

and is financed through revenues from the auctioning of emission allowances. Its purpose is to help

lower-income Member States meet their 2030 climate and energy targets, as outlined in the European

Green Deal and the European Green Deal Investment Plan.

The legal framework of the Fund includes the ETS Directive (notably Articles 10 and 10d) and the

Implementing Regulation on the Modernisation Fund, both last amended in 2023 and applicable from

2024. In addition, the European Investment Bank (EIB), in consultation with the European

Commission, has published an Assessment Guidance Document. Investments financed by the Fund

must align with the objectives of the ETS Directive, the European Green Deal, the European Climate

Law, and the long-term goals of the Paris Agreement.

The Modernisation Fund is coordinated by the European Investment Bank in cooperation with the

European Commission.

The use of Modernisation Fund resources is governed by European Union legislation:

• Directive 2003/87/EC of the European Parliament and of the Council of 13 October 2003

establishing a scheme for greenhouse gas emission allowance trading within the Community and

amending Council Directive 96/61/EC;

• Commission Implementing Regulation (EU) 2020/1001 of 9 July 2020 laying down detailed rules

for the application of Directive 2003/87/EC of the European Parliament and of the Council as

regards the operation of the Modernisation Fund supporting investments to modernise the energy

systems and to improve energy efficiency of certain Member States and its amendment

(2023/2606).

The requirements for the use and reporting of Modernisation Fund resources in Estonia are established

by:

• Atmospheric Air Protection Act (AÕKS), §165¹ Modernisation Fund, which stipulates, among

other things, that the allocation of Modernisation Fund resources and the ministers responsible for

their use are determined in the State Budget Strategy (RES). For the implementation of measures

specified in the RES, the minister responsible for the use of resources may establish, by regulation,

the conditions and procedure for implementing the respective measure. Pursuant to subsection 51

of this paragraph, the Ministry of Climate submits the allocation of Modernisation Fund resources

for assessment and approval to the European Investment Bank and the Investment Committee in

accordance with Commission Implementing Regulation (EU) 2020/1001.

• Government of the Republic Regulation No. 25 of 10 March 2022 „General Conditions for the Use

and Reporting of Modernisation Fund Resources.“

Modernisation Fund-supported programmes in Estonia

1. On 14 September 2021, Estonia submitted two priority investment applications, both approved by

the European Commission. The EIB issued a positive confirmation for both on 11 October 2021.

➢ Programme for improvement of energy efficiency and renewable energy use in public

sector buildings (MF 2021-2 EE 0-001)

The objective is to improve the energy efficiency of public sector buildings and thereby reduce

greenhouse gas emissions from their use. With the support of the Modernisation Fund, energy

efficiency targets are planned to be achieved for 255,000–425,000 m² of floor area during

2021–2030. The programme is implemented through two sub-programmes: one focusing on

central government buildings and the other on local government buildings. Activities under this

programme are planned to be supported with €170 million from the Modernisation Fund during

2021–2030.

Internal Audit Department, Ministry of Climate, Republic of Estonia Audit No 2/2025

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The form of financing is a grant, which will be given for energy saving investments, renovation

or in some cases replacement and accompanying construction works.

From the Programme for improvement of energy efficiency and renewable energy use in public

sector buildings, the following sub-measures and related project costs, as well as administrative

costs for implementing the measures, are included within the scope of the audit:

a) Costs of projects supported under Regulation No. 36 of the Minister of Finance of 26

September 2023 „Conditions and Procedure for the Use of Support from the

Modernisation Fund for Improving the Energy Efficiency of Local Government

Buildings“.

The first application round was announced in October 2023 with a budget of €40 million and

implementation costs of €142,000. The deadline for submitting applications was 31 January

2024. As a result of the evaluation, 39 applications were approved, with a total support

allocation of €30,972,078.71. Projects are currently being implemented.

The second application round, with a budget of €45 million and implementation costs of

€150,000, was announced in March 2025, and the deadline for submitting applications was

31 July 2025.

As of 31 December 2024, funding from the Modernisation Fund has been disbursed for the following

projects

Project name Support rate Amount paid from the

Modernisation Fund to final

recipients up to 31 December

2024 (euros)

Kliima2.8.01.23-0039 Improvement of energy efficiency in Muhu

Sports Hall (Muhu Municipal Government)

65% 5947,50

Kliima2.8.01.23-0026 Improvement of energy efficiency in the

Käina Hobby and Cultural Centre building (Hiiumaa Municipal

Government)

63% 69230,98

Kliima2.8.01.24-0063 Reconstruction of Orissaare Cultural Centre

(Saaremaa Municipal Government)

69% 30304,80

Kliima2.8.01.24-0060 Improvement of energy efficiency in the

educational building at Lille Street 2/3 in Põltsamaa (Põltsamaa

Municipal Government)

67% 156519,57

TOTAL 262002,85

b) Costs of projects supported under Regulation No. 36 issued by the Minister of Public

Administration on 5 August 2022 „Conditions and Procedures for the Use of the

Modernisation Fund Support for Energy Efficiency Improvements in Central

Government Buildings“.

First application round: the budget for the round was 28 million euros, the deadline for

submitting applications was 31 January 2023. Two applications were submitted, both were

approved. A total of 20.6 million euros of support was allocated to the applications.

Second application round: the budget for the round was 27 million euros, the deadline for

submitting applications was 31 January 2024. Two applications were submitted, one of them

was approved. A total of 0.9 million euros of support was allocated to this application.

Third application round: the budget for the round is 24 million euros, the deadline for

submitting applications was 31 January 2025.”

As of 31 December 2024, funding from the Modernisation Fund has been disbursed for the following

projects:

Project name Support rate Amount paid from the

Modernisation Fund to final

recipients up to 31 December

2024 (euros)

Kliima2.8.01.23-0008 Reconstruction of the office building at

Lasnamäe Street 2 (Riigi Kinnisvara AS), VAT is not eligible

100% 74550,00

Kliima2.8.01.23-0010 Energy-efficient renovation of Tartu 100% 3900107,83

Internal Audit Department, Ministry of Climate, Republic of Estonia Audit No 2/2025

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Courthouse (Riigi Kinnisvara AS), VAT is not eligible

TOTAL 3974657,83

c) Administrative Costs for Implementing Sub-Measures of the Programme for

improvement of energy efficiency and renewable energy use in public sector buildings.

The State Shared Service Centre (https://www.rtk.ee/en), which is a government agency under

the administration of the Ministry of Finance, is responsible for carrying out the open call for

proposals and for supervision of the implementation of the projects and payments.

Administrative costs for implementing the measure under the Regulation No. 36 of the Minister

of Finance of 26 September 2023, “Conditions and Procedures for the Use of Support from the

Modernisation Fund for Improving the Energy Efficiency of Local Government Buildings”,

and related orders:

➢ Order of the Minister of Finance, 10 October 2023, No. 155: I confirm the indicative

financial volume for the 2023 application round as €40,000,000. I confirm the

administrative costs for the measure implementer for conducting the application round as

€142,000 in total.

➢ Order of the Minister of Regional Affairs and Agriculture, 27 February 2025, No. 47 (1.1-

2/47): I confirm the financial volume for the 2025 application round as €45,000,000. I

confirm the administrative costs for the measure implementer for conducting the

application round as €150,000 in total.

Administrative costs for implementing the measure under the Regulation No. 36 issued by the

Minister of Public Administration on 5 August 2022 „Conditions and Procedures for the Use of

the Modernisation Fund Support for Energy Efficiency Improvements in Central Government

Buildings, and related orders:

➢ Order of the Minister of Public Administration, 19 September 2022, No. 175: Financial

volume for the first application round: €28,000,000; administrative costs for the measure

implementer for conducting the application round: €104,200 in total (administrative costs

for implementing the measure: €8,200 (2022), €31,000 (2023), €32,000 (2024), €33,000

(2025)).

➢ Order of the Minister of Finance, 17 October 2023, No. 158: Financial volume for the

second application round: €27,000,000; administrative costs for the measure implementer

for conducting the application round: €134,000 in total.

➢ Order of the Minister of Finance, 20 September 2024, No. 105: Financial volume for the

third application round: €24,000,000; administrative costs for the measure implementer for

conducting the application round: €90,000 in total.

As of 31 December 2024, funding from the Modernisation Fund has been disbursed to the State Shared

Services Centre for the following costs (code 9R40-MF00-08112HALD):

Year Description of Costs Amount paid from the Modernisation Fund to

final recipients up to 31 December 2024 (euros)

2023 Administrative costs for measure implementation

(partial salaries, taxes, etc.)

8790,42

2024 Administrative costs for measure implementation

(partial salaries, taxes, etc.)

77986,05

TOTAL 86776,47

➢ Energy-efficient low-emission public transport programme (MF 2021-2 EE 0-002)

The aim is to improve the energy efficiency of Estonia’s public transport by supporting

investments that accelerate the transition to vehicles using renewable energy or hydrogen.

The programme contributes to the Transport and Mobility Master Plan 2021-2035 and to

the National Energy and Climate Plan 2030. Activities include acquiring an

environmentally friendly and energy-efficient ferry for the Virtsu–Kuivastu route,

modernising Estonia’s train fleet by purchasing 10 electric passenger trains with the Fund’s

support, and promoting the use of electric buses and/or trams in cities. These activities are

Internal Audit Department, Ministry of Climate, Republic of Estonia Audit No 2/2025

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planned to be supported with €130 million from the Modernisation Fund during 2021–

2030.

➢ As of 31 December 2024, expenses have been incurred in connection with the procurement

of electric trains. On 6 September 2022, the Government of the Republic of Estonia

decided at a cabinet meeting to approve the acquisition of 10 new dual-system electric

trains financed from the Modernisation Fund. The public procurement reference number is

217993 “Purchase of dual-system electric trains” (restricted procedure; the international

notice is published at https://ted.europa.eu/et/notice/-/detail/121993-2020). The contract

with the successful bidder was signed on 19 December 2022. The trains are currently in

production and according to the signed contract, the final handover of 10 electric trains

will take place in March 2026.

As of 31 December 2024, funding has been paid to AS Eesti Liinirongid for the following costs:

Description of Costs Support rate Amount paid from the

Modernisation Fund to final

recipients up to 31 December

2024 (euros)

Execution of Contractual Payments under the Procurement Contract

Resulting from the Public Tender „Purchase of dual‑system electric

trains“ (Reference No. 217993), Concluded with the Škoda

Transportation a.s. and Škoda Vagonka Consortium

100% 21702517,00

Payments to final beneficiaries under these two programmes have been made up to 31

December 2024 and are included within the scope of this audit (see Annex 1 for details).

➢ On 13 February 2024, Estonia submitted an application for Phase 2 of the Programme for

Increasing Energy Efficiency and Renewable Energy Use in Public Sector Buildings

(amounting to €250 million). The EIB issued a positive financing decision on 12 March 2024.

No payments to final beneficiaries have been made from this funding.

Internal Audit Department, Ministry of Climate, Republic of Estonia Audit No 2/2025

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Final Report Programme for improvement of energy efficiency and

renewable energy use in public sector buildings Sub-measures:

➢ Regulation No. 36 of the Minister of Finance of 26 September

2023 „Conditions and Procedure for the Use of Support from

the Modernisation Fund for Improving the Energy Efficiency of

Local Government Buildings“

➢ Regulation No. 36 issued by the Minister of Public

Administration on 5 August 2022 „Conditions and Procedures

for the Use of the Modernisation Fund Support for Energy

Efficiency Improvements in Central Government Buildings“

Administrative costs for implementing sub-measures of the Programme for improvement of energy

efficiency and renewable energy use in public sector buildings.

Programme eligibility period 01.07.2021 - 31.12.2030

Total amount of eligible programme costs (euros) 170 000 000,00

Project proponent/final recipient (name of institution) State Shared Service Centre (Riigi Tugiteenuste Keskus), who is the final recipient only for its

administrative cost component, but acts as an implementing body for investment sub-measures.

Decision forming the basis for Modernisation Fund

financing for sub-measure

Administrative costs for implementing the measure under the Regulation No. 36 of the Minister of

Finance of 26 September 2023, “Conditions and Procedures for the Use of Support from the

Modernisation Fund for Improving the Energy Efficiency of Local Government Buildings”, and

related orders:

➢ Order of the Minister of Finance, 10 October 2023, No. 155: administrative costs for the measure

implementer for conducting the application round as 142 000 euros in total.

➢ Order of the Minister of Regional Affairs and Agriculture, 27 February 2025, No. 47:

administrative costs for the measure implementer for conducting the application round as 150

000 euros in total.

Administrative costs for implementing the measure under the Regulation No. 36 issued by the

Minister of Public Administration on 5 August 2022 „Conditions and Procedures for the Use of the

Modernisation Fund Support for Energy Efficiency Improvements in Central Government

Buildings“, and related orders:

➢ Order of the Minister of Public Administration, 19 September 2022, No. 175: administrative

costs for the measure implementer for conducting the application round: 104 200 euros in total

(8200 euros (2022), 31 000 euros (2023), 32 000 euros (2024), 33 000 euros (2025)).

➢ Order of the Minister of Finance, 17 October 2023, No. 158: administrative costs for the measure

implementer for conducting the application round: 134 000 euros in total.

➢ Order of the Minister of Finance, 20 September 2024, No. 105: administrative costs for the

measure implementer for conducting the application round: 90 000 euros in total.

Internal Audit Department, Ministry of Climate, Republic of Estonia Audit No 2/2025

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Audited amount of Modernisation Fund financing up

to 31.12.2024 (in euros) for programme / for sub-

measure

86 776,47 (These administrative costs relate exclusively to the implementation of the two

sub-measures listed above and do not include any project-level expenditures)

Size of the audited sample up to 31.12.2024 (in euros)

for programme / for sub-measure 24 795,19

Amount of identified non-eligible financing (in euros) 0,00

Audited cost documents (sample)

Cost document

number and date

Submitter of the

cost document Description of the expense

Total amount of the

cost document

(EUR, including

VAT)

Payment order for the

payment made by final

recipient

Eligible

amount

(EUR)

Paid amount of

Modernisation

Fund funding to

final recipient

(EUR)

Modernisation Fund

funding payment date Internal Travel Order

– Expense Report

R400-3-4L/404,

1510006416

(26.05.2023) S. A.

Reimbursement of Personal Vehicle

Use Expenses, 20.04–20.04.23;

Tallinn, Work at the Tallinn office.

65,00

(0,00)

No 0020029871

(31.05.2023) in the amount

of 65,00 euros 65,00 65,00 0200006633 (30.12.2022)

233053 (20.07.2023)

Juunika Koolitus

osaühing

A. Zolin Training, 15–16 November

– From Specialist to Manager, Part

2.

486,00

(81,00)

No 0020038834

(27.07.2023) in the amount

of 486,00 euros 24,30 24,30 0200006633 (30.12.2022)

230500 (16.08.2023) Toosikannu OÜ

Catering, room rental and

accommodation at the State Shared

Service Centre 10-11.08.2023

seminar „Organizational Value“.

25478,90

(3777,01)

No 0020041940

(30.08.2023) in the amount

of 25478,90 euros 24,03 24,03 00200006633 (30.12.2022)

44

(13.11.2023) HEVAC OÜ

Modernisation Fund measure.

Expert consultancy fee.

180,00

(30,00)

No 0020059012

(27.12.2023) in the amount

of 180,00 euros 180,00 180,00 0200006633 (30.12.2022)

32053

(24.11.2023) OÜ Laidoneri KV

Autumn seminar of the Public

Infrastructure Department on 23

November 2023, catering and

seminar room rental.

581,00

(96,83)

No 0020055814

(06.12.2023) in the amount

of 581,00 euros 13,20 13,20 0200006633 (30.12.2022)

42023

(28.04.2023) M.A., S.A., H. A.

Salaries paid to employees from the

payroll module (the proportion of

salaries paid to the employees of the

State Shared Service Centre from

the Modernisation Fund, as

specified by the Director General’s

directives, M.A. 5%, S.A. 10%, H.

A. 10%) 482,07

Paid as a part of mass

payments: No 1423930002

(28.04.2023) in the amount

of 858150,28 euros and No

1423930003 (28.04.2023)

in the amount of 495941,79

euros 482,07 482,07 0200006633 (30.12.2022)

42023

(28.04.2023) Maksu- ja Tolliamet Taxes related to labor costs 343,01

No 0020026212

(10.05.2023) in the amount

of 343,01 euros 343,01 343,01 0200006633 (30.12.2022)

122023

(28.12.2023) A.Z., H.A., S.A

Salaries paid to employees from the

payroll module (the proportion of 526,61

Paid as a part of mass

payments: No 1596070005 526,61 526,61 0200006633 (30.12.2022)

Internal Audit Department, Ministry of Climate, Republic of Estonia Audit No 2/2025

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salaries paid to the employees of the

State Shared Service Centre from

the Modernisation Fund, as

specified by the Director General’s

directives, A.Z. 5%, S.A. 10%, H.

A. 10%)

(28.12.2023) in the amount

of 515538,05 euros and No

1596070000 (28.12.2023)

in the amount of 888276,08

euros

122023

(28.12.2023) Maksu- ja Tolliamet Taxes related to labor costs 379,89

No 0020060267

(29.12.2023) in the amount

of 379,89 euros 379,89 379,89 0200006633 (30.12.2022)

11050894

(24.01.2024)

Sihtasutus Eesti

Kontsert

Annual Seminar 19 January 2024,

Rental of training rooms and

equipment

8436,30

(1521,30)

No 0020004146

(07.02.2024) in the amount

of 8436,30 euros 23,00 23,00 0200006633 (30.12.2022)

8

(19.01.2024)

Osaühing

Vanemuise Kohvik

Catering service for the annual

seminar on 19 January 2024

19151,00

(3453.46)

No 0020003756

(02.02.2024) in the amount

of 19151,00 euros 52,21 52,21 0200006633 (30.12.2022)

3546

(19.08.2024)

Osaühing 360

KRAADI

Organization of a team event in

Nelijärve on 15 August 2024

3308,64

(596,64)

No 0020031390

(09.09.2024) in the amount

of 3308,64 euros 17,78 17,78 0200003572 (22.05.2024)

17203

(07.10.2024) Duco MP OÜ

Catering and room rental for the

Autumn Seminar of the Grants

Implementation Department (15-

16.08.2024)

7088,00

(1278,17)

No 0020037687

(21.10.2024) in the amount

of 7088,00 euros 186,85 186,85 0200003572 (22.05.2024)

Internal Travel Order

– Expense Report

R400-3-4L/923,

1510008148

(12.11.2024) S. A.

Travel expenses, (business trip

04.11-04.11.24), S.A., Pärnu -

Tallinn - Pärnu

15,15

(0,00)

No 0020041266

(14.11.2024) in the amount

of 15,15 euros 6,81 6,81 0200003572 (22.05.2024)

32024

(27.03.2024) T.T.

Fee paid under a contract for

services for verifying compliance

with energy audit requirements No.

11.1-15/24/77-1, dated 20 February

2024

to T.T. 8596,80

No 1653440000

(27.03.2024) in the amount

of 8996,80 euros 8596,80 8596,80 0200006633 (30.12.2022)

32024

(28.03.2024)

A.Z., L.S., S.A.,

H.A.

Salaries paid to employees from the

payroll module (the proportion of

salaries paid to the employees of the

State Shared Service Centre from

the Modernisation Fund, as

specified by the Director General’s

directives, A.Z. 4,5%, L.S. 2%,

S.A. 45%, H.A.45%) 1846,48

Paid as a part of mass

payments: No 1656320000

(28.03.2024) in the amount

of 883848,51 euros; No

1656320005 (28.03.2024)

in the amount of 526594,55

euros 1846,48 1846,48 0200006633 (30.12.2022)

32024

(27.03.2024;

28.03.2024) Maksu- ja Tolliamet Taxes related to labor costs 7095,69

No 0020012353

(10.04.2024) in the amount

of 7095,69 euros 7095,69 7095,69 0200006633 (30.12.2022)

102024

(31.10.2024)

J.M., A.Z., S.A.,

A.K., H.A.

Salaries paid to employees from the

payroll module (the proportion of

salaries paid to the employees of the 2784,74

Paid as a part of mass

payments: No 1809110000

(31.10.2024) in the amount 2784,74 2784,74 0200003572 (22.05.2024)

Internal Audit Department, Ministry of Climate, Republic of Estonia Audit No 2/2025

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State Shared Service Centre from

the Modernisation Fund, as

specified by the Director General’s

directives, J.M.20%, A.Z.10%,

S.A.45%, A.K.25%, H.A.45%)

of 870684,34 euros; No

1809110005 (31.10.2024)

in the amount of 522004,74

euros

102024

(31.10.2024) Maksu- ja Tolliamet Taxes related to labor costs 1996,20

No 0020040185

(08.11.2024) in the amount

of 1996,20 euros 1996,20 1996,20 0200003572 (22.05.2024)

TSD 11.2024 Maksu- ja Tolliamet

Social tax and income tax payable

on fringe benefits 150,52

No 0020040975

(11.11.2024) in the amount

of 150,52 euros 150,52 150,52 0200003572 (22.05.2024)

SIZE OF THE AUDITED SAMPLE (The “size of the audited sample” reflects the value of cost items selected for detailed testing. The remaining

expenditure was part of the overall audit population and included in the audit scope, but was not subject to individual document testing in line with the

sampling methodology applied. No risk indicators or inconsistencies arose during the audit that would have required expanding the sample.)

Sampling approach for personnel costs and other administrative expenditure:

Within the overall audit population, personnel‑related costs (salaries and related taxes) amounted to  85 157,76 EUR, of which  24 051,49 EUR was included in

the detailed audit sample in accordance with the sampling rule of testing at least 10% of personnel expenditure. The remaining personnel costs formed part of

the audit population but were not subject to individual document testing, in line with the sampling methodology applied. No indications were identified during

the audit that would have required expanding the sample.

One cost item in the sample was a fee paid under a contract for services. Although formally classified as a service contract, this expenditure represents

remuneration for work performed by a natural person and is treated as a personnel‑type cost for sampling purposes. Its inclusion in the sample is consistent

with the sampling approach, as the methodology allows the selection of any cost item falling within the relevant cost category regardless of contractual form.

Other administrative costs amounted to  1618,71 EUR and, based on the sampling methodology (ten lines or 10% of cost lines, whichever is greater), ten cost

items totalling 743,70 EUR were selected for detailed testing. All remaining cost items formed part of the audit population but were not examined at individual

document level in line with the sampling methodology applied. No matters arose during the audit that would have indicated a need to increase the sample. 24795,19

Technical note: The payment references 0200006633 (30.12.2022) and 0200003572 (22.05.2024) reflect the date on which Modernisation Fund administrative resources were transferred in advance to the State

Shared Service Centre. Subsequent administrative costs (e.g., salaries, taxes, travel) incurred in 2023–2024 are settled against this advance allocation.

Cost document

number

Accounting entry

date Submitter of the cost document

Description of the expense (in the process of posting

accounting entries)

Paid amount of

Modernisation Fund funding

to final recipient (EUR)

Modernisation Fund

funding payment date

1510006281 13.04.2023 S. A. 13.04-13.04.23 S.A., Tallinn, Work at the Tallinn office 21,10 0200006633 (30.12.2022)

1510006406 09.05.2023 S. A. 09.05-09.05.23 S.A., Tallinn, Work at the Tallinn office 20,10 0200006633 (30.12.2022)

230766 30.06.2023 osaühing Tripod Grupp Testing 6,60 0200006633 (30.12.2022)

233052 27.07.2023 Juunika Koolitus osaühing A. Z., From Specialist to Manager, Part 1 24,30 0200006633 (30.12.2022)

680100 11.08.2023 AS Hansabuss Lõkke 4. Tallinn > Toosikannu > Lõkke 4. Tallinn 1 2,30 0200006633 (30.12.2022)

19283 11.08.2023 OÜ Peoloog Seminar moderation 1,42 0200006633 (30.12.2022)

654 11.08.2023 Glamping Estonia OÜ

Rental of a 5‑person accommodation tent at

Toosikannu on 10–11 August, charging area tent with

furniture and string lights, transport of accommodation

tents from Tallinn to Toosikannu and back 3,87 0200006633 (30.12.2022)

K26E26 11.08.2023 KERA OÜ Training: The Values Game, 10 August 2023 2,25 0200006633 (30.12.2022)

1510006915 11.10.2023 S. A. 11.10-11.10.23 S. A., Tallinn, Excel BCS training 2,50 0200006633 (30.12.2022)

31799 24.11.2023 OÜ Laidoneri KV

Accommodation for 23–24 November 2023 for the

seminar (AT) 20,39 0200006633 (30.12.2022)

535 24.11.2023 Savilind OÜ Team activity on 23 November (TRO AT) 5,75 0200006633 (30.12.2022)

200/M 24.11.2023 Nõmme Kaubandus OÜ Catering 23.11-24.11 4,27 0200006633 (30.12.2022)

Internal Audit Department, Ministry of Climate, Republic of Estonia Audit No 2/2025

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032023 31.03.2023 Salaries paid to employees 482,07 0200006633 (30.12.2022)

Maksu- ja Tolliamet Taxes related to labor costs 343,01 0200006633 (30.12.2022)

052023 31.05.2023 Salaries paid to employees 482,06 0200006633 (30.12.2022)

Maksu- ja Tolliamet Taxes related to labor costs 343,01 0200006633 (30.12.2022)

062023 22.06.2023 Salaries paid to employees 185,00 0200006633 (30.12.2022)

062023 30.06.2023 Salaries paid to employees 346,94 0200006633 (30.12.2022)

Maksu- ja Tolliamet Taxes related to labor costs 377,91 0200006633 (30.12.2022)

072023 30.07.2023 Salaries paid to employees 442,14 0200006633 (30.12.2022)

Maksu- ja Tolliamet Taxes related to labor costs 318,45 0200006633 (30.12.2022)

082023 31.08.2023 Salaries paid to employees 481,31 0200006633 (30.12.2022)

Maksu- ja Tolliamet Taxes related to labor costs 347,12 0200006633 (30.12.2022)

TSD 08.2023 31.08.2023 Maksu- ja Tolliamet Social tax and income tax payable on fringe benefits 9,38 0200006633 (30.12.2022)

092023 29.09.2023 Salaries paid to employees 478,04 0200006633 (30.12.2022)

Maksu- ja Tolliamet Taxes related to labor costs 344,83 0200006633 (30.12.2022)

102023 31.10.2023 Salaries paid to employees 478,05 0200006633 (30.12.2022)

Maksu- ja Tolliamet Taxes related to labor costs 344,82 0200006633 (30.12.2022)

112023 30.11.2023 Salaries paid to employees 478,04 0200006633 (30.12.2022)

Maksu- ja Tolliamet Taxes related to labor costs 344,83 0200006633 (30.12.2022)

TSD 11.2023 30.11.2023 Maksu- ja Tolliamet Social tax and income tax payable on fringe benefits 10,45 0200006633 (30.12.2022)

681773 19.01.2024 AS Hansabuss

Transport (Eesti Rahvusraamatukogu - Vanemuise

kontserdimaja) 11,07 0200006633 (30.12.2022)

1190 19.01.2024 GLOCL OÜ

L. Viik Presentation at the annual Seminar, January

2024 3,66 0200006633 (30.12.2022)

964 19.01.2024

OSAÜHING ROCKSTICK

PRODUCTION

Technical support for the State Shared Service Centres

annual seminar 23,11 0200006633 (30.12.2022)

703113 19.01.2024 Miltton New Nordics OÜ Annual Seminar Panel Discussion 2,66 0200006633 (30.12.2022)

1 19.01.2024 OÜ Sintar Recording of video footage 0,72 0200006633 (30.12.2022)

563 19.01.2024 OÜ Tikerberry

Scriptwriting and directing of the annual seminar

videos 2,73 0200006633 (30.12.2022)

1510007351 12.03.2024 L. S. 12.03-12.03.24 L.S., Tallinn 0,60 0200006633 (30.12.2022)

1510007700 12.06.2024 A. Z. 12.06-12.06.24 A. Z., Tartu office 4,68 0200003572 (22.05.2024)

1510007767 10.07.2024 A. Z.

10.07-10.07.24 A. Z., Pärnu, Conducting annual

reviews 4,55 0200003572 (22.05.2024)

222 16.08.2024 OÜ Mõttemaru Presentation 9,83 0200003572 (22.05.2024)

19372 16.08.2024 OÜ Peoloog Teamwork organisation 18,17 0200003572 (22.05.2024)

24279 16.08.2024 AS Hotell Stroomi

Accommodation services at Nelijärve Holiday Centre

on 15–16 August, rental of rooms and outdoor area, and

catering 192,60 0200003572 (22.05.2024)

10254 16.08.2024 Porrulans OÜ Inspirational lecture at the summer seminar 5,58 0200003572 (22.05.2024)

1366 16.08.2024 SinuVideo Production OÜ

Video and photography services – State Shared Service

Centre Summer Seminar, 15–16 August 2024 4,26 0200003572 (22.05.2024)

1510007846 12.09.2024 A. Z. 12.09-12.09.24 A. Z, Pärnu 11,72 0200003572 (22.05.2024)

1510007972 27.09.2024 A. K.

26.09-27.09.24 A. K, Nina Kordon Guesthouse,

seminar (ATT) 27,18

0200003572 (22.05.2024)

1510007975 27.09.2024 H. A. 26.09-27.09.24 H. A., Peipsiääre vald, seminar (ATT) 24,84 0200003572 (22.05.2024)

96 27.09.2024 Peipsimaa Präänikutalu OÜ Organization of team activities 18,98 0200003572 (22.05.2024)

Internal Audit Department, Ministry of Climate, Republic of Estonia Audit No 2/2025

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1475 01.10.2024 Peipsinina Puhkekeskus OÜ

ATT seminar lunch and dinner on 26 September 2024,

ATT seminar room rental on 26 September 2024, ATT

accommodation at the Nina Kordon Guesthouse from

26–27 September 133,94 0200003572 (22.05.2024)

1510008035 03.10.2024 S. A.

03.10-03.10.24 S.A., Tallinn, Seminar of the

department (TRO) 5,13

0200003572 (22.05.2024)

1510008164 03.10.2024 A. K.

03.10-03.10.24 A.K., Tallinn, Seminar of the

department (TRO) 16,00 0200003572 (22.05.2024)

236 03.10.2024 OÜ Mõttemaru 3.10 TRO Team-building training 38,59 0200003572 (22.05.2024)

24102 09.10.2024 OÜ Agenda Public Relations Media and communication messaging training 13,91 0200003572 (22.05.2024)

202414850 31.10.2024 Meliva AS Occupational health package 1 42,75 0200003572 (22.05.2024)

1510008166 04.11.2024 A. K. 04.11-04.11.24 A.K., Tallinn 2,85 0200003572 (22.05.2024)

20169207 07.11.2024 AS BCS Koolitus 7.11 MS Outlooki modules and Teams training 3,15 0200003572 (22.05.2024)

240646 19.12.2024 Skyon Resto OÜ 19.12 Catering for the TRO managers’ seminar 4,46 0200003572 (22.05.2024)

012024 31.01.2024 Salaries paid to employees 1910,93 0200006633 (30.12.2022)

Maksu- ja Tolliamet Taxes related to labor costs 1370,84 0200006633 (30.12.2022)

TSD 01.2024 31.01.2024 Maksu- ja Tolliamet Social tax and income tax payable on fringe benefits 34,59 0200006633 (30.12.2022)

022024 27.02.2024 Salaries paid to employees 197,62 0200006633 (30.12.2022)

022024 29.02.2024 Salaries paid to employees 1918,02 0200006633 (30.12.2022)

Maksu- ja Tolliamet Taxes related to labor costs 1518,20 0200006633 (30.12.2022)

032024 09.04.2024 Salaries paid to employees 1080,00 0200006633 (30.12.2022)

042024 30.04.2024 Salaries paid to employees 1835,21 0200006633 (30.12.2022)

Maksu- ja Tolliamet Taxes related to labor costs 2041,49 0200006633 (30.12.2022)

052024 27.05.2024 Salaries paid to employees 7128,00 0200003572 (22.05.2024)

31.05.2024 Salaries paid to employees 1915,22 0200003572 (22.05.2024)

Maksu- ja Tolliamet Taxes related to labor costs 6167,56 0200003572 (22.05.2024)

062024 28.06.2024 Salaries paid to employees 2869,06 0200003572 (22.05.2024)

Maksu- ja Tolliamet Taxes related to labor costs 2060,16 0200003572 (22.05.2024)

072024 31.07.2024 Salaries paid to employees 2893,46 0200003572 (22.05.2024)

Maksu- ja Tolliamet Taxes related to labor costs 2078,12 0200003572 (22.05.2024)

082024 30.08.2024 Salaries paid to employees 2844,57 0200003572 (22.05.2024)

Maksu- ja Tolliamet Taxes related to labor costs 2042,16 0200003572 (22.05.2024)

TSD 08.2024 31.08.2024 Maksu- ja Tolliamet Social tax and income tax payable on fringe benefits 78,02 0200003572 (22.05.2024)

092024 30.09.2024 Salaries paid to employees 2844,56 0200003572 (22.05.2024)

Maksu- ja Tolliamet Taxes related to labor costs 2042,17 0200003572 (22.05.2024)

112024 29.11.2024 Salaries paid to employees 2844,56 0200003572 (22.05.2024)

Maksu- ja Tolliamet Taxes related to labor costs 2042,16 0200003572 (22.05.2024)

122024 12.12.2024 Salaries paid to employees 126,70 0200003572 (22.05.2024)

122024 30.12.2024 Salaries paid to employees 2717,87 0200003572 (22.05.2024)

SIZE OF THE REMAINING EXPENDITURE OF THE OVERALL POPULATION (This refers to the portion of expenditure that formed

part of the audit population but was not selected for detailed document-level testing under the sampling methodology. These amounts remained

within the audit scope; however, no matters were identified during the audit work that would have required expanding the sample.) 61981,28

The audit scope covered the activities and expenditures incurred up to 31 December 2024. Role of the State Shared Service Centre in the Programme for

improvement of energy efficiency and renewable energy use in public sector buildings: Within this programme, the State Shared Service Centre acts as the

implementing body, responsible for administering the measure, including receiving and assessing applications, verifying eligibility, authorising payments,

Internal Audit Department, Ministry of Climate, Republic of Estonia Audit No 2/2025

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monitoring implementation and carrying out reporting and control activities.

For the administrative costs related specifically to the implementation of this programme, the State Shared Service Centre is also the final recipient, as these

costs are financed directly from the Modernisation Fund in accordance with the applicable ministerial decisions and the programme’s regulatory framework.

Accordingly, in the answers below, references to “final recipient” relate to the State Shared Service Centre solely in the context of its eligible administrative

expenditure under this programme.

Auditor’s Summary Opinion

Based on the procedures carried out during the audit, it can be concluded that the use of the funds paid from the Modernisation Fund to the State Shared Service

Centre, within the scope of the audit, has been compliant. The reimbursed costs comply with the requirements of European Union and Estonian national

legislation and are directly linked to the implementation of the programme’s planned objectives and activities.

For all audited expenditures, adequate and appropriate supporting documents exist, confirming the link to the programme and compliance with the eligibility

conditions. The transactions correspond to the actual circumstances, the costs are accurately and fully recorded in the accounting system, have been paid

correctly, and align with the nature and amounts of the recorded transactions. A minor immaterial difference (0.08 EUR ) observed in one cost item did not

affect the eligibility, accuracy or completeness of the audited expenditure.

In designing the audit methodology, the auditors applied the principle of proportionality, taking into account the nature and materiality of the expenditure. For

the State Shared Service Centre, the Modernisation Fund‑financed shares of purchased services within administrative costs were immaterial, and procurement

compliance testing would not have provided additional audit assurance. Accordingly, procurement procedures were not reviewed for the Centre’s administrative

cost items.

Within the audit scope, no violations, shortcomings, or other circumstances were identified that would cast doubt on the justification, accuracy, or compliance of

the costs with the rules governing the use of the support. In conclusion, it can be confirmed that the funds used within the programme have been managed

transparently, purposefully and in accordance with applicable requirements.

The final recipient has implemented the necessary resources and procedures to ensure the retention of all documents related to the Modernisation Fund for at

least five years after the final payment, as required by Article 16(5) of Regulation (EU) 2020/1001.

Programme‑related publicity and visibility activities have been carried out in accordance with EU visibility and communication requirements.

Compliance of Project Planning with Modernisation Fund Objectives Conclusion

(YES / NO

/ N/A) Auditor verified:

➢ Whether the use of funding or the project (regardless of whether implemented by the final recipient or by the State Shared Services Centre as

the implementing body) complies with the eligibility criteria (in accordance with Directive 2003/87/EC Article 10d, Regulation (EU)

2020/1001, national support conditions and the financing decision).

Explanation: The State Shared Service Centre (https://www.rtk.ee/en), as a government agency under the Ministry of Finance, performs the role

of implementing body within the Programme for improvement of energy efficiency and renewable energy use in public sector buildings. In

accordance with the applicable regulations, the Centre is responsible for receiving and processing support applications, verifying compliance with

eligibility requirements, authorising and executing payments for eligible activities or activity bundles (the “project”), and carrying out

project-level oversight. To enable the performance of these functions, dedicated funding for administrative tasks has been allocated to the State

Shared Service Centre through ministerial orders, ensuring that the activities related to programme management are financed in accordance with

YES

Internal Audit Department, Ministry of Climate, Republic of Estonia Audit No 2/2025

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national and EU-level regulatory frameworks. These include:

1. Administrative costs related to the measure established by the Minister of Finance Regulation No. 36 of 26 September 2023,

“Conditions and Procedures for the Use of Support from the Modernisation Fund for Improving the Energy Efficiency of Local Government

Buildings,” and related orders confirming both the financial volume of application rounds and the corresponding administrative cost

allocations for the State Shared Services Centre:

✓ Order of the Minister of Finance, 10 October 2023, No. 155: Indicative financial volume for the 2023 application round as €40,000,000.

Confirmed administrative costs for the measure implementer for conducting the application round as €142,000 in total.

✓ Order of the Minister of Regional Affairs and Agriculture, 27 February 2025, No. 47: Financial volume for the 2025 application round

as €45,000,000. Confirmed administrative costs for the measure implementer for conducting the application round as €150,000 in total.

2. Administrative costs related to the measure established by the Minister of Public Administration Regulation No. 36 of 5 August 2022,

“Conditions and Procedures for the Use of the Modernisation Fund Support for Energy Efficiency Improvements in Central Government

Buildings,” and related ministerial orders approving the financial volume and administrative cost ceilings per application round:

✓ Order of the Minister of Public Administration, 19 September 2022, No. 175: Financial volume for the first application round:

€28,000,000; administrative costs for the measure implementer for conducting the application round: €104,200 in total (administrative costs

for implementing the measure: €8,200 (2022), €31,000 (2023), €32,000 (2024), €33,000 (2025)).

✓ Order of the Minister of Finance, 17 October 2023, No. 158: Financial volume for the second application round: €27,000,000;

administrative costs for the measure implementer for conducting the application round: €134,000 in total.

✓ Order of the Minister of Finance, 20 September 2024, No. 105: Financial volume for the third application round: €24,000,000;

administrative costs for the measure implementer for conducting the application round: €90,000 in total.

All listed cost allocations represent direct administrative expenditures necessary for the State Shared Service Centre to implement the

Modernisation Fund measures, including support administration, application processing, payment verification, supervision, and reporting. These

activities fall squarely within the categories defined as eligible under Directive 2003/87/EC Article 10d and Regulation (EU) 2020/1001, which

explicitly allow the use of Modernisation Fund support for the administration, monitoring, and control of supported measures, provided these

tasks are essential for the implementation of the funded actions. Based on the verification carried out, all reviewed activities and

administrative costs were found to comply with the applicable eligibility rules in EU legislation, national regulations, and the decisions

establishing the financial allocations. The expenditures are directly linked to the administration and oversight of Modernisation Fund

measures and therefore meet the requirements for eligible use of funds.

➢ Whether the objective of the final recipient’s activities is aimed at modernising energy systems or improving energy efficiency;

Explanation: The administrative tasks for which the State Shared Service Centre is the final recipient directly support the implementation of

measures whose objectives are to modernise energy systems and improve energy efficiency. The national regulations governing the measures —

Minister of Finance Regulation No. 36 of 26 September 2023 and Minister of Public Administration Regulation No. 36 of 5 August 2022 —

explicitly define State Shared Service Centre as the implementing body responsible for organising and managing support schemes aimed at

achieving these objectives.

In accordance with Directive 2003/87/EC Article 10d and Commission Implementing Regulation (EU) 2020/1001, the operation of the

Modernisation Fund includes essential functions such as the submission, assessment and approval of investments, disbursement of funds,

YES

Internal Audit Department, Ministry of Climate, Republic of Estonia Audit No 2/2025

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monitoring, reporting and auditing. These functions form part of the Modernisation Fund’s implementation structure and are necessary for

ensuring that the supported investments achieve their intended purpose of modernising energy systems or improving energy efficiency.

State Shared Service Centre’s activities — including processing applications, verifying eligibility, authorising payments, maintaining project

oversight, and fulfilling reporting and control obligations — are therefore directly linked to enabling and safeguarding the delivery of investments

whose objectives align with the Modernisation Fund’s purpose. The administrative expenditures audited relate exclusively to these

implementation tasks, which are necessary to ensure that the support reaches measures contributing to improved energy efficiency and the

modernisation of public-sector energy systems. Accordingly, even though State Shared Service Centre does not implement investment

activities itself, its administrative role directly contributes to the achievement of the Modernisation Fund’s objectives, and the audited

expenditures support activities whose overarching aim is modernising energy systems or improving energy efficiency.

➢ Whether the activities of the final recipient support the objectives of the EU Green Deal (e.g., reduction of carbon emissions, clean energy,

climate neutrality).

Explanation: The State Shared Service Centre`s administrative tasks financed from the Modernisation Fund support measures whose objectives

are consistent with the EU Green Deal, including the reduction of carbon emissions, increased energy efficiency and the transition to clean energy.

The national regulations governing the relevant measures—Minister of Finance Regulation No. 36 of 26 September 2023, “Conditions and

Procedures for the Use of Support from the Modernisation Fund for Improving the Energy Efficiency of Local Government Buildings,” and

Minister of Public Administration Regulation No. 36 of 5 August 2022, “Conditions and Procedures for the Use of the Modernisation Fund

Support for Energy Efficiency Improvements in Central Government Buildings”—define support schemes that explicitly target energy efficiency

improvements and the modernisation of energy systems in public‑sector buildings. These aims correspond directly to the EU Green Deal

objectives of improving energy performance, reducing energy consumption, and lowering greenhouse gas emissions.

Under Directive 2003/87/EC Article 10d and Commission Implementing Regulation (EU) 2020/1001, administrative functions such as the

assessment and processing of applications, payment authorisation, monitoring, reporting, and control form an essential part of the operation of the

Modernisation Fund. These implementation tasks ensure that the Modernisation Fund resources are directed to investments that advance clean

energy transitions and contribute to climate neutrality—key priorities under the EU Green Deal. Therefore, State Shared Service Centre`s

activities support the achievement of the EU Green Deal objectives by enabling, managing and supervising measures aimed at

modernising energy systems and improving energy efficiency. The administrative expenditures audited are thus linked to activities that

facilitate and safeguard the delivery of outcomes aligned with the EU Green Deal.

YES

➢ Whether the documents forming the basis for the use of the support by the final recipient (e.g., applications, financing decisions, contracts or

other agreements) include clear performance indicators (such as energy savings in MWh, reduction of CO₂ emissions) and a description of the

measurement methodology, ensuring transparent, reliable and Modernisation Fund-compliant information on the achievement of results;

Explanation: As the State Shared Service Centre is the final recipient only for its administrative costs and does not carry out investment

activities, it does not have project‑level performance indicators of its own. Its role is administrative: receiving and assessing applications,

verifying eligibility, authorising payments, and ensuring compliance with the conditions set out in the applicable national regulations and

EU-level Modernisation Fund rules.

However, for the projects implemented under the measures, the regulatory framework requires that final recipients provide clear and measurable

performance indicators. Both Minister of Finance Regulation No. 36 of 26 September 2023 (“Conditions and Procedures for the Use of Support

YES

Internal Audit Department, Ministry of Climate, Republic of Estonia Audit No 2/2025

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from the Modernisation Fund for Improving the Energy Efficiency of Local Government Buildings”) and Minister of Public Administration

Regulation No. 36 of 5 August 2022 (“Conditions and Procedures for the Use of the Modernisation Fund Support for Energy Efficiency

Improvements in Central Government Buildings”) require that applicants specify the projected energy savings, expected improvements in energy

efficiency, or other quantifiable outcomes relevant to the Modernisation Fund’s objectives. These indicators typically include measurable units

such as reductions in CO₂ emissions, energy savings in MWh, or improvements in energy performance. The application forms and project reports

issued within these measures include these performance indicators together with methodologies for their calculation and reporting. As part of its

administrative function, the State Shared Service Centre verifies that the final recipients have provided the required indicators and methodologies

in their project documentation in accordance with the national regulations and the Modernisation Fund’s operational rules. Accordingly, while

the State Shared Service Centre does not define performance indicators for its own administrative activities, the underlying project

documentation submitted by final recipients includes the required indicators and measurement methodologies. These ensure transparent,

consistent and Modernisation Fund-compliant reporting on the achievement of results at project level.

➢ Has the planning of the use of funding (the project) complied with climate and environmental criteria (e.g., avoidance of significant harm,

DNSH), and are these documented and, where necessary, justified;

Explanation: The Estonian Government Regulation No. 25 of 10 March 2022 “General Conditions for the Use and Reporting of Modernisation

Fund Resources” does not provide for a requirement to submit the results of an assessment regarding compliance of the supported activity with the

“do no significant harm” (DNSH) principle or the assurance of climate resilience of the supported infrastructure.

The Modernisation Fund Assessment Guidance Document (p. 9) states: “Do no significant harm” principle (applicable as of 1 January 2025). In

line with Article 10f of the ETS Directive, from 1 January 2025, the BMS and the EC shall use the revenues generated from the auctioning of

allowances referred to in Article 10(1), third (Original 2%) and fourth subparagraphs (New 2.5%) of this Directive in accordance with the “do

no significant harm” criteria set out in Article 17 of Regulation (EU) 2020/852, where such revenues are used for an economic activity for which

technical screening criteria for determining whether an economic activity causes significant harm to one or more of the relevant environmental

objectives have been established pursuant to Article 10(3), point (b), of that Regulation. Further guidance on how the BMS will have to

demonstrate compliance with Article 10f of the ETS Directive will be agreed and communicated at a later stage.”

The DNSH principle became mandatory from 1 January 2025. At the time of programme planning, this requirement was not applicable;

therefore, no non-compliance was identified. Future programmes will need to comply with DNSH requirements effective from 1 January

2025.

N/A

➢ Has compliance with the European Union State aid rules and the provisions set out in Chapter 6 “State Aid” of the Estonian Competition Act

been ensured.

Explanation: The audited costs concern the administrative activities of the State Shared Service Centre as the implementing body. These

activities do not constitute State aid within the meaning of EU State aid rules, nor do they involve the granting of support to an economic

undertaking. The State Shared Service Centre is a government agency under the Ministry of Finance and performs non‑economic public

administrative functions defined in national regulations (Minister of Finance Regulation No. 36 of 26 September 2023 and Minister of Public

Administration Regulation No. 36 of 5 August 2022). As such, its administrative tasks do not fall within the scope of State aid rules. Compliance

with EU State aid requirements is assessed at project level, where applicable, during the processing of applications by the State Shared Service

Centre, based on the conditions laid down in the relevant ministerial regulations. Since the costs audited relate solely to the implementing

N/A

Internal Audit Department, Ministry of Climate, Republic of Estonia Audit No 2/2025

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body’s own administrative expenditure and do not involve granting State aid to final recipients, the question is not applicable.

Scope of activities and exclusions:

➢ Does the use of funding exclude investments in energy generation installations operating on fossil fuels; the use of coal, lignite, or other solid

fossil fuels?

➢ For activities related to fossil gas: is there evidence that the case constitutes an exception (e.g., a notification coordinated with the

Commission), and are these activities temporary, transitional solutions, or of limited scope?

Explanation: The audited expenditure concerns only the administrative activities of the State Shared Service Centre as the implementing body.

The State Shared Service Centre does not carry out investment activities, construct energy installations, or implement energy‑related measures

itself. Therefore, no funding audited is used for energy generation, including installations operating on fossil fuels, coal, lignite or other solid

fossil fuels. Similarly, the audited administrative costs do not involve any activities related to fossil gas, nor do they constitute—directly or

indirectly—temporary or transitional fossil fuel investments. Such considerations are applicable only at the project investment level, where they

are assessed in accordance with Directive 2003/87/EC Article 10d and the requirements established in the national regulations governing the

Modernisation Fund measures (Minister of Finance Regulation No. 36 of 26 September 2023 and Minister of Public Administration Regulation

No. 36 of 5 August 2022). Since the audit concerns the State Shared Service Centre’s administrative expenditure and no investment

activities are financed under these costs, the fossil‑fuel‑related exclusions are not applicable.

N/A

Actual Implementation of Activities and Achievement of Impacts (exclusion of activities: the auditor does not perform or commission an

energy audit or CO₂ reduction calculations) Conclusion

(YES / NO

/ N/A) Auditor verified:

➢ whether the activities of the final recipients comply with the project description, the terms of the agreement or other foundational financing

document, and with the purpose of the funding;

Explanation: In the context of the audited expenditure, the State Shared Service Centre is the final recipient for the purposes of its own

administrative costs financed from the Modernisation Fund, which constitute an eligible use of support under the national regulations establishing

the measures and correspond to the Centre’s designated role as implementing body.

Under Minister of Finance Regulation No. 36 of 26 September 2023 and Minister of Public Administration Regulation No. 36 of 5 August 2022,

the State Shared Service Centre is tasked with the implementation of the Modernisation Fund measures, including processing applications,

verifying eligibility, monitoring compliance, authorising payments, reporting and performing oversight. The administrative costs reimbursed from

the Modernisation Fund reflect activities that are necessary for ensuring proper implementation and supervision of the support schemes.

The audited costs — including salaries and related taxes, expert consultancy services related to measure implementation, business travel, staff

training, seminar organisation, room rentals, catering for work-related events, and other operational expenses — fall within the scope of

administrative functions described in the applicable regulations. These activities support the Centre’s statutory mandate and ensure that the

Modernisation Fund measures are administered in line with EU and national requirements. Since the national regulations and ministerial

orders explicitly define the administrative tasks of the State Shared Service Centre as part of the measure’s implementation structure and

provide for their financing from the Modernisation Fund, the audited activities comply with the purpose of the funding and with the

terms governing the use of support. The activities are appropriate, necessary and consistent with the functional role assigned to the State

Shared Service Centre.

YES

Internal Audit Department, Ministry of Climate, Republic of Estonia Audit No 2/2025

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➢ whether the activities have been implemented within the prescribed timeframe and in accordance with the schedule presented in the

application or other financing document, including any approved modifications;

Explanation: The audited activities of the State Shared Service Centre have been implemented within the prescribed timeframe for which the

funding was allocated and in accordance with the timelines defined in the applicable ministerial orders. The audit covered administrative

expenditure incurred in 2023–2024, and the Minister of Finance and Minister of Public Administration orders issued for the respective

Modernisation Fund measures explicitly authorised the use of Modernisation Fund resources for the State Shared Service Centre’s implementation

activities during these periods.

The ministerial orders adopted under Minister of Finance Regulation No. 36 of 26 September 2023 and Minister of Public Administration

Regulation No. 36 of 5 August 2022 confirmed the financial volumes and administrative cost allocations for each application round and specified

the years during which the implementing body may incur administrative expenditure. All reviewed expenditures were incurred within the

periods covered by the relevant ministerial orders. No expenditure was identified outside the authorised timeframe, and no deviations

from the approved implementation schedule were observed. Accordingly, the activities audited were carried out within the authorised

period and in alignment with the implementation schedule established in the governing ministerial decisions and financing framework of

the Modernisation Fund.

YES

➢ whether the final recipients have achieved the results set out in the project, the agreement or other financing document (e.g., improvement in

energy efficiency, MWh saved, reduction of CO₂ emissions), and whether the reported results are sufficiently substantiated / documented

(where possible with photos, data records, etc.)

Explanation: The audited expenditure concerns only the State Shared Service Centre’s administrative activities, for which the Centre is the final

recipient under this programme. These activities have been carried out in line with the applicable regulations and the purpose of the funding. The

achievement of programme‑level results (e.g. energy savings, CO₂‑reduction indicators) cannot yet be assessed in this audit, as the investment

projects under the programme are still ongoing and have not reached the reporting milestones set in the financing decisions and national

regulations. This is fully in line with the programme’s regulatory framework, as result reporting becomes due only after project completion. Final

recipients are required to submit measurable performance indicators only after project completion and over several subsequent reporting years. As

the relevant reporting periods have not yet commenced, no result data is available for verification. Consequently, programme‑level outcomes

cannot yet be confirmed. This does not affect the compliance of the administrative expenditures audited.

N/A

Accounting Conclusion

(YES / NO

/ N/A) Auditor verified:

➢ whether the accounting system of the final recipient enables direct reconciliation of the costs and revenues declared for the project / funding,

and whether these costs and revenues have been systematically recorded using a specific numbering system;

Explanation: Within the scope of this audit, the administrative costs of the State Shared Service Centre financed from the Modernisation Fund

have been recorded in a way that allows direct reconciliation. The Centre uses the SAP accounting system, and all audited transactions were

entered using the specific object code 9R40‑MF00‑08112HALD, which clearly distinguishes Modernisation Fund–related administrative

expenditure from other costs. All costs reviewed during the audit period were systematically recorded under this code, making them

traceable, verifiable and directly linked to the implementation activities financed from the Modernisation Fund. The accounting system

YES

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therefore enables clear reconciliation between the declared expenditure and the underlying financial records.

➢ whether, in cases where costs are allocated across multiple projects, appropriate allocation keys reflecting the actual workload have been

established and applied systematically and accurately;

Explanation: Within the scope of this audit, the allocation of costs across different funding sources has been carried out systematically and based

on established, documented allocation keys. As the implementing body, the State Shared Service Centre determines its administrative costs

according to the tasks required for the preparation, implementation, control, monitoring, training, evaluation and communication of the

Modernisation Fund measures. These tasks generate costs such as staff expenses, travel costs, training, expert services and similar administrative

expenditures, which are considered justified and necessary for the effective management of the measures.

The Centre applies uniform principles for defining and allocating administrative and implementation costs across all funding instruments, unless a

specific legal act provides otherwise. The allocation keys used for staff costs are based on earlier time‑measurement exercises, which assessed

how working time is distributed across different tasks. These percentages are formally approved by Director General’s orders, and they are

reviewed and adjusted when the nature or volume of work changes.

For the period covered by the audit, the following Director General’s orders governed the distribution of staff costs across funding sources:

➢ 29.03.2023 No. 1‑2/23/21

➢ 26.07.2023 No. 1‑2/23/49

➢ 27.12.2023 No. 1‑2/23/84

➢ 29.01.2024 No. 1‑2/24/7

➢ 12.07.2024 No. 1‑2/24/57

These orders specify, per employee, the exact percentage of salary financed from the Modernisation Fund and from other funding sources.

The State Shared Service Centre uses SAP as its accounting system, and all Modernisation Fund‑related administrative transactions are recorded

under the dedicated object code 9R40‑MF00‑08112HALD. This ensures that the portion financed from the Modernisation Fund is clearly

distinguishable from expenditure covered by other instruments, each of which has its own object code (for example, the Estonian–Latvian

Programme technical assistance uses code 9R40‑LV21‑RPM‑TA). All tested transactions were allocated in line with the principles and

percentages established in the Director General’s orders.

Where a cost is fully attributable to the implementation of Modernisation Fund measures—such as the trainer’s fee for a training session held

specifically for energy audit preparers under the 2023 application round—the expenditure is allocated 100% to the Modernisation Fund object.

Based on the audit procedures performed, the allocation keys are appropriate, consistently applied and accurately reflected in the

accounting records.

YES

➢ whether clear accounting records have been maintained to prevent double reimbursement of costs, and whether cost documents are easily

distinguishable (i.e., costs related to the use of the grant are clearly separated from other costs in the accounting system, as well as the cost and

payment documents reflecting these costs from other documents);

Explanation: Within the scope of this audit, clear accounting records have been maintained to ensure that no costs are reimbursed twice and that

all expenditure related to the Modernisation Fund is fully distinguishable from other costs. The State Shared Service Centre uses the SAP

accounting system, and all audited transactions financed from the Modernisation Fund were recorded under the dedicated object code

9R40‑MF00‑08112HALD, which prevents overlap with other funding sources. Other grants and programmes use separate object codes, ensuring

YES

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that no transactions can be mixed or duplicated across funding streams. All cost and payment documents reviewed during the audit were

recorded consistently under the correct code, allowing the expenditure to be traced from the accounting system to the underlying

invoices, contracts and payroll records. This coding structure ensures clear separation from other institutional costs and provides an

auditable trail that excludes the risk of double reimbursement. Cost documentation was complete, properly linked to the corresponding

accounting entries and easily distinguishable from documents relating to other activities.

➢ whether the final recipient has confirmed that the same costs have not been double-financed from other sources (e.g., other EU funds or

national programs), and whether controls have been carried out (e.g., SFOS cross-check) to ensure that the same costs (such as train purchases,

design services, etc.) have not been declared for other EU funds or national financing during the same period and to the same extent (e.g.,

Cohesion Fund, CEF, REPowerEU, etc.);

Explanation: Within the scope of this audit, no instances of double financing were identified. The State Shared Service Centre records all

Modernisation Fund administrative expenditure using a dedicated object code in the SAP accounting system (9R40-MF00-08112HALD), while

other funding instruments use separate object codes. This ensures that costs cannot be recorded simultaneously under multiple funding sources

and provides a clear accounting separation between the Modernisation Fund and other EU or national programmes.

Since the audited expenditure concerns the Centre’s own administrative costs and is not processed through SFOS, cross-checks in that system are

not applicable. The accounting structure itself ensures that costs are allocated only once and in accordance with the Director General’s orders

governing salary distribution across funding sources. Based on the audit work performed, including reconciliation of accounting entries and

review of documentation, no evidence was found of any costs being claimed from more than one funding source.

YES

➢ whether the costs are recorded in the final recipient’s accounting system or reflected in tax documents;

Explanation: Within the scope of this audit, the costs financed from the Modernisation Fund were recorded in the State Shared Service Centre’s

accounting system and reflected in the relevant tax documents where applicable. Audit procedures included reviewing the recording of

transactions in SAP, verifying the existence and approval of invoices and supporting documents, and confirming the execution of payments.

The accounting entries and underlying documentation were, in all material respects, consistent and correctly linked to the relevant Modernisation

Fund object code. One minor inconsistency was noted regarding the difference in the number of participants listed for a large seminar when

comparing the accounting records and the attendance list; however, the financial impact of this deviation was immaterial (0.08 euros) and does not

affect the overall reliability of the recorded expenditure. Overall, the accounting records reviewed were properly maintained, and the costs

were appropriately reflected in both the accounting and tax documentation.

YES

➢ (A) for the Ministry of Climate: whether the funding has been transferred through payments to the final recipients or to the responsible

ministries;

➢ (B) for the responsible ministries: whether the funding has been forwarded to the final recipients or to the State Shared Service Centre for

making payments to the final recipients;

➢ (C) for State Shared Service Centre: whether the funding has been disbursed to the final recipients based on supporting documents;

Explanation: The audited expenditure relates to a programme activity in which the responsible ministries transfer funding to the State Shared

Service Centre for the purpose of covering its administrative and implementation‑related tasks under the Modernisation Fund measures. In this

context, the relevant part of the question is item (B). Within the scope of this audit (2023–2024), the funding allocated for administrative

costs was transferred to the State Shared Service Centre in accordance with the ministerial orders issued under the applicable

YES

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regulations. These transfers were made within the authorised period.

Overall Financial Accounting Aspects Conclusion

(YES / NO

/ N/A) Auditor verified:

➢ Whether the costs declared by the project applicant or the final recipient of the Modernisation Fund support are eligible in accordance with the

conditions for granting the support and the funding decision, and whether the funded costs were foreseen in the application or have been

accepted by the responsible ministry or the State Shared Service Centre (e.g., through a contract amendment, correspondence, or reporting).

➢ Whether the amount and description of the costs correspond to the project budget and what was presented in the application.

Explanation: Programme financial start date was July 1, 2021 and financial completion date will be December 31, 2030. Within the scope of this

audit, the administrative costs declared by the State Shared Service Centre as final recipient under the Modernisation Fund were found to be

eligible in accordance with the applicable regulations and the ministerial funding decisions. The audited costs—such as staff costs and related

taxes, travel expenses, training, expert services, and seminar‑related expenditure etc—are activities foreseen under the Centre’s implementation

responsibilities as defined in Minister of Finance Regulation No. 36 of 26 September 2023 and Minister of Public Administration Regulation

No. 36 of 5 August 2022.

All audited expenditure was recorded under the correct Modernisation Fund object code in SAP (9R40‑MF00‑08112HALD) and supported by

valid cost documents. The amounts, nature and purpose of the costs correspond to the types of administrative activities required for the proper

implementation, monitoring and management of the Modernisation Fund measures. The Director General’s orders governing the allocation of

staff costs across funding sources confirm that the salary proportions financed from the Modernisation Fund during 2023–2024 were authorised

for this purpose.

Based on the verification performed within the scope of this audit, the funded costs are consistent with the funding framework, fall within

the categories foreseen for administrative expenditure, and are supported by documentation that aligns with the declared purpose and

coding structure. No deviations of material significance were identified regarding the alignment of costs with the intended budget or the

conditions for granting support.

YES

➢ Whether the costs were incurred and paid by the project applicant or the final recipient of the Modernisation Fund support, whether they are

directly related to the project (e.g., invoices include project references and costs were made efficiently), and whether appropriate supporting

documents (invoices, payment confirmations, contracts) have been provided.

Explanation: Within the scope of this audit, the costs financed from the Modernisation Fund and declared by the State Shared Service Centre as

the final recipient were incurred, documented and paid by the Centre itself. All audited expenditure—such as staff costs and related taxes, travel

expenses, training, seminar costs, expert services and other implementation‑related administrative costs—was supported by appropriate

documentation, including invoices, contracts, travel orders and payment confirmations.

The transactions were recorded in the SAP accounting system under the dedicated Modernisation Fund object code 9R40‑MF00‑08112HALD,

which ensures a clear link to the Modernisation Fund financing. The documentation reviewed confirmed that the costs relate directly to the

Centre’s implementation duties under the applicable national regulations (Minister of Finance Regulation No. 36 of 26 September 2023 and

Minister of Public Administration Regulation No. 36 of 5 August 2022). The expenditures were made in line with the Centre’s internal

procedures, in an efficient manner, and with a clear connection to the tasks necessary for the administration and oversight of the Modernisation

YES

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Fund measures. Based on the verification performed within the scope of this audit, the costs were correctly incurred by the final recipient,

properly paid, and supported by sufficient and appropriate documentation.

➢ Whether the costs were incurred within the eligible project period and do not exceed the eligibility timeframe.

Explanation: The programme’s financial start date was 1 July 2021, and the financial completion date will be 31 December 2030. The costs

reviewed in the scope of this audit were incurred within the eligible period of the Modernisation Fund. The audited administrative costs of the

State Shared Service Centre fall within the years 2023–2024 and are therefore within the eligibility timeframe. No costs were identified outside

the permissible financing period.

YES

➢ Whether the actual support paid for eligible costs does not exceed the maximum support amount or rate specified in the funding decision,

contract, or other applicable agreement.

Explanation: Within the scope of this audit, the support paid for eligible costs does not exceed any of the applicable limits at programme level or

for administrative expenditure.

At programme level, the European Investment Bank decision MF 2021‑2 EE 0‑001 of 11 October 2021 confirms that Estonia indicated an

expected Modernisation Fund support volume of EUR 170,000,000 for the investment proposal. This overall ceiling covers both the

implementation of the measures (i.e., project‑level investments) and the administrative costs necessary for their management. The audited

administrative expenditure of the State Shared Service Centre — EUR 8,790.42 in 2023 and EUR 77,986.05 in 2024, totalling EUR 86,776.47 —

represents only a very small fraction of this total and remains well within the overall programme ceiling.

For administrative expenditure, separate national limits apply. These are established in a series of ministerial orders issued under Minister of

Finance Regulation No. 36 (26 September 2023) and Minister of Public Administration Regulation No. 36 (5 August 2022). These orders define

the maximum amounts available to the State Shared Service Centre to perform its implementation tasks. The administrative costs audited fall fully

within the limits authorised in these national decisions.

Regarding proportionality of cost allocation, there is no fixed funding rate or co‑financing percentage defined specifically for the State Shared

Service Centre’s administrative expenditure under the Modernisation Fund. Instead, the Centre applies internally approved allocation keys for

distributing staff costs across funding sources. These keys are based on previously conducted time‑measurement exercises and formalised through

Director General’s orders. Where an activity relates exclusively to the Modernisation Fund — for example, training organised specifically for

applicants in the 2023 Modernisation Fund application round — the cost is allocated 100% to the Modernisation Fund object code. This approach

is consistent with the Centre’s cost‑allocation rules and ensures that funding is applied proportionately and appropriately.

Based on the verification performed within the scope of this audit, the support claimed for administrative costs does not exceed the

programme‑level allocation, does not exceed the ministerial limits for administrative expenditure, and is allocated in accordance with the

Centre’s established internal proportionality rules.

YES

➢ Whether the costs comply with applicable tax and social legislation

Explanation: Within the scope of this audit, the costs were found to comply with the applicable tax and social legislation. For invoices included

in the audit sample, the correct VAT rate was applied, and the invoices were issued in accordance with the legal requirements. Salary‑related costs

were also correctly calculated and recorded: payroll documents reflected the appropriate statutory deductions (including income tax, social tax and

other mandatory labour‑related contributions), and taxable fringe benefits were processed and taxed in line with the relevant legislation.

All payments reviewed were executed by the State Shared Service Centre in accordance with statutory obligations and supported by appropriate

YES

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documentation. No issues of material significance were identified that would indicate non‑compliance with tax or social legislation.

➢ Whether the cost description is clear and, based on the description, demonstrably linked to the project activity.

Explanation: Within the scope of this audit, the cost descriptions were clear and adequate, and the linkage between the recorded costs and the

State Shared Service Centre’s implementation activities under the Modernisation Fund was demonstrable. All audited cost items—such as staff

costs, related taxes, travel expenditure, training, seminar organisation, expert fees and other administrative expenses—contained descriptions that

allowed the costs to be directly associated with the Centre’s statutory tasks in preparing, managing and supervising the Modernisation Fund

measures. The descriptions provided in invoices, payroll documents and internal accounting entries were sufficient to understand the nature and

purpose of each cost, and they were consistent with the implementation responsibilities outlined in the applicable national regulations. Where a

cost related exclusively to Modernisation Fund tasks, it was fully assigned to the Modernisation Fund object code; where allocations were needed,

they were made according to the Director General’s approved distribution percentages. Overall, based on the verification carried out within

the scope of this audit, the cost descriptions were adequate and demonstrably linked to the administrative activities required for the

implementation of the Modernisation Fund measures.

YES

➢ Whether the costs are, in the auditor’s opinion, reasonable, justified, and in line with the principles of sound financial management.

Explanation: Within the scope of this audit, the costs declared by the State Shared Service Centre were considered reasonable, justified and in

line with the principles of sound financial management. The expenditure consisted of administrative and implementation‑related costs necessary

for carrying out the Centre’s responsibilities under the Modernisation Fund measures, such as staff costs and related taxes, travel expenses,

training, seminars, expert services and other operational items.

The amounts were proportionate to the nature and scale of the activities performed and consistent with typical public‑sector cost levels. Cost items

were supported by appropriate documentation, allocated according to approved internal distribution rules and recorded under the correct

Modernisation Fund object code, ensuring transparency and controlled use of funds. No indications of excessive, unnecessary or inefficient

spending were identified during the audit. Based on the verification performed within the scope of this audit, the costs were in line with the

principles of economy, efficiency and effectiveness.

YES

➢ Whether the funding covers only costs that are directly related to the project and have actually been incurred (i.e., the work has been accepted,

the service delivered, or the goods received and taken into possession).

Explanation: Within the scope of this audit, the funding covered costs that were directly related to the State Shared Service Centre’s

implementation activities under the Modernisation Fund and had actually been incurred. The audited expenditure consisted of both direct

administrative costs (such as expert fees, training, travel and seminar‑related costs) and indirect costs linked to employees whose work is partially

allocated to the Modernisation Fund.

Indirect costs—such as participation in internal seminars or organisation‑related events—were allocated proportionally according to the Director

General’s approved workload distribution percentages. For example, where an employee’s duties are 45% related to Modernisation Fund tasks,

45% of that employee’s associated participation cost was allocated to the Modernisation Fund. This proportional allocation is consistent with the

Centre’s internal cost‑allocation methodology and reflects the actual workload related to the implementation of the measures.

All audited costs had supporting evidence demonstrating that the service was delivered, the goods were received or the work was performed.

Payments were made only after acceptance in accordance with internal procedures, and all expenditures were recorded under the Modernisation

Fund’s dedicated object code (9R40‑MF00‑08112HALD), ensuring traceability. Based on the verification performed within the scope of this

YES

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audit, all costs—both direct and proportionally allocated indirect costs—were found to be actually incurred and appropriately linked to

the activities required for administering and implementing the Modernisation Fund measures.

➢ Whether technical and administrative costs (e.g., audit, reporting, site supervision) are reasonable and justified in the context of the project’s

scope and objectives.

Explanation: Within the scope of this audit, the technical and administrative costs financed from the Modernisation Fund were found to be

reasonable and justified in relation to the scope and objectives of the activities carried out by the State Shared Service Centre as the implementing

body. The audited costs — including staff costs and related taxes, training, travel, expert services, seminar and room‑rental costs, and other

administrative expenses — correspond to the tasks necessary for preparing, managing, monitoring and reporting on the Modernisation Fund

measures.

The amounts observed were proportionate to the nature of the work performed and aligned with standard public‑sector practice. For indirect costs

linked to staff whose duties are only partially related to the Modernisation Fund, expenditures were allocated proportionally in accordance with

the Director General’s approved workload distribution percentages. This ensured that only the share of costs corresponding to actual

Modernisation Fund–related work was financed.

All technical and administrative cost items were supported by appropriate documentation, incurred efficiently and linked to the Centre’s statutory

responsibilities under the applicable national regulations. Based on the verification performed within the scope of this audit, the costs are

considered reasonable, necessary and consistent with the principles of sound financial management..

YES

➢ Whether the cost documents and contracts are consistent (including invoices, quantities, and delivered services/works).

Explanation: Within the scope of this audit, the cost documents and related contracts were found to be consistent. The quantities, descriptions

and services reflected on the invoices matched the supporting documents such as contracts, attendance lists, travel orders, delivery confirmations

and payment records. For staff‑related costs, payroll calculations, tax components and proportional allocations corresponded to the Director

General’s approved workload distribution percentages.

The administrative expenditure tested — including seminars, training, expert services, travel and salary‑related items — was supported by

documentation that was coherent, aligned with the nature of the activity and showed no material discrepancies between what was contracted,

delivered and invoiced. One minor immaterial discrepancy was observed regarding participant numbers in a seminar attendance list, but its

financial impact was negligible and does not affect the overall assessment. Based on the verification performed within the scope of this audit,

the cost documents, contracts and delivered services were consistent and reliably supported.

YES

Own contribution Conclusion

(YES / NO

/ N/A) Auditor verified:

➢ Whether the final recipient of the support has provided co-financing in monetary form in accordance with the funding decision (except in

cases where the project was implemented on a zero-cost basis).

Explanation: Within the scope of this audit, the question of monetary co‑financing is not directly applicable, as no specific co‑financing rate is

defined for the State Shared Service Centre’s administrative costs under the Modernisation Fund. The funding decision and the applicable national

regulations do not require the Centre to provide monetary co‑financing; instead, administrative costs are covered proportionally from different

funding sources based on the workload distribution percentages set out in the Director General’s orders.

YES

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The Centre allocates staff‑related and indirect administrative costs across financing instruments (including the Modernisation Fund and the state

budget) according to these approved internal allocation keys. This proportional distribution constitutes the Centre’s contribution, and no fixed

co‑financing percentage is foreseen or required for administrative expenditure. Based on the procedures performed, the costs reviewed were

financed in accordance with the established allocation rules, and no instances were identified where required co‑financing was missing or

where costs should have been covered by another source. All expenditures were properly allocated and supported in line with the

Centre’s internal methodology and the Modernisation Fund’s requirements.

➢ Whether the co-financing is correctly recorded in the beneficiary’s accounting system and relevant reports.

Explanation: Within the scope of this audit, it was verified that all audited costs were fully paid and fully recorded in the State Shared Service

Centre’s accounting system. For administrative expenditure under this programme, no mandatory monetary own contribution is required; the

Centre covers the remaining share of these costs from its other funding sources in accordance with its internal allocation rules.

The audit focused solely on confirming that the portion of costs financed from the Modernisation Fund was correctly calculated, recorded and

traceable. Where costs were allocated between the Modernisation Fund and other funding sources, only the Modernisation Fund share was tested

for accuracy. The correctness of allocations relating to other funding sources was not assessed, as this lies outside the scope of the audit.

The audited transactions were entered using the dedicated Modernisation Fund object code 9R40‑MF00‑08112HALD. Based on the procedures

performed, the Modernisation Fund share of the expenditure was recorded in line with the Centre’s internal allocation methodology.

YES

Value Added Tax (VAT) Conclusion

(YES / NO

/ N/A) Auditor verified:

➢ Whether VAT is eligible for the beneficiary,

a) it is permitted under the conditions for granting the support, and

b) the beneficiary has no right to deduct or reclaim the VAT paid as input VAT in accordance with applicable VAT regulations.

Explanation: Within the scope of this audit, only VAT amounts that are non-refundable and non-recoverable have been declared. The

Government of the Republic Regulation No. 25 of 10 March 2022, “General Conditions for the Use and Reporting of Modernisation Fund

Resources”, does not define measure-specific VAT rules for the State Shared Service Centre, and no additional VAT-eligibility conditions have

been established for the Centre’s administrative activities.

During the audited period, the State Shared Service Centre (registration code 70007340) was registered as a limited VAT taxpayer since 15

September 2018, as confirmed on 11 February 2026 through the Estonian Tax and Customs Board VAT register (VAT number EE102099579).

As a limited VAT taxpayer, the Centre has no right to deduct input VAT, meaning that any VAT included on invoices constitutes a

non-recoverable cost for the final recipient. Accordingly, all VAT amounts included in the audited transactions are non-deductible and therefore

eligible for coverage from Modernisation Fund resources. Based on the verification performed within the scope of this audit, no indications

were found that recoverable VAT had been declared, given the final recipient’s VAT status

YES

➢ Have only VAT amounts that are non-refundable and non-recoverable been declared.

Explanation: Within the scope of this audit, only VAT amounts that are non-refundable and non-recoverable have been declared. The

Government of the Republic Regulation No. 25 of 10 March 2022, “General Conditions for the Use and Reporting of Modernisation Fund

Resources”, does not define measure-specific VAT rules for the State Shared Service Centre, and no additional VAT-eligibility conditions have

YES

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been established for the Centre’s administrative activities.

During the audited period, the State Shared Service Centre (registration code 70007340) was registered as a limited VAT taxpayer since 15

September 2018, as confirmed on 11 February 2026 through the Estonian Tax and Customs Board VAT register (VAT number EE102099579).

As a limited VAT taxpayer, the Centre has no right to deduct input VAT, meaning that any VAT included on invoices constitutes a

non-recoverable cost for the final recipients. Accordingly, all VAT amounts included in the audited transactions are non-deductible and therefore

eligible for coverage from Modernisation Fund resources. Based on the verification performed within the scope of this audit, no indications

were found that recoverable VAT had been declared, given the final recipient’s VAT status.

➢ Are there supporting documents (e.g., confirmation from the Estonian Tax and Customs Board) indicating that VAT is non-refundable or non-

deductible? If such a document is not available, the auditor will add a note to the working papers stating that no possibility of refund was

identified during the review.

Explanation: Within the scope of this audit, verification was performed regarding the VAT status of the State Shared Service Centre. The entity

is registered as a limited VAT taxpayer under VAT number EE102099579, as confirmed through the Estonian Tax and Customs Board’s VAT

register on 11 February 2026. As a limited VAT taxpayer, the Centre has no right to deduct or reclaim input VAT, meaning that all VAT included

on invoices is non‑refundable and therefore eligible.

A separate confirmation letter from the Tax and Customs Board is not issued in such cases; consequently, no additional supporting document

exists beyond the public VAT register entry. In line with audit practice, a note has been added to the working papers documenting that the final

recipient has no possibility to recover VAT and that no indications of recoverable VAT were identified during the audit procedures. Based on this

verification, only non‑deductible VAT has been declared within the scope of this audit.

YES

➢ Have public sector beneficiaries refrained from declaring VAT for activities falling under the exercise of sovereign powers? If VAT has been

declared for activities outside the scope of sovereign powers, has the beneficiary provided confirmation from the competent state authority.

Explanation: The State Shared Service Centre is a public sector institution whose activities financed from the Modernisation Fund relate to

non-economic public administrative functions. Within the scope of this audit, no VAT was declared for activities falling under the exercise of

sovereign powers. As the Centre is registered as a limited VAT taxpayer and has no right to deduct input VAT, any VAT included on invoices

constitutes a non-recoverable cost. Since the audited activities do not involve taxable economic activities or activities outside the scope of

sovereign powers, no confirmation from a competent state authority was required. The audit did not identify any instances where VAT would

have required separate verification or where VAT had been declared inappropriately.

YES

Implementation of Procurement and Purchasing Conclusion

(YES / NO

/ N/A) Auditor verified:

➢ Were the principles of transparency, proportionality, and equal treatment of tenderers observed during the procurement or purchasing

procedure.

➢ Have the requirements of the Public Procurement Act been complied with in the case of public sector beneficiaries.

➢ Were the costs incurred under the project above the thresholds set in the Public Procurement Act, and if so, was an appropriate procurement

procedure conducted in accordance with the Act.

➢ Did the successful tenderer and its bid comply with the procurement notice and the tender documents.

N/A

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➢ Was the procurement procedure transparent, justified, and non-discriminatory.

➢ Was the contract concluded with the tenderer offering the best price-quality ratio or the lowest price, in accordance with the evaluation criteria

set out in the tender documents.

➢ Was the contract concluded under conditions consistent with the tender and the procurement documents.

➢ Was the procurement contract concluded without a conflict of interest, and is the contracting partner not a related party.

➢ If a framework agreement was used, was it concluded in compliance with the principles of transparency and best price-quality ratio.

➢ Is all procurement documentation (including notices, minutes, quotations, contracts, etc.) available, complete, and auditable.

➢ Have similar or functionally related purchases not been artificially split to avoid the application of procurement or purchasing procedures.

➢ Have any modifications been made to the project, and if so, were they carried out in compliance with the Public Procurement Act and the

grant conditions.

Explanation: Within the scope of this audit, the procurement procedures of the State Shared Service Centre were not assessed. In

designing the audit approach for administrative expenditure of the State Shared Service Centre, the auditors applied the principle of

proportionality, taking into account the nature and materiality of the expenditure.

➢ The majority of the audited costs consisted of items to which the Public Procurement Act does not apply (e.g., salaries and related taxes, travel

and subsistence expenses, reimbursement of personal vehicle use).

➢ For the limited number of cost items involving purchased services, the portion financed from the Modernisation Fund was immaterial and

represented only a proportional share of broader institutional purchases. For example, the largest invoice in the sample (EUR 25,478.90

including VAT) resulted in a Modernisation Fund-financed amount of only EUR 24.03.

➢ In all cases, the Modernisation Fund-financed portion of service-related invoices was significantly below the national public procurement

threshold of EUR 30,000 for goods and services (§14 of the Estonian Public Procurement Act), meaning no mandatory procurement procedure

was required under the Act.

➢ Although the institution’s internal procurement rules may set lower thresholds, the audit of the Centre’s administrative expenditure was not

designed to assess institution-wide procurement compliance. In line with proportionality principles commonly applied in EU-funded audits,

small-value items with immaterial Modernisation Fund exposure were reviewed for eligibility, but procurement compliance testing was not

performed where such testing would not have added audit assurance. Consistent with this approach, where the Modernisation Fund–financed

portion of an expenditure item was below approximately EUR 1,000, it was neither necessary nor efficient to audit a potential procurement

process behind a general institutional purchase.

➢ One contract (No. 11.1-15/24/77-1) in the sample exceeded EUR 1,000 in total value; however, the Modernisation Fund-financed share of this

contract was below EUR 30,000 and therefore not subject to mandatory procurement requirements. In addition, the contract complied with the

Centre’s internal rules requiring written contracts with natural persons.

Accordingly, procurement procedures were not examined for the Centre’s administrative cost items, as procurement testing would not have

contributed additional assurance in the context of the Modernisation Fund-financed amounts. The audit work focused solely on verifying the

eligibility and correctness of the Modernisation Fund-financed expenditure, and no conclusions are drawn regarding the underlying procurement

processes.

Personnel-related costs and other costs, including administrative costs for implementing State Shared Services Centre measures Conclusion

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The auditor verifies personnel costs based on a sample (10% of the total amount). Other costs are checked based on the following

approach: Full review if there are fewer than 10 cost lines; If there are more than 10 cost lines, the auditor reviews either 10 lines or 10%

of the cost lines, whichever is greater.

(YES / NO

/ N/A)

➢ What methodology is used for determining personnel costs and linking them to the funding?

➢ Does the calculation of personnel costs comply with the applicable grant conditions and permitted accounting principles?

➢ Is the link between personnel costs and the project sufficiently evidenced (including project-related tasks, working time, and workload

proportion)?

➢ Are relevant documents such as employment contracts, job descriptions, or task allocations available to demonstrate the employees’

connection to funded activities?

➢ Is the portion of working time reimbursed from the funding correctly calculated and documented?

➢ Are tasks not related to the funding correctly separated?

➢ Are travel expenses and daily allowances correctly defined and linked to the project, in accordance with the beneficiary’s internal rules and

applicable legislation?

➢ Do training costs (if any) comply with applicable legislation and are they justified in the context of the project objectives?

Explanation: Within the scope of this audit, according tested sample, the personnel‑related costs declared by the State Shared Service Centre

were found to be calculated in accordance with the Centre’s approved internal methodology and linked appropriately to the activities financed

from the Modernisation Fund. Personnel costs are determined based on workload distribution percentages established through the Director

General’s orders, which define the share of each employee’s working time attributable to the implementation of the Modernisation Fund

measures. These allocation keys are derived from previous time‑measurement exercises and reflect the actual workload related to the funded

activities.

Relevant supporting documents — including employment contracts, job descriptions, organisational roles and the Director General’s formal

allocation decisions — were available and demonstrate the connection between the employees’ duties and the implementation tasks financed from

the Modernisation Fund. The proportional allocation of staff costs in the accounting system corresponds to these established percentages, and the

calculations reviewed were accurate and properly documented.

Personnel costs unrelated to the Modernisation Fund are not charged to the funding. Where indirect costs, such as participation in internal

seminars or work‑related events, were allocated to the Modernisation Fund, they were attributed only in the proportion corresponding to the

employee’s approved Modernisation Fund workload share. Travel expenses and daily allowances included in the audit sample were correctly

defined under the Centre’s internal rules, supported by travel orders, and linked to administrative tasks required for implementing the measures.

Training costs included in the audit sample were appropriate, complied with applicable legislation and internal rules, and were relevant to the staff

members’ duties associated with the implementation of the Modernisation Fund.

Based on the verification performed within the scope of this audit, the methodology for personnel‑cost calculation, the supporting

documentation and the proportional allocation of working time were consistent, traceable and in line with the principles of eligibility and

sound financial management.

YES

➢ What methodology is used for determining other costs and linking them to the funding?

➢ Are “other costs” (including office supplies, software, administrative expenses, etc.) eligible and directly related to project implementation? YES

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➢ Are the costs correctly identified and attributed to the project?

➢ Are the items listed on invoices not recorded as fixed assets, and is the accounting treatment consistent with the beneficiary’s usual accounting

practices?

➢ Do other costs comply with internal cost-handling rules and are they proportionate to the scope and objectives of the project?

➢ For procurements classified under “other costs,” have procurement or purchasing procedures been followed (see section “Procurement and

Purchasing”)?

Explanation: Within the scope of this audit, no general overhead costs such as office supplies, software or other administrative consumables were

included in the sample. The “other costs” reviewed consisted primarily of participation in institutional seminars or general staff training, which

were allocated to the Modernisation Fund in proportion to the employee’s approved workload percentage. Where costs were directly and

exclusively related to Modernisation Fund implementation tasks, they were charged in full. The proportional allocations were consistent with the

State Shared Service Centre’s internal methodology for distributing costs across funding sources and were accurately calculated in the accounting

system.

All reviewed costs were supported by appropriate documentation, correctly identified in the accounting records and linked to activities required

for the administration and implementation of the Modernisation Fund measures. No cost items represented fixed assets, and their accounting

treatment was consistent with the final recipient’s usual accounting practices and internal cost‑handling rules.

The costs reviewed were proportionate to the nature and scale of the Centre’s administrative duties under the Modernisation Fund and aligned

with the principles of economy and sound financial management. No procurement‑related issues arose within the sample: the expenditures

classified as “other costs” were either typical administrative items to which procurement rules do not apply (e.g., travel‑related participation costs)

or proportionally allocated shares of wider institutional expenses, all of which were below the national procurement threshold under §14 of the

Public Procurement Act and therefore outside mandatory procurement procedures. Based on the verification performed within the scope of this

audit, the methodology for determining and allocating other costs was appropriate, the link to funded activities was adequately

demonstrated and the costs were eligible, reasonable and properly attributed to the Modernisation Fund.

Document Retention Conclusion

(YES / NO

/ N/A) Auditor verified:

➢ Has the final recipient retained all cost documentation and project reports in a manner that ensures a clear and traceable audit trail for activities

and expenditures.

Explanation: Within the scope of this audit, the State Shared Service Centre has retained all cost documentation, supporting records and related

project information in a manner that ensures a clear, complete and traceable audit trail. All requested documents—including invoices, payment

confirmations, contracts, payroll documents, travel orders and other supporting materials—were made available to the auditors, and the link

between each cost item and the corresponding activity was fully traceable. The State Shared Service Centre stores and administers documentation

through established systems:

➢ FitekIN – the e‑invoicing environment used for processing and archiving electronic invoices; documentation retention requirements follow the

technical specifications of procurements No 221169 and No 293704.

➢ Delta – the official document management system used for formal records.

YES

Internal Audit Department, Ministry of Climate, Republic of Estonia Audit No 2/2025

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➢ RTIP – the State Employee Self‑Service Portal for handling travel orders and expense reports.

➢ SharePoint – used for day‑to‑day working materials that do not have long‑term retention value.

Document retention practices follow the requirements of the Accounting Act: accounting source documents must be retained for seven years from

the end of the financial year in which they were recorded. For EU‑funded projects, documentation is retained for up to 20 years, and as confirmed

by the Centre’s archivists, no documentation is destroyed without explicit confirmation from responsible staff. Based on the verification

performed within the scope of this audit, the documentation related to expenditures financed from the Modernisation Fund is properly

retained, organised and auditable, ensuring full traceability and compliance with applicable retention requirements.

➢ Has it been ensured that the final recipient retains all documents and data related to the grant, including information on payments and

expenditures, for at least five years from the date of the last payment of the project or measure (as required by Article 16(5) of Regulation

(EU) 2020/1001)

Explanation: Within the scope of this audit, it has been ensured that the State Shared Service Centre retains all documents and data related to the

Modernisation Fund support in accordance with Article 16(5) of Regulation (EU) 2020/1001, which requires the retention of project‑related

documentation for at least five years after the final payment of the project or measure. The State Shared Service Centre’s document retention

practices are also aligned with national legislation. According to § 9(3) of the Ministry of Finance’s accounting internal rules, accounting source

documents must be retained for seven years from the end of the financial year in which the document was recorded. In addition, § 9(2) specifies

that documents related to EU funding must be grouped and retained for the period defined in the document retention schedule of the state

accounting entity, which may exceed the general seven‑year requirement when applicable.

Document handling and retention obligations are further established by the State Shared Service Centre’s internal rules. The Director General’s

order of 20 November 2024 (No. 1‑2/24/75) adopted the “Document Management Procedure,” which sets out document management principles,

and the order of 6 December 2024 (No. 1‑2/24/82) established the Centre’s “Classification Scheme,” including specific document retention

periods. In practice, archivists of the Centre do not destroy any documents unless explicit confirmation is received from the responsible staff

member, ensuring compliance with both EU and national retention obligations.

Based on the verification performed within the scope of this audit, the State Shared Service Centre has the systems, procedures and

internal controls in place to ensure that all documents related to Modernisation Fund–financed activities are retained in a complete,

traceable and compliant manner for at least the minimum period required by EU legislation.

YES

Communication and Visibility (Article 17) Conclusion

(YES / NO

/ N/A) Auditor verified:

➢ Has the final recipient of the support complied with the European Union’s communication and visibility requirements (including proper use of

the EU and Modernisation Fund logos, clear indication of the amount and origin of the support; implementation of communication activities,

such as notice boards in strategic locations visible to the public and other information aimed at the general public);

o If the final recipient has used informational materials (e.g., printed publications, websites, videos) when utilizing the funding or presenting

projects and their results, it is verified whether these materials include proper references to EU and Modernisation Fund co-financing and

whether the visual identity complies with the EU and grant conditions guidelines;

o If information on the use of funding has been published in the final recipient’s public communications (e.g., on its website, in annual

YES

Internal Audit Department, Ministry of Climate, Republic of Estonia Audit No 2/2025

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reports, press releases, or other sources aimed at the general public), the presence of proper references to EU and Modernisation Fund co-

financing is assessed, along with compliance of the visual identity with the EU and grant conditions guidelines, and the accuracy and

timeliness of the information (e.g., funding amounts, purpose of the support, project period, etc.);

o If the final recipient has informed the public about receiving the support (e.g., when presenting projects and their results), it is assessed

whether appropriate, coherent, effective, and proportionate information has been provided to different target groups, including the media

and the general public.

Explanation: Within the scope of this audit, the State Shared Service Centre has complied with the relevant communication and visibility

requirements applicable to its role in implementing the Modernisation Fund measures. The Centre’s website (www.rtk.ee) contains

publicly available information on the Modernisation Fund application rounds, guidance materials for applicants and summaries of

supported measures such as:

1. Riik toetab KOV hoonete energiatõhusust ja liginullenergiahoonete ehitamist ligi 50 miljoni euroga | Riigi Tugiteenuste keskus

2. Kohaliku omavalitsuse hoonete energiatõhususe parandamine moderniseerimisfondist 2025 | Riigi Tugiteenuste keskus

3. Keskvalitsuse hoonete energiatõhususe parandamine moderniseerimisfondist | Riigi Tugiteenuste keskus

4. Kohaliku omavalitsuse hoonete energiatõhususe parandamine moderniseerimisfondist 2023 | Riigi Tugiteenuste keskus

This information enables applicants, project promoters, and other stakeholders to understand the objectives, requirements and

implementation logic of the measures administered by the State Shared Service Centre. The Centre also conducts information days,

publishes instructions for preparing applications and ensures, during project implementation, that beneficiaries comply with the visibility

requirements set out in the applicable regulations.

The Centre’s website does not currently include a dedicated sub‑section expressly structured as a Modernisation Fund programme section.

While such a section is not required, the auditor raised the idea for discussion to improve the accessibility of programme‑related

information. State Shared Service Centre explained that it does not consider it expedient to change the current website concept or to create

fund‑based sub‑structures. Centre noted that the website is intentionally organised by thematic policy areas (e.g. regional development,

public governance), as this aligns with how applicants typically search for information—based on their need or problem rather than the

funding source. State Shared Service Centre emphasised that all information relevant to each specific call (conditions, guidance,

application and processing information, results and contacts) is already consolidated on the call‑specific page, as calls under the same

measure may differ. Creating separate fund‑based sections could lead to an inconsistent website structure and potential confusion for users.

The auditor took note of State Shared Service Centre’s rationale. No compliance issue was identified.

The visibility requirements applicable to project-level beneficiaries are monitored by the State Shared Service Centre during

implementation and payment checks. As part of its supervisory role, the Centre verifies that beneficiaries apply the correct EU and

Modernisation Fund visual identity and include the required visibility acknowledgements in their communication materials and public

notices.

No requirement exists for the Centre to publish information on the use of Modernisation Fund support for its own administrative activities,

and such disclosures are not standard practice for other funding instruments either. Within the scope of this audit, the Centre has

fulfilled its communication and visibility responsibilities in accordance with the requirements applicable to its role as an

implementing body, and no issues were identified.

Internal Audit Department, Ministry of Climate, Republic of Estonia Audit No 2/2025

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➢ Is the information provided up to date and free from substantive inaccuracies or omissions that could affect the transparency of the support and

public awareness of the funding source

Explanation: Within the scope of this audit, no evidence was identified that the information published by the State Shared Service Centre in

relation to the Modernisation Fund was outdated, inaccurate or incomplete. The information reviewed was consistent with the content of the

applicable calls for proposals, guidance materials and public announcements published on the Centre’s website, and did not contain omissions or

inconsistencies that could adversely affect the transparency of the support or public awareness of its origin.

YES

Suur-Ameerika 1 / Tallinn 10122 / 626 2802/ [email protected] / www.kliimaministeerium.ee/

Registrikood 70001231

Pärt-Eo Rannap Riigi Tugiteenuste Keskus

[email protected]

20.02.2026 nr 1-11/26/11

Aruande edastamine

Austatud Pärt-Eo Rannap

Edastame Teile Moderniseerimisfondi auditi nr 2/2025 lõpparuande (nr A1-8), mis käsitleb

Avaliku sekotri hoonete energiatõhususe ja taastuvenergia kasutamise suurendamise programmi

raames Riigi Tugiteenuste Keskuse kulude hindamist kuni 31.12.2024.

Auditi eesmärk oli Moderniseerimisfondi rakendusmääruse (EL) 2020/1001 artikkel 16 lõike 4

kohase auditi läbiviimine (Toetust saavad liikmesriigid tagavad, et iga kahe aasta järel

auditeeritakse Moderniseerimisfondist toetust saava liikmesriigi või kava korraldusasutuse poolt

projekti esitajale või Moderniseerimisfondi toetuse lõppsaajatele makstud summade kasutamist.).

Täname Teid meeldiva koostöö ja osutatud abi eest.

Lugupidamisega

(allkirjastatud digitaalselt) Maarja Kilter

Siseauditi osakonna juhataja

Lisad: Aruanne

Maarja Kilter, 626 2932

[email protected]