Any administrative supervision of local authorities may only be exercised according to such procedures and in such cases as are provided for by the constitution or by statute.
With regard to the supervision of local authorities, the principle is laid down in Article 160 of the Constitution: “The administration of local governments and the supervision of their activities shall be provided by law.” Details are set out in sections 66 and 66.1 of the Local Government Organisation Act. There are two main forms of supervision of municipalities. Internal supervision is carried out by the audit committee, the council and the Government (executive body of the local government). External supervision is carried out by the county governor, the Chancellor of Justice and the National Audit Office. Administrative supervision over the activities of local governments is also exercised by ministries, boards and inspections (for example, Ministry of Finances, Data Protection Inspectorate, Language Inspectorate, Labour Inspectorate, etc). The main supervision functions have been described by the Minister of Public Administration in functions as follows: the county governor has the right to monitor individual legislative measures of councils and local authorities. At the same time the county governor has no authority to stop or declare void any measures taken by local authorities; he/she can only suggest that the local authority take the necessary measures to comply with the law. If the municipality does nothing to bring the act into line with the law the county governor must appeal to the courts. The Chancellor of Justice reviews the local government regulations for conformity with the Constitution and the laws. The National Audit Office exercises economic control over local authorities insofar as they use immovable and movable property of the state which has been transferred into their possession; it also exercises control over the municipal use of allocations for specific purposes, such as earmarked grants, and subsidies granted from the state budget; and funds allocated for the performance of state functions. The mandate of the National Audit Office also includes the audit of local authorities regarding the possession, use and disposal of municipal assets; the audit of the foundations and non-profit associations founded by a local authority or where a local authority is a member as well as of companies where a local authority exercises dominant influence through a majority holding or otherwise, and the subsidiaries of such companies. The National Audit Office verifies whether public funds have been properly used – i.e. economically, efficiently and effectively – and that their use is lawful. In order to avoid conflict with the principle of autonomy of local government, the National Audit Office may not, however, assess the expediency of the activities or use of funds by local authorities. In other words, the National Audit Office may not conduct performance audits of local authorities. The National Audit Office also has the right to make proposals to the government, ministers and local authorities to draft legislation or amend or modify legislation in force. The purpose of supervision is to ensure the lawfulness and appropriateness of municipal activities. The rapporteurs believe that the requirements of Article 8 are met in Estonia.
In order to interpret the scope of the legal limits of administrative supervision of local authorities, the Supreme Court of Estonia has referred directly to Article 8 of the Charter. “To preserve the essence of the local authorities’ right to self-organisation the restriction thereof must be proportional, i.e. suitable for achievement of the desired aim, necessary and reasonable.” (See the Constitutional Review Chamber on the Supreme Court's judgment of 16 January 2007 in case No. 3-4-1-9-06 – RT III 2007, 3, 19; paragraph 23). The same requirement concerning administrative control is expressed in Article 8(3) of the Charter. In this judgment the Court held that “the Charter does not preclude economic control over the state assets allocated to local governments in the extent described in § 6 of the NAOA, if the control is exercised - in conformity with Article 8(2) of the Charter – according to such procedures and in such cases as are provided for by the constitution or by statute”. However, with respect to the limitations of this aspect of control it deemed that the control of the use, possession and disposal of municipal property would be in conflict with the Charter. This possibility is not provided for in the National Audit Office Act.
With regard to the supervision of the upcoming administrative reform project, the Minister of Public Administration in functions explained to the rapporteurs that during the voluntary phase there will be minimal supervision (limited to the legality of the proceedings) of the merging agreement and other decisions made by local councils in preparation for the reform. In addition to the legal supervision, the Minister of Public Administration is financing seven merger consultants to support all the municipalities interested in additional expertise. One of their roles is to support the preparation process and guarantee the inhabitants’ involvement in it. In the state-initiated phase there will be a larger – supportive, not supervisional - role for county governors, as in certain situations they will have lead the merger process. As the voluntary phase ends in early 2017, the state will initiate mergers in line with its regulation in mid-February, so that local government council elections can be held in October. During the process inhabitants will be polled and local authorities' opinions will be obtained. The rapporteurs will follow with interest whether the new government will continue the former government's supervision strategy or whether it will completely or partially change the administrative procedures.
Supervisory competence of the county governor in activities of local governments is regulated by section 85 of the Government of the Republic Act.
See section 4, paragraph 2, of the Constitutional Review Chamber of the Supreme Court Judgement, from 5 February 1998, judgement No. 3-4-1-1-98.