Article 58 of the Satversme (Constitution) of the Republic of Latvia stipulates that public administration institutions are subordinated to the Cabinet of Ministers. According to the State Administration Structure Law, public administration is organised in a single hierarchical system. No institution or administrative official may remain out of the system. The hierarchy ensures subordination of public administration to people’s will expressed in a democratic way, and the chain of legitimacy (voter – Parliament – Government – administration) also includes the lowest administration level. Public administration institutions are divided into direct and indirect public administration institutions.
Direct administration institutions are all institutions and officials of the Republic of Latvia as the initial public person. They are ministries and other administration institutions directly subordinated to the Cabinet of Ministers, Prime Minister or Minister, as well as institutions that are subordinated to the above-mentioned institutions. Ministries are top-level direct administration institutions that develop state policies and that are directly subordinated to a respective Member of the Cabinet of Ministers. In early 2004 there were the State Chancellery, 16 ministries, 2 secretariats of ministers for special assignments (in total, 19 top-level public administration institutions) in Latvia. The Corruption Prevention and Combating Bureau also has the status of a top-level institution; it is supervised by the Prime Minister and in charge of development and implementation of state policies for prevention and combating of corruption. 98 institutions are subordinated and 84 institutions – supervised by members of the Government, incl. 30 state agencies. Information about direct administration institutions is publicly available. Database of direct administration institutions has been available in the Internet homepage of the Cabinet of Ministers since March 2005.
Indirect administration institutions are local governments and other derived public persons, their bodies and officials. With regard to indirect administration, the focus is laid on autonomy of these institutions, thus, their subordination to the Cabinet of Ministers implies supervision (control of legality and lawfulness), i.e., the Government has to guarantee that indirect administration performs its tasks in compliance with the laws and regulations.
Main elements of the institutional system of public administration are public administration institutions determined in the legislation, their hierarchy, competence, regulations on their establishment and operation, procedures for preparation and adoption of decisions.
During 2003-2004, due to coming into force of the Commercial Law, according to the procedure established by the Cabinet of Ministers, assessment of institutions, companies, including state non-profit organizations and state companies was performed and they were transformed into direct administration institutions, state agencies, or state commercial companies according to functions performed by them.
The aim of the institutional reform of public administration was to ensure that clear and transparent conditions for operation and funding are introduced and maintained in the operation of public administration, and to discontinue the legal status of “non-profit organization state limited liability company” and “non-profit organization state joint-stock company” that were widely used in the 90s, because these did not allow sufficiently transparent regime of funding and supervision of institutions.