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Press Release
24/05/2016   Management of administrative municipal buildings in Vilnius leads to negative consequences

Municipal governments should find comprehensive solutions for dealing with real estate and, in managing state property through subordinate enterprises, carefully assess emerging risks and potential consequences. This was revealed by a public audit conducted on the subject of the Vilnius City municipal administration building and the use of funds allocated for it.

Having made the decision to build a new administrative building, the municipal government of Vilnius City made a commitment to build an administrative building (at 1 Europos Square) with the funds from the sale of real estate on Gedimino Avenue and hand the finished premises over to the state. The municipal government had the opportunity to hand the new premises over to the state back in 2004, however, it failed to fulfil this obligation for over 11 years. With local government delaying the fulfilment of its obligations, a public budgetary establishment – the State Security Department – was forced to pay rent for premises that should have been in the hands of the state for 10 years. Public auditors calculated that this resulted in the state budget experiencing a loss of 478.4 thousand euros in costs.

The supreme audit institution notes that the method of purchase and management of the Vilnius City municipal administration building (at 3 Konstitucijos Ave.) has also not produced a return on investment. The municipal government spent 24.4 million euros of its own funds to finance the construction of a new administrative building, but ownership rights were relinquished to the controlling enterprise, which now leases the property to the municipal administration. The lease constitutes an annual loss of 2.3 million euros from the municipal budget. Over a 15-year period, these costs will amount to 34.5 million euros, exceeding the amount used to acquire the building in the first place.

The municipal government is responsible for managing state and municipal property based on the principles of public gain and effectiveness. The supreme audit institution has on more than one occasion recommended that municipal authorities fulfil their obligations at a more rapid pace. The public audit has revealed that the process has been slowed down by the method used to acquire the premises: the property was purchased in the name of the controlling enterprise and not the municipality itself. Only in February of this year, following the decision of the Vilnius County Court, were the administrative premises at 1 Europos Square (3069.72 m2 of floorspace) finally handed over to the state. However, some of the property has still not been handed over because it has been used to secure a loan for the controlling enterprise.

The audit of the Vilnius City municipal administration building and the funds used to manage it was carried out as part of the 2016 Public Audit Programme.

 

Responsible for the information Communication Division
Last updated on 1 July 2016

National Audit Office of Lithuania

Pamėnkalnio St 27, LT-01113 Vilnius, Phone: + 370 5 266 6793, + 370 5 266 6752, Email: nao@vkontrole.lt.