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15/11/2016   National Audit Office Completed the Assessment of the Budget Project for 2017

In implementing the functions of the independent fiscal institution, the National Audit Office has carried out the assessment of the Draft Law on the Approval of Financial Indicators of the State Budget and Municipal Budgets for 2017 and submitted the conclusion to the Parliament on the compliance of the structural impetus target. The conclusion is accompanied by the underlying analysis of financial indicators of the government sector of 2017.

According to the fiscal institution, the estimated structural deficit of the government sector in 2016 (0.7 percent of the GDP) is below the medium-term goal (deficit of 1 percent of the GDP); therefore, there were valid reasons not to provide for the structural impetus target, when preparing the Draft Law on the Approval of Financial Indicators of the State Budget and Municipal Budgets for 2017.

The analysis of financial indicators of the government sector of 2017 revealed that compliance with the excessive government sector rule was not taken into account, when preparing the Draft Law on the Approval of Financial Indicators of the State Budget and Municipal Budgets for 2017. According to the rule, structural deficit of the government sector should decrease by at least 0.1 percent of the GDP every year. The Government estimated the deficit of 0.9 percent of the GDP for 2016, while for 2017, it predicts the deficit of 1.3 percent of the GDP. This means that not only shall the deficit fail to decrease in 2017 (compared to 2016); its deviation from the medium-term goal (deficit of 1 percent of the GDP) shall be observed.

According to the experts of the fiscal institution, the medium-term budget system is only formal in Lithuania. The three-year planned indicators of revenue and expenditure of the state budget and municipal budgets as well as medium-term fiscal indicators of stability programmes are merely indicative figures, which only describe (rather than define) the likely development of the three-year indicators.

The fiscal institution, furthermore, notes that the information presented in the accompanying documentation of the budget project is still incomplete, lacks structure, user-friendliness and coordination. This observation was already given by the experts back in 2015. The analysis of financial indicators also suggests that the state budget procedure in Lithuania lacks the key features of a budget focused on performance. The form of budget project presentation focuses only on the expenditure and fails to link the taxpayers’ money to the pursued objectives and results. There are no opportunities for the public to contribute to the budget management, greater incentives to pay taxes and achieve more ambitious goals during the planned period.

This October, when presenting its audit report on the state budget execution for 2015, the National Audit Office also noted that the Government priorities or goals lack connection with financial indicators for the relevant year, while the budget execution statements fail to reflect the results achieved. To deal with this major problem, it has been agreed with the Government and the Ministry of Finance that a fundamental review of the budget structure is to be carried out, linking the expenditure with the results. For the purpose of implementing these changes, the Government undertook to prepare an action plan in the second quarter of 2017.

 

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Last updated on 5 January 2017

National Audit Office of Lithuania

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