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16/10/2018   The Supreme Audit Institution: More Effective and Mature Budget Management Requires Accurate Data

Today at the Seimas (Parliament), the National Audit Office (NAO) will present its opinions regarding the national set of financial statements for the year 2017, the sets of financial statements and budget execution reports of six funds (Compulsory Health Insurance fund, State Social Insurance Fund and other resource funds). The NAO submits these opinions each year while performing its Constitutional duty.

The NAO considers the ongoing budget management reform to be an activity of exceptional importance. “While there have not yet been any tangible results, the very first signs of the reform can already be seen, namely – the simplification of the annual performance reporting procedure, the planning of management resources, and the reduction in the implementation of state investment programmes.  However, we still don’t know what outcomes we should demand as a result of appropriations from the state budget. We hope that once the Government implements the reform of the strategic planning and budgeting system, the medium-term budget of improved quality will be available by 2021-2023,” noted Deputy Auditor-General Audrius Misevičius.

For this reason, the opinions will be introduced together with an assessment of the maturity of budget management – conducted by the NAO for the first time – the outcomes of which have only confirmed the importance and necessity of the reform – we are still yet to overcome classic, rule-based management. In order to consistently move towards greater maturity, we should first learn where we stand right now. According to the auditors, various challenges still arise every step of the way: from policy-making and the determination of operational priorities, to performance reporting and the use of such information for the purposes of formulating the budgets of subsequent periods.
 
The quality of data is the area which should be improved first. Five qualified opinions have been submitted regarding the sets of financial statements for the year 2017, necessitated by the persistence of significant errors in the reports of the state, Social Insurance, Guarantee, and the Long-Term Employment Benefit funds. Inconsistencies present in said reports have also led to errors in the set of national statements. Meanwhile, there have been no significant shortcomings in the budget management reports drawn up in accordance with the cash-based method.

Six institutions which administer the Compulsory Health Insurance Fund, and thirteen institutions responsible for administering the Social Insurance Fund should be merged into two legal entities – one for the management of each of the funds. This could lead to a reduction in the management costs of said funds, and would include the institutions responsible for their administration into the institutional optimisation process currently conducted by the Government.

The NAO would like to emphasise the results of the audit on the Compulsory Health Insurance Fund, which have indicated a number of shortcomings with regards to the formation of prices for healthcare services – the NAO recommends to recalculate them on a regular basis in accordance with objective costs, and having regard to the effect of the application of modern methods. The NAO would like to emphasise the importance of a clearer definition of the purpose if the fund – the state does not pay sufficiently for its insured persons, however it allocates buildings to health institutions and purchases equipment for their benefit, which affects the scope and price of the guaranteed services.

An unqualified opinion has been expressed regarding the sets of statements of the Reserve (Stabilisation) Fund, which, according to the auditors, are correct and represent the actual financial state of said Fund. While this fund is the key money-box, the savings of which we would use in case of financial crisis, the current (163 million Eur/0.4 percent GDP in 2017) or planned amount of savings estimated to accumulate in the short-term (plan for 2018 – 284 Eur/0.6 percent GDP) is hardly sufficient.

On 28 November, the National Audit Office will hold the second public sector conference SIGNALS for further discussions on signals of critical importance for state development, which will involve discussions on the budget, as it is understood by the public, challenges facing the healthcare system, and perspectives of EU funding in 2021-2027.

 

Responsible for the information Communication Division
Last updated on 11 December 2018

National Audit Office of Lithuania

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