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26/09/2019   OECD: Lithuania’s IFI has brought fiscal transparency but lacks independence

An expert team led by the Organisation of Economic Cooperation and Development (OECD) has carried out the first external review of Lithuania‘s independent fiscal institution in the National Audit Office. The aim of the review is to evaluate performance of the independent fiscal institution against internationally agreed OECD principles and to provide recommendations to improve its effectiveness and long-term viability.

The independent fiscal institution‘s functions have been implemented by the Budget Policy Monitoring Department (BPMD) of the National Audit Office since 2015. The OECD noted that the IFI  has benefitted from the NAO’s reputation and in a relatively short period has established a reputation for rigorous independent analysis.  However, the experts observe that despite recognition of the quality of its work, it lacks the operational independence to carry out its functions effectively in the longer term. It also lacks a clear public identity, with many stakeholders unable to clearly distinguish between the independent fiscal institution and the supreme audit institution (SAI) which work together under one roof inthe National Audit Office.

“An effective independent Fiscal Institution acts as a lighthouse shining a light on risks to the public finances and bringing benefits to citizens. We have witnessed remarkable progress in terms of a very young institution building a good reputation for solid analysis but challenges remain.. Our recommendations aim to reinforce the institutions independence and strengthen the institution overall”, said Lisa von Trapp, Senior Policy Analyst, Budgeting and Public Expenditures Division, Directorate for Public Governance.

The OECD stresses that, in the light of international standards related to independence for fiscal institutions and for supreme audit institutions, the recruitment and other processes provided for in the new Civil Service Law do not appear to be appropriate either to supreme audit institution or fiscal institution. According to the supreme audit institution, a centralised system for the recruitment of civil servants provides for building relationships with the auditees and poses reputation risks relating to the objectivity and impartiality of the National Audit Office staff.

“The OECD has noted that the level of corruption is lower in the countries with strong audit institutions. If our country loses in this area, we will lose everywhere else. Let us not forget that the OECD does not send money to Lithuania, i.e. they give us a rod, not a fish”, said the Auditor General Arūnas Dulkys

The insights from the OECD review will be presented by the SAI to the Seimas for discussion. This is expected to provide an effective impetus for decision makers to further implement the necessary changes recommended by international experts. At the end of this year, it is planned to present the peer review currently being performed by an expert team from the European Court of Auditors and the supreme audit institutions of Poland and the United Kingdom.

Three independent institutions are acting under the umbrella of the National Audit Office: a classical supreme audit institution, an audit authority for EU investment and an independent fiscal institution. With such an unusual structure in place, every effort is made to ensure the proper performance of these three entirely different functions.

OECD Review of Lithuania’s Independent Fiscal Institution

 

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Last updated on 11 October 2019

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