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17/06/2020   Last year all local governments adhered to the fiscal discipline rules, however, the need for data adjustment is still relevant in 2020

The National Audit Office of Lithuania, implementing the functions of the budget policy monitoring institution (hereinafter referred to as the Fiscal Institution), has carried out an assessment of the compliance with the fiscal discipline rules of local governments which aims to determine if the fiscal discipline rules were adhered to when approving and implementing the budgets of local governments. The compliance with these rules allows relocating savings accumulated in good times to prioritised areas, when it is needed the most, as well as demonstrates the ability to meet commitments taken without increasing the tax burden and transferring expenses to future generations. The ex-post compliance with the fiscal discipline rules of the local governments is important in order to ensure the maintenance of grants for the co-financing projects from the European Union Structural Funds. Eligibility for carrying out investment projects financed using loans is possible only when complying with the fiscal discipline rules.

When preparing the ex-ante assessment of the compliance with the fiscal discipline rules, it was established that budgets of local governments for the year 2020 were approved in accordance with these rules. Nevertheless, some of the local governments still do not properly fill in the information, which is provided to the Ministry of Finance: if only the primary information was used, 12 local governments would be regarded as not complying with these rules. The number of such local governments would have been 26 in 2019, most of them being different than this year. This reveals that local governments still face problems with data provision and their usage when calculating the balance estimate. 

“The councils of local governments adopted the primary budgets before 1 March 2020; thus, the uncertainty regarding the spread of COVID-19 was not included in the planned primary budgets of the local governments. The deterioration of the economic situation shows the persistent relevance of a responsible and transparent budget planning process in each local government. By this assessment we want to remind the local governments what indicators are the most significant when planning the balance estimate and adhering to it later”, says Rasa Ibelhauptaitė, Chief Specialist of the Budget Policy Monitoring Department.  

The ex-post compliance with the fiscal discipline rules of local governments’ budgets for 2020 will be assessed in 2021. This assessment will take into account the impact of COVID-19 spread and fiscal escape clauses related to it. When assessing the ex-post compliance with the fiscal discipline rules of local governments in 2019, it was identified that all budgets attributable to local governments were implemented in accordance with the fiscal discipline rules attributable to the general government sector.

Assessment of the Compliance with the Fiscal Discipline Rules of the Local Governments

 

Responsible for the information Communication Division
Last updated on 15 July 2020

National Audit Office of Lithuania

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