Auditor General Irena Segalovičienė met with representatives of the Ministry of Education, Science and Sport (MESS) to discuss the main challenges and envisaged changes in the Lithuanian education system. The meeting focused on strategic areas that are vital for the further strengthening and efficiency of the education system.
  
Discussions with Minister Raminta Popovienė focused on the system of educational support in Lithuania and the ongoing audit in this area. The progress of the Millennium Schools project and potential risks to ensure smooth and efficient modernisation of schools were reviewed. The use of the Recovery and Resilience Facility in education also received considerable attention.
  
One of the topics of the meeting was strengthening vocational training. Its importance for the labour market was highlighted, and ways were explored to make vocational training more attractive and relevant to today's needs. The Auditor General, Ms Segalovičienė, made a concrete proposal to introduce inclusive education in vocational training. This would ensure that everyone, regardless of their abilities or special needs, would have the same opportunities to acquire a vocational qualification and successfully integrate into the labour market.
  
The importance of non-formal education for personal and skills development, its effectiveness, and its economic and social potential were also discussed. Discussions also included the current system of quality assessment of higher education studies, its strengths, weaknesses and opportunities for improvement in order to ensure the highest level of studies. The meeting also discussed the challenges of data management in the education system, highlighting the importance of accurate and reliable information for evidence-based decision-making.
  
The Auditor General stressed that systematic audits and close cooperation with the MESS are essential to ensure transparent and efficient use of public funds in education. She also recalled the importance of continuous monitoring of recommendations and stressed the need to improve the financial accounting and reporting of some institutions within the Ministry's area of responsibility.
  
"Only through joint efforts can problems be identified, the best solutions be found, and the necessary reforms be implemented to achieve long-term progress in the education system," said Ms Segalovičienė.
  
Representatives of the MESS confirmed their commitment to cooperate with the National Audit Office to ensure the best possible quality of education and efficient management of financial resources in Lithuania.

The National Audit Office auditors' assessment Use of data from ministerial management programmes revealed a systemic problem: while the state is striving to make savings, it is impossible today to calculate exactly how much is spent on management.

In their management programmes, ministries are required to indicate how much of the state budget they use to run their activities. However, this obligation is not foreseen for the bodies subordinate to the ministries, and it is not clear which expenditure is to be attributed to these programmes, so it is not possible to compare which of them and how much they have spent on certain activities.

"From 2022, ministries are obliged to show the money they spend on management in their management programmes. The aim of measuring how much money is spent on management and where we can make savings is the right thing to do, but the way we have chosen to do it does not help. It is not clear which particular data from bodies are to be attributed to management expenditure only, so ministries are left to their own discretion. This means that they are wasting their resources by collecting data that is not comparable between different ministries," says Auditor General Irena Segalovičienė.

Of the 414 bodies that receive budget allocations, only 41 are obliged to provide information in their management programmes on how much money they spend on their activities, giving us only a fragmented and often misleading picture of the cost of administration. The information collected by only some of the bodies is insufficient to assess the efficiency of administration at public sector level.

In 2024 EUR 240 million, or 2% of the total appropriations used by ministries, were included in management programmes. However, this is not all management expenditure: expenditure corresponding to the purpose of management is also included in other programmes, i.e. for the implementation of functions. Moreover, this figure only reflects the expenditure incurred by the institutions for their own administration, excluding subordinate bodies. This gives a false impression of the high efficiency of public administration.

The Strategic Management Methodology defines the attribution of expenditure to management programmes in abstract terms. The management activities of the Ministries are similar, but the institutions differ in the way they attribute expenditure to management programmes. For example, there are differences in the allocation of salaries and social security, and in the purchase of utilities. Some ministries allocate all expenditure to the management programme, while others allocate the same expenditure to the functional programmes. For this reason, the reporting on how much public money has been spent in the previous year may be misleading when reporting on the cost of management.

According to the Auditor General, without a comprehensive, comparable and reliable picture, we cannot assess the efficiency of public sector management and ensure that money spent on administration is used rationally. If ministry staff are being burdened with extra work but the benefits are not clear, then another way of measuring the efficiency of the public sector should be found.

"I see a clear solution: for decision-makers to act without delay, to step up efforts and to define a single and precise procedure for all appropriation managers for calculating management costs and assessing the efficiency of their use. Only then can we know exactly how much management really costs, where we can make savings, and what efficiency strategies and tactics to adopt. This would not only allow for a more efficient use of taxpayers' money, but also increase transparency and accountability in the public sector. This work is particularly relevant at a time when everyone's expectation to save on management costs has increased", suggests the Auditor General.

In order to improve long-term strategic management, the Organisation for Economic Co-operation and Development (OECD), together with Lithuanian institutions, has been working on a standardised performance evaluation system for public administrations for the period 2022-2024. The OECD has pointed out that not only the size of expenditure that needs to be assessed, but also its efficiency. To measure this, common indicators should be developed for all institutions. The results and recommendations of the project have been forwarded to the Public Management Agency for analysis, and the head of the Agency has been given the task of preparing and submitting to the Ministry of the Interior for 2025 proposals on management indicators for budgetary institutions and public bodies that could be monitored at national level.

The concept of the public sector accounting and financial reporting system reform aims to restructure the system to provide reliable and objective information for economic decision-making. It should contribute to more efficient management of public resources at all levels and more transparent use of public resources. This aspiration was enshrined by the Government in 2005. Since 2010, the reform has been implemented, which means that all assets and liabilities are included in the financial accounts, correctly classified as long-term and short-term, recorded in the accounts, the value of the assets corresponds to their fair value, and other important things are done. But is this the case?

AUTHOR 

Danguolė Krištopavičienė
Head of Financial Audit Department 1
e-mail:[email protected]

Even after 15 years, we cannot be satisfied with the results achieved: the main sets of public accounts are subject to qualified opinions, which means that significant errors are found. The negative auditor's opinion in 2020 and 2021 on the set of accounts of the State (issued when significant errors are identified and are pervasive in the financial statements) was replaced by qualified opinions in 2022, 2023 and 2024. The State Social Insurance Fund and the Compulsory Health Insurance Fund are also affected by errors.

What do significant errors mean? Inadequate information systems for accessing accounting information, disorganised processes for controlling public assets, i.e. assets created or acquired with our money, and negligent attitudes of those responsible. And above all, errors represent a risk to the efficiency and transparency of public finances, which are contributed by people and businesses through the payment of taxes.

Fifteen years after the introduction of public sector accounting and reporting standards, museum representatives still believe that the annual inventory of assets, carried out in accordance with financial accounting requirements, and the permanent accounting of museum objects should be distinguished as two distinct processes. The attempt to join the two processes is said to lead to misleading interpretations and to give the impression that museums are unaware of the objects they hold. But isn't this true? If there is a permanent record of museum objects, why were the auditors unable to determine during the audit which specific objects were recorded in the accounts and at what price? For example, one museum audited was unable to detail the value of valuables totalling more than EUR 156 million, or 89% of the museum's total holdings.

As declared, the data on museum values are included in the Lithuanian Integral Museum Information System (LIMIS), a centrally maintained system for the accounting, management and publicity of cultural heritage values stored in Lithuanian museums. However, this system seems to have been forgotten to be used for another purpose - financial accounting. This means that the staff who manage it are left without a modern tool - information systems adapted for this purpose, and the accounting employee is like the stepdaughter in the fairy tale: “she loved her daughter, but she troubled her stepdaughter with all kinds of tasks, and she gave her the most difficult jobs.”

Another common situation is when assets in public bodies are not written off at the time of transfer or consumption, but only at the end of the year or even at the time of the inventory itself - I didn't find the asset, so it should be written off, because I must have consumed it. This practice of asset management creates the potential for abuse, in other words, misappropriation. Are the financial statements of an institution that does this reliable?

For a number of bodies and for a number of years, auditors have made observations on the accounting for improvements to assets, where substantial improvements to assets were incorrectly recorded as simple repairs, did not increase the value of the asset, and were immediately written off as an expense. What does this mean? For example, there is a building, millions of euros have been spent on repairs, it has become virtually new, and the accounts show that the value of the building is symbolic, because all the millions have been written off as costs immediately after they were spent. This means that someone could come up with the idea of selling such a building for a symbolic value, i.e. the value as shown in the accounts. Or perhaps investments will be planned again in the already improved assets because the accounts show that they are needed? So, such accounting errors can also become facts of abuse.

What would happen if entrepreneurs behaved like these public authorities? For a businessman, incorrect financial reporting is not just bad management, but a real risk: fines, reputational damage, perhaps even bankruptcy.

Why is it that some of us are required to be very responsible, while others can disregard even the most basic rules? Every year, auditors find institutions where the general ledger (the document that collects the data from the registers and calculates the account balances) is not closed, where its data do not reconcile with the data in the financial statements, and where transactions are not recorded correctly. If this were the case in business, we would say that the accounting data is being falsified, possibly with the aim of avoiding tax. And in the public sector, auditors make recommendations to those charged with governance that they need to tidy up and address the issue of responsibility.

When will every public sector body realise that financial accounting and reporting is much more than a bureaucratic obligation and the filing of prescribed reports? We can safely say that correct financial reporting, based on agreed and approved rules, is the foundation of a country's financial transparency and the basis for citizens' trust in the state.

Finally, it should be recalled that the Government, when approving the Concept of the Reform of the Public Sector Accounting and Financial Reporting System in 2005, foresaw that "during the transitional period, a doubling of accounting is inevitable (i.e. the preparation of the consolidated set of accounts of the State would be done on an accrual basis, and the budget would be settled on a cash basis). In the future, accrual-based budgeting and reporting could also be considered". This would allow to avoid “doubling up” the accounting and to produce a single set of accounts. For public finances, it would also mean lower accounting costs. However, the current audit results show that the vision of advanced financial accounting that the Government talked about 20 years ago has not yet become a reality. Unless, of course, there are changes. Decision-makers and heads of institutions must show will and leadership, especially at a time when public expectations of efficiency and transparency in the public sector are growing.