EU Investment Audit

From May 2025, the National Audit Office will no longer perform the function of the European Union (EU) audit authority, as the 2003 mandate of the Seimas to the National Audit Office to carry out audits of EU structural assistance received in the Republic of Lithuania in accordance with EU legislation expires. This function has been entrusted to the Ministry of Finance by a government decision from 2021 and the National Audit Office submitted its last audit report to the European Commission on 25 April 2025.

"With more than 20 years of experience in auditing the management and control systems for EU support and investment, we have a wealth of experience in ensuring the eligibility of activities and expenditure in EU-funded projects and assessing the risks of the management tools for each EU support period. It is crucial for us that the knowledge and practice of this largest audit of all EU financial mechanisms for Lithuania is used in other audits and assessments. Our colleagues who audit EU investments assess not only the legality of expenditure declared to the European Commission, but also the legal environment and projects in various areas of the public sector, and we are therefore pleased that the staff of the department performing the EU investment audit function took the opportunity to complement our other audit units with their professional experience," said Auditor General Mindaugas Macijauskas.

The European Union Investment Audit Department assessed the management and control system created for the implementation of Operational Programme for European Union Funds Investments for 2007-2013 and 2014-2020, and the eligibility of expenditure declared to the European Commission. The Ministry of Finance is carrying out the eligibility assessment for the new period (2021-2027).

You can find the full results of the EU investment audit here.
 

• The application of Covid-19 business support measures poses risks relating to the proper use of the money.
• There have been cases of construction work in special category buildings being carried out by legal entities and professionals who are not authorised to carry out such work.
• The overall error rate of 14.15% is the highest for the whole period.

The European Union (EU) Investment Audit Department of the National Audit Office has carried out an assessment of the functioning of the management and control system created for the implementation of the Operational Programme for Investments of the European Union Funds for 2014-2020, expenditure declared in the accounts and expenditure declared for the period from 1 July 2023 to 30 June 2024 for which reimbursement has been requested from the European Commission.

According to the auditors, not all of the COVID-19 business support was used properly. There was no adequate risk management control for the measure "Covid-19 e-commerce model" (worth more than EUR 40 million). As a result, the quality of most of the websites created with project money was not in line with the money spent on them. As a result of the risks identified by the Audit Authority, the Innovation Agency declared more than EUR 3.6 million of expenditure ineligible that should be recovered from the project implementors. The auditors point out that the new period of EU projects also contains a similar measure on e-solutions, so the Innovation Agency should assess the potential risks and take appropriate action to avoid errors.

The audit found that it is still common for construction contract projects in special category buildings to be carried out by subcontractors or specialists who are not authorised to carry out the construction work. For example, the construction works of the Medical Science Centre of the Faculty of Medicine of Vilnius University and of the Study Campus of the Lithuanian Academy of Music and Theatre were carried out by subcontractors without the required certificate. These non-compliances resulted in more than EUR 3.5 million of ineligible expenditure.

As every year, this audit identified procurement irregularities which were attempted to be resolved by changing the procurement practice regarding changes to works during the implementation of the contract: contract changes are now proposed to be calculated mathematically by assessing the difference, which creates a risk of abuse in the volume of changes made. The new practice raises a number of risks due to the lack of equality of treatment of former project participants.

According to the auditors, the overall error rate of 14.15% was found in 32 projects financed with EU money. This exceeds the European Commission's (EC) tolerable limit of 2% and is the highest in the history of the National Audit Office's audits of EU Structural Fund investments, so it is crucial to ensure that these errors do not occur in other EU projects.

"This error level has led Lithuania to make a financial correction of more than EUR 216 million, which is covered with state money. In this report, the auditors share risks of project administering authorities which I believe will be very useful for the administration of projects for the 2021-2027 EU funding period. I also hope that the errors now identified will not be repeated and will be significantly reduced in EU projects of the new period", said Auditor General Mindaugas Macijauskas.

The results of the audit have been submitted to the European Commission for approval as required by Article 139 of Regulation (EU) No 1303/2013 of the European Parliament and of the Council.

• There is a lack of oversight of centralised procurement procedures and errors identified have a significant impact on the eligibility of expenditure.
• The inclusion of an ineligible applicant in the list of State projects resulted in the loss of more than EUR 6 million of funding.
• The overall error rate of 4.92% is the highest throughout the year.

The European Union (EU) Investment Audit Department of the National Audit Office has carried out an assessment of the functioning of Management and Control System Created for the Implementation of the Operational Programme for European Union Funds Investments for 2014-2020, Expenditure Declared in the Accounts and the Expenditure Declared for the Period 1 July 2022 to 30 June 2023 for which Reimbursement has been Requested from the European Commission.

Following a change in legislation in 2022, allowing both the audit and the management and control system authorities to assess procurement carried out through the Central Purchasing Organisation (CPO), the audit found that the controls in place at the authorities are not sufficient to ensure the quality of public procurement, and that a significant number of irregularities were identified.

"The law requires project implementers to use CPO services in defined cases, but the audit results show that CPO procurement procedures do not ensure the legality of expenditure and expose them to a higher risk of error. With the recent trend towards centralised procurement, it is important to ensure quality supervision by central contracting authorities," said Rasa Virganavičienė, Head of the European Union Investment Audit Department.

The audit results show that quality assurance is equally important in the implementation phase and in the phase of assessing the eligibility of applicants. Inappropriate selection of applicants has not only significant financial implications for the funding of inappropriately selected projects, but can also prevent other applicants from receiving funding. The audit identified a case where an ineligible applicant was included in the list of State projects, resulting in a 100 % financial correction applied to the project, which led to a loss of funding of more than EUR 6 million.

According to the auditors, the overall error rate is 4.92%. It exceeds the European Commission's (EC) tolerable limit of 2% and is the highest in the history of the audits of EU Structural Funds investments carried out by the National Audit Office.

"Our audits show that the overall level of errors in the expenditure declared for EU Structural Fund investments has been above the tolerable limit for all of the last three years. This means that the Ministry of Finance has to apply a financial correction to reduce this error to the level tolerated by the EC. In order to correct last year's error (which is the highest over the whole period), the amount of corrective action taken following the audit results amounts to EUR 40.56 million," said Ms Virganavičienė.

Our audit assessed and found no non-compliance in four projects with costs of EUR 7.9 million calculated and declared to the EC on the basis of pre-determined fixed rates. In this case, project implementers do not need to provide evidence of actual expenditure and proof of payment, but only to justify the result achieved, for which the expenditure is reimbursed. Not for the first time in our audit, we note that the use of fixed rates in a project is a preventive measure to avoid ineligible costs, which generate the overall error rate.