2010-01-13
A Common Policy on State Enterprise Management is a Necessity
The National Audit Office proposed the Government to formulate a common policy for state enterprise management and to consider possibility to appoint an institution that would co-ordinate and monitor implementation of the common policy as well as analyse and publicise its activity indicators. “Today we do not have a clear policy on state enterprise management in place therefore the state institutions that are responsible for management of state enterprises often act at their own discretion, usually not paying enough attention to enterprise supervision and effectiveness. It is not clear what activity state enterprises should perform, what significant public services they should provide and what return they should give to the State”, said Deputy Auditor General Mr Viktoras Švedas when summarising outcomes of the audit on State Enterprise Management.
Auditors pointed out that part of state enterprises provide insignificant services for public or do not generate income as a result of their activity whereas all of their costs are being covered from the budget. Some of the state enterprises do not comply with legal requirements for this type of enterprises defined by law. For instance, state enterprise Rest Home Baltija provides accommodation services while using state property and receiving budget allocations. Expenses incurred by state enterprise Agriculture Information and Rural Business Centre for performing assigned functions are covered by the Ministry of Agriculture.
State enterprises economic effectivity is poor. Their profitability indicators were not satisfactory, property profitability was less than 8 percent. While not seeking profit state enterprises do not ensure continuity of activity and do not have enough funds for investments, as a result they do not invest at all or use budget funds for investments.
The market value of property managed by some enterprises is much higher than it is indicated in their financial statements. This is the reason why all the taxes payable on the use of state property by the right of trust are not collected.
During three years state institutions allocated about 350 million Litas to state enterprises for property acquisition. Auditors established that some of the enterprises record these allocations as subsidies without increasing enterprise owner capital from which tax is payable.
A part of property in state enterprises in managed ineffectively. For instance state enterprise Klaipėda Region Roads when letting facilities to private companies incurred 326 thousand Litas costs for facilities and equipment depreciation whereas their income amounted only to 173 thousand Litas.
Some of the state enterprises lend non-interest loans for their employees. For instance state enterprise State Forest Inventory and Management Institute in three years lent 478 thousand Litas. Such lending is in contradiction with the enterprise activity goals, does not give any benefit to the enterprise and demonstrates ineffective use of turnover. Besides enterprises have to cover taxes related to this lending as well as to undertake risk in the case of loan default.
Auditors determined that owners of some of state enterprises instructed their enterprises to cover expenses that are not typical to the activity of those enterprises. For instance state enterprise under Pravieniškės 1st Correction House paid 29 thousand Litas for creation of documentary “Ministry of Justice” as instructed by the Ministry of Justice.
Today in Lithuania there are 108 state enterprises whose property is valued at 14.4 billion Litas based on the data of financial statements.