2013-02-18
National Audit Office: delay in both privatisation and renewal of state assets
The National Audit Office conducted an audit to assess effectiveness of privatisation and of renewal of state assets. Auditor General Ms Giedrė Švedienė commented on the audit findings as follows: “Half of the state assets offered for privatisation are actually objects not prepared for sale, often of limited use and therefore not attractive to a potential buyer. Renewal of state-owned real estate has not been effective either because of failure to renew the assets necessary for the State in due time.”
The List of Privatisation Objects includes nearly 1000 objects, however, privatisation of half of these objects cannot be started because, for various reasons, they are not prepared for sale. For most of them (almost 400), privatisation procedures cannot be initiated because respective state land plots have not been formed. Legislation provides for that the plot of state land allotted to the object which is offered for privatisation shall also be sold. However, it is difficult to form state land plots for such buildings and structures as bastilles, dugouts, bunkers, etc. and this often takes five years or more. In addition, in many cases these are neglected buildings in poor condition, often included in the Register of Cultural Valuables or standing on the territory included in this Register. Several dozens of objects subject to privatisation are located on privately-owned land. However, the auditors found that the State Property Fund has failed to take all necessary actions to establish the right to access, operate and maintain these objects. Also, nearly 100 other objects cannot go on sale because they have not been validated and were not transferred to the State Property Fund in due time. The List of Privatization Objects also contains objects made available for use, the duration of a number of the Loan for Use Agreements is as long as a dozen years so they cannot be privatised either. For all these reasons, it is recommended to review the List of Privatization Objects and to assess relevance and feasibility of the privatisation of the listed objects.
Renewal of state-owned real estate has not been efficient either. Currently there are 30 real estate objects planned for renewal, but only two objects have been renewed since the start of the renewal, i.e. since 2007. It was planned that funds for the renewal of all these objects will be received from the sale of almost 300 objects included in the List of Renewable State-Owned Real Estate. However, it is difficult to sell these objects due to the stagnation in the real estate market. For example, since 2009 the state enterprise Turto bankas (Bank of Property) organised 13 auctions to sell a recreational complex (10 buildings) owned by the Lithuanian army; however, in 2012 the complex was still not sold. Part of the objects are included in the Register of Cultural Valuables or are objects of medical purpose, so their usability is limited. As a result, the objects have not been sold for a long time. Also, there are a number of free (unused) objects which require maintenance costs but Turto bankas cannot lease them until their sale because legislation provides for only sale of such assets.
Loans may be taken to renew assets and planned to be paid back after the sale of the property. The National Audit Office found that the revenues planned to be received from the sale of state-owned real estate by Turto bankas were too optimistic. Consequently, the sales revenues may not be sufficient to renew assets or to repay the loan. For example, in the case of the renewal of the building of the General Prosecutor's Office, the revenues expected to be received after the sale of the property totalled more than LTL 24 million. With a view to start renewal of the building as soon as possible, Turto bankas borrowed LTL 21 million. However, the amount received having sold the building was only LTL 6.9 million so the loss of revenue from the sold assets will have to be covered from the State budget. Therefore the National Audit Office noted that the planning of revenues from the sale of assets in cases of borrowing funds for renewal has to be carried out with caution, taking into account potential risks.