Is the Lithuanian Business Monitoring System Effective?

There are 56 institutions in Lithuania monitoring the business from the effectiveness of which it depends whether there are no unjustified bureaucratic barriers, excessive requirements that create administrative and regulatory burden. Among the monitored areas of business it is worth mentioning construction safety, non-food products safety and consumer protection, medicines and health care, occupational safety, etc., which monitoring is needed to protect the rights of the citizens and ensure a safe environment.

The audit carried out by the Supreme Audit Institution "Is the Lithuanian Business Monitoring System Effective?" shows that the consolidation of business monitoring institutions carried out since 2012 was more focused on the reduction of monitoring institutions, however, the improvement of quality of monitoring activity was not a priority.  The number of institutions decreased by six, however, the planned number was significantly higher.  The auditors notice that the analysis of costs and benefit had not been performed while planning the consolidation.  In 2015 OECD also noted that during the course of preparation of the plan, the principal question had not been raised - what monitoring functions are necessary for the state and who will implement them. 

As it can be seen from the audit results, the monitoring institutions and responsible ministries do not assess the effectiveness of the carried out monitoring and benefit for community and business.  So far, there are no estimations how much it costs for the state the monitoring of business.  According to the data provided by the institutions on the part of the activity consisting of the monitoring, the auditors estimated that in 2016 at least 229 million EUR had been used from the state budget and in 2017 - 233 million EUR.  The actions taken in response to the audit recommendations would help to assess the optimality of these costs and reduce the burden on business. The audit determined that the annual activity reports of the Government and half of the ministries do not contain any information about the business monitoring carried out in their sectors.

There are also good practices in the business monitoring system, however, in order to reduce the costs of monitoring, the Ministry of Economy, monitoring institutions and ministries, in which management they operate, lack effective interaction by sharing information on economic entities, monitoring results, advanced methods, etc. The institutions say that they cooperate and coordinate their actions with other institutions, however, only a few have had and provided evidence to support this. It should be noted that in this area and OECD experts also suggested to Lithuania to strengthen the system of coordination of the reform, the collection of data on activity management and impact but the recommendations unrealized.

"The monitoring institutions lack a common approach to protecting regulated rights and interests since not all institutions are monitored based on risk assessment of activity of economic entities which would help to choose when to check the business, and when it is enough to consult or apply other preventive measures. This would reduce the barriers of excessive requirements and redundant bureaucracy for business", says Julius Lukošius, the Director of Economy Audit Department.

The Supreme Audit Institution recommends: at state-level to assess economic activities - what should be monitored by public institutions or self-government and what can be left for self-monitoring, thus reducing monitoring costs without losing quality; annually evaluate the state of business monitoring and report to the Seimas; take other measures for improving the performance of monitoring institutions (risk assessment based activity; cooperation; assessment of legislation governing activities of economic entities; requirements for employees' ethics, impartiality and independence).