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Legality of the implementation of the measures under the objective “Helping businesses to safeguard liquidity“ of the Economic Stimulus and Coronavirus (COVID-19) Consequences Mitigation Plan

June 29, 2021

2021-06-29

Even under a state of emergency, state budget funds must be used responsibly

Picture for Even under a state of emergency, state budget funds must be used responsiblyThe National Audit Office, Supreme Audit Institution, carried out an audit of the legality of the implementation of the measures under the objective “Helping businesses to safeguard liquidity“ of the Economic Stimulus and Coronavirus (COVID-19) Consequences Mitigation Plan drafted by the Government in March 2020. EUR 1 424.5 million was allocated for this purpose, of which 40.3 per cent was used in 2020. The audit assessed compliance with legal acts of processes and funds intended to help businesses maintain liquidity and analysed whether the legal environment was sufficient to achieve the goals set and the measures adopted. No significant inconsistencies with legislation have been identified in the allocation of funds, but there is room for improvement of support solutions.

“At the time of the pandemic, urgent solutions were needed; however, in any situation, state budget funds must be used responsibly and transparently. The state must be constantly ready to quickly develop new or improve the existing business support schemes that would function effectively and would help to mitigate the difficulties or threats faced by the country’s businesses", said Auditor General Mindaugas Macijauskas.

The audit report draws attention to the lack of consistency and information in the planning of expenditure to mitigate the consequences of COVID-19. The European Commission has recommended that Member States pay particular attention to supporting micro and small enterprises, as they make a significant contribution to jobs and growth. The model of business promotion to maintain liquidity chosen in Lithuania allowed enterprises whose annual income is estimated at tens of millions of euros to also receive subsidies meant to micro enterprises (which employ no more than 9 employees). In 2020, among those receiving subsidies meant for micro enterprises there were 10 large enterprises (whose annual income exceeds EUR 50 million or balance sheet assets exceed EUR 43 million), 113 medium enterprises (whose annual income does not exceed EUR 50 million, balance sheet value does not exceed EUR 43 million) and 938 small enterprises (whose annual income and balance sheet assets do not exceed EUR 10 million).

When assessing loans granted to agricultural entities, it is noted that they were provided responsibly and in order to ensure that the funds from the state budget would be used as transparently as possible. However, a third of the municipalities checked (11 out of 34) and the National Paying Agency, which had to assess whether the beneficiaries were in financial difficulties before the start of the pandemic, indicated that they did not assess the financial statements of the applicants and trusted in the information provided in their applications that they had not experienced difficulties before 31 December 2019.

Having assessed the experience and practice of the pandemic period, the auditors draw attention to the importance of equal principles and conditions based on objective criteria for different business sectors to receive state budget support in order to achieve transparent and targeted use of state budget funds.

It is now crucial to implement the recommendations previously made by the National Audit Office so that decisions are taken quickly and in compliance with legislation in the state of emergency, and that financing models be developed working both in good economic times and in emergencies.


   

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