2023-05-30
Municipalities risk investment opportunities by failing to ensure the reliability of financial data
The National Audit Office, implementing the functions of the budget policy monitoring institution, carried out an assessment of compliance with the fiscal discipline rules of municipal budgets. The aim of the assessment is to determine whether the rules have been complied with when approving and implementing municipal budgets.
The assessment of municipalities' compliance with fiscal discipline has been carried out from two perspectives: assessing the 2022 budgets (ex-post) based on actual data and analysing how the 2023 budgets were planned (ex-ante).
The preliminary assessment of the 2023 budgets indicated that the initial 2023 budget adopted by the Council of one municipality did not meet the requirements. According to the financial statements, there were 15 such municipalities. Following the identification of possible errors in the documents submitted by the municipalities, it was requested to review the data and, if justified, to clarify the information.
In 2023, a new version of the Constitutional Law defining fiscal discipline rules for municipalities entered into force, giving more flexibility to promote investment. In order to take advantage of this flexibility, compliance with municipal fiscal discipline rules is essential.
"We use our assessment also to help municipalities to identify the risks of non-compliance, so that they can adjust their budgets and ensure compliance before the end of the year. We would like to point out that there are still errors in municipalities' financial reporting documents. Municipalities providing incorrect information risk losing the opportunity to finance investments through borrowing, as the application of the flexibility rule may be restricted if the actual assessment shows that the rules are not complied with," said Jurga Rukšėnaitė, Head of the Budget Monitoring Department.
In recent years, municipal budget balances have been better than planned. On average, municipal budgets have exceeded revenue plans by around 19% and expenditure plans by around 11% between 2019 and 2022. This cautious municipal revenue planning has contributed to the result of all municipalities complying with fiscal discipline rules in 2022.
To ensure that the data provided by municipalities is reliable and that budgets are prepared in compliance with the fiscal discipline rules, training sessions for municipal representatives, where specialists from the National Audit Office and the Ministry of Finance presented the changes in regulations, were organised this year. In addition, the National Audit Office website includes a supporting calculator on municipalities' compliance with fiscal discipline rules, which includes the financial statements used for the assessment. The aim is to help municipalities to make a preliminary assessment of the compliance of their budgets with the rules.