National Audit Office: Has the centralisation of administrative functions justified itself?

• The centralisation of public sector functions is proceeding more slowly than planned, and its financial benefits remain unclear.
• An audit conducted in 2022 revealed shortcomings in the preparations for centralisation; two of the six recommendations made have not yet been implemented.
• At the beginning of this year, centralised functions were being performed by only about 70% of the planned institutions.
• To achieve real benefits from centralisation, it is necessary to assess its financial impact.

The latest Report on the implementation of recommendations by the National Audit Office reveals that the consolidation of financial accounting and human resources management functions in the public sector is stalling. The process has taken seven years longer than planned, and some key decisions have yet to be made.
 
The aim of centralisation was to organise financial accounting and human resources management functions more efficiently and to reduce government spending, but the expected breakthrough has been delayed—at the beginning of this year, only 70% of the planned institutions were being served through the centralised system.
 
“A process that has been delayed for seven years without any clearly demonstrated financial impact is unacceptable. Centralisation cannot become an end in itself or a burden on the budget—it must be a tool for actually saving taxpayers’ money. Today, we still have no evidence that this reform has paid off financially,” says Auditor General Irena Segalovičienė.
 
The centralisation of functions began in 2018, when it was decided to transfer financial accounting and human resources management functions to the National Shared Functions Centre (NBFC). In 2022, the National Audit Office conducted an audit titled “Centralisation of accounting management and personnel administration functions”, which assessed whether the centralization of functions provided conditions to perform those functions efficiently.
In the auditors’ view, the preparations for centralisation had shortcomings: they would have been more efficient if criteria for centralising agencies had been established, missing information systems had been developed in a timely manner and existing ones improved, and more attention had been paid to attracting staff and strengthening their competencies.
 
Six recommendations were made to the Ministry of Finance (MoF) and the NBFC, two of which have not yet been implemented. Centralisation has been postponed on multiple occasions (from 2020 to 1 September 2027), so the expected change did not occur, and by early 2026, shared functions were being performed centrally by only about 70% of the planned institutions. Although the centralisation criteria for including institutions in the process and the lists of positions to be transferred have been approved, institutions are struggling to negotiate the transfer of functions and rarely manage to find a solution acceptable to all parties.
 
The legal framework for centralised human resources management processes also remains unresolved. Due to differing positions among various institutions, the necessary legislative amendments prepared by the Ministry of Finance back in 2024 have not yet been adopted.
 
Following the implementation of the National Audit Office’s recommendations, positive changes have also taken place: the NBFC’s structure has been adapted to a process-based management model, and a task and workload management system has been introduced in all departments, enabling more efficient work organisation and improved service quality. Although satisfaction with NBFC services reached 77% in 2024, auditors identify significant errors in the financial statements every year. This indicates that the quality of services provided by the NBFC is still not sufficient.
In an effort to improve financial accounting practices and the quality of the Centre’s internal control, the National Audit Office recommended in 2019 that the Ministry of Finance and the NBFC standardise the operational processes necessary for the centralised management of the institutions’ financial accounting. In light of this, a unified financial management information system was implemented, which made it possible to phase out some of the previously used systems and reduce their maintenance costs. In the future, plans include creating a centralised payroll and human resources management system, assessing the cost of services, and ensuring more efficient data exchange between institutions.
 
The National Audit Office emphasises that without a clear financial assessment, the benefits of centralisation will remain purely theoretical. Without calculating the benefits and without completing the process, the state risks maintaining a “dual structure”—funding both the NBFC and leaving some employees in non-centralised institutions. Such a risk may not lead to savings but, on the contrary, increase the administrative burden.
 
Up-to-date information on the status of the implementation of recommendations is published on the National Audit Office’s website at Open Data | National Audit Office of the Republic of Lithuania, while the report on the implementation of the most important recommendations is available in the Implementation of Recommendations section of the website.