ANNUAL REPORT NATIONAL AUDIT OFFICE OF LITHUANIA

Transcription

1 20 16 ANNUAL REPORT NATIONAL OFFICE OF LITHUANIA

2 Natioal Audit Office of lithuaia 2016 aual Report SUPREME INSTITUTION EUROPEAN UNION INVESTMENT INSTITUTION INSTITUTION

3 A WORD FROM THE OR GENERAL What was the Natioal Audit Office of Lithuaia lookig at? We ofte hear this questio whe more or less resoat evets ripple across Lithuaia. We may start coutig that i the public sector there are more tha 4,000 bodies with their respective maagers, competecies, ad obligatios to react, however, let each of us begi with himself. We follow this priciple i our audits ad recommedatios, i our strivig to be a model for the public sector, to serve as a idepedet ad competet adviser to decisio makers ad Parliametary scrutiy. That is our attitude whe moitorig key atioal problems ad, ofte, whe a certai case surfaces, it appears that auditors have already emphasised it ad otified about it several or more years ago. What is the price of a good advice? 8.7 millio Euros this is the amout of taxpayer moey we spet o our activities i The Natioal Audit Office is the oly istitutio that uites three importat fuctios which are ofte assiged to separate orgaisatios i other coutries: we supervise the lawfuless ad effectiveess of the maagemet of the State property ad use of state fuds, we audit the use of EU ivestmets ad carry out budget policy moitorig. I exercisig all these fuctios, we aim to ot oly see the problems but also come up with meas to elimiate their causes. The decisio to iclude i our activity plas horizotal audit allowig us to idetify problems ot limited to oe project or istitutio, but systemic public sector problems was probably oe of the most successful i We have already

4 coducted a umber of such audits i the fields of strategic plaig, public lad, ivestmet maagemet, etc. Audit results suggest a upleasat thought: o oe would hadle their family fuds i the same way as public ivestmets worth billios of euros, atioally sigificat ecoomic projects of public fiaces are maaged. Our recommedatios could help chage that. What kid of impact do we expect? The proper implemetatio of recommedatios made by auditors i 2016 aloe could result i icreased focus of the programme budgetig o the achievemet of results ad maagemet suited to meetig people's eeds, a comprehesive review of the process ad priorities of state fuds ivestmet, ad more efficiet maagemet ad admiistratio of public lad. Ope public sector data would also geerate more beefits to the State. It is estimated that accessible ad actively used ope data i Lithuaia could geerate beefits equivalet to almost 2 per cet of GDP. It is a huge ad still utapped potetial. I 2016, we opeed iformatio o how the public sector implemets audit recommedatios. Publicity is udoubtedly oe of the key meas that may prove helpful i ecouragig the public sector bodies to fuctio more efficietly, to address weakesses ad make decisios without repeatig the past mistakes. What should we focus o to maximise the positive impact? To develop a regioal policy strategy, to fix State ivestmet programme ad to keep o workig while focusig o the desired outcomes. These three elemets are itercoected: without the regioal policy agreemet, it is ot possible to reasoably pla the ivestmets, without the programme budgetig to efficietly implemet projects ad moitor the achievemet of outcomes. It is easier to deal with cosequeces; however, we eed to see the causes. We may dig yet aother pit for oe more multifuctioal swimmig pool withi a radius of over a doze kilometres, but maybe we should rather build ew paths for iovatios that i substace cover ot oly techologies, material ad fiacial aspects? Smart budgetary goverace would ot oly make our coutry more competitive, but it would also provide a basis for atioal security. Should we thik ad talk about tomorrow? I 2016, we made a careful assessmet of the log-term perspective: i implemetig the fuctio of fiscal istitutio we preseted to the public the report o the fiacial sustaiability of the govermet sector, which aalysed the biggest challeges that may arise i 20 or more years' time. Populatio ageig, the level of public debt, rules of fiscal disciplie ad a threat that icreasig umbers of people will fid themselves below the poverty lie this is what eeds to be cosidered whe makig decisios already today. Future geeratios will ask us may questios about that. Will we have the aswers? Could we do more? May of our audits reveal that orgaisatios resposible for makig certai decisios ofte lack cooperatio, mutual trust, ad strog leadership. Our thikig should go beyod the boudaries of idividual istitutios. We should combie best maagemet practices, to develop a culture of high-quality plaig i the public sector as well as to chage the approach to reportig o how moey is spet. O 28 November 2017, we will hold the first iteratioal sustaiable developmet coferece SIGNALS. The coferece will welcome audited etities, authorities, busiess ad media represetatives as well as various experts. I the future, we pla to preset public sector risks ad their aalysis o a aual basis. Maybe it will serve as a impetus for more ope sharig of isights ad seekig of cosistet solutios. Ad, as regards their implemetatio we should all begi with ourselves. I would like to sicerely thak the audited etities ad my team of auditors!

5 TENTS FUNCTIONS OF THE NATIONAL OFFICE 7 SUPREME INSTITUTION 9 EUROPEAN UNION INVESTMENT INSTITUTION 18 INSTITUTION IMPROVEMENTS IN THE FUNCTIONING OF THE INSTITUTION 22 Quality FINANCIAL DATA Expected chages after the implemetatio of recommedatios made i 2016 Expected chages after the implemetatio of recommedatios of earlier audits Challeges observed withi the public sector Impact Commuicatio

6 OUR VALUES We base our activities o the values that we have idetified as the most represetative of our professioal attitude to work ad the missio to be implemeted. PROFESSIONALISM We apply best practices ad are committed to cotiuous developmet so that we ca make objective decisios ad produce quality results RESPONSIBILITY We are hoest ad take resposibility for our ow ad our team results as well as for our istitutio COOPERATION We work together towards a commo goal ad foster relatioships with stakeholders based o respect ad trust INNOVATION We are iquisitive ad darig as we search, try, discover ad apply Oe year ago, as we bega to chage ad develop a ew orgaizatioal culture, we uderstood that it is a log-term process. The specificatio of a istitutio's values ad workig priciples is the begiig of chage, which requires a specific actio pla. Durig the spa of a sigle year, we have clarified our core values ad behavioural models, ad developed a pla for their implemetatio. We have decided to meet i commo evets four times per year, which correspods to the umber of our key values. This helps us develop a harmoious office, review ad assess chages, ad, if ecessary, chage our directio.

7 FUNCTIONS OF THE NATIONAL OFFICE

8 The practice whereby the fuctios of three idepedet istitutios are cotaied withi aother is exceptioal. We are curretly implemetig the fuctios of the Supreme Audit Istitutio, the Europea Uio Ivestmet Audit Istitutio, ad the Fiscal Istitutio at the same time. The way we see, these commitmets deote trust i our curret idepedece ad ability to esure the quality ad maturity of products uder developmet. The Supreme Audit Istitutio Durig fiacial ad regularity audits, we assess the regularity of the audited etities' sets of aual cosolidated fiacial ad budget implemetatio statemets, maagemet ad use of data, fuds ad property for the purposes specified by the law, as well as the implemetatio of budgets. Supreme Audit Istitutio Europea Uio Ivestmet Audit Istitutio The Fiscal Istitutio Durig performace audits, we assess the audited etities' activities related to public ad iteral admiistratio from the perspective of effectiveess, efficiecy ad ecoomy. The Europea Uio Ivestmet Audit Istitutio Durig audits, we assess the use of fuds ad the systems created for the implemetatio of the operatioal programme for the use of EU Structural Assistace for towards achievig the covergece objective ad the operatioal programme for the EU fuds ivestmet. The Fiscal Istitutio We are resposible for the moitorig of the compliace with the fiscal disciplie rules ad the implemetatio of tasks assiged to the budget policy moitorig istitutio the Fiscal Istitutio i the Costitutioal Law o the Implemetatio of the Fiscal Treaty. 8

9 CONTENTS IMPACT QUALITY COMMUNICATION FINANCE supreme istitutio S 39 completed public audits performace audits 483 errors ad observatios From which idetified durig audit From which fiacial (compliace) audits 17 issued auditors' opiios 45% 6,9 mlrd. From which Audituota asigavimų uqualified % observatios regardig ieffective maagemet of idetified violatios of legislatio From which qualified The aim of the Supreme Audit Istitutio today is ot to oly professioally assess the maagemet of state property ad fuds ad to idetify errors, but to also ecourage the etire public sector to improve ad implemet positive chages i maagemet by makig recommedatios. related to accoutig % recommedatios made From which % fully or partially implemeted i 2016 recommedatios made before the completio of audit From which implemeted durig audit

10 Expected Chages after the Implemetatio of Recommedatios Made i 2016 State budget should be more focused o the achievemet of results The Lithuaia model of programme budgetig is mostly fiished, but still operates iappropriately. The budget is ot properly focused o the achievemet of results ad positive chages to public life. Curret structure of the state budget does ot provide the basis for havig a coversatio about results, for the achievemet of which about 8 billio Euros are assiged every year. Whe developig the atioal budget, it is imperative to set clear goals, estimate desirable results, ad the expected impact. The audit report Programme Budget System: Settig up Strategic Actio Plas ad Moitorig their Implemetatio, 10/10/2016. Accoutig for the used appropriatios should also be tied to the achieved results Moey that was spet or is expected to be spet is rarely tied to the achievemet of results. It is imperative to soo make a decisio regardig the appropriate meas of accoutability of the maagers of appropriatios to the Seimas ad the public for the achievemet of aual strategic goals. The audit report Regularity of the Republic of Lithuaia 2015 Set of Cosolidated Fiacial ad Budget Executio Statemets ad Assessmet of State Budget Executio, 03/10/2016. The process ad priorities of the ivestmet of state fuds should be fudametally reviewed The several decades-old state ivestmet maagemet practice requires ot miimal, but rather fudametal, log-term chages i the area of state fud ivestmet. No atio-wide assessmets of the most beeficial aveues for the ivestmet of state fuds are beig implemeted. Miistries lack iformatio o which objects withi their purview received state ivestmet programme fuds assiged to them by other miistries. If o chages are iitiated, it would be ureasoable to expect the chaellig of programme fuds towards areas prioritised by the govermet. Audit Report Maagemet of the State Programme for Ivestmet i 2015, 10/10/2016. If the recommedatios made by the Natioal Audit Office durig the latter three audits were implemeted: approved appropriatios would be tied to the plaed results withi a give area, ad the accoutability for said results would be tied to the accoutability for the used fuds; the procedure of the plaig of ad accoutability for all the state ivestmet would be trasformed, ad the accoutability-related processes of strategic ad ivestmet plaig would be itegrated; a clarificatio would be made regardig which fiacial idicators should be cofirmed by the Seimas, ad how much power should the Govermet have i chagig ad implemetig the budget this decisio is imperative i order to esure the observace of the Costitutio. 10

11 Public audits carried out i 2016 had show that i the absece of fudametal ad clear strategic chages idividual decisios are ot goig to geerate the desired added value. We are still lackig i attetio to the developmet of atioal strategic directios, fiacial resources for their plaig, accoutability, trasparecy, ad accoutability for results. Residets could be payig 27 millio EUR less for medicatios Makig geeric medicatios more available i Lithuaia is still difficult because there is o explicit policy regardig the use of such medicatios. Cosumers lack iformatio about ot oly geeric medicatios, but also the possibility to buy less expesive medicatios i pharmacies. The surcharge paid by cosumers whe buyig cheaper, geeric medicatios could be reduced by 50 percet goig dow 54 millio EUR to 27 millio EUR. We are curretly waitig for decisive actio o the part of the Miistry of Health i makig the moitorig of pharmaceutical services more effective ad esurig the supply of adequate iformatio to cosumers. Audit report Is Access Esured to Medicatio, 20/05/2016. Reimbursable Geeric Ope access to the data of the public sector could geerate more value to the state I 2011, Lithuaia declared its aim to make the data of the public sector publicly available. Sice 2012, the Seimas ad the Govermet have bee submittig propositios regardig meas which were supposed to provide the coditios for makig data publicly available, however the resposible istitutios had failed to carry out more tha a half of the plaed activities over the followig five years, ad the maturity of publicisig the data of the public sector i Lithuaia is still i its ifacy as a cosequece. Publicly available ad actively used data could geerate value that is equivalet to almost 2 percet of the Lithuaia GDP. Accordig to data from 2015, this would amout to aroud 800 millio EUR. Accordig to the curret istitutioal plas, the results of publicisig the data possessed by the public sector will oly become visible by It is imperative to implemet this processes as smoothly as possible. Audit report Whether Disclosure of the Public Sector Data is Esured, 29/11/2016. State lad should be maaged ad admiistered more effectively The criteria of the lad maagemet ad admiistratio programme the oly strategic plaig documet regulatig state policy i the area of lad maagemet are plaed uambitiously ad do ot allow for the measuremet of the outcomes ad impact of the etire programme, ad do ot ecourage ratioal use of state lad which could esure larger icome for the state. The Natioal Lad Service has ot paid appropriate attetio to the implemetatio of the fuctios of state lad cotrol that were assiged to it. It is imperative to esure more effective cotrol of reted out state lad, its sellig o the basis of istalmet ad the admiistratio of debts related to such sales. Audit report Maagemet of State Lad i Implemetig the Lad Maagemet ad Admiistratio Programme, 10/10/

12 We expect more efficiecy ad trasparecy i the state-owed eterprises We are of the opiio that the systemic isights submitted to the Govermet regardig the activities of state-owed eterprises will be useful i esurig the effectiveess of the activities of said eterprises, as well as optimal returs obtaied from the maaged property. The systemic issues ad risks idetified durig the audit will be more comprehesively assessed durig the audits Retur of the State-Owed Eterprises to the State, The Maagemet ad Activities of Eterprises Owed by Muicipalities ad Are there Coditios i Place for the Effective Fuctioig of the Iteral Cotrol System i the Public Sector, as well as i the implemetatio of moitorig of the maagemet of state property. We hope to ecourage more rapid restructurig of state-owed compaies towards more trasparet ad effective fuctioig that meets the eeds of the state. Audit report Eactmet ad executio of the prelimiary agreemet betwee NT Valdos UAB ad Karalieės Mortos Mokykla UAB o 11 September 2015, 01/06/2016. It is imperative to more appropriately prepare for emergecy situatios ad the elimiatio of related cosequeces State istitutios resposible for civil protectio ad respose i emergecy situatios are ot sufficietly prepared for such istaces. The greater part of such istitutios have ot implemeted assessmets of their readiess to react to real dagers, ad their employees were ot provided with eve miimal kowledge regardig the actios to be take i case of impedig threat. Our safety i the face of disaster ca oly be esured by cooperatio betwee the Govermet, the Misitry of the Iterior, the Miistry of Eergy, ad the Fire ad Rescue Departmet. Audit report Are State Istitutios Prepared for Emergeces, 11/07/2016. The moderisatio of places of iprisomet should be implemeted purposefully ad cosistetly Lithuaia has o clear ad cosistet strategy for the moderisatio of places of iprisomet. The moderisatio process has bee goig o for more tha 10 years ad while the strategy is beig costatly chaged ad the expeses keep growig, o key results have bee achieved to this day. The Moderisatio Programme for Places of Iprisomet, approved by the Govermet i 2004 was chaged three times, ad every time, before ay of the programmes were implemeted, the objects to be moderized, the ecessary expeses ad the terms of moderizatio were chaged. The coditios of icarceratio still fail to meet the requiremets of the Europea Uio: i 2015, as compared to 2013, the umber of idividuals who received allowaces icreased six-fold, up to 935, ad the paid out sum durig this period icreased more tha 19-fold, reachig about 1 millio Euro last year. The idetified problems ad deficiecies should be addressed because the fiacial load o the State is likely goig to oly icrease. Audit report Implemetatio of the Peal System Programme, 28/11/2016. Iformatio about all audits carried out i 2016, the recommedatios provided durig said audits ad their implemetatio. Relevat iformatio about all audits to be carried out i

13 Expected chages after the implemetatio of recommedatios of earlier audits I performig public audits, we strive to ot oly idetify systemic deficiecies, but also propose possible solutios. Eve though, i 2016, we have see some positive chages i the implemetatio of public audit recommedatios, a resposible attitude towards addressig idetified problems is still lackig. Chages could become more sigificat if the implemetatio of recommedatios was to be see from a systemic stadpoit, because it is oly cooperatio betwee public sector istitutios that ca lead to desired outcomes. Here, we preset sigificat chages that took place i 2016 after implemetig the recommedatios of earlier public audits. A more effective system of miimum ad medium supervisio measures that esures the rights ad legitimate iterests of childre ad meets the public eed for safety, desiged for socialisig, educatig ad providig other types of help to childre with behavioural problems was developed, which ca help childre to overcome defective behaviours ad develop a cocept of meaigful idividual ad public livig. Miimum measures of supervisio assiged to childre will provide aid ot oly to the child, but also to his or her represetatives. Social services will be assiged by first assessig a idividual's eed for them. Priority will be give to alteratives to log-term social care services provided withi the commuity: social care, short-term social care, ad a umber of days of social care at the recipiet's home or day cetre. The ambiguous provisio that curretly results i idividuals who have o right to receive social isurace paymets receivig them (e.g., at the expiratio of a temporary work cotract) will be elimiated i the ew versio of the Law o Social Isurace of the Uemployed. A programme for reovatig the aumbulace vehicle park was implemeted this should lead to icreased quality ad availability of health care services i the provisio of vital medical services. Physicias will be held more strictly accoutable for the provisio of icorrect data about the determiatio of disability ad capacity for work the procedure of resposibility of physicias who had provided icorrect medical data was determied, i accordace to which physicias may have their liceses termiated. After reviewig ad approvig the methods of the determiatio of the basic price of orthopedic equipmet, the procuremet of which is reimbursed from the Madatory Social Security Fud, the prices of some orthopedic equipmet were reduced. 13

14 Sums adjudged to the state's beefit would be exacted more effectively, because courts would be obligatd to provide the State Tax Ispectorate with all of the writs of executio regardig the sums adjudged to the state's beefit. Icreased fiscal disciplie of muicipalities muicipal borrowig arragemets, icluded ito muicipal debt ad borrowig limits, would be specified i more detail; real muicipal debetures would be revealed; ad provisios to esure the fiscal disciplie of muicipalities would be specified. Improvemets i cotrols of the preferetial retig out of state lad by way of implemetig stricter requiremets ad solvecy assessmets. More effective use of state fuds i carryig out scietific research ad experimetal developmet projects. More appropriate orgaisatio of huma resources i muicipal fire services by way of specifyig the geeral ad special requiremets to idividuals who wat to become firefighters. The approval of priorities, measures ad fudig sources for the elimiatio of products that cotai asbestos; the specificatio of procedures for the accoutig, disposal cotrol ad evirometal impact assessmet of such products. Natioal forests (forest lad ad stads) will be accouted for ad preseted i state ad atioal sets of fiacial statemets. The approval of the Strategic Directio of Library Developmet Higher quality aimal breedig programmes ad more effective state moitorig of breedig. Ehaced attetio to the elimiatio of crimes related to huma traffickig by way of establishig a Fight Agaist Huma Traffickig Coordiatio Commisio ad approvig the Actio Pla to Fight Agaist Huma Traffickig i

15 Challeges observed withi the public sector We cotiuously observe chages takig place withi the public sector i order to idetify developig challeges as soo as possible ad ecourage public sector istitutios to maage them. There is a eed for a overhaul of civil service, begiig with a assessmet of the fuctios implemeted by State istitutios: their redudacy, superfluous or isufficiet State regulatio, ad the eed for civil servats. It is imperative to address the issue regardig the provisio of iformatio o the achievemet of the aual strategic goals to the Seimas. Such iformatio, provided together with the set of budget implemetatio reports, would help the Seimas to implemet Parliametary cotrols ad esure that its decisios are made i accordace with fiacial iformatio, strategic goal achievemet results ad impact assessmet. Pla appropriatios trasparetly, such that the Govermet or appropriatios maager would ot chage the fiacial idicators approved by law of the Seimas. The curret practice whereby the Govermet or appropriatios maager chages the fiacial idicators approved by law of the Seimas by relyig o the rights grated i the law of a specific year's aual idicators, is defective. This idicates a lack of trasparecy i the plaig of appropriatios ad creates the coditios for the Govermet or appropriatios maager to chage the budget idicators approved by the Seimas durig budget implemetatio. Esure sustaiable budgetary icome prepare for the period after 2020 at which poit the extet of aid from the EU may decrease. Give that the achievemets of Lithuaia studets have bee amog the lowest i Europe for a umber of years, it is very importat to esure the quality of pre-primary, pre-school ad geeral educatio. Ivestmet is usually directed at improvig the ifrastructure rather tha the quality of educatio ad studies. No quality assessmets of pre-school educatio establishmets are beig implemeted, ad the certificatio of teachers ad heads of schools is ot tied to the achievemets of studets. Optimise the etwork of higher educatio istitutios. The Miistry of Educatio ad Sciece does ot act as a istitutio resposible for the developmet of policy i this area, which addresses the issues related to the overhaul of higher educatio istitutios ad the optimizatio of their etwork. Eve though the umber of studets is decreasig, fudig remais the same, ad the existet ifrastructure is ot used to its full potetial it is almost twice the size ecessary for servicig the curret umber of studets. There is a growig gap betwee the major ad regioal istitutios of higher educatio. Eve though iteratioal istitutios are ecouragig to udertake a overhaul of the etwork of higher educatio ad study establishmets, the ecouragemet to review the fudig mechaisms, expressed by the Iteratioal Moetary Fud, the OECD, ad the Europea Commissio is to o avail, which leads to stagatig quality of educatio ad studies. 15

16 Address child care ad adoptio issues, ad esure the protectio of the rights of childre. Audit recommedatios made i 2012 regardig the protectio of the rights of childre, ad takig childre away from usafe eviromets, as well as recommedatios made i 2014 regardig adoptio ad the developmet of a guardiaship programme have ot bee implemeted. Methodologies for determiig idividual (familial) eeds ad social security beefit idicators (basic social beefits ad state-sposored icome) have bee i developmet sice Reduce social exclusio by appropriately plaig ad effectively utilisig fuds iteded for social support. Social support or the plaig thereof fails to achieve strategic aims, therefore requirig a ew approach. More tha half of fuds iteded for fiacig social support (a idepedet muicipal fuctio) remai uused ad therefore wasted, while social exlusio ad poverty remai uchaged. It is imperative to esure that social support be provided oly to those who are uable to take care of themselves ad therefore really eed it, otherwise it fails to ecourage employmet ad earig icome. It is also imperative to determie the real atioal poverty level, to review the basic idicators ad mechaisms of social beefits, tie social support to specific target groups, ad esure effective fuctioig of the public housig system. Improve the effectiveess of the Lithuaia Labour Exchage. Labour market services are provided ot to jobseekers, but to uemployed idividuals. The legal obligatio of the uemployed to register at the Labour Exchage to receive social beefits ad compulsory health isurace icreases the workload of regioal labour exchage employees, which, i tur, reduces the quality of services provided to jobseekers ad the uemployed. 16 Update the Natioal Eergy Strategy. This is especially importat because the eergy sector is itegral to the developmet of the atioal ecoomy as a whole, which meas that ay decisio regardig the developmet of ew projects related to the eergy ifrastructure or the expasio or moderisatio of curret capacities will ievitably affect the price of eergy resources such as electricity, atural gas ad heatig which, i tur, will have a impact o the price of all other cosumer goods ad services. Review the mechaism of muicipal fudig: ecourage them to take a active part i geeratig public reveue i their respective territories, rather tha askig to reimburse their foregoe earigs. It is imperative to improve the curretly valid legal regulatio of the distributio of persoal icome tax across differet budgets. Reduce the debt of the State Social Isurace Fud Board (SSIF). There is curretly a lack of budgetary resources assiged to fiace the pesio reform ad the icreasig expediture of the SSIF. The Miistry of Social Security ad Labour proposes draft legislative acts iteded to icrease the Fud's expediture, but fails to pla for its compesatio. Esure the resources of the fud iteded for fiacig the decommissioig of the Igalia Nuclear Power Plat. The auditors recommed Lithuaia to adopt the polluter pays priciple ad start icreasig the geeral atioal fudig i 2017 the failure to do that will result i serious problems for the Lithuaia ecoomy by Esure cyber security ad the protectio of e- iformatio. It is imperative to implemet the key recommedatios of past audits regardig cyber security ad the protectio of e-iformatio: set geeral strategic cyber security ad e-iformatio protectio directios ad the meas ecessary for their implemetatio, set atio-wide priorities, criteria ad a moitorig ad cotrol mechaism for the allocatio of fuds ecessary for cyber security ad the protectio of e-iformatio, ad cosolidate the maagemet of the protectio of e-iformatio.

17 Reduce redudat ad irratioal legal regulatio which leads to disproportioate admiistrative load o idividuals ad ecoomic operators, ad icreases the scope ad maagemet expeditures of public maagemet istitutios. Isufficietly clear ad cumbersome regulatio iterferes with the public's ability to represet its ow iterests ad uderstad ad implemet its rights ad duties. Address the relevat issues related to the maagemet of state lad amely, issues regardig: the restoratio of residetial property rights i the cities of Vilius ad Kauas, the use of reted state lad as iteded, the exatio of fuds for lad sold o the basis of istallmets, ad the accoutig for lad. Reduce the support assistace frequecy of errors related to the use of EU support i the area of agriculture the admiistratio of such should be improved. The ability of atioal istitutios to detect, prevet ad correct such errors remais imperative. Use the existet waste maagemet ifrastructure effectively. Eve though more tha 500 millio Euro were ivested ito the atioal waste maagemet ifrastructure, o-recycled waste still eds up i dumps ad their hadlig expeditures are ot goig dow. It is imperative for the Miistry of Eviromet to assess the log-term prospects ad estimate the way the ifrastructure is goig to be used, updated or developed after 2020, at which poit EU support will be drastically reduced. Reduce the price of medicatios. The issue is relevat both to the State Social Isurace Fud Board ad the residets because of the expeses icurred. The price of medicatios depeds ot oly o maufacturers, but also o suppliers ad pharmacies. The measures implemeted by the Miistry are still mostly related to egotiatios with maufacturers of medicatios regardig the reductio of basic price for reimbursable medicatios ad the applicatio of discouts to Lithuaia. The Miistry should take more desicive actio: it is imperative to costructively cooperate with wholesale ad retail distrubutors of medicatios by makig use of all available leverage, ad iclude them i the implemeted measures desiged to icrease the availability of medicatios to residets (accomplished by way of reducig prices). Esure the trasparecy ad validity of eergy prices. Curret legislatio does ot grat the Natioal Commissio for Eergy Cotrol ad Prices (NCECP) the right to receive all the iformatio it requires from subsidiaries ad associates that service electricity compaies, which makes it difficult to esure the trasparecy ad validity of eergy prices. The risk will remai for as log as the Seimas does ot itroduce the ecessary chages to the Law o Eergy, which would grat the NCECP the right to receive all the iformatio it requires from eergy compaies that have regulated prices applied to their activities, as well as the services, prices, cotractual obligatios, etc. related to their subsidiaries ad associates. Itegrate the maagemet of emergecy medical service establishmets ito the etwork of the geeral emergecy call umber 112, because the fuctios of said establishmets are beig duplicated, ad the ifrastructure developed at the Emergecy Respose Cetre is ot beig used to its full capacity. 17

18 EUROPEAN UNION INVESTMENT INSTITUTION AN ASSESSMENT OF EU STRUCTURAL ASSISTANCE AND EU INVESTMENT 3 2 ogoig public audits completed public audits 30 iistitutios which performace was measured assessed paymet requests assessed ivestmets ito fiacial istrumet projects observatios provided implemeted recommedatios preseted i previous audits recommedatios made We have cofirmed that the maagemet, iteral cotrol ad iformatio system developed for the admiistratio of EU ivestmets durig the period betwee 2014 ad 2020 meets the requiremets set for them i regulatios of the EU.

19 The period betwee 2007 ad 2013 Operatioal Programmes Closure Audit Procedures of the EU structural assistace operatioal programme closure audit were cotiued i 2016 by auditig the fuctioig of the EU ivestmet maagemet ad cotrol system, ad the expeditures declared sice 1 Jauary After the completio of the audit o 28 March 2017, the Fial Audit Report ad Closure declaratio was submitted to the Europea Commissio. These documets are part of the fial documet collectio submitted to the Europea Commissio. The period betwee 2014 ad 2020 The EU ivestmet maagemet ad iteral cotrol system meets requiremets The maagemet ad cotrol system of the EU ivestmet operatioal programme of is comprised of 30 istitutios, ad admiisters aroud 6.7 billio Euro of EU fuds. The audit of the system had resulted i a uqualified opiio regardig the compliace of the maagemet ad cotrol system of EU structural fud ivestmet with the relevat criteria ad requiremets set i regulatios (cooperatio with the audited etities has lead to the correctio of idetified deficiecies before the coclusio of the audit itself). From this momet o, Lithuaia istitutios ca submit paymet applicatios to the Europea Commissio ad receive EU fudig ecessary for the implemetatio of the operatioal programme. Assessmet has begu, but o expeditures were declared thus far I implemetig the requiremets of the EU, the Audit Authority should coduct aual audits of the maagemet ad cotrol system of EU structural fud ivestmet of , the expeditures declared to the Europea Commissio ad the prepared bills. The audit report ad opiios are to be submitted for approval to the Europea Commissio: a report of the audit of the first fiacial period (1 Jauary Jue 2015) was submitted to the Europea Commisisio i February 2016; a report of the audit of the secod fiacial period (1 July Jue 2016) was submitted i Jauary No expeditures were declared durig either of the periods because, durig that time, the maagemet ad cotrol system of EU structural fud ivestmet of was ot yet established. For this reaso, the scope of our audit was limited ad we were ot able to submit our opiio regardig the validity of the fuctioig ad related expeditures of the maagemet ad cotrol system. A assessmet of the third fiacial period (1 July Jue 2017) was commeced i The report of said assessmet will be submitted to the Europea Commissio by 15 February

20 FIScal INSTITUtIo the moitorig of fiscal disciplie 2 opiios regardig the approval of the sceario 1 report o the sustaiability of geeral govermet 1 opiio ad report o assessmet of the geeral govermet's fiacial idicators of 2017 The first assessmet of the sustaiability of geeral govermet's fiacial idicators was carried out i 2016, resultig i a idepedet forecast o the fiacial sustaiability of geeral govermet by aalyzig the period betwee 2016 ad Eve though, compared to other coutries of the Europea Uio, the fiscal ad macroecoomic situatio of Lithuaia is curretly favourable, the prerequisites for maitaiig such a eviromet i the log term are lackig, which ecessitates structural re-orgaisatio. The Ecoomic Dvelopmet Sceario has bee approved The Fiscal Istitutio has carried out a assessmet of the ecoomic developmet scaarios for developed by the Miistry of Fiace ad published i September, ad submitted its opiios to the Seimas regardig their approval. The Fiscal Istitutio had edorsed the risk factors idetified by the Miistry of Fiace, as well as the idea that, i order to address them, immediate implemetatio of structural reforms ad assurace of a favourable eviromet for ivestmet are imperative.

21 The curret debt level of Lithuaia geeral govermet is ot sustaiable I 20 years, provided o structural chages are prepared ad implemeted, the debt level may exceed 54 percet of the GDP. The tedecy is for the debt level to rapidly icrease. Accordig to the Iteratioal Moetary Fud, the World Bak, ad the Orgaisatio for Ecoomic Cooperatio ad Developmet (OECD), the moitorig of the logterm assurace of effective maagemet of fiaces ad fiacial disciplie should be the core aims of idepedet fiscal istitutios. The assessmet of geeral govermet's fiacial sustaiability was implemeted by the Lithuaia Fiscal Istitutio i accordace with the OECD recommedatios. The aim of the assessmet is to cosolidate uderstadig about the log-term expeditures of the geeral govermet, related risk factors, macroecoomic stability, ecoomic developmet, ad reveal the burde of future obligatios of the geeral govermet. If the rules of fiscal disciplie were to be upheld more strictly, the debt level would likely decrease. However, if o structural reforms were to be implemeted at the same time, there would also be a icrease i the risk of a greater part of the public slidig dow below the poverty lie. The risk of icreased taxatio is usually maaged at the expese of icreased debt level of the geeral govermet. Give the impossibility of esurig a sustaiable level of debt ad a low risk of icreased taxatio ad poverty at the same time, it is imperative to cosider the estimated trajectories, make log-term decisios ad address problems i a timely maer. Compliace with the redudat geeral govermet rule was ot esured durig the developmet of the atioal budget for Accordig to the Fiscal Istitutio, the failure to set a structural icitemet task while developig the Draft Law o the Approval of the Fiacial Idicators of the Natioal ad Muicipal Budgets for 2017 was justified. However, compliace with the redudat geeral govermet rule was ot esured durig the developmet of the drat law o the approval of the fiacial idicators of the atioal ad muicipal budgets for The applicatio of rule that limis the expeditures of geeral govermet was ujustified because of the emergece of exceptioal circumstaces specified i the Costitutioal Law o the Implemetatio of the Fiscal Treaty, which were related to the idicator measurig the growth of the Lithuaia GDP. The draft law o the approval of the idicators of the State Social Isurace Fud Board's budget for 2017 was developed i accordace with the rule of budgets allocated to the geeral govermet, which took place because of the estimated structural surplus of the Fud's budget for It should be oted that the Seimas-approved three year estimated idicators of the cosolidated whole's icome ad expeditures of state ad muicipal budgets, as well as the Govermet-approved mid-term fiscal idicators of stability programmes are merely idicative ad therefore o-bidig umbers which simply describe the potetial developmets three years ito the future. I order to ehace fiscal disciplie, the plaig of geeral govermet's expeses for a period loger tha oe year should be restricted. Coditios ecessary for the public to become more ivolved i budgetary maagemet, bigger icetives to pay taxes, ad demads to achieve more ambitious goals durig the plaed period. The Lithuaia budget developmet system does ot coform to the fudametal features of a result-orieted budget. The form of the submissio of a draft budget is tied oly to expeditures ad fails to establish ties betwee the moey paid by tax payers ad the achievemet of set goals ad outcomes.

22 THE IMPROVEMENT OF THE INSTITUTION'S FUNCTIONING

23 The Natioal Audit Office Strategy for 2020

24 I order to implemet the strategic goal amely, to icrease the effectiveess of the public sector ad the value it creates for the public three strategic improvemet directios were chose i the Strategy for of the Natioal Audit Office: impact, quality, ad commuicatio. Fiftee measures are plaed for the implemetatio of chages i these directios i , with almost 20 percet of all employees takig a direct part i their implemetatio % 48% Number of measures Percetage of employees takig a direct part i implemetatio Percetage of implemeted measure pla The process of selectig these 15 measures was also affected by the recommedatios obtaied from the Peer Review of the Natioal Audit Office performed i 2014 regardig the improvemet of the fuctioig of our istitutio ad the quality of audits. Some of these recommedatio were implemeted i 2015, ad the rest will be implemeted by way of applyig the measures specified i the strategy. Report of the 2014 Peer Review of the Natioal Audit Office of Lithuaia I 2016, the Natioal Audit Office commeced its activities after developig a log-term pla for improvig the fuctioig of the istitutio the Natioal Audit Office Strategy for

25 CONTENTS IMPACT QUALITY COMMUNICATION IMPACT With the help of results of public audits ad assessmets we ited to chage the attitude of the public sector towards orgaizatioal accoutability, trasparecy, progress, ad proper allocato ad maagemet of resources, as well as to ecourage the practice of oly makig decisios after carefully assessig their ecessity, potetial usefuless, ad positive or egative impact. 42% of audits completed i 2016 are directly related to strategic aims of the state 75% audits of the pla are directly related to strategic aims of the state 86 umber of problems suggested to audits i 2016 by iterested parties I order to icrease the effectiveess of the istitutio, we have made plas to: Update the atioal audit plaig ad selectio system. Develop a method for aalysig the cost ad usefuless of assessig the fuctioig of the Natioal Audit Office. Develop a public sector risk map. Update the procedures of the moitorig of recommedatios. Develop recommedatio developmet guidelies. 88% percetage of implemeted recommedatios which cotributed to positive chages i the public sector 60% percetage of recommedatios implemeted durig the first term agreed upo with the audited subject 35% a a a percetage of errors ad violatios related to failure to comply with legislatio that were elimiated before the completio of audits FINANCE

26 Audit topics are tied to the strategic aims of the state I plaig public audits ad seekig to affect the developmet of the etire coutry, we select audit topics by assessig the relatioship betwee the idetified issues withi the public sector ad strategic state documets. Special attetio is paid to Lithuaia's core future visio documet the Lithuaia 2030 Strategy ad the Natioal Developmet Programme desiged to implemet it. 42 percet of audits i the atioal audit programme of 2016, ad up to 75 percet of audits i the atioal audit programme of 2017 were plaed by directly likig them to the core strategic aims of the state. We believe that the outcomes of these audits will iitiate systemic chages i kowledge developmet ad comprehesive learig, the orietatio of the ecoomy towards better results ad higher value added, ad the improvemet of public maagemet. For the purposes of assessig the fuctioig of public sector istitutios, we have also selected aother sigificat criterio the OECD recommedatios, which are associated with higher quality state maagemet ad the highest growth of certai areas of the ecoomy. Special attetio to importat areas We cotiuously moitor the various areas of the public sector ad look for ways of implemetig fudametal systemic chages. Takig ito accout the challeges related to the maagemet of state assets, we pay special attetio ad allocate sufficiet resources to assessig this area. We have aalysed the issues related to the assets maaged by the state, the systemic problems related to property maagemet, idetified the risks, ad specified (ad eve bega implemetig) a audit of the maagemet of the state's immovable property i the actio pla of the istitutio for Equal attetio is also paid to the moitorig of the improvemet of public goverace. We observe the success or failure of esurig the developmet ad effective implemetatio of public policy that meets the eeds of the public. We have oticed that the eed for public sector employees ad the ecessity of the fucitos assumed by the public sector are ot justified, the restructurig of public service is protracted, the policy regulatig the paymet ad motivatio of public sector employees is ieffective, ad the use of budget resources iteded for traiig is ot esured. This iformatio had led us to iclude a audit o the improvemet of public goverace ito the actio pla of the istitutio for 2017, which we have already bega implemetig. 26

27 While plaig the audit topics, we cosult iterested parties Every year we ask public sector istitutios, ogovermetal orgaisatios, ad residets to ame issues they have oticed withi the public sector. While plaig the public audit programme for 2017, we have received 86 suggestios regardig such issues. The majority of idetified issues were related to the maagemet of state property, the cotrol of state market ad ecoomy, ad the fields of educatio ad studies. All of the submitted proposals are importat i moitorig the public sector ad idetifyig related risks. We strive to clearly idetify the value of the impact of our work I order to serve as model for the public sector, we have decided to measure the outcomes ad impact of our activities by way of quatititative, rather tha qualitative, idicators, ad resolved to assess the ratio betwee the curret costs ad value of public audit, with the goal of regularly improvig it. Every Euro we sped should brig about the most value to the state ad its tax payers. The Natioal Audit Office of the Uited Kigdom (UK NAO) had agreed to guide us i implemetig the cost-tobeefit assessmet methodology for our activities. The UK NAO is kow aroud the world for its audit traditios, exceptioal professioalism ad quality work. We strive for more effective implemetatio of recommedatios We strive for the largest possible impact of public audit by ecouragig the implemetatio of public audit recommedatios saw the full or partial implemetatio of 88 percet of the recommedatios submitted durig the past three years, while the umber of delayed recommedatios was cut i half. I implemetig the recommedatios of the Peer Review of our istitutio that was performed by iteratioal experts i 2014, we have developed our first report o the implemetatio of public audit recommedatios early this year, which was the submitted to the Seimas Audit Committee. The report cocers the most sigificat issues related to the various areas of the public sector, the state of the implemetatio of recommedatios ad related challeges, ad ecourages more decisive actio i improvig the maagemet ad effectiveess of the public sector. The secod report cocers a assessmet of the actios take by the audited istitutios durig the six moths followig the first report, as well as the impact of the audit. We have also paid a sigificat amout of attetio to the recommedatios that would be implemeted if the Seimas were to approve the ecessary draft laws that have already bee developed ad submitted. These, as well as other, cosistet actios take by the Natioal Audit Office brought about expected outcomes the audited etities had udertake the measures required for the implemetatio of recommedatios. While, curretly, the idicator of the implemetatio of public audit recommedatios is high, we strive for the recommedatios to be ot oly implemeted, but also implemeted i a timely maer, as that leads to the biggest desired impact. As may as 60 percet of recommedatios were implemeted durig the first term agreed upo with the audited etity. We are aways o the lookout for measures that might help ecourage the audited etities to implemeted recommedatios o agreed upo time. The third recommedatio implemetatio report (March 2017) is mostly focused o areas where the implemetatio of recommedatios lags the most. 27

28 We recommed to correct the idetified errors ad observatios immediately Audited etities are iformed about ay errors ad irregularities durig the audit i order to allow for immediate correctio ad adopt measures that may prevet their recurrece i the future or to reduce the risk of their occurrece. These measures proved to be effective because 35 percet of errors ad irregularities related to the failure to comply with the legislatio had bee elimiated before the completio of audits. We strive to be a socially resposible istitutio I our strivig to promote the value of resposibility ad to serve as a model ot oly i our professioal, but also i public activities, we feel compelled to take a active part i various social projects. We have siged a cooperatio agreemet with the associatio Metor Lietuva, whereby we have agreed to educate the childre ad youth so they could grow up to be decet citizes, ad to ivolve them i various activities that may help decrease the risk of drug abuse. To date, four of our employees have already served as metors i the programme. I order to support those who eed help the most, every year we take part i blood doatios ad orgaise the Pie Day. All the proceedigs collected durig the Pie Day are used to improve the wellbeig, physical fitess ad creative skills of gravely ill childre or childre growig up i foster care or i care homes. Our staff members also took part i the Natioal Forest Platig Day, i the Let's Do It campaig, ad i a umber of other similar activities. With these iitiatives, we strive to serve as a model to others, to foster the idea of a harmoious society, ad ecourage all residets to be coscietious, create chage ad develop a better coutry together. 28

29 We cooperate to brig about systemic chages I 2016, the NAOL siged a cooperatio agreemet with the Special Ivestigatio Service. We expect their assistace ad cosultatios regardig the idetificatio of corruptio risks i order to idetify them i a timely maer ad to cotribute to the prevetio of potetial crimial activities. We have also siged a cooperatio agreemet with the State Tax Ispectorate, which foresees the provisio of comprehesive mutual aid to each other i order to protect the potetially violated rigts ad material iterests of the State, exchage of iformatio, expert opiios, ad expert assessmets. I the reewed agreemets with the Fiacial Crime Ivestigatio Service (FCIS) ad the Public Procuremet Office (PPO) we have committed to provide methodological mutual assistace, geeral cosultatios, expert opiios ad assessmets. We pla to exchage the iformatio o idetified violatios of legislatio with the PPO, as appropriate, trasfer ay related materials as well as share other ecessary iformatio. The agreemet with the FCIS obligates us to iform it about ay allegatios regardig the potetial crimial activities withi the state fiacial system, as well as violatios of the law. We have also agreed with the Competitio Coucil to provide each other with professioal aid, as well as to ehace the professioal cooperatio betwee employees of our respective istitutios, to exchage i f o r m a t i o re g a rd i g t h e i m p ro v e m e t of competitiveess, atioal ecoomy, market cotrol, the provisio of state aid, iteral agreemets, ad prohibited agreemets. Associatio of Ombudsme, the Istitute of Iteral Auditors Lithuaia, ad the Lithuaia Chamber of Auditors siged a ew cooperatio programme for desiged for the improvemet of the public sector maagemet ad the quality of exteral ad iteral audit, thereby icreasig public trust i persos resposible for the implemetatio of audit. The programme specifies such measures as cofereces, semiars o the importace ad place of iteral audit withi the public sector, review of audit-related programmes taught at higher educatio establishmets ad makig of recommedatios for their improvemet, maturity assessmet of each lik of the audit system, ad others we believe that every oe of these will cotribute to the quality improvemet of iteral cotrol ad audit of the public sector, ad therefore, more efficiet maagemet of the public sector. The NAOL siged a agreemet with the Vytautas Magus Uiversity agreeig to provide each other with cosultatios ad esure opportuities for itership to studets. I order to provide the opportuity for gaiig more professioal kowledge ad exchagig good practices, a cooperatio agreemet siged i 2015 by the Bak of Lithuaia ad the NAOL was supplemeted with a opportuity for coductig mutual iterships. Now, represetatives of the Bak of Lithuaia ca take temporary positios at the NAOL, while the employees of the NAOL are already takig their iterships at the Bak of Lithuaia. We hope that this will ehace ad foster the competecy level of our staff members, ad provide them with the coditios ecessary for applyig their work experiece ad sharig of good practices I cotiuig the cooperatio with auditors resposible for carryig out audit of the public sector, represetatives of the NAOL, the Miistry of Fiace, the Muicipal 29

30 QUALITY The quality of public audits is assessed i accordace with their compliace with iteratioal stadards of supreme audit istitutios, the achieved public audit impact, ad the assessmets of the audited etities. To esure the quality of the performace of the NAOL, we apply efficiet methods of carryig out ad maagig of our work, ad ehace cooperatio with iteratioal parters. We believe that it is ecessary to cotiuously improve the performace quality moitorig ad assurace system. I , we pla to: Develop a list of the products of the NAOL ad their scope. Develop chages i the orgaisatioal structure model of the NAOL. Develop a format(-s) for ehacig the commuicatio of the best practice of public audit withi the NAOL. Update the templates of public audit reports ad opiios. Develop a methodology for calculatig the idex of the orgaisatioal eviromet which ecourages the quality (empowermet, satisfactio, ivolvemet, ad microclimate) ad coduct the assessmet. score give to 8,6 15 quality of our 2,6 3 audits by audited etities of 10 of 60 of 5 score of maturity of the NAOL processes years we have bee assiged to coduct exteral audit of INTOSAI 27 muicipal cotrol ad audit offices where we coducted a aual exteral review of audits umber of coutries takig part i activities of the EUROSAI Task Force o Muicipality Audit established at the iitiative of NAOL 349 5% average umber of employees (maximum umber of positios - 363) decrease i the maximum umber of positios (10% less tha i 2015) 93% of the NAOL employees took part i various traiig sessios average umber of hours our employees sped o traiig every year average umber of Euros spet aually for the traiig of each employee

31 We are ehacig the quality of implemetatio ad maagemet of public audit I 2016, i order to improve the efficiecy ad quality of public audit, we started to more actively moitor the implemetatio ad maagemet of public audit: every moth, we carry out a exteral review of the maagemet ad documetatio of every audit. This helps us idetify the risks that may lead to the failure of implemetig the NAOL actio pla i a timely maer, clearly shows the state of the ogoig audits, ad provides the opportuity to make the ecessary decisios i a timely maer. Quality of public audits is assessed by audited etities Audited etities evaluated the quality of the audits by givig them 8.6 poits out of 10, ad as may as 9.4 poits to the cooperatio ad ethical coduct of auditors. While the work load has remaied the same, we reduced the maximum umber of positios assiged to the NAOL by 5 percet. I total, the maximum umber of positios decreased by 10 percet sice The efficiecy of the audit process ad the competece of auditors are a itegral part of the public audit quality. I order to improve, we cotiuously aalyse ad assess the audit process this is where kowig the opiio of audited etities regardig the value, quality ad outcomes of audit becomes ecessary. Every employee of a audited etity ca submit a opiio i the audit quality assessmet questioaire. The quality system of the NAOL meets the requiremets of the ISO 9001:2008 stadard After itroducig a quality cotrol system two years ago, we strive to cotiuously improve the effectiveess of our performace ad assess the maturity of the NAOL processes agaist the requiremets of ISO The process maturity is assessed from several differet perpectives: process maagemet, resources, proces moitorig, ad process improvemet. I 2016, the average maturity of our processes was evaluated with 2.6 poits out of 5. Optimisatio of maaged resources I 2016, we cotiued the optimisatio of our resources. The premises of the Traiig Cetre i Klaipėda were trasferred over to the State Eterprise Turto Bakas. The maximum umber of positios assiged to the NAOL was reduced by 5 percet (from 383 to 363). Durig the past two years, this umber decreased by 10 percet. This had a impact o the icreased employee turover, which amouted to 11.2 percet i While we highly value the staff members that we have traied, we are always pleased that they usually leave to assume equivalet or higher positios i other public sector istitutios, thereby, i our opiio, cotributig to the improvemet of their fuctioig. While the work load has remaied the same, we reduced the maximum umber of positios assiged to the NAOL by 5 percet. I total, the maximum umber of positios decreased by 10 percet sice I 2016, audited etities gave the relevace of audit topics, idetified issues, coclusios ad recommedatios 8.6 poits out of

32 We help i ehacig the quality of cotrol ad audit withi the area of self-govermet As is the case each year, we coducted the exteral review of audits performed by cotrol ad audit offices i 15 out of 60 muicipalities. The purpose of the moitorig was to assess the audit quality cotrol systems developed by the offices, the quality of audits, ad to provide help i improvig the performace quality of those offices that struggle with it. The assessmet carried out i 2016 showed that oe of the assessed offices is performig flawlessly. It should be poited out that, compared to the outcomes of prior exteral reviews, progress was oticeable oly i the offices of Zarasai district ad the city of Druskiikai, however, the overall quality of audit did ot improve. I eleveth year of exteral reviews of muicipal cotrol ad audit offices, ad with a view to the chages i the audit quality, the NAOL auditors oticed a sigificat disparity betwee the quality of audit carried out by offices with a differig umber of employees. We have poited out that some of the muicipal cotrol ad audit offices have ot coducted performace audit for several years ow, eve though this audit could help muicipalities orgaize their activities more efficietly ad save resources. We established a iteratioal Task Force o Muicipality Audit The Goverig Board of the Europea Orgaisatio of Supreme Audit Istitutios (EUROSAI) approved our iitiative to establish a Task Force o Muicipality Audit. The Task Force set out ivitiatios to all members of EUROSAI who seek to share their experiece ad good practice examples with foreig colleagues i the area of muicipal audit. Curretly, the Task Force uites the supreme audit istitutios of 27 Europea coutries. The sharig of experiece ad good practices will allow us to idetify the priority areas of muicipal audit relevat to the public ad achieve results that will help us improve the fiace maagemet of the public sector ad esure the appropriate implemetatio of muicipal fuctios. The NAOL orgaised a semiar Groud-Breakig Aalysis i Auditig Muicipalities Timely Audit Impac i Vilius, which was atteded by represetatives of the supreme audit istitutios from 24 EUROSAI coutries. The semiar discussios raged from the fiacial risks of effective resource maagemet i muicipalities, a ew approach to strategic aalysis withi this sector, the presetatio of ope data o state ad muicipal fiaces to other topics. Exchage of experiece i implemetig audits of muicipality owed compaies ra by muicipalities ad the methods of fiacial aalysis of the state of compaies also took place. 32

33 The NAOL was give cofidece of iteratioal auditig commuity We were omiated as exteral auditors of INTOSAI the iteratioal orgaisatio coectig all supreme audit istitutios Durig the XXIId Cogress of Iteratioal Orgaisatio of Supreme Audit Istitutios (INTOSAI), the NAOL was elected by the majority of votes to act as exteral auditor of this orgaisatio for the budgetary period of three years. This is the first time we have bee assiged the resposible task of auditig INTOSAI, which uites 194 members. The duties of exteral auditor iclude the assessmet of the orgaisatio's fiacial statemets ad the maagemet of fiaces. The assigmet to carry out a exteral audit of INTOSAI is a sig of recogitio ad a great resposibility, a challege ad a ackowledgemet of our professioalism. The quality of our work is evideced by the recogitio eared i 2016 The NAOL employs professioals experts i their field, dedicated employees characterized by their iovative thikig. We are proud of them all ad we are glad that the cotributio made by the NAOL ad by our staff members is recogized ot oly i Lithuaia, but also abroad a represetative of the NAOL was omiated as a member of the Audit Committee of the Europea Ivestmet Bak, a positio he will hold util We are also happy to aouce that the NAOL was elected the public istitutio of the year i 2016 a title awarded aually by the weekly publicatio Veidas - for its competece, resposibility, excellet results as well as represetatio of the iterests of the Republic of Lithuaia. We strive to cotiuously improve I plaig aual traiig sessios, we seek ot oly their applicability i our everyday workig life, but also the developmet of our employees' persoal skills. Ivolvig employees i the process of improvemet ecourages their professioal resposibility ad provides the most value. I 2016, 93 percet of the NAOL employees took part i various types of traiig. Some of the traiig we orgaised ourselves, relyig o the special skills, experiece ad kowledge of our employees. For 309 Euro a average amout spet for the traiig ad qualificatio of a idividual employee each staff member spet aroud 47 hours i traiig. 33

34 CONTENTS QUALITY IMPACT COMMUNICATION commuicatio Ubiased ad uderstadable to the public presetatio of performace results of a istitutio is particulally importat i achievig the expected impact. Ehacemet of iteral ad exteral commuicatio ad applicatio of moder meas of commuicatio help us icrease the visibility of the NAOL as a supreme audit istitutio, as well as the availability of objective ad importat iformatio to the public. data o the implemetatio of audit recommedatios was made public 87 umber of times audit results were preseted durig meetigs of the Seimas Committees (o average, results of 2 audits per meetig 2846 every 45 mi. 82% I , we pla to: Develop commuicatio policy. Publish iformatio o the process ad results of implemetatio of recommedatios o the website of the NAOL. Develop a cocept for the collectio ad exteral commuicatio of best practices. Update the style book of the NAOL. I 2017 hold the aual coferece of the NAOL SIGNALS. umber of metios i the media (6.5% icrease sice 2015) frequecy of metios i the media every workig day i 2016 percetage of favourable public metios of the NAOL 9,4 of 10 score give to us by audited etities regardig our cooperatio ad ethics of commuicatio 12 place held i the ratig of the credibility of istitutios (public survey, research cetre Vilmorus) 23 umber of top maagemet meetigs broadcast live to the NAOL staff FINANCE

35 Data o the implemetatio of recommedatios was made public O the website of the NAOL, we opeed data o the implemetatio of recommedatios made i public audits carried out i 2014 owards: how specific istitutios implemet recommedatios give to them durig audit, ad how timely ad appropriate their implemetatio of the plaed measures is. Public audit recommedatios are oe of the key tools used by the NAOL to make a positive impact o the maagemet of the public sector, while publicity is a importat meas that has the potetial to ecourage public sector istitutios to fuctio more efficietly ad resposibly. I the future, we pla to ope to the public eve more data that is collected ad maaged by us. The media shows iterest i the results of audit ad other assessmets The results of the NAOL are regularly published by the media, o televisio, radio, ad olie. I 2016, we published 91 press releases o audit results, ad the NAOL was metioed by the media a total of 2,846 times, i.e., almost every 45 miutes o every workig day i We are pleased to say that 82 percet of such metios were favourable ad 16.5 percet were eutral, which idicates a level of trust i our istitutio ad i the results achieved through hard ad cosistet work. More active use of exteral commuicatio meas All results of public audits ad other assessmets carried out by the NAOL are published o our website, ad submitted to the Seimas ad the media. We belive that a greater audit impact ca be achieved by actively ecouragig the public sector istitutios ad all citizes to take a iterest i audit results ad demad resposibility ad implemetatio of the assumed commitmets from resposible public sector istitutios. Therefore, we are costatly lookig for ew meas of commuicatig our audit isights: we both orgaise ad take part i various cofereces, hold meetigs with the Seimas Committees, members of the Govermet, ad active public idividuals; we preset our audit results i the publicatios ad meetigs of iteratioal auditig commuity. 35

36 More active cooperatio with our parter the Seimas Active cooperatio with Members of the Seimas opeed ew possibilities for discussio o atioal issues ad potetial solutios for them. I 2016, durig the meetigs of the Seimas Committees ad Commissios, various audit results of the NAOL were metioed a total of 87 times. We ot oly actively preseted the results of our latest audits, but also worked with the Seimas Committees o ecouragig the implemetatio of recommedatios made i previous audits. We paid a lot of attetio to amedmets of legislatio, which were iitiated as a result of the implemetatio of the audit recommedatios. Applicatio of ew meas of iteral commuicatio Last year, a ew measure was itroduced at the NAOL. It has helped to esure the smooth flow of iformatio without excludig ay divisio or member of the orgaisatio ad savig their time. Meetigs of the NAOL Coucil focused o key strategic ad activity-related issues ca ow be watched either i real time or i video recordigs by all members of the NAOL. Durig the coferece Public Fiace Maagemet: Resources are Available, Now it's Time for Wise Decisios orgaised i partership with the Committee o Audit of the Seimas, we discussed the ecessity of structural, results-orieted budgetar y reform i Lithuaia. Represetatives of both the public ad private sectors shared their isights o the improvemet of the efficiecy of state ivestmet, solvig of budgetary goverace issues, ad the potetial for strivig towards the log-term sustaiability of state fiaces. I presetig the audit results, represetatives of the NAOL revealed a umber of sigificat systemic issues related to the maagemet of atioal assets ad fuds, ad ivited Members of both the Seimas ad the Govermet, as well as the academic commuity ad audited etities to strive towards a completely ew (results-orieted) resposible approach to the formulatio ad executio of the state budget, ad the plaig ad implemetatio of atioal ivestmets. Two more cofereces dealig with issues related to the eergy sector ad opeig of data orgaised i partership with the Seimas Committees, are plaed for We are goig to cotiue these iitiatives i order to ecourage a discussio o importat topics that are relevat to may iterested parties. 36

37 SUSTAINABLE DEVELOPMENT CONFERENCE Tomorrow's work, which has to be doe today Lithuaia ad foreig experiece Decisios that might aid i improvig the public sector 28/11/2017

38 FINANcIAl Data

39 APPROPRIATIONS 9,390,000 Eur Assiged aual appropriatios 8,662,000 Eur Used appropriatios 87 % For payroll ad social isurace 0,9 % For busiess trips 1,6 % For acquisitio of tagible ad o-tagible assets ASSETS AND LIABILITIES 3,312,000 Eur No-curret assets By 20 percet less tha at the ed of the previous referece period (31/12/2015) Mostly due to completely wor out assets that were writte dow or trasferred to other public sector etities (597,000 EUR) ad o-curret fiacial assets trasferred ito accumulated receivables (curret year's part of idetified o-curret liabilities) the payroll that was disproportioately reduced durig the ecoomic crisis that should be repayable to staff members (297,000 EUR). 51 % Buildigs 38 % No-curret fiacial assets (the payroll that was disproportioately reduced durig the ecoomic crisis that should be repayable to staff members) 1,459,000 Eur or 44 % Amout of completely wor out assets (procuremet prime cost value provided) used by the NAOL 998,000 Eur Curret assets 95 % Etitled appropriatios from the state budget for issued but usettled suppliers' ivoices ad accumulated employee holiday allowace expeditures i ,219,000 Eur Liabilities 73 % Regardig the payroll that was disproportioately reduced durig the ecoomic crisis that should be repayable to staff members (59% o-curret liabilities, 14% curret year's part) 39

40 We are stroger together