1. Audit of debt and liabilities of local governments Audit Department 3 Panevėžys Division, Principal Auditor Inga Trepšienė and Senior Auditor Jurgita Vilniškienė 10-09-2014

2. The borrowing area was chosen for the following reasons: The increasing level of local government indebtedness. Faster growth in local government debts than in their revenue. Limited legal regulation of borrowing.

3. The Role of Audit Department 3 in audit National set of financial statements Public debt Opinion of the National Audit Office Sets of financial statements of 60 local governments Debt of local governments Opinions of the Control and Audit Services of 60 local governments Audit carried out by Audit Department 3 of the National Audit Office

4. Local governments revenue structure and debt proportion

5. Controls of local government debt and liabilities: Every year, the Seimas (Parliament) passes a law establishing rules for reducing the liabilities of local governments and approves borrowing limits. The following borrowing limits were set for the local governments for the year 2013: 45 % of their revenue if there are no EU-funded projects. 75 % of their revenue in case of EU-funded projects.

6. The audit addressed the following issues: Correctness of the information on debt obligations of and guarantees provided to local governments and on data given in the reports on loans for the year 2013. Management of debt and other financial obligations. Regularity of borrowing, assumption of financial obligations, and use loan funds and compliance with the borrowing limits set for local governments.

7. Audit findings: As many as 25 local governments out of 60 have limited borrowing capacities. The level of municipal debt does not reflect the actual situation concerning the debt obligations of local governments. Local governments have no clear debt management strategies. There are no sufficient controls developed for managing municipal debts.

8. Recommendations Recommendations made to the Government of the Republic of Lithuania, Ministry of Finance, and other ministries: To establish a surveillance system to ensure budgetary discipline of local governments. To ensure clearer regulation of municipal borrowing, to manage the growing indebtedness, and to initiate necessary legislative amendments.

9. Cooperation with another Audit Department The results of our audit Another Audit Department which develops the audit report on the national set of financial statements and reports

10. Thank you for your attention!