Companies managed by municipalities are preparing for changes in the accounting of special obligations

Since last year, the obligation for municipally managed enterprises (MOEs) to provide information on the special obligations being carried out and to separate their finances has been implemented only gradually. Vidas Danielius, head of the Management Coordination Center, which oversees this process, says that the changes in the financial accounting policy should be implemented by 2025 for MOEs fulfilling special obligations.

Updated requirements regarding the establishment of special obligations of MOEs, their disclosure and financial accounting management were adopted in 2021 by the Government’s resolution. MOEs have an established obligation to follow good governance practices and, in accordance with the provisions of the Transparency Guidelines, together with the set of annual financial reports, provide information on the special obligations being carried out to the director of the municipal administration.

“The separation of the special obligations performed by the company by analyzing financial information enables the company’s management bodies and shareholders to better understand how different activities determine financial indicators, and based on this information to make management decisions aimed at increasing transparency and efficiency.” This area of ​​management in the MOE sector has not been properly implemented and currently requires a lot of work, because so far neither the companies themselves nor their shareholders – the municipalities – have paid enough attention to the self-evaluation of the special obligations being carried out”, notes V. Danielius, director of the Governance Coordination Center.

For the implementation of this Government resolution, the Governance Coordination Center has prepared a transitional plan. Last year, work was done with MOEs in order to separate and identify special obligations, this year MOEs will be required to submit financial data related to the performance of special obligations, and in 2024, MOEs will be encouraged to form financial accounting principles for special obligations.

“We are ready to work closely with MOEs, so we will continue to provide regular methodological consultations on the disclosure of special obligations and their accounting management. We also very much hope for the active involvement of municipal administrations, as it is important to fulfill the state’s expectations for the activities of MOEs and to foresee the necessary resources to ensure quality public services to the people of Lithuania,” VKC director V. Danielius notes.

Today, the Governance Coordination Center organized an online seminar for representatives of MOEs and municipal administrations, where, together with other management experts, they reviewed good practices on how to properly identify and disclose special obligations. This informative event attracted a lot of interest – almost 200 people from all municipalities of Lithuania took part in it.

According to the Government’s resolution, information about special obligations performed by MOEs must be made public on the websites of the municipalities managing the companies.

In total, Lithuanian municipalities currently manage 232 companies.