At the request of the Central Project Management Agency, the Ministry of Finance of the Republic of Lithuania and the Government Office of the Republic of Lithuania, BGI Consulting developed a general methodology for conducting cost reviews, which allow systematic reviews of budget expenditures in all areas of public policy. For the purpose of preparing this methodology, in February-May 2019, a review of the expenditures of selected budgetary institutions in three public policy areas - social protection, health care, and education - was carried out. These budget reviews aimed to find the potential cost savings that would allow the redirection of surplus funds to other sectors in need of additional financing.
The subject of the budget review in the field of social security was the expenditures for the main activity costs of 26 state social care institutions. Review of the costs of social care institutions is relevant in the context of the ongoing reform of the institutional care system, which aims to move from institutional care to family and community-based services for disabled people and children without parental care.
The subject of budget review in health care sector – expenditures (drugs, solutions, bandages, and medical assistance) of 72 state and municipal hospitals. The review of hospital costs is relevant in the context of the ongoing restructuring of the health care system, which aims to restructure the hospital network and optimize its services.
The subject of budget review in education sector was maintenance costs of 932 general education schools. The review of school spending is relevant as the general education system is criticized as one of the areas whose results and effectiveness remain poor and the funds allocated are mainly used to maintain buildings rather than improve the quality of education.
A sophisticated method - data envelopment analysis - was used to review the costs of social care institutions and hospitals. Using this method, the technical effectiveness of social care institutions and hospitals has been identified on the basis of the ratio between the performance (outcomes) of the analyzed institutions and the actual financial resources required for such results, Also, the most effective and inefficient (relatively) institutions of 2016–2018 were identified. Comparing the effectiveness of the institutions analyzed, potential savings of social care institutions and hospitals were identified. For the purpose of reviewing the expenditures of general education schools, an analysis of the technical efficiency of the schools using logarithmic regression was made, i.e. school maintenance costs per pupil were compared between all schools. This comparison led to the identification of potential maintenance cost savings.