State Audit Office: Risk of Overpayments to Bankrupt Company Employees Identified

Lithuania's State Audit Office (VK) has identified a significant risk of overpayments to employees of bankrupt companies, stemming from inadequate verification of creditor claims by insolvency administrators. An audit of the 2025 Guarantee Fund report revealed that administrators may not be properly checking employee claims before submitting them for court or creditors' meeting approval, potentially leading to incorrect amounts being paid out and disregarding tax obligations.

According to the VK, such errors could result in employees receiving more money than they are entitled to, thereby infringing upon the interests of other creditors. State Controller Irena Segalovičienė stated, "The state's duty is to ensure that employees who lose their jobs due to employer insolvency receive their due payments on time. However, it is equally important that this assistance is allocated correctly, justifiably, and accurately."

Last year, 'Sodra' (the Lithuanian social insurance fund) found inaccuracies in nearly one-third of cases during control procedures, prompting it to request corrections from insolvency administrators or courts. While these adjustments extended payment timelines, they helped avoid an average overpayment of 1,100 euros per employee, approximately 38% of the approved sum. Given that over 9,000 individuals received such payments last year, these figures are considered substantial.

The VK noted that since January 6 of this year, changes to the Guarantee Fund's administration procedures have eliminated additional checks on data submitted based on court rulings and creditors' meeting decisions. This has rendered previously managed risks of overpayment less controllable. Auditors recommend ensuring that employee creditor claims are established and approved uniformly and accurately throughout the entire process, from the administrator's assessment to the Guarantee Fund's payment allocation. The VK has advised 'Sodra' and the Ministry of Social Security and Labour to implement measures to manage the risk of inaccurate employee claims and reduce the likelihood of future overpayments. A temporary measure involving additional data verification has been agreed upon until long-term solutions are found.

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The state's duty is to ensure that employees who lose their jobs due to employer insolvency receive their due payments on time. However, it is equally important that this assistance is allocated correctly, justifiably, and accurately.