National Audit Office’s annual activity report to Parliament 2012

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There is a focus in the National Audit Office’s annual activity report to the 2012 Parliament on three themes that are vital for the foundations of Finland’s economy and citizens’ wellbeing: the effectiveness of research, development and innovation activity, employment and increasing the employment rate, and energy and climate policy. The erosion of the competitiveness and structural foundation of our economy poses a visible risk to the welfare state. At the same time the creeping effects of climate change will cause radical changes, the response to which is a major economic and technological task that at the same time also affects security policy and our security.

Rapid erosion will take place in the economic foundations of welfare and employment unless the number of innovative growth companies can be increased through research, development and innovation activities and measures that support their effectiveness. Due to structural changes in the economy, the economic growth required to safeguard welfare and action against climate change call for the bold renewal and development of research, development and innovation activity. Research, development and innovation activity as well as employment and increasing the employment rate must be seen as broad entities and as part of the economic and growth policies. The role of effective and efficient competition as a factor encouraging innovations and their utilisation is emphasised. Research, development and innovation also play a major role in the improvement of energy efficiency, which is required in climate change management.

Targets and information relating to economy and productivity are key elements of well-functioning performance guidance. It can be stated on the basis of financial audits concerning 2011 that the performance targets adopted by ministries relating to economy and productivity have still remained insufficient in the same way as had been seen in previous years. At the same time the situation is considerably better as regards the provision of true and fair information. Reporting on economy and productivity is fairly comprehensive. Clear key indicators and a uniform manner of presentation would, however, make the information easier to utiliseand facilitate its production by accounting units.

The main question for the employment management audit theme was the employment rate and measures to increase it, which´are essential for attendance to the sustainability gap in central government finances. Audits covered the prevention of long-term unemployment, support for areas undergoing abrupt structural change, and promotion of work-based immigration. According to the audits, these only provided a minor contribution towards improvements in the employment rate, although measures such as support for areas undergoing abrupt structural change as such were found to work well and be necessary from the regional perspective. Broad-ranging efforts will be needed to reach the employment rate target.

The National Audit Office has compiled findings concerning the local government and service structure made in audits over the past few years. The conclusion is that the structures as such are unable to provide a solution to service quality and availability from the citizen’s perspective. For example, in municipalities that have undergone a merger, service development has often been trampled on by the merger process. With the Act on the Reform of Municipal and Service Structures providing a rather loose framework, service structure in the cooperation areas may have become even more fragmented. It is important to pay attention in structural development to the maintenance of service delivery in accordance with the Constitution of Finland and relevant special legislation. Observations including those from the audit of child welfare revealed that the interests of the child are not always realised in accordance with the Child Welfare Act. Key problems in this are to do with the provision of comprehensive support for families, supervision, and substitute and after-care services.

The National Audit Office has completed a series of five audits themed on climate and energy policy. These audits showed that it is possible to improve the cost-efficiency and effectiveness of climate and energy policy measures. Problems in this field are to do with weaknesses in the information base relating to costs and measurement methods, vagueness in target-setting, and types of support that are contradictory from the climate objectives perspective. There has been variation in the implementation of Finland’s Climate and Energy Strategy. Further transparency would have been required in its preparation and the use of central government funds. According to the National Audit Office’s calculations, in 2011 Finland allocated around €550 million or around one per cent of the budget appropriations to expenditure relating to climate change. Central government funding doubled from 2008 to 2012. The biggest increases were seen in appropriations for research and development and the promotion of renewable energies. Finland seems to be able to reach the objectives set for the 2008–2012 Kyoto period, but reaching the targets set by the EU by 2020 appears to be a bigger challenge.

It can be stated on the basis of audits relating to education, research and innovation (ERI) that decisions are made by Parliament on the funding and structures of public ERI activities without in practice being able to have an efficient impact on the activities´on the whole. Instead of increasing or cutting resource provision for ERI, new lines of thought and operating models aiming at new types of financial risk management should be found. With this objective in mind, the purpose of public activity should be determined more clearly, the objectives of ERI activity should be clarified, and transparency of funding should be increased. The aim is to determine support for research and innovation in accordance with the expressions of Parliament’s will and to target it in a more selective, courageous and sustained manner. To increase the effectiveness of public support, the line between fiscal policy and ERI policy must also be crossed in a new way.

The National Audit Office has repeatedly drawn attention to problems relating to legislative quality and their role in decision-making on central government finances. Shortcomings still persist in the achievement of the principles of good legislative drafting, but recent audit findings show positive development in the prerequisites available for quality improvements. Problems in practical lawdrafting are not to do with competence or expertise or lack of guidelines. Instead, they are to do with the complexity of the operating environment, drafting resources and timetables as well as insufficiencies in the Government- level workflow management system to support drafting. More attention should be paid to two factors in legislative drafting and related decisions: the substantive clarity of legislation and the resources required for its implementation. The monitoring of legislative implementation and impacts should not be forgotten either.

The National Audit Office’s goal is to promote the effectiveness and quality of the financial management of the State. In this duty, it supports Parliament in its exercise of fiscal power and plays an important role in the national integrity system that maintains good governance. International comparisons show that national audit offices are among the strongest and best-functioninginstitutions maintaining good governance and public integrity in Europe. According to research, there is a correlation between poor governance and weak control institutions and the poor state of general government finances and poor performance of national economy. On the whole the effectiveness of the National Audit Office was at an excellent level considering that its resources are very low when compared with its peer institutions elsewhere. In the tighter budgetary situation, the National Audit Office has focused on employees’ wellbeing at work and its management and continued the efficiency and stability programme launched in 2010. The programme will result in a reduction in the National Audit Office’s personnel from 150 to 138 starting from 2012.

The National Audit Office monitors the implementation of positions put forward by Parliament on the basis of reports issued by the Parliamentary Audit Committee where these positions relate to the National Audit Office’s audits and Parliament has required reporting on the matter by the Government. Positions monitored for the current electoral term have pertained to the functioning of the central government spending limits procedure, measures to eliminate borrowing in excess of liquidity needs, and the introduction of the workflow management system for the justice and interior administrations. The National Audit Office will get back to the functioning of the spending limits procedure following the completion of follow-up on the matter and in conjunction with reporting on the results of fiscal policy audits halfway through and at the end of the electoral term. In other respects measures can be regarded as having progressed as required by Parliament.