Central government has operated flexibly under the exceptional circumstances. The significance of long-term action and foresight are emphasized in the management of central government finances under uncertain economic conditions.
Auditor General Tytti Yli-Viikari: Resilient central government safeguards the building of the future
In many central government functions, 2020 will probably mark a watershed between the time before and after the coronavirus crisis. Central government has succeeded in operating extremely well in these exceptional conditions. The success is attributable to competent and committed people, as well as the new operating models developed in public administration. Central government will continue to need resilience, an ability to renew itself and to recover amid change. To promote this resilience, public administration should learn from its activities during the crisis, and adjust its structures and processes to ensure their flexible compatibility.
The coronavirus crisis does not eliminate the climate crisis, the expenditure pressures of public finances caused by the ageing population, the work revolution, or other change drivers that call for structural changes. The outlook of public administration is turbulent, as we will be facing extensive changes and new crises. It is therefore necessary to continue to further improve the resilience of central government.
It is excellent that central government is performing an extensive assessment of its operations during the corona crisis. Assessment is important, because in addition to its crisis-related activities, the public administration also continues to prepare internal reforms and decisions that are significant for society’s future. The situation shows how important it is to proactively maintain the public authorities’ crisis preparedness. It is especially important to agree clearly on the procedures of collaboration, management and division of labour, and to keep information up to date. This also applies to preparing for crises affecting the financing system.
Overhauling the operating models in the public administration would also benefit the societal objectives of central government. For example, discussions concerning the establishment of special assignment companies have made it evident that issues of common concern should be managed more quickly and flexibly than is possible in the present agency model. This reflects the need to overhaul the management practices, HR policy, and steering and decision-making processes in central government.
Long-term decision making builds on information that is supplemented later
When the economy is stimulated after the coronavirus crisis by extensive infrastructure projects, it is important to consider the permanent lifecycle costs caused by the investments. A new transport infrastructure will increase maintenance costs in the future. Optimal lifecycle management of the transport network requires long-term funding. This makes it possible to plan and implement maintenance efficiently so that the transport network can benefit society when the conditions change.
In addition to managing the corona crisis, the public administration continues to prepare decisions that are significant for the future.
The public administration also prepares long-term investments, based on information that is updated gradually, e.g. in the ongoing strategic capability projects of the Finnish Defence Forces. Access to information is particularly important in the preparation of projects that progress in steps: it is important that Parliament is always provided with the necessary and correct information. In the HX Fighter project, a challenge for the preparation and decision making is that information related to the lifecycle costs is specified only in the final tenders and may remain uncertain even after that.
Policymaking is guided by projections and sustainability assessments for general government finances. However, these are not stable and accurate indicators to which fiscal policy could be tied in advance or during a parliamentary term. It is important that the selected measures take general government finances in the desired direction, and that the implementation takes account of changes in the operating environment. Long-term policymaking would be promoted by the preparation of a long-term growth strategy for central government to improve productivity and competitiveness.
The work revolution is accelerating – information is needed on the impacts of employment measures
The coronavirus crisis is accelerating the work revolution. The development of the economy is uncertain, which increases the number of part-time jobs. At the same time, the amount of full-time work is reducing. The situation challenges the employment services to make reforms. Previously used measures do not necessarily increase long-term employment on the open job market, even if the figures in the employment register have improved. We therefore need more comprehensive information on the impacts of employment policy measures. When completely new measures are introduced, their impacts should be examined through carefully planned experimental designs, systematic monitoring of the results, and comparable assessments.
As a result of the corona crisis, employment services customers have increased in both number and diversity. To make the measures applied by the employment services more suitable for people in different situations, it should be possible to introduce new employment measures linked with social security. The legislative amendments this requires are currently being deliberated in the preparation of the social security reform. Supporting people’s subsistence and employment calls for flexibility, which has been increased by adjusted unemployment aid and adjusted adult training aid. The introduction of the Incomes Register has made it easier to adjust the amount of the benefit paid to the customer only when they have been paid for their work.
Employment services serve an increasingly diverse customer base.
In the present situation, TE Offices, i.e. the public employment services, do not necessarily have sufficient resources to develop their operations. A good example of a more extensive reform of employment services is their performance-based funding model, which encourages service providers to provide individual service to jobseekers and promote permanent employment.
The renewal of public administration should be supported by blue thoughts and blue networks
The Finnish central government has been built on specialist administrative branches. Its efficiency is attributable to the deep expertise accrued by public officials and the strong mutual trust between different institutions. The operating models and the increase in competence have been based on linear thinking, i.e. on things progressing on a familiar track. This has led to the creation of silos in the public administration, and over time, to bridging these silos.
However, the continuous change of the operating environment and the diversity of political issues challenge the present structures and operating models. Linearity should be replaced with a network-based approach. Cooperation and mutual trust continue to be an important element in a well-functioning public administration.
“If you were by a big open lake, you could see further and might catch a blue thought…”
– Veikko Huovinen: Havukka-ahon ajattelija
(quotation translated at the National Audit Office)
Klaus Schwab, the founder of the World Economic Forum, aptly describes the impacts of the fourth industrial revolution on legislative work and policy preparation by underlining that we need resilient governance, based on extensive interaction and networks, and public officials’ continuous renewal and understanding of the changes in the operating environment. Schwab states that decision makers are too fixated on traditional linear thinking. Their time is spent on constant crisis management. They therefore lack the time to think strategically about how the forces shaping our future will impact our operations. We need more space to think blue thoughts like the thinker of Havukka-aho.
In his research on strategic foresight, J. Peter Scoblic has highlighted the need for continuous strategic thinking and scenario planning, i.e. institutionalising imagination. According to Scoblic, in a continuously changing unpredictable operating environment, organizations should change their ways of thinking and establish processes that allow top managers to build permanent but flexible bridges between their actions in the present and their thinking about the future.
The change in the operating environment and the diversity of political issues challenge the public administration to replace its structures with open networks.
In addition to blue thoughts, we will also need blue networks. Charles Galunic, a professor at the international business school and research institution INSEAD, has studied the impact of networks on innovation management. He discusses blue networks, i.e. open and renewable networks that provide their members with an opportunity for multifaceted learning and new thinking. Such networks support innovativeness, because they make it possible to combine ideas and insights in a new way. They are multidimensional, helping organizations to prepare and anticipate future risks.
The opposite of blue networks is red networks, where all the network members know each other. Such closed networks function extremely well in acute crisis management because of strong mutual trust. However, they are not particularly resilient when the operating environment becomes more turbulent, and the need for continuous change grows. The weakness of closed networks is that they are conservative and slow to obtain and combine new insights.
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Figure 1: The members of blue networks gain new insights and a wide body of knowledge. Source: Lecture by Charles Galunic, 2020, Insead.
The resilience of the public administration and governance should be supported by investing in public officials’ competence development and goal-oriented networking. Staff mobility, collision of expertise, and cross-pollination of insights are tools by which the public administration can improve its resilience and learning. The public administration should also network with the private and third sector, and national think-tank and research activities. It should also encourage people to get involved in more diverse personal networks.
Auditing supports the renewal of the public administration
The National Audit Office continues to renew its operations in a controlled manner, taking into account the above changes in the operating environment. In the 2020s, auditing will anticipate Parliament’s need for information, provide a timely service, and be based on competence development and the sharing of expertise.
I want to thank our stakeholders for using the audit information we have produced in improving the resilience of the public administration. I also want to thank the staff of the National Audit Office for their enthusiasm in learning and creating diverse networks. In this way, we are acting in accordance with our vision: “Together – a sustainable future and shared knowledge”.
The following publications and articles have been utilized in the review
Ronan, Simon – Galunic, Charles 2004: “More than network structure: How knowledge heterogeneity influences managerial performance and innovativeness”, Strategic Management Journal 25.
Collan, Mikael – Michelsen, Karl-Erik (eds) 2020: Technical, Economic and Societal Effects of Manufacturing 4.0 Automation, Adaption and Manufacturing in Finland and Beyond. Palgrave Macmillan.
Scoblic, J. Peter 2020: “Learning from the Future”, Harvard Business Review 07/2020
Uncertainty of forecasts should be taken into account in the pursuit of balanced general government finances
Fiscal policy legislation requires the Government to pursue balanced general government finances. However, it also provides flexibility under exceptional circumstances such as the coronavirus crisis. When measures to promote the balance are planned, it should be taken into account that budgetary forecasts are uncertain even under normal circumstances. The impact of the measures taken should also be assessed regularly during the government term. Fiscal policy should not be based directly on sustainability assessments, but they are useful when the need for structural reforms is considered. Sustainability analyses should be expanded, and this should be supported by legislative amendments.
The setting of fiscal policy objectives is steered in Finland by both the EU framework adopted after the financial crisis and the domestic legislation developed according to the EU rules. The Government presents its statutory fiscal policy objectives annually in the General Government Fiscal Plan submitted to Parliament.
The Government is not free to select the fiscal policy objectives set out in the General Government Fiscal Plan or their strictness.
The main objective relates to the structural balance of general government finances, i.e. central government, local government, employment pension institutions, and other social security funds. The general government structural balance reflects the difference between general government revenue and expenditure net of the effects of the economic cycle and certain one-off factors. The EU framework sets a minimum level for the structural balance objective, and the Finnish Government cannot set a less strict objective (see Figure 1). From the beginning of the present regulation, the minimum level in Finland has been −0.5 per cent of GDP.
Fiscal policy regulation steers the Government to seek a balance
Under domestic legislation, the Government is also required to set an objective for the general government nominal balance in the General Government Fiscal Plan. Unlike in the case of structural balance, the effects of the economic cycle and one-off factors are not eliminated from it. Under normal economic circumstances, the nominal balance objective leads to achieving at least the structural balance objective, which provides the Government with hardly any room for manoeuvre. In Finland, Governments have set balanced general government finances as the nominal balance objective . This has been justified, as it leaves a small safety margin between the nominal and structural target.
The Government may become obliged to strengthen general government finances based on an ex-post EU decision.
If the nominal balance objective is not achieved, the Government has no statutory obligation to remedy the situation. The correction mechanism, which obliges the Government to take fiscal policy measures to achieve a balance, can only be activated later following a significant deviation from the structural balance objective.
The mechanism is based on EU-level decisions, and therefore many exceptional circumstances are taken into account automatically. Because of the coronavirus crisis, for example, the EU decided that during the crisis, Member States did not have to strive to achieve the objectives set for general government finances under the EU framework.
Objectives are set to be achieved by the end of the parliamentary term, and it is difficult to assess them in real time. In practice, their achievement can only be assessed during the next Government term, when the statistics for the year concerned have been completed. According to the data in the spring of 2020, the objective set for the parliamentary term 2015–2019 was missed by a significant margin, although during the parliamentary term, it was expected to be more or less achieved.
Stabilizing measures are based on the projections of general government finances
When planning its economic and fiscal policy during the preparation of the Government Programme and also during the Government term, the Government should define the measures for achieving the objectives. The methods are scaled on the basis of the projections of general government revenue and expenditure. The projections illustrate the development of general government finances if no new political decisions are taken. This sets high requirements for their quality and reliability.
As a rule, the Ministry of Finance prepares its medium-term projections appropriately. The Ministry has included discretionary policy measures in its projection in compliance with the guidelines of the EU Commission. The differences between the budget outturns and the original projections have been rather large, but there are natural reasons for this.
The uncertainty of the projections of general government finances is well illustrated by how they have changed in recent years (see Figure 2). In the spring of 2018, the outlook for the next few years was positive, and a slight surplus was forecast for the end of the review period. In the spring of 2019, the projections weakened significantly, and in the autumn of 2019, they were already showing a deficit of 1.5 per cent instead of the surplus forecast in the spring of 2018. Such projections are therefore uncertain even in normal circumstances. The subsequent weakening of the forecast in the spring of 2020 was caused by the fact that the econimic crisis made the outlooks plummet.
Visualization: General government deficit relative to GDP
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Forecasts of general government nominal balance in 2018–2019, % of GDP Source: Ministry of Finance.
As projections may change, it is entirely possible that the measures tied to them may prove either inadequate or excessive. The impact of the measures on general government finances is also surrounded by many uncertainties. This is especially true when the Government does not strive to achieve impacts directly through legislative amendments related to taxation or expenditure. For example, an improvement in the employment rate may have very different impacts on the balance of general government finances, depending on whether it is caused by an increase in full-time or part-time employment. Although it may be difficult to assess the impacts of some measures, it is not justified to select primarily measures that are easier to assess.
It is necessary to set evaluation points within the parliamentary term for the impacts of Government decisions.
However, the Government can strive to ensure that the measures are implemented as planned. During the government term, it would therefore be important to have evaluation points to assess the impacts of the decisions taken on the balance of general government finances and to consider the need for additional measures. In this respect, the present Government Programme includes the right kinds of element, such as the examination of increases in expenditure based on the milestone set for the employment rate.
Sustainability assessments should not serve directly as a foundation for fiscal policy but can help to identify the need for structural reforms
Long-term sustainability assessments, such as the sustainability gap, involve even more uncertainties than medium-term projections. Although improvement of the sustainability of general government finances is an important fiscal policy objective, it is not justified to use sustainability assessments mechanically in the setting of fiscal policy objectives and in the steering of general government finances. This is because they emphasize many of the problems related to economic indicators.
First, sustainability assessments are highly uncertain. For example, the underlying assumptions of population projections have a significant effect on the assessments, and demographic factors (e.g. birth rate and immigration) can vary greatly. Changes in calculation methods and assumptions can also result in a substantial fluctuation in the value of the long-term sustainability gap. Not all the factors having significant effect on sustainability can be impacted directly by political decision making. In sustainability calculations, it is also difficult to take into account the potential detrimental effects that consolidation measures can have on long-term economic growth.
Long-term sustainability is built into the EU-level medium-term fiscal policy regulation (see Figure 1). Long-term spending needs thereby impact the strictness of medium-term objectives, which further reduces the need to set a separate objective for the sustainability gap during the government term, for example.
Comprehensive assessments of the sustainability of general government finances should be made and reported to Parliament.
In any case, sustainability assessments are quite useful for assessing the need for structural reforms in the long term and for building a comprehensive situational picture. There is clearly a need for more extensive sustainability analyses in Finland. Statutory sustainability reporting to Parliament should be strengthened, and it should be linked with a medium-term review. The National Audit Office therefore proposes that fiscal policy legislation be amended to oblige the Government to cover the sustainability of general government finances comprehensively in the General Government Fiscal Plan. In practice, this would mean calculating sustainability assessments for different periods based on several alternative scenarios.
Visualization: Development of age-related public expenditure in the EU countries
The following visualization shows how the ratio of total age-related expenditure to GDP will develop in the EU countries, Norway and Great Britain according to different scenarios in a time span of about 50 years. Age-related expenditure refers to health care, long-term care, pension, education, and unemployment expenditure.
At the top left of the visualization, you can opt to view the data on several countries according to a certain scenario (“View by scenario”) or the data on a certain country according to several different scenarios (“View by country”). Select a scenario or country from the drop-down menu at the top right. You can add scenarios or countries by clicking on them at the bottom of the figure and remove them by clicking on them again.
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The chapter is based on the following audits
Medium-term projections in the planning of general government finances (17/2019)
Reconciliation of fiscal policy and employment policy (9/2020)
The state’s financial management can be supported by unifying the budget
In the 2019 financial audits, the National Audit Office issued as many cautions as in the previous year. As a rule, central government finances have been managed in compliance with the regulations, but the operations of the accounting offices can still be improved. It is worrying that the same accounting offices are cautioned each year for procedures violating the budget. Compliance with the budget could be supported by unifying the budgeting.
Every fourth accounting office was cautioned
The National Audit Office audits the final accounts of central government, the ministries, other agencies obliged to prepare final accounts, and three off-budget funds. The National Audit Office issued 65 financial audit reports for 2019. Most of the audited entities – the three funds and 46 accounting offices – received a clean financial audit report, i.e. the National Audit Office found no deficiencies in their final accounts or financial management procedures. However, the National Audit Office found deficiencies in 15 accounting offices and in the final central government accounts. Every fourth accounting office was thus cautioned, which is a significant number.
Eight accounting offices have been cautioned repeatedly during the past four years.
It is worrying that as many as eight accounting offices have been cautioned each year during at least the past four years. Nevertheless, in the latest two financial audits, the number of accounting offices that had to be cautioned was lower than before. In 2016 and 2017, every third accounting office was cautioned.
In the financial audit for 2019, more than one caution was issued to the Finnish Immigration Service, the Government Shared Services Centre for Finance and HR, the Finnish National Agency for Education, the Finnish Transport and Communications Agency, the Finnish Transport Infrastructure Agency, and the Development and Administrative Centre for the ELY Centres and TE Offices.
The National Audit Office obliged two accounting offices to report to it on the measures they had taken to remedy the state of affairs for which they had been cautioned. The Finnish Transport Infrastructure Agency was to report how it would aim to remedy the deficiencies related to the processing of the incomplete assets to be transferred to Traffic Management Finland Group, the budgeting and monitoring of project-specific reallocation, and the information in and arrangement of accounting vouchers. In turn, the Government Shared Services Centre for Finance and HR was to report how it would remedy the deficiencies in the internal control of the centralized financial and HR management duties.
Visualization: Financial audit findings 2017–2019
In the visualization, you can view the financial audit findings of the National Audit Office for 2017–2019. You can examine the findings per category: you can, for example, focus on the column that discloses whether the accounting offices have had effective internal control. You can see which accounting offices have been cautioned in the different years by clicking on “Show cautions”. You can also view the reasons for the cautions by clicking on the name of the accounting office.
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The dynamic visualisation provides information on the cautions and disclosure requirements issued by the National Audit Office in its audits in 2017, 2018 and 2019. The same data is available in the Excel file below.
What are the special characteristics of the financial audits conducted by the national audit office?
In its financial audit reports, the National Audit Office expresses its opinion on the following issues: whether the audited entity has provided true and fair information on the final accounts and the operational efficiency; whether its internal control is effective; and whether it has complied with the budget.
If the budget or the related key statutes have not been complied with in all respects, the National Audit Office issues a qualified opinion on regularity. The qualified opinion can include several specified cautions on regularity.
Qualified opinions on regularity usually concern individual areas or procedures in financial management. Therefore, it does not mean that the agency’s or central government’s finances have been managed contrary to law as a whole, or that central government assets have been misappropriated. However, a qualified opinion on regularity should always be considered a serious issue for the financial management of the agency in question.
The National Audit Office can oblige the management of an audited agency to report to it on the actions taken to remedy the state of affairs for which the agency was cautioned. This is called the obligation to report.
The budget has been adhered to well
The National Audit Office found procedures contrary to the budget and the related key statutes in the audits of seven accounting offices. The number of accounting offices issued with a qualified opinion on regularity in the previous year was also seven. About half these accounting offices were also issued with a caution on regularity this year.
In its qualified opinions on regularity, the National Audit Office issued a total of ten specified cautions on regularity. The Finnish Immigration Service received two cautions, and the Finnish National Agency for Education as many as three.
Cautions are often issued because the accounting office has spent the appropriation during the wrong budget year or for a purpose other than the one for which it was granted under the budget. The National Audit Office can also caution accounting offices for procedures that are contrary to other statutes applying to asset management.
As many as four cautions on regularity concerned authorizations.
As many as four cautions on regularity concerned authorizations. This means that accounting offices need more expertise in monitoring authorizations especially. Authorization refers to a permission granted by Parliament in the budget to commit to expenditure payable in the years following the budget year.
The budget needs uniformity
The budget for 2019 is not uniform as regards the different administrative branches. The incoherence is especially caused by the extensive use of mixed items, salary payment from items other than the operational expenditure items, deviation from the allocation principles laid down in the State Budget Decree, the large number of extensive and varied item decisions, and the differences in class structures. The budget for 2020 is even more incoherent.
The statutes and regulations related to budget drafting leave room for different types of budget solution in different administrative branches. In recent years, however, the number of exceptional budget solutions, which under the budget drafting regulations should be used only for a special reason, has increased significantly. The accounting offices have started to apply the drafting regulations too flexibly, which has undermined the uniformity of the budget.
Accounting offices have started to apply the budget drafting regulations too flexibly.
Clear and coherent budgeting facilitates the monitoring of the budget, supports efficient financial management, and promotes the achievement of the productivity targets set for financial management. It also makes it easier to make budget decisions and promotes compliance with the budget. All this is essentially related to Parliament’s work as well. Clear and coherent budgeting, particularly as regards the item decisions, would make it easier to implement the budget and support the uniform digitalization of administrative processes. Material efficiency gains would require harmonization of not only the budget but also the regulations related to government transfers and grants.
Uniform guidelines would support a successful confiscation process
Government agencies are in possession of confiscated property, which they must manage in compliance with regulations and guidelines. The National Police Board should harmonize its guidelines for the confiscation process and develop the practice supervisors follow when monitoring the process.
Government agencies should strive to unify the key practices related to the confiscation process. The special characteristics of the confiscation process should be taken into account in the development of information systems, for example.
The National Audit Office found no irregularities in confiscation activities. However, the storage facilities of the Finnish Customs contain property whose confiscation process has already been terminated. In future, it will be of the utmost importance to complete the confiscation processes without delay.
Confiscated property has generally been stored appropriately. However, agencies should ensure that their storage facilities are acquired in compliance with the Act on Public Procurement and Concession Contracts, that the facilities are suitable for storage, and that their security and surveillance are appropriately arranged.
Palkeet again obliged to disclose how it has arranged its financial and HR management processes
The internal control of Palkeet (the Government Shared Services Centre for Finance and HR) should be further improved. Palkeet has a large customer base and performs many transactions. It is therefore especially important that it has reliable internal control.
The effectiveness of Palkeet’s internal control is important for the state’s entire financial management.
Palkeet should develop systematic risk management to ensure that risks are identified, their significance is assessed, and the necessary risk management solutions are made whenever decisions are taken, or the operations are organized. Palkeet should give more consideration to internal control particularly in the development of processes and information systems. Internal control is at its most efficient when controls, i.e. control measures, prevent errors and abuse.
Special assignment companies should be established after careful consideration
Holdings in companies are a significant part of central government fixed assets. Special assignment companies have been established to serve the societal objectives of central government and perform duties where the company form benefits central government finances or operations. However, Parliament has limited budgetary and oversight powers in relation to them, because the operations and funding of state-owned companies are steered and overseen by both the Government and the companies’ own bodies.
The establishment of special assignment companies should therefore always be considered from the perspective of both the use of central government funds and the company’s future operations. It should be clarified what social problem or need can be met by company-type operations. The rationale behind the use of company-type operations should not be the opportunity to operate outside the spending limits and capitalize the company quickly by selling shares held by the state or another state-owned company.
When special assignment companies are established, it is important to consider what social problem or need can be met with the company form.
The changeover from agency to company type is often justified by savings. However, the actual operations also change very often in this connection. In such a case, it is difficult to verify in practice that the incorporation will lead to savings or the streamlining of operations. In turn, the economic efficiency and profitability of a company’s operations can usually be monitored carefully through the company’s reporting. However, if the company’s operations are almost fully based on a service agreement concluded with only one government agency, it is questionable whether a genuine customer relationship and genuine business are involved.
If a company is established as part of a more extensive reform, the state owner and the company should ensure that the company’s services are not tied only to this reform. The services will thus remain relevant even if the actual reform is cancelled. In the case of very narrow-scale operations, it should always be considered whether a separate company is required, or if the existing state-owned companies could assume the responsibility, or if it were possible to purchase the required service from existing private companies.
Government agencies and public bodies have complied with the joint procurement obligation
Government agencies and public bodies purchased product and services under Hansel Oy’s framework agreements for more than EUR 900 million in 2019. Framework agreements are an established practice in central government, and government agencies have largely complied with the joint procurement obligation. However, Hansel has amended the terms and conditions of participation in framework agreements because of the recently changed decision-making practice of the Supreme Administrative Court. The amendment of the terms and conditions of participation has weakened the opportunities of central government procurement units to apply framework agreements.
The Ministry of Finance and Hansel do not share an unambiguous idea of the products and services that fall within the scope of the joint procurement obligation. The Ministry of Finance should therefore assess whether it should specify its decision on the joint procurement obligation.
It is difficult to monitor purchases under the joint procurement obligation in central government’s Handi system, and reporting on purchases in Handi should also be developed. Handi does not support automation of financial administration in joint purchases, because government agencies’ joint purchases are processed in the system in the same way as other purchases.
Through joint purchasing, Hansel strives to promote the policy objectives related to responsible operations. In its framework agreements, Hansel has observed the targets for environmental, economic and social responsibility. However, joint purchases are rarely suitable for making innovative purchases, and it is therefore difficult to use them to promote policy objectives related to innovativeness.
The chapter is based on the following audits
Central government financial audits 2019 (in Finnish, State Department of Åland in Swedish)
Limited company as an organization form of central government functions (13/2020)
Management of employment calls for accurate information on the impact of measures
Central government can support the labour market by effective employment policy measures, such as pay subsidies to businesses or youth workshops. The Government should examine the impacts of new measures through well-planned experimental designs. The public authorities should cooperate more closely to better meet the needs of different customer groups. Not all services can operate online on a self-service basis. Customers of several different services benefit most from face-to-face meetings.
One of the key objectives of the latest Government Programmes has been the promotion of employment. Increasing the relative share of the employed population has been considered important for securing people’s subsistence and welfare services, and reducing the sustainability gap. Central government debt has continued to increase despite a slight upturn in recent years, and the dependency ratio continues to weaken because of the ageing population.
One of the objectives of Prime Minister Sanna Marin’s Government has been to improve the employment rate to 75 per cent and reduce the unemployment rate to 4.8 per cent. In 2020, the coronavirus epidemic has increased lay-offs and unemployment, which has slowed down the achievement of the objectives.
The employment rate does not distinguish between part-time and full-time work
The employment rate discloses the ratio of employed people to the total population aged between 15 and 64. The figure is based on the monthly labour force survey by Statistics Finland. In this survey, a person is considered employed if they have been in gainful employment for at least one hour during the survey week.
The employment rate as such does not reveal anything about the success of the employment policy. If the majority of new jobs are temporary or part-time jobs of only a few hours per week, the role they play in increasing tax revenue is minor compared with full-time paid employment.
Tax revenue is also impacted by the quality of jobs.
An overall picture should therefore be drawn of employment measures and their impacts on general government finances. This would provide more comprehensive data for the preparation of the measures. It is also important to consider the individual: even a temporary job can support wellbeing and prevent social exclusion.
Visualization: The group of the unemployed is constantly changing
In the following visualization, you can view the shifts that have taken place in the labour market compared with the preceding quarter. In the drop-down menu above the visualization, you can select a quarter (between 2017/1 and 2019/3) and gender. To highlight a shift, move the cursor on it. Below the visualization, there is a table that shows all the figures related to the filter criteria you used.
Get background information about the visualization here.
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Pay-subsidized work in a company improves an individual’s employment opportunities
Central government has limited opportunities to create permanent new jobs. However, it can promote the employment of unemployed jobseekers in the open labour market by pay subsidies, for example.
Pay subsidies granted to employers by the state are considered a somewhat effective measure. According to econometric studies, pay-subsidized work in a private company improves a person’s employment probability after the pay subsidy period. In turn, pay-subsidized work in the public sector has not been found to have an effect on the person’s subsequent employment. In 2015–2019, the amount of pay subsidies to the private sector reduced, while the use of pay subsidies in municipalities increased.
Reduction of long-term unemployment requires a long-term perspective – experiments should be carefully planned
Those who have been unemployed for a long time often have a long way to the open labour market, and some of them are unlikely to be employed regardless of support measures. In addition to public employment services (TE services), the long-term unemployed often also need social and health care services, as well as social assistance.
Prime Minister Juha Sipilä’s Government Programme included a regional employment experiment, where municipalities assumed responsibility for employment of the long-term unemployed in their own area. A total of 23 municipalities took part in the experiment, implemented between 2017 and 2018. The experiment was funded by the reallocation of resources.
Visualization: Regional employment experiments reduced unemployment
The five ELY centre areas in which the treatment municipalities of the regional employment experiments are located are highlighted in the map. The boundaries of the treatment municipalities are indicated by a thick line. Those municipalities in the ELY centre areas whose boundaries are not indicated by a thick line did not participate in the experiment. To select a period, use the slider bar above the map and drag the circles to the desired months.
Get background information about the visualization here.
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During the experiment, long-term unemployment and the unemployment rate reduced in the municipalities participating in the experiment (Figure 1). The experiment can also be considered to have reduced registered unemployment, but it is unknown how many people found a job in the open labour market, and how many participated in employment-promoting activities through the TE services.
Registered unemployment was reduced in the municipalities participating in the employment experiment.
The number of experiments and reformed measures related to employment policy is high. During the ongoing government term, the aim is to carry out municipal employment experiments. The employment experiments should be based on carefully planned experimental designs, their results should be monitored systematically, and comparable high-quality impact assessments should be made of them. It should also be ensured that the results of the assessments are used in the development of the measures.
Cooperation between public authorities should be improved
During the programming period 2014–2020, about EUR 70 million of national public funding has been allocated annually to the projects of the European Social Fund (ESF). Of this, 75 per cent comes from central government, and the rest from local government. According to the operational programme approved by the EU, the funding is intended to improve the position of people in a weak labour market position and prevent social exclusion.
The connection between the targets of the ESF project activities and the national employment policy should be strengthened.
However, the participants in the ESF projects have been mainly employed people and students; only about one in four participants has been unemployed. The participants are also in many other respects better positioned than the average unemployed, and it has been impossible to assess the impact of their participation on their employment or income.
The Ministry of Economic Affairs and Employment should ensure that ESF project funding is better targeted at the main target groups. The Ministry should also more clearly define the objective of ESF project activities and their relationship with the national labour market policy.
It has proved difficult to get unemployed participants in the ESF projects. The cooperation between the ELY Centres (Centres for Economic Development, Transport and the Environment), which grant funding for the projects, and the TE Offices (Public Business and Employment Services), which are responsible for unemployed jobseekers, is obviously not working sufficiently well in this respect.
Better cooperation is also required between central and local government. The government proposal related to the transfer of basic social assistance to Kela (the Social Insurance Institution of Finland) failed to ensure sufficiently well that municipal social work and financial support would continue to be interconnected, particularly in the case of disadvantaged customers. The preparation of the law also failed to assess how the legislative amendment would affect the supplementary and preventive social assistance expenditure of municipalities and the operations of TE offices, for example.
When preparing the comprehensive social security reform, the Government should ensure the coordination of benefits and services so that the law can be implemented smoothly from the perspective of both the public authorities and different customer groups.
Services for young jobseekers should be provided on a needs-based one-stop principle
Youth workshops help young people to proceed in their studies and working life. They allow young people to try out different jobs, consider interesting industries and participate in rehabilitation. Workshop training clearly increases young people’s willingness to study: it encourages them to complete their upper secondary education and continue studying.
The Ministry of Education and Culture should continue to develop workshops activities so that they more clearly provide support for under 20-year-olds and young people with only basic education in their studies, and in completing their upper secondary education. The Ministry should also allocate discretionary government transfers for workshops more clearly according to regional needs.
Youth workshops should focus on study and its completion.
Guidance centres are low-threshold one-stop service points that help young people in issues related to studying, finding employment, and wellbeing, for example. At its best, the operation of guidance centres promotes young people’s employment in the long term.
It is often functional to bring services together in one place, as it may be difficult for young people especially to know where to get which service. Many young people would also like to have an opportunity to discuss with an adult who has time to listen to them and help them in various problems and transitions.
Electronic service cannot always replace personal service
The employment and benefit services provided by central government have been increasingly digitalized in recent years. The unemployed and applicants for benefits should register for the services on the Internet, seek open jobs in various search services and apply for benefits online. At the same time, the management of self-service and electronic service channels has become more important.
At the beginning of the 2010s, the future vision of the Ministry of Economic Affairs and Employment was a “virtual TE Office”. Accordingly, the reform of TE services in 2013 was largely based on increasing the use of electronic and other service channels. The aim was to target face-to-face service, which requires the most human resources, at those who need it the most. At the same time, TE offices were closed, especially in sparsely populated areas.
However, it is impossible to completely replace personal service. The average duration of unemployment increased in municipalities where the TE office had been closed. Not all customers can seek employment independently without help, or they need deeper personal advice and guidance.
The long-term unemployed often also need social assistance, which must now be applied for on the Internet. Application for basic social assistance involves similar problems as the digitalization of employment services: some customers are unable to use electronic services.
The chapter is based on the following audits
Effectiveness of youth workshops, and resources and efficiency of outreach youth work (2/2020)
Provision and reforms of employment services in 2015–2019 (7/2020)
Reconciliation of fiscal policy and employment policy (9/2020)
Investments should be examined in terms of their entire lifecycle
The number of assets should be adjusted according to their maintenance need and the funds available. It is extremely important to consider this already when investments are prepared. The costs of investments should be estimated in terms of their entire lifecycle, and the estimates should be presented clearly to the decision makers.
Investments should be given more consideration in the planning of central government finances
Central government assets are given rather little consideration in the planning and monitoring of central government finances. In the most important financial planning document, the state budget, assets are mentioned mainly in proposals on authorizations and appropriations for new investments. Concerning the monitoring of central government finances, assets are presented in the central government balance sheet and total calculations of central government finances. However, their main focus is usually on the amount of central government debt; much less consideration is given to central government assets.
Uncertainties related to the costs and benefits of investments should be clearly presented to decision makers.
Central government real assets should be used efficiently, profitably and effectively, and investments should improve the cost-effectiveness of the state’s financial management. Investments should therefore be given more consideration in financial planning, and their economic impacts should be more clearly presented to decision makers.
Under the regulations on budget drafting, working documents should itemize the costs of investments and the operating costs for the coming years. However, the guidelines are very general, and such itemization has not always been made. The impact of investments on a government agency’s operating expenses should be given more detailed consideration in the preparatory phase. This is particularly important in the case of investments in transport infrastructure, which lead to the construction of very long-lasting structures. An investment decision also ties appropriations to the management and maintenance of the infrastructure for its entire lifecycle.
The operating expenses of central government machinery and equipment have been estimated relatively well. In turn, the estimated price of the actual investment has sometimes been significantly lower than the actual final price. When an investment is planned, it is important to provide the decision makers with clear information about any uncertainties related to the estimated costs and benefits. The more uncertain the assessments are, the more careful further planning the decision makers can require before committing themselves to the final investment.
Planning major investments takes years. The basic time span in the planning of central government finances is four years. This is the period covered by the General Government Fiscal Plan, and the operational and financial plans of the administrative branches. However, it may be too short a period for planning major investments. When planning their operations and finances, government agencies should also make longer-term investment plans. Such long-term investment planning has been started in the national transport system plan, which includes a 12-year action plan for developing the transport network.
Parliament decides on investments in the budget by granting appropriations or authorizations by which a government agency can commit itself to future expenses. The budget proposal has not always clearly disclosed the total costs of an investment, or the share of the investment that remains to be paid. Items may have included several investments that have not been clearly distinguished, and authorizations have been granted for programmes including several significant investments that have not been specified.
Visualization: Central government’s fixed asset balance sheet values
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Figure: Central government’s fixed asset balance sheet values (sources: Government’s annual report for 2019 (Appendix 2 Final accounts: Total calculations of central government finances) and National Accounts).
The repair backlog can be managed better if maintenance costs are taken into account when investments are made
The transport network, i.e. roads, railways and waterways, is central government’s most significant fixed asset item: in the balance sheet, the book value of the transport network amounted to more than EUR 18 billion. In recent years, central government has invested about EUR 400–500 million per year in the transport network and spent about EUR 1.4 billion per year in maintaining the basic transport infrastructure, i.e. maintaining and repairing the transport network.
When making investments, central government should ensure that it can afford to maintain the functionality of the transport network.
The repair backlog of the transport infrastructure assets has been estimated to amount to EUR 2.7 billion. This refers to the amount of money that would be needed to place the state-owned roads, railways and waterways in a good condition in view of the present needs. The repair backlog is the result of central government investments made in new transport infrastructure without sufficient consideration of the maintenance the infrastructure needs during its lifecycle. Optimal lifecycle management of transport infrastructure would require the investment and maintenance operations to be closely linked. New investments would then also have an impact on the level of maintenance funding.
The Governments of Marin, Rinne and Sipilä have all striven to reduce the repair backlog. Sipilä’s Government increased appropriations for the maintenance of the basic transport infrastructure by almost EUR 1 billion in four years. According to Rinne’s, and later Marin’s, Government Programme, the appropriations for the maintenance of the basic transport infrastructure were increased by EUR 300 million. These measures succeeded in halting the growth of the repair backlog. Nevertheless, the repair backlog programme of Sipilä’s Government also had its problems: as the programme was drawn up quickly, there was no time to select the projects sufficiently carefully, and appropriations were also used for purposes other than reducing the repair backlog. The level of appropriations should be foreseeable to make it possible to reduce the repair backlog in a controlled and efficient manner.
The management of the transport network has been developed to enable the transport administration to examine the transport network increasingly as a whole and as one asset item. This makes it also possible to examine the service level and effectiveness of the network as a whole, allocate resources more effectively to the network and apply lifecycle thinking to the management of the network. However, the comprehensive management of the transport network is not fully supported by the decentralization of road maintenance to the Finnish Transport Infrastructure Agency and the ELY Centres (Centres for Economic Development, Transport and the Environment).
As a result of the coronavirus crisis, the Government has decided to make significant new investments in the transport network. As the state is building new transport infrastructure, the need for future maintenance appropriations will grow. In the construction of new transport infrastructure, it is therefore important to consider the lifecycle costs. When making investments, central government should ensure that it can afford to maintain the functionality of the transport network in the future as well.
Lifecycle management is strongly present in the preparation of major defence purchases, but cost estimates are surrounded by uncertainties
The strategic capability projects refer to the HX Fighter and Squadron 2020 projects for replacing and developing the Air Force and Navy capabilities to be phased out after the mid-2020s. The HX procurement budget is EUR 10 billion. The annual operating and maintenance costs are capped at 10 per cent of the military defence budget, which is EUR 270 million at the 2020 cost level. In the procurement decisions related to Squadron 2020, central government has committed itself to costs of about EUR 1.3 billion.
The HX Fighter project aims for the best possible capabilities within the cost limits set.
In building its capabilities, the Finnish Defence Forces examine the entire lifecycle of the defence materiel from needs analysis and planning to phase-out. As a rule, this practice has also been followed in the HX Fighter and Squadron 2020 projects. In these projects, approximately half the lifecycle costs are acquisition costs, while the other half consists of operating, maintenance and midlife upgrading costs.
The preparation of the HX procurement is steered by the project’s decision-making model, which aims for the best possible military capabilities. The preparation of the procurement has been thorough. A key challenge has been the significant uncertainties involved in both the issues described in the decision-making model and the estimated lifecycle costs. The uncertainty of the cost estimate should be taken into account in the further preparation of the project.
Squadron 2020 consists of different subprojects coordinated by the Finnish Defence Forces. The project has been prepared carefully, and risks have been prepared for, but the risks may still be realized: the costs may be higher than expected. The cost estimate committed to in the procurement decision was about EUR 100 million higher than the original budget. In turn, the estimated operating and maintenance costs seem realistic, because they are based on the experience gained from old vessels. The announced total costs of the project do not include every separately purchased subsystem, which is not optimal for transparency.
Government agencies need asset management expertise
Central government assets should be used profitably, and they should therefore be maintained in an optimal condition. The purchase, maintenance and repair of assets can require in-depth expertise from government agencies. Central government has tried to ensure sufficient expertise in the maintenance of its assets by centralizing its asset management. The management of transport infrastructure assets, for example, has been concentrated in the Finnish Transport Infrastructure Agency, and the management of building assets in Senate Properties.
Thus far, the government agencies responsible for asset management have had little cooperation.
Central government still has financially significant asset items even in individual government agencies. In our audits, we have paid attention to situations where the audited organizations have lacked sufficient resources or expertise for good asset management. It is understandable that organizations with particularly scarce resources focus primarily on their core operations. However, it is difficult to achieve sufficient asset management competence if these duties are performed in addition to the regular ones.
Central government has issued few guidelines and descriptions about good asset management, and the agencies responsible for asset management have not been cooperating particularly closely. From the perspective of comprehensive asset management, central government should consider creating a common good asset management practice independent of the asset type to steer government agencies towards good and appropriate asset management.
The chapter is based on the following audits
Lifecycle management of central government assets – machinery and equipment (5/2020)
Expenses of and funding for the strategic capability projects of the Finnish Defence Forces (8/2020)
Lifecycle management of central government building assets (14/2020)
National Audit Office produces information for future needs
The coronavirus pandemic, which broke out in early 2020, has had a significant impact on both the global and national operating environment. At the National Audit Office of Finland, we have contributed to supporting central government’s ability to operate in a timely and cost-effective manner. Under the exceptional circumstances, we have striven to ensure that Parliament obtains information, and we have provided information proactively to support the decision making. To meet the needs of our stakeholders, we have developed new products to clarify and explain audit information, and we have also developed our operations to make them more flexible and customer-centric. We have been able to continue our audit and monitoring operations, even under the exceptional circumstances.
Our audit operations aim for a societal impact. We aim to promote the cost-effectiveness of the state’s financial management and increase confidence in the knowledge base of decision making and in the open, cost-effective and sustainable operations of the Finnish central government. In our audit work, we take account of different stakeholders’ expectations, as well as the risks and changes we have identified in the audit environment. We are in continuous dialogue with our stakeholders to ensure that by providing audit information, we can better support the development of the public sector.
A dialogue based on audit and monitoring information improves the cost-effectiveness of the state’s financial management
We continuously assess the outlook and risks of general government finances, which are currently substantially affected by the coronavirus pandemic and the exceptional circumstances it has caused. In exceptional circumstances, the economy contracts and is subject to direct fiscal policy measures. We have therefore been monitoring general government finances particularly carefully. In May, we issued a fiscal policy monitoring assessment of the management of the situation and the General Government Fiscal Plan. This spring, we also published a series of blog posts on the economic impacts of the coronavirus. In the blog posts, we assessed, for example, the fiscal policy measures taken by the Government and their timing, as well as the possibility of developing the fiscal rules. We have also considered the exceptional circumstances in our ongoing audits and when targeting new audits.
The risk analysis prepared by the National Audit Office is a versatile tool for risk management.
We have drawn up a risk analysis to support our audit work. In the risk analysis, we have identified issues that we expect to be relevant to the state’s financial management and sustainable central government finances in the future. We have identified the following key risks to the state’s financial management: the automation of financial processes, the outsourcing of functions and the operation of the performance management system. In turn, the key risks to central government finances are related to the need for taxation adjustments, competence development and maintenance and decision-making capability. In identifying the risks to central government finances, we utilized the vision of the future laid out by the Prime Minister’s Office. We use the risk analysis in monitoring the operating environment and selecting audit topics. The analysis can also support our customers’ risk management.
Based on our audit and monitoring information, we maintain a continuous dialogue with Parliament, the Government, and the public administration, which implements the decisions. The dialogue is development- and future-oriented, focusing on the cost-effectiveness of financial management and the factors that have substantially either promoted or hampered it. In addition to the audit process, we conduct dialogue in expert meetings, working groups, and other stakeholder meetings and events.
To support the decision making of Parliament and central government, we have published not only audit and monitoring reports and blog posts but also briefing papers. Our briefing papers deal with social issues outlined in the Government Programme or otherwise topical in the light of information produced by both our audits and our stakeholders. The papers focus on central government finances and their related risks. Our stakeholders have given us positive feedback on the briefing papers, particularly as they provide comprehensive information in a concise and timely manner. During the annual report period, we published a total of three briefing papers.
To have a societal impact, audit work should provide an overall view of the state of general government finances over the right channels. Other ways of impacting are opinions and hearings. During the report period, we issued 14 expert opinions to parliamentary committees and 15 opinions to ministries drafting Government proposals or to other public bodies. A total of five committees invited our experts to be heard 14 times in total.
Based on the feedback we collect systematically and the results of our stakeholder survey of 2019, audited entities feel that our audit work has benefited them. According to our stakeholders, we can provide them with material information that helps them to develop their operations. Our stakeholders are satisfied with their cooperation with our auditors. They are also satisfied with our ethical and responsible operations and societal impact, as well as with the service quality and interaction.
A proactive audit approach produces information with a greater impact to support decision making.
Our stakeholders value our increasingly future-oriented and consultative approach. An example of our development-focused and future-oriented work is the audit we completed during the report period on the transfer of basic social assistance from municipalities to Kela (the Social Insurance Institution of Finland) in 2017. In the audit, we assess the preparation of the law and the impacts of the implementation of the legislative amendment on the entire social assistance scheme and the authorities dealing with social assistance customers. The Government is currently preparing a comprehensive reform of the Finnish social security system. In this work, the Government can utilize the audit information on the phases and consequences of the previous legislative preparations.
High-quality audit work enhances confidence in the knowledge base of decision making
By conducting independent audit work, we ensure that state funds are used appropriately, and in compliance with the law and budget. During the report period, we conducted a total of 113 audits: 65 financial audits, 12 performance audits, 2 compliance audits, 3 fiscal policy audits and 31 audits of political party funding. We also monitored fiscal policy and election campaign funding, and published statutory reports on them.
During the annual report period, we audited how the lifecycle costs of the strategic capability projects of the Finnish Defence Forces have been taken into account in the preparations of the projects and in the decision-making model. We can thus ensure that when making the decision on the purchase of HX fighters, Parliament and the public administration have access to the relevant information on the cost effects.
Through audit follow-ups, we monitor whether the public administration has implemented our recommendations. On average, we carry out follow-ups two years after the audits have been completed. The public administration has taken good account of our conclusions when developing its operations. During the reporting period, 82 per cent of our recommendations were implemented in full or in part.
We have made significant changes to our financial audit practices and heard the utilizers of audit information in the development work. Our financial audits aim to provide more comprehensive information in a more centralized manner, even from the customer’s perspective. By concluding financial audits, we will continue to ensure the accuracy of the knowledge base of decision making and to provide decision makers with valuable information on all on-budget entities.
We can also provide decision makers with comprehensive information packages by combining the designs, materials and methods of compliance, performance and fiscal policy audits to conclude ‘multi-type audits’. During the report period, we concluded the ‘Implementation of joint procurements’ and ‘Limited liability company form of business in the organization of central government functions’ multi-type audits.
Oversight of election campaign and political party funding has improved the transparency of funding.
Each year we audit both political party funding and government subsidies granted to political parties, i.e. party subsidies. As a rule, political parties comply well with the funding legislation, but on this occasion, when auditing small parties, we found several considerations on which no statutory disclosures had been submitted. We also discovered cases where the annual maximum laid down in law had been exceeded. After the audits, parties have reported missing data to the political party funding register. This has improved the transparency of political party funding.
It is our duty to assess the setting and implementation of fiscal policy rules. We monitored and assessed the drafting and implementation of the General Government Fiscal Plan, compliance with the Stability and Growth Pact, and the applicability of the EU rules to Finland. We also monitored and assessed compliance with the medium-term objective set for general government finances and the related correction mechanism, the realism of the macroeconomic forecasts used as a basis for fiscal policy, and the reliability of the macroeconomic and budgetary forecasts. We report on the findings of fiscal policy monitoring twice a year. Since 2017, we have also made regular ex-post assessments of forecasts under the Government Decree on the General Government Fiscal Plan. The Government must either comply with the conclusions publicly issued by the National Audit Office or publicly disclose the reason for non-compliance.
To an increasing extent, central government finances are examined on the basis of phenomena. Sustainable development has been included as a cross-sectoral theme in the state budget since 2018. Other examples of phenomenon-based budgeting that have raised public interest are gender-responsive budgeting, wellbeing budgeting, and child-responsive budgeting. We have launched a project to examine the framework conditions and good practices of phenomenon-based budgeting both inside and outside Finland. The project will deliver its results during 2020. We aim to strengthen the knowledge base and provide central government and Parliament with tools as the Government continues to develop phenomenon-based budgeting.
Cooperation enhances confidence in central government’s openness, cost-effectiveness and sustainability
Our operations help to ensure that taxpayers and international actors operating with Finnish society can trust the ability of the Finnish central government to act openly, cost-effectively and in an economically sustainable manner. Confidence is strengthened by cooperation and information sharing. In November 2019, with Statistics Finland, we organized a seminar at which international audit and statistics authorities discussed the significance of reliable data in the steering and monitoring of general government finances. The public authorities stated that it was their common goal to ensure and promote the reliability of accounting and statistical data on public finances and the economic forecasts based on them to enable sensible and sustainable fiscal policymaking.
The significance of consolidated reporting in central government was discussed in December 2019 at the ‘VTV Nyt! State as the parent company in a group of companies’ event. In many countries, such as Sweden and Estonia, consolidated reporting is already applied at the central government level. Combining finances and operations may be a functional solution in Finland. A better overall picture would improve the management of central government and ensure that internal business transactions between special assignment companies and central government are reported.
With the parliamentary Audit Committee, we arranged a seminar on sustainability reporting in February 2020. Eva Lindström, Member of the European Court of Auditors (ECA), presented a recently published ECA review of the EU’s sustainability reporting. According to Lindström, the EU lacks a comprehensive sustainable development strategy that sets goals for the EU’s sustainable development for 2030. Lindström finds that auditors play an important role in monitoring and promoting sustainable development goals by verifying reported information.
Through active stakeholder cooperation, we want to promote a dialogue on topical issues and bring stakeholders together to discuss audit themes. An example of this is the stakeholder report we compiled on the digitalization of learning environments to accelerate the implementation of our audit recommendations by the public administration and stakeholders.
Our experts have participated in different network and working groups and in several international groups for developing audit methodologies and standards.
During the reporting period, we have supported the development of public administration, for example,
in a working group set up to examine the need to amend the Election Act, the Act on Political Parties, and the Act on a Candidate’s Election Funding;
the Advisory Council on Internal Control and Risk Management;
a working group on the development of the procedures and content of central government spending limits and budget planning;
a working group set up for the national preparation of the European Public Sector Accounting Standards (EPSAS);
projects to examine the performance management and steering entity of general government; and
the Government digital security management board (VAHTI).
We took over the presidency of INTOSAI, the global umbrella organization for supreme audit institutions, at the beginning of 2020. During our presidency, we will focus especially on promoting audits related to plastic waste, sustainable traffic, and climate financing.
Our strategy, which was revamped during the previous reporting period, is centred around renewal and human resource development. We focus on competence development by enabling individual development paths through traditional training, tailored training programmes, job rotation, arrangements based on paid leave of absence and diverse on-the-job learning. We conduct regular development discussions with our personnel and draw up a personal development plan for each employee. We can thus ensure that everyone can develop their competence according to our field of operations.
Additional information on the operations of the national audit office during the annual reporting period
The link below opens a PDF file which includes information on the audit publications of the National Audit Office from September 2018 to August 2019. The link will open in a new window.
Audit publications from September 2018 to August 2019
The financial audit reports are available in Finnish only, with the exception of the State Department of Åland and the final central government accounts and the final central government accounts. The follow-up reports are also available in Finnish only.
Dynamic visualizations on economy and employment
On this page, you can view dynamic visualizations that provide more information on topics linked with economy and employment. The visualizations illustrate the development of public expenditure relative to GDP in different countries in the next 50 years, shifts in the labour market in 2017–2019, and the impacts of the regional employment experiments of 2017–2018 on the unemployment rate. In addition, the visualizations present more detailed findings of the financial audits of accounting offices 2017–2019.
Development of age-related public expenditure in the EU countries
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The figure illustrates how the ratio of total age-related expenditure to GDP will develop in the EU countries, Norway and Great Britain according to different scenarios in a time span of about 50 years. Age-related expenditure includes health care, long-term care, pension, education, and unemployment expenditure.
At the top left of the figure, you can opt to view the data on several countries according to a certain scenario (“View by scenario”) or the data on a certain country according to several different scenarios (“View by country”). Select a scenario or country from the drop-down menu at the top right. The scenarios include, for example, the high life expectancy scenario (+2 years), the lower birth rate scenario (–20%), and the higher employment rate scenario (+2 percentage points). You can add scenarios or countries by clicking on them at the bottom of the figure and remove them by clicking on them again.
The figure shows that the future development of public expenditure is highly dependent on the background assumptions used in the calculations. When the growth of age-related expenditure in Finland is examined according to different scenarios, it is obvious that the background assumptions have a significant effect on the results. If it is assumed, for example, that the employment rate will increase more rapidly in the high age groups than in the basic scenario, the expenditure will not grow as fast as in the basic scenario. On the other hand, if it is assumed, for example, that immigration will be lower than in the basic scenario, the expenditure will grow faster than in the basic scenario.
The data on the development of age-related expenditure illustrated in the figure is based on “The 2018 Ageing Report” by the Working Group on Ageing Populations and Sustainability (AWG) of the EU Member States and Commission. The data presented in the figure has been published in 2018 and is updated every three years.
View ”The 2018 Ageing Report” on the website of the European Commission.
The group of the unemployed is constantly changing
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In the graph, you can view the shifts taken place in the labour market compared with the preceding quarter. In the menu above the graph, you can select a quarter between 2017/1—2019/3 and gender. To highlight a shift flow, move the cursor on it. The figures included in the graph are presented in table format below the graph.
The graph shows that most of the employed people were also employed during the preceding quarter. The same applies to people outside the labour force, i.e. students, household workers, conscripts, and similar groups. In these groups, the quarterly shifts in the labour market are relatively small.
The biggest relative changes have taken place in the group of unemployed people. In the fourth quarter of 2018, for example, 76,000 people remained unemployed, 56,000 became employed, and 48,000 moved outside the labour force. Correspondingly, people moved to the unemployed both from the employed (38,000) and from outside the labour force (48,000). The data shows that the unemployed are not a group that remains stable over time but a constantly changing group from which people move both to the employed and outside the labour force and back. Some people remain unemployed for several years, others only for a few weeks.
The statistics illustrated in the graph are based on the data of the monthly Labour Force Survey of Statistics Finland. The Labour Force Survey collects statistical data on the activities and participation in the labour market among the population aged between 15 and 74. The statistics on labour force flows are produced by building a longitudinal sample from the samples of two successive quarters. The sample is limited to the respondents who have been included in the samples in both quarters This makes it possible to view a change in a respondent’s labour market status between two survey times.
Regional employment experiments reduced unemployment
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The five ELY centre areas in which the treatment municipalities (23) of the regional employment experiments are located are highlighted in the map. The experiment lasted from August 2017 to December 2018. The boundaries of the treatment municipalities are indicated by a thick line. Those municipalities in the ELY centre areas whose boundaries are not indicated by a thick line did not participate in the experiment. To select the period you wish to examine, use the slider above the map.
The change in the unemployment rate (percentage points) between the start and end date of the selected period is indicated by colour codes. The negative scale (shades of blue) illustrates a decrease in unemployment, whereas the positive scale (shades of red) illustrates an increase in unemployment during the period selected. For example, examination of the period from July 2015 to December 2016, i.e. two years before the experiment, shows that there was a lot of variation in the change in the unemployment rate: unemployment increased in some municipalities and decreased in others. This variation appears both in the municipalities that later participated in the experiment and in the other municipalities of the same area.
During the experiment, i.e. between July 2017 and December 2018, the unemployment rate fell in most of the municipalities. The unemployment rate did not grow in any of the treatment municipalities contrary to some of the other municipalities in the ELY centre areas concerned.
The data presented in the map is based on the municipality-specific unemployment figures of the employment register of the Ministry of Economic Affairs and Employment. The figures can be found under “Labour Market” in the open Statfin database (pxnet2.stat.fi) of Statistics Finland.
Financial audit findings 2017–2019
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In the figure, you can view the audit findings of the National Audit Office for 2017–2019. The data presented in the figure is based on the financial audit reports of the accounting offices and discloses whether
the final accounts present true and fair information
the internal control of the accounting offices is effective
the accounting offices have complied with the budget
the accounting office has been obliged to report what measures it has taken as a result of the caution issued to it.
The figure shows which accounting offices have been cautioned regarding the above issues (“Show cautions”). To see the reasons that have led to the cautions, click on the name of the accounting office.
The number of cautions has slightly decreased in the past three years, as follows:
in 2017, cautions were issued to 21 accounting offices,
in 2018, cautions were issued to 16 accounting offices,
in 2019, cautions were issued to 15 accounting offices.
The number of accounting offices audited per year can vary: in recent years, the number has been slightly over 60. This means that in 2018–2019 every fourth and in 2017 as many as every third accounting office was cautioned.
Eight accounting offices have been cautioned each year in at the least the past three years.
In the financial audit for 2019, more than one caution were issued to
Finnish Immigration Service
Finnish Government Shared Services Centre for Finance and HR
Finnish National Agency for Education
Finnish Transport and Communications Agency
Finnish Transport Infrastructure Agency, and
Development and Administrative Centre for ELY Centres and TE Offices
For 2019, the National Audit Office obliged two accounting offices to report to it on the measures they had taken to remedy the state of affairs for which they had been cautioned.
The Finnish Transport Infrastructure Agency was to report how it would aim to remedy the deficiencies related to the processing of the incomplete assets to be transferred to Traffic Management Finland Group, the budgeting and monitoring of project-specific reallocation, and the information in and arrangement of accounting vouchers.
The Government Shared Services Centre for Finance and HR was to report how it would remedy the deficiencies in the internal control of the centralized financial and HR management duties.
Accessibility of the visualizations
On this page, you can examine the website’s dynamic visualizations in accessible text format. The description of each visualization starts by a description of what is shown in it. This is followed by a summary of the key contents of the visualization. The source of the information is disclosed at the end of the description. The descriptions help you to picture the key contents of the visualizations. Thus, the page does not describe each detail in the visualization but aims at presenting a summarized description.
Lisätietoja antaa
Mika Sainio
Principal Fiscal Policy Auditor
Monitoring and Oversight
Ville Vehkasalo
Principal Performance Auditor, D.Soc.Sc.
Audit
