National Audit Office’s Annual Report to Parliament 2023

Auditor General’s review: Exceptional crises highlight the importance of sustainable fiscal management

The current year 2023 is important for Finland’s public administration. The negotiations conducted after the parliamentary elections of last spring resulted in Finland’s most important political document: the Government Programme, which contains the objectives and policy orientations of the new Government.

The new government term has begun in a challenging situation, and placing public finances on a sustainable path requires determined and broad-based measures. It has long been known that the economic and administrative policy environment is significantly affected by, for example, climate change and the ageing population. In addition, general government finances have been hit by exceptional crises – the Covid-19 pandemic and Russia’s war of aggression in Ukraine – which have led to a substantial increase in central government expenditure.  This year, the economic outlook has also been affected by the energy crisis, inflation and rising interest rates.

To support the preparation of the Government Programme for the new parliamentary term, the National Audit Office (NAOF) published its viewpoints on key topics in economic and administrative policy for the first time. The viewpoints address, for example, means of achieving balanced general and central government finances to support the sustainability of the state’s fiscal management in the coming years. The viewpoints are based on the key findings and conclusions of the NAOF’s audits and fiscal policy monitoring, published during the 2019–2023 parliamentary term.

The National Audit Office will continue to work effectively and efficiently

The current year is also important for the National Audit Office. We now operate in a new line organisation with a new management system in the Audit, Monitoring and Oversight and Shared Services Units. The aim of the reorganisation was to clarify responsibilities and to better support the implementation of the NAOF’s core tasks: audit and oversight.

The significant challenges faced by Finland’s public finances highlight the importance of a well-functioning and cost-effective central government as well as sustainable and transparent use of public funds. It is important that the accountability of the central government is implemented as this makes it possible to ensure that public funds are used in compliance with the law and Parliament’s decisions. The National Audit Office aims to promote the achievement of these objectives through its audit activities.

The NAOF also aims to promote transparency in public administration and decision-making through its oversight activities. We oversee election campaign and political party funding within the powers conferred on us by legislation, and we are preparing for the introduction of the Finnish Transparency Register in 2024.

In 2023, the National Audit Office will overhaul its strategy for the period 2024–2030 and in this work, consider the impacts that future change factors are anticipated to have on the NAOF. The new strategy will focus on ensuring that the NAOF will be able to perform its statutory tasks effectively and efficiently, taking into account the anticipated impacts of the future change factors on both the NAOF and the central government. In preparing the strategy, we have utilised our employees’ strong competence and their views on the NAOF’s activities and field of operations.

The annual report compiles the key conclusions of our audit and oversight activities

In this annual report, we present, as usual, the most important findings of our audit and oversight activities and key conclusions regarding the state of central government finances and public administration during the annual report period, from September 2022 to September 2023. The report also presents the NAOF’s activities and effectiveness.

Chapter 1 compiles the observations made in the audits related to risk and continuity management. Active risk and continuity management are needed both in the central government and in state-controlled companies. This ensures that society will function in all circumstances and that at the same time, attention is paid to the risks and liabilities the central government is exposed to. Government resolutions on the state’s risk management policy and ownership policy are currently being prepared. We consider it important that the new government resolution on the state’s ownership policy highlights the importance of not jeopardising the state’s strategic interests by way of decisions made by the state owner or the state-owned company itself.

Chapter 2 presents a summary of the financial audit reports of the central government accounting offices. In the 2022 financial audits of the accounting offices, we issued more cautions than in the previous year on shortcomings in internal control and errors in financial statements or in operational efficiency data. The uniformity of the Budget has improved, which makes it easier to decide on the Budget, promotes the central government’s compliance with it and enhances the state’s fiscal management and financial administration.

Chapter 3 focuses on the audits targeted at benefit and service systems. The coordination of social security benefits and the services related to them as well as boosting incentives for work have been some of the key goals in the preparation of the social security reform. During several parliamentary terms, efforts have already been made to make public service systems and various permit processes more effective, for example by taking customer needs into account and by means of digitalisation. Audits targeted at different systems show that improvements have been achieved but there is still work to do. The overall management of the different systems can be improved by specifying the division of tasks between the service providers and by clarifying and harmonising the steering practices. More attention should still be paid to customer needs and regional special features in the development of services as the shortcomings identified will not be solved if the digitalisation of services is service provider driven.

Chapter 4 deals with the key findings of the audits related to infrastructures. Infrastructures, such as ICT systems, transport infrastructure and building stock, are an important part of the government’s fixed assets. The lifecycle management costs arising from infrastructure maintenance and repair backlog should be presented comprehensively in the budget proposals and the General Government Fiscal Plan together with new investments and acquisition costs. Common goals, acquisition and management procedures as well as monitoring practices are also needed for the lifecycle management of fixed assets.

Chapter 5 deals with the conclusions of the audits related to the financial information and statistics that provide the basis for decision-making. Medium-term projections and fiscal statistics provide a reliable basis for fiscal decision-making. However, in our audits, we have repeatedly drawn attention to shortcomings in government proposals regarding the assessment of the economic impacts of reforms. We also find it important that statistics on local government finances and the finances of wellbeing services counties are produced on a centralised basis so that uniform financial data is available for decision-making. Correctly timed foresight reports and centralised coordination of information would increase the use of foresight information in decision-making and put the Government’s foresight activities on a more structured basis.

Chapter 6 compiles information on the activities and effectiveness of the National Audit Office. The benefits of our auditing depend on how comprehensively our audits cover the central government and how public administration implements the recommendations made in our audits. Based on our monitoring, public administration has implemented most of the recommendations issued in our audits. Public administration also uses discretion as to when and where it implements the recommendations, taking into account both financial and operational aspects.

Sami Yläoutinen
Auditor General