Procurements from in-house entities in wellbeing services counties
Non-tendered procurements from in-house entities are a common practice to procure services in wellbeing services counties. However, procurements from in-house entities may involve legal risks, in particular with regard to the control criterion.
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Scope of the audit
- Lawfulness of procurements from in-house entities
- Ownership steering and oversight of in-house entities
- External and internal audit of in-house entity arrangements
Key findings
- Legal risks were identified in the wellbeing services counties’ procurements from in-house entities in relation to the fulfilment of the control criterion laid down in section 15 of the Public Procurement Act when the owner has only very limited influence over the in-house entity.
- Individual development targets were identified in the organisation and implementation of the steering and oversight of in-house entities, for example in the wellbeing services counties’ group instructions, in the definition of the powers of the group management and in the representation in the governing bodies of in-house entities.
- The statutory financial reporting related to in-house entities was inadequate in a number of audited entities. Attention should be paid to the accuracy of the reported information.
- Audit bodies within the wellbeing services counties’ or municipalities’ control system have conducted only a very limited amount of compliance auditing targeted at procurements from in-house entities and related arrangements.
Briefly
The NAOF audited the organisation of procurements from in-house entities by the wellbeing services counties, the health, social and rescue services sector of the City of Helsinki and the HUS Group, as well as the steering and oversight of in-house entities. Procurements from in-house entities are an exception to the rule that public procurements must be tendered. They may only be carried out if the requirements under the procurement regulations are met. Direct procurements from in-house entities are a common practice in wellbeing services counties.
Based on the audit, wellbeing services counties’ procurements from in-house entities involve legal risks. Particularly the wellbeing services counties with only minority shareholdings have very limited means of exercising control over their in-house companies. In some of the audited entities, the National Audit Office identified needs to develop the steering, oversight and financial reporting of the wellbeing services counties’ in-house entities.
Wellbeing services counties’ procurements from in-house entities involves legal risks particularly when a wellbeing services county with a minority shareholding has only very limited means of exercising control over the in-house company.
Around
150
Total number of in-house entities in the wellbeing services counties, the HUS and the City of Helsinki in autumn 2024
Recommendations of the National Audit Office
The wellbeing services counties ensure that they have actual control over the in-house entities they own in order to ensure the lawfulness of procurements from the in-house entities.
The wellbeing services counties ensure, where necessary, that their group management's powers and division of responsibilities have been defined and that their group instructions have been drawn up in compliance with the Wellbeing Services Counties Act.
The wellbeing services counties, the HUS Group and the City of Helsinki pay attention to the accuracy and adequacy of the information reported in the financial statements and submitted to the State Treasury.
Timing of follow-up
The follow-up of the audit will be conducted in 2028.
Contact persons
Riku Stengård
Principal Financial Auditor, Authorised Public Accountant
Financial audit
Audit areas: Ministry for Foreign Affairs, Ministry of Defence, Ministry of Justice, Ministry of the Environment, Ministry of the Interior, Office of the President of the Republic of Finland
Laura Hyvönen
Principal Financial Auditor, Authorised Public Accountant
Financial audit
Audit areas: Ministry of Agriculture and Forestry, Ministry of Economic Affairs and Employment, Ministry of Education and Culture, Ministry of Social Affairs and Health
