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National Audit Office’s Annual Report to Parliament 2020

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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.

Further information

Jenni Leppälahti
Planning Director