Go to the contents

National Audit Office’s Annual Report to Parliament 2022

fi sv en

Effective public administration requires systematic planning and concrete objectives

Good management of central government finances requires public administration to operate according to plan. Sufficiently concrete long-term objectives lay the foundation for steering and monitoring the activities, cost-effectiveness and financial impacts of public administration.

In the audits conducted by the National Audit Office of organisational mergers, competence development, recruitment and climate finance, it was found that planning has not been sufficiently detailed and long-term. When government agencies have been merged, many objectives and their intended impacts have remained vague from the perspective of monitoring. The planning of the number of central government staff has been short-term in the case of duties for which the central government itself trains the workforce. Furthermore, agencies do not sufficiently anticipate the competence they will need. Between 2017 and 2021, Finland has granted more than EUR 600 million in total in international climate finance as part of development assistance. However, the Ministry for Foreign Affairs has lacked a clear plan on how to implement the Government’s policy lines for increasing climate finance.

The need for organisational mergers should be justified, and their objectives should be defined in detail

Mergers of central government agencies should be better prepared and have concrete objectives, and their economic impacts should be assessed and monitored. Mergers aim to develop and increase the efficiency of government agencies’ activities. However, based on the audit conducted, they do not necessarily lead to any major changes in the merged organisations.1

In the audit conducted, the National Audit Office assessed how organisational mergers in the central government are prepared, implemented and monitored. It was also assessed as to whether the objectives set for reorganisations are met. Two recent agency mergers were used as examples: the establishment of the Finnish Competition and Consumer Authority and the establishment of the Finnish Food Authority. In 2013, the Finnish Competition Authority and the Finnish Consumer Agency merged to form the Finnish Competition and Consumer Authority, operating in the administrative sector of the Ministry of Economic Affairs and Employment. The Finnish Food Authority, in turn, was established in 2019 in the administrative sector of the Ministry of Agriculture and Forestry through a merger of the Agency for Rural Affairs and the Finnish Food Safety Authority. The functions transferred to the Finnish Food Authority also included some of the information management services of the IT service centre of the National Land Survey of Finland and the supervision of the use of plant protection products, which had been the responsibility of the Finnish Safety and Chemicals Agency.

It was found in the audit that the economic, digital and other impacts of the mergers resulting in the establishment of the Finnish Competition and Consumer Authority and the Finnish Food Authority were assessed during the preparatory phase in a very general or even poor manner. In the assessment of financial impacts, it is possible to present alternative measures, detailed data on preparedness for funding, information on the development of impacts over different time periods and comparative data on benefits and costs. No financial or other impact assessments were carried out of the mergers resulting in the establishment of the Finnish Competition and Consumer Authority and the Finnish Food Authority. It would be good if the need for and objectives of agency mergers were defined in the future in an accurate and concrete manner, also specifying their impacts in euros.1

In the planning phase of a merger, it would be important to take into account the monitoring needs and to define concrete objectives, criteria for success and evaluation processes.

The mergers were not preceded by a comprehensive survey of the available alternatives or an analysis of the alternative methods or solutions to achieve the desired objectives. In the government proposals, alternatives were discussed only briefly or not at all. No sufficiently concrete objectives and indicators were set to enable assessing the success of the mergers. From the perspective of monitoring, many of the objectives and their intended impacts have remained vague. Mergers can be effectively monitored only if the objectives set for them are sufficiently concrete and if there are processes and success criteria or indicators in place to enable assessing their achievement and impacts. In fact, the monitoring needs should already be considered in the planning phase of a merger.1

The central government does not have such common principles or guidelines for agency reforms that would encourage examining the reforms from the perspective of all agencies and the overall organisational structure. Nor have there been any guidelines concerning assessing the necessity of agency mergers. However, it should be noted that the Ministry of Finance issued a recommendation in December 2021 on the principles to be observed in the organisation of activities in central government agencies.1

Organisations remain almost unchanged after mergers

Based on the audit, agency mergers had little impact on the management systems and the organisation of the core tasks of the Finnish Food Authority and the Finnish Competition and Consumer Authority. The old organisational structures are still clearly visible in both agencies. In the Finnish Food Authority, the most important change concerned information management, which was brought together to form a new operating entity.

Leadership and the management system have a major impact on how and to what extent the objectives set for the merger are achieved. In organising and carrying out their core tasks, the audited agencies still rely on the management positions and systems used in the old agencies. In the Finnish Food Authority, new organisational structures were also created to meet the needs for strategic management.1

After the mergers, the performance management of the Finnish Competition and Consumer Authority and the Finnish Food Authority have developed from detailed steering to broader upper-level steering of a more strategic nature. Instead of setting concrete performance targets, the ministry steering the agency provides a strategic direction that the agency is expected to follow.1

According to the audit, agency mergers have had little impact on performance management. Both performance targets and the organisation of performance management have remained more or less unchanged even though performance targets have become more strategic in nature. As performance management has become more strategic in nature, the ministries have monitored the achievement of the objectives set for the mergers only randomly or to a limited extent. Improving the monitoring of mergers would be necessary in order to measure the cost-effectiveness and societal impacts of the activities of the new organisations.1

The number of central government staff is planned only task or agency-specifically

The National Audit Office conducted two audits to assess competence development, recruitment and related staff planning in the central government. The audits focused on central government steering2 and the activities of government agencies in competence development and recruitment.3

The number of staff in on-budget entities has decreased significantly in the 2000s: in 2000, it was about 124,000, but in 2021, it was only about 78,000. The most important reason for the decrease has been reorganisations. For example, the university institution and its staff became off-budget resources in 2010. In recent years, however, the number of staff has increased again: between 2016 and 2021, the increase was more than 5,000 persons, i.e., about seven per cent.2

The central government does not plan the number of staff strategically and in the long term.

The increase in the number of staff had not been planned. The central government does not have such strategic staff planning that would define the desired number of staff in the longer term. The appropriate number of staff depends on the tasks included in the central government’s on-budget activities and on how much the central government uses appropriations for staff salaries and other personnel expenses.2

The number of staff in central government on-budget entities was 123,731 in 2000 and 78,230 in 2021. Between 2000 and 2015/2016, the number of staff decreased by a total of 50,747 persons. The biggest drop took place in 2009, when the number of staff decreased by about 40,000. The number of staff continued to decrease steadily until 2015, when it was 72 984. From 2017 to 2021, the number of staff has started again to show a modest increase.
Figure: The number of staff in on-budget entities in 2000–2021. (Source: Tutkihallintoa.fi)

The planning of the number of staff is the responsibility of ministries, which steer the activities and finances of their administrative sectors, as well as the agencies and institutions themselves. On the other hand, the Government also steers the number of staff in various ways. Government programmes and reports set targets for the number of staff at government agencies, and the task or agency-specific numbers of staff have been steered even in great detail in the financial planning.2

Targets for the number of staff have been set, for example, for the Police, the Emergency Response Centre Administration and the Defence Forces. The targets have been mostly consistent and reasonably clear, although the targets set for the Police, in particular, have often been changed. The targets set for the Police have applied only to the number of police officers, although about a quarter of the Police staff are other than police officers. Setting a target only for the number of police officers may encourage pursuing the target by replacing other Police staff inappropriately by police officers.2

The steering of the number of staff has been consistent in the sense that in budget proposals, the targets set for the number of staff have been presented as a factor affecting the amount of appropriations. On the other hand, the amount of appropriations has been affected by several factors with opposite impacts: an appropriation may have been raised in order to increase the number of staff but, at the same time, it may have been decreased on other grounds.2

The central government itself organises the training required in the duties for up to a quarter of its staff.

The central government itself organises the training required in the duties for up to a quarter of its staff. The staff groups trained in this manner include, for example, officers of the Defence Forces, border and coast guards, police officers, emergency response centre officers and the guards of the Criminal Sanctions Agency. In these staff groups, successful recruitment requires that a sufficient number of persons complete the required qualification each year. Over the past decade, there have been great differences in the number of available student places for emergency response centre officers, police officers and guards and the number of students who have completed their education. Long-term planning of student places is needed in order to achieve the targets set for the number of staff. The Ministry of Finance should, together with the other ministries, strengthen the central government’s long-term staff planning, especially in the case of the duties for which the central government itself trains the workforce.

The competence needed in government agencies is not yet planned in the long term

The central government has long been aware that it needs competent personnel in order to function effectively. For example, the latest HR policy guidelines, issued by the Government in 2001, state that the different units of central government must be able to acquire and retain competent, motivated and continuously developing employees capable of working. Based on the education level, the competence level of the central government staff has increased: in 2021, about 57 per cent had a university degree, which is 17 percentage points more than in 2002.2, 3

The central government’s HR steering group has emphasised competence development, and this target can now be found in most performance agreements. However, the targets that the agencies’ performance agreements set for competence development are still general in nature. Therefore, they have a weak steering effect, and it is difficult to assess whether they have been achieved. Based on job satisfaction surveys, the central government staff are fairly satisfied with how their work enables learning and renewal and how the central government, as an employer, strives to maintain and improve competence. The central government’s inputs into competence development can mainly be examined for the part of training expenses. However, a significant part of competence development takes place through on-the-job learning.2, 3

The competence development targets recorded in performance agreements have a weak steering effect, and it is difficult to assess how they have been achieved.

The number of staff, retirement and other loss of personnel as well as replacement recruitment have played a key role in government agencies’ staff planning and foresight. Agencies do not systematically anticipate the competence needed in the future or take loss of competence into account in their personnel planning. This poses a risk to the activities of the agencies and the achievement of their operational objectives. The agencies have no documented overall view of the human resources and competence needed in the future.3

Government agencies have tried to develop the competence of their staff by promoting mobility. Increasing the mobility of staff, competence and knowledge has been one of the central government’s shared HR policy objectives. However, no target level has been set for mobility, and the mobility of knowledge and competence have not been defined or examined in greater detail. The agencies have, therefore, understood mobility to refer mainly to staff mobility. In order to promote mobility, the concept should be defined in greater detail. In particular, it should be clarified what the mobility of knowledge and competence could mean in practice.2, 3

Finland’s international climate finance lacks clear objectives and implementation plans

In the Paris Agreement, Finland has undertaken, together with other industrialised countries, to finance climate measures in developing countries. However, in the audit conducted, it was found that Finland does not have a published plan regarding the amount, allocation and effectiveness of the increasing climate finance.4

International climate finance is part of Finland’s public development assistance, which is managed by the Ministry for Foreign Affairs. In 2017–2020, the climate finance reported by Finland amounted to EUR 47–147 million and accounted for around 6–15 per cent of the total spent on development cooperation. According to preliminary data, climate finance in 2021 amounted to EUR 183 million, which is approximately 15 per cent of the total development cooperation payments. Prime Minister Marin’s Government has outlined that Finland’s climate finance will be increased and targeted equally at climate change mitigation and adaptation.4 In March 2022, the Ministry for Foreign Affairs announced that Finland’s international climate finance will almost double during this government term.

The planning of climate finance has not been particularly transparent.

The Ministry for Foreign Affairs has lacked a clear plan for how the Government’s policy lines will be implemented overall and what kinds of choices will be made in the allocation of the finance and on what grounds. The theories of change and aggregate indicators in the Ministry’s development policy have also lacked quantitative objectives for climate change mitigation and adaptation. As the monetary level or other strategic objectives have not been defined publicly, the planning of the finance has not been particularly transparent. Therefore, it is also difficult to establish its effectiveness.4

The level of Finland's international climate finance has been showing an increasing trend. In 2019, the amount Finland channelled to climate actions in developing countries reached a record level of EUR 147 million. In 2020, the finance amounted to EUR 131 million. In 2016 and 2018, the climate finance was considerably lower, amounting to EUR 43 million in 2016 and EUR 47 million in 2018. The clearly lower amounts were due to the cuts made in development cooperation funds during the previous government term and the fact that certain large payments were made in other years.
Figure: Finland’s public international climate finance 2010–2020. (Source: Suomen julkisen kansainvälisen ilmastorahoituksen toimeenpanon suunnitelma (Implementation plan for Finland’s public international climate finance). Publications of the Ministry for Foreign Affairs 2022:2.)

The objectives of climate finance have been specified to some extent in the Ministry for Foreign Affairs’ steering documents that concern individual financial instruments and the organisations channelling the finance. However, the Ministry’s practices and possibilities of influencing the effectiveness of the various climate-related financial instruments vary to a great extent, and the Ministry does not systematically monitor the climate results of all financial instruments.4

To be able to monitor and report on the effectiveness of climate finance appropriately, the Ministry for Foreign Affairs should have available as systematic and consistent information as possible on the results of climate actions implemented through different financial instruments and organisations. This is a major challenge for both Finland and other donor countries.4

The National Audit Office recommended that the Ministry for Foreign Affairs should draw up a public plan for how it will increase and allocate Finland’s international climate finance, justifying the choices, priorities and influencing objectives included in it. At the same time, the Ministry should develop the operational planning and decision making related to climate finance. It would also be important to justify decisions on climate finance from the perspective of climate results and to ensure that the results of the finance are monitored, entered in statistics and reported as systematically and consistently as possible.4 In March 2022, for the first time, the Ministry of Foreign Affairs published Finland’s long-term plan for international climate finance, extending until 2026.

Further information

Lassi Perkinen
Director for Performance Audit