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National Audit Office’s Annual Report to Parliament 2022

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The National Audit Office focuses on its statutory tasks and prepares for new ones

Audit recommendations are well addressed in public administration: in the last two years, over 80 per cent of them have been implemented either in full or in part. In addition to audit activities, the National Audit Office also has other statutory tasks that contribute to supporting democracy, the sustainability of public finances and citizens' trust in the functioning of public administration. Our field of operations will be further expanded by the new task of maintaining a transparency register and the authorisation to audit the wellbeing services counties.

The National Audit Office of Finland is an independent audit and monitoring authority, the role and duties of which are laid down in the Constitution of Finland. We audit the management of central government finances and compliance with the budget, monitor fiscal policy rules, oversee political party and election campaign funding and process complaints and reports on irregularities concerning the management of central government finances and assets. Our activities focus on ensuring the cost-effectiveness of the state’s financial management and on promoting trust in the knowledge base, transparency and sustainability of decision making. The audit task includes performance audits, financial audits, compliance audits, fiscal policy audits and multi-type audits, combining several audit types. We collect information on the external impacts of audits, for example by monitoring the implementation of audit recommendations.

The external impacts of audit activities are built on the implementation of audit recommendations

We target our audits, as timely as possible, at issues that are relevant for central government finances and significant for decision making. The aim is to ensure improvement of the cost-effectiveness of the state’s financial management and enhancement of trust in the knowledge base of decision making and in open, cost effective and sustainable operations of the Finnish central government. Our audits are based on the National Audit Office’s approved audit plan. We completed a total of 84 audit reports in 2021 and plan to complete a total of 83 audit reports in 2022.

From 2011 to 2021, the total number of the NAOF's audit publications has varied between around 100 and 140 . In 2011 and 2012, the NAOF issued more than 130 reports a year. Between 2013 and 2020, the NAOF issued on average 110 reports a year. The number of reports issued was the lowest in 2016. The biggest group of audit publications is financial audit reports.
Figure: Audit and monitoring publications in 2011–2021.

Audit reports and reports to Parliament are the main deliverables of audit activities. The total number of audit reports has remained relatively stable in the 2011–2021 reference period, although a small decrease can be observed if the trend is examined over a longer time period. The number of financial audit reports reflects changes in the number of accounting offices. The number of performance audits decreased in 2020–2021. However, starting from 2020, we have completed multi-type audits, combining performance audits with elements of compliance audits or financial audits. The largest number of performance audit reports were completed in 2011 and 2015–2017.

Audit reports provide recommendations for remedying or developing activities in the audited administrative entity. The implementation of recommendations is monitored through follow-ups and constitutes one of the basic indicators for the effectiveness of our activities. In a follow-up, we examine whether the entity has taken appropriate measures on the basis of the audit findings to remedy the state of affairs or to develop its activities. Based on the monitoring, the rate of implementation of audit recommendations remained at roughly the same level in 2020–2021. In the follow-ups carried out in 2021, the total number of recommendations examined was 84, of which 82 per cent had been implemented either in full or in part. In 2020, 84 per cent of the recommendations had been implemented either in full or in part; in 2019, the corresponding figure was 78 per cent.

Follow-ups are carried out on a regular basis on fiscal policy, compliance, performance and multi-type audits after 2–3 years from the audit, when the audited entity has had enough time to develop its activities in line with the recommendations. Based on the follow-up observations, each year some of the recommendations are, nevertheless, left unimplemented either in full or for the most part. There are many reasons for this: for example, development measures may be underway or have not been considered necessary. Sometimes the National Audit Office may also find the measures taken insufficient. In 2020–2021, a total of 26 recommendations remained unimplemented or their implementation had been postponed.

Follow-ups provide valuable information on the implementation of audit recommendations.

In financial audits, the implementation of audit recommendations is monitored as part of the audit process, and no separate follow-ups are carried out. In 2021, 85 per cent of the recommendations made in financial audits had been implemented. The total number of recommendations examined was 194, which includes the recommendations made in the audit of common central government processes. The level of monitoring financial audit recommendations was changed in 2021; therefore, the data are not fully comparable with those of previous years.

Monitoring and oversight play an important role in society

In addition to auditing, our statutory tasks include various types of monitoring and oversight tasks, such as the oversight of political party and election campaign funding, fiscal policy monitoring and the receipt and processing of complaints and reports on irregularities. Starting from 2023, we will also maintain a transparency register and oversee lobbying activities.

Anyone can file a complaint with the National Audit Office about any action that is in violation of the state budget or otherwise unlawful from the perspective of the management of central government finances. It is also possible to file a complaint about defects in political party or election campaign funding disclosures. A central government authority, agency, unincorporated state enterprise or state fund must, without delay, report to the National Audit Office any irregularities in its activities that are related to the funds or assets managed by it. The number of complaints and citizen letters has doubled annually during the past two years, and we have also received more reports on irregularities. In 2021, we received almost 150 complaints, reports on irregularities or citizen letters. We also advised citizens in 120 cases after being contacted regarding complaints or irregularities. The complaints and reports on irregularities concerned, for example, the fighter and ICT procurements, enforcement issues, legal aid, the representation expenses of ministries, the funding of research and development cooperation and government grants.

Transparency of election campaign funding strengthens trust in democracy.

Transparency of election funding strengthens citizens’ trust in the functioning of the democratic system. In Finland, citizens have been guaranteed access to information on candidates’ election campaign funding. Candidates have a statutory obligation to disclose the election campaign funding they receive, and these disclosures are public documents. The parliamentary election working group set up by the Government assessed the needs to develop the Election Act, the Act on Political Parties and the Act on a Candidate’s Election Funding and submitted its final report in February 2022. The working group proposed reforms that would improve the conditions for oversight and the transparency of political party and election campaign funding.

The team of the National Audit Office that is responsible for overseeing election campaign funding receives election funding disclosures from those subject to the disclosure obligation and publishes them on its website. We also oversee that all those subject to the disclosure obligation submit a disclosure and that the disclosures provide true and fair information. All candidates may submit an advance disclosure before the elections. Once the results of the elections have been confirmed, it is known who are obliged to disclose their election funding.

The first county elections in history were held in January 2022. They were preceded by extensive preparations at the National Audit Office. In the county elections, an advance disclosure was submitted by the deadline by 3,067 candidates, i.e. 29 per cent of all candidates. The obligation to file an election funding disclosure applied to a total of 2,785 candidates in the 2022 county elections. In February 2022, we reported to Parliament on the oversight of election campaign funding in the 2021 municipal elections.

Each year we also audit political party funding and government grants awarded to political parties, i.e. party subsidies. In 2021, we conducted 52 audits, on which we reported to Parliament in February 2022. As a rule, the overseen entities have kept their accounts appropriately, and the audit reports of certified auditors have improved in recent years. However, there is still room for improvement in the accounting of the overseen entities and in the work of certified auditors.

We also monitor compliance with the Fiscal Policy Act and the provisions issued under it as well as the setting and implementation of the rules steering fiscal policy. Since 2017, we have also regularly prepared an ex-post assessment of economic forecasts under the Decree on the General Government Fiscal Plan. The aim of the monitoring is to promote transparent and easy-to-understand fiscal rules as well as stable and sustainable general government finances. Fiscal policy monitoring is an activity of a continuous nature, and we report on its results twice a year. The Government must either comply with the public conclusions issued by the National Audit Office or publicly disclose the reason for non-compliance.

In the autumn 2021 report, we assessed that Finland’s fiscal policy had supported the economy appropriately during the Covid-19 pandemic and that Finland’s public finances were recovering from the Covid-19 crisis slightly faster than anticipated. In the spring 2022 assessment of the General Government Fiscal Plan, we stated that the war in Ukraine had weakened the economic outlook of the coming years. We drew attention to the deviations from the spending limits that the Government has made during this parliamentary term. We assessed that some of these deviations were contrary to the spending limits principles. In both reports, we highlighted the need to ensure the achievement of the objective of bending the growth curve of the debt-to-GDP ratio, which is included in the Government’s sustainability roadmap. This is important in order to prepare, for example, for the risks of higher interest rates. The sustainability roadmap should be updated rapidly.

The National Audit Office is preparing for its new tasks

During this year, we have prepared for our new tasks as the auditor of the wellbeing services counties, the keeper of the transparency register and the authority overseeing lobbying activities.

In their report of 2 December 2021, the parliamentary steering group and expert group set up by the Government in spring 2020 proposed enacting a transparency register act and establishing a transparency register. In June 2022, the Government submitted a proposal for the Transparency Register Act. According to the proposal, the Act would enter into force on 1 January 2024. According to the Government proposal, legal persons or private entrepreneurs should register with the transparency register when they start professional long-term lobbying activities directed at Parliament and the ministries. Providers of professional lobbying-related consulting, such as influencer communications offices, should also register. Those entered in the register should submit disclosures on their lobbying or consulting activities to the transparency register twice a year. The information will be published online.

The transparency register will increase the transparency of lobbying activities.

The purpose of the transparency register is to improve the transparency of decision making, combat inappropriate influencing and strengthen citizens’ trust. Lobbying is regarded as an acceptable part of the democratic system, and the transparency register will make it transparent. According to the Government proposal, the National Audit Office will be the controller responsible for maintaining the transparency register. We will also oversee compliance with the disclosure obligations related to the register. In addition, the National Audit Office will set up an advisory board, which will define good lobbying practice and monitor the effectiveness of legislation and a transparency register in other respects as well.

We are also preparing to start auditing the wellbeing services counties in 2023. When preparing for this task, we will compile a picture of the structures, financial management and activities of the wellbeing services counties and plan how to conduct the audits. We will also identify the key sources and channels of information on the finances and activities of the wellbeing services counties. In addition, we will build a knowledge base and establish monitoring practices for the National Audit Office to enable the financial management of all wellbeing services counties to be audited on a regular basis, either annually or periodically. At the same time, our audit activities will expand to cover the organisation of health and social services.

We will audit the activities and financial management of the wellbeing services counties for the part of state funding.

The National Audit Office will be responsible for auditing the legality, cost-effectiveness and appropriateness of the activities and financial management of the wellbeing services counties for the part of the funding they receive from the state. The state funding for the counties is divided into three parts: general funding (central government transfers), investment funding and other funding (government grants). The audit right covers the wellbeing services counties, the entities, foundations and institutions belonging to the group of wellbeing services counties and the entities jointly controlled by the counties.

As far as the state funding is concerned, the audit right also extends to the health and social services and rescue services of the City of Helsinki and to the entities that have been set up to perform these tasks and are controlled by the City of Helsinki. (Act on Wellbeing Services Counties 611/2021, Act Amending Section 2 of the Act on the National Audit Office 660/2021, Act on Organising Healthcare and Social Welfare Services and Rescue Services in Uusimaa 615/2021.)

As an auditor of the wellbeing services counties, it is our task to provide Parliament, the ministries and their subordinate organisations with objective and independent information on the finances and activities of the counties. Thus, we can also assess and monitor the achievement of the overall objectives set for the reform and any subsequent changes in relation to the state of general government finances and the sustainability gap.

The information contained in the figure is provided in the report text.
Figure: The audit tasks of the National Audit Office in a wellbeing services county.

Reorganisation and digitalisation improve the efficiency of the National Audit Office

In the annual report period, from September 2021 to August 2022, we have started to clarify the organisation and management model of the National Audit Office and to pursue the objectives of the audit and monitoring activities of the National Audit Office more efficiently. In autumn 2021, we carried out a self-assessment of the management and organisation model, on the basis of which we started to revamp the model in spring 2022. In this work, we focus on increasing the efficiency of decision making and the flow of information, clarifying the responsibilities and target setting, developing the supervisory work and evaluating the use of the project model. The new organisation and management model is planned to be effective as from the beginning of 2023. In addition, we continue to develop our sustainability reporting. The first sustainability report of the National Audit Office was published in summer 2021.

We have also developed the digital foundation of the National Audit Office and increased the use of data and analytics in audit and monitoring. The objective of the digital development is to promote the external impacts of the activities of the National Audit Office. The development work has focused on efficient information management, technical architecture as well as the structures and tools needed in the digital development. The new data repository solution of our financial audit enables uniform processing, extensive utilisation and more efficient and secure analysis of audit data. We have also piloted robotics in auditing, and our aim is to put it into production use during 2022.

In 2022, the National Audit Office launched two important system investments in order to enhance the efficiency in performing its statutory tasks related to financial audit and the transparency register. The new data system of financial audit improves audit planning and implementation and makes it easier to steer the auditing and control its quality. The system improves the documentation of audits and the common flow of information. The new task of maintaining the transparency register requires the building of a register system and related online service.

Audit publications 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 2021 to August 2022.

Audit publications from September 2021 to August 2022

The financial audit reports are available in Finnish only, with the exception of the State Department of Åland. The follow-up reports, reviews and memorandums are also available in Finnish only.

Further information

Jenni Leppälahti
Planning Director