Central government finances continue to face challenges – the impacts of measures should be assessed comprehensively

Central government finances continue to face significant challenges. Responding to them requires a comprehensive impact assessment as well as cooperation between the administrative branches.

“Sufficiently concrete long-term objectives lay the foundation for steering and monitoring the activities, cost-effectiveness and financial impacts of public administration,” says Auditor General Sami Yläoutinen.

Impacts should be assessed as comprehensively as possible already at the planning stage

The National Audit Office has audited several reforms that aim to restructure public administration and prepare it for changes in the operating environment. The audits have been targeted, for example, at benefit systems, climate finance, organisational mergers in public administration, and measures to support economic activities and growth.

According to the audits, the setting of objectives and the cooperation between administrative branches have improved. However, decentralised steering and insufficient monitoring make it difficult to assess the cost-effectiveness and societal impacts of the activities. Therefore, less information is also available to support the planning of future measures.

Moreover, the impacts are not always assessed sufficiently comprehensively. In the preparation of the social security reform, for example, it would be important, according to the NAOF, to pay special attention to incentive traps as a whole and to examine whether other traps remain in legislation or its implementation that hamper the achievement of the objectives set for the reform.

Audit recommendations have an impact on public administration

The NAOF’s audit recommendations are well addressed in public administration: 85 per cent of the recommendations we made in financial audits were implemented in 2021. In addition, over 80 per cent of the recommendations made in performance, compliance and fiscal policy audits have been implemented either in full or in part in the last two years. The NAOF carries out follow-ups after 2–3 years from the audit, when the audited entity has had enough time to develop its activities.

“We continue to target audits at administrative reforms and measures to support balanced central government finances. By undergoing changes ourselves, we ensure high-quality audit and monitoring, that is, the implementation of our core task,” says Yläoutinen.

The National Audit Office submits a report on its work to Parliament annually in September. On the basis of the annual report, the Parliamentary Audit Committee may make observations on the management of central government finances for Parliament's position.

Read the publication: National Audit Office's Annual Report 2022