Background and goal of the investigation
Norway has cooperated with Russia for many years in the fields of environmental protection and nuclear safety, and between 1995 and 2010 the Storting allocated approx. NOK 1.5 billion via the Government’s Action Plan for Nuclear Safety. The scrapping of nuclear submarines and securing of lighthouses along the Kola peninsula has been one of the most important focus areas.

The Office of the Auditor General’s investigation into radiation safety and protection of the environment against pollution from radioactive sources in North-Western Russia, Document No 3:9 (2009–2010), was submitted to the Storting on 11 May 2010. The investigation was conducted as a parallel audit with the Accounts Chamber of the Russian Federation.

As a result of weaknesses identified in the Office of the Auditor General's Document 3:9 (2009-2010), the Office of the Auditor General and the Accounts Chamber of the Russian Federation agreed to continue their cooperation by auditing the financial management of two selected projects aimed at securing radioactive waste and spent nuclear fuel in North-Western Russia, the lighthouse project and the scrapping of nuclear submarine 609.

The goal of this parallel audit has been to check whether funds allocated to the two selected projects for the securing and removal of radioactive sources in North-Western Russia were used efficiently, and whether these projects had implemented a system for internal control of the use of funds. Auditor General Jørgen Kosmo and Chairman of the Accounts Chamber of the Russian Federation Sergej Stepashin signed a memorandum containing the results of the respective investigations and joint assessments on 1 September 2011.

Method
The investigation was carried out as a parallel audit with the Accounts Chamber of the Russian Federation, and the two countries' supreme audit institutions prepared a joint plan for the audit and agreed on a methodological approach. The investigation is based on document analyses, accounts analyses and interviews. Interviews were carried out with Russian contracting parties and subcontractors in cooperation with the Accounts Chamber of the Russian Federation.

The investigation was also based on data obtained through the Office of the Auditor General’s investigation into radiation safety and protection of the environment against pollution from radioactive sources in North-Western Russia, cf. Document No 3:9 (2009–2010). Data were primarily collected for the period 2005-2011.

Results
The investigation found shortcomings in the accounting documentation of the Russian project manager for the lighthouse project, the county administration in Murmansk. Nerpa shipyard, which has been responsible for the scrapping of nuclear submarines, has not kept separate accounts for the implementation of the individual projects. As a result of the auditing cooperation between the Office of the Auditor General and the Accounts Chamber of the Russian Federation, both the Russian project managers have now established units for internal control of the use of Norwegian funds.

The investigation also found weaknesses in the Ministry of Foreign Affairs' system for internal control and follow-up of Norwegian funds allocated to projects in North-Western Russia. The contracts entered into between Norwegian and Russian project managers do not contain any requirements for competitive tendering or access to the accounting documentation of Russian contracting parties. Pursuant to Russian law, competitive tendering must be carried out for the procurement of goods, work and services for which public funds are used, but international aid funds are not covered by the federal procurement regulations. It is therefore important that the Ministry of Foreign Affairs monitors that contracts entered into between Norwegian and Russian project managers are used actively to ensure the efficient use and effective control of Norwegian funds. The Norwegian project managers for the scrapping of 609 and the securing of lighthouses have monitored the projects closely during the project period and carried out physical inspections of achieved milestones before paying the Russian party. The investigation nevertheless shows that the information on which payments made by the Norwegian to the Russian side are based is not always well documented. Nor does the Ministry of Foreign Affairs require Norwegian project managers to report how their activities are organised in order to prevent and uncover corruption, misuse of funds and irregularities.

The weaknesses uncovered in the internal control system on the Norwegian as well as the Russian side entail a risk that irregularities may not be prevented or uncovered.

During the period 2005-2009, Murmansk county administration received more than NOK 148 million for the implementation of the lighthouse project. The value of the contract for the scrapping of submarine 609 was approx. EUR 4.7 million (2006).