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Efficiency and financial performance in state-owned companies should be followed up more closely

The Office of the Auditor General notes that there is a substantial variation in important areas in the ministries’ implementation of the state’s ownership policy. - Follow-up of efficiency and financial performance are essential for state ownership. Several of the ministries and state-owned companies should handle this better, says  Auditor General Jørgen Kosmo.
Published 11/27/2012 12:30 PM

Document 3:2 (2012–2013) The Office of the Auditor General’s supervision of the management of state-owned companies for 2011 was submitted to the Storting on 27 November 2012. The purpose of the supervision is to assess whether the management of the state’s interests complies with the Storting’s resolutions and prerequisites.

For 2011, the Office of the Auditor General has comments on the implementation of the government’s ownership policy and the management of the state’s interests in companies and enterprises under the Ministry of Health and Care Services, the Ministry of Culture, the Ministry of Education and Research, and the Ministry of Agriculture and Food.

Financial performance and efficiency should be followed up more closely

The Office of the Auditor General notes that several ministries and entities have a considerable potential for strengthening their follow-up of the companies’ financial performance and efficiency.

  • For several companies with commercial objectives no yield targets and dividend expectations have been stipulated in compliance with the government’s ownership policy.
  • Companies with commercial objectives are followed up to a marginal extent through comparison with similar companies.
  • Follow-up of companies that do not have commercial objectives as regards efficient operations is not good enough.
  • For several of the companies that had yield targets, the average yield in the period 2007–2011 was considerably lower than the yield target.
- The objective of commercial ownership is to achieve the highest possible yield over time. It is therefore important that the state to a greater extent makes comparisons with similar companies and communicates expectations to the effect that the state-owned companies are to be in the upper level in such comparisons, says Kosmo.

The work regarding board compositions should be strengthened

Several ministries and entities can strengthen their work considerably as regards board compositions and remuneration of boards, the Office of the Auditor General points out:

  • There is a substantial variation in the boards’ estimate of how much time is spent on board offices, also between companies of approximately the same size. There is substantial variation in directors’ remuneration seen in relation to time spent and the general manager’s fixed salary.
  • Board chairs’ own estimates of time spent on their office varies from 2 to 150 24-hour equivalents, with an average of 35. Among companies with more than 10 000 employees, the estimated time spent varies from 25 to 140 24-hour equivalents.
- It is important that the boards have a capacity adapted to the companies’ size, complexity, purpose and character. The great differences registered in the use of resources entails that there is very different capacity in the boards surveyed. This particularly applies to the largest companies, says Kosmo.

There are also major variations in board remuneration. For board chairs, remuneration per 24-hour equivalent varies from NOK 350 to NOK 18 100, and for directors from NOK 610 to NOK 20 870.

- Board remuneration should reflect responsibilities, expertise, time use and the complexity of the entity. We cannot see that there is a reasonable basis for the variation in board remuneration that our survey has found, says Kosmo.

Weak ownership management of the reorganisation of Oslo University Hospital

Neither the South-Easernt Norway Health Authority nor the Ministry of Health and Care Services have implemented necessary corrective measures early enough in the reorganisation of Oslo University Hospital, the Office of the Auditor General notes.

- None of the ownership levels have exercised good ownership management, says Auditor General Jørgen Kosmo.

The Office of the Auditor General refers to the fact that a critical risk of the reorganisation not being implemented as planned was reported up through the chain of command a repeated number of times without any measures being implemented proportionate to the reported risk picture.

Challenges such as the poor-quality buildings, scattered localities, the financial frameworks for the health enterprise and fragmented and different ICT solutions in the hospitals to be merged, have in particular impacted Oslo University Hospital’s ability and opportunity to complete the reorganisation task. The South-Eastern Norway Regional Health Authority (HSØ) was familiar with the challenges before the task was assigned. The consequences for Oslo University Hospital’s implementation ability and treatment of patients were not sufficiently assessed or taken into consideration by HSØ in planning the project. Due to this, HSØ has contributed to creating unrealistic expectations to the implementation of the reorganisation of Oslo University Hospital, the Office of the Auditor General concludes.

Patients wait considerably longer than shown in statistics

The waiting list statistics for the specialist health service shows a positive development from 2010 to 2011. At the same time, the Office of the Auditor General review of 76 forms of treatment shows that that several health enterprises have weaknesses in their reporting of waiting times. For a great number of the patients these health enterprises have registered their waiting period as completed before treatment had begun.

- Incorrect information about waiting times means that patients receive wrong information when they choose hospitals. This in turn will lead to lower quality of the waiting list data, says Auditor General Jørgen Kosmo.

The Norwegian Broadcasting Association’s use of resources should be followed up more closely

While the Norwegian Broadcasting Association (NRK) improved its TV production productivity for several years up to 2008, this has been considerably reduced in the 2008–2011. From 2008 the number of programmes broadcast with high production costs has also declined. The Ministry of Culture has not obtained information suited to assessing whether NRK’s operations are efficient. The Ministry should strengthen its follow-up of NRK’s use of resources, the Office of the Auditor General concludes.

Weaknesses in the student welfare organisations’ finances and financial management follow-up

Several student welfare organisations have not adapted their operations to their financial situation, the Office of the Auditor General notes. Some of the student welfare organisations had a low equity ratio in 2008, and weakened their financial strength further in the period 2008–2011. In 2011, 11 of 24 student welfare organisations subsidised non-students either taken together or in individual services. The accounts for six other organisations do not enable assessing whether subsidising exists. A considerable amount of work remains to ensure that the student welfare organisations comply with the prohibition against subsidising non-students, the Office of the Auditor General points out.

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