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– Poor management and control of fighter aircraft sale

​Both the Norwegian Armed Forces and the Ministry of Defence had inadequate internal controls during the process associated with the sale of F-5 fighter aircraft, which took place during the period 1999–2015. The documentation, archiving and audit trails for the sales process in the Norwegian Armed Forces, Ministry of Defence and Ministry of Foreign Affairs were poor. "The defence authorities had an inadequate understanding of the rules concerning the export of military material in connection with the attempted sale in 2003, which is extremely serious," says Auditor General Per-Kristian Foss.

Published 5/2/2017 12:00 PM

​Document 3:7 (2016–2017) The Office of the Auditor General's investigation into the Norwegian Armed Forces' sale of F-5 fighter aircraft was submitted to the Storting on 2 May.

In 2015, the Norwegian Armed Forces sold two of its original fleet of 15 F-5 fighter aircraft for more than NOK 200,000 to private US company Northern General Leasing LCC (NGL). Twelve of the aircraft have been donated to schools and a museum, and one is used for military exercises. All of the aircraft were initially put up for sale in 2002 for a minimum price of NOK 100 million. The Storting asked the Office of the Auditor General to investigate the entire sales process.

The Office of the Auditor General has identified serious deficiencies in a number of areas. These deficiencies relate to a lack of: understanding of the regulations regarding export controls, audit trails concerning important documentation, equal treatment of prospective purchasers, and preparations to ensure the best possible financial return from the sale.

"The Norwegian Armed Forces' internal controls have been inadequate, and the Ministry of Defence has not adequately followed up its overall responsibility," highlights Foss.

It became apparent that an attempted sale to Greece in 2003 involved a key representative of the Israeli defence industry. The Norwegian Armed Forces had not checked the ownership circumstances before it signed a binding agreement with an assumed Greek company in the autumn of the same year.

"The Office of the Auditor General believes that the case illustrates the lack of established routines for checking prospective purchasers of defence equipment, despite the Norwegian Armed Forces' responsibility as an exporter. This is extremely serious, as the checking of prospective purchasers helps to ensure Norway does not sell military equipment to regions which are at war or where there is a threat of war," says Foss.

The archiving and documentation of the sales process conducted by the Norwegian Armed Forces, the Ministry of Defence and the Ministry of Foreign Affairs has been inadequate. The Norwegian Armed Forces' logistics organisation has not established routines and systems to ensure that important documentation is archived, and the decisions that have been taken have not always been justified. There have been several instances in the Ministry of Defence where case handling has not been documented and documentation has been absent. The Ministry of Foreign Affairs lacks records to provide an overview of the documents relating to the F-5 aircraft in the archive for export controls, and has different versions of documents where it is unclear which is the final version. There have also been instances where emails worthy of archiving have not been archived. "This is strongly reprehensible," says Foss.

The Office of the Auditor General has identified several breaches of the principle of equal treatment of prospective purchasers in the sales process, along with cases where the final sale process did not facilitate the maximum possible price.
"For many years, the aircraft were stored by the company NGL, which ultimately purchased the aircraft. Employees of NGL were present during the negotiations with Spain in 2014 and overheard the price for which Norway was willing to sell the aircraft. This may have been a factor behind the price paid by NGL, which was as low as NOK 116,000 per aircraft. NGL was prepared to pay NOK 5.1 million per aircraft as recently as in 2012," says Foss.

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