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Weaknesses in the management and follow-up of Entra Eiendom AS - Document no. 3:2 (2006-2007)

Entra Eiendom AS has not been managed in accordance with the intentions of the Storting as to the object of the company. The results of the enterprise have been overstated in performance reporting, and weaknesses have been detected in the internal management of the company.
Published 11/22/2006 2:00 PM

These are some of the main conclusions of The Office of the Auditor General’s investigation of Entra Eiendom AS, Document no. 3:2 (2006-2007) that was submitted to the Storting on 22 November.

The main purpose of the company is to meet the state sector’s need for premises in competition with private players. The investigation reveals that Entra Eiendom’s business concept and strategies are targeted towards private players and municipal and county authorities in a manner that is not in accordance with the Storting’s terms for the formation of the company. In particular the Office of the Auditor General (OAG) points out that the company has spent NOK 1.3 billion on the purchase and development of new properties that for the most part are rented out to private tenants.

Jørgen Kosmo, Auditor General, has stated that in this investigation the OAG has emphasised that Entra Eiendom has disbursed considerable funds in the rental of property to private players, thus failing to comply with the Storting’s premises when first establishing the company.

Entra Eiendom’s reporting shows that the company has created substantial value added from its formation in 2000 until the end of 2005. However, the investigation reveals that the company’s contribution to this increase in value has been considerably lower than the company has indicated in its reporting. Nonetheless it is the view of the OAG that the company has achieved good results in the period in question.

The investigation has also detected a number of weaknesses in the internal management of the company. This applies mainly to weaknesses in the documentation of processes and in decisions related to property sales as well as to the fact that the company’s results-based wage system is keyed to the company’s reported profit performance. The weaknesses in the management of the enterprise constitute in total a critical risk factor for the company.

The OAG has not documented that transactions in connection with the sale of the properties Cort Adelers gate 33 and Fritzners gate 12 have resulted in an unfair advantage being achieved at the expense of the company. However, Entra Eiendom AS has been unable to give any good explanation of why the company first sold Fritzners gate 12 and then bought it back, and it is uncertain whether it was profitable to repurchase the property.

The Ministry of Trade and Industry states that the investigation has not revealed circumstances that indicate that the company has bought or sold properties or carried out other transactions on terms that imply that an unfair advantage has been gained at the expense of the company. Moreover, the ministry points out that the company’s activities have been chiefly directed at the main purpose of supplying premises to cover the need in the public sector. The ministry also underlines that a comparison with other real estate companies shows that Entra Eiendom has demonstrated a better profit trend in the period from 2002–2005 than the average for the companies in the comparison.

The document in Norwegian can be downloaded from this website or ordered from Akademika booksellers, tel. +47 22 18 81 23.

The provision concerning delayed public access to documents that are compiled by or sent to the Office of the Auditor General in connection with Document no. 3:2 (2006-2007) has been repealed, cf. Section 18, paragraph 2 of the Auditor General Act.

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