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The Office of the Auditor General’s comments concerning the Central Government Financial Statements for 2001- Doc. No. 1 (2002-2003)

On 8 November, the Office of the Auditor General submitted its annotations and cases submitted for information linked to the government administration’s financial statements for the accounting year 2001 to the Storting. All the comments are published in Document no. 1 (2002-2003).
Published 11/8/2002 10:00 AM

In total, there were 22 matters raised, 16 annotations and six cases submitted for information. No matters were raised under the Ministry of Children and Family Affairs, the Ministry of Fisheries, the Ministry of Cultural Affairs, the Ministry of the Environment, the Ministry of Trade and Industry or the Ministry of Transport and Communications.

The Office of the Auditor General did not approve the Directorate of Taxes’ accounts for the Revenue Service or the Norwegian College of Veterinary Sciences’ accounts for 2001. The Office of the Auditor General regards it as particularly serious that the Directorate of Taxes’ accounts for the Revenue Service, which represent a significant part of the revenues included in the Central Government Financial Statements, contained such serious errors and deficiencies that they could not be approved.

The Storting was also informed that the National Hospital (University of Oslo), Aetat (the Directorate of Labour), the Norwegian Directorate of Immigration, the Norwegian Agricultural Authority and the Sami upper secondary schools in Karasjok and Kautokeino had carried out a number of measures to correct the errors and deficiencies that had prevented their accounts for 2000 being approved. The Office of the Auditor General has approved these organisations’ accounts for 2001.

The Ministry of Finance has implemented a number of training schemes to improve the central government’s accounting and financial management functions, and in general, there appeared to be considerable improvements.

The audit of the accounts and benefit schemes of the National Insurance Services revealed that there were still deficiencies in the internal control system. In some areas, controls were going to be established via new or improved computer systems and specialisation of tasks. In general, systematic, risk-oriented work was being done to improve the quality of the performance of tasks. However, in many areas the regulations are so complicated that internal control is extremely difficult and resource-intensive. The audit demonstrated that this can lead to erroneous payments.

There were still considerable errors and deficiencies linked to the central government’s procurements. The errors seemed to be in part due to insufficient competence in the area and in part because satisfactory routines had not been established for follow-up of the applicable regulations.

Inadequate management and monitoring of large development projects in the area of ICT continued to cause problems. The results were frequent delays and extra costs for the central government, and it takes longer than expected to realise efficiency gains.

Ministry-by-Ministry overview of the annotations:

The Ministry of Finance

The Office of the Auditor General was not able to approve the Directorate of Taxes’ accounts for the Revenue Service for 2001. There were several errors and deficiencies that affected the completeness and auditability of the accounts. For example, no matched financial statement was submitted for the agency as a whole, as prescribed by the regulations that govern the service. Further, there were failures in internal control routines and insufficient general reconciliation and checks prior to the reporting of figures to the Central Government Financial Statements.

The Directorate of Taxes had developed and started to use a new administration system for value added tax (MVA3). For a number of reasons, the MVA3 system has demonstrated material errors and deficiencies that have had considerable negative consequences.

The Ministry of Defence

The Office of the Auditor General was critical of the Ministry of Defence, because steps to reduce the number of employees in the Norwegian Armed Forces were taken before the structure for the various different branches had been decided. This led to a great deal of uncertainty concerning the processing of redundancy packages. Further, the reductions have had little impact on the number of established posts and tasks. In some cases, people that received redundancy packages were then rehired as consultants.

The accounts of the Norwegian Armed Forces contained significant errors and deficiencies. There were weaknesses in the routines for use of funds allocated for adult education. A number of instances were detected of violation of the overtime provisions in the Working Environment Act and unwarranted use of exercise supplements.

The Ministry of Petroleum and Energy
There was inadequate compliance with the regulations for public procurements in the Ministry. The auditor’s criticism pertained to insufficient tendering procedures and failure to obtain tax certificates. The Ministry was criticised for similar inadequacies last year as well.

The State’s Direct Financial Interest in petroleum operations (SDØE)
In connection with the administrative system for the State’s Direct Financial Interest, the Office of the Auditor General looked more closely at the instructions and guidelines that have been laid down and at the process for transferring responsibility from Statoil to Petoro AS. Some of the elements linked to the submission of accounts were raised, including the backlog in reconciliation and differences in relation to the figures reported in to the Central Government Financial Statements. It was also pointed out that it has taken a long time to establish the necessary guidelines and that the relationship to the financial management regulation for the central government has not yet been fully clarified.

The Ministry of Justice and the Police

It has taken too long to develop joint ICT systems for the police. In addition, the Ministry has not given priority to introducing previously developed systems throughout the entire police force. This may have entailed extra costs for the central government and reduced the possibilities for exploiting efficiency gains.

The Office of the Auditor General’s test of overtime remuneration paid out in Oslo police district in 2001 revealed several violations of the provisions governing working hours for the police. Some of the working hours provisions have been practised in an unfortunate and faulty manner, meaning that the district incurred higher overtime costs than necessary.

The Ministry of Local Government and Regional Development

The costs of developing a computer system to handle cases concerning foreign citizens and refugees (DUF) were considerably higher than the NOK 25 million that was allocated to the project after redistribution of funds. The Ministry has reported that a new cost framework for the project is somewhere between NOK 48 and 68 million.

The development project was initiated without sufficient monitoring of progress, quality and costs. For example, an overall budget and accounts were not compiled for the costs connected to the development of the computer system. It is still unclear when the system can be put into full use.

Grant for the EU’s regional co-operation programme – Interreg
The Storting was not informed about the overall Norwegian commitments in the co-operation projects under the Interreg III programmes for 2000-2006, which were stipulated to NOK 560 million. Several weaknesses were detected linked to the routines for monitoring Norwegian funds.

The Ministry of Foreign Affairs

The Office of the Auditor General’s review of NORAD’s administration of grants to the Office for International Development Cooperation and the Atlas Alliance revealed significant weaknesses in NORAD’s routines and practices. It has also taken too long to develop guidelines and routines for administration in this area.

The Ministry of Labour and Government Administration

There were several deficiencies in the administration of the scheme for central government guarantees for claims for pay in connection with bankruptcy, etc. (the wage guarantee schemes). The problem areas concerned the Directorate of Labour Inspection’s follow-up of administrators in bankruptcy and the Directorate’s own routines, rules and processing of cases. Several of the instructions that the Ministry issued in the letter of allocation for 2001 were not sufficiently implemented or followed up.

The Norwegian Labour Inspection Authority’s use of coercive fines
As early as in 1995, the Office of the Auditor General remarked that the routines for the use of coercive fines were not satisfactory. There are still several weaknesses in the Directorate of Labour Inspection’s routines and processing of cases, and it has taken an inordinate amount of time to implement adequate corrective measures.

The Directorate of Public Construction and Property
Several errors and deficiencies were detected in the Directorate of Public Construction and Property’s accounts for 2001. The auditors found that the quality of the reconciliation of interim accounts and accounts for current and fixed assets was unsatisfactory.

The Office of the Auditor General raised matters concerning the Directorate of Public Construction and Property’s procurement of administrative consultancy services in connection with the accounts for 1998 and 2000. The Office of the Auditor General’s audit for 2001 showed that there were still errors and deficiencies linked to procurements.

The Ministry of Education and Research

The Office of the Auditor General was not able to approve the accounts of the Norwegian College of Veterinary Science for 2001. The College’s accounts were not approved in 1999 either. The Ministry has instructed the College to carry out a project to devise and introduce routines and guidelines to stabilise the accounting ­function during the course of autumn 2002.

The Ministry of Social Affairs

In 2001 too, the Office of the Auditor General had remarks concerning the accounts of the National Insurance Service. For example, this pertains to the fact that there was an increase in outstanding claims in connection with erroneous payments, that there were discrepancies between what was recorded as a rehabilitation loan and what appeared in the debt certificates, and that collection of outstanding claims in connection with the National Insurance’s advancing of allowances was not very effective.

Weaknesses were also detected with regard to the routines pertaining to access to the National Insurance Service’s computer systems. In addition, deficiencies were found in the internal control system in connection with payment of maternity and adoption benefits, which resulted in errors in payments. Inadequate control routines and errors in payments were also detected in connection with refunding of expenses for medication etc. (“blue prescriptions”) and settlement with private laboratories and X-ray institutes.

The Ministry of Health

The Office of the Auditor General has informed the Storting about the fact that the National Institute of Forensic Toxicology used special agreements in 2001 to prepare expert opinions. As a result of this, fees were paid out for expert opinions to a value of just under NOK 6 million. Although providing expert opinions is one of the Institute’s main tasks, most of the statements were prepared outside ordinary working hours. The intention behind the agreements was that the statements would be prepared in ordinary working hours without special remuneration. The Office of the Auditor General has noted that the Ministry of Health is following up this matter actively.

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