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The Office of the Auditor General's investigation of the Norwegian Armed Forces' sale of F-5 fighter aircraft

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Summary

Background and objectives of the investigation

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). The aircraft were first put up for sale in 2002 with a minimum price of NOK 100 million for all 15 aircraft. The Storting asked the Office of the Auditor General to investigate the entire process relating to the sale of the two F-5 fighter aircraft.

Findings

In 2003, the Norwegian Armed Forces and the Ministry of Defence had a poor understanding of export control regulations

The attempted sale to Greece through the Israeli company IAI and the assumed Greek company Seaways in 2003 illustrates that the Norwegian Armed Forces and the Ministry of Defence did not have an adequate understanding of the export control regulations in 2003.

The Norwegian Armed Forces' follow-up of the work concerning the disposal of military equipment has been inadequate

Internal controls in the Norwegian Armed Forces have been insufficient to ensure compliance with applicable laws and regulations or to safeguard adequate audit trails.

The Ministry of Defence has not adequately fulfilled its overall responsibility concerning disposals

  • The Ministry of Defence has established a framework for proper management, yet the risk of errors and deficiencies associated with disposals has still not been identified.
  • The Ministry of Defence's handling of the case was inadequate in identifying non-compliance with applicable requirements when the ministry approved the direct sale of the F-5 aircraft in both 2008 and 2015.

The audit trail concerning the process of selling the F-5 aircraft was poor

  • The Norwegian Armed Forces' logistics organisation (FLO) has no established routines or systems to ensure that important documentation is archived, and in many cases, no justification has been given for the choices that were made.
  • The Ministry of Defence had one instance where there was no documentation, and one case of undocumented case handling prior to approval of the sale.
  • The Ministry of Foreign Affairs lacks records to provide an overview of the documents relating to the F-5 aircraft in the export control archive. It also has different versions of documents where it is no longer clear which is the final version. There are also instances where emails worthy of being archived have not been archived.

The principle of equal treatment of stakeholders has not been followed

  • NGL gained a competitive advantage over other stakeholders because it had been storing the aircraft.
  • FLO's follow-up of stakeholders has been inconsistent.
  • Requirements imposed by FLO on stakeholders have been inconsistent.

The final sale did not maximise the financial return

The fact that NGL had overheard the price that FLO had agreed with the Spanish air force may have been a contributory factor behind NGL being able to purchase the aircraft for such a low price. NGL was prepared to pay NOK 5.1 million per F-5 aircraft as recently as in 2012.

Ministry/ministries:

Riksrevisjonen, Storgata 16, P.O. Box 8130 Dep, 0032 Oslo, Norway

Phone: +47 22 24 10 00

Org.nr: 974 760 843