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The Office of the Auditor General’s investigation into internal control in the defence sector

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Summary

The Norwegian Armed Forces make substantial procurements and manage large quantities of materiel. Good internal control is therefore important if the Armed Forces are to be able to prevent and uncover irregularities. The goal of the investigation was to assess whether, based on the decisions and intentions of the Storting, satisfactory internal control has been implemented in the defence sector with a view to preventing and uncovering irregularities.

Method

The investigation is based on a questionnaire survey, interviews, document analysis and a review of 98 procurements.

Results

The investigation shows that the Ministry of Defence and the Armed Forces have established a good formal framework through regulations and guidelines in order to ensure sufficient internal control and prevent irregularities. Inadequate implementation of this framework has been uncovered in the organisation, however. Among other things, this applies to the requirements for risk management set out in the Regulations on Financial Management in Central Government. The investigation shows that half of the Armed Forces’ units have failed to prepare written risk assessments. The quality of control activities in the individual units has also been found to be inadequate, among other things in relation to verifying compliance with regulations and procurement procedures.

The review of procurements shows several violations of the requirements that procurement records must be kept and that grounds must be stated for exemptions from the competition requirement. Furthermore, poor invoice verification was uncovered in the Armed Forces’ driving training. Workdays of up to 19 hours have been invoiced without the Armed Forces having questioned this.

In the Armed Forces’ accounting system, SAP, a main process has been defined that must be followed in connection with procurements, but this was only done in 28 per cent of the procurements made in 2010. When the main process is not followed, there is no documentation of the decision to carry out the procurement, and there is also an increased risk of procurements being made by unauthorised personnel.

The investigation also shows weaknesses in connection with the administration of framework agreements. The Armed Forces acknowledge that loyalty to framework agreements is challenging, but the Armed Forces’ control in this field is nevertheless inadequate. The control of whether framework agreement suppliers invoice the correct prices is also unsatisfactory, and this entails a risk of overcharging.

The impartiality of personnel who carry out procurements is a necessary precondition for ensuring that the most competitive tender is chosen. The investigation shows that, except for the central procurement entities in the Armed Forces Logistics Organisation, few regular impartiality assessments are carried out. Both in previous investigations and in this investigation, the OAG has found weaknesses in the Armed Forces’ materiel management. Materiel is not satisfactorily registered in the administrative system SAP, and there are also weaknesses in the units’ internal control. The investigation shows that the extent to which units in the Armed Forces are subject to control and followed up by superior levels varies. Some units are followed up closely, while, for other units, responsibility for ensuring that internal control is carried out in a satisfactory manner is largely delegated.

Ministry/ministries:

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

Phone: +47 22 24 10 00

Org.nr: 974 760 843