According to its new strategy, the National Audit Office of Finland (NAOF) will focus on phenomenon-based audit work. One of our impact areas is A Safe, Healthy and Affluent Society. We share the same goal with the central government actors and stakeholders: we want that the state economy has a sustainable foundation and is managed effectively and in compliance with regulations even in the long term. In this blog series, we deal with the changes taking place in audit work and the operational environment from the perspective of the NAOF’s new strategy.
In the publication Opportunities for Finland, the Permanent Secretaries of ministries list means for securing the future of the welfare society during the following government term. It is no coincidence that we have identified the same issues as important in our impact area A Safe, Healthy and Affluent Society. In this area, we focus on the cornerstones of an affluent society – the functioning of social benefit and service systems, the prerequisite for Finland’s sustainable growth (such as employment and entrepreneurship, continuous learning, and research, development and innovation activities) – and on maintaining total security in society. The complex issues at which our audits are targeted are selected on the basis of our discussions with government actors and stakeholders, analysis of the operational environment, and previous audit findings.
The ageing of population increases pressure on social security expenditure – costs can be controlled by securing the prerequisites for sustainable growth
A sustainable social security system is a basic condition for an affluent society and also one of the biggest challenges of the upcoming decade. Social security consists of benefit systems related to income security and services targeted at citizens, which are integrated with each other and strongly linked to the situation and trend in society, economy and employment.
We monitor this trend closely, utilising research and statistical data. Our audit work is particularly focused on evaluating the impacts, effectiveness, efficiency, economy and functionality of the different parts of the social security system and the interfaces between them. At present, we are auditing the indirect financial impacts of the income support system, the functionality and effectiveness of the measures for preventing social exclusion of young people and for promoting their employment, and the steering and management of the digitalisation of general education. We are also considering starting new audits this year to assess the cost-effectiveness of social and health care services and the functionality of service providers’ self-monitoring, and to evaluate the reform of upper secondary vocational education.
We agree with the goal set by the Permanent Secretaries of ministries that the social security system should enable flexible combination of paid work, competence development and entrepreneurship in different life situations. The social security system should also utilise new means for dividing the cost burden and providing a sustainable financing base. New means are indeed called for if the aim is to achieve an employment rate of 75 per cent during the next government term.
In addition to employment promotion, investments in continuous learning and research and innovation are considered important for securing the prerequisites for Finland’s sustainable growth. It has been estimated that, at an annual level, continuous learning is subsidised by EUR 19 billion, of which EUR 15.5 billion come from the state and municipalities. The target set for investments in research, development and innovation – four per cent of the GDP – has so far been unattainable. According to the Permanent Secretaries of the ministries, the financing of continuous learning should be clarified and directed to people with a weaker labour status in connection with the social security reform. Digitalisation of the educational system should also be enhanced. In addition, efforts should be focused on better attracting international companies and experts and integrating them into the Finnish society.
Total security ensures the sustainability of an affluent society
In view of the sustainability of an affluent society, it is crucial that people in Finland can live without fear or insecurity caused by crime, disorder, accidents and other phenomena. To contribute to this goal, the Government made two resolutions in 2017: Security Strategy for Society, and Internal Security Strategy. The implementation of these guidelines will ultimately depend on the cooperation of the different actors.
Functional cooperation between the authorities is the target of our audits under the audit theme Citizen security in the changing operating environment, which will be completed by the summer of 2019. Our audits have shown that the authorities’ commitment to cooperation varies and is at its highest when the responsibilities and coordination are clearly defined and the actors feel that the cooperation benefits them and provides them with added value. There are also obstacles to the cooperation, particularly as regards competence and resource issues. Cooperation becomes a challenge if operations are steered from several different administrative branches and levels. The much-criticized administrative silos often form an obstacle for cooperation that is otherwise perceived as important.
Our audits are targeted at systemic changes, cross-administrative phenomena and their mutual relationships
The impact area A Safe, Healthy and Affluent Society is characterised by strongly regulated multi-channel financing, where the state is one of the key providers of financing and where the state financing is also allocated through multiple channels. Our aim is to link the audit knowledge we have gathered of this subject to a broader picture. Based on the results of the audits, we create a reliable knowledge base on complicated and complex issues. Our means include focusing our resources on subjects that are topical and of significance to society, combining elements of different audit types, and utilising our own employees’ competence comprehensively and, if necessary, seeking special competence from outside our own organisation. These means will improve the effectiveness of our audits and make our recommendations more widely useful in society.
In 2017, social security expenditure in Finland amounted to EUR 69.1 billion (EUR 12,532 per capita), almost half of which was financed by the state and municipalities. Social security expenditure is closely linked to the public-sector finances: in 2017, social security spending accounted for 30.9 per cent of GDP. The ageing of the population will inevitably increase social security spending. In 2017, almost 42 per cent of social security spending was allocated to pensions and services for senior citizens, and these expenses were up by 3.8 per cent in real terms as compared with the previous year. The second largest group of expenditure was illness and health, which accounted for about 22 per cent of the total social security expenditure in 2017. Although the expenditure decreased by 1.2 per cent in real terms in 2016 – following the decrease in income security expenditure, in particular – social and health care services spending grew by 0.8 per cent. According to different surveys, 10 per cent of the population covered by the service account for approximately 70 to 80 per cent of local government’s social and health care spending. On the other hand, the improved employment situation and the changes made to the unemployment benefits restrained the expense trend: in 2017, unemployment expenditure was down by 12.6 per cent in real terms on the previous year, mainly as a result of the decrease in the spending on the protection of earnings.
The Security Strategy for Society presents a cooperation model for comprehensive security and lays out the general principles governing preparedness in society. Comprehensive security is maintained in cooperation by the authorities, the business sector, organisations and citizens. In the cooperation model, the different actors share and analyse security information, prepare plans and practise together. Foresight is an important part of preparedness work. The strategy lays out the vital functions in society, i.e. the basic functions that must be safeguarded under all conditions and at all operative levels.
The Internal Security Strategy is a road map describing the forces of change that are likely to influence internal security in Finland in the near future. The operational environment of internal security is now more complex than before, and it is also affected by factors outside Finland. The strategy focuses on phenomena that have elevated the risks to everyday security in recent years or that can be expected to pose security risks to society in general or to a large number of people in the near future. The action plan includes eight set of measures, the implementation of which requires the input of the entire society. The responsibility for the 39 measures set out in the strategy has been assigned to different actors.