For the past ten years, I have signed the statement which confirms that internal control and risk management of the state comply with the requirements of the State Budget Decree. While doing that, I have wondered how the presenter of the final accounts, the person who signs the final accounts and the entire auditing organisation can ultimately be sure that all of the information included in the final accounts is fine, as they are auditing the entire central government.
Author: Director General Timo Laitinen, State Treasury
Preparation of final accounts is an interactive process
There are factors other than the final accounts and the assessment of the final accounts which allow us to reach an objective and truthful conclusion about the information included in the final accounts. On the basis of state budget legislation, the State Treasury provides central government organisations regulations and instructions on how to carry out their internal accounting and prepare the final accounts. The State Treasury prepares the final central government accounts on the basis of the last reports of the year by the accounting offices. The State Treasury can monitor the finances of the accounting offices throughout the year, as it receives their monthly cumulative financial information.
Meanwhile, the National Audit Office of Finland audits the final central government accounts. It also reviews the final accounts of the agencies and how they have addressed risk management and internal control. Furthermore, the National Audit Office audits final accounts of the accounting offices throughout the year, receiving plenty of information to be used when auditing the final central government accounts. Over the course of the year, experts of the National Audit Office and the State Treasury discuss which actions the Ministry of Finance and the State Treasury should take on the basis of the observations made by the National Audit Office.
The preparation of the final central government accounts and the related audit are not two separate events; instead, they are an interactive and iterative process that continues from one year to the next and where the parties – the agencies and the service centre, the Ministry of Finance, the State Treasury and the National Audit Office – teach each other, as well as assess and develop their operations or make corrections as necessary.
The agencies assess their own internal control and risk management procedures, and the State Treasury assesses the procedures used when preparing the final central government accounts. Meanwhile, the National Audit Office audits the final accounts of the agencies and the final central government accounts.
The processes of central government finances and administration culminate in Parliament, to which the Government submits the final central government accounts as part of its annual report and the National Audit Office submits its own annual report. The preparation of these reports requires more interaction than one might think.
Based on my experiences, I can say that the system works and you can rely on it. There have been no major problems with risk management or internal control in the past ten years. There have been some minor observations about authorisations, probably partially due to the complexity of the authorisations. The situation is great from the perspective of misconduct. Relatively speaking, you’d be hard pressed to find an organisation as clean as the government and governmental agencies.
High ethics of the financial administration officials and their diligent approach to their work further increases the reliability. They are extremely professional and their competence is high. Their mutual trust in matters being handled as agreed within the agreed schedule makes the process efficient and fluent, which helps to confirm the knowledge that everything is at it should be.
The State Treasury has been involved in the development and launching of the financial, salary and HR administration system Kieku in the central government organisations. The significance of shared rules was very apparent during the launch of Kieku when the systems of the different agencies were being reconciled. The work was fairly easy in the case of financial administration, as the agencies had already been using the same financial administration rules. However, a lack of shared operating methods and regulations caused problems in the merging of HR administration systems, because all of the agencies had been managing their HR administration in the manner they deemed the best.
The State Treasury often heard from the agencies the argument of “We are such a distinctive agency that…” when the systems were being developed and the shared rules were being established. Maybe we are not so different after all in these administrative matters? Everything should be done more or less in the same way in all organisations to increase the effectiveness of central government as a whole.