Central government finances are often compared to the finances of an enterprise or a household. When there is a warning on indebtedness, the Government is advised to do what a family would do: to use as little money as possible. There are plenty of interesting differences between the finances of a state and a private enterprise, however. The differences become clear when you study the operations and the operating logic from the outside.
WRITER
Central government finances are all about planning, while enterprises are interested in the result
In the Western countries and the Nordic countries in particular, central government finances are usually fairly open and public. Financial data is easily available to anyone. Finnish media continuously discusses the budget and the planning of finances. The public discussion often focuses on the spending limit discussions that create the framework for the budget planning by the ministries, the government negotiations that are held every summer and Parliament decision-making on the budget.
Information on the use of assets is also readily available, even though this issue is not discussed in public as often. Netra.fi provides, with a slight delay, monthly usage data divided by items. Tukihankintoja.fi allows you to study what the Government purchases and from whom. These issues are usually discussed in public only when misconduct or an offence is suspected, however. In many cases, it is a question of relatively minor, practical issues.
The Government publishes its final accounts and annual report each spring. They contain a huge amount of information, also lots of descriptive documents in addition to the actual final accounts. These documents describe the status of general government finances, actions taken by the Government and replies of the Government to questions from Parliament, as well as provide information on which results and effects the ministries have achieved with their appropriations. This result data is hardly ever discussed in public or covered by the media, however.
The finances of a private enterprise are like a mirror image of central government finances. All plans for the next year are confidential and not revealed to competitors. News on practices is not published until an investment decision has already been made or if there is a special reason to do so. On the other hand, the owners of the company and the general public are fairly disinterested in these issues. The major news, i.e. how much profit was made the previous year, is published every spring. For richer or poorer, in the case of the finances of a private enterprise, the point of interest is the result. This can be clearly seen in the most important stock market news, i.e. the stock prices. The value of a company is provided in the form of a table that indicates last year’s profit, any profit forecasts for the next years, and a variety of ratios that describe the company’s value and profit. This is enough information for the busy stakeholders.
Measuring the result of a state is difficult, because the result is not only monetary
Central government finances being public and information on the entire process being available is good. The fact that the result data is found of little interest is problematic, however. Not only the media but also Parliament ignores or shows little interest in it. However, to make rational decisions, you need to assess what was achieved with the resources used. Even though the new budget seems to be the most important issue, you should also identify the impact of decisions made in the past.
How could the result data of central government finances be made more interesting and how could it be better utilised in decision-making? First, we must determine what the problem is and try to resolve it.
The view on what the result is can vary a great deal depending on the person’s viewpoint. An administrative party can deem the fact that the assets specified in the budget have been used as a result: all of the subsidies meant for enterprises were used up. This does not have anything to do with the actual effects, however.
According to our audits, the manner in which the results of the different administrative sectors are reported has improved over the years, but little information on successful use of assets is still provided. The most common view is that if the administration has done something, it is a result: some services were provided or one major legislative reform or several smaller reforms were completed. The effects, such as how the actions improved security or wellbeing, are not always discussed, not to mention reporting on the achievement of objectives or the failure to achieve some objectives.
Good result reports require clear objectives
It is genuinely difficult to describe the effects of the actions of public entities. The objectives set for appropriations should be considered already at the budget planning stage. After all, these are the objectives that will be reported some 18 months later. The objectives should be in a format that can be reported well and thoroughly. When making decisions on the budget, money itself and decisions made on money override the objectives, however. The current system and the fact that little attention is paid to this issue make result reporting a mandatory task that is completed as quickly as possible and by only meeting the formal requirements.
The Government provides much more versatile and open financial information than the corporate sector. This is what the citizens’ right to obtain information about the collection and use of tax revenue requires. As more information is generated and digitised, more up-to-date information on the use of assets can be provided. The citizens’ opportunity to process large volumes of data is continuously improving.
Some positive development in the field of result data has also occurred. Due to the nature of Government operations, the development has not progressed in huge leaps and bounds, however. Improvement of the result data is the most arduous task in the development of decision-making. It requires investments in detection of the correct issues in social development. The question is: what effects did the assets of the state actually have? Was the funding useful, and which actions had the best effects? Surely these are issues in which taxpayers are also interested.
Additional information
Preparation of the state budget and related decisions:
http://budjetti.vm.fi/
https://www.eduskunta.fi/FI/talousarvio/Sivut/Aiemmat-talousarviot.aspx
Information on the use of the state assets:
www.netra.fi
Government acquisitions:
www.tutkihankintoja.fi
State budgets and annual Government reports:
https://valtioneuvosto.fi/paatokset/hallituksen-vuosikertomukset