Auditing of central government finances will continue to build trust in good governance

From the viewpoint of a taxpayer, an audit of central government finances increases trust in the good management of tax revenue. In the future, audits will comprise humans and smart machines auditing complex data systems and automatic decision-making rules. Digitisation is an opportunity: at its best, it provides more time and space for interaction between people.

Are taxes just a way of milking you or a way of creating shared wellbeing? The question about trust towards the management of general government finances is timeless. In her dissertation on the history of taxes, Suvianna Seppälä describes tax reforms made by king Gustav I and the levying of taxes in Finland in the 16th century. How administration can be kept efficient, how to ensure the tax base and reliable levying of taxes, how to report on the management of general government finances and how to maintain the citizens’ trust in public administration are issues that need to be considered now as well, as technologies and the economy around us are quickly changing. A new kind of thinking was required when renewing administration in the past, and that is what is required now.

Some of the underlying principles of the Constitution of Finland and administrative law include creating and maintaining citizens’ trust in lawful, appropriate and effective public administration. Audits of central government finances assist in this work by verifying that the material prerequisites of the citizens’ trust are objectively reached.

Digitisation means that public administration and general government finances will be transferred to platforms consisting of bodies of data and computer software, and the networks of the parties using these platforms. Meanwhile, an automated, real-time operating model and decision-making process will be introduced in public administration and the management of central government finances. There are more solutions shared by several agencies than before.

The right of a nation to tax itself is one of the oldest constituents of Western democracy. The right to participate in decision-making on the use of tax revenue, the management of the public property maintained with the tax revenue and the oversight of the use of the tax revenue were and still are at the core of citizenship. In Sweden and in Finland, which was part of Sweden for a long time, this principle has been included in the governmental system starting from the very beginning, from the ancient Scandinavian local laws and the county council.

The county council and later the assembly of the estates, which represented the people, had to give their consent to permanent taxes. This principle was reflected in the taxation and administration reforms carried out by Gustav I in the 1530s, which included a demand for a regular “bailiff account” from the levy of taxes. One of the key stages of the development of oversight and reporting is the establishment of a National Judicial Board for Public Lands and Funds in 1539 as the first central agency. The duties of the current National Audit Office of Finland, Tax Administration, State Treasury and Finnish Government Shared Services Centre for Finance and HR Palkeet are based on the different houses of the National Judicial Board for Public Lands and Funds.

Based on academic research data and results of the OECD’s TrustLab project, for example, one can summarise important and timeless prerequisites that need to be met for the citizens to be able to trust in the public administration. Trust in the administration and central government finances is created by the opportunity to participate and a feeling of inclusion; the citizens must have an idea and a feeling of a shared value base and “being in the same club”. Trust also requires for the citizens to feel that all citizens are being treated equally and fairly by the public administration. Another prerequisite for trust in a digital environment is adequate information security – and trust in the information security.

Digital administration will change the manner in which audits maintain trust

Even if the implementation methods and operating environment change, audits will still serve to maintain trust. There are several information providers and parties practicing operations that can be considered oversight in the case of a digital platform. The final accounts and the annual financial statements are no longer the most important sources of information on central government finances.

Platforms enable the use of data analytics that covers areas broader than single data systems. Extremely important issues in terms of the constitutional state, good governance and trust include privacy protection, information security, an individual’s self-determination and an individual’s value as a unique person.

Principles of good governance must be extensively integrated into data systems and the inference rules used in data analytics. Furthermore, it must be ensured that the data used in the development and teaching of learning systems is varied and objective.

Maintenance of the trust requires the possibility to assess the structure of the platforms, their operating principles, automatic decision-making and reporting. These must also be integrated into the information technology, processes, data management architecture and data systems used on the platforms. Under these circumstances, inclusion and monitoring and auditing of administration require partnership between humans and machines, as well as a profound understanding of software, data management and data processing.

Internal control must be used to ensure the security and appropriateness of automatic reporting and decision-making. This can be achieved through real-time monitoring, proactive risk management and good planning and implementation of the infrastructure and data systems. The importance of appropriate internal control cannot be emphasised too much. It includes reliable, automated reporting and control in real time, as well as their careful building. It requires a comprehensive approach from all the parties involved in central government finances and public administration as a whole, cooperation and solutions.

Instead of the production or verification of single pieces of data, external audits must focus on oversight of assessment systems which utilise analytics and monitoring systems. The latter aims to verify functionality of internal control and automated administration as a whole, as well as to proactively guide it to verify and develop it.

Digital administration provides more time and room for interaction between people

An audit is an objective verification of the prerequisites for trust. Auditors require new partnerships and new kind of competencies. For example, data protection authorities and information security assessors are interesting partners in the oversight and verification of data systems and in financial oversight and audits.

A new kind of oversight of the functionality of the structures and of monitoring to ensure that the principles of good governance are integrated into software and data systems require from the auditors dialogue with parties all the way up to the supreme guardians of law at the top of the hierarchy laid down in the Constitution, the Parliamentary Ombudsman and the Chancellor of Justice.

The supreme guardians of law oversee and promote the achievement of justice, democracy and inclusion in all public functions and the oversight of public officials. This task also covers the management of general government finances, their external auditing and internal control. The supreme guardians of law also ensure in a proactive manner that justice and good governance are integrated into scripts, platforms and software, and that the public officials responsible for the scripts, platforms and software and responsible for monitoring them take care of their duties. Hence, verification of the reliability of digital administration requires more extensive dialogue, cooperation and shared knowledge and vision.

Administration built upon digital platforms is a wonderful opportunity to manage general government finances faster, more effectively, in a more standardised manner and thus in a manner that generates more trust. At its best, technology can be liberating: many difficult and boring routine tasks can be automated, and a machine will perform better in many analytical tasks than a person. The cooperation and dialogue required to perform oversight in the future mean more human interaction that is more versatile than before.

Administration can also become quicker, freer from defects and easier to reach from the viewpoint of citizens, which means more time for actual human encounters. Humans are social beings. The new administration and the new way of auditing may leave more room for social interaction and creativity. How the new digital platforms and the software included in them are built will determine how much room for creativity and social interaction there will be. This is one of the major questions regarding trust and trustworthiness in the future.


Tuomas Pöysti

The author is the Chancellor of Justice at the Office of the Chancellor of Justice.