The NAOF underlines that central government assets must be managed systematically and according to long-term strategic goals.
The National Audit Office of Finland (NAOF) has published its annual report, in which it presents to Parliament its key observations on central government and the management of central government finances. In particular, the NAOF highlights responsible management of central government assets.
In addition to central government debt, assessments of the state’s financial position should also take into account central government assets, the value of which approximately equates to the debt. The value of central government assets amounts to approximately EUR 100 billion, including holdings in companies, land and forests, buildings, and roads and railways.
Central government assets very often also have other purposes than merely providing yield. Ownership may be strategically important, for example, in the case of energy sector holdings, and it may involve social functions through monopoly. State-owned land makes it possible to provide recreational services, while the building stock may involve historical value. The NAOF underlines that central government assets must be managed systematically and according to long-term strategic goals.
‘Short and long-term goals are competing for attention in politics. People are attracted by promises, the fast food of politics – initially tempting, but ultimately empty and unsatisfying. Decision-makers have a greater amount of high-quality information at their disposal than before, but it can be challenging to utilise the information in the rapidly changing environment. However, a long-term perspective is crucial in central government operations,’ says Tytti Yli-Viikari, Auditor General of the NAOF.
When considering divestment of assets in order to finance expenditure or new investments, central government should also examine other alternatives, such as debt and borrowing. It should be observed that after divestment, assets no longer yield profit.
At present, the National Pensions Fund holds a fifth of central government assets. The fund, whose value is high, has been used as a kind of buffer savings fund. The assets of the fund have been used to balance the budget, and transfers larger than planned have also been made to it in good times.
‘The target size set for the National Pensions Fund by law is problematic now that the target is about to be reached. The investment strategy of the fund may overemphasise prudence, which may weaken its yield,’ says Yli-Viikari.
Other themes in the NAOF’s annual report are central government’s role in promoting sustainable solutions, central government’s risk management policy, and digitalisation of government services.
According to Auditor General Tytti Yli-Viikari, the Sustainable Development Goals promote responsibility for societal development. Sustainable development can be supported by linking long-term goals with the budget, and sustainable development policies should extend over different government terms.
The NAOF recommends that central government should have a more comprehensive risk management policy. This would prevent unexpected events from paralysing central government’s capacity for service provision. Yli-Viikari points out that risk management is also needed to create an overall picture of central government and its finances. It would also improve people’s confidence in central government operations.
Digitalisation makes government services independent of time and place. This improves operational efficiency and saves time and costs for everyone. Successful digitalisation is based on up-to-date legislation and efficient utilisation of the leeway it offers.
‘Prime Minister Antti Rinne’s Government Programme identifies the need to adjust political operating models. Longer-term planning and parliamentary commitment to common development goals increase the likelihood that demanding structural changes will actually be implemented,’ says the NAOF’s Auditor General Tytti Yli-Viikari when describing the current situation.
Read more about the NAOF’s observations of central government finances: National Audit Office’s Annual Report to Parliament 2019
Read more about good governance and the audits conducted by the NAOF: VTV.fi