Limited company as an organization form of central government functions

The main reason for the use of company form should not be the opportunity to inject capital into a state-owned company outside the budget spending limits through shares held by the state in listed companies. Nor is it always necessary to establish a new company for a new function. Transferring state funds or activities from on-budget entities to companies weakens Parliament’s control and oversight power.

The National Audit Office audited the establishment of seven central government special assignment companies and the early stages of their operations. The companies at which the audit was targeted included four state-owned companies established for the regional government reform prepared by Prime Minister Sipilä’s Government:  Maakuntien tilakeskus Oy, SoteDigi Oy, Vimana Oy, and Hetli Oy. In addition, the audit was targeted at three other state-owned companies. Traffic Management Finland Oy was established when the traffic control and management services of the Finnish Transport Agency were incorporated. Pohjolan Rautatiet Oy was established for the planning of new rail connections. Oppiva Invest Oy was established to support the development of learning environments and teaching tools for vocational education.

The companies were established in 2017–2019, and the state made capital injections of a total of about EUR 490 million into them. The money for this purpose was raised from sales of shares, the budget, and the funds of Senate Properties. The reasons for conducting the audit were both the significance of the topic for central government finances and the fact that exceptionally many new special assignment companies were established during the period. The aim of the audit was to ascertain that it had been appropriate to establish the companies.

Central government special assignment companies should be established only to meet a genuine need. When state-owned companies are established, it is important to consider what social problem or need can be met with the company form. Capital was injected into most of the audited state-owned companies through shares in listed companies. However, the main reason for the use of company form should not be the opportunity to operate outside the spending limits or to inject capital quickly into the company by selling shares held by the state or another state-owned company.

When new state-owned companies are established and when the state’s ownership steering is performed, the government agency responsible for the ownership steering should form a clear picture of how it expects the company to operate and what it expects the company to achieve. The state owner should communicate these issues to the company’s board of directors and management. A new state-owned company need not necessarily be established for a new function. The ministry preparing the matter should analyse and document an alternative solution where, instead of the establishment of a new company, the new function would be assigned to one of the existing state-owned companies or the necessary service would be bought from private companies already operating in the market.

The National Audit Office also recommends that the Ministry of Finance should contribute to the amendment of the central government spending limits rule in such a manner that transfers of shares held by the state are included in spending limits expenditure. The National Audit Office recommends, moreover, that unbiased assessment be made within five years of the social benefits and costs of the operations of Oppiva Invest Oy and Traffic Management Finland Oy.