Recent audit work of NAOF Jonna Carlson National Audit Office of - PowerPoint PPT Presentation

Recent audit work of NAOF Jonna Carlson National Audit Office of Finland Annual Meeting of INTOSAI Working Group on Public Debt, 23-25 May 2019, Baku, Azerbaijan

The structure of the presentation I. Moving forward – changing NAOF II. Current findings of financial audit III. Case example of auditing contingent liabilities • Financial liabilities of the Government in international organisations (2/2018)

National Audit Office of Finland • Finland's Supreme Audit Institution • An independent institution operating in affiliation with Parliament • Audits the state ’ s finances, monitors fiscal policy, and oversees election and political party funding • Status and mandate grounded in the Constitution • Follow ISSAI standards

Sphere of activities Right to conduct audits and Parliament receive information according to legislation on the NAO Parliamentary audit Other audits according to Right to receive information Parliament ’ s according to legislation on the own finance NAO National audit office legislation Funds for which Parliament is Government responsible Office of the President of Government financial controller's function Bank of Finland Government Controller-General the Republic Social Insurance Ministries Institution Internal control internal audit Government Certain Unincorpo- Recipients organizations State- Off-budget agencies rated state of state aid • responsible for owned funds internal enterprises procuring funds or EU companies control or taking care of • internal audit funds special tasks Other audits according to legislation Other audits according to legislation

Current findings of financial audit Financial audits 2018: • Financial Central Government Accounts (annual) • Ministry of Finance (annual) • State Treasury (annual)

Source: State Treasury – Debt Management Annual Review 2018

Audit of State Treasury Audit is performed annually (risk analysis) We verify that • key rules of the state budget and its application are followed • process controls of all balance sheet items > EUR million are working properly • financial statements present true and fair view • internal control mechanisms are properly arranged • debt management is carried out in accordance with the provisions of the Ministry of Finance AUDIT CONCLUSIONS 2018

Case example of auditing contingent liabilities Financial liabilities of the Government in international organisations (2/2018)

Finland is a member of several international organisations. When joining an organisation, a member state must enforce treaties regarding the organisation. With such treaties, the member states commit to being responsible for already existing commitments and liabilities.

Identification of liabilities Contingent liabilities Explicit Implicit Legally binding Socially/polically binding • • Government guarantee Deposit guarantee • • State guarantee Other support to the banking sector • • Export financing liabilities State-owned companies (increase of • Liability for compensation of share capital either to retain SMEs ´ bad debts and guarantee ownership share or to secure losses operational capability) • • On demand capital contributions in Operations of the regional authorities • international financial institutions Environmental liabilities, • Climate liabilities catastrophes, external security • Nuclear liability International organisations employee benefits

Audit questions: I. I. How much con Ho onti tingen ent t liab liabil ilit ities es to o Fin inla land will ill arise rise fr from em employee e ben enefi fit ob obli ligations of of in intern ernati tional or organis isations? ? II. II. Wheth ther th the e fin final l cen central l government acc ccounts shou ould in indic icate e th the e financia fin ial liab liabili liti ties of of th the e Government in in in inter ernational l or organisati tions? III. Ho How th thes ese liab liabil ilit ities es shou ould ld be e taken in into o acc ccount t when en makin ing decis ecisions on on joi oining in intern ernational l or organisations? ?

Audit Process Sample based on • Annual membership fees to information from central international organisations • Analysis made with acl-analytics bookkeeping • Audit evidence: Identifying organisations 1. Financial Statements 2. Original treaties, Basic texts with most financial and other impact 3. Internal guidance documents of the organisations Analysis • Documentation analysis by & Reporting Nvivo-coding.

Off-Balance Sheet Liability Employee benefits of International Preparedness Recognition Organisations Transparent • Organisations are poorly prepared reporting on to pay non-current employee contingent liabilities benefits • 90 % of the liabilities are non- is needed funded • Finland´s share of the non-funded liabilities is around EUR 1,4 billion.

Thank you for your attention! Comments, Questions?