Norway 2008

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The deviations were less than 1 percent in all of these three years (2004-2006): - 2004: 0.4% - 2005: 0.7% - 2006: 0.2% (p. 16)

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Analysis of budget deviations for primary expenditure between budgeted amounts and actual out-turns, by ministry, shows that deviations have averaged less than 5 percent of the budgeted amounts in the three most recent years. The average variance in excess of overall deviation was 3.2 percent in 2005, 3.4 percent in 2005 and 2.4 percent in 2006. (p. 16)

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Actual domestic revenue collection, including net revenue from petroleum activity, was 10-15 percent higher than the estimates in original approved budget in the three years 2004-2006. Revenue exclusive net revenue from petroleum was estimated with little deviation from actual revenue collection. In 2004 and 2005 revenue exclusive petroleum was 98.3 percent and 101.2 percent of budgeted domestic revenue estimates and in 2006 105.6 percent. (p. 16)

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The total stock of payments arrears is assessed to be at a low rate. There is no central data system on the stock of arrears. However there have been few comments from the Auditor General the last three years on the agencies systems as regard to errors of expenditure payments. Furthermore in the two cases were the Auditor General had comments the errors were below 1 percent of total expenditure in these agencies, and the comments in this agencies have been followed up. This indicates that expenditure payments arrears are at a very low level. (p. 17)

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Each agency is responsible to establish systems and procedures for expenditure payment to be registered, disbursed and controlled, and that there are measures to expose and correct arrears in systems or routines. There is no central data system on the stock of arrears, but each agency has data system to monitor expenditure payment arrears and to generate data on this. Several of the agencies have started to use e-based invoice system. (p. 17)

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The Budget Proposition shows budget broken down by agency, i.e. administrative classification. There is a presentation of expenditures by economic classification (current operations, capital operations, financial operations etc.), by functional classification (by functions of government such as health, education and defence), and by sub-functional classification. The Budget Proposition is not presented according to GFS/COFOG standards, however, the standard used is considered to be able to produce consistent documentation according to GFS/COFOG standards. Statistics Norway prepares presentations of national accounts by GFS/COFOG standards in a timely manner. (p. 18)

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"The budget documents submitted to Parliament provide a comprehensive picture of central government fiscal activities. The information cover: 1. Macroeconomic assumptions, including estimates of aggregate growth, inflation, exchange rate; 2. Fiscal surplus; 3. Information on use of surplus; 4. Debt stock, including details at least for the beginning of the current year; 5. Financial assets, including details at least from the beginning of the current year; 6. Prior year’s budget outturns presented in the same format as the budget proposal; 7. The annual budget presents the current year’s budget in the same format as the budget proposal. At disaggregated level the current year’s budget presented, is the original approved budget. In addition the status of the current budget per 1 half year is presented at aggregated and at programme level; 8. Summarised budget data for both revenue and expenditure, including the current and previous year; 9. Explanation of budget implications of new policy initiatives with estimates of the budgetary impact of all major revenue policy changes and some major changes to expenditure programmes. (p. 18-19)"

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"The level of unreported extra-budgetary expenditure is assumed to be insignificant. There are extra-budgetary activities which are not direct part of the state budget. Such extra-budgetary activities are reported in the state budget by the ministries or through separate annual reports. (p. 19, 22)"

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There are no donor-funded projects in Norway. Dimension (ii) is therefore not applicable to Norway. (p. 22)

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Some more than half of the state transfers are unconditional block transfers. These general grants are distributed to municipalities and counties based on objective and transparent criteria to compensate costs and needs that the municipality in short term can not control (demographical criteria etc.). The earmarked grants to child care, disabled and elderly care are allocated based on transparent and rules based systems. Overall more than 90 percent of the transfers are determined by transparent and rules based systems. (p. 19-20)

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The final information to sub-national government is issued late December or at the start of the fiscal year. However the sub-national governments are provided reliable preliminary information on the allocations to be transferred ahead of completing their budget proposal. (p. 22)

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Reports of sub-national government revenue and expenditure according to sector categories based on accounting data, is collected and consolidated by Statistics Norway by June the following year. There is no collected and consolidated ex-ante (budget) fiscal information. (p. 22)

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The autonomous government agencies and public enterprises submit fiscal reports to their responsible line ministry at least annually, but there is no overview or reporting of the total risk for central government. Since the Ministry of Finance has distanced itself from the role of controlling the spending activities and risk management to line ministries, the Norwegian system is predicated on a high degree of trust between the Ministry of Finance and spending ministries. (p. 21)

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Local governments can not generate fiscal liabilities for central government. In addition, if a sub-national government has not budgeted in balance, or not established short term accounting deficit in balance after two year, it will no longer be allowed to lend without permission from the central government. (p. 21)

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"The public has access to the following key fiscal information: - Annual budget documentation: A complete set of documents can be obtained by the public when it has been submitted to the legislature. All documents are available on the internet, where annotated information on various subjects is also available. - Year-end financial statements: The statements are made available to the public within four months after the completion of the financial year. The document is available on the internet. - External audit reports: All reports on central government consolidated operations are made available to the public are made available to the public within six months of completed audit. The reports are posted on the internet. - Contract awards: Award of all state contracts with value above NOK1.1 million (USD178 000) and municipality contracts above NOK1.7 million (USD275 000) are published on the internet. Start up of a procurement competition for contracts above NOK0.5 million (USD80 000) are obliged to be published, but there is no obligation to publish the contract award. Public access to information elements not fulfilled: - In-year budget execution reports are reported monthly to a central agency (The Government Agency for Financial Management), but are not made available to the public. - There are no central regulations to make sure that information on resources available to primary service units are publicized or made available up on request. The actual availability of such information from the municipalities’ primary schools and health clinics, have not been further examined as a part of the PEFA assessment. (p. 21-22)"

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A clear annual budget calendar exists, is general adhered to and allows ministries enough time to prepare their detailed budget proposals. (p. 25)

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Cabinet approves ministry expenditure ceilings before the budget circular is issued. (p. 25)

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The legislature has, during the last three years, approved the budget before the start of the fiscal year. (p. 25)

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Forecasts of fiscal aggregates are prepared for 3 years on a rolling annual basis. The forecasts include expenditures for each ministry with details of the main items, but are only on the basis of unchanged policy. The aggregates are not presented according to economic classification and there is not a clear link to annual budget sector ceilings. (p. 25)

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Analysis of the sustainability of fiscal deficits is undertaken each year. (p. 25)

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Sector goals and strategies with costing exist for some sectors, but are not consistent linked with aggregate fiscal forecasts. (p. 25)

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The majority of important investments are selected on the basis of sector strategies and include recurrent cost implications. (p. 25)

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The Norwegian Tax Administration is responsible for collecting and administering direct and indirect taxes. The legislative basis for taxation and the administrative procedures are clear and comprehensive. (p. 25)

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Information on taxpayer liabilities is widely available. Up-to-date information on tax liabilities and administrative procedures is posted on the Revenue Autority ’s (RA) website. Information is also sent to all tax payers every year with information on expected salary and expected tax liability. The information posted on the website is considered to be quite user- friendly. (p. 25)

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A tax appeal mechanism is functional. It includes several different appeals authorities dependent on the nature of the appeal. Appeals can be made to independent institutions. There is a comprehensive and transparent system with independent tax tribunals, and disputes with the RAs can also be treated within the ordinary court of law. There are many independent appellate bodies, which guaranties the tax payer a complete and fair treatment. (p. 25)

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Taxpayers are registered in a complete database system with comprehensive direct linkages to other relevant government registration systems (directory of residents, social security and pension register, shareholders register, official registration and property register) and information from financial institutions (financial assets and liabilities). (p. 26)

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Planning and monitoring of tax audit and fraud investigation in the Central Tax Administration are managed and reported according to comprehensive and documented audit plans, with clear risk assessments criteria for all major taxes that apply self-assessment. (p. 26)

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The revenue administration can fine taxes at an estimated level and penalty taxes if incomplete or wrong information are given by taxpayers. The penalties for non-compliance with registration and declaration obligations have been sufficiently high (up to 60 percent penalty tax). New guidelines from the European Human Rights Convention, and limited capacity in the prosecuting authorities (police), may have weakened the ability to impose strict penalties to some degree. The penalties are fairly and consistently administrated. (p. 26)

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The total amount of tax collected were around 99 percent of total claims in 2004 and 2005. The arrears are therefore considered insignificant. (p. 26)

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Revenues from income and payroll taxes are collected jointly by central and local governments. All income and payroll taxes are paid to accounts controlled by local governments, but every cash balance is transferred to accounts controlled by the Treasury daily and placed at the Ministry of Finance disposal. (p. 26)

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The local tax collectors are daily reconciling the bank accounts for tax revenues. A complete reconciliation of tax assessments, collections and arrears on a national scale takes place every month within 3 weeks after the end of month. (p. 26)

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The budget is always voted by Parliament before the start of the budget year. The line ministries are therefore authorised to commit expenditure from 1 January. (p. 28)

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Adjustments to budgetary allocations are generally made through issuing of a revised budget twice per year and are done in a transparent and predictable way. (p. 29)

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The Ministry of Finance is in charge of cash management, and the Central Bank of Norway is in charge of controlling the cash reserve on behalf of the Ministry of Finance. This includes making prognosis for the cash reserve. Cash flow forecast is prepared for the fiscal year, and are updated daily by the Central Bank on the basis of actual cash inflows and outflows. (p. 27)

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Debt data records are completed, currently updated and reconciled on a monthly basis with data considered of high integrity. Comprehensive management and statistical reports (cover debt service, stock and operations) are produced quarterly. (p. 28)

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All cash balances in government bank accounts are identified, calculated and consolidated daily. (p. 28)

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No guarantees of loans can be given without priori decision by the Parliament (as a part of the budget process). Overview of new guaranties and the detailed terms are reported in the budget documents. The limits for central governments borrowing are authorised by the Parliament. The contracting of loans is made against transparent criteria and fiscal targets and the management is centralized to the Ministry of Finance. (p. 29)

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Personnel database and payroll are directly linked to ensure data consistency and monthly reconciliation. (p. 31)

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Required changes to personnel records and payroll are updated monthly, generally in time for the following month’s payments. Retroactive adjustments are rare. (p. 30)

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Authority to change records and payroll is restricted and results in an audit trail. (p. 31)

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The Office of the Auditor General’s annual external audit also covers payroll audits. This includes systematic controls on authority given and log reports from the payroll systems and an audit on whether the agencies have control weaknesses (or ghost workers). (p. 30)

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There is statistics of the number (not the value) of contracts awards above the value of NOK1.1 million (USD178 000), but the data does not make it possible to estimate the use of open competition for award of contracts compared with total contract awards. (p. 32)

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The national regulations require that the use of other less competitive methods is to be justified. In cases with complains from competitors, the method used will be examined. The Office of the Auditor General has several comments on shortcomings in routines and documentations in the governmental agencies. (p. 30)

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An independent agency for complaints on public procurement was established in January 2003 (Klagenemda for offentlige anskaffelser). The setting up of the agency is regulated by law and government regulations have been established to regulate the functioning of the agency. Information of all complaints received and on all decisions made is available on the website of the agency. (p. 30)

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Each agency is responsible to establish systems and procedures for expenditure commitment controls. There are no cash availability limits but there are appropriation limits authorised by the responsible line ministry (approved budget allocations, as revised). Comprehensive expenditure commitment controls are generally in place. (p. 30)

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Other internal control rules and procedures are relevant (based on a risk assessment), and incorporate a comprehensive and generally cost effective set of controls and are widely understood. (p. 32)

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Compliance with rules is high and any misuse of simplified and emergency procedures is insignificant of compliance with rules for processing and recording transactions. (p. 31)

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The ministries do not have internal audit units. Only the largest agencies have internal audit units or internal audit systems. (p. 32)

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The largest agencies report to their management in the agency, but do not submit internal audit reports to their line ministry, The Ministry of Finance or to the Office of the Auditor General. (p. 32)

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The extent of actions on internal audit findings is uncertain. Twelve agencies received repeated comments on same issues from the external audit in 2004 and 2005. (p. 32)

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Bank reconciliations for all central government bank accounts take place at least monthly at aggregate and detailed level, within 4 weeks of end of period. (p. 32)

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Each agency accounts for its own reconciliation and clearance of suspense accounts and advances. There are no central rules and no central information on the practice in the different agencies. Reconciliation and clearance of suspense accounts and advances take place at least annually, within two months from the end of period and with few balances brought forward. (p. 32-33)

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There is no central regulation to make sure that information on resources available to primary service units are publicized or available up on request. (p. 34)

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Classification of in-year budget execution reports at payment stage allows comparison to the budget. However the data usually don’t include expenditure at commitment stage. (p. 34)

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Reports are prepared on a monthly base. The reports are issued within 4 weeks of end of period. (p. 33)

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There is no material concerns regarding accuracy of the data included in the in-year budget execution reports. (p. 33)

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The annual financial statements include details of revenue and expenditure for central government. The statements also include information on central government’s assets and liabilities. (p. 33)

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The annual statements are submitted within four months of year-end. (p. 34)

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All statements are presented in a consistent format according to detailed national accounting standards established by the Ministry of Finance. (p. 33)

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All entities of central government are audited annually. The audit covers revenue, expenditure and assets/liabilities. Performance audits are undertaken for a number of entities/issues. (p. 34)

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Financial statements for the previous year are prepared by the government by 30 April each year. The Office of the Auditor General’s report is normally released in November the same year. Hence, the auditing takes less than 7 months. (p. 34)

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The audit of the financial statements of the budget year 2005 had 210 ended audits without comments and 23 audits with comments. The report of the auditor general includes information on the ministries’ follow-up of earlier comments made by the auditor general. The Office of the Auditor General’s comments are generally followed up by the agencies. However twelve agencies received repeated comments on the same issues from the Office of the Auditor General in 2005 and 2004. (p. 35)

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The Parliament’s review of the budget proposal covers the macroeconomic framework and medium term macroeconomic outlook, and details of expenditure and revenue. Medium term priorities are not reviewed by Parliament as they are not presented by the government. (p. 35)

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The Parliament has established procedures for the budget review and decision making. The procedures include organisational arrangements such as review of the budget by the standing committees. (p. 35)

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The government’s budget proposal is presented to Parliament in early October. Parliament must vote on the budget no later than 15 December. Hence, Parliament has more than 2 months to review the proposal. (p. 35)

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The government generally does not have the authority to make budget amendments without ex-ante approval by Parliament. However, minor budget increases, below approximately NOK5 million (USD0.8 million), that are regarded as uncontroversial, can be decided by the government. In cases where there is an urgent need to increase the budget, e.g. due to fire, accidents or other acute situations, the government may also decide on budget increase without prior approval by Parliament. However, in such cases an ex-post proposal must be made to Parliament as soon as possible. In all other cases Parliament’s ex-ante approval must be sought before amending the budget. (p. 35)

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The auditor general’s detailed annual audit report for the previous year is generally sent to Parliament in November. One of the standing committees (Control and Constitutional Committee) examines the report and the scrutiny is generally completed in March or April the following year. Hence, the scrutiny takes 4-5 months. (p. 35)

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When preparing the audit report the Office of the Auditor General sends the findings to each ministry. The ministries’ responses are included in the audit report and reviewed by Parliament. The Parliament generally does not conduct hearings on the key findings of the Office of the Auditor General. However, in the first half of 2007 the Parliament conducted three hearings on special issues where four responsible cabinet ministers and two agency leaders had to participate in the hearings. (p. 35)

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Recommendations of actions from the Parliament are generally not issued directly to the executive, but do occur. However, the Parliament usually takes note of the comments from the Office of Auditor General. The executive generally follow up on the findings of the Office of the Auditor General, with some exceptions of repeated comments. (p. 36)

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