1 Appointment, terms of reference and composition of the Committee
1.1 Better basis for decision-making, better control and management
Central government control is complex. It is often challenging to formulate the objectives pursued through central government activities. Outcomes are affected by many forces, not all of which can be controlled. Many levels and stakeholders are required to interact, often with differing views as to the best way forward. Long-term and short-term considerations need to be balanced. Consideration for individual elements needs to be weighed against consideration for a sound overall outcome. Decisions are made under uncertainty, and one needs to decide how and by whom such uncertainty shall be handled. In addition to the inherent uncertainty, decisions are often made with limited information concerning objectives, alternatives and effects. Decision-making authority and informational needs interact with organisation and affiliation.
The terms of reference call upon the Committee to assess changes to the budget system and requirements as to the basis for decision-making. The Committee partly considers changes to the form of the resolutions of the Storting, partly changes to the information from the Government to the Storting, and partly changes to requirements internally within central government.
Control at the top level of the Norwegian central government control system; the Storting, faces few limits. Even the Constitution and international treaties can be amended in the longer run. This means much freedom, as well as much responsibility. Apart from voters, there is little or no formal monitoring of the resolutions of the Storting, and little or no scope for intervention if such resolutions turn out to be misguided. This is a key difference between the Storting and all other decision-makers in Norwegian society – whether in the private or the public sector. This, together with the complexity, has major implications for the formulation of decision-making rules and decision-making documentation requirements at the central government level.
The recommendations of the Committee are based on the fundamental perspective that decision-makers must, within the defined framework, have the freedom to make those decisions that are deemed to be the most appropriate at any given time. It is of decisive importance that decision makers have adequate information about problems, objectives, alternatives and consequences – prior to actually making the decisions. The main message of the Committee is that decision-making information and plans prepared by the central government administration and submitted to the Storting should be expanded and improved, whilst the decision-making system – the budget system – should not be changed towards additional restrictions or more complex systems. The Committee believes that a better basis for decision-making will result in better control.
1.2 Terms of reference
The Committee was appointed by Royal Decree of 10 October 2014, with the following terms of reference:
«The following is stipulated in the Government’s platform of 7 October 2013:
«The Government will:
Appoint a new public committee to assess multi-year budgets in selected areas and a clearer distinction between investments and operations in the budget.»
Government absorbs a considerable portion of society’s resources. There is a need, within a unified budget process in which different initiatives are evaluated against each other, for a robust basis for decision-making and predictable funding of investments, thus enabling investments to be implemented in an efficient manner and to deliver the expected effects.
Budget and accounting information based on the accruals principle provides, generally speaking, more information on resource use than does corresponding information based on the cash principle. However, government is not a business in which investments are made on the basis of anticipated cash repayments in a market. Besides, central government is such a large participant that the sum total of its decisions affects overall demand in the economy. Government also needs to take the long-term sustainability of its finances into account.
There has nonetheless been a gradual development in the cash-based budgets of central government over the last few decades, with distinct accrual elements having been added to the budget system. Annual provisions for future waivers of student loans have, for example, been expanded. The budgeting of central government interest revenues from the Norwegian State Housing Bank, the Norwegian Public Service Pension Fund and the Norwegian State Educational Loan Fund has been based on accrued interest as from 2010.
A multi-year perspective is needed to facilitate the efficient selection and implementation of investments and other long-term projects. Although the fiscal budget is based on the single-year principle, central government may assume liabilities that shall not be met until after the end of the fiscal year, if the Storting has specifically consented thereto. Such authorisations may differ in scope and scale, depending on the relevant need. Despite this, it may nonetheless be challenging to achieve efficient progress.
The Ministry of Finance has developed joint central government accounting standards («SRS») based on the accruals principle. SRS have been introduced on a voluntary basis for central government entities in their entity accounts, as supplementary information in addition to the cash accounts that are to be reported to the central government accounts.
A committee shall, against this background, be appointed to assess the need for multi-year budgets in selected areas and a clearer distinction between investments and operations in the budget. The recommendations of such committee shall provide an improved basis for decision-making for central government prioritisations and promote the efficient use of government funds.
The Committee shall assess:
the appropriateness of multi-year budgets and accruals on a general basis. The Committee shall thereafter take a closer look at selected sectors in which multi-year budgets and new accrual elements are of particular relevance. This shall be done within the scope of central government cash-based budgets/accounts and the rules governing annual budget resolutions.
whether there can, in connection with the fiscal budget, be prepared specifications that show, better than at present, the estimated future costs or benefits of investments in fixed assets and other initiatives, thus potentially providing a better basis for assessing which priority these should be accorded in the budget process. It shall be assumed that such specifications, if any, would be additional to the current classification of the budget, and not in replacement thereof.
whether the documents submitted to the Storting should be required to include a more comprehensive discussion of the overall costs and benefits of reforms. The Committee, should, inter alia, consider criteria for when an expanded discussion shall be required and how analyses and estimates of multi-year implications of initiatives can be prepared, including what is an appropriate time horizon. The alternative use of the resources should be considered in this context.
the progress of completed investment projects in different sectors. The Committee is requested to examine whether any inefficient progress of investment projects is caused by inadequate budget authorisations, inadequate information concerning the overall budgetary implications of adopted initiatives or other circumstances.
If the Committee finds that authorisations, informational basis or other circumstances are not adequately catered for, the Committee is requested to propose potential improvements, including multi-year budgets. Any multi-year budgets shall be considered from various angles, such as degree of multi-year restrictions, level of detail and scope. It is requested that any advantages relating to increased predictability be weighed against the disadvantages of additional fiscal budget restrictions and reduced scope for reordering priorities in the annual budget process.
experience with the use of entity accrual accounts in conformity with SRS, including whether the highlighting of costs provides an improved basis for decision-making in ministries and other central government entities. The Committee shall consider mandatory use of SRS at the entity level. The Committee shall also consider mandatory reporting of accrual information alongside cash-based information to the central government accounts.
The Committee should in its efforts draw on international practice and experience from comparable countries, previous work in this field, as well as assessments from international organisations such as the OECD and the IMF. The Committee shall examine whether the introduction of new accounting standards for the EU (EPSAS) may have an impact on public sector budgeting and accounting in Norway as well. The Committee shall take into account that the Government has initiated a preparatory effort to establish a designated road development entity and that the Instructions for Official Studies and Reports are under review.
The Committee is requested to assess financial and administrative implications of its proposals.
The Committee should adopt an open approach in its work. This may be achieved by holding seminars and meetings to which representatives of relevant ministries, other public sector entities and the two sides of industry can be invited, together with researchers and others.
The Committee is requested to submit a joint report by the end of November 2015.»
1.3 The work and composition of the Committee
The composition of the Committee has been as follows:
Øystein Børmer, Director General, Norwegian Government Agency for Financial Management, Chairperson
Stein Berntsen, President consulting, Dovre Group
Tore Eriksen, Special Adviser, Ministry of Finance
Harald Brandsås, Technical Director, Norwegian Institute of Public Accountants
Anna Rømo, Director, Statistics Norway
Kristina Lundqvist, Head of Department, Swedish National Financial Management Authority
Kåre P. Hagen, Professor Emeritus, Norwegian School of Economics
Marianne Mancini, Chief Financial Officer, Diakonhjemmet
Hanne Gaaserød, Director, South-Eastern Norway Regional Health Authority
The Secretariat of the Committee has comprised the following individuals:
Frode Karlsen, Deputy Director General, Ministry of Finance, Head of the Secretariat
Siril Kvam, Adviser, Ministry of Finance
Johan Nitter-Hauge, Senior Adviser, Ministry of Finance
Torstein Sørbotten, Senior State Account Adviser, Ministry of Finance
Per Arvid Borøy, Senior Adviser, Ministry of Finance
Pål Sletten, Senior Policy Adviser, Ministry of Finance
Pål Ulla, Deputy Director General, Ministry of Finance
Nina Lillelien, former Senior Adviser, Ministry of Finance
Jan-Erik Hansen, Senior Adviser, Norwegian Government Agency for Financial Management
Gry Hamarsland, Head of Section, Norwegian Government Agency for Financial Management
In addition, affected line ministries have been represented in the Secretariat when matters within their areas of responsibility have been under discussion. This applies to the Ministry of Transport and Communications, the Ministry of Health and Care Services, the Ministry of Defence, the Ministry of Education and Research and the Ministry of Local Government and Modernisation. The following individuals from these ministries have contributed to the work of the Secretariat:
Magnar Alsaker, former Deputy Director General, Ministry of Transport and Communications
Magnus O. K. Worren, Adviser, Ministry of Education and Research
Tom E. Markussen, Senior Adviser, Ministry of Local Government and Modernisation
Helga Daae, Assistant Director General, Ministry of Health and Care Services
Ingunn Mari Skaaden, Deputy Director General, Ministry of Defence
The Committee has completed a total of 15 meeting days in connection with the work. In addition, two seminars have been held; one on the efficient progress of large investment projects and one on the distinction between operations and investments. The Committee has also hosted, in collaboration with Partnerforum, a major conference on decisions, investments and efficiency. In addition, international lectures have been held by representatives from Sweden, Denmark, the United Kingdom and the OECD. Affected ministries have submitted written inputs to the Committee, and national experts have made presentations before the Committee. A meeting in which the ministries presented their views on the terms of reference has also been held. An overview of individuals contributing to the work of the Committee is provided in Appendix 1.
Appendix 1, Chapter 1
Contributors
Below is provided an overview of individuals who have held lectures before the Committee, during the meetings of the Committee or in seminars and the conference hosted by the Committee.
Marianne Andreassen, Chief Executive Officer, Norwegian State Educational Loan Fund
Fredrik Arnesen, Director General, Ministry of Transport and Communications
Peder Berg, Deputy Director General, Ministry of Finance
Stein Berntsen, President, Dovre Group
Atle Birkeland, acting Head of Section, Directorate of Fisheries
Jón Blöndal, Head of Budgeting and Public Expenditures, OECD
Anatoli Bourmistrov, Professor, University of Nordland
Ola Brattegard, Deputy Director General, Ministry of Transport and Communications
Ådne Cappelen, Researcher, Statistics Norway
Lasse Ekeberg, Deputy Director General, Ministry of Local Government and Modernisation
Rune Fagerli, Deputy Director General, Ministry of Defence
Colin Forthun, Deputy Director General, Ministry of Finance
Nils Terje Furunes, Economist
Jan Hjelle, Director General, Ministry of Local Government and Modernisation
Erling Holmøy, Researcher, Statistics Norway
Per Ivar Gjelstad, Senior Adviser, Norwegian Public Roads Administration
Levi Gårseth-Nesbakk, Associate Professor, University of Nordland
Jan Fredrik Lund, Head of Department, Norwegian Public Roads Administration
Arne Lunde, Deputy Director General, Ministry of Education and Research
Julie Lungholt, Deputy Head of Division, Danish Ministry of Finance
Julian Kelly, Director General of Public Spending and Finance, HM Treasury
Knut Klepsvik, Deputy Director General, Ministry of Finance
Frode Mellemvik, Professor, University of Nordland
Frode Myrvold, Director General, Ministry of Health and Care Services
Harald Vaagaasar Nikolaisen, Chief Executive Officer, Statsbygg
Peter Olgyai, Head of Section, Norwegian Government Agency for Financial Management
Kristina Padrón, Senior Adviser, Swedish Ministry of Finance
Stein Reegård, Chief Economist, Norwegian Confederation of Trade Unions
Bettina Sandvin, Head of Department, Norwegian Public Roads Administration
Simen Vier Simensen, Director Emeritus, McKinsey & Company
Liv Kari Skudal Hansteen, Managing Director, Association of Consulting Engineers
Eirik Lae Solberg, former Finance Commissioner, City of Oslo
Øystein Thøgersen, Professor, Norwegian School of Economics
Hans Vaalund, former Secretary General, Ministry of Justice and Public Security, and Special Adviser, Ministry of Finance, etc.
Dag Aarnes, Deputy Director General, Confederation of Norwegian Enterprise
Espen Aasen, Assistant Secretary General, Ministry of Education and Research
The following individuals made presentations at a conference hosted by Partnerforum in collaboration with the Committee:
Øystein Børmer, Director General, Norwegian Government Agency for Financial Management
Leif Helland, Professor, BI Norwegian Business School
Jon H. Fiva, Professor, BI Norwegian Business School
Hans Christian Holte, Director General, Directorate of Taxes
Tom Christensen, Professor, University of Oslo
Jørn Rattsø, Professor, Department of Economics, Norwegian University of Science and Technology
Åge Johnsen, Professor, Oslo and Akershus University College of Applied Sciences
Kristin Clemet, Managing Director, Civita think tank, and former cabinet minister
Marte Gerhardsen, Director, Agenda think tank
Svein Gjedrem, former Secretary General, Ministry of Finance, and Governor, Central Bank of Norway, etc.