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upon the Storting to appropriate moneys necessary to meet government expenditures” (Art. 75).

4.9. Budget execution – delegation of authority

Most issues associated with budget execution, such as apportionment of expenditure authority, details of in-year expenditure control, cash planning and internal audit, are not dealt with in law – certainly not in detail. Accordingly, there is a density of regulation in each country.17 This is the counterpart to the high degree of trust in executing agencies and the focus of Parliament on results rather than controlling budget lines and day-to-day operations of executing agencies. Finland’s State Budget Act explicitly mentions that provisions necessary for budget implementation and for the organisation of financial and accounting administration may be issued by government decree (s. 10b). Although such a provision is not written in law in the other countries, there is also a high degree of delegation of authority. In Sweden, it follows from the Constitution that the government has the authority to issue decrees in this area.

Nonetheless, the State budget acts of Finland and Sweden elaborate on a few specific budget execution issues. For example, in Finland the law specifies that government agencies must provide appropriate arrangements for internal control of their own activities and that the arrangements for internal control are run by each agency’s management. Even in these areas, the law specifies that government decrees may elaborate. Indeed, the central budget authority issues decrees. These are necessary given the decentralised budget management system – execution is performed by hundreds of agencies in each country. Civil service management is also decentralised. Thus central guidelines are also needed for conditions of employment and remuneration conditions.

4.10. Cancellation of appropriations and contingency funds

In most countries, the government may decide not to spend portions of the moneys approved for programmes in the annual budget. The law does not regulate this tightly. In Sweden, the State Budget Act explicitly allows the government to restrict – without limit – the use of appropriations by subordinate agencies. The government is also authorised to not appropriate funds if circumstances justify this. In contrast, in Norway, an appropriation is regarded not only as permission to spend, but also as an instruction to spend on the activity for which funds have been allocated. This is not regulated by a formal law, but by interpretation of the budgetary guidelines.

Although all four countries have contingency funds in their budget (OECD, 2003, Q.3.2.c.1), the use of this spending flexibility by government (and

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government agencies) is generally not regulated by law. However, in some countries, government regulations (for example the Budgetvejledning in Denmark) control the use of contingency reserves. In Sweden, there is unlimited discretion up to € 1 million.

4.11. Government accounting

The requirement to submit annual accounts to higher authorities is a constitutional requirement in Denmark, Finland and Norway. In Denmark and Norway, unaudited annual accounts must be submitted to the elected parliamentary auditors no later than six months after the close of the fiscal year (a generous deadline in today’s world of computerised accounts). In Finland, the Constitution does not provide a deadline to submit annual reports on State finances and adherence to the budget to Parliament (s. 46). In Sweden, the State Budget Act provides a four-month time limit for the government to submit a preliminary report on the outcome of State budget revenues and appropriations and a nine-month time limit for submission of the final annual report to Parliament. In practice, the final annual report, which must contain full accounting information, is submitted to Parliament by about 15 April.

Additional government accounting provisions are contained in law in Denmark, Finland, and Sweden, although these laws do not elaborate extensively on the accounting framework. Finland’s State Budget Act specifies that “the State accounts shall be kept according to generally accepted accounting practice” (s. 14). Sweden’s State Budget Act is more specific: it states that the annual report shall contain an operational statement, a balance sheet, and a cash flow statement. Denmark’s State Accountancy Law, 1984, is cursory (six articles only). It requires accounts to follow the same presentation as in annual budgets and to cover all State revenues, expenditures, assets, and liabilities. The law also requires ministers to issue accounting instructions to all budget-dependent agencies under them.

Although not a strong legal requirement, Finland and Sweden maintain whole-of-government accounts on an accruals basis. Finland’s budget appropriations, except for depreciation of assets, are also on an accruals basis. Sweden’s budget is on a modified cash basis and accounting on an accruals basis (Lundqvist, 2003). Denmark has introduced accrual accounting for some transactions. Norway maintains a cash-based accounting and budgeting system.

The content of annual accounts is detailed mainly in regulations in each country. An exception is Finland, where the law specifies that “the accounts shall be arranged so that it is possible to follow up the outcome of the budget at least at the level of detail of budgetary items. The accounts will include all

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revenue, expenditure, and financial transactions on a gross basis. Government agencies shall arrange to monitor the profitability of chargeable activities so that their annual results can be presented with their annual accounts” (State Budget Act, s. 15). Government agencies must “account for performance and management, and monitor operating costs, performance and effectiveness” (s. 16).

4.12. Other fiscal reporting and special reports

Apart from the above provisions, there are very few legal requirements for supplementary fiscal information. For Sweden, the State Budget Act elaborates that when submitting the outcome of State budget revenue, spending and debt to Parliament, the government must explain significant discrepancies between budgeted amounts and the estimated outcome. In practice, government programmes are submitted to Parliament at periodic intervals. These are not necessarily linked with the budget cycle. For example, in Finland, the government presents to Parliament its programme, including a medium-term fiscal strategy, in March, whereas the annual budget is submitted to Parliament in September.

4.13. External audit – constitutional and other legal requirements

Given the importance of openness and accountability, all four countries’ constitutions contain several provisions for the appointment of auditors to examine the financial activities of the State (Table 5). The constitutional provisions are supplemented by separate external audit laws. In three of the four cases, new audit laws are been adopted quite recently (Finland in 2000; Norway in 2004; Sweden in 2002). In Sweden, the Constitution itself was altered to bring about the changes. The main reasons in all three countries for

Table 5. Nordic countries: Constitutional requirements for external audit

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the modifications were to strengthen the powers of Parliament to exercise control, to reinforce the independence of auditors from the executive branch, to clarify governance structures, and to emphasise even more the three Es of economy, efficiency and effectiveness. In Denmark, the Auditor General’s Act 1976 was amended in 1991 and 1996 to strengthen the independence of the National Audit Office and to provide legal authority to access accounting information from independent administrative units.

Control over government finances by parliamentary auditors has a long tradition in the Nordic countries. A common feature is the election or appointment of several auditors by Parliament who are often sitting Members of Parliament. The executive branch is excluded entirely from the appointment of external auditors (compare to France, where the President of the Republic plays a major role). In Denmark, Finland and Sweden (until 2002), constitutions required an unspecified number of auditors to be elected or appointed; in Norway, the Constitution requires five auditors to be appointed by Parliament.

The purpose of external audit is stated in the constitution of each country, usually briefly. For example, in Denmark, the auditors’ roles are to “examine the annual public accounts, ensure that all the revenues of the State have been duly entered therein, and that no expenditure has been defrayed unless provided for in a finance act or in some other appropriation act” (s. 47). In Norway, the Constitution confines auditors’ roles “to examining the State accounts and publishing the same” (Art. 75 k). In Sweden, the Constitution simply states that the function of the National Audit Office is to “audit the activities carried out by the State. More detailed rules are laid out in the Parliament Act and other legislation” (Instrument of Government Act, Art. 12.7).

External auditors’ tasks are spelt out more fully in separate external audit laws, as well as in regulations issued by Parliament (in the case of Norway there are several). There is a strong legal mandate for the auditing of performance, as well as for continuing to conduct traditional compliance audits. Unlike some OECD countries, there has been an emphasis on performance audits for a number of years. This division of labour is reflected in organisational structures. For example, in Finland, there is one financial audit unit, but two performance audit units.

The institutional coverage of audits is established in the individual external audit laws. Coverage includes the State accounts, all central government ministries and agencies, most independent administrative agencies and public enterprises that are owned by government and/or receiving budget subsidies, and in some cases (for example Sweden, but not Finland), the accounts of Parliament. National audit offices do not audit the accounts of regional and local governments, except to follow up in their

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accounts the spending at sub-national level that has been funded by the central government. In Finland, a special audit law was adopted in 1995 to specify the competency of the national audit office to audit financial transfers between Finland and the European Union. In the case of Norway and Sweden, the National Audit Office is legally required to audit the accounts of the central bank. The opposite is true in Denmark and Finland.

In all four countries, a collegial approach to management and decision making is taken. Recent changes have been made to clarify governance and management structures, which are similar but not identical in the four countries. In Finland, the 1999 Constitution establishes two independent external audit and control bodies. First, there are parliamentary auditors who are elected from Members of Parliament. Parliament’s Rules of Procedure (Art. 12) specify that five State auditors are elected (and five deputy auditors) who are required to submit an annual report to Parliament. Second, the Constitution establishes an independent State Audit Office whose duties are elaborated in law (State Audit Office Act, 2000). To avoid unnecessary overlap, the parliamentary State auditors organise their activities in collaboration with the State Audit Office (Finland Parliament, 2000).

A similar dual parliamentary structure exists in Denmark. The Law on the Auditors of the Public Accounts, 1975, establishes six parliamentary auditors and defines their role and tasks. They are supported by a secretariat

– the Office of the Auditors of Public Accounts. As in Finland, this office is distinct from the Office of the Auditor General, established by the Auditor General’s Act, 1976.18 This Act specifies that a single Auditor General will be appointed by the Speaker of Parliament, with the approval of the Standing Orders Committee of Parliament.

Since the constitutional change in Sweden, three Auditors General manage the Riksrevisionen (in contrast with Denmark’s single Auditor General), which is stated to be an agency under Parliament. The agency has a board whose members are appointed by Parliament and whose tasks are to monitor audit activities, prepare for Parliament proposals that result from the audit reports of the Auditors General, and determine draft national budget appropriations for the office of the Auditor General (Instrument of Government Act, Art. 12.7). The Parliament Act (Art. 8.13) requires the board of the National Audit Office to have no fewer than 11 members.

In Norway, a new law on the external audit office (the Riksrevisjonen) came into force in mid-2004. Under the Act, previous organisational structures were maintained. The five Auditors General constitute the board of the Riksrevisjonen and are not distinct from it, that is, there is a single legal entity. The board has overall authority in policy matters. Responsibility for the day- to-day management of the Riksrevisjonen rests with the chairman of the board.

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There is a legal requirement to publish and send to the Storting a yearly report on the previous year’s financial audit of the State accounts. The law includes specific provisions related to the submission of accounts, notably that accounts with remarks should be forwarded to the Riksrevisjonen as soon as possible after the end of the fiscal year and, at the latest, by the deadline determined by the Ministry of Finance.

In the past, not all four countries had a single external audit office directly under Parliament. In Sweden, until the reforms in 2002, the Auditor General and his/her deputy and assistants were appointed by the government. The old Riksrevisionsverket was subordinate to the government through the Ministry of Finance, with a State ordinance, rather than a law, specifying the activities of the old office. A similar situation prevailed in Finland – the State Audit Office was under the Ministry of Finance until 2001. In Denmark, prior to 1976, there were four audit agencies under the Ministry of Finance and one under Parliament. Unification and the establishment of an independent Auditor General’s Office took place in 1976. This law was amended in 1991 so that the Auditor General was no longer to be appointed by the King upon recommendation of the Minister of Finance, but by the Speaker of Parliament (see United Kingdom National Audit Office, 2001, pp. 61-72).

The State audit office laws include the wide powers of investigation and access to documents needed to conduct its work. Reference to such powers is made in the constitutions of half of the countries. Audit laws also contain strong provisions for the enforcement of the findings of Auditors General. In Denmark, for example, law requires that replies to the Auditor General’s comments contained in audit reviews be provided within a six-week time limit (Auditor General’s Act, s. 16.1). The Auditor General is authorised to follow up on unsatisfactory responses. He/she may communicate directly with the relevant minister if necessary, requesting comments within six weeks. When requested, ministers must present a statement to parliamentary auditors of the measures and considerations that the report induced (s. 18.1). Ministers’ statements and the Auditor General’s comments form part of the parliamentary auditors’ final recommendation to Parliament. It is a constitutional requirement for the parliamentary auditors’ report to be submitted to the Folketing for decision (s. 47). The 1976 audit law also requires the Auditor General’s annual report to be presented to Parliament’s auditors, with the latter determining the time delay.

Finally, although INTOSAI guidelines recommend that publication of an annual audit report be embodied in a country’s constitution, publication is only mentioned in Norway’s Constitution. In Sweden, the law requires audit reports concerning each of the 250 government agencies to be presented by the government 30 days after the agencies have presented their annual reports. The audit report on the State annual report is submitted to the