Audit of the 2009 Central Government’s Accounts

In its report on the Audit of the 2009 Central Government Accounts, the Icelandic National Audit Office (INAO) had a number of comments on the Government’s financial statements and financial management. Among the issues criticised is the fact that the statements make no mention of certain financial commitments.One of the main tasks of the National Audit Office, according to law, is to audit the Central Government Accounts and the financial statements of public bodies, companies and funds. The manner in which such work is performed and its results are presented in an annual report which is sent to the Althingi and subsequently published.
The report The Audit of the 2009 Central Government Accounts criticises, among other things, the fact that no mention is made in the Accounts of the substantial commitments undertaken last year by the Treasury due to bank takeovers of deposits in collapsed financial undertakings.
Severe criticism is levelled at the 2005 decision of the Ministry of Agriculture to spend funds obtained from the sale of the Agricultural Loan Fund, more than ISK 214m, to purchase bank bonds from Kaupthing Bank. When the bank collapsed in 2008, the bonds were defined as general receivables, and it is now likely that a substantial proportion of the funds has been lost. In the opinion of the INAO, it is vital to establish clear and harmonised rules on the Treasury’s asset management.
In the summer of 2009, the Government issued recommendations to ministries and public bodies stating that they should cut wages that exceeded ISK 400,000 per month. The INAO’s examination showed that a large number of public bodies did not comply with this recommendation. The report criticises the manner in which the Ministry of Finance and other ministries presented the recommendations and provided guidance for their implementation. However, the report does state that the implementation of another Government decision from the same time, i.e. to terminate all vehicle subsidy agreements with government employees, was a great success.
The report reveals that approximately 20% of Government revenues from VAT in 2009 was based on estimates prepared when filers do not submit their reports.Such estimates are intended to encourage filers to submit their reports. In the view of the INAO, it is clear that the estimates have only limited effect in this respect. Other measures need to be examined to improve submissions.
There are a number of other comments in the report, including comments on the collection of receivables, security in the Government’s IT systems and rules on ear-marked income. Finally, it should be noted that the audit of the 2009 Central Government Accounts covered more than 300 of just under 500 budgetary items, public bodies, companies, funds and limited liability companies owned by the State.