Audit of the Central Government Accounts 2006

There was considerable surplus in the operation of the State Treasury in 2006, and the status of its principal strengthened considerably. Moreover, the weighted payroll costs of the state increased rather less than expected. Furthermore, state institutions’ management of accounting data is generally in good order. However, it is important that institutions follow the plans contained in the Budget for each year. Moreover, companies that are not in operation but receive VAT estimates should be removed from the register of companies.
The report “The Audit of the Central Government Accounts 2006” states that the financial position of the Treasury has improved considerably over the past two years due to considerable surpluses in the operation of the Treasury, ISK 115 billion in 2005 and ISK 82 billion in 2006. In 2006, this surplus can for the most part be attributed to increased tax revenue and other operating income resulting from expansion in the Icelandic economy. The results of the Treasury, therefore, were much better than the 2006 Budget anticipated. The 2006 Budget anticipated an ISK 20 million surplus, and if the trend continues, it is likely that the Treasury’s principal will be positive next year.

In general, state institutions’ management of accounting data is in good order. However, a large number of institutions still have difficulty in following the plans contained in the Budget of each year. The report of the National Audit Office shows that a total of twelve institutions under Group A of the Treasury have an overdraft of a total of ISK 221 million in bank accounts at the end of 2006. It is pointed out that according to the rules of the Ministry of Finance as regards loans and credit transactions of institutions under Group A of the Treasury, state institutions may not finance their operation through bank account overdrafts. The loss-making operation of institutions that exceed budgetary appropriations has also been financed by payments from the Treasury. In such cases, these payments are accounted as short-term debts to the Treasury. The 75 institutions that exceeded budgetary appropriations by more than 4% in 2006, and were indebted to the Treasury, financed the loss with an ISK 3.5 billion business debt with the Treasury.

Estimated VAT by the tax authorities has decreased substantially in recent years, although the balance is still ISK 26.2 billion. Currently, it is anticipated that only 3% of estimates will be collected. The National Audit Office recommends that companies that are verifiably inactive and yet receive estimates be deleted from the register of companies pursuant to authorisation contained in the Act on Limited Liability Companies and the Act on Private Limited Liability Companies. Moreover, the Office recommends that tax authorities be granted authorisation to close the VAT numbers of parties who are in substantial default.

During financial auditing for the year 2006, the National Audit Office specifically examined the manner in which collective wage agreements were implemented and wages projected from May 2006. It was revealed that, on the whole, the weighted payroll costs of the State between 2005 and 2006, i.e. after having taken into account altered work contributions, was rather less than anticipated in the Payroll Budget, or approximately 8.1% as compared with 8.6% in the Budget. There proved to be considerable differences between Ministries in this respect. In some cases, the increased payroll costs can be attributed to normal reasons, i.e. are the result of the efforts of the State or individual ministries to improve the terms of particular sectors or to correct the difference between the wages of employees according to ministry or institution. In other respects, deviations from the Budget can generally be explained by the fact that the number of employees was other than anticipated.

The managers of institutions were generally of the opinion that the wage IT systems met the needs of those who register therein and returned the information that they needed for management. Moreover, the survey performed by the National Audit Office indicated that the majority of institutions have synchronised the order of all positions and that this order is based on written reasoning, independent of the individuals holding the positions in question. Furthermore, the institutions that previously paid a (fixed) unmeasured overtime have generally transformed these payments into the fixed day-time wages based on an evaluation of personal or time-related aspects. Finally, all fixed overtime is generally measured. Thus the collective wage agreements have led to increased transparency and objectivity in wage decisions.

On auditing the Central Government Accounts for 2006, the National Audit Office placed particular emphasis on State creditors and debtors formally confirming their position with respect to institutions or state companies. The audit showed that in the majority of cases, the registration of amounts is in order. There were a small number of exceptions discovered. These have been specifically addressed, and the correct parties have been notified of the aspects that need further attention.