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National Audit Office’s Annual Report to Parliament 2021

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Reforms should focus on legislative drafting and information systems

A successful administrative reform requires good preparation, which in turn requires a clear understanding of the problems that the reform seeks to address. Reforms are often carried out in a hurry. Therefore, people in the field do not necessarily have the time to adapt to the changes, and there may be problems with the introduction of information systems. Reforms may also lead to other difficulties with information systems, such as problems with access rights or compatibility. Major administrative reforms may also be difficult to manage.

Reforms of public services and administrative reforms often prove to be difficult. A separate dimension to such reforms is brought by digitalization and new information systems, which are expected to increase efficiency and bring savings. These wishes often remain unfulfilled, or at least they are not fulfilled immediately. A topical example of a difficult reform is the reform of healthcare and social welfare, which has been prepared during several parliamentary terms.

Preparation of legislative amendments should be based on adequate and comprehensive information on the impacts of the changes

The preparation of legislative amendments should be based on an understanding of the problems with the current practice and how they could be solved by legislative amendments. The Finnish social security system and its legal basis are considered to be complicated. If a decision is made to simplify the system in a straightforward manner, there is a risk that legislative amendments aim to solve a problem whose existence has not been proven sufficiently well. An example to illustrate this is the amendment of the Unemployment Security Act (1290/2002) in 2018. Its purpose was to reduce the bureaucracy that may arise in the processing of adjusted unemployment benefit as a result of the reconciliation of earned income and unemployment benefit. The aim was to encourage jobseekers to also accept shortterm and temporary work. To solve the problem, the adjustment of unemployment benefits was changed so that it was based on the charge criterion instead of the earnings criterion. However, when this change was prepared, it was not examined in greater detail what kinds of delays had been caused by the application of the earnings criterion to the payment of the benefit. Nor was it examined how big a share of those receiving adjusted unemployment benefit might benefit from the change. The impacts of the legislative amendment have been assessed in an audit of incentive traps to be published in autumn 2021.

Legislative amendments sometimes aim to solve a problem whose existence has not been carefully examined.

On the basis of the audit, the reform reduced the delays caused by the application of the earnings-based criterion to the payment of the adjusted unemployment benefit. However, the audit was unable to assess the extent to which the delays had served as a bureaucratic trap, i.e. reduced people’s willingness to work, and, on the other hand, whether shorter delays had increased their willingness to accept temporary work. In any case, shorter delays are a sign that the reform has reduced actual measurable bureaucracy related to the benefit. On the other hand, the reform has made it more complicated to adjust the unemployment benefit due to lay-offs. Furthermore, the fulfilment of the requirement concerning previous employment is still monitored on the basis of the earnings criterion, which makes it more difficult to implement unemployment security.

The complexity of legislation cannot be solved by information systems

The main objective of the Incomes Register is to provide different authorities with income earners’ real-time income data while reducing employers’ administrative burden and improving the authorities’ efficiency. The audit Introduction and impacts of the Incomes Register (Audit Report 3/2021) found that the legislation contains a wide range of income concepts. These were not harmonized as a whole during the Incomes Register project. It was found in the audit that the information system was unable to eliminate the complexity, which is mainly due to the inconsistency of legislation established over a long time.

The data content of the Incomes Register is extensive and detailed not only because of the large number of income concepts but also because the data collected for the register are intended to serve several needs. In order not to cause too much burden on employers, some of the data in the register have been defined as information to be declared voluntarily. However, the audit found that the administrative burden on employers caused by the provision of data has not decreased; rather, the workload related to reporting has increased. The project strived to meet the needs of many data users simultaneously, but it was not anticipated sufficiently in the preparatory phase how the changes would impact data providers.

Haste is detrimental to the preparation and implementation of reforms

A recurrent problem in the preparation of reforms of public administration is haste. Haste may lead, for example, to inadequate impact assessments, regulations that are open to interpretations, and problems in the implementation phase of the reform. If the reform is extensive, consisting of separate parts, it should be considered whether it could be implemented in several parts or otherwise gradually in a controlled manner. This would make it possible to assess its impacts.

It may be appropriate to carry out extensive reforms in phases.

The audit Reform of vocational education (Audit Report 2/2021) found that the tight schedule for the implementation of the reform has hampered the coordination of information systems as well as the compilation of a knowledge base for the funding of the education. The reform was also prepared quickly at the same time that the appropriations for vocational education were cut, which caused an administrative burden on the management and staff of educational institutions. On the other hand, the audit found that the reform of vocational education and the related funding system have reconciled different objectives and incentives, which has inevitably made the funding system complex.

Good experience has been gained of participatory methods in law drafting.

For the above reasons, the Ministry of Education and Culture, which led the preparation of the reform, applied new participatory methods in the law drafting. The participatory preparation process contributed to broad acceptance of the objectives set for the reform among educational institutions. As a result of the participatory process, some good practices, such as strong working life cooperation and an education process modelled according to the adult education model, have also been integrated into the reform.

Obvious development needs remained in the funding system for vocational education because of lack of time but also because of the diversity of objectives. For example, the audit showed that it has not been possible for an education provider to manage all the factors on the basis of which the performance and effectiveness funding allocated to it is determined. From the perspective of the objectives set for the reform, it is important to have information on how students find work, for example. However, the funding is based on insufficient information on student feedback and the employment of students, and it has not been possible to allocate impact-based funding reliably on the basis of the available information.

According to the audit of the reform of vocational education, the success and development of learning in workplaces is essential to ensuring the sustainability of the education system. Vocational education is on a sustainable basis if the content, operating model and reciprocity of working life cooperation meet the expectations of business life and enterprises. In 2021, the National Audit Office carried out a follow-up on a previously completed audit of vocational education and related development projects. In the follow-up, it was found that the Ministry of Education and Culture and the Finnish National Agency for Education had followed the recommendation of the National Audit Office: in the application guidelines for development projects, they had paid some attention to the fact that it should be possible to assess the effectiveness, cost-effectiveness, and employment effects of the projects afterwards.

The management and steering of reforms should be improved

In extensive reforms, management of implementation may become a problem. If the steering responsibility is not clearly defined and the knowledge base used in the steering is not comprehensive enough and of sufficiently high quality, it is difficult to implement the reform. This was found in the audit Local government’s financial data and cost-effectiveness indicators in the steering of health and social services (Audit Report 9/2021). According to the audit, the production of information on the finances of health and social services is developed from different directions, and the knowledge base related to healthcare and social welfare is compiled through several channels. The entity is steered by different actors without any administrative body ensuring that the whole works. Activities are developed in separate projects, which may cause discontinuity of information and complicate overall management. The overall steering of the data production of healthcare and social welfare should therefore be clarified, and the responsible ministries should steer the process as a whole.

Unclear steering responsibilities complicate the implementation of reforms.

It has already been found before that shared steering or management responsibility leads to problems. The management of environmental healthcare was previously divided between three ministries and three central agencies. In a differentiated governance model, local authorities received a large number of steering inputs from central agencies, and the steering was not sufficiently coordinated. However, in the follow-up of the audit of environmental healthcare in 2020, it was found that the management of environmental healthcare at central government level had become more concentrated and that there were fewer actors than before.

In the audit Steering and monitoring of patient and client safety (Audit Report 7/2021), it was found that the steering and guidelines related to patient and client safety in healthcare and social welfare form an extensive entity that is difficult to interpret. The audit also revealed that the Ministry of Social Affairs and Health and its subordinate administration had not managed to steer patient and client safety in a long-term and consistent manner. There have been interruptions and slowness in the steering, and many of the key national targets have not been met.

Information system problems are common in connection with reforms

In connection with administrative reforms, information systems are often modernized as well. This may lead to poor usability of systems and problems with their interfaces and access rights. When information systems are modernized, it is important to look into the needs of their different users. In addition, attention should be paid to risk management in the implementation phase of the project and to the clear role of system suppliers.

When information systems are modernized, it is essential to identify the needs of different user groups.

In the audit of environmental health, it was found that municipalities had not been directly incorporated into the new information systems built for central agencies. The National Audit Office recommended that systems in environmental healthcare should be shared genuinely so that consideration can be given to the needs of both the central agencies and local government. On the basis of the follow-up, it can be concluded that information systems have been developed actively since the audit was published and improvements are being planned to take account of the needs of municipalities.

If it is necessary to enter data manually into information systems, or even to enter the same data separately into several systems, the efficiency to be achieved by the information systems is lost. For example, in the reform of vocational education, the information system was not ready when the implementation of the reform began. When the introduction started, there were technical problems in the system. The system interfaces did not work, which made it necessary for education providers to enter information manually.

The audit Local government’s financial data and cost-effectiveness indicators in the steering of health and social services examined a legislative reform that has an impact on how municipalities and joint municipal authorities report their financial data. The responsibility for collecting the data was transferred from Statistics Finland to the State Treasury as from 2021. At the same time, the contents of the data collected from municipalities and joint municipal authorities changed, and all data providers did not have sufficient competence at the initial stage of the reform. The quality and comparability of data may be weaker than before in the first years following the reform.

Automating the data collection reduces the possibility of human error. At the same time, the verification of the accuracy of the data may be jeopardized. For example, patient data have been poorly recorded in the treatment notification system of healthcare and social welfare. As a result of this, some of the health and social services’ cost-effectiveness indicators that are based on the data in the system are partly unreliable.

There are also problems with measuring. Only some of the key objectives of the reform of vocational education are measurable. No indicators have been set for the objectives, and it is not yet possible to compare the achievement of the objectives on the basis of numerical data. No key indicators have been defined for patient and client safety, either; the audit found that national data on patient and client safety are fragmented and incomplete.

A reform should be based on a clear need and fit into the whole

It is possible to distinguish the different stages in an administrative reform and the risks associated with them. To start with, it is important to examine the current situation and consider the objective of a potential reform and, based on this, to decide what the appropriate way forward is. If the problem to be solved requires measures, it should be considered what the best way to proceed is. A reform requires careful preparation, and its implementation requires good overall management. When a reform is planned, it is important to consider how it fits into the rest of the operating environment and what externalities it may have. After the reform has been implemented, it should be monitored how it affects the problem that it was planned to solve.

Visualization: Key phases and risks of a reform

Get background information about the visualization here.

Identifying a need for a reform

  1. Problem

    Identifying and describing the problem or way of operating that calls for a reform

    No clear information on the current problems

    A reform is needed as the current situation is not found to be appropriate. Has it been examined what the actual problem is? Is there research-based knowledge on the problem or just ideas and speculation?

    An unnecessary reform is implemented

    What is the objective of the reform? Is it needed? Are there alternatives? Is the problem such that it can be addressed by a legislative amendment or an administrative action?

  2. Looking into alternatives

    Assessing alternative ways to address the problem and their schedules and costs

    Alternatives are not looked into

    When the reason and impacts of the problem have been examined, alternative ways to act and their impacts are assessed. What is the best way to address the problem: a new law, a legislative amendment, another administrative action, or some other way?

  3. Preparing the reform

    Taking preparatory measures: legislative drafting, impact assessments, and IT and system changes

    The preparation is inadequate and carried out in haste

    When the best solution has been found, the measures to be taken are prepared: law drafting, impact assessments, as well as IT and process changes. The schedule and costs are assessed in detail. Defining the steering and coordination responsibilities – this is important especially in large projects. Sufficient time is reserved for the preparation.

  4. Implementing the reform

    In the implementation, it is important to manage the whole.

    Management of the implementation fails

    In the implementation phase, it is important to manage the process as a whole – particularly the schedule and costs. It is important to define the roles and responsibilities of the different actors and who has the overall responsibility. The changes made to information systems must be integrated with the rest of the reform.

  5. Monitoring the reform

    After the implementation, the way in which the reform affects the problem that was to be solved is monitored.

    Monitoring fails

    After the implementation, the way in which the reform affects the problem that was to be solved is monitored. In addition, it is assessed whether the reform has unexpected (adverse) impacts. If necessary, corrective actions are taken.

The reform has been implemented

Further information

Juho Nurminen
Principal Performance Auditor