Poor focus on efficiency in fee-based public services for companies
The Government’s management of agencies that both determine the level of their fees and how the resulting revenue is used is too weak. The Swedish National Audit Office is now recommending measures that help government agencies render these services effectively and to high standards.
A great number of central government agencies conduct fee-financed activities, such as supervision, licensing and certification.
Normally, the Government determines the fee level. However, 18 government agencies have fees for which they can both determine the fee and how the resulting revenue is used. This deviates from accepted budgetary principles. These fees total SEK 9.2 billion annually.
As these government agencies can, in practice, determine the size and level of ambition of their operations, there is an elevated risk of inefficiency. The Swedish National Audit Office has therefore examined how the Government and the responsible agencies work to ensure that their operations are performed cost-effectively and to high standards.
The overall conclusion of the audit is that the Government’s management is too weak. For example, the Government does not monitor and reexamine these issues over time. Neither does the Government ensure that agencies engage in an ongoing dialogue with the companies concerned on how the services work.
“Since the risk of inefficiency is relatively higher in operations governed by public law, for which government agencies both determine the fee level and how the resulting revenue is used, it is reasonable that the Government should pay relatively closer attention to this in its management. Our assessment is that this is not the case,” says Auditor General Christina Gellerbrant Hagberg.
Good examples can be found among the Government’s agency dialogues with the audited agencies. However, taken together, such dialogues do not exert pressure to enhance efficiency, according to the Swedish National Audit Office’s assessment.
The Government’s expert authority, the National Financial Management Authority (ESV), has an important role in terms of exerting pressure to enhance efficiency, and there is potential for the Authority to do more. However, the National Financial Management Authority does not take any specific measures concerning government agencies that determine the level of their fees governed by public law and how the resulting revenue is used.
The examined government agencies do not specifically address the risks posed by how the system is devised. This could lead to government agencies neither developing their services nor reducing related costs, to the extent possible.
“Numerous sector organisations find that government agencies do not live up to companies’ expectations and needs for a long-term perspective, transparency and predictability. The fact that the central government has a monopoly on the services concerned, and that companies are required to use them, makes the situation problematic,” says Dimitrios Ioannidis, project leader for the audit.
Recommendations in brief
Our recommendations to the Government include:
- continuously monitoring and assessing whether a government agency should determine the fee level and how fee revenue is used
- strengthening governance to ensure that government agencies’ fee-based services are appropriate and cost-effective
- instructing relevant government agencies to monitor how the services work in relation to market and business needs.
Our recommendations to the National Financial Management Authority include:
- paying particular attention to fees governed by public law for which the relevant government agency both determines the fee level and how revenues are used
- ensuring that the annual accounts of central government fee-based activities, as far as possible, do not contain misstatements.