Public Financial Management Performance Report - Norway

The Public Expenditure and Financial Accountability (PEFA) Performance Measurement Framework was launched in 2005 and has been applied so far in over 80 developing countries. Norway has supported the development of this framework to assess the performance of a country's public financial management system. This assessment of the Norwegian public financial management is the first time the framework has been applied in a high income OECD country. The aim of the assessment was to get further experience with the framework by using it in another country context. A special section on management of Norwegian petroleum revenue is included in the report.

Norway is one of the richest countries in the world with the standard of governance being perceived as very high. This is confirmed in the assessment as 22 of the indicators were rated at A or B level (in a scale from A to D). However there were exceptions from this general standard as eight indicators or indicator dimensions were rated at C or D level.

Areas obtaining low ratings include procurement practices, legislative scrutiny of external audit reports and follow-up to the external audit report findings, affecting three indicator ratings. On these areas low score to some extent reflects a need for improvement also anticipated by the Norwegian government.

Low ratings affecting two other indicators are a result of primary service provision being entirely decentralised to municipalities. The local government is primary to be responsible for the local inhabitants, so for that reason the central government do not see central collection of ex-ante (budget) fiscal information from each municipality as needed. Furthermore, for the same reason, there is no central regulation in Norway to make sure that information on resources at primary service level (e.g. schools, health clinics) are made public available.

Three other areas of low performance ratings are lack of multi-year budgeting at dis­aggregated level, internal audit functions being optional for agencies and lack of a central consolidated assessment of risks in public corporations and autonomous agencies. In these areas the government in Norway find the current systems to be appropriate in the Norwegian context.

The assessment shows that the PEFA framework seems to be broadly applicable in a highly developed country as Norway. However on some areas it is more uncertain whether middle and lower performance scorings implies needs for improvement. This point out some areas for discussion whether good international practices and standards as reflected in some of the indicators, addresses needs for improvement in a country's public financial system, both in high income countries and developing countries.