Paper by Norway
The Norwegian Constitution from 1814 is based on the principle of the separation of powers. It states that the Storting (the Norwegian Parliament) has been vested with the legislative power and the authority to appropriate funds, the King (the government) has the executive power and the courts of justice have the judicial power. The principle of the separation of powers presupposes that the three powers of state are basically independent of one another. However, in Norway, the original independence between the Storting and the government has been modified to some extent by the rise of the parliamentary system of government. It is now generally accepted in Norway that the Storting monitors the national administration (the government), and each individual minister is accountable to the Storting. As the supervisory body of the Storting, the Office of the Auditor General is thus assigned the task of monitoring that each individual ministry fulfils its administrative responsibilities.
Pursuant to Article 19 of the Constitution the Government (i. e. the King's) shall ensure that the state's interests in companies are utilised and administered in accordance with the decisions and intentions of the Storting. Within the Government, the responsibility for the individual agencies and companies is distributed between the ministries.
The Office of the Auditor General is monitoring that each individual ministry fulfils its administrative responsibilities vis-a-vis the company interests.
The state owned (wholy and partly owned) limited companies are as the privately owned limited companies, separate legal entities and are subject to the ordinary limited companies act.
In accordance with instructions given by the Storting, the Office of the Auditor General shall monitor the ministries' exercise of authority in matters concerning the state's interests in limited companies where the state owns so many shares that they represent 50 percent or more of the votes or in which the state otherwise has a dominant position, due to share ownership or by virtue of state control of the company.
By a dominant position in the company is here understood that the state has the opportunity actively to influence the companies development. This is to be assessed in each individual case.
Corporate control does not include a financial audit of the companies' financial statements - this task is performed by the elected (private-sector) auditors.
The overriding objective in the corporate control is for the Auditor General to have formed an opinion about whether the ministry has performed its tasks as administrator of the state's interests in companies in accordance with the decisions and intentions of the Storting.
The ongoing procedures that make up corporate control can be described as three main tasks. The three tasks are not independent actions.
The starting point for corporate control is always the decisions and intentions of the Storting regarding the particular company in question. The auditors must evaluate whether the Ministry administers and manages the state's special interests invested in the companies in the manner prescribed by the Storting.
The individual control procedures that are necessary will thus to a great extent be dictated by the Storting's concrete requirements regarding each individual company, and these requirements vary considerably - both in number and content. For some companies, the only requirement is the general requirement that its financial management must be sound, whereas others are subject to very specific requirements regarding such diverse aspects as operations, geographical location, production, financial results and reporting.
The Storting's assumptions, intentions and specific requirements regarding companies can be ascertained from the records of the Storting's consideration of matters related to the companies.
The corporate control also includes checking compliance with general laws and regulations including ascertaining that the operations are within the constraints laid down in the companies articles of association. The objective is both to verify that the Ministry is exercising its authority in the manner prescribed in the relevant Act that governs the entity under audit, and to verify that the companies observe other relevant laws and regulations.
A rule to be mentioned in this context is that in Norway civil servants in the ministry that administers the states interests in a company are not allowed to be members of the company's board of directors.
The third main task in the ongoing corporate control is to verify that the enterprises are being run in a financially sound manner and with requirements for commercial profitability. Sound financial management and appropriate structure are general requirements laid down by the Storting and apply to all the state's interests in companies.
The companies must have an adequate capital base with regard to the activities they are expected to perform. The Office of the Auditor General should therefore also assess the capital base of government companies.
In order to check whether the state interests represented by the enterprises are being administered in a financially sound manner, the Office of the Auditor General should evaluate the status and finances of the company. Whether operations are being managed responsibly, for example, by evaluating the chosen organisational form, the management, flexibility and results in relation to the market in general, etc. from an investor's point of view.
Some companies in which the state has an interest are charged with performing social functions and achieving public goals etc. This may have material significance for the financial results they can achieve. These factors should therefore be taken into consideration when assessing the commercial performance and profitability of these companies. If the assessments suggest it is necessary, the auditors may request that the ministry concerned provides reasonable documentation of the effect caused by providing these social services etc has for profitability, compared to the results that could otherwise have been achieved.
In its corporate control the Office of the Auditor General assesses discrepancies between the companies results and activities and the decisions and intentions of the Storting as well as discrepancies between the companies results and activities and the ministries information to the Storting. Any indications of disparity between the results or activities of an enterprise and the decisions and intentions of the Storting should be raised with the ministry concerned, which must evaluate the matter. The Minister's reply forms the basis of the Office of the Auditor General's possible remarks or information to the Storting concerning the Minister's management of the State's interests in the enterprise. Wether the Office of the Auditor General finds it necessary to submit any remarks or information to the Storting also depends on the information the Ministry itself already has given, or will be give, the Storting about the matter.
The starting point for corporate control is always the decisions and intentions of the Storting regarding the enterprise in question. These are ascertained by means of analysis of documents that demonstrate the basis of the Storting's deliberation of questions related to the enterprises and documents that describe the actual debate of the matter in the Storting.
The standard procedure for corporate control is a review of information that is received or gathered from the companies and the ministries. Some of this information, which acts as audit evidence in corporate control, is received automatically, including:
Corporate control includes those investigations and studies that are deemed necessary for the Office of the Auditor General to be able to give a qualified opinion regarding the individual ministry's administration of the state's interests in companies, banks, etc.
The Office of the Auditor General is entitled to participate as an observer in the general assembly of wholly state-owned companies in which the ministry is the highest corporate authority. The Office of the Auditor General receives the minutes from the general assembly and of the companies' board meetings.
The Office of the Auditor General obtains copies of correspondence, including reports, notes, etc. regarding matters in which the audited entity is involved. This includes both correspondence from the company to the ministry in question and from the ministry to the company.
In respect of wholly owned business enterprises, the Office of the Auditor General is also entitled to demand such information as it finds essential to the exercise of its control, for example, the audited entity's budgets. Documents such as reports from consultants, statistics on the industry as a whole, information in the mass media, etc. may also constitute important sources of information in connection with the Office of the Auditor General's corporate control.
In large wholly owned companies, the Office of the Auditor General aims to hold at least one liaison meeting a year, which is attended by representatives of the ministry, representatives of the company and the companie's auditors.
The Storting's instructions for the Office of the Auditor General's corporate control apply both to wholly and partly owned companies.
Despite the fact that in principle the ministry's responsibilities with regard to partly owned companies is the same as for wholly owned companies, the government's influence is weaker, as the degree of control a shareholder has is directly proportional to the ownership stake in the company. The monitoring of these companies is aimed initially at ascertaining whether the ministry has used its vote at the general meeting in accordance with the intentions and decisions of the Storting.
The Office of the Auditor General does not have any special rights of direct access to information from partly owned companies; nor does it try by other means to obtain information that is not available to the company's other shareholders. This is because all shareholders in a company are entitled to the same information. The administration of partly owned companies must be assessed on the basis of the information that the ministry has received or has had the opportunity to acquire.
Ordinarily, this monitoring is performed on the basis of the company's annual accounts, the auditors' report, the annual report of the board of directors and the ministry's report concerning the exercise of its authority in matters related to the company in the previous year.
By means of an analysis of the companies' annual reports and other information gathered by the ministry, the Office of the Auditor General will have reasonable grounds for judging whether the government's commercial operations are in accordance with the decisions and intentions of the Storting regarding state involvement in the company. If necessary, additional information may be collected, against which the ministry's exercising of its authority in the general assembly is assessed. Information of this kind can be found in the minutes of the general assembly meetings or in correspondence between the company and the ministry. This information can be obtained directly from the ministry.
The guidelines for the Office of the Auditor General of Norway will be available in English translation on the Internet: http://www.riksrevisjonen.no.