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The Financial Crisis in Iceland

IX EUROSAI Congress – The Hague 2014 Seminar – Auditing the Financial Crisis Response of the Icelandic National Audit Office to the Financial and Economic Crisis Mr Sveinn Arason, Auditor General of Iceland. The Financial Crisis in Iceland.

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The Financial Crisis in Iceland

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  1. IX EUROSAI Congress – The Hague 2014Seminar – Auditing the Financial CrisisResponse of the Icelandic National Audit Office to the Financial and Economic CrisisMr Sveinn Arason, Auditor General of Iceland

  2. The Financial Crisis in Iceland • The Icelandic banks had borrowed heavily on the international capital markets • 2007 and 2008: Problems with refinancing their depts • October 2008: Insolvency • Total liabilities of the system more than 100 billion US $ (ten times the GDP of Iceland)

  3. Effect on Public Finances • Enormous costs of rebuilding the financial system (int. al. the Central Bank) • Great increase in debts and other liabilities • Increased costs in the welfare system • Sharp decline in state revenue • State dept now around 80% of GDP

  4. Effect on Public Finances • Spending cuts and austerity measures • Collective consumption (cost of core operations of the state) diminished by 15% between 2007 and 2012 in real terms

  5. Response of the INAO - 1 • The crisis created some unique challenges for the INAO • 2009: Special effort in monitoring financial management of ministries and agencies • Task Force: Both FA and PA staff • Results published in two reports • Numerous recommendations for improvements

  6. Response of the INAO - 2 • Financial auditing: • Emphasis on audit of balance sheet items and off-balance-sheet liabilities • Strengthened monitoring and audit of revenue items • Tightened monitoring of compliance with budget appropriations • Measures to detect and prevent fraud

  7. Response of the INAO - 3 • Performance auditing: • Focus on issues and problems that ministries and agencies are facing as a result of the crisis • Effect of cutbacks on operation and services • Clearly delimited and concise audits • Continous monitoring and audit • Issue areas: Procurement, mergers and organisational reform, HR management etc.

  8. Response of the INAO - 4 • Cutbacks at the INAO: • Budget appropriations decreased by around 31% in real terms 2008–2012 • Number of employees went from 49 to 42 in the same period

  9. Thank you!

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