The Office of the Auditor General's investigation into efficient utilisation of resources by the Norwegian Labour and Welfare Administration (NAV)

Transcription

1 Document 3-series Office of the Auditor General of Norway The Office of the Auditor General's investigation into efficient utilisation of resources by the Norwegian Labour and Welfare Administration (NAV) Document 3:10 ( )

2 This document is available at Public offices can order this document from Government Administration Services Phone: publikasjonsbestilling@dss.dep.no Others can order this document from Bestillinger offentlige publikasjoner Phone: Fax: offpub@fagbokforlaget.no Fagbokforlaget AS Postboks 6050 Postterminalen NO-5892 Bergen ISBN Illustration: 07 Oslo AS

3 Document 3-series The Office of the Auditor General's investigation into efficient utilisation of resources by the Norwegian Labour and Welfare Administration (NAV) Document 3:10 ( )

4

5 To the Storting The Office of the Auditor General hereby submits Document 3:10 ( ) The Offi ce of the Auditor General's investigation into effi cient utilisation of resources by the Norwegian Labour and Welfare Administration (NAV). The Office of the Auditor General, 6 March 2012 For the Board of Auditors General Jørgen Kosmo Auditor General

6

7 Table of contents 1 Introduction 7 2 Implementation of the audit 8 3 Summary of the findings 9 4 The Office of the Auditor General's remarks 13 5 The Ministry of Labour's response 14 6 The Office of the Auditor General's statement 18 Annex: Report Key terms 27 1 Introduction 29 2 Methodology and data basis 31 3 Audit criteria 36 4 Development in the administration of benefits in the county line 40 5 Productivity analysis of the administration of benefits in the county line 46 6 Systems, management practices and processes that affect the degree of resource utilisation in the county line 69 7 The Ministry of Labour's management of the administration of benefits in the county line 89 8 Assessments 94 Annexes 100

8

9 Ministry of Labour The Office of the Auditor General's investigation into efficient utilisation of resources by the Norwegian Labour and Welfare Administration (NAV) 1 Introduction The Ministry of Labour has the overall responsibility for policy relating to the labour market, working environment, pensions and welfare in Norway. Within the Ministry of Labour's area of responsibility, the Norwegian Labour and Welfare Service is the most important instrument for implementing government policy. In 2011, the agency administered welfare schemes totalling close to NOK 300 billion in public expenditures. Each year, about half of the population is in contact with the agency and the agency as a whole has about 2.8 million users. Benefits administered by the agency are of great importance for both individuals and society as a whole. A main objective of the NAV reform was that a new agency would create cooperation and integration in areas which were previously divided between two state agencies and the municipalities. The creation of a single agency was to result in the scaling back of the divisions between two old agencies, and the establishment of a new professional role within NAV, based on the goals of tailored employment and user services. Storting Proposition No. 46 ( ) Ny arbeids- and velferdsforvalting (New labour and welfare administration), abbreviated NAV in Norwegian, states that the administration and production of employment and welfare services shall be accomplished in the most efficient manner, and that an efficient labour and welfare administration must direct its attention at both devoting resources to the right programmes and services and ensuring that the services that are provided, are produced without unnecessary use of resources. Storting Proposition No. 46 ( ) states that the NAV offices are to be a recognisable front door to the Norwegian Labour and Welfare Administration's range of services, and that they are to be perceived by users as a single entity. The proposition also states that functions where proximity to the user is not required can be provided through specialised regional or national units. Storting Proposition No. 1 ( ) states that one of the purposes behind the creation of the specialised administration units was to ensure better quality in decision-making and provision of services as a result of shorter case processing times, higher quality decisions/information and equal treatment. On 20 March 2009, the Ministry of Labour and Social Inclusion submitted Storting Proposition No. 51 ( ) Redegjørelse om situasjonen i arbeids- og velferdsforvaltningen og forslag om tilførsel av ressurser til arbeids- og velferdsetaten (Review of the situation in the Norwegian Labour and Welfare Administration and proposal for supplying resources to the Norwegian Labour and Welfare Service). Here, the Ministry describes the major challenges facing the agency, and stated that there is still a high risk of weaknesses in the administration of benefits. In Recommendation No. 220 to the Storting ( ), the Standing Committee on Labour and Social Affairs emphasised that it is critical that the overall labour and welfare service functions satisfactorily and meets the expectations and requirements set by the Storting. In Proposition 1 to the Storting ( ), the Ministry wrote that 2010 would also be a challenging year for NAV. The agency's resource framework in 2010 was expanded by NOK million compared with the budget adopted for The Ministry pointed out that the reduction of case processing times and backlog cases would be high priority areas for NAV in It further pointed out that the Norwegian Labour and Welfare Service is to work systematically at the same time to improve the quality of benefits administration, so that it can be documented that the individual has received the right benefit, and that work on each case is performed more efficiently. The Directorate of Labour and Welfare manages the state's part of the agency through two separate lines of governance: the special unit line and the county line. The county line includes the NAV offices and NAV Administration, which are the units in each county that work together on the administration of benefits. The purpose of the audit is to examine whether NAV has established efficient resource utilisation in its administration of benefits in the county line, 7

10 and to identify organisational and managementrelated reasons for why the utilisation of resources varies between counties. The purpose is illustrated by the following issues: 1 To what extent has efficient resource utilisation been established in the Norwegian Labour and Welfare Service's administration of benefits in the county line? 2 To what extent does the Norwegian Labour and Welfare Service have systems, management practices and processes that ensure efficient resource utilisation in the administration of benefits in the county line? 3 To what extent does the Ministry of Labour, in its governance of the agency, ensure efficient use of resources and instruments in the county line in the Norwegian Labour and Welfare Service's administration of benefits? The draft report was submitted to the Ministry of Labour by a letter dated 25 October The Ministry commented on the report in a letter dated 22 November The comments are largely incorporated in the report and in this document. The Office of the Auditor General (OAG)'s report is attached as a printed annex. 2 Implementation of the audit The issues in the audit are mainly illustrated by the use of statistics, interview data, case file reviews and document analysis. All interview data included in the audit has been verified. The audit is mainly based on data supplied by the Directorate of Labour and Welfare, and in this context the full-time equivalents in the administration units are an important source of data. On 15 November 2011, the Directorate of Labour and Welfare, via the Ministry of Labour, noted that the numbers for full-time equivalents in the administration units previously provided to the OAG were unsuitable for making comparisons between counties. Following dialogue between the OAG and the Directorate of Labour and Welfare, the Directorate submitted adjusted figures for full-time equivalents in the administration units on 23 November The material was reanalysed on the basis of the new data and the report was adjusted on several points. Based on the contact that has taken place with the Ministry and the Directorate concerning data quality, it is assumed that the data provided by the Directorate is now accurate and of sufficient quality. Quantitative analyses based on statistical information about the work of NAV's county line were carried out to investigate the extent to which efficient utilisation of resources has been established in the Norwegian Labour and Welfare Service's administration of benefits in the county line. The analyses highlight performance over time, relative productivity in the counties and certain qualitative aspects of the administration of benefits. In the audit, an analysis was carried out of productivity based on a calculation of the overall workload in the administration of benefits and information about the counties' available resources measured in full-time equivalents in the administration units. The workload in the administration of benefits in the counties is calculated on the basis of information on the total case production and information from NAV's resource mapping about how employees in the administration units spend their total work hours. The estimated workload was then divided by available full-time equivalents in the administration units in order to give an indication of the relative productivity of the full-time equivalents in the counties. To assess whether the Norwegian Labour and Welfare Service has systems, management practices and processes that ensure efficient resource utilisation in the administration of benefits in the county line, document analyses and interviews were carried out with the Directorate of Labour and Welfare. In addition, Sør-Trøndelag and Hordaland counties were selected for an in-depth audit on the basis of different outcomes in the quantitative part of the audit, because the counties are considered comparable with a view to municipal structure and demographics, and because the administration of benefits in the two counties is organised somewhat differently. The in-depth audit includes interviews, case file reviews and document analysis, and information concerning conditions in the counties, such as work organisation and way of working, views on the interaction between units and between counties, collaborative practices, skills and competence requirements, and management at the visited units and in the counties in general. The county administrators were interviewed in each of the two counties. In addition, visits were conducted at both administration units in the two counties as well as a selection of NAV offices. In 8

11 all, interviews with 61 NAV employees were conducted in the two counties. An analysis of key governance documents, such as the objectives and resource allocation letters from the Directorate to the counties, was also undertaken along with reporting internally in the counties and from counties to the Directorate, minutes from county director meetings and internal management documents in administration units and at NAV offices in Sør-Trøndelag and Hordaland for 2009 and To investigate how the Ministry of Labour discharges its responsibility for efficient resource utilisation in the administration of benefits, key governance documents such as letters of appropriation and reporting were analysed along with minutes from agency management meetings in 2009 and Interviews with representatives of the Ministry of Labour were also conducted. The review is limited to the management of the Norwegian Labour and Welfare Service relating to efficient resource utilisation in the administration of benefits and related topics included in the issues of the audit. 3 Summary of the findings 3.1 Increased resource framework, but still poor outcomes and failure to achieve goals The audit shows that the total number of backlog cases (cases submitted for processing) in NAV's county line was reduced from August 2008 to December Nevertheless, the backlog cases in December 2010 were only marginally lower than the backlog cases in January The audit shows that several case areas (including the pension area) were removed from the county line during the period 2007 to This led to a reduction in the overall backlog level and incoming cases. The Directorate of Labour and Welfare stipulates the standard time requirements for selected benefits in the county line in the annual objectives and resource allocation letter to NAV County. The audit shows that the agency meets, to a limited extent, the requirements that the agency itself has set for case processing times. In the period 2008 to 2010, the agency achieved the prescribed processing time requirement for only one of the ten benefits the entire period. For six of the ten benefits the processing time was generally longer than the stipulated requirements. Taken together, there was no appreciable improvement in the agency's processing times during the period. NAV's aggregate operating expenses for administration units and NAV offices increased significantly from 2007 to 2009, but dropped slightly from 2009 to In 2010, aggregate operating expenses for NAV offices and administration units in the county line were just over NOK 4.5 billion. In the period aggregate operating expenses increased by 26 per cent. Payroll expenses increased during the same period by 29 per cent. NAV figures show that employees at NAV offices and NAV Administration spend almost 60 per cent of their total time on professional work relating to the benefits. More than 40 per cent of the time was spent on other tasks, such as management, administration and internal training, as well as sickness absence. This distribution did not change substantially from 2008 to The audit shows that for several years NAV has had a sickness absence rate significantly higher than the sickness absence rate in the state at large, and that the county line in NAV has a slightly higher sickness absence rate than NAV in general. In interviews in connection with the audit, several administrators pointed out that high work pressure, a tight resource situation and a lack of a sense of coping are factors which are burdensome for employees. In the audit office's opinion, it is important that the Directorate, the counties and the management of each unit devote necessary attention to the challenges posed by the agency's sickness absence rate. 3.2 Too large regional variations in productivity and goal attainment The audit shows that NAV offices and NAV Administration together have around 7,500 fulltime equivalents. While the distribution of fulltime equivalents between the two types of units varies somewhat in the individual counties, for the country as a whole, 70 per cent of full-time equivalents (5,250 full-time equivalents) work for NAV offices, while the remaining 30 per cent (2,250 full-time equivalents) work for NAV Administration. In the case of full-time equivalents per 1,000 inhabitants, the audit shows that for the country as a whole, overall staffing at the NAV offices and NAV Administration is 1.54 full-time equivalents, but also that there are significant differences between 9

12 the counties. Finnmark and Nordland counties have staffing levels of 2.2 and 2.0 full-time equivalents per 1,000 inhabitants, respectively, while Rogaland, Akershus and Hordaland have a staffing level of between 1.3 and 1.4 in other words, 30 to 40 per cent lower. Factors relating to the municipal structure and population pattern in the individual county will affect the counties' overall staffing and staffing at NAV offices. The administration units are largely comparable across county boundaries and are the type of unit that is crucial with respect to case processing in the counties' administration of benefits. The audit shows that the average staffing of the administration units per 1,000 inhabitants in the county is close to 0.5 full-time equivalent. Here too there is variation between counties. While NAV Administration in Nord-Trøndelag and Finnmark have around 0.6 full-time equivalent per 1,000 inhabitants in the county, NAV Administration in Akershus and Hedmark has less than 0.4. The administration units in Nord- Trøndelag and Finnmark thus have more than 50 per cent more full-time equivalents per 1,000 inhabitants than the administration units in Akershus and Hedmark. The audit shows that incoming cases per inhabitant vary between the counties. In 2010, Finnmark received 15 per cent more cases per inhabitant than was the case for Rogaland. When the counties' incoming cases are viewed in comparison with the full-time equivalents in the administration units, the differences between the counties are even greater. The audit shows that Hedmark has more than 50 per cent more incoming cases per full-time equivalent in the administration unit than what Nord-Trøndelag has. 3.3 Potential for increased productivity and better resource utilisation Production in the counties was made comparable by carrying out a workload measurement. This shows that there are considerable differences between the counties concerning productivity. The output per full-time equivalent of the most productive county (Oppland) is 47 per cent higher than the least productive county (Finnmark). If all of the administration units in NAV had an output equal to the average of the five most productive counties, the agency could have produced the same amount of work with 273 fewer fulltime equivalents. It then follows that 13 per cent of the full-time equivalents at the administration units could have been assigned to other tasks. In 2009, a backlog reduction team was established in NAV to increase overall production capacity in the county line. The teams are funded by and report to the Directorate, and receive cases from several counties. The backlog reduction teams handled just over 130,000 cases in 2010, and around 70 per cent of these cases concerned sickness benefit claims. The audit shows that, measured in workload units, the four counties that received the most help from the backlog reduction teams in 2010 were Finnmark, Hordaland, Møre og Romsdal and Vest-Agder. The first three counties rank in the relatively less productive end of the scale. 3.4 Good productivity is linked with good goal attainment in many areas The audit shows that there are wide variations between the counties in important performance areas as backlog level, case processing time, follow-up of users and user satisfaction, and for other key aspects of the administration of benefits. The audit shows that high productivity in the counties is linked with low backlog level and shorter case processing times. Low backlog level, in turn, is linked with higher goal attainment with respect to user follow-up and user satisfaction. Improvement in the counties' productivity is therefore key in order to increase goal attainment in the agency. Backlog cases The audit shows that there are major variations between the counties with respect to the backlog level. In 2010, the county with the lowest number of backlog cases (Sør-Trøndelag) had an average of 12 unprocessed cases per 1,000 inhabitants, while the backlog level in the county with the highest number (Finnmark) was 36 in other words, three times as many backlog cases. Most counties reduced their backlog level from 2008 to 2010, and all had fewer cases per 1,000 inhabitants in 2010 than in The audit shows that there is a tendency for the more productive counties to have the lowest backlog level. Case processing time The audit shows that counties still have major challenges in meeting the case processing time requirements the agency itself has set. In the last four-month period in 2010, only Oppland had an overall average standard time for all of the benefits that was shorter than all of the prescribed 10

13 requirements. The long case processing times and the huge variations between the counties yield huge differences in how much time users have to reckon with before they receive responses to submitted claims. For example, the standard time for attendance benefit cases is more than seven times as long in Oslo as in Oppland, while the standard time for disability cases is more than twice as long in Finnmark as in Sør-Trøndelag. While the challenges are the greatest for counties with a high backlog level, counties with a relatively low backlog level also have case processing times that are too long. Appeals and reversals The quality of the administration of benefits is illustrated in part by the scope of appeals from users and reversals of earlier decisions. The audit shows that the number of appeals from users for decisions made in the county line, increased by 20 per cent from 2008 to 2010 (from 3.5 to 4.2 appeals per 1,000 inhabitants). Just under 35 per cent of the cases appealed were reversed by the administration unit itself. At the same time, there are examples of where certain counties in some benefit areas have a reversal rate of nearly 80 per cent of appeal cases. Regardless of benefit area, NAV Appeals reverses between 10 and 20 per cent of the decisions that following an appeal were upheld in the administration units, while also here there are examples of the reversal rate for certain counties and certain benefits being substantially higher. In its reporting, NAV Appeals points out that there are significant differences in case processing practices between the counties and that the high reversal rate in the administration units represents a risk to the legal safeguards protecting users of the agency. In the audit office's opinion, the wide variation in appeals and reversals indicates different administrative practices in the counties, which seems to be highly inconsistent with the expectation that the establishment of the administration units would ensure improved quality of case processing. The audit shows no correlation between productivity and number of appeals or percentage of reversals, and high productivity therefore does not seem to be incompatible with good quality case processing. User follow-up The audit shows that NAV has major challenges with reaching its targets for following up users. For example, in 2010 only one county attained its target for following up regular job seekers. In the case of dialogue meeting 2 follow-up of persons on sick leave, none of the counties met the target. Better follow-up of users was an important premise for the NAV reform, and is key to the main goal of stimulating employment and activity. When the counties do not meet the targets set by the agency for follow-up of priority user groups, it may seem that this area is not sufficiently emphasised in the agency's work, either in daily operations or by the administration at various levels of the agency. According to NAV's own statistics, the NAV offices spend as little as 14 per cent of their total resources on this important task, indicating that this area is also not given sufficient attention. User satisfaction NAV user surveys show that user satisfaction with NAV's services fell in the period for the country as a whole, and that only one county achieved higher user satisfaction. User satisfaction is related to the needs of the users. Users who have been in contact with NAV on the basis of benefits relating to health services and age and disability, are relatively more satisfied than users who have contact with NAV in connection with family benefits, unemployment and social services. Users are satisfied to varying degrees with key aspects of NAV's accessibility. Users are especially dissatisfied with case processing times, accessibility by phone and followup of users' needs. NAV is working to improve goal attainment in all three areas, but the survey shows that the results are still poor with respect to case processing times and user follow-up. The survey shows that the counties with the best results in terms of case processing times also have more satisfied users than other counties. 3.5 Improved productivity and goal attainment requires management attention and better cooperation on good common solutions In its appropriation letter to the Directorate of Labour and Welfare, the Ministry of Labour sets requirements associated with a number of factors that appear to be important for ensuring efficient resource utilisation in the administration of benefits in the county line. The objectives and resource allocation letter from the Directorate to the counties continues and operationalises the requirements issued by the Ministry. In connection with its oversight of the Directorate of Labour and Welfare's work with the administration of benefits, the Ministry of Labour receives comprehensive reporting which generally corresponds to the Ministry's order. Nevertheless, the audit shows that the Ministry itself feels that it 11

14 does not have good enough information about the efficiency performance of the agency, and has no basis for assessing whether the improved results are a product of improved resource utilisation or a result of increased resources. An improved information base for monitoring outcome performance in the agency and resource inputs used to achieve results, will be a useful supplement in conjunction with the Ministry's governance and monitoring. The audit shows that in the period from 2008 to 2010, the Ministry, Directorate and counties gave priority to case production and reduction of backlog cases in their management, while quality was given less attention in governance and monitoring. The audit shows that the Directorate has initiated steps to improve the agency's internal control and further develop management information concerning the quality of the administration of benefits. The Ministry's and the Directorate's follow up of whether the agency meets its key goal of providing the right benefit at the right time, requires better information about both case processing time and quality. Since both the Directorate's and counties' management attention has been aimed at reducing backlog cases and production in the administration units, there has been less emphasis on important tasks relating to user follow-up at the NAV offices. In the audit office's opinion, more management attention directed at the work on user follow-up at the NAV offices is important for improving NAV's overall performance in this area. Good organisation of the work is a prerequisite for efficient resource utilisation in the administration of benefits. The Directorate of Labour and Welfare has developed an improvement methodology that is being employed in improvement projects in cooperation with selected counties. The audit shows that visited NAV offices and administration units have had largely good experiences with improvement projects. The audit also shows that the Directorate, despite widespread agreement that this improvement methodology is useful, did not prioritise the implementation of such measures in Production management Production management is a key management task in the administration units. The audit shows that the target figures for how many cases a fulltime employee in the two selected counties (Sør- Trøndelag and Hordaland) are to handle each week, are very different. It is reasonable that this varies somewhat between the counties, and these differences may have their background in real differences in productivity in the two counties. However, it does not seem reasonable to operate with production targets as diverse as the audit shows, for what is expected of NAV employees in different counties. For example, the audit shows that in the area of disability pension a case officer is expected to handle 75 per cent more cases in one of the visited counties (Sør-Trøndelag) than in the other (Hordaland). Furthermore, the audit shows that it is a key challenge in the administration units to ensure that each benefit area has sufficient personnel resources at all times to handle incoming cases. The number of incoming cases varies considerably through the year for several benefit areas, and these benefit areas, for certain periods of the year, consequently have a need for greater personnel resources than during other periods. It is clear from the audit that the administration units do not fully have sufficient flexibility to meet the variable need for resources in various benefit areas. The fact that the audit shows that case production largely matches incoming cases, and that during certain times of the year there are unreasonably long case processing times for some benefit areas, indicates that these are challenges that the agency should continue to work on. The audit shows that there are clear limitations in the existing production management tools developed by the Directorate. The audit shows that the counties compensate for a lack of system support by developing their own tools for production management, and by keeping manual counts and records. This practice seems to be very inefficient and vulnerable to error, and causes differences in production management between counties and between performance areas at each administration unit. Expertise As early as 2005 the Storting underlined the importance of having sufficient expertise in NAV. The wide scope of the NAV offices' areas of responsibility requires considerable expertise needs with respect to both guidance and followup of users. Many advisors at the visited NAV offices emphasised that they do not have sufficient expertise to provide the guidance that users expect in their dealings with NAV. 12

15 The audit also shows that between 2008 and 2010 there was a reduction in the amount of time spent on internal training activities at the NAV offices. Managers and advisors at the NAV offices point out that, in practice, it is difficult to set aside time for building and maintaining expertise. Many point out that it is particularly challenging to develop professional social security-related expertise and skills in the use of the agency's electronic case processing systems. The audit shows that little professional exchange takes place between the administration units in the various counties. This implies a risk that some counties will develop their own management practices, and that similar cases will not receive the same treatment regardless of where a claim was submitted to NAV. Appeal and reversal statistics and comments from NAV Appeals also provide a basis for questioning the management practices in the counties and the expertise of the administration units. Collaboration between various units Case flow in the counties depends on how well the NAV offices and the administration units collaborate. An interface committee has been established to contribute to clarifications and adjustments relating to the procedures for interaction between these units. The audit shows that the interface committee has facilitated better collaboration between the units in the counties after it was established. The audit shows that many cases are not documented well enough when they are processed by the administration units, and that this delays processing routines in the administration of benefits. Case officers at the administration units feel that they have to spend a lot of time obtaining additional documentation to process the applications. The audit shows that case officers at NAV Administration do not feel that applications submitted at the NAV offices are better documented than applications that the user has submitted using NAV's form tutorial on the Internet. It is clear from the in-depth audit in two counties that the administration units do not provide systematic feedback about the quality of the work to the NAV offices. The informants at the NAV offices believe that more systematic feedback would have provided important correctives and knowledge for the practices at each office. With many small NAV offices, it is the audit office's opinion that good dialogue with the administration units is particularly important to ensure consistent and sound administration of benefits even at NAV offices with limited professional staff. The agency's ICT tools The audit shows that the current ICT tools in the agency do not sufficiently meet the processing and information needs of the new labour and welfare administration because they were adapted to the way the old agencies worked. Managers, advisors and case officers interviewed at NAV in Hordaland and NAV in Sør-Trøndelag described the challenges relating to having to use parallel computer systems to ensure access to all relevant information in a case. County administrators in Sør-Trøndelag emphasised that the ICT tools are their biggest challenge with respect to achieving efficient case flow and administration of benefits in NAV. According to the informants, the consequences of the many technical systems is deficient information flow between the different benefit areas in the administration unit, that case officers have to record information in multiple systems, and that many manual operations must be undertaken. 4 The Office of the Auditor General's remarks The Office of the Auditor General's audit shows that there are considerable differences in the counties' overall staffing at NAV offices and administration units. Factors relating to municipal structure and the population pattern in the individual county may to some degree affect the counties' overall staffing and staffing at the NAV offices, while staffing at the administration units is largely comparable across county borders. The audit shows that there are large differences in the per capita staffing of the administration units. On this basis, the OAG raises questions about the differences in the staffing-related resources at the administration units, and the reasonableness of an administration unit in one county having 50 per cent more full-time equivalents per inhabitant than the administration unit in another county. The Office of the Auditor General's audit shows generally poor goal attainment and large differences between counties in key performance areas such as backlog levels, case processing time, user follow-up and user satisfaction. The audit furthermore shows that despite considerable allocation of resources and major attention to management, there continue to be challenges relating to high backlog levels and long case processing times. 13

16 The OAG believes that within the current resource framework there is a basis for expecting NAV to largely meet its case processing time targets, and to reduce the wide performance variations in the counties. The audit documents wide variations in the productivity of the counties. When one county has almost 50 per cent higher productivity than another and overall there is considerable potential for increased efficiency in the administration of benefits, it highlights, in the OAG's opinion, the need for continuing to develop the Directorate's work on productivity analyses and incorporating it as an important element in the governance and monitoring of the counties. In the OAG's opinion, management information on productivity and efficiency will be crucial for improving resource utilisation in the agency. At the same time, more information about the real workload of various tasks will provide a basis for better resource management and contribute to help prevent and reduce the high sickness absence rate in the agency. In the OAG's opinion, questions can be raised about whether the Directorate and the Ministry have to a necessary degree established a basis for managing the agency's resources in the best possible manner. The audit shows that there is a connection between productivity in the administration units and the outcomes achieved in the counties. Counties with higher productivity in the administration units have a lower backlog level, shorter case processing times and more satisfied users than counties with less productive administration units. The audit indicates that productivity differences are linked with internal circumstances in the individual county. Productivity and goal attainment require sound handling of matters of a management nature. In the OAG's opinion, the Directorate, NAV Counties and the individual unit have considerable potential with respect to systematic further development of good organisational solutions aimed at efficient administration of benefits. There is little information about the quality of the work performed in NAV Administration and at NAV offices. The Directorate has initiated control measures in the form of key controls to promote the quality of the administration of benefits, while the development of robust management information about the quality of NAV's work will still take some time. Current information about appeals and reversals indicates variable quality and management practices in the administration of benefits. In the OAG's opinion, questions can be raised about whether users' rights are protected to a sufficient degree, and whether the administration units have sufficient expertise to discharge their duties. It is a key goal that the Norwegian Labour and Welfare Service is user oriented, and that the agency's services and follow-up are adapted to user needs. NAV's user survey shows that user satisfaction with NAV's services fell in the period NAV is working to improve goal attainment in several of the areas users are most critical of, but the results are still poor with respect, for example, to user follow-up and case processing time. Systematic governance and monitoring by management is considered to be a prerequisite for the necessary improvement of the agency's performance. In the OAG's opinion, the prioritisation of reducing backlog cases should be continued and intensified in the counties where the challenges are greatest. At the same time, the OAG also believes that there is reason to question whether the important work of user follow-up is given sufficient attention in the agency's management. 5 The Ministry of Labour's response The case has been submitted to the Ministry of Labour, and in a letter dated 11 January 2012 the minister responded as follows: "I refer to the Office of the Auditor General's letter of 14 December 2011 requesting remarks from the Ministry on the OAG's observations in Document 3:10 ( ) concerning efficient resource utilisation in the Norwegian Labour and Welfare Service's administration of benefits. Enclosed are some administrative remarks on the factual basis of the draft report. 1. General comments The OAG has conducted a comprehensive survey of productivity in the administration of benefits in the Norwegian Labour and Welfare Service. It contains interesting findings and will help form a foundation for efforts to improve the administration of benefits. Some of the findings and remarks from the OAG are already known, including the review of the final report of the expert group that evaluated the division of tasks and responsibilities in NAV dated 24 June 2010 and Storting Proposition No. 14

17 51 ( ). Measures that have been established, partly as a result of these documents, will be discussed below. Proposition No. 1 to the Storting ( ) states that efforts to ensure users the right benefit at the right time have been a key factor in the improvement work that the Norwegian Labour and Welfare Service has carried out. The quality and robustness of the administration of benefits will continue to remain a challenge for the agency, and efforts to reduce case processing times and ensure good quality in the administration of benefits will continue. After the agency in 2008 and especially in 2009 had to prioritise efforts to reduce case processing times, the focus is now increasingly on improving the quality of the administration of benefits. The work is rooted in the agency's operations strategy, and action plans have been developed for improvement work that is to be monitored and reviewed annually. A comprehensive effort is also under way to establish a comprehensive quality system with associated quality measurements that will gradually cover all performance areas. In my responses over the last two years to the OAG's Document 1, I have reported on steps taken to improve the quality of the administration of benefits. In my response to Document 1 ( ) I pointed out that: "The size and complexity of the Norwegian Labour and Welfare Service suggests that further development of the agency must have a long-term and holistic perspective. This applies to both eff orts to improve the administration of benefi ts and follow-up of users to increase their participation in the labour force, including the observations the OAG raises in the report. Given the wide range of tasks that the agency has, and within the fi nancial framework the agency has at its disposal, improvements will have to be gradual. It will therefore take time before both the administration of benefi ts and follow-up work will be of acceptable quality. This must also be considered in light of the fact that much of the improvement will be based on ICT modernisation in which improvements will be achieved gradually." The audit carried out reflects the situation in The trend through 2011 shows progress in many areas concerning both the administration of benefits and user follow-up. I will report on this in Section 2.5. The Directorate of Labour and Welfare has established a new operations strategy for Most of the OAG's observations will be addressed within the framework of this strategy. The Ministry will have a dialogue with the Directorate on the follow-up of the operations strategy. 2. Comments on the Office of the Auditor General's remarks 2.1 Staffi ng variations In the audit, the OAG demonstrated that there are wide variations in the administration units' per capita staffi ng in the individual county. The OAG raises on this basis questions about the diff erences in staffi ng-related resources at the administration units, and the reasonableness of an administration unit in one county having 50 per cent more full-time equivalents per inhabitant than the administration unit in another county. The Directorate of Labour and Welfare allocates operating funds in the form of framework budgets for each county office. The county offices are responsible for ensuring that the operational framework is divided among the county's units in a manner that provides a basis for ensuring that they have approximately the same budgetary assumptions in order to achieve satisfactory goal attainment. The Directorate of Labour and Welfare's allocation of operating funds between the counties is aimed at ensuring that the counties have equal conditions in order to provide good services to users. The distribution models that were used until 2011 were based on the earlier Aetat and National Insurance Service models. These models did not grasp the task situation in the Norwegian Labour and Welfare Service in a sufficiently adequate manner. In its appropriation letter for 2011, the Directorate of Labour and Welfare was asked to develop a new resource allocation model. The Directorate has prepared a new resource allocation model for the county line. To avoid major budget changes from one year to the next, the Directorate has stated that the new model will be implemented gradually is the first year that the model has been implemented in the budget allocation, but with transitional arrangements. The Directorate says that the model will gradually lead to changes in the staffing situation 15

18 among the counties. The Ministry has no comments on the implementation rate in the Directorate. The administration units are organised and staffed somewhat differently, partly as a result of different municipal structures, settlement patterns and different demographics. This can justify different staffing levels at the administration units. However, the OAG's finding provides a basis for assessing whether the variations are larger than what ensues from such conditions. In connection with the modernisation of the ICT systems in the Norwegian Labour and Welfare Service, the Directorate will be required to free up full-time equivalents in the administration of benefits. In this connection, the Directorate has initiated efforts to assess the organisation of the administration of benefits, partly with a view to reducing variations between counties and having a more robust organisation across the counties. This is an undertaking on which the Ministry will have a dialogue with the Directorate going forward. 2.2 Case processing time The OAG believes that within the current resource framework there is reason to expect that the Norwegian Labour and Welfare Service will largely attain its case processing time targets, and that the large variations in county outcomes will be reduced. I agree with the OAG's assessment that there should be a basis for attaining the case processing time targets, and reducing the county variations. The basis for achieving this is also better going forward, in part as a result of the fact that the period of establishing NAV offices and the administration units is now complete. In its reporting in 2011, the Directorate showed that the agency has clearly better goal attainment in many areas, and that more counties are now managing to meet the requirements for case processing times. There is a basis for expecting further improvements throughout 2012, and the Directorate states that the agency's goal is for all counties to meet the case processing time requirements in 2012 for most benefits. The outcome improvements in 2011 took place in a period with no staff increases in the administration units. This is a clear indication that productivity in the administration of benefits has improved. This is partly due to the effects of earlier measures relating to improved production management and more systematic performance monitoring, fewer establishment and change burdens, and that the agency has adopted solutions for electronic document management Resource management In the opinion of the OAG, questions can be raised as to whether the Directorate and the Ministry have established a basis for managing the agency's resources in the best possible manner. As explained in Section 2.1, the Directorate exercises framework management of the resources to the counties, and a new resource distribution model has been prepared that will be gradually implemented. The Directorate follows up each county in monthly governance dialogues based on stipulated performance requirements in which the administration of benefits in the administration units and follow-up work in the NAV offices are regular main topics. Statistics showing the performance of the individual county compared with previous months and how the county is performing in comparison with other counties are used in these dialogues. Data on resource utilisation in proportion to workload for key benefits are also used. The Directorate states that they regularly follow up productivity with the counties at the follow-up meetings. The Directorate of Labour and Welfare says that the target and framework management principles that form the basis for the governance and monitoring of the agency's activities provide a satisfactory basis for managing the agency's resources. As the OAG points out in the report, however, limitations exist in production management tools. The appropriation letter for 2012 requires further development of the methodological basis for measuring productivity and efforts to improve the agency's productivity. According to the existing plans for phase 1, the development of system solutions for better production management in the agency will also be prioritised in connection with the ICT modernisation programme Further development of organisational solutions In the OAG's opinion, the Directorate, NAV Counties and the individual unit have considerable potential with respect to further systematic development of good organisational solutions aimed at achieving effi cient administration of benefi ts. 16

19 The OAG writes that the audit indicated that productivity differences are linked with internal conditions in the individual county. This is partly why the agency has worked on various methods of transferring good practices between counties through projects such as "continuous improvement" and "internal best practices". I also refer to section 2.1 and that the organisation of the administration of benefits will be assessed in connection with the ICT modernisation programme. The Norwegian Labour and Welfare Service is a relatively new entity that has undergone an extensive reorganisation coinciding with an overhaul of substantial parts of the regulations the agency is to administer. I therefore find it natural that the agency must regularly assess the need for adjustments aimed at improving the organisation of the work and the entity. Please note that the Directorate is currently reviewing the organisation of the Directorate. One purpose of the review is to develop better management of non-central entities, including the administration of benefits The quality of the administration of benefi ts In the OAG's assessment, questions can be raised about whether the quality of the administration of benefi ts is suffi cient and whether the administration units have suffi cient expertise to discharge their duties. As the OAG knows, the Norwegian Labour and Welfare Service had operational challenges relating to the administration of benefits in the period To handle this situation, it was necessary to prioritise the reduction of backlog cases through higher case production, especially in 2008 and Efforts to improve control and quality in the administration of benefits have clearly had higher priority since 2010, and definite improvements in follow-up efforts throughout 2011 have also taken place. Since the process of establishing NAV offices and administration units has been completed, and many of the regulatory changes have been put into effect, the agency now has more scope to drive continued improvement in both the administration of benefits and user follow-up. My assessment is that the agency at times has not been able to follow up on quality in the administration of benefits to the desired extent, and I have therefore put this area high on the agenda. As part of this effort, we are now working to develop and implement a quality system that will eventually include all main processes in the agency. This is also discussed in my response to Document 1 ( ). I expect in the years ahead that the quality system will provide a further boost to the quality of the agency's work. This process has come the furthest with old age pensions, where spot check-based quality measurements have been carried out each month since the autumn of Similar spot check-based quality measurements will be introduced for other benefits in Manual key controls have also been introduced for most benefits to ensure good quality in the administration of benefits. Over time, the manual key controls will also be replaced by automatic controls in line with the improvement of services based on the ICT modernisation programme. As mentioned in 2.1 the Directorate has initiated a process to evaluate the organisation of the administration of benefits. This may lay a foundation for further strengthening of the quality work and provide better conditions to ensure adequate expertise in the benefit areas. The Directorate of Labour and Welfare has stated that, in their assessment, the administration units now have access to sufficient competence to enable them to perform their duties in a satisfactory manner. I want to emphasise that during the reform period the Norwegian Labour and Welfare Service carried out a number of skills initiatives at many levels within the organisation. The purpose was to promote good quality in the performance of tasks. The work has been followed up in the governance dialogue. This includes training and competence-building measures relating to the establishment of NAV offices, the pension reform, work assessment allowance (AAP) and work capacity evaluations. Training and competencebuilding measures were also carried out in partnership with local government and county governors on the administration of the qualification programme, etc. As part of the training and competence-building measures, emphasis is also placed on establishing a strong control environment and compliance with internal controls in the agency. However, the Ministry has been aware that the agency has been forced, on a running basis, to balance the time and resources it spends, respectively, on training and competence-building 17