Document 3:8 (2024-2025) / Published Government lease agreements
Mistakes are made and it is unclear what government agencies are allowed to agree to when entering into lease agreements. Over time, a grey area has emerged. Nine per cent of the leases investigated by the National Audit Office of Norway include terms that resemble loan terms.
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(PDF, 3.69 MB)
The pdf is in Norwegian
Brief background
- Government agencies can rent premises and necessary office equipment for normal operations, but the Constitution prohibits taking out loans without the consent of the Storting.
- The case involving the Norwegian National Security Authority (NSM) demonstrated that there is a risk of government agencies making mistakes when entering into large leases.
- In 2023, the state spent NOK 17.3 billion on renting premises. Most of the money – NOK 11.9 billion – was spent on renting premises on the market.
- We took a closer look at 174 leases from 88 different government agencies. The total contract value for the agreements is NOK 45.2 billion.
- We have not looked at premises rented by the Norwegian Armed Forces, which are managed by the Norwegian Defence Estates Agency in accordance with a separate set of rules.
Overall assessment
The National Audit Office of Norway finds it objectionable that
- several government agencies have entered into agreements for the lease of premises that do not comply with the current legislation
- the ministries’ governance and control have not been sufficient to make sure that subordinate agencies follow the procedures established to ensure compliance with the legislation
- the Norwegian Media Authority has entered into a loan agreement in violation of the legislation
Conclusions
Several government agencies have entered into agreements for the lease of premises that do not comply with the current legislation
- The current legislation does not clearly stipulate which operating expenses can be covered through future rent.
- One agency (the Norwegian Media Authority) has entered into a loan agreement. This violates the requirements of the Norwegian Constitution.
- Of the leases investigated, 9 per cent have agreements with loan-like terms. The agreements do not explicitly state that the government has taken out a loan, but contain terms and conditions regarding repayment or payment of instalments or terms such as construction loan and annuity. Today's legislation allows investment leases, but they are costly over time.
- Of the leases investigated, 23 per cent include investment leases.
- Two agencies have contractual obligations that require additional allocations during the contract period.
The ministries’ governance and control have not been sufficient
- The ministries follow up to varying degrees that subordinate agencies use Statsbygg's advisory services.
- The ministries’ follow-up of relevant cases to ensure that they are presented to the Ministry of Digitalisation and Public Governance, has been lacking.
- The ministries have only to a limited extent taken responsibility for active portfolio management of leased premises.
- Government agencies are not required to prepare overviews of future lease liabilities.
Recommendations
The National Audit Office of Norway recommends that
- the ministries ensure that subordinate agencies enter into agreements on the lease of premises in line with the current legislation
- the Ministry of Finance clarifies which expenses can be covered by rent
- requirements are laid down for future lease liabilities to be set out in the financial statements.