Public auditors preparing for digital transformation — the case of the National Audit Office of Finland
The National Audit Office of Finland (NAOF) has recently adopted a new strategy and organisational set-up. Like many public audit bodies in Europe, the digital transformation of audit is a major topic for the NAOF. Digitalisation also provides an opportunity to challenge established practices and innovate. Pirkko Lahdelma has worked as Director of the NAOF’s Digitalisation Competence Centre since May 2019. She was previously Strategy Director, responsible for renewing the NAOF’s strategy, and has also worked in performance audit focusing on digitalisation and ICT. She highlights some of the changes introduced at the NAOF, while her colleague Ines Gullichsen, a Project Advisor, gives a more personal account of her experiences as a participant in the NAOF’s Young Professionals’ Programme.
By Pirkko Lahdelma and Ines Gullichsen, National Audit Office of Finland
Digitalisation as a stepping stone towards renewing audit
Digitalisation, technological development, artificial intelligence and big data are hot topics among the community of supreme audit institutions (SAIs). Awareness of the need for digital transformation has grown considerably, and nearly every SAI is now considering how to take the next step on the path to digitalisation. We all are busy talking about digital audits where we use algorithms to automate our audit processes and mine big data with sophisticated analytics to obtain new insights. Rapidly developing technology and exponentially larger volumes of data offer us many opportunities to renew the whole auditing industry. The question now is how to recognise and seize those opportunities.
Strategy as a mindset
At the National Audit Office of Finland (NAOF), we recently launched a new strategy emphasising future-orientation, change, and the need for innovation. This strategy is not only a long-term plan but also a statement of intent for everyone working at the NAOF. It defines the organisational culture we wish to foster.
With our strategy, we have chosen to support the innovative renewal of public governance. When making this statement, we also realised that if we want to promote innovative renewal, we must serve as an example ourselves. As part of our own innovative renewal, we are investing in digitalisation.
Building skills for the future
In the light of our new strategy, we have recently discussed the skills needed for the future. We agree with the report by the World Economic Forum (2016), which states that ‘many formerly purely technical occupations are expected to show a new demand for creative and interpersonal skills’.
As regards digitalisation in our own organisation, one of the skills that will be required is creativity combined with critical thinking. Investing only in technology without changing anything else can easily lead to a situation where we have simply converted our analogue processes and practices into digital ones. The benefits of this kind of approach are likely to be marginal.
Instead, we must be able to challenge our current practices, procedures and thinking. Are the premises, assumptions and beliefs on which we have built our activities and operations nothing but a legacy from the analogue era? The key to successful digital transformation is actually finding the right problems to be solved.
Leadership promotes creativity
Another skill we wanted to focus on is leadership. Leadership plays a vital role in promoting creativity in organisations. Creativity requires a safe environment for trial and error. For the purposes of creativity, leadership is about encouraging, inspiring and motivating.
It is obvious that we also need technical knowledge and skills for the digital transformation to succeed. However, what kinds of technical skills are really needed? We have identified the following three:
- being able to understand the potential impact of new technologies on our business;
- being able to determine how to use new technology efficiently in our daily work;
- knowing how to acquire expertise to develop and maintain technical solutions that are not only sustainable but also affordable.
Especially for a small organisation like the NAOF, it is almost impossible to have a large number of staff whose knowledge and skills regarding the latest technological developments are constantly up to date. Instead, a small organisation should have the knowledge and skills it needs to find and cooperate with trustworthy and competent partners, and thus expand its technological knowledge base.
Multilevel learning through experiments and pilots
As well as cooperating with relevant stakeholders, we are building capacity for digitalisation by improving our creativity, critical thinking, and technical skills. Out-of-the-box thinking requires a leadership style that is different from the one we have been used to. Such a style emphasises empowering staff, enabling teams to manage themselves, and supporting them with coaching.
However, learning and adopting a new leadership style does not happen overnight. Many people in our organisation have always worked in strictly top-down-managed organisations. They have therefore grown up in a culture where people are given strictly defined assignments and instructions. That is why we have decided to test the new leadership style first in small experimental projects to gain experience and learn how it works in practice. These projects include our Young Professionals’ Programme and, with it, the ‘Risk Detector’.
The Young Professionals’ Programme is not a new concept as such: different kinds of trainee programmes have been on the market for decades. However, we wanted to develop it by incorporating an experiment on a new leadership style. Mentoring and coaching were therefore an important part of the Programme.
During the one-and-a-half-year Programme, the young talents who were selected learned by participating in different types of audits, but also by being moved between units. In addition, they were assigned a task of their own, which they were to carry out as a team in parallel with their other activities. The outcome of this assignment was the ‘Risk Detector’, which proved to be a success story.
Encouraging an open approach to digitalisation
As part of our digitalisation process, we are exploring new ways and methods to use new data sources and integrate them into our audit processes. The assignment given to the young talents was linked to this (see Box 1). At the beginning of the project, the team was given objectives, but no instructions on how to achieve them. In addition, the objectives were suggested rather than precise, and were thus open to development during the project. We set up a steering group to support and coach the project team in solving problems, thinking out-of-the-box, and developing the objectives during the process.
As a result of the programme, we obtained a tool that combines data from open data sources and enables new analyses in a visually attractive way. At the same time, we gained experience on new methods for acquiring technical expertise from external partners: the ‘Risk Detector’ was created in a reverse hackathon, which allowed the team to approach the problem in an agile and flexible manner.
Lastly, we also obtained great results from testing our new leadership style. Coaching and encouraging this new style enabled the team of youngsters to flourish: as a team, they managed to maintain high motivation levels and turn drawbacks into successful learning experiences. We obtained evidence that we are on the right track with our strategy. We will take advantage of these experiences as the NAOF is transforming from a hierarchical organisation into a matrix where we will be working in project teams. Last but not least, the next Young Professionals’ Programme is under way — this time being implemented by our young talents.
Box 1 — An innovative approach
Ines Gullichsen works as a Project Advisor in the NAOF’s Executive Office, and participated in the Young Professions’ Programme. Below are some of her experiences and impressions.
The Young Professionals’ Programme, which is now coming to an end, had two components. First, there were our supervisors, who had planned the programme and were responsible for it. For them, the Programme was a leadership experiment which achieved the goal of providing an innovative landscape for the NAOF’s practices.
Then, there was the Young Professionals component, which consisted of multiple phases and features. As well as being introduced to the world of auditing, we were also expected to bring fresh ideas and approaches into the office. To highlight the emphasis on new thinking, our Auditor-General assigned us a development task. This essentially entailed introducing an artificial intelligence tool into the office, thereby contributing to an increasingly digitalised operational environment.
We studied the basics of data analytics to get an idea of where we stood at the time. We interviewed colleagues in the governmental sector to understand what other officials were experiencing. We met with the data analytics teams of other SAIs, and studied what the private sector had to offer. We also relinquished our initial plan of action and had to reorganise our whole approach.
Then, finally, the overall picture began to take shape. Having understood the basic principles of data analytics (figuring out what was happening nationally and internationally, and finding an external partner to provide us with a tool), the next crucial phase was to engage our auditors. We could not imagine developing a digital tool for helping auditors in their work without having some of them participate in the prototype planning phase. We initiated cooperation through a workshop, and workshop-like engagement continued throughout the coding phase led by our supplier.
Seen from our current perspective, the AI task actually consisted of elements that were well known from descriptions of innovative experiments — starting with an idea, becoming familiar with it, implementing it, failing, and then learning from our mistakes. We really could not have succeeded in our task without persistent cooperation and open communication.
The tool we developed is now the internationally renowned ‘Risk Detector Tool’. Its focus is on helping auditors to detect risky procurements. We also managed to introduce an element of AI into the tool, in the form of a bipartite network recognising buyer/supplier relations. Looking at the big picture, the innovation of the Young Professionals’ Programme led to another innovation, the Risk Detector tool. The lessons learned on both of these journeys are countless and, of course, ‘documented’ — if we can still use this word in the digital age.
This article was first published on the 1/2020 issue of the ECA Journal. The contents of the interviews and the articles are the sole responsibility of the interviewees and authors and do not necessarily reflect the opinion of the European Court of Auditors.
