Finland faces cost evaluation challenges in new welfare regions amid inflation and varying accounting practices

At the start of 2023, new welfare regions responsible for social and healthcare services launched their operations in Finland. Cost evaluations for these regions were required before they began, and a recent study has explored how these assessments were conducted.

Santeri Seppälä, director of the South Savo welfare region, described the situation as somewhat uncertain due to several contributing factors. Variations in municipal accounting practices, surging inflation, and increased costs associated with wages and rental properties complicated the financial landscape. Moreover, the previous two years had seen the government cover additional healthcare expenses linked to COVID-19, creating an unrealistic starting point for cost estimates.

The assessment of costs across different welfare areas proved to be inconsistent, according to researchers from the University of Jyväskylä and the University of Helsinki. Emeritus Professor Pekka Neittaanmäki noted significant disparities, with administrative and maintenance costs in some regions towering at 30% compared to just 5% in others.

The study revealed that first-year budgets were often based on rough estimates, with some figures derived from mere guesses. Neittaanmäki expressed that despite these uncertainties, the regions managed relatively well. He pointed out a 10% shortfall in funding due to rushed calculations related to service demand indicators.

Going forward, the availability of actual cost data will play a crucial role in financial assessments, offering insights into the real expenses incurred. However, challenges remain in determining unit costs, which vary greatly between regions. A national registry to standardize these unit prices is being developed to aid budget planning and encourage competitive bidding among services, with preliminary figures expected by December 2023.