Using Standardized Revenue and Cost Norm Analyses to Reveal Subsidy Fraud in Contracted Public Transport Services

In 2004, one of the biggest ferry operators in Norway was found guilty of having intentionally attempted to defraud the state of about 113 million Norwegian kroner in subsidies by underreporting revenues and overstating costs during the period 1992-2002. The company and five of the top managers were convicted and the case was regarded as one of the most serious subsidy offences ever committed in Norway. The aim of this article is to show that standardized revenue and cost norm models from the state can deter operators from committing such offences and when relevant detecting the fraud attempts at an early stage. Our model suggests that the operator in question overstated costs by about 19% and that the actual subsidy fraud attempt was about three times higher than concluded by the Court.