Iceland Cut Government Agencies to 143, but Auditor Warns Small Offices Persist

Iceland reduced the number of institutions operating under government ministries from 155 at the end of 2020 to 143 at the end of 2025, but nearly one in three of those remaining were small agencies, according to a National Audit Office review published on 22 October 2026.

The audit describes 12 completed reductions over five years. It separately projects at least 16 additional reductions during 2026 following legislative changes and mergers. If implemented as described, the combined reduction would be 28 agencies, or 18.1% of the 2020 total. The projected changes should not be mistaken for a verified count of agencies already closed in November.

The National Audit Office said 43 of the 143 institutions at the end of 2025, or 30.1%, had no more than 20 full-time-equivalent positions. That compares with 44 of 155 institutions, or 28.4%, in 2020. The number of smaller institutions fell slightly, but their share of the total increased. The audit urged further examination of mergers among the smallest agencies to improve efficiency and administrative oversight.

The report also scrutinized mergers that were abandoned. It singled out the University of Akureyri's decision to discontinue talks with Bifröst University in October 2025. Icelandic broadcaster Vísir reported on 22 October that the auditor considered the university council's stated reasons insufficient and questioned why the responsible ministry had not been consulted before the talks ended.

The university had cited the institutions' different legal structures and uncertainty about a proposed research fund. The auditor said differences in institutional form were not necessarily an obstacle to continuing discussions. This was criticism of a decision-making process, not a finding that the university had broken criminal law or that the merger was legally required to proceed.

The wider review also cited planned mergers involving secondary schools that had been abandoned amid apparent staff or management opposition. It called on ministries to prepare reorganizations carefully, lead the process clearly and engage institutional managers, employees and other affected parties.

The figures measure the number and size of institutions, not the amount of money saved. The audit does not establish that all proposed 2026 consolidations have occurred, that every small institution is inefficient, or that any named official committed misconduct. Actual savings, service quality and completed 2026 reorganizations require separate follow-up.

The next questions are whether the planned 16 reductions were formally completed, how the government measures resulting efficiency, and whether ministries have responded to the auditor's concerns about the halted education-sector mergers.