performance checklist/supreme audit institutions - discussion/control/ach/policy

performance checklist

In order for SAIs to act as effective institutions that promote and defend government accountability and transparency, their operation must be based on the following underlying principles:

Institutional, personal and operational independence
This will enable effective and objective auditing and protect the operation of SAIs from political interference. It includes ensuring the independence of SAIs in choosing the subject and method of audit (within the remits of its mandate), as well as protection of the office-holder's tenure from arbitrary intrusion. Ideally, the independence of SAIs should be constitutionally guaranteed. The Lima Declaration of Guidelines on Auditing Precepts, adopted at the 9th International Congress of Supreme Audit Institutions in October 1977, provides a basic framework for this. Should this not be feasible, independence and autonomy concerns should be addressed through the SAI's governing mandate and/or other relevant legislation governing its operation. The interpretation and effective application of the concept of independence, and of related constitutional/statutory guarantees, are greatly affected in practice by the national political and civil society structures within which SAIs operate. For example, SAI independence has little meaning in an environment where other checks and balances do not exist or are severely limited. It is also dependent, to a considerable extent, on the degree of democratisation present in the environment in which SAIs evolve.

INTOSAI Task Force Report on the Independence of SAIs

De facto SAI independence is also contingent on whether constitutional/statutory guarantees are operationalised and sufficient human, material and monetary resources made available. The latest INTOSAI task force report on the independence of SAIs concludes that a considerable number of the SAIs surveyed are not in a position to fulfil their mandates in a manner consistent with the requirements of the Lima Declaration. The issue of independence is, therefore, still firmly on the agenda and presents a major challenge for ensuring the effective functioning of SAIs as anti-corruption watchdogs.

For details see: Final Task Force Report on Independence of SAIs, INTOSAI, 2001
http://www.intosai.org/Level1/1_defaue.html

Enabling institutional environment
In order for SAIs to be able to perform their functions, the surrounding institutional environment should be robust and enabling. Important institutions include the parliament and relevant parliamentary committees, such as the public accounts committee, to which SAIs in some countries report and rely on for endorsement of their recommendations. In systems where SAIs have judicial powers, an independent and effective judicial system is key to ensuring a prompt and fair judicial process.

The Russian Accounting Chamber

Cooperation with parliamentary budget or public accounts committees to ensure that SAI reports are given due consideration is an important issue. The Russian Accounting Chamber, Russia's SAI and the principal institution responsible for auditing state expenditures in Russia, produces a large number of substantial and well-researched reports each year - some 1,500 since its inception. These reports have, however, had limited impact because the Chamber must often compete for the attention of the Duma's Budget and Taxation Committee, which has many other priorities. This very basic example demonstrates the importance of cooperation within the framework of an enabling institutional environment.

For details see: 'Controlling Corruption: A Parliamentarian's Handbook', WBI/The Parliamentary
Centre, 2000
http://parlcent.ca/publications/index_e.php

Enabling mandate
A clearly defined and unambiguous mandate is crucial to the efficacy of SAIs. Issues such as the guarantee of access to information held by government bodies, the ability to request investigation by law-enforcement agencies where SAIs do not have judicial powers, along with structural organisation, responsibilities and reporting lines must be adequately examined, addressed and defined. A number of factors, such as jurisdiction, governing law and operational powers can affect the mandate of a SAI.

Database of SAI Mandates

For an international comparative overview of SAI mandates and their features, this database of SAI mandates around the world is particularly useful. Mandates can be searched not only by country, but also via a set of 22 attributes, covering various facets of an SAI's statutes, including independence, audit jurisdiction and both audit and administrative powers. This valuable resource has been complied by the Office of the Comptroller and Auditor General of India as part of the activities of the INTOSAI Standing Committee on EDP Audits.

Transparent appointments and ethical staff conduct
Transparent, merit-based recruitment mechanisms are essential to ensure selection of the person best suited for a particular post within SAIs. Recruitment procedures should also be designed to prevent individuals of low integrity or with inappropriate links to the ruling party from succeeding. These requirements should apply not only to the director of an SAI, but also to all other staff. Adequate remuneration should also be introduced to deter office-holders from seeking undue advantage through abuse of their positions. If SAIs are to establish and maintain their reputation and credibility as watchdogs, they should apply the same standards to their own operations that they apply to the organisations they audit. In order to do so, INTOSAI recommends that they use appropriate work and audit standards and adhere to a strict code of ethics.

The INTOSAI Code of Ethics

At the 16th INCOSAI (the international congress of SAIs) in Montevideo in 1998, the congress unanimously approved and issued an INTOSAI Code of Ethics. The code constitutes a significant step forward in the process of harmonising ethical concepts within INTOSAI. It addresses only the basic postulates of ethical behaviour and recognises the need for their adaptation to the specific cultural, linguistic, legal and social environment present in a particular country. This code should therefore be seen as a foundation for national codes of ethics to be developed by each supreme audit institution.

The code can be found on INTOSAI's website at
http://www.intosai.org/Level1/1_defaue.html

Sound human resources, financial and technical capacity
SAIs need sufficient human and financial resources to operate effectively. This ranges from enough funding to maintain their operations without compromising the quality and scope of their work, to enough trained and competent staff to adequately apply the latest auditing and accounting techniques. Sufficient funding and resources are also essential for maintaining the independence of SAIs.

Funding Zambia's SAI

With regard to guarding its independence, the Zambian SAI proposed that parliament grant funding to the office in accordance with the planned scope of its work and without interference from the ministry of finance in the form of budget cuts and funding delays. The SAI also proposed a law empowering the office to recruit its own staff and set its own conditions of service, ensuring the retention of competent staff.

For more details, see: http://www.intosai.org/Level3/Jounals/3_IJGA_.html

Adherence to international auditing standards
Membership to international professional bodies, such as INTOSAI, and adherence to best practice auditing standards are important in promoting the efficiency, quality, professionalism and credibility of SAIs. There is now a growing body of international standards to guide the work of SAIs which together represent a comprehensive framework for their work.

International SAI Standards

The Lima Declaration (adopted by delegate acclamation at the 9th INCOSAI in October 1977) provides a solid foundation for later documents and includes comprehensive precepts on auditing in the public sector. The INTOSAI Code of Ethics represents the next level, providing a statement of values and principles guiding the daily work of auditors. One of the principles outlined in the Code of Ethics is the obligation of auditors to apply generally accepted auditing standards. The INTOSAI Auditing Standards, on the next level, contain the postulates and principles for carrying out audit work. INTOSAI's Guidance Material, which is the fourth level, provides practical assistance to SAIs in implementing the Standards in their individual constituencies.

For more details, see: http://www.intosai.org

Timely publication and dissemination of reports
It is important to have effectively functioning mechanisms for public dissemination of audit information. It is essential to publish audit reports promptly in order to ensure that their impact remains undiminished.

Timely Publication of Audit Findings

It is of great importance that audit reports are made available to the public in a timely fashion. Most SAIs publish their reports annually after submitting them to parliament and consider that their main objective is to provide parliament with an independent opinion. Many SAIs maintain and strengthen ties with the press to deter fraud and corruption through public disclosure. Especially in corruption-related cases, it is important to avoid excessive time-lags between the actual audit and the publication of SAI reports.

For more details, see:
http://www.10iacc.org/content.phtml?documents=102&art=176

Adequate follow-up mechanisms
It is paramount that the recommendations contained in SAI reports are properly implemented in a timely manner. Recommendations can relate to insufficiencies uncovered in the internal control mechanisms of audited institutions, loopholes within the existing legal framework or other discrepancies or malpractices that must be addressed. Unfortunately, some SAIs still do not have formal systems or mandates to make enforceable recommendations.

Reporting Suspected Offences and Irregularities

A key element of effective follow-up mechanisms is the existence of provisions requiring SAIs to report any suspected violation of law and criminal activity uncovered during the performance of their auditing functions to appropriate law enforcement bodies. Having such legal provisions in an SAIs mandate is important, though exact formulations will vary from country to country. One example is the Estonian SAI's mandate, which states that:

"Upon suspicion of discovery of a violation of law with criminal elements, the State Audit Office shall submit all relevant materials to an investigative body which shall notify the State Audit Office of the results of a review of the materials submitted." - Article 51 (3).

For more details, see: http://www.cagindia.org/mandates/index.htm

key recommendations

SAIs can play a vital role in countering and preventing corruption. They can enhance good financial management and the transparency and accountability of government operations. They are also instrumental in detecting and uncovering irregularities, malpractice and fraud. The following is a set of key recommendations for ensuring effective SAI performance of its vital anti-corruption function:

· SAIs should work in close collaboration with other institutions and actors, ranging from law enforcement and prosecution authorities to the media. Effective coordination and cooperation with these institutions is important to ensure that SAIs are well-placed to fulfil their mission. In most countries and systems, SAIs' closest institutional relationships are with parliamentary committees, such as finance, budget, and public accounts committees.

· The underlying principles that can increase the effectiveness of SAIs as institutions of accountability and transparency should be promoted and defended. These include sufficient independence and autonomy, a clearly defined and enabling mandate, transparent personnel recruitment and management, adherence to the highest standards of ethics and integrity, retention of competent staff and expertise and sound financial resources.

· The anti-corruption role of SAIs should be strengthened via methodologies and approaches aimed at enhancing public participation, scrutiny and disclosure. This can be done through the establishment of channels for public reporting of irregularities, timely publication and dissemination of reports, as well as proactive and adequate follow-up on audit report recommendations.

· Research on the role of SAIs in countering corruption is still evolving. Further efforts in this area should be supported by anti-corruption stakeholders to facilitate the introduction of increasingly innovative auditing techniques and objectives. These may extend into such areas as impact assessment of government reform programmes and/or examination of the integrity of public officers in audited institutions.