U4 Helpdesk Query

U4 helpdesk reply

Sub-question 1: Projects Supported by Utstein Agencies

Here is an overview of most recent Utstein agencies' projects aimed at supporting the supreme audit institutions in developing and transitional countries. Details of the projects and project documents can be obtained through contacting the project managers/focal points (provided below).

NORAD is supporting a 2-year 25 450 000 NOK project (ending 12/2003). The implementing partner is INTOSAI. The project supports IDI, the training arm of INTOSAI, to help SAIs, especially in developing and emerging nations, to improve their audit capacity and address audit issues through training and information sharing.

Contact person:
Svanhild Nedregård, NORAD
P.O. Box 8034 Dep, 0030 Oslo, Norway
E-mail: svanhild.nedregard@norad.no ; Phone: 22 24 05 41

GTZ is supporting a 1.722.031,05 EUR project (anticipated end date was 01/2003). The implementing partner is the National Audit Office, Nicaragua. The project aims at enabling the CGR to conduct audits of high quality, and at improving the internal auditing capacity of the administration. The project will help to improve the legal status of the external audit institution and improve the internal financial control of the administration, strengthen the system of public complaints offices, the internal audit system of local communities and the audit department of the CGR. Project means: technical assistance, mainly advisers.

GTZ is supporting a 2-year 2555875 EUR project (ending 03/2004). The implementing partner is the National Audit Office, Mongolia. The current phase of the project aims at improving the auditing of governmental budget and assets by the staff of the Mongolian Audit Institutions. It will care for the introduction of modern auditing methods and techniques, for the establishment of suitable knowledge management and of a system of permanent training for the staff at the audit institutions. Concerning the overall system of financial control, advice will be given for keeping up with INTOSAI-standards. Project means: technical assistance, and some equipment.

In addition, GTZ has recently (12/2002) completed a project aimed at strengthening the national supreme audit court in Mauritania and is near to completing the project aimed at strengthening the Central Organisation for Control and Auditing in Yemen.

Contact person for the current and completed GTZ projects is:
Matthias Witt, GTZ
Dag-Hammarskjöld-Weg 1-5, 65760 Eschborn, Germany
E-mail: Matthias.Witt@gtz.de ; Phone: 06196791643

Netherlands Ministry of Foreign Affairs is supporting a 3-year INTOSAI training initiative for National Audit Institutions in Anglo-phone Africa.

Contact person is:
Nelleke Kruijs Voorberge, Netherlands Ministry of Foreign Affairs
Bezuidenhoutseweg 67 2594 AC Den Haag, Netherlands
E-mail: nelleke.kruijs@minbuza.nl ; Phone: +31 (0) 70 3486179

Details of other Utstein initiatives can be found at the U4 projects database.

[top]

Sub-question 2: SAIs' Relation with Parliament's Oversight Functions

The accountability functions of the SAIs and their role as institutions of accountability are discussed in sub-question 3. As to the relationship between SAIs and parliamentary public finance oversight bodies, while the closest synergies exist with Parliament's Public Accounts Committees (PACs), other Parliamentary Committees and bodies can also have relevance to or synergies with SAIs functions. A number of African Parliaments, for example, have "Committees of Assurances" to hold ministers accountable for statements and promises they have made to the Parliament. Such committees can be useful in exposing incidents of corruption.

PACs exist in systems that follow the Westminster parliamentary model (in other systems, such as the Napoleonic model, Supreme Audit Institutions report directly to parliament or pass directly enforceable judgements). A standard procedure is for the Parliament to refer the reports issued by the SAI to the PAC. The committee then conducts public hearings including the Auditor General, the financial heads of the institutions under investigation and other witnesses, and reports its conclusions and recommendations to the Parliament. Often, PACs can also examine questions independently, review relevant draft legislation or ask the SAIs to perform specific audits.

PACs perform the following functions relevant to the fight against corruption:

• PACs design the recommendations for actions following up on audit and investigation reports and present them to Parliament. Credible and effective follow-up activities after the discovery of inefficiencies or fraud are indispensable for actual reforms of the system and for the credibility of the parliamentary system of control.
• PACs provide control and scrutiny over the actions of the SAIs. By conducting public hearings to verify the reports, in which witnesses from all stakeholder groups are called, the system of auditing itself becomes more transparent and the objectivity and thus legitimacy of the reports is increased.
• Finally, PACs play an important role by publicising the results of audits and inquiries. Ensuring public debate about audit reports not only reinforces the institutional framework, but also creates the public pressure to follow up on these reports.

For resources on accountability functions of parliamentary committees, please consult Strengthening accountability and oversight of key parliamentary committees in Kenya (report of the workshop for select committees dealing in finance, Safari Park Hotel, Nairobi Kenya May 3-4, 2001).

For details of audit and oversight agencies role in the budget process and financial management, please consult TI Source Book on Confronting Corruption, Chapter 23 on Good Financial Management.

[top]

Sub-question 3: Role of SAIs as Institutions of Accountability

Role of SAIs as Institutions of Accountability
SAIs are key to enabling and maintaining government's accountability as they supply the information needed by the legislature and the public to hold governments accountable. As such, they are fundamental institutions of accountability. A very cost-effective means of promoting transparency and openness in government operations, audits can contribute to improving government performance through not only identifying faults but also acting as a deterrent for abuse of power by providing valuable information about government actions to the public.

Supreme Audit Institutions can undertake different kinds of audits aimed at ensuring better accountability. These include financial audits, assessing the accuracy and fairness of accounting procedures and financial statements; compliance audits, scrutinising the use of funds for approved purposes through compliance with laws and regulations; performance audits (also known as "value for money" audits), analysing the operational efficiency and general effectiveness of government programmes; as well as ethical audits, assessing the ethical environment of an institution with the goal of identifying high-risk areas - a recent trend introduced by Auditor Generals, among others in the UK and Canada.

SAIs are not primarily designed as anti-corruption institutions. They can nevertheless play a central role in deterring corruption by influencing the approaches used to combat corruption and promoting a culture of integrity.

The main contribution of SAIs to the fight against corruption is the improvement of overall transparency and accountability to limit the opportunity for acts of corruption. They focus on dissuasion and prevention rather than detection. According to Magnus Borge (INTOSAI; Borge, 2001), SAIs consider the following parts of their work to be of particular importance in the fight against corruption:

Procedurally,

1. fostering sound financial management and internal controls (reporting, disclosure, etc.) on the basis of a strong standards framework. The reliability of financial management systems is central to preventing corruption as it has a deterrent and inhibiting effect on potential perpetrators. SAIs should make sure that an evaluation of the soundness of financial systems and internal control methods is done regularly as part of compliance audits.
2. making audit reports available to the public in a timely fashion. In many cases, including corruption, it is important to publish the reports promptly in order to ensure relevance. For example, many SAIs maintain links with the press to deter fraud and corruption through public disclosure rather than just submitting an annual report to parliament (see also Dye, Stapenhurst, 1997: 12)
3. ensuring aggressive follow-up on the implementation of recommendations, in particular when loopholes within the existing legal framework are discovered. Many SAIs still lack such a system or do not have the mandate to make such recommendations.
4. increasing public awareness of the risks of corruption and the need for sustaining good governance and accountability.

In addition, SAIs can have specific anti-corruption programmes, including definitions of risk-areas, the establishment of task-forces and the implementation of special audits. Examples include NIK Poland and NKU Czech Republic.

Organisational Capacity/Status,

1. independence from government and a clear definition of government auditing to parliament. This is necessary for SAIs to enable them to audit high risk areas such as lack of function separation, procurement without competitive bidding, weak internal control systems, low managerial capability and political appointments without facing insurmountable obstacles.
2. while most SAIs consider their mandate and the legal provisions governing their prosecution of corrupt behaviour sufficient, more investigative powers would be practical. Some SAIs already have investigative authority, but key to success is the collaboration of SAIs with investigation and prosecution organisations.
3. training staff in detecting fraud indicators as auditors must rely on technical expertise, professional judgement and a good understanding of how fraud is committed to recognise them.
4. ensuring immaculate ethics and conduct of auditors at all times.

Capture of SAIs by Corrupt Networks
Like any institution, SAIs are susceptible to being captured by corrupt interests if and when their institutional set-up allows for the capture to take place. However, while every corrupt institution damages the fabric of the state, a corrupted SAI undermines the country's integrity system. Designed to act as a watchdog over the financial management of government bodies, they play a major role in auditing government accounts and operations and in promoting sound financial management and accountability in governments. If the watchdog's credibility and integrity are questionable, then so are the credibility and integrity of the subject of its audit.

For details on SAIs role as institutions of accountability, national pillars of integrity and examples of SAIs role being undermined through pressure of "clients" (government public expenditure bodies, Legislature) or corrupt influences, please consult TI Source Book on Confronting Corruption, Chapter 9 on Auditor-General.

As to comparative analysis with focus on countries of LA and CEE, relevant experts have been contacted by the U4 helpdesk researchers, and any answers will be forwarded to you in due course.

Criteria to gauge the effectiveness of SAIs as Institutions of Accountability

1. Transparent appointment process based on merit to ensure the selection of the person best suited for the post and to prevent individuals of low integrity or inappropriate links to the ruling party from succeeding. This requirement applies not only to the director, but also to all staff. For example, in 2000 in Paraguay, the Comptroller-General Daniel Fretes, was being investigated by a criminal tribunal for 18 crimes including extorsion and money laundering. Congress, however, failed to formalise the charges.

2. Institutional, personal, financial and operational independence to enable effective and objective auditing and to protect the operation from political interference. This would include independence in choosing the subject and method of audit as well as the protection of the office-holder's tenure from arbitrary intrusion. At best, independence should be constitutionally guaranteed. The case for independence is impressively underlined by the example of the Controller and Chief of Audit in Samoa, Su'a Rimoni D. Ah Chong, who, in 1994, was removed from office following the publication of his report that detailed gross financial mismanagement by senior politicians.

3. Enabling institutional environment: this would include a mandate which is clearly defined by law, the guarantee of access to all information held by government bodies, the ability to request investigation by law-enforcement agencies in case the SAI does not have judiciary powers on its own, adequate remuneration of the post (to deter office-holders from seeking undue advantages), and the adequate staffing and funding of the agency.

4. Adherence to international auditing standards, such as the INTOSAI auditing standards that reflect a 'best practice' consensus among SAIs, to ensure efficiency, quality, professionalism and credibility of the SAIs.

5. Timely publication and dissemination of reports (for more detail, please refer to points 2 and 3 of the previous section).

6. Existence of regular follow-up mechanisms by Public Accounts Committees (or similar institutions) of the recommendations made in the reports.

See U4's selected annotated literature on SAIs Role in Ensuring Accountability and Curbing Corruption (5 titles).