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I N T O S A I . PUBLIC DEBT COMMITTEE. Public Debt: General Policies and Best Practices. Portugal, June 21-22, 2007. Background. An Exercise of Reference Terms to Carry Out Performance Audit of Public Debt. The following document was presented in Moscow :.

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Public Debt: General Policiesand Best Practices

Portugal, June 21-22, 2007

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An Exercise of Reference Terms to Carry Out Performance Audit of Public Debt

The following document was presented in Moscow:

Comments from PDC members were included and the paper was endorsed during the Sofia meeting.

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It was agreed in Sofia that a document should be prepared on general policies and best debt management practices, complementary to the exercise of reference terms to carry out performance audit of public debt.

  • The paper would have informative purposes and would offer the auditor a vision and conceptual framework wherein policy decisions on public debt are taken.

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The first draft of the document was presented at Buenos Aires meeting, which was titled:

Public Debt: General Policies and Best Practices.

The paper focused in explaining public debt policies’ decision makers and operators logic.

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Comments received

Eight SAIs sent comments on the document presented in Argentina.

  • United Kingdom

  • Sweden

  • Canada

  • The Russian Federation

  • Ukraine

  • Bulgaria

  • Yemen

  • Lithuania

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United Kingdom

  • The document addresses general policies and best management practices for public debt, instead of simply focusing on the audit of public debt.

  • There is a risk of duplication of effort regarding public debt management good practice. Comprehensive material already exists.

  • The papers appears to be taken a view on economic policy issues.

  • SAIs role is to audit the implementation and outcomes of policy decisions and not to question the merits of the policy itself.

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  • The objective of the paper should be clarified.

  • It mainly deals with principles for management of public debt, rather that with auditing the management of public debt.

  • General aspects of economic and fiscal policy could be a part of the paper, but only as background information.

  • Specific views on matters of economic policy should be avoided.

  • Two additional documents are proposed: 1) Debt management auditing; 2) Code of Conduct.

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  • Improvement of the Spanish-English translation is proposed, since many concepts can be misunderstood (traductore – traditori).

    • Substitution of some texts is proposed.

    • Specifying the message of some paragraphs is requested.

  • Canada asks: As auditors should we question policy choices and the reasons for borrowing? And answers: It is not the role of auditors to question government decisions.

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    • Policy makers are making choices that will have an intergenerational impact. Is it suggested that auditors question the impact on future generations?

    • The paper refers to the 1929 Economic Depression. More recent examples are suggested (e.g., the Argentina case).

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    The Russian Federation

    • The document is well worked in details to cover all aspects of general policies and best practices.

    • It is more desirable to define more clearly which particular categories of public debt have to be considered for each debt indicator.

    • Additional research on uniformed standards of public debt accounting standards is required.

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    • The document contains significant items that should be taken into account in the course of policy making and implementing of public debt management.

    • Ukraine agrees with the proposed principles of sound public debt management. Yet, a sound regulatory framework as a basis and a new principles hierarchy is proposed.

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    • Subdividing the auditing section into two segments is proposed: internal auditing and external auditing. A document on this issue is included.

    • Two additional or complementary documents are proposed: one on contingent public debt; another one on Debt Management Office.

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    • The Bulgarian NAO fully agrees with the content of the document “Public Debt: General Policies and Best Practices' .

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    • The SAI of the Republic of Yemen agrees with the content of the paper and appreciates the realized effort.

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    • Offered to use one definition in all document – debt or public debt (management) or put an explanation.

    • It was suggested to use the concept “parliament”, instead of “congress” as to be more understandable.

    • It is not clear enough what exactly norms are mentioned – INTOSAI audit standards or another confirmed documents, we offer to disclose them.

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    • According the World Bank guidelines of public debt management, human resources and informational systems audits are part of public debt management audit.

    • It would be very useful to add the footnote with reference where we could find the evaluation of indicators or limits.

    • They offer to include at the end of the document, a list of literature with references.

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    We agree with the United Kingdom, Sweden and Canada:

    • The paper examines the conceptual framework in which the debt phenomenon takes place.

    • The document cannot be used to perform an audit; it allows for understanding the context in which decision-makers are immerse.

    • Auditors must understand public policies’ design, although his/her responsibility exclusively involves auditing the implementation of these policies.

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    We agree with the United Kingdom, Sweden and Canada:

    • We should certainly not surpass our work’s scope, specially when we act as authority.

    • Economic as well as fiscal policies, and resource allocation, are exclusive responsibilities of the Executive Branch. There is no doubt about it.

    • Due to the comments from the United Kingdom, Sweden and Canada, all information referring to economic policy was eliminated in order to avoid any confusion among our auditors.

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    United Kingdom

    • The United Kingdom points out the risk of duplicating efforts, since excellent documents published by the World Bank and the IMF are available.

    • The document considers only the best practices’ conceptual aspects; no further analysis is done regarding technical aspects contained within the manuals and guidelines.

    • This section is exclusivelyintended to facilitate auditors a better understanding of what is known as best practices.

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    United Kingdom and Sweden:

    • These countries’ comments allowed us to be categorical on defining the boundaries of the auditors’ exercise: auditing policies implementation and their outcomes.

    • The decision level is beyond SAIs’ responsibilities. There is no question about it.

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    • All Canada’s considerations were fully included.

    • They were particularly useful in order to precise and focus several concepts and to clarify translation inaccuracies.

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    The Russian Federation:

    This country’s comments were taken into consideration regarding indicators, as well as the need for standardizing public debt accounting records.

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    The text on internal auditing sent by this country was included as part of the section on the functions to be considered for a Debt Management Office.

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    Bulgaria and Yemen

    We sincerely thank you for your kind comments.

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    • A footnote to clarify that the whole document refers to public debt, was included.

    • The term “parliament” was added when referring to the Legislative branch.

    • The standards referred to in the paper are those issued by INTOSAI.

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    • The paper section referring to management audit was restructured to include human resources and information systems auditing.

    • The sources of information on debt indicators were incorporated.

    • We look forward to receiving the offered document with literature on public debt, in order to be included in the paper.

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    Purpose of the paper:

    This paper must be seen as complementary to the PDC product An Exercise of Reference Terms to Carry Out Performance Audit of Public Debt.

    Its purpose is to provide the auditor a general framework of public policies design and management.

    The main issue, auditing, is included in the first document.

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    Structure of the document:

    • General Policies

    • Best Practices

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    • First principle: Sound regulatory framework

    • Second principle: Best management practices

    • Third principle: Focus on the expected goals

    • Fourth principle: Priorities in face of time and

      resource scarcity.

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    • Fifth principle : Debt structure on

      sustainability criteria

    • Sixth principle: Intergenerational equilibrium

    • Seventh principle: Transparency of all


    • Eighth principle: Thorough process auditing

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    2) Public Debt Best Practices.

    a) Best Management Practices

    • Conceptualization

    • Criteria on best practices

    • Executive management

    • Operative management

    • Accountable entity

      b) Transparency and accountability.

      c) Auditing.

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    Comments focused on three principles:

    • Credit allocation.

    • Priorities in face of time and resource scarcity, and

    • Intergenerational equilibrium.

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    Action Boundaries

    • In connection with these three principles, the document considered as contextual information several issues regarding economic, fiscal and debt policies.

    • It was considered that this context could arise misunderstandings regarding the SAIs’ role.

    • For this reason, and for focusing the audit tasks solely at the implementation and outcome levels of public policies, all references regarding economic, fiscal and debt policies were eliminated.

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    Best Practices

    • Ukraine made specific comments on this issue.

    • Including the internal audit function within the Debt Management Office responsibilities is proposed.

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    In Conclusion:

    • The previous contributions have improved the document.

    • Sections that could arise misunderstandings regarding SAIs responsibilities have been eliminated.

    • The translation has been improved.