THE EVOLVING ROLE OF SUPREME AUDIT INSTITUTIONS

1. THE EVOLVING ROLE OF SUPREME AUDIT INSTITUTIONS Presentation to 22nd International Conference on New Developments in Government Financial Management May 19-23 – Miami, Florida - USA

2. PRESENTATION POINTS • Introduction • The traditional role of the SAI • Performance or value-for-money audits • Auditing of other state agencies • Independence of the SAI • SAI’s role in fighting corruption • Relations with the media • SAI’s own accountability • Conclusion • Any questions?

3. INTRODUCTION Michel (1991) on the basic elements of public accountability: • Every act or action is done openly according to law and prudent judgment; • Every actor is responsible for his or her action; • Every act is documented and reported publicly; • Every act or action is subject to independent, professional, non-partisan audit review and public report of results; and • Where the review shows that purposeful error has been made prompt corrective action, including punishment where appropriate, is taken.

4. INTRODUCTION cont’d • SAI helps legislators to monitor and control public expenditure. • SAI carries out ex post evaluations against established norms, highlights deficiencies and make recommendations for improvement. • Geist (1981): Effective state administration depends on rigorous public accountability that state audit assures.

5. THE SAI’S TRADITIONAL ROLE • Review of government activities for regularity and compliance • Certification audit includes regularity and compliance as well as fair presentation of financial statements. • Inadequate to assure public accountability • Transactions need to be examined against stated objectives, …and evaluation of outputs, outcomes and impacts.

6. PERFORMANCE/VFM AUDITING • Auditing for performance not a new concept • Previously undertaken under the guise of “avoidance of waste and extravagance” • Involves evaluating extent to which resources are used in an economic, efficient and effective manner i.e. 3 Es • Considers objectives, outputs, outcomes and impacts • 3 other Es – equity, ethics and environment

7. PERFORMANCE/VFM AUDITING cont’d • Not a usurpation of management role to secure good value for money • Effectiveness audit requires measuring performance and assessing matters of policy and politics. • Policy objectives sometimes unclear, ambiguous or non-measurable • Performance audit more complex, time-consuming, and requires multidisciplinary approach and high skill and judgment

8. AUDITING OTHER STATE AGENCIES • SAI’s mandate should include the entire public sector and not just central government activities. • Normanton: Many big fish, heavily nourished from taxation, swim through unscathed, and their transactions are not systematically studied, except by auditors with no constitutional reporting role. • Auditing of government’s privatisation programme essential part of the SAI’s work to provide independent assurance of transparency and good value

9. INDEPENDENCE OF THE SAI • Foundation pillar of its work • Emile Woolf: Concept of an audit and concept of independence twin sides of the same coil. A dependent auditor has lost his/her raison d’être and is a contradiction in terms • Important safeguards include constitutional/legislative mandate, unrestricted access, independent funding, flexibility to hire and remunerate staff. • Minimum requirement: independence from the Executive • Emerging trend: corporate structure with legislative oversight

10. SAI’S ROLE IN FIGHTING CORRUPTION • Corruption is misuse of public power for private gain. Public interest sacrificed for private interest. • Lambsdorff: Corrupt behavour is accompanied by blunt neglect of expectations and interest of the public. • Evidence suggests a link to poverty. • Peter Eigen: The two scourges feed on each other, locking populations in cycle of misery. • SAI uniquely placed to fight corruption, should play a more direct role, and should be provided with resources to do so

11. RELATIONS WITH THE MEDIA • Several SAIs publish findings subject to appropriate safeguards concerning national security, foreign policy, commercial secrecy and personal privacy. • Geist & Mizrahi view this as a right and duty. Any lesser arrangement is less than ideal accountability. • Normanton: Those who restrict the flow of information about public bodies are following an authoritarian line. Publication and open discussion help towards that elusive blessing, good government, and a token of at least one higher civilisation • Friedberg laments the ‘annual roar’. Sees media as brokers between the SAI and the wider public.

12. SAI’S OWN ACCOUNTABILITY • Who audits the auditor? • SAI cannot claim immunity by virtue of its independence. • SAI should subject itself to external review and evaluation of its operations and results reported to the Legislature. • Such review enhances transparency, credibility and respect • In final analysis, public are the final arbiters of the SAI’s accountability

13. CONCLUSION All SAIs should: • Be provided with mandate to undertake performance or VFM audits • Play a more direct role in fighting corruption • Strive for greater independence from the Executive • Ensure that adequate resources are made available to discharge mandate. • Ensure that mandate includes all activities of the State • Cultivate good relations with the media • Ensure that adequate mechanisms in place for their own accountability

14. END OF PRESENTATION Thank you. Any questions or comments?