Budget Execution, Public Expenditure and Financial Accountability

1. Budget Execution, Public Expenditure and Financial Accountability Supreme Audit Institutions Johannes Stenbaek Madsen, FMS ECSPS • Basic (empirical) characteristics of SAIs • Main challenges for SAIs (mainly in ECA) • Ideas as to how the Bank can assist the continued development of SAIs The World Bank, April 8-9, 2003

2. Budget Execution, Public Expenditure and Financial Accountability: A. Basic (empirical) characteristics of SAIs • Public external oversight bodies - often with independent constitutional status • Reporting to Parliament – thus indirectly part of the legislature • In some cases they also have own judicial powers (Courts of Account/Audit) • Provides discharge on the state budget accounts – providing independent external assurance to Parliament and citizen • Generally responsible for ex-post financial control of legality of the transactions of the state – a decreasing number of SAIs also do ex-ante financial control – increasing focus on auditing performance aspects and financial statements (in accordance with IFAC’s International Accounting Standards or national equivalent) • Formally apply the INTOSAI Auditing Standards for compliance, financial and performance audits - the most advanced apply IFAC’s International Standards on Auditing for its financial audits/ audits of financial statements The World Bank, April 8-9, 2003

3. Budget Execution, Public Expenditure and Financial Accountability: B. Main challenges for SAIs – in ECA and elsewhere • Lack of operational independence, incl. lack of financial and law drafting capability (varies in ECA) • Weak control environments (generally in ECA) • Lack of appreciation of SAI role and function among the audited (universal problem) • Inadequate audit remit/mandate/scope (varies in ECA) • Overemphasis on formality and legality, disregarding materiality and the need to add value (varies in ECA) • Weak follow-up mechanisms leading to low effectiveness of audits (generally in ECA) • Lack of appropriately trained staff – in particular with respect to newly introduced audit products, incl. audits of financial statements and performance audits (generally in ECA) The World Bank, April 8-9, 2003

4. Budget Execution, Public Expenditure and Financial Accountability: C. Ideas as to how to assist SAI development • Make sure assessment framework (e.g. in CFAAs) is recognizable to and fully appreciated by the SAI’s management (INTOSAI, IFAC and EU Guidelines) and addresses the concerns of the SAI’s management • Make sure to build on and support past or on-going assessments and reform work (e.g. SIGMA peer reviews and assessments or twinning project assessment and technical assistance work in EU candidate country SAIs, and bilateral SAI projects) • Promote strategic development approach (e.g. via Strategic Development Plan) owned by SAI’s management • Collect, analyze and use all available data about SAIs in the relevant region for comparison (a lot of data exists, e.g. via SAI networks) • Build on existing SAI networks, e.g. to promote (and monitor) application of international auditing and accounting standards (ex. EU candidate country 11 recommendations) • Use World Bank reputation to push for dialog with Parliaments as well as governments concerning SAI role • Promote, initiate and/or manage peer reviews of SAIs The World Bank, April 8-9, 2003