Accountability and Independence of Independent Officials: Examining Checks and Balances

1. ASPG Conference 2013 • Jacquie Stepanoff • Manager Policy and Coordination • Watching our watch-dogs: current models for accountability and independence

2. Why are we here? What will this presentation cover? Recently…some disquiet around adequacy of checks and balances for independent officials with powers of scrutiny. Possibly… a response to the growth of the ‘independent review’ sector? This presentation Won’t comment on validity of the growth of integrity bodies – they are created and empowered by Parliaments. Won’t address specific concerns about particular exercises of authority Will try to offer some context around this sense of unease by surveying checks and balances in place for one sample group: Auditors General Will offer perspectives on how Parliaments and researchers might assess whether these are adequate

3. Growth in size and scope of independent review bodies Growth in size and number…an ‘audit explosion’? UK study: 22% increase in numbers/100% in spending on bodies with powers to review government activity (Hood et al, 2008) Australia: rapid increase of commissioners with powers of scrutiny and review (e.g. FOI, Privacy, Children’s, Gambling, Public Sector etc). Growth in scope and powers New powerful bodies with quasi judicial powers to prosecute and make binding findings (e.g. corruption commissions, inspectorates) Increased powers for existing bodies (e.g. A-Gs can compel appearances by citizens, Ombudsmen can search 3rd party premises) Growth in independence Reforms by Parliaments to integrity and audit legislation across 2000s

4. PART 1 – What Checks and Balances are in Place? To help inform this conversation on oversight of independent offices, we decided to get a better understanding of what kinds of checks and balances were (already) in place. So… as a case study - we surveyed legislation of Auditors-General (A-Gs) in Australia, selected Canadian and UK jurisdictions We hoped this quick survey might then trigger thinking on Common approaches, gaps/overlaps AND How Parliaments might assess whether these checks and balances are • Adequate • The right ones

5. Surveying the checks and balances: What did we find? Our review found substantial layers of accountability in place under legislation for most Auditors-General in Australia, NZ, Canada, UK. We saw 4 distinct kinds of accountability mechanisms in place Public Sector – controls that apply to A-Gs the same as they do to all public sector entities, including judicial + administrative review Parliamentary – checks and balances emanating from a direct relationship with the Parliament. Professional – controls on performance, conduct and ethics arising from the application of professional auditing standards and quality assurance requirements Performance – formal reviews and oversight of A-Gs’ performance

6. 1. Public Sector (a) : General governance Most public sector accountability mechanisms apply to most A-Gs too INTOSAI: sometimes translate indirectly to controls by Govts over A-Gs Mechanisms that frequently applied to A-Gs include • Appropriation – most A-Gs still receive budget through Executive. Estimates hearings/inquiries can interrogate outputs. • Financial Management – mandatory compliance and policy frameworks, procurement restrictions, annual/quarterly reporting requirements • People Management – conditions for employees who are public servants, grievances, codes of conduct • Public administration – can be subject to reviews by govt departments • Risk Management and IA requirements – audit committees, risk frameworks and attestations

7. 1. Public Sector (a): examples Appropriation -Treasurer has control over budget allocation for audit office in NSW, NT, SA & TAS. Gordon Robertson, (http://www.acag.org.au/Independence-of-Auditors-General-in-ANZ-2013.pdf) Financial Management – The Tasmanian Audit Office is subject to the Financial Management and Audit Act 1990. (TAS) Financial Management and Audit Act 1990 Schedule 1 People Management - Public Sector Act 2009 (SA) governs employee matters at SA Auditor-General’s Department. Public Administration - Public Administration Act (Vic) allows ‘special reviews’ of VAGO by a government department/Minister. Risk Management - Statutory requirement for Audit and Risk Management Committee (3 external independent representatives who advise the Auditor-General). (QLD ) Annual Plan 2012

8. 1. Public Sector (b): Mutual accountability A key accountability mechanism for the public sector is scrutiny by ‘integrity bodies’, including administrative and judicial review. National Integrity Systems Assessment (2005) found Australia’s integrity bodies should be – and often were - ‘mutually accountable’. Our review supports this, finding offices and actions of A-Gs often subject to Cross-review * by other ‘core’ integrity bodies: e.g. Corruption Commissioner, Human Rights Commissioner Administrative review: e.g. Ombudsman Judicial review. i.e. courts * Hon Wayne Martin QC notes some limitations in W.A.

9. 1. Public Sector (b): Mutual accountability examples Cross review of core integrity bodies Canada NAO: Languages Commissioner, Public Service Commission (staffing and classification practices), Privacy Commissioner (Privacy Act), Information Commissioner (Access to Information Act). (Canada) Office of the Auditor-General of Canada, “Scrutinising the Office of the Auditor General,” 2011 Australian NAO – Australian Public Service Commission, Merit Protection Commissioner, Australian Crime Commission. National Integrity Systems Report 2004, p. 25 Administrative review – Victorian Ombudsman may investigate actions of Office (VIC) Ombudsman Act 1973, Schedule 2 Judicial review – A-Gs are subject to judicial review in all Australian jurisdictions, which can examine the legality of the agencies actions.

10. 2. Parliamentary Beyond ‘public sector’ – A-Gs also have direct accountabilities to Parliament (in accordance with traditional role as officer of Parliament) Common mechanisms include: Whole of Parliament • Appointment, termination and suspension • Appropriations – recommendations or directly • Receive annual plan and hold to account via annual report • Audit findings reported openly in Parliament Parliamentary Committees • Input to audit program + censure should input not be taken up • Review of audit reports • Noteworthy development: specific oversight Committees

11. 2. Parliamentary – Whole of Parliament examples • Appointment, termination and suspension – Auditor-General may be suspended & removed from office by resolution of both houses of Parliament. (SA) Public Finance and Audit Act 1987 • Appropriations – Auditor-General submit an estimate of funds required in that fiscal year to Select Standing Committee of Parliament. This is reviewed and the transmitted to Minister of Finance. (Alberta) Auditor-General Act 2000 s12 • Receive annual plan and hold to account via annual report – Auditor-General present annual report to House of Representatives and must include account of the implementation of the annual plan. (NZ) Public Audit Act 2001 s37

12. 2. Parliamentary – Parliamentary Committees examples Input to audit program – Annual plan, budget, and specifications for performance audit developed in consultation with Parliamentary committee before it can proceed (VIC) S. 7A and s.5 (2), Audit Ac 1994 Review of audit reports – Public Accounts committee selects parts of Auditor-General’s report on which to hold public meetings for Minister and senior staff. The committee submits a report to the legislature containing comments and recommendations on the Auditor-General’s Report. (Ontario) Office of The Auditor-General of Ontario, (http://www.auditor.on.ca/en/about_what_en.htm#public) Specific oversight Committees – Public Accounts Committee reviews reports. Joint Audit Committee (established June 2013) undertakes statutory reviews of OAG. (WA)

13. 3. Professional Note: these accountability mechanisms are possibly unique to A-Gs International auditing standards have force of law in Australia, Canada and UK. In some cases A-Gs can waive, but must disclose publicly. Standards are highly proscriptive and set the bar above that required for most public sector functions. They include binding dicta on: Evidentiary requirements for audit conclusions Natural justice for person/entities subject to public comment Ethics Complaints procedures Holding to account for compliance with standards • External - usually via external (non financial) audits of A-Gs • Voluntary - peer and internal reviews on cyclic basis, external reported

14. 3. Professional - examples Force of law - S.13 of the Audit Act 1994 requires that standards made by AUSAB must be applied to audits (VIC) Auditing Standard ASA 500 A1 Ethics - Auditors must have regard to the applicable requirements of APES 110 Code of Ethics for Professional Accountants. Auditing Standard ASA102 A1 External review of compliance - PAEC performance audit of the VAGO report includes in its terms of reference inquiry into whether the office complies with Australian Auditing Standards. (VIC) • Internal controls – Australasian Council of Auditors-General have agreed a detailed quality framework for use by external reviewers of A-G offices to ensure compliance with standards.

15. 4. Performance Performance based accountability for A-Gs is often addressed via generic public sector accountability mechanisms (see 1.) But – on top of that, it is now common for Parliaments to require ‘performance audits’ or a performance-based statutory reviews Common elements of these accountability mechanisms include Whole-office scope (not just areas of risk) • Public reports • 3-5 year intervals • Strict requirements around independence of auditors undertaking them Of note, in some jurisdictions: • Audits in accordance with standards (inc independence requirements) • New: standing auditor, potential for greater continuous disclosure

16. 4. Performance audits/reviews - examples • Cyclic – Statutory reviews every 3-5 years (QLD, WA, VIC) • Broad Scope – >40 criteria in 2013 performance audit of VAGO (VIC) • Public report - Review made public and contains 44 recommendation for areas of improvement. (QLD) • Independence - Auditor undertaking financial and performance audits of Audit Office must be independent. (ACT) Auditor-General Act 1996 s27 • Same powers as A-G - An independent performance or financial auditor is provided with the powers provided to Auditor-General (VIC). Audit Act 1994 S17(6)(a)-(h) and S19(5A)(a)-(h) • New: standing auditor - An independent auditor is appointed for a term of 3- 5 years. Audits financial statements & conducts performance audit of the ANAO at any time. (Commonwealth) Auditor-General Act 1997 s41-45 .

17. PART 2: Towards an assessment of accountability A survey like this shows how much A-Gs are accountable…but not how well To answer the ’how well’ question of whether the checks and balances are the right ones – a more qualitative approach is needed… Review of recent literature, conference papers and legislation suggests some clear emerging evaluation approaches Independence perspective – Independence is key value of A-G, so should limit ‘hard’ accountability to (whole of) Parliament, not Executive. Risk perspective – Independent review bodies can pose risks to community and oversight/accountability mechanisms should be designed accordingly Regulatoryeffectiveness – Accountability of any public sector body should encourage and allow effective performance of functions

18. Concluding thoughts Trend to create and empower independent review bodies (including ‘integrity bodies’) Interest from some commentators in reassessing the balance between independence and accountability/ adequacy of checks and balances Review of Auditor-General legislation in Aus, Canada, UK show significant layers of accountability, features include: binding/hard accountability largely confined to Parliaments additional ‘soft’ accountability mechanisms on top of those applying to other public sector bodies Qualitative approaches to evaluating the adequacy of these checks and balances should consider independence, risk and regulatory perspectives

19. Further reading • Robertson, G. “Independence of Auditors General: A Survey of Australia and New Zealand Legislation,” http://www.acag.org.au/Independence-of-Auditors-General-in-ANZ-2013.pdf , 2013 • Martin, W. “Forewarned and Four-Armed – Administrative Law Values and the Fourth Arm of Government,” Whitmore Lecture, 2013 • Field, C. “The Fourth Branch of Government,” AIAL Forum, 2012 • Wood, J. “Ensuring Integrity Agencies have Integrity,” AIAL Forum 2007 • NISA, “Chaos or Coherence? Strengths, Opportunities and Challenges for Australia’s Integrity Systems,” http://archive.transparency.org/policy-research/nis/nis_reports_by_country , 2005 • Spigelman, J. “The Integrity Branch of Government,” AIAL Forum, 2004