External Accountability Supreme Audit Institutions

1. External Accountability Supreme Audit Institutions Budget Execution Course January 10-11, 2004 Anne Mondoloni, OPCFM-AFTFM

2. Overview • What is an SAI ? • The Lima Declaration theory and practices • Regional perspectives • What is INTOSAI ? • World Bank Strategy to support and strengthen SAIs

3. What is a Supreme Audit Institution ? The national audit body, independent of the executive, that issues reports on the use of public funds for the Legislature and Public

4. Financial accountability scheme Citizens-Public Legislature Financial accountability Reports to SAI MOF Audits accounts and management

5. Three Different institutional models • Westminster model • UK – most commonwealth countries including in Sub Saharan anglophone Africa • SAI work intrinsically linked to the system of parliamentary accountability • Judicial / Napoleonic model • Latin countries in Europe / Turkey / Francophone countries in Africa and Asia / Several Latin American countries • SAI integral part of the judicial system. Often goes with the personal and financial responsibility of government officials • Board model • Asian countries including Indonesia / Philippines • Institution positioning similar to that of Westminster model but internal organization is collegial with of Board of auditors

6. Different types of audit • Compliance audits Reviewing compliance with financial laws and regulation • Financial audits Providing an annual opinion on the fairness of the information presented in State financial statements or government agencies statements • Performance audits (value for money) May vary significantly in scope

7. The Lima Declaration - Independence

8. The Lima Declaration - Capacity

9. The Lima Declaration - Impact

10. Regional Perspective • ECASAI in EU candidate countries have made important progress (e.g. Poland) / others have difficulties reaching an adequate institutional positioning • AFR-MNAIn francophone countries : scattered auditing resource / and limited access to the general public / In anglophone South Africa as example of best practice • LACSAI could potentially benefit from well developed PFM system in Ministries of Finance but very low impact due to limited access to the general public • SAR – EAPLonger tradition of external oversight but weaknesses in terms of audit content, staffing and therefore impact / India as example best practice and initiating changes

11. Identification of stages Possible steps to take CASE I “ Start” No external audit institution in place or very recently created CASE II “Low PFM Capacity environment” When quality of State Accounting system is very low CASE III “Intermediate” Heterogenous staffing - Inadequate scope or institutional position Confidentiality of reports CASE IV “Advanced” Sufficient and skilled staff / but limited range activities Free Disclosure of reports to the public but no follow-up

12. What is INTOSAI ? • INTOSAI International Organization of Supreme Audit Institutions For experience sharing and cooperation • Regional organizations AFROSAI / ARABOSAI OLACEFS / CAROSAI / EUROSAI / ASOSAI / SPASAI • Congress every 3 years last Congress in Budapest – October 2004

13. Outcomes of 2004 XVIII INTOSAI Congress • INTOSAI has adopted a Strategic Plan, that include a mission statement, a “vision” and a set of goals among which : • Accountability and Professional Standards as Goal 1 • Institutional capacity building as Goal 2 • Creation of a Working Group or Committee on SAI capacity building • Full alignment with Bank’s SAI approach

14. Strategy paper : Objective Provide an overarching framework on how to make the most out of the commonality of interests between SAIs and donor agencies– which is based on ensuring that public / development funds are used in an effective manner to reduce poverty and are properly accounted for.

15. Strategy Paper : key ideas (1/2) • Dealing with SAIs as potential partners in bringing about results, rather than as remote oversight institutions • Advocacy / Policy dialogue • need to work on acceptance by the executive branch / government of a relevant– independent external scrutiny of its management of public funds • Leveraging the Bank’s portfolio • “acceptability” issue to be used as opportunity to engage dialogue / training program for enhancement of audit capacity

16. Strategy Paper : key ideas (2/2) • Draw on external expertise through partnerships with INTOSAI and its members • Build on on-going initiatives within the SAI community that deal with SAI capacity building – Large amount of on-going bilateral cooperation among SAIs • Support SAI capacity to audit budget execution • On area of particular interest SAI – as the sole public auditor for annual state budgets – is the main source of information for citizens, the legislature, the government and ultimately for development partners. • In line with new OP 8.60 need for specific support in carrying out Financial Audit of State Accounts (Budget execution)

17. Lessons learned • The need for a comprehensive approach of Public financial management • Freedom of disclosure of reports as a necessary condition for having impact • Role of the Ministry of Finance and importance of the accounting system

18. For your consideration • Financial accountability and … Rule of Law ? • Financial Accountability and… Corrupt environment ? • Financial accountability and .. Authoritarian regimes ?

19. Thank you for your attention !