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Appendix - 1

THE TOKYO DECLARATION OF "GUIDELINES ON PUBLIC ACCOUNTABILITY"

PREAMBLE

The background papers, country papers and comparative review papers on the various sub-themes under the main theme for the Seminar on the "Role of Supreme Audit Institutions in Promoting Public Accountability", the discussions in the ASOSAI Workshop held in Kuala Lumpur in February 1985, and the deliberations at the Second ASOSAI International Seminar held in Tokyo in May 1985 recognize that:

1. With the steady growth of public sector activities and spending by governments in pursuit of development, and with the expansion of public enterprises, greater autonomy in local authority administrations and trends at privatisation in some countries, the character, scope and dimensions of public accountability have now extended over greater horizons;
2. With increased public consciousness, the demand for public accounta bility of persons and bodies managing public resources has become increasingly evident so that there is a greater need for ensuring that the accountability process is in its rightful place and is effective. Deficien cies in the process will require the introduction of reforms and innova tions to strengthen it; and
3. The Supreme Audit Institutions (SAIs) have accordingly become in creasingly concerned with the need for proper mandates, systems, controls, checks and balances in the discharge of functions in the planning, programming, implementation and delivery processes in addition to the traditional forms of audit, and the need for ensuring value for money in the management of public resources. SAIs are also of the view that there is a need for increasing the public accountability awareness in all sections of society.

THEREFORE, in the light of the above considerations, the Third ASOSAI Assembly meeting in Tokyo, Japan from 15 to 21 May 1985 hereby resolves:

To adopt and disseminate the recommendations declared in "The Statement of Guidelines on the Role of Supreme Audit Institutions in Promoting Public Accountability" as set out in the accompanying documents which will henceforth be referred to as the Tokyo Declaration of Guidelines on Public Accountability.

STATEMENT OF GUIDELINES ON "THE ROLE OF SUPREME AUDIT INSTITUTIONS IN PROMOTING PUBLIC ACCOUNTABILITY"

DEFINITION

Public accountability means the obligations of persons/authorities entrusted with public resources to report on the management of such resources and be answerable for the fiscal, managerial and programme responsibilities that are conferred.

GENERAL GUIDELINES

The following general guidelines are recommended for promoting public accountability:

1. With the increased pace of national development, the objectives and the norms by which programmes and investments can be evaluated should be explicit and quantified wherever possible by the planning and approving authorities to facilitate a meaningful review and analysis of their results. Development of adequate information, control, evaluation and reporting systems within the public sector will facilitate the ac countability process.
2. The regulatory or central agencies within the administration should increasingly perform supervisory and review functions and establish satisfactory performance standards and criteria for determining actual progress and productivity against predetermined objectives and tar gets. There is a need to develop cost consciousness and to inculcate greater efficiency and efficacy in the utilisation of resources.
3. As the traditional accounts still provide an important and effective means of discharging accountability, appropriate authorities in Govern ment should ensure the promulgation of generally accepted accounting standards for financial reporting and disclosure relevant to the needs of the public sector. As a corollary measure, a strict enforcement of these standards is equally necessary.
4. The existence of systems of appropriate safeguards and mechanisms for implementing prompt corrective measures would certainly assist in better discharge of accountability. The laxity in enforcing reprimands and other punitive measures for failures, abuses or malpractices will only weaken the accountability process.
5. While the primary function of SAIs in the past has been to express an opinion and lend credibility to the financial statements of the various public sector entities subject to its audit, its role should now be more performance oriented. They should make efforts to equip themselves adequately for their expanded responsibilities and be conscious of their own accountability.
6. As a considerable proportion of expenditure on development and on investments is incurred by public authorities of one kind or another, and moneys raised to meet such demands, all these activities should be subject to audit or review by the SAIs. The acquisition and disposal of public resources and assets, and the achievement of objectives require attention. The SAIs must progressively conduct more value for money audits aimed at evaluating the performance of these entities including the efficiency and effectiveness of their programmes.
7. SAIs should, where necessary, secure legal mandate enabling them to do the audit of all public enterprises. A clear and unequivocal legislative mandate outlining the powers and responsibilities of the SAI to under take performance audits in all areas of government activity should also be obtained.
8. Improved utilisation of all audit resources could be achieved if SAIs worked more closely with internal audits and were to provide guidance and advice to them in the development of their activities where re quested or as necessary.
9. For audits to achieve maximum results in promoting accountability, audit reports must have relevance, receive wide publicity, be objective, responsive, current and accurate. The need for timely discussions of the reports of SAIs by parliamentary committees and remedial actions taken thereon cannot be overemphasised. The SAIs should also ensure that follow-up actions on such measures are undertaken.

SUB-THEME 1.
PUBLIC ACCOUNTABILITY - CONCEPTS ISSUES AND PROBLEMS

SPECIFIC GUIDELINES

The following guidelines are recommended for enhancing accountability in the public sector:

1. Selection and formulation of policies and strategies of development and specific programmes to achieve national objectives are the functions of planning and other relevant agencies. Bearing in mind the concept of audit as an independent and objective activity, the issue of assessing policy decisions may be left to the discretion and sound judgement of each SAI since their reviews may, at times, impinge upon questions of policy and the selection of strategies.
2. With the vast scope of public involvement in the national economy, there is accordingly a need to develop different sets of accountability criteria relevant to the corresponding levels of autonomy, control and the type of work, particularly in the socio-economic fields, performed by the various public sector agencies.
3. For SAIs to play an effective and meaningful role in promoting public ac countability, it is of paramount importance that the SAIs should always retain their independence and objectivity and enhance their credibility. The SAIs must be given adequate authority and flexibility in the determination and spending of their budgets, the selection and management of their audit personnel and the discharge of their audit functions.
4. The SAIs should emphasise that while audit is an important part of the accountability process, it does not detract from the fact that the executive and the legislature are in themselves accountable for their actions in discharging their functions. Nonetheless, the SAIs must co-operate with the planners and administrators as well as continue to assist and advise them to promote change and reforms which will enhance this accountability.

One of the primary objectives of performance auditing is to enhance the accountability of executive agencies by providing information to decision makers in government, to the Parliament and through them to the public. Performance auditing has to be seen as complementary to financial regularity auditing, and not as a substitute for it. The intention of performance auditing is to create a greater awareness by the legislature and the public of the success, or otherwise, of public officials in obtaining value for money in public expenditure, in the utilisation of resources and in seeking to ensure that all due government revenue is collected. To achieve this objective SAIs must ensure that the standard of quality of reports on performance auditing are timely, factual, well-balanced with fully supportable findings and conclusions and contain sound recommendations for improvement where deficiencies are present. Public debate should be encouraged by the wide distribution of reports.

2.    Another aim of performance auditing is to improve the quality of public administration by encouraging and promoting better planning, sound management practices, comprehensive and relevant information systems, economic and efficient utilisation of resources, constant evaluation against predetermined performance measures and appropriate mechanisms to correct shortcomings in achieving programme goals.

The following guidelines are recommended as a basis for improving public accountability through performance auditing:

1. Legislative enactments would facilitate the co-operation of audited agencies in maintaining and providing access to all relevant data necessary for a comprehensive assessment of the activities under examination.
2. SAIs should, wherever possible, promote and encourage the provision of statements outlining in detail the Government's goals in establishing individual programmes and the development by administrators of specific and measurable objectives and targets. At the same time, SAIs should work towards improving techniques for reviewing the validity of performance measures.
3. SAIs should draw attention to deficiencies observed in the design of management and operational processes and information systems, and in the presentation of budgetary and accounting information. SAIs should make suggestions for improvement in these areas including in relation to processes and documentation. SAIs should examine management's own evaluation processes and make use of them where they are found to be satisfactory.
4. SAIs should draw attention to the improvements in public administration that should flow from performance audits undertaken. Techniques for assessing these benefits need to be further developed.
5. SAIs should ensure that the methodology employed for performance auditing is well-based, fully understood and accepted, and that research into new techniques is given a high priority.
6. SAIs should develop appropriate criteria for the selection of audits and the establishment of priorities within which audits will be undertaken. Subjects for audit should be carefully selected and defined having regard to the quantity and quality of available audit resources.

Public enterprises can be defined as organisations which are largely financed by the Government, for specific purposes, through one or more of the following ways:

1. departmental undertakings;
2. statutory corporations or autonomous bodies established by or under legislation;
3. autonomous bodies set up by government resolution or order; and
4. companies, nationalised or established under Company Law, where Government has a controlling interest.

AUTONOMY AND ACCOUNTABILITY

The autonomy granted to public enterprises does not relieve them from public accountability. The need for audit of public enterprises must be recognized by the relevant authorities in order to ensure their accountability to Parliament especially in view of their increasing importance in the process of socio-economic growth, large investments of public funds in them and rising public expectations of sound management, cost consciousness and adequate benefits.

The following guidelines are recommended for promoting accountability of public enterprises:

1. The scope of audit by SAIs should include attestation of financial statements, compliance, economy, efficiency and effectiveness as pects, and the observance of accounting standards.
2. SAIs may entrust one or more of the above mentioned areas of audit to an outside agency to be carried out on their behalf and under their direction where deemed necessary or appropriate. The reports of such audit should be subject to scrutiny/approval of the SAIs as the case may be.
3. Whereas norms and standards have been developed for attestation of financial statements and compliance audit, criteria for evaluating effi ciency, economy and effectiveness relevant to goals and objectives and government's policy decisions, need to be developed and reviewed by each enterprise from time to time and the SAIs may evaluate the criteria so developed.
4. SAIs should also aim at improving management controls and reporting systems in these enterprises by giving assistance towards their devel opment wherever necessary.
5. SAIs should ensure that the norms for accountability are applicable to subsidiary companies as they are to their parent bodies.

When a public enterprise or one or more of its activities are privatised, SAIs may examine that in the process of privatisation public interests are safeguarded.

The following guidelines are recommended for enhancing accountability through training:

1. The guidelines for training endorsed at the Second ASOSAI Assembly and First International Seminar held in Seoul, Korea are still relevant.
2. Emphasis must be given to the training of new recruits. Continuing education and training should be aimed at all levels of staff and where SAIs have special expertise relevant to the administration, the training effort could be extended to planners, financial managers and other administrators.
3. Joint working relationships between SAIs and private auditing firms could enhance the training of staff particularly in commercial type audits. Co-operation between audit institutions and institutions of higher learn ing could also create an awareness for public sector auditing needs in the development of curricula.
4. SAIs should endeavour to obtain adequate funding to up-grade training facilities and seek to ensure that sufficient numbers of appropriately trained and experienced staff are available to undertake audits and that access to specialist knowledge and skills in a wide range of disciplines is guaranteed either within its own organisation or through the engage ment of consultants.