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How OAG of Thailand Develops Performance Auditing

Contributed by the Office of the Auditor General of Thailand

The Office of the Auditor General of Thailand or 'OAG' in short, is an independent body with broad powers and duties to audit all government offices, agencies and enterprises, and local government units to ensure control of the utilization of public funds. OAG is also obliged to submit audit reports, comments and remedial suggestions and recommendations on deficiencies detected in the course of audit to agencies concerned. OAG sets its own direction and scope of audits without interference and reports its annual performance directly to the Prime Minister.

OAG is headed by the Auditor General who is appointed by the Council of Ministers and approved by the Legislative Assembly. The Auditor General is a civil servant subject to the Civil Service Law and can be in his office until the retirement age of 60. The position of the Auditor General is that of the highest civil service level.

OAG currently has a total staff of 1,686 of which 1,546 are civil servants. The vast majority of these civil servants are auditors and the rest are clerical and other administrative support staff.

OAG operates through eight separate Divisions and nine Regional Offices as listed hereunder:

Status of Performance Auditing

The State Audit Act of B.E. 2522 (1979), which repealed the Audit Council Act of B.E. 2476 (1933) and transferred all duties and powers of the Audit Council to OAG, has enlarged the OAG's authority with a view to enabling it to perform more complete performance audits. The legislation regarding performance auditing is described as follows: "....may examine the disbursement of money and use of other properties, and give opinion whether they are in compliance with the objectives, are economical and worthwhile and reach the target."

OAG has begun to engage in performance audits on a step by step basis since 1975. At that time no specific statute authorized such audits, but there was no prohibition against them and it was argued that the Audit Council Act could be interpreted to include performance auditing among the responsibilities of the office. The audits performed focused on procurement expenditure, asset utilization, custody and maintenance of assets, and on construction.

On the suggestion of the UN Interregional Adviser for Government Budgeting and Financial Management whose 2-week services in May 1978 were made available by the UNDP, OAG started taking further steps that were considered appropriate for developing the expertise for performance auditing. Initial efforts resulted in the conduct of performance audits of 6 pilot projects with the advise and guidance of a consultant on performance auditing made available for 7 months in 1980-1981 by the UNDP. Most of the audits focused on the efficiency, effectiveness, and impact of development projects. An Audit' team of 3-4 selected auditors from 4 divisions and 1 regional office took part in these audits. After the completion of the pilot projects OAG continues and gradually expands this type of auditing. A number of performance audits are scheduled to be carried out annually by every audit division and regional office, taking into consideration the present work pressures of the necessary financial audits and the limitations of staff.

In fiscal year 1983 (Oct. 1, 1982-Sept. 30, 1983), evaluations of the implementation of development projects under the poverty-stricken area development plan which cover 38 target provinces and are expected to benefit some 7 million poor people throughout the country by the end of the Fifth National and Social Development Plan in 1986 and the Rural Employment Generation Programme which aims at generating employment and supplementing the income of the villagers during the high-unemployment period were the more significant audits. The audits., dealt with projects such as construction of village water resources, bridges and roads, digging of canals for agricultural purpose and setting up of buffalo banks and livestock development.

Broad Steps taken in carrying put Performance Audits

  1. Make a preliminary survey of the activity/project under examination to obtain necessary background information for use in making the audit.
  2. Study the pertinent legislation or assignment of responsibility for the activity/project to ascertain the authorized purposes and related authorities of the activity/project and any restriction.
  3. Review key management activities, systems and controls for their efficiency and effectiveness in assuring that things are done in the way and with the results intended.
  4. Examine any important problem areas or weaknesses encountered by obtaining all relevant evidence and doing necessary analytical work.
  5. Review audit findings with management officials responsible for the operations to obtain as much further information on the problems as possible and to formulate conclusions in the light of the detailed knowledge of the responsible officials.
  6. Prepare report on results of the audit work performed. Send draft report to the audited agency for comment. The comments received are included in their entirety in the final report which is submitted to those responsible to take action on the auditor's findings and recommendations.

Problems OAG faces

  1. Weak internal audit systems in operating ministries: Even though the Government has mandated the creation of internal audit units in the ministries, the performance of the units with very few exceptions has not been impressive. This is because of the limited number, training, education and experience of internal audit staff. Because of this situation, OAG has to spend more time than it should on the auditing of detailed financial transactions and vouchers. Unless the operating ministries strengthen their internal audit capability in order to be able to audit significant financial transactions and to monitor the status of programs and projects, OAG would not easily be freed to engage in broader performance audits as it would like to.
  2. Lack of accurate and adequate data on expenditures for development projects and on-going programs on the part of audited agencies.
  3. Lack of performance indicators.
  4. Work pressures and limited staff.
  5. Lack of staff capability. At present the nucleus of adequately trained auditors capable of applying knowledge of the performance audits is still small.
  6. OAG has no other professionals except accountants.

Major Steps taken to solve the Problems

  1. Authorities concerned including OAG are considering ways and means to promote the establishment and development of good internal audit systems in operating ministries.
  2. National accounting system is being modified to provide better data for evaluation purposes.
  3. OAG is considering possibilities, one of which is strengthening internal audit capability as mentioned in no. 1, to make a major reduction in the volume of voucher audit workload so that linked staff can be concentrated on those problem areas most demanding of attention from the standpoint of efficiency and economy in the use of scarce public funds.
  4. Provide training to develop necessary skills in performance audits. This includes obtaining funds for overseas training of a number of staff members to familiarize themselves with performance audit practices to be able to deal effectively with performance audits and the training of other auditors.
  5. A performance audit manual is now being prepared.
  6. At present the Government is in the process of improving, integrating and coordinating separate management systems encompassed in planning, budgeting, accounting and performance evaluation. OAG is one among central staff agencies most directly concerned with the project. The improved systems will make it easier for OAG to carry out effective performance audits.
  7. OAG has been making an attempt to recruit graduates in fields of study other than accountancy and commerce i.e. business administration, law, economics, architecture and engineering. So far support has been given for the recruitment of graduates in business administration and economics.

Conclusion

OAG realizes that to be successful in extending its scope beyond financial audits to performance audits, it has to learn gradually. Furthermore, there are other variables that will contribute to the development of performance auditing. Among them are sound internal audit systems, development of performance indicators and management reporting systems, support for more staff, continued technical assistance from various international organizations and other Supreme Audit Institutions such as GAO, the Office of the Auditor General of Canada and so on. It is hoped that within a reasonable period of time OAG will finally be able to implement full-scale performance auditing that can cover many high priority projects annually.