Back to Basics:
The Audit Board of Indonesia has finally completed its change of leadership, which was expressed in the appointment of a new Secretary General early 1999.
According to Law No. 5 of the year 1973, the Audit Board of the Republic of Indonesia is a High State Institution, which in the implementation of its task shall be independent from the influence and power of the Government, but shall not be superior to the Government. The Audit Board shall have the form of a council composed of seven members, including a Chairman and a Vice-Chairman. To assist its daily activities, the Board shall have a Secretariat General headed by a Secretary General.
The change of the current leadership starting from August 1998 was carried out in the midst of a great social economic and political turmoil, characterized by the formation of an ad-interim cabinet whose particular duty is to prepare for general election on June 1999, which will open a new way towards more democratic way of life.
This situation is also a welcome invitation to the Audit Board to re-evaluate what has been done so far in the past. The 1945 Constitution has established an independent Audit Board, which would verify that the finances of the Government would confirm to the budget given to it by the Parliament. Audits by the SAI of Indonesia are in general related to matters, which have already taken place or have already been carried out or have already been accounted for (post-audit). The Audits shall also include the task of finding out whether the spending of public funds/money has taken place according to the provisions governing the disposal and management of state finance and also to evaluate whether the implementation of the state finance has been carried out in accountable ways commensurate with their objectives.
According to their existing rules and regulations the audits performed are to be in general desk-audits (checking on documents) and if considered very necessary, completed by the so-called "on-site checks". By doing documentary audits the auditors will find out the "formal" compliance of activities to the current rules and regulations, whereas check-on-site activities will obtain the "material" compliance to the activities planned in advance.
The basic purpose of any government audit is to provide the management and the public through the parliament, information on how well public funds are being managed. The report must not only contain information on the past, but also provides estimates, comparisons, or evaluations into the future that will assist those responsible for the activities to improve their performance.
During the former leadership the Board has conducted more site-audits compared with documentary audit, the reasons thereof is the absence of adequate information obtained from available documents at ministerial levels at the capital city in Jakarta. These site-audits however have caused the usage of a very large sum of travel-money, which may be more beneficial if it is used for intensive documentary audits at the administration centres of all government ministries and agencies in the capital city. This was formally carried out by the ARK (Algemene Rekenkamer), the official name of the SAI during the Dutch-occupation period in Indonesia. At that time voucher-audits were the main and principal audit activities with additional obligations like quasi-legal authority and the authority to rectify government bonds and securities. It is for that reason, that the current Board decided to return to voucher audits, this time more oriented on evaluating the accountability of each government ministry and agency.
For that purpose, through the Presidential Instructions no 1 of 1999, every government ministry and agency must render all documents related to revenues and expenditures to the Audit Board for regular inspection through documentary audits.
Also of equal importance is working-relations between the Audit Board and Parliament. Although maybe very much different during the colonial times, it should be improved by naming this relationship a "partnership". This condition was impossible because the five high state institutions, i.e. the Executive, the Parliament, the Supreme Court of Justice, the Supreme Advisory Board and the Audit Board are constitutionally to be on an even level. Particularly the new elected Parliament is now ready to become the future "watch-dog" of the Executive. By furnishing the Parliament with the right "evidence" it is hoped that its Members will be able to use the Audit Board's findings and recommendations for the benefit of maintaining good governance.
Launching of Government Auditing Standards' by Bangladesh Audit Department.
The Office of the Comptroller and Auditor General of Bangladesh recently introduced "Government Auditing Standards' as part of its on-going reform programmes to strengthen and develop the government auditing system and practices in Bangladesh. The standards were prepared under the "Strengthening the Office of the CAG Project" funded by UNDP, which has been undertaken to enhance the office's capability to improve the quality of audits and to introduce modern approach to auditing, especially Performance Auditing. The standards were formally launched on 2nd February 2000.
The adoption of the "Standards' has filled an important void in public section auditing in Bangladesh as dependence on INTOSAI guidelines and existing Audit Code and Manuals of Office were felt to be inadequate to meet the needs of the Office. The new standards have taken into consideration INTOSAI auditing standards and auditing standards followed by other SAIs with additions and modifications based on the auditing environment and the prevailing financial management system and practices in Bangladesh.
The Standards are divided into six-section viz., Introduction, General Standards, Field Standards for Financial Regularity Audits, Reporting Standards for Financial and Regulatory Audits, Field Standards for Performance Audits, and Reporting Standards for Performance Audits. The Standards represent the first important step towards modernization of auditing practices in Bangladesh. This will be followed by a new set of audit manuals and a comprehensive training programme including study visits and fellowships to the developed SAIs.
Anyone interested in obtaining a copy of this "Government Auditing Standards' may contact: National Project Director, Strengthening the Office of the CAG (STAG) Project, Audit Bhavan, 189 Shaheed Nazrul Islam Sarani, Dhaka-1000.
On the activity of the Accounts Chamber of the Kyrgyz Republic
It's necessary to note that the Accounts Chamber of the Kyrgyz Republic is a new control structure of national significance. Before our republic had no board with so high status which had to carry out financial and economic control in national scale. It is written in the Law of the Accounts Chamber of the Kyrgyz Republic adopted in October 1999.
First, notion of the Accounts Chamber of the Kyrgyz Republic appeared when some changes and corrections on the results of the national referendum were submitted to the constitution. Grounds of that was certainly international experience.
The point is that such boards are functioning in many highly developed countries. They have different names, such as the Accounts Committee, the Accounts Court etc. but their functions are the same. In different countries they have different independence.
The structure of the Accounts Chamber of the Kyrgyz Republic is rather simple. For example, in contradistinction to the former National Control Board functioning in the former USSR and to other control boards the Accounts Chamber has a very moderate staff. It consists of the auditors, inspector's staff and a rather small operating staff.
We have no departments, sectors and structural subdivisions. The whole staff is forming a little more than 40 persons. It's less than the total staff of the Control Revision Board under the Ministry of finance, which is just a departmental control structure.
Before the Control Chamber was completely formed by the Jogorky Kenesh (Parliament) and was accountable to it. But now the order of the Accounts Chamber's formation has become rather different than earlier. According to the principles of the Constitution the Chairman of the Chamber and one-third auditors are nominated by the President of the Kyrgyz Republic, one-third of audits - by the Legislative Assembly and one-third - by the Assembly of the Public Representatives of the Jogorky Kenesh of the Kyrgyz Republic.
In this way, we are accountable to two supreme boards of power. It shows, from one side, a high status of our Chamber and from another side - responsibility in realization of state financial and economic control on the territory of the republic.
All auditors, before being nominated, are thoroughly elected by above-mentioned structures. On an average 10-15 candidates from each structure claimed on one auditor place.
Among the auditors there are financiers who went through all levels of financial activity economists, book-keepers and Candidates of Science. Three auditors were leaders of big financial boards of the republic. Two of the auditors headed appropriate subdivision in the Government and the Jogorku Kenesh. Two auditors came to our organization from the former State Financial Inspection under the Government of the republic. The rest of the auditors have come from other branches of the national economy. All auditors have 20 years of audit experience.
As a Chairman of the Accounts Chamber I should take into consideration auditor's experience, nominating a more experienced auditor as a group leader. The auditor's authorities are equal to the minister's. In a word, during the control process we are trying to find more acceptable forms and methods of interactivities between the officers.
The Kyrgyz SAI has been working a little more than two years. Of course, it is too early to make any generalizations. Nevertheless I want to dwell upon the stages of the Chamber's activities. So, the rest of 1996 on the whole we devoted to the legislative and personnel activities. Specifically, we elaborated different versions of the Law " on the Accounts Chamber of Kyrgyz Republic". After repeated discussions at the committees and commissions of the Legislative Assembly of the Jogorky Kenesh, it was adopted and signed by the Preisdent of the Kyrgyz Republic in October 1996. Personnel enrolment was also realized stage by stage. The Presidential Decree nominated first group of auditors in March 1996 and the following 8 auditors were nominated by both chambers of the Jogorku Kenesh at the end of October and December 1996.
For these reasons control audit activity of the Accounts Chambers began in fact in 1997 after solution of all organizational and personnel problems.
Spectrum of interests and directions realized by the Chamber was rather compound and many-sided. In 1997 the main task of the Accounts Chamber was realization of detailed complex control over republican budget performance, which is a leading section in the system of the state budget of our republic.
In accordance with the demands of the Law "On the Accounts Chamber of the Kyrgyz Republic" our control audit activity begins from collaboration of working plan on the quarters of a year. Working plans take into consideration instructions of the President and the Jogorku Kenesh of the Kyrgyz Republic.
So as not to burden the Asian Journal with unnecessary details I would like to bring only facts characterizing results of the Chamber's activities for the last year. Organising control activity with consideration of the foreign audit practice, in 1997-1998 the Accounts Chamber prepared and executed more than 70 important revisions affecting problems of the republican budget and in some cases those of local budget.
Audits took place in all big districts of the republic, Bishkek City, in the ministries, state agencies, state commissions and other administrative organizations, many enterprises, joint-stock companies of all forms of property. We audited also activity of such fiscal structures as the State Tax Inspection, the State Custom Committee, the Ministry of Finance and its subdivisions.
With the aim of detailed acquaintance with the state of matters concerning local budget performance there were departures to the regions.
To my opinion, audits conducted at the Central Treasury, regional treasuries of Bishkek City, State Property Fund and its territorial subdivisions were effective enough.
As a result of revealing of serious violations and deficiencies and question on treasury was discussed at the meeting of the Accounts Chamber. Materials on privatization were considered at the meetings of the Government of the Kyrgyz Republic. The activity of the State Property Fund on the realization of privatization policy was found unsatisfied. At the same time there were planned concrete measures for liquidation of violations and punishment of guilty officials.
On the revenues part of the budget most of violations (as by natural and judicial persons) were committed in the account of tax revenues and their timely transfer to the budget. More over, in some organizations and enterprises part of sums on taxation was concealed from the account.
Most of revenues are lost on alcohol and petrol, which are the most profitable productions for the budget. It was calculated, for example, that only in the result of illegal production and export of alcohol drinks and also illegal import of oil products considerable sums of payments do not come to the budget.
It should be noted that the main problem for budget is not full collection of payments, ranging in 2000 million soms that is a rather great sum.
As audits show in some cases managing subjects are given unfounded delays and privileges on payments to the budget.
In accordance with the decision of the State Tax Service under the Ministry of Finance of the Kyrgyz Republic only in 4 large enterprises 15.7 million soms have not come to the budget due to the delays on payment of tax on import.
More over the Joint-Stock Company "Kyrgyzchampany" was released from payment of financial sanctions in 18.9 million soms according to the letter of July 17, 1996 from the Ministry of Finance.
Main violations in performance of expenditure part of the budget are admission of different kinds of over expenditures against estimate, illegal expenditures and excesses and also use of budget and non-budget means.
As audits show such financial violations are committed in all levels; in organs of executive power and production sectors of economic and social-cultural sphere.
Last years SAI of Kyrgyzstan carried out a number of audits of high and secondary schools, health services establishments and many other subjects which use budget and non-budget means and revealed serious violations.
Analysis shows that the most vulnerable sections of the budget are "Education", "Health services", "Culture and Art". Situation in these spheres was increased by illegitimate actions of local state administrations, which took decisions on reduction of expenditures on social sphere in favour of state structures. That is one of the reasons why citizens of the republic sometimes complain about low quality of education, bad medical services and other shortages.
In Chui district 6.4 million soms were allocated gratis for different purposes that is a serious violation of budget legislation. In 1992-1994 in the Ministry of Social Labour of the Kyrgyz Republic 5 million soms were added to the accounts of commercial structures but only 587 thousand soms were restored.
As one can see there are a lot of problems with use of budget means. Thus, the Accounts Chamber considers its duty to perform strict control over such events, which increase complicated financial situation in the republic.
I would like to bring some figures giving general idea of the Accounts Chamber's activity for the last years. So, in 1997-1998 on the results of performed audits we accepted 48 decrees, 281 orders were sent to the ministries, departments, organizations with request to take necessary measures on liquidation of committed violations and punishment of guilty persons.
48 persons were dismissed on out orders.
In 1997-1998 in the result of performed audits, 157 million soms were restored.
In 1999 the SAI of Kyrgyzstan is carrying out a lot of new audits. In some ministries and departments it controls rationality of use of budget and non-budget means. Recently we finished audit of the republican budget performance for 1998. It is a very complicated work and its results will be submitted to sessions of the Parliament. We also carried out audits on request of UNDP (United Nations Development Programme) on poverty, small and medium sized enterprise development, and technical assistance to support public sector resource management and other projects. We also carried out audits on fulfillment of the demands of the Law of the Kyrgyz Republic "On rent and rent terms".
Not everything goes off smoothly in our work. It told on imperfection of the acting Law "On the Accounts Chamber of the Kyrgyz Republic". In this connection in December 1998 on our initiative the Parliament adopted a Law "On introduction of changes and additions to the Law "On the Accounts Chamber of Kyrgyz Republic". The Law extends control powers of the Accounts Chamber, makes rights and duties of officers more precise and includes a number of editorial changes and additions to the text of the acting law.
This is a brief review of the activity of the Kyrgyz SAI for two years (1997-1998).
8th Indo China Joint Seminar
A four member Indian delegation led by Deputy Comptroller and Auditor General (Comml.) participated in the 8th Indo China Joint Seminar at Beijing and Nanjing from 21-29th November 1999.
The Theme of the seminar was "EDP Audit". The Indian side presented papers on IT Audit Strategies and perspectives of SAI India for the new millennium and computer auditing.
The Chinese paper presented described the speculation on the influence of development of knowledge economy on the auditing of information system and their IT audit initiatives.
The Indian side demonstrated the audit software tools and techniques and also demonstrated the use of specialized software IDEA for extraction, analysis and reporting. On the other side Chinese side demonstrated their own developed audit software with features such as extraction, analysis and generate report from multiple auditee information environments.
Indian delegation also visited the Huairou training base of CNAO at Huairou, Jiangsu province Audit Bureau and Nanjing Audit Institute.
To conclude, both side realized the need for sharing knowledge and audit experience of the IT environment and stressed the need for meetings and bilateral exchange and importance of information technology in adapting audit and usage of this technology for better quality audit to be conducted with timely, accurate and valuable information.
CNAO International Exchanges 1999
In 1999, the CNAO furthered its international exchanges. Major activities include:
Overseas Visits:
Visits to the CNAO
Visits to the CNAO were undertaken by Auditor General of the Russian Federation (April), Kiribati (August), Sweden (November), Israel (November), Germany (November) and Vietnam (November) as well as the Deputy Auditor General of Argentina (November).
Seminars
Projects
Training