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Developments in Member SAIs

Nepal

(Contributed by SAI - Nepal)

New Performance Auditing Guide Published

Office of the Auditor General of the Kingdom of Nepal has recently published “Performance Auditing Guide.” It is an updated version of the existing guide which was developed and adopted in 1995. The new guide deals with selection of issues, and planning and acceptance execution of audit, reporting, documentation and quality review and follow up. The guide has experimentally been tested in the performance audit of three pilot projects and updated with the feedback.

Indonesia

(Contributed by SAI - Indonesia)

Institutional Development Plan (2001-2003)

In the next few years, the Audit Board of the Republic of Indonesia continues to face two major challenges.

• It will have to transform itself into a supreme Audit Institution which meets international best practices in performing its major mission in contributing to government financial accountability in an independent and supporting role. This is in accordance with the development priorities and the governance policies of Indonesia.
• It will have to adjust itself to the extensive decentralization of government powers and government finance demanded by the electorate in their desire for democratization, a process at present poorly planned and therefore essentially unpredictable.

To meet these challenges, the Audit Board will undertake the following courses of action:

• The Audit Board will take the necessary steps to maintain and increase the independence of the Institution
• The organizational structure in head and regional offices will be flattened, to two or three layers of management. This will result in very broad span of control issues. The People’s Deliberative Assembly will continue to be informed of the necessity to pass a constitutional amendment establishing a regional office of the Audit Board in each province which will report to provincial parliaments will continue.
• The Audit Board will also have to take major changes in the way it works. The audit process will be changed to become a single unified process. The review of documents and of on-site in-depth investigations by the same auditors(s) will lead to report, stating the feasibility of further investigations; a full audit will as frequently as possible follow, including on-site work.
• Changes will include the improvement of recruitment and promotion policies, major revisions of the audit procedures, major revisions auditor functional career path, and changes in the monetary and non-monetary reward or incentive system, with the objective of making both the institution and the auditors more professional and guaranteeing their independence. A pre-requisite for these changes is the redefinition and concentration on audit entities, and the reclassification of actual, professional auditors available.
• Annual audit planning will become more flexible. Emphasis will be given more on the number of the reports and the quality of the findings produced, with flexibility on the topics. Planning will be decentralized to the operational units. As auditors become more professional and independent, planning will be much more simplified with the major planning process undertaken by the auditors themselves. Planning at the center will consist mainly of assisting the Board in making adjustments to plans made by Chief Auditors and Regional Directors to conform with the priorities set by the Board in making adjustments to plans made by Chief auditors and Regional directors to conform with the priorities set by the Board and the limitations of the budget, and editing and integrating the reports, internal control, including quality control. The importance of addressing highest risk areas will be a priority of the auditor
• As the audit Board becomes more involved in the active pursuit of fraud and corruption in government, there will be needs for additional skills. Priority will be given to investigating auditing, quality control of the legal quality of audit reports by the training and appointment of the legal counselor and advisors in headquarters and regional offices, computer aided auditing, and auditing of programs and performance, as well as of compliance.
• Support development shall be made, consistent with the new emphasis on an increased coverage of public spending and income through the production of a greater quantity of reports, and of relevant findings, which will be the major criteria of performance of individual auditors and the Audit Board as a whole, as well as the major factor for promotion in the functional career path and for incentives.
• The information processing and information exchange capability of both individual personnel and the audit Board as a whole will be significantly improve by the acquisition of workstations, application and communication hardware and software as well as the training of staff in modern information technology. The installation and operation of these equipment and system are beyond present the Board’s capability and will require major consultancy and attachment of outside personnel.
• Large amounts of professional, technical, change agent and leadership training will be necessary, as well as consultancy in work procedures, job descriptions, career planning and development and organizational change.

The major elements and components of the Institutional Development plan are:

• Legislation, including legal consultants.
• Governance, management and decentralization, including streamlining the headquarter, regional offices, and delegation of authority.
• Audit, including guidelines, panel-based procedures, report targets, and legal counselor/advisor.
• Human resources, strengthened by career, policy, organizational change, and job descriptions experts and specialists.
• Information systems, starting from basics, audit activities, communication and extension capabilities.
• Training

The plan has been adopted by the Board in October 2000, and will be financed under the on going World Bank funded project

New Zealand

(Contributed by SAI - New Zealand)

Developments - Office of the Controller and Auditor General (New Zealand)

A.    Public Audit Bill

The Office of the Controller and Auditor General in New Zealand has until now operated under the Public Finance Act 1977. Most of this statute was repealed during the state sector reforms in the late 1980s, but for the part concerning the Audit Office. A new statute, the Public Audit Act 2001, came into force in April 2001.

There has been need for reform for a long time. The principal objective of the Act is to establish the Auditor-General as an Officer of Parliament. This has been in prospect since the Public Finance Act 1989 and the recommendations of the Finance and Expenditure Committee (FEC) in its Report on the Inquiry into Officers of Parliament in 1989. The most recent impetus to reform was the April 1998 report of the FEC following its inquiry into the Audit Office legislation, to which the Government responded favourably in June 1998.

The FEC report, and the Government’s response, signaled a broad consensus on the key policy issues underlying the proposed legislation.

Reform was required for a number of reasons.

• There has been general recognition that the Auditor-General ought to be an Officer of Parliament in the formal sense. There was informal recognition of that status by virtue of the Audit Office being an Office of Parliament under the Public Finance Act 1989. However, formally the Auditor-General was an officer of the Crown and the Chief Executive of the Audit Department, which provided staff and administrative services to the Audit Office. This was ambiguous, given that the Auditor-General and the Audit Office are synonymous.
• The language of the Public Finance Act 1977 in respect of the Audit Office’s mandate was unclear and out of step both with the Public Finance Act 1989 and with the nature and scope of public sector auditing. The 1977 Act did not contemplate many of the institutional forms developed in New Zealand since 1977 e.g. State-owned Enterprises and Crown entities.
• The scope of the Audit Office’s jurisdiction, particularly the ability to conduct “effectiveness and efficiency” audits was unclear and inconsistent as between different audited entities. The mandate will be applied more consistently under the new statute.
• The Auditor-General’s surcharge powers under sections 30 and 31 of the 1977 Act were seen to be inappropriate and need changing. They have been replaced with a special reporting power in respect of local authorities, which will form part of that sector's legislation, the Local Government Act 1974.
• The Auditor-General’s power to delegate key functions to employees and agents (in particular, the power to sign audit reports) required redefinition to reflect the current approach to the contracting of public sector audits, whether to staff of the Audit Office (including those in Audit New Zealand, a stand-alone business arm of the Audit Office) or to private sector audit providers (which for the purposes of an appointment are deemed to be part of the Audit Office).
• The provisions in respect of the setting of audit fees did not reflect current practice.
• The existence of the Audit Department as an organisation distinct from the Audit Office was confusing, unnecessary, and constitutionally inappropriate. The abolition of the current set-up is long overdue.

At the time of writing, the Public Audit Bill had completed the Third Reading stage in New Zealand's House of Representatives. Once it has received Royal Assent (i.e., it has been signed by the Governor-Genera), it becomes an Act, which will come into force from 1 July 2001.

B.    Performance Reporting

The OAG is in the process of finalising a report "Reporting Performance". The Auditor - General has a central interest in the external accountability of public entities to Parliament and the public. The aim of the report is to contribute to improving external accountability reporting. The report suggests a framework of performance elements and discusses setting direction, measurement and reporting in the context of this framework.

The key message to all readers is that an enriched performance reporting framework must:

• consider all aspects of performance in order to provide good information; and
• report those aspects of performance that are important to stakeholders.

The report suggests that performance in the public sector includes the following elements:

• results - what public entities achieve;
• the level and quality of interactions with the public; and
• the costs of these results and interactions.

Taking each of these in turn, first, performance comprises results that are:

• public entities’ actual outcomes or achievements (the impact of government activities on the community); and
• how the community is better or worse off as a consequence of public entities’ activities.

Second, performance comprises interactions with the public:

• processes, including the systems and operations of public entities and their associated standards of ethical behaviour; and
• the delivery of goods and services (outputs) to the public.

Third, performance comprises costs:

• Public sector entities receive public funds to deliver a certain level of services.
• Inputs are the resources applied to the tasks, and their cost to the taxpayer or ratepayer is the public funding received by the entity.
• Delivering more now may mean the capability to deliver in the future is lost. The cost of performance includes any declines in public entity capability.

When public sector performance is being measured and reported for accountability purposes, it is usually discussed in these terms: outcomes, capability and a transformation cycle - inputs, processes and outputs. These are the elements of a comprehensive model of performance.

To measure and report on performance elements, entities also need to compare their planned with their actual performance. Performance reporting needs to show:

• a forecast, at the start of a time interval, of all elements - including available capability and desired outcomes; and
• a report of actual performance, at the end of a time interval -including entity capability and actual outcomes (what has been achieved) as well as inputs, processes and outputs for that time period.

Among other recommendations, the report suggests that entities should:

• identify the short to medium term results needed to achieve the long-term desired effect (intermediate outcomes);
• consult stakeholders, especially in connection with setting priorities and determining risks and strategy;
• take social and environmental change into account in setting direction for the entity; and
• be clear about direction setting, because this identifies why you’re measuring, and allows you to identify what dimensions of performance to measure.

The report then discusses ways in which entities are experimenting with better measurement to enhance accountability reporting, by measuring outcomes, capability, and processes.

Finally, in external accountability reports, the report emphasises that accountability reports must be taken from the information used to manage the entity. Accountability reports should describe direction-setting processes, assessment of risks, and the trade-offs and choices made. Entities should also consider how to report:

• bad as well as good news (including unintended as well as intended consequences); and
• short term performance without losing a long term focus.

The messages about reporting include maximising the quality of information reported, while making the best use of technology.

The report considers what the real incentives are for developing better performance reporting. It suggests there are intrinsic incentives to report well, but more attention needs to be paid to developing extrinsic incentives.

The draft report has been circulated widely for comment, both in New Zealand and overseas. The authors are now revising the draft and incorporating comments. The report will be available electronically when published around mid-2001.

C.    Change Of Government In 2000 - The Labour/ Alliance Government

The Labour/Alliance coalition which took power after elections in late 1999 is the second government under New Zealand’s mixed member proportional representation system of government. It is also the first change in government in a decade. This means some rethinking for our public sector and some potential challenges.

The Government commissioned a “State-Sector Standards Board” to provide views on where standards, ethics and the public sector ethos may have suffered or declined over the last decade of financial management reform. One likely outcome of this initiative is a “strengthening of the centre” - a response to the downside of the reforms of the 1980s and 1990s that included:

• the silo effect - agencies doing their own thing and not co-operating or sharing best practice as fully as they could;
• a lack of depth in the pool for future Chief Executives; and
• insufficient emphasis on outcomes and evaluation.

The Office of the Auditor General is maintaining a watching brief over significant initiatives in e-government, which are being led by New Zealand's State Services Commission with strong support from the elected Government. The Auditor General is currently considering the most appropriate position for the Office in this regard.

Since the election of a new Parliament, the Auditor General's involvement with Parliament’s Finance and Expenditure Committee (FEC) has grown. A sub-committee has been established to consider the findings of the Office's special audits and studies. This is seen as a significant step in enhancing the level of uptake in reports. Further this helps close the accountability loop between Parliament and the Executive.

Kuwait

The Activities:

First:    Within the range of developing the cooperation and relations with other SAIs members in the organization, a delegation from our SAI headed by the State Audit Bureau Undersecretary visited the Office of Comptroller and auditor General of India during the period from 16-17 November 2000, the delegation also participated in INTOSAI Standing Committee for EDP 9th meeting, that was conducted during the period from 20-21 November 2000 in the Office of Comptroller and Auditor General of India.

Second:    A delegation from the State audit Bureau participated in the International Conference “Improving Oversight functions: Challenges in the New Millennium” hosted by the Office of Comptroller and Auditor General of Bangladesh in cooperation with U.N.D.P. and the World Bank that was conducted during the period from 10-12 September 2000 in Dhaka.

Third:    Within the range of developing the training plan for the year 2000 to train employees in SAIs of Gulf Cooperation Council, the State audit Bureau hosted a program “Control of the external investments”. Many technical specialists employees from SAIs of GCC participated in this program during the period from 23-27 September 2000.

Fourth:    The State Audit Bureau hosted the 7th meeting of the Standing Committee for Training employees of SAIs in GCC during the period from 10-12 February 2001, resulted in an number of decisions including the training plan for the year 2001.

Five:    Within the range of developing the friendly relations between the State Audit Bureau and other SAIs members in the ASOSAI, a delegation from the Accounts Chamber of Russian Federation headed by the Chairman, Mr. Sergey V. Stepashin, visited the State Audit Bureau during the period from 17-21 February 2001.

Visit of the Delegation of the Accounts Chambers headed by
Sergey V. Stepashin 17-21 February 2001

Sixth:    A delegation from the State Audit and Inspection Committee of Mongolia will visit the State Audit and Inspection Committee of Mongolia will visit the State Audit Bureau during the period from 15-22 March 2001, headed by the Committee chairman Mr. Javzmaa Lkhamsuren.

Seventh:    In the process of implementing the annual training plan for the State Audit Bureau employees which starts in 1st April and ends in 31 March each year, we conducted the following programs: 14 essential programs, 12 specialized programs, 5 academic seminars, 4 general programs and 27 specialized computer programs for the employees in the technical and administrative sector of the State Audit Bureau.

Eight:    The State Audit Bureau of Kuwait will host ASOSAI Governing Board 30th meeting and the ASOSAI Training Committee meeting during the period from 29th September to 3rd October 2001.

India

Indo-China Seminar

Under the Memorandum of Understanding (MOU) between India and China a 3 day seminar was organized on the “Role of Government Audit Institution in the Campaign against Fraud and Corruption”. The seminar was hosted by SAI India from December 5th -7th at Shimla and was attended by a 6 member Chinese delegation headed by Mr. Wang Daochang - Disciplinary Commissioner of Chinese National Audit Office (CNAO). Mr. S. Lakshminaryanan, Additional Comptroller & Auditor General of India, headed the 5 member Indian Delegation. Both the sides presented well drafted papers and some very interesting cases under the theme.

Indo-Polish Seminar

The first Indo-Polish Seminar on “ Audit of IT Application” was held in New Delhi from November 23rd to November 27th, 2000. The seminar was organised as a part of the bilateral agreement between Comptroller & Auditor General of India and Supreme Chamber of Control of the Republic of Poland. The four member Polish delegation was headed by Mr. Jacek Uczkiewicz Vice President and the Indian delegation was headed by Mr. K.N. Khandelwal, Additional Comptroller & Auditor General of India. Both sides presented their papers. The main areas of focus were Use of IT in Certification of Accounts, Audit of Electronic Data Interchange and a case study on Use of CAATS in Income Tax Schemes.

The seminar was a success and both the sides were immensely benefited with the interaction and exposure. The Polish delegation also visited Mumbai and saw the computerisation in a field office there.

Bangladesh

International Conference on Improving Oversight Functions

The Office of the Comptroller & Auditor General of Bangladesh in cooperation with UNDP and the World Bank hosted an International Conference titled `Improving Oversight Functions: Challenges in the New Millennium’ during 10-12 September 2000 at Sonargoan Pan-Pacific Hotel in Dhaka. The conference provided an important forum for discussion, exchange of ideas and sharing of experiences on the key issues involved in improving financial oversight functions. The Honourable President of the People’s Republic of Bangladesh, Justice Shahabuddin Ahmed inaugurated the conference, which was also graced by the Honourable Finance Minister Mr. Shah AMS Kibira. Messages from Honourable Prime Minister and Speaker were also received and published in various National dailies.

Parliamentarians, heads of SAIs professionals and policy makers, including distinguished delegates from 20 countries spanning five continents, attended the conference. Their active participation was compelling testimony to the importance and the timeliness of this conference. The importance of the topic was also reflected in the positive and wide coverage received from the media.

In addition to the inaugural and concluding sessions, three substantive business sessions were held on `Parliamentary Control of Public Expenditure’, `Public Sector Auditing in Bangladesh’ and `Accountancy profession in Bangladesh’. Significant contributions were made by, among others, Mr. John G. Williams, Honourable MP and Chairman, PAC of Canada; Mr. Andrew Feinstein, Hourable MP & Deputy Chairperson, Audit Commission, South Africa; Dr. Satrio Budihardjo Joedono, Auditor General of Indonesia & President of ASOSAI; Mr. P.J. Barret, Auditor General Australia; Mr. V.K. Shunglu, Comptroller & Auditor General of India, Mr. Bishnu Bahadur K.C., Auditor General, Nepal; Mr. Kunzang Wangdi, Auditor General, Bhutan; Mr. S.C. Mayadunne; Auditor General, Sri Lanka; as well as by senior officials from the SAIs of Canada, China, India, Indonesia, Kuwait, Korea, Malaysia, The Netherlands, Saudi Arabia, USA, Northern Ireland and officials from the World Bank, Washington.

Participants were unanimous that strong oversight was the key to good governance. The free flow of ideas and exchange of experiences were valuable in helping conference participants formulate important recommendations for improving financial oversight functions in Bangladesh. The main recommendations of the conference were:

• Attitudes towards the activities of Parliamentary Committees should change.
• Parliamentary Committees should scrutinize the budget before it is passed.
• The work of Parliamentary Committees should be visible and transparent to the people.
• Meetings of the PAC should be open to the public and the media.
• The accounting and audit functions of the C&AG’s office should be separated.
• The tenure of the CAG should be increased to a minimum of 5 years and the constitution amended accordingly.
• Need for amendments to the companies Act, SEC Rules, Banking Act, Insurance Act and by-laws of professional institutes to make the standards mandatory on all public companies and large private companies.
• Training and entrance requirements in the accounting profession should be changed.

International Conference titled `Improving Oversight
Functions: Challenges in the New Millennium’
during 10-12 September 2000 at Dhaka

Iran

Visit to Chinese National Audit Office (CANO)

Upon the invitation of Mr. Li Jinhua, Auditor General of CNAO, a delegation headed by Mr. Seyed Kazem Mirvalad, President of the Supreme Audit Court of Iran, visited China on the 10-17 August 2000. On this trip Mr. Mirvalad was accompanied by Mr. Lotfollah Atabaki, Public Prosecutor, Mr. Abbas Mohseni Deputy Auditor General of the Supreme Audit Court.

The trip was enriched by the working discussion set forth by the Chinese Authorities and they were thereby better acquainted with the audit systems, functions and mandate of the CNAO, staff system, performance audit, audit of government companies, legal actions taken against violation of rules and regulations, training activities and other technical subjects of mutual interest. The delegation also visited Yunnan Provincial Audit Office, Huairou Training Centre and Dalian Municipal Audit Office and were consequently informed on the organizational systems, and training and audit activities there of. The delegation also had the opportunity to visit a few of the economical and cultural centers of the country.

The Supreme Audit Court of Iran has, in recent years, greatly extended its friendly relationship with the CNAO. The existing policy of Iran is based on the development of International relationship and cooperation with other SAIs, specially ASOSAI and ECOSAI members. The Iranian SAI considers this recent trip to have been very successful and highly beneficial.

High ranking members of the Supreme Audit Court of
Iran visit National Audit Office of the
People’s Republic of China