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ARTICLES

PREPARED BY
Mr. Barrak Kh. AL-Marzouq
President of the State Audit Bureau of Kuwait CNAO

Introduction

The state of Kuwait is keen to provide the needed protection and safeguard to public fund. To activate this protection, Article No. 151 of the constitution states that “There shall be established by law a commission for the financial control, and its independence shall be safeguarded by the law and it shall be attached to the National Assembly. It shall help both the Government and the National Assembly in collecting the state revenues and expending of funds within budget allocations. The commission shall submit to both the Government and the National Assembly an annual report on its activities and findings”.

To carry out the constitutional provision, law No. 30 for the year 1964 was issued to establish the State Audit Bureau. The first article of that law confirms SAB’s independence, and the second article explains that SAB aims, basically, to perform an effective control upon Public funds through its practices and authority given by law.

SAB Control

SAB started to practice its control mission as a result of the authority provided by law. That law was convenient to realize an effective control on the public fund in that time, since it suited the nature of financial and economical positions of the state. It also suited the control methods followed by the other countries to realize an effective control on the public fund.
The Audits practiced by SAB focused on two kinds of audits: (1) prior Audit that was performed before engagement, (2) post Audit that was performed after engagement.

SAB audit reports are objective, express opinions regarding financial positions movements and give the real financial positions of the State. The reports also include evidence to prove and support SAB remarks and comments. In addition, they show the compliance of entities subject to SAB control with financial laws, rules and regulation. This kind of audit is called the regularity audit.
Since the public expenditure increased and the State role grew in all the economical and social fields, it became necessary to confirm the efficiency and effectiveness of the government administration when using public funds and in carrying out the stated plans and programs.

As a result of public and parliamentary pressure to have public accountability for persons and sectors managing public funds and the misuse of the public fund, in particular, the fund abroad, the law No. (1) for the year 1993 regarding public fund protection was issued. SAB was assigned to follow up the transactions and actions related with invested amounts inside the country or abroad.
Beside the changes and conversions, there are some other reasons and factors which led to an uncomprehensive and uneffective audit role for SAB. The most important reasons and factors are:

1. A shortage in law No. 30 for the year 1964 regarding SAB establishment to provide basic requirements needed for control process to be effective and efficient.
    
2. There is a need to update SAB current audit methods and tools by using updated tools and technology.
    
3. There is a need to increase SAB manpower to match the growing control burden resulted from expansion and increased number of entities subject to SAB control. There is also a need to carry out the National Assembly and cabinet assignments to SAB or the missions stated in the other laws.
    
4. There is a need to put efficient plans to develop and improve SAB’s staff skills and abilities to perform their audit missions effectively and efficiently and also to enter into updated audit fields.

SAB Control Method Development Strategy 1995-2005

SAB senior management, that resumed the mission in the beginning of nineties, believes in the continuation of development and raise the performance efficiency. The senior management apprehended the importance to put a strategy to develop SAB control method to match the latest development and circumstances. This strategy is to be carried out for the period from 1995 to 2005.
This strategy is based on a group of policies related with control activation, human resource development and raise the current administration system efficiency. Thus, the strategy based on three major groups defined according to their abilities to create the required organizational changes to SAB’s activities and performance. The strategy also includes a clear specification of goals to be achieved, and methods and means to reach these goals.

The following is a summary of the strategy and some detailed policies of audit activities:

Group I : Policies related with Audit Activities

Within the strategy goal to reorganize audit activities framework, avoid passive aspects in audit process and reach an effective control on public fund, the major pivots to be followed were determined as follows:

First : Amend Legislative Frame

This amendment aims to handle passive aspects of SAB establishing law to suit economical and financial changes that appeared during SAB control history. The amendment also aims to keep pace with the financial laws, legislations and new audit concepts and updates through the following:

1. An accurate determination and specification to SAB mission, the entities subject to its control, and audit kinds that should be practiced by SAB as a result of economical and financial changes.
    
2. Compliance with laws, rules and legislations that arrange SAB missions and duties.
    
3. Adding some new goals to audit process to match the updated audit concepts and methods to reach a comprehensive control.
    
4. Bring out the real goal of investment process and evaluate efficiency and effectiveness of the sectors managing these investments.
    
5. Identify the obligations of entities subject to SAB control and their compliance with these obligations within certain period of time. That is to enable SAB to perform the needed study and analysis to their financial and economical positions to express its opinion.
    
6. Make the reports issued by SAB subject to more studies and analysis since they are the final product of SAB.
    

Second: Activate SAB control

This goal can be achieved through developing current control practices, realize a comprehensive control, and an entry to new audit fields according to the following:

1. To follow a comprehensive audit system upon entities subject to SAB control which includes financial audit and performance audit, and prepare SAB to practice some new audits as environment audit.
    
2. To urge and follow up entities subject to SAB control to set up an effective internal control system and provide these entities with assistance to set up the system.
    
3. To evaluate the programs of entities subject to SAB control.
    
4. To establish a higher committee for accounting standards comprising efficient academics and SAB efficient technicians.
    
5. Audit is rarely performed completely upon all operations. So, it is a must to move to optional examinations.
    
6. To give a considerable weight to the comprehensive audit of public projects.
    
7. To apply computer technology including utilization of computer audit technology.
    
8. To establish an intellectual base for financial control upon human resources that relies, mainly, on regular examination to staff efficiency and effectiveness performance in the government sector. There is also a need to examine motivation and performance factors, wages and salaries, productivity and individual welfare level. Accordingly, SAB shall be able to prepare reports related with returns of spent fund in the field of human resources.
    
9. To work out to find the proper accounting standards to perform the optional control.
    
10. To prepare a work guide for financial audit as a part of improving SAB staff skills. This guide should consider the latest standards, steps and procedures to be followed in compliance with issued laws, legislation, regulation and bylaws.
     
11. To support SAB prior audit through researches and analytical studies to confirm the effective use of public fund.
     
12. To show SAB audit positive aspects and focus on recommendations that may improve government financial systems administration. It is also important for developing SAB reports.

Group II : Policies Regarding Administration Development

According to the framework of strategy goal to create some essential changes in current SAB administration form to harmonize developed audit methodologies, and to identify problems and obstacles that may contradict the required administration development, we may reach the basic pivot to the group of policies regarding administration development that should be followed :

First : To reorganize SAB administration system in a way that participates to achieve SAB’s goals.

Second : To benefit from information systems and computer technology to establish financial and economical data base that may help to show a clear vision about the entities subject to SAB control. This technology may also help to create SAB human resources data base.

Third : To create some new financial, administrative and control systems that may support SAB independency to perform effective and efficient role.

Group III : Policies Regarding Human Recourses

Since the strategy aims to reach the highest performance of SAB human resources and to improve professional skills required for the effective audit activities, it is necessary to define the major pivots as follows:

First : To attract human resources capable to interact with developed audit methods and qualified to deal with its technology.

Second : To develop human resources of SAB to meet the needs of audit performance developments.

Third : To provide tangible and moral support to human resources to attract competent staff and maintain the current skilled staff.

SAB Achievements in the light of Strategy to Develop Control Method

Plan is considered the main basic stone to success, and the sound plan may participate at the effective and efficient achievement of goal. Since SAB performance is developed and audit activities increased, planning became of the main focus to achieve control missions and anticipation. The concepts are expressed in SAB strategy that identifies desired goals which SAB is functioning to achieve and show methods and means to realize them.

To follow up the achieved goals in the first half of the strategy policy, SAB evaluates and follows up the achievements as follows :

First : Infrastructure Achievements

The goal regarding essential changes to SAB infrastructure adopts some policies that match development required for audit methodology. The most important achievements in this regard are :

1. Reorganization of SAB administration system to link SAB organizational units with the major State sectors in a way that reflects the amounts allocated to each sector and the weight of audit should be given to each sector. SAB also prepared an organizational directory includes goals, missions and officials of each organizational unit.
    
2. Concentration on recruitment, qualifying the national manpower, and putting some selection standards within an effective salaries and wages cadre that maintains the qualified national staff and motivates specialists with highly technical skills to join SAB.
    
3. Putting some guides for rules, systems and procedures of personnel that can be a reference to SAB staff to avoid problems could be raised as a result of unclear policies or rules or misunderstanding them.
    
4. Putting an effective system to evaluate staff performance depends on the employee effort and participation to develop and create. Evaluation is also related with the employee seriousness and progress in training and adaptation.
    
5. Development of training programs to cover old and new staff according to training route required for each position to improve and qualify staff abilities and realize the desired development. A guide for policies, rules, regulations and procedures of training and development was also placed to determine the scientific and practical mechanism of training process along its stages, the steps to be followed in carrying out the annual training plan, and the required procedures at the end of the plan. A data base was prepared and included all training needs and ways to select efficient specialist trainers.
    
6. Development of information systems to support audit process, assistant activities and decision making process. The development is achieved through updating several systems, fostering SAB audit role in the field of information technology, and updating the quality and amount of this field training process.

Second : Audit Activity Achievements

SAB put several procedures to activate audit activities. Some of these procedures are enforced and some others are under study by the concerned authorities. The procedures that are under study are those related with SAB establishing law amendments and the way to remedy its weak aspects, support its independency, and to entitle SAB to practice new audit missions.

During the period we evaluate (1995-2000), and within SAB control activation, SAB succeeded to achieve the following :

1. Increase of SAB prior audit efficiency through the deep concept of study and analysis, preparation of some studies concerned with general phenomena discovered while auditing, preparation an integral auditor manual to those who work in prior audit, increase the efficiency of support provided by Technical Support Department to prior audit sector, developing work steps and procedures, creation of a mutual relation with post audit sector, developing SAB relation with the National Assembly, and achievement the assignments issued to SAB by the National Assembly.
    
2. Increase SAB post audit efficiency through the support to technical sectors by professionals, developing audit process practices, increase training efficiency during work through coordination with concerned departments, developing the audit reports structure that issued by SAB and related with law No. (30) for the year 1964, law No. (1) for the year 1993 and law No. (25) for the year 1996, in additional to reports related with assignments as the report presented by SAB regarding the State Financial Position and the other reports. SAB succeeded to add analytical dimensions to the reports contents as remarks, findings and issue of semi-annual audit reports to enable government entities to be aware with the remarks earlier and take the required action to avoid these remarks repetition. The reports also aim to activate the relations between SAB and the entities subject to its control, and also to develop SAB relation with the National Assembly and its Committees.
    
3. To adopt new audit practices by establishing performance audit unit and a selection of some efficient professionals, in additional to national staff, to be the base stone to start performance audit. The unit works through an integral manual to practice such kind of audit and within and integrated training plan to prepare the assigned auditors.

Performance audit methodology of this kind of audit began with concentration on the missions SAB should perform inside each entity depending on its weight. SAB audit is initiated by understanding the entity and the nature of its activities, how the entity sectors functioned and the current mandate systems. Being aware with these points qualifies SAB to concentrate on the significant aspects inside the entity. The audit can be achieved by classifying that audit into parts according to their importance and through consideration to the audit risks.

Some indicators are being followed when we establish the standards of importance and weight that require to inform the National Assembly and the auditee. These indicators include financial allocations and the spent amounts, the breach to the applied standards and the social, economical, organizational or environmental effects, in addition to the possible risk.
SAB credibility and outputs quality of performance audit depend on qualified and experienced technical staff that follows the developed audit concepts and committed by initiative principal and able to give a sound evaluation to all audit stages. The head of audit group is responsible for the activities of his assistants and should provide them by experience, opinion and advice, in addition to helping them to form the final decision.

SAB performance audit unit achieved several control missions. The performance audit unit succeeded to evaluate some service ministries activities.

4. SAB gave the required concern to the issues related with public funds and issued several audit reports included recommendations to support accountability and increase the efficiency of State financial management. SAB also concerned the financial breaches that represent a repeated phenomena in more than one entity and in different financial years. SAB, in this regard, performed analytical studies to these phenomena to reach their reasons and formed its opinion and reported both the legislative authority and the executive authority to take the required corrective action depending on SAB view.

Conclusion

As a preview, we find out that SAB adopted a strategy to develop audit method and to raise SAB efficiency. SAB strategy depends on a group of policies that work to activate audit activities, develop human resources and boost the current administrative systems efficiency.
Through a follow up to what SAB implemented, which we mentioned as achievements, we find out that there are some difficulties and obstacles appeared while implementing. The most apparent are :

1. The amendments proposed by SAB to the establishing law have not been ratified yet.
    
2. An increase in work amount and getting a lot of priorities as a result of more assignments to SAB.
    
3. The data bases and modern technology needed for the growing SAB activities either in the audit aspects or the assistant aspects are not available yet. This issue led to an incapability to reach the desired performance average, in spite the attention SAB pays to this matter as establishment of information technology department, support the department with human and financial resources and beginning to establish the information technology infrastructure.
    
4. Some external entities may affect SAB activities, and the rules and regulations of these entities may restrict SAB new concepts application. That leads to a slow down in the required development and change process.

In spite of the above mentioned, the development process is still going on, and SAB is doing its best to over come any kind of restricts to achieve its planned goals and develop its control method. SAB also expands its mission to include performance audit, in addition to carrying out some audit missions in environment field. SAB is working to finalize establishing rules and regulations of internal control to all sectors subject to SAB control. SAB follows all means to realize the strategic plan goals.

REFERENCES

• State of Kuwait constitution issued on November 11th, 1962.
   
• State Audit Bureau establishing law No. 30 for the year 1964 and its amendments.
   
• SAB control reformation strategy 1995-2005.
   
• SAB achievements and its trends in the light of control reformation strategy 2001.
   
• State Audit Bureau as a civilized figure of the state of Kuwait.
   
• SAB directory 2002.