International Journal of Government Auditing – October 2005
EUROSAI Holds Sixth Triennial Congress in Germany
The Audit of Public Revenues by Supreme Audit Institutions (SAI) was the central theme at the sixth triennial congress of the European Organization of Supreme Audit Institutions (EUROSAI) held May 30–June 2, 2005, in Bonn, Germany. Dr. Dieter Engels, President of Germany’s Federal Court of Audit, and his staff welcomed 174 delegates from 44 countries. Observers from INTOSAI regional groups (AFROSAI, ARABOSAI, ASOSAI, and OLACEFS) also attended the conference, along with observers from several international organizations and this Journal.
The opening ceremony was held in the rotunda of the historic Steigenberger Grandhotel Petersberg, near Bonn. Dr. Sergey V. Stepashin, President of the Accounts Chamber of the Russian Federation and outgoing Chairman of EUROSAI, opened the congress with a warm welcome to the delegates. Dr. Stepashin noted that EUROSAI was celebrating its 15th anniversary and that in this short time period the organization has become an efficient vehicle for international cooperation and for strengthening institutions of independent financial control across Europe. He remarked that EUROSAI now includes 47 members, with the SAIs of the Republic of Macedonia and Kazakhstan joining since the last congress. He summarized 3 years of successful work by the EUROSAI working groups on environmental audit and information technology and by the EUROSAI Training Committee. He also highlighted EUROSAI’s cooperation with related organizations across the globe, such as joint conferences held with OLACEFS, and commented on fruitful cooperation between EUROSAI and INTOSAI.
Dr. Stepashin handed over the presidency of EUROSAI to Dr. Engels, who remarked that international cooperation was indispensable in an increasingly integrated Europe. He said that he welcomed the “promising and pleasant” challenge of presiding over EUROSAI. Dr. Engels introduced the technical themes and subthemes of the congress and thanked all the theme chairs who had worked so hard to prepare for the congress.
Dr. Engels’ remarks were followed by welcoming comments from Dr. Wolfgang Zeh, Director of the German Parliament, and several members of parliament: Mr. Karl Diller, State Secretary to the Federal Minister of Finance; Mr. Manfred Carstens, Chairman of the Budget Committee; and Mr. Gerhard Rubenkonig, Chairman of the Public Accounts Committee. Mr. Diller presented Dr. Engels with a EUROSAI Congress commemorative stamp.
Technical Theme Presentations
The central theme of the congress was the audit of public revenue. It was addressed in three subthemes: the significance of public revenues for public financial managers and for the legislature’s budgetary authority (rapporteur: Netherlands), the role of the SAI in the budgetary cycle (rapporteur: United Kingdom), and audit approaches and audit impact (rapporteur: Poland). The three rapporteurs drafted discussion papers on the subthemes, summarizing the findings and lessons learned by EUROSAI members. The following paragraphs summarize the major conclusions and recommendations made at the congress.
Subtheme I: The Significance of Public Revenues for Public Financial Managers and for the Legislature’s Budgetary Authority
EUROSAI delegates at the congress reiterated their commitment to the 1977 Lima Declaration, which calls for tax revenues to be audited as extensively as possible. The declaration, which is applicable to all public revenues, emphasizes conducting legality and regularity audits of the collection of public revenues, the importance of examining the efficiency of the system of revenue collection, the need to review the achievement of revenue targets, and the importance of proposing improvements to legislative bodies.
The delegates welcomed initiatives by EUROSAI members of European working groups to share with other SAIs their audit guidelines on specific types of public revenue. The delegates also acknowledged that taxes and social contributions are the most important categories of public revenue and that although the composition of public revenue is quite stable, collection processes are changing rapidly due to new legislation, reorganization of tax administrations, and increasing automation. Similarly, it was recommended that SAIs pay attention to the broader audit context, including the tax culture and public willingness to comply with tax requirements. SAIs need to develop a strategy for auditing public revenues, including a risk analysis of the tax environment in their countries (for example, the complexity of tax regulations and the extent of access to tax-related data). Overall, the congress advocated conducting a coordinated audit of tax subsidies that would be open to all EUROSAI members.
Subtheme 2: The Role of the SAI in the Budgetary Cycle
In subtheme 2, the delegates recognized that parliaments are increasingly interested in SAIs playing a larger role in the revenue budget process. SAIs are in an excellent position to do so because of their independent access to government revenue budget data. However, SAIs need to work out their strategy in this regard so that they are not drawn into doing too much revenue forecasting, thereby compromising their independence.
It was noted that SAIs’ involvement in reviewing budget preparation varies widely from country to country. In countries where the SAIs do not have an advisory role on revenue budgets, it was recommended that the SAIs try to have their mandates expanded. The delegates also emphasized the execution of tax legislation in revenue auditing. Some audits reveal that the practical impact of such legislation is not always in line with legislative objectives. In such cases, the shortcomings may result from problematic legislation—for example, excessively complex legislation that is difficult to implement. Delegates concluded that if the SAI’s mandate permits, the SAI should use these audit findings to advise legislators by pointing out these shortcomings and recommending legislative amendments.
Subtheme 3: Audit Approaches and Audit Impact
The delegates acknowledged that based on their respective mandates, SAIs use different methodological approaches to revenue audits. Regularity and compliance audits are valuable for identifying shortcomings in the revenue legislation, and performance audits are useful for encouraging the efficiency of revenue collection and monitoring the restructuring processes within tax authorities. Combining financial and performance audits may prove especially constructive.
It was recommended that SAIs adapt their audit work to the increasingly computerized environment. SAIs must be knowledgeable about the information technology (IT) systems used by the tax authorities they are auditing. Nationally, SAIs should attempt to coordinate with other public bodies responsible for auditing revenues. Furthermore, because national economies are becoming increasingly interdependent, SAIs may be more effective in doing their work if they cooperate with other SAIs; for example, international cooperation is particularly useful in the auditing of tax fraud.
After three excellent presentations on each of the subthemes, the congress agreed to several overall recommendations.
Representatives from the co-chairs (Spain and France) of the EUROSAI Training
Committee presented information on the committee’s activities over the past 3 years and summarized the training strategy. The congress resolved to accept the report, adopt the training strategy and operations plans for 2005-2008, renew and confirm the committee’s mandate, and ask the committee to implement the actions and report on them to the governing board.
Information Technology Working Group
Saskia Stuiveling of the Netherlands Court of Audit reported on the activities of the Information Technology Working Group, which comprises 29 member SAIs. The group completed its first work plan (for 2002-2005) with outputs in five areas: electronic records management, IT self-assessment, e-government, inventory IT training courses, and a Web site (www.eurosai-it.org). The working group’s 2005-2008 work plan was unanimously approved by the delegates.
Working Group on Environmental Auditing
Miroslaw Sekula, of Poland’s Supreme Chamber of Control, reported on the mission and activities of the Working Group on Environmental Auditing. The congress resolved to acknowledge the working group’s 2002-2005 activity report and to extend the group’s mandate for another 3-year period within its existing organizational framework.
Magnus Borge, Director General of the INTOSAI Development Initiative (IDI), reported on IDI-EUROSAI cooperation activities. He remarked on the success of IDI’s Long Term Training Program in the EUROSAI region. As a result of the program, EUROSAI has a pool of 67 training specialists that both the region and individuals SAIs can use to enhance training.
Faiza Kefi, head of the SAI of Tunisia, proposed that there be closer ties between EUROSAI and ARABOSAI. She suggested establishing a biennial meeting between the two groups and an exchange program for training.
The congress unanimously accepted the offer of Poland’s Supreme Chamber of Control to host the seventh EUROSAI congress in Krakow in 2007. The delegates enjoyed a video presentation on the beautiful city.
For additional information on the EUROSAI Congress, see the EUROSAI Web site
(www.eurosai.org), where the congress proceedings will be posted in late 2005.