Cover Story

International Journal of Government Auditing – October 2012

Background is map of the world with no markings.  The title superimposed on the background is 'Environmental Auditing in INTOSAI: 20 Years Later.' The title is to the right of a photo of Mihkel Oviir.
by Juan M. Portal, Auditor General of Mexico, and Chair, INTOSAI Working Group on Public Debt

The current state of affairs in the global economic and financial environment has fostered great interest in public debt matters among not only SAIs but also the international community as a whole.

Within this context, I believe that the efforts of INTOSAI’s Working Group on Public Debt (WGPD) can make an important global contribution to developing an adequate public debt policy. Such a policy will be a crucial element for nations as they seek to maintain long-term financial strategies and encourage development financing.

Recently, the WGPD has undertaken significant efforts toward this end. These include the presentation of its 2011–2016 strategic plan, the submission of an official public debt product to the XX INCOSAI, the launching of the process to revise current ISSAIs and INTOSAI GOVs related to public debt, and the WGPD’s annual meeting and its outcomes.

The WGPD’s 2011–2016 strategic plan includes its mission and vision statements and two strategic goals supporting them: (1) building capacity and enhancing SAI expertise and (2) strengthening the WGPD’s capabilities and measuring its impact. For each goal, the strategic plan includes a description of specific activities to be conducted over the next 5 years.

The SAI of Mexico prepared the exposure draft of an official WGPD product on debt indicators that was shared with the INTOSAI community. After valuable comments from several SAIs were received and addressed, the final version was presented in Johannesburg in the five INTOSAI official languages and was endorsed by the XX INCOSAI, thus becoming ISSAI 5411.

In 2011 the WGPD’s membership grew with the addition of the SAIs of Moldova and Indonesia. Its annual meeting took place in Vilnius, Lithuania, and registered a record attendance of delegations from 16 member countries. At this meeting, members were assigned the task of revising existing WGPD products to ensure that they are properly updated and valuable to the INTOSAI community.

To date, the WGPD is considering two possible themes to be addressed in official products for the XXI INCOSAI in 2013:

  • the impact of financial crises on public debt and INTOSAI initiatives, to be prepared by the SAI of the United States of America, and
  • the evaluation of information systems related to public debt management, to be developed by the SAI of Brazil.

The WGPD believes that the best way to address emerging situations, such as the global increase of public debt, is to take advantage of its members’ expertise and diverse perspectives to conduct professional and thorough investigations to develop guidelines, methodologies, and technical tools suggesting feasible actions for SAIs.

Through the efforts of both the WGPD, chaired by the SAI of Mexico, and the Task Force on the Global Financial Crisis, chaired by the SAI of the United States, INTOSAI has stressed the active role that SAIs should play in protecting the financial position of their governments. SAIs can help to ensure that there are appropriate and sound public debt practices and sufficient regulation for financial markets. Moreover, SAIs should encourage governments to place a greater emphasis on monitoring vulnerabilities and prioritizing risk management.

In recent years, the WGPD has issued official products that are now part of the ISSAIs and should be taken into account throughout the INTOSAI community when conducting public debt audits.

Paradoxically, most of these guidelines were published before the global financial crisis first appeared in the past decade. This leads to a natural question about the value and impact the WGPD’s products have had on the INTOSAI community.

Five different possibilities regarding the use of public debt ISSAIs in public audit could explain the lack of preventive measures by governments in response to the audit findings and recommendations issued by SAIs:

  1. The INTOSAI community may not be aware of the ISSAIs and products prepared by the WGPD.
  2. SAIs may be aware of the ISSAIs but their legal powers do not allow them to carry out public debt audits.
  3. SAIs may be entitled to conduct public debt audits, but they do not have the institutional capacity to fully perform their tasks.
  4. SAIs may be using public debt ISSAIs and submitting recommendations that warn about public debt management risks, but congresses or governments may have disregarded the SAIs’ findings.
  5. SAIs may have submitted to Parliament recommendations that have been properly considered and successfully implemented but have failed to share the positive impact of their work with the INTOSAI community.

Whatever the case, we must consider all these possibilities and determine the best way to address them. Some governments have relinquished or set aside their responsibilities for ensuring that terms of indebtedness do not exceed their capability for payment, that liabilities are correctly assessed, and that debt is generally sustainable. This has created a complex and delicate situation magnified by the interaction of different national economies due to the ongoing globalization process.

These situations and their possible future effects demand that SAIs improve the techniques and methodologies for auditing public debt management so that they can contribute to a timely and accurate assessment of national debt levels and thereby help ensure their sustainability. While the auditing process will not resolve the situation by itself, financial authorities can adopt more sound and sensible practices if they can count on a reliable analysis of public debt issues.

It is my conviction that actions to address public debt issues have been maintained at a steady pace, and the WGPD expects to continue to offer useful materials to the INTOSAI community to meet its needs in this area.