International Journal of Government Auditing – July 2013
editor's note: This article describes the formation of a proposed new task force on audits of public contracts that the Russian SAI is planning to establish. SAIs interested in knowing more about the task force and its work are invited to contact the Russian SAI at email@example.com.
As the volume of procurement spending by most governments across the world continues to increase, so too does the need for effective oversight by audit organizations. Although the systems that governments use to acquire goods and services vary considerably, they typically have several objectives in common, including accountability, efficiency, and transparency. The purpose of this article is to suggest that organizations that audit government contracts should work together to identify a set of common principles to guide such audits to help ensure that procurement contracting by governmental entities achieves desired outcomes as efficiently as possible.
When governmental procurement systems do not meet expectations, there are several unwelcome consequences. Most immediately, the goods and services needed by agencies or the citizens they serve are not delivered on time when procurement systems do not function as intended. Governments already struggling under budgetary pressures may face even greater challenges. Economic development can suffer. The implementation of international projects ranging from infrastructure to disaster relief can be put in jeopardy. Perhaps most importantly, public confidence in the ability of governments to function effectively declines.
For at least the last decade, issues associated with the improvement of national procurement systems have become important agenda items of such authoritative organizations as the United Nations (UN), the Organization for Economic Cooperation and Development (OECD), the World Bank, the World Trade Organization, the Organization for Security and Co-operation in Europe, and the International Chamber of Commerce. For example, Article 9 of the UN Convention against Corruption of 2003 obliges ratifying states to take “necessary measures to create appropriate procurement systems based on transparency, competition and objective criteria for decision-making.” Further, the official statement of the participants of the 2012 G20 Summit in Los Cabos sets forth independent assessment of national public procurement systems as one of its five requirements.
Such close attention to procurement issues by the international community is far from accidental. The volume of the public procurement market in the OECD member states amounts to 10 to 15 percent of gross domestic product (GDP), while in developing countries and countries with economies in transition it amounts to 25 to 30 percent of GDP.
But the importance of government procurement cannot be measured in numbers alone. The way a government conducts its procurement activities often reflects the social contract between the state and its citizens. Procurement systems are largely the creation of a political process that balances the sometimes competing demands of efficiency, fairness, competition, accountability, and other values. Each country strikes its own balance on these issues depending on individual needs, circumstances, and priorities. For example, some countries may place a premium on timely delivery of required goods and services, while others may be more focused on preventing corruption. In many countries, the procurement system is not just a means to acquire goods and services but also a mechanism to accomplish various policy objectives.
Not all of the problems cited above can be addressed, much less solved, by members of the audit community. But the community clearly has a role to play and the capacity and will to do so. In this regard, the strategic goal of SAIs is to assess the effectiveness of procurement to meet public needs. To date, many SAIs have accumulated significant experience in public sector contract auditing, which is summarized in relevant methodological materials. The Procurement Performance Model, one of the most important and useful documents, has been prepared and is regularly updated by the Working Group for Public Procurement of the Contact Committee of the SAIs of the European Union member states.
But more can and should be done. A set of principles is needed to guide the conduct of public procurement audits. Such a set of principles would reflect the underlying objectives shared by government procurement systems and provide a framework to enable the audit community to hold governments accountable for accomplishing those objectives. Given the magnitude of the public procurement market and the complexity of the issues in this highly sensitive area, it seems reasonable to engage INTOSAI members globally to develop coordinated approaches and principles for effective public contract audits.
This idea was expressed by the SAI of the Russian Federation and the U.S. Government Accountability Office at the 63rd Meeting of the INTOSAI Governing Board in Chengdu, China, in November 2012. It was supported by the chairman of the INTOSAI Governing Board, the Secretary General of INTOSAI, and the INTOSAI Knowledge Sharing Committee.
To implement this initiative, the Accounts Chamber of the Russian Federation is planning to establish a task force on audits of public contracts.
The task force would have the following objectives:
Task force activities and focus areas will need to have an appropriate degree of flexibility. They will need to address practical issues and needs of countries with mature public procurement systems and also enhance the role, and even establish benchmarks for, states where public procurement mechanisms are just emerging. SAIs would be able to apply the products developed by the task force along with their national standards and regulations.
For additional information, please contact the Russian SAI at firstname.lastname@example.org.