The chief aim of the Lima Declaration (1977) is to promote independent government auditing. As the declaration stipulates, an SAI that cannot meet this demand does not come up to standard. SAI independence must be anchored in legislation, but this requires that institutions of legal security function effectively. As the issue of SAI independence continues to be discussed throughout the INTOSAI community, the Israeli SAI—the Office of the State Comptroller—provides a case study in independent state auditing.
The Mexico Declaration on SAI Independence (2007) recognizes eight core principles—based on the Lima Declaration and decisions reached at the XVII INCOSAI held in Seoul, Korea, in 2001—as essential requirements of proper public sector auditing. This article outlines how these principles are exemplified in the legal framework and properties of the State Comptroller of Israel.
The first principle requires the existence of an appropriate and effective constitutional, statutory, or legal framework and of de facto provisions implementing this framework.
In Israel, two laws govern the operations of state audit:
The second principle calls for the independence of the head of the SAI, including security of tenure and legal immunity in the normal discharge of his or her duties. The applicable legislation must specify the conditions for the appointment, removal, and retirement of the SAI head by a process that ensures his or her independence from the executive. Moreover, to enable the head to perform his or her duties without fear of retaliation, the appointment must be for a sufficiently long and fixed term.
According to the Basic Law, the Knesset elects the state comptroller by secret ballot; the comptroller’s term of office is 7 years, and he or she may serve only one term. The Basic Law (complemented by the procedures determined by the State Comptroller Law) adds that the state comptroller cannot be removed from office unless he or she
It is worth noting that none of the comptrollers elected to date by the Knesset has had prior political affiliation. The State Comptroller Law prohibits political activity by the comptroller during his or her term of office. In addition, publications made by or on behalf of the state comptroller in the execution of his or her duties are immune from all libel prosecutions.
The third principle calls for a sufficiently broad mandate and full discretion in the discharge of the SAI’s functions. An SAI must be empowered to audit the use of public monies, resources, or assets by a recipient or beneficiary, regardless of its legal nature; the collection of revenues owed to the government or public entities; the legality and regularity of government or public entity accounts; the quality of financial management and reporting; and the economy, efficiency, and effectiveness of government or public entity operations. This principle also stresses the SAI’s freedom from legislative or executive interference in selecting audit issues; planning, programming, conducting, reporting, and following up on audits; and organizing and managing the SAI’s office.
The Israeli SAI meets all these requirements in both the functions and scope of state audit. The state comptroller audits the economy, property, finances, obligations, and administration of the state; government offices; all enterprises, institutions, and corporations of the state; and local authorities and numerous other bodies or institutions subject to state audit by law. The state comptroller also examines the legality, moral integrity, orderly management, efficiency, and effectiveness of the audited bodies and any other matter that he or she deems necessary. Accordingly, even the most clandestine defense establishment entities and the most sensitive aspects of their activities are subject to audit. The far reaching policy changes adopted by the current state comptroller, Judge (Ret.) Micha Lindenstrauss, provide a good example of the comptroller’s fully independent discretion. These changes include a marked expansion of real-time audit, the publication of officials’ names in audit reports, and the investigation of prominent public figures, including the prime minister, for acts of corruption. Judge (Ret.) Lindenstrauss also established a special anti-corruption task force. The state comptroller is thus free to select audit issues and make autonomous decisions concerning the planning, programming, conduct, reporting, and follow-up of audits. The organization and management of the state comptroller’s office, including staff conduct and dismissal, are also under the comptroller’s exclusive authority.
The fourth principle requires unrestricted access to information.
The Basic Law itself—which, as emphasized above, is constitutional in nature—stipulates that a body subject to audit by the state comptroller shall provide without delay information, documents, explanations, or any other material that the comptroller deems necessary for the purposes of audit. This obligation is not supported by any sanction, and audited bodies do occasionally fail to cooperate. However, subject to the approval of the State Audit Affairs Committee of the Knesset, the comptroller and any person appointed by him or her shall have the powers of an enquiry commission, which may subpoena witnesses. A witness appearing before the state comptroller within this framework is subject to the restrictions and sanctions prescribed by criminal law. Auditors in the Israeli SAI have also recently gained direct online access to the computers of certain high-ranking officials, including government ministers.
The fifth principle establishes the prerogative and obligation to report on the SAI’s work; namely, the SAI should not be prevented from reporting the results of its audit work and should be required by law to make such reports at least once a year.
The Basic Law states that the state comptroller shall submit to the Knesset reports and opinions within the scope of his or her functions and shall publish them in the manner and subject to the restrictions prescribed by the State Comptroller Law. This law stipulates that no later than February 15th each year, the comptroller shall submit a report to the prime minister and the chairman of the State Audit Affairs Committee on the results of the audits of government offices and state institutions 1 carried out during the previous financial year. Within 10 weeks of receiving the report, the prime minister shall present the comptroller with his or her observations concerning each defect and violation detailed in the report and the responses of the audited bodies to the report. Thereafter, the report is tabled in the Knesset.
The sixth principle calls for freedom to decide the content and timing of audit reports and to publish and distribute them. The SAI should be free to decide the content of its audit reports and include observations and recommendations. It should also be at liberty to decide on the timing of its audit reports, except where specific requirements are prescribed by law, and to publish and distribute its reports once they have been formally submitted to the appropriate authority.
The State Comptroller Law provides that in the audit report, the comptroller shall summarize his or her activities in the field of audit and specify any violation of moral integrity and any defect or infringement of law or the principles of economy and efficiency as, in his or her opinion, deserve to be included in the report; make recommendations to rectify and prevent the defects; and specify any improvement or outstanding actions that he or she deems worthy of inclusion. Apart from the annual report discussed above, the state comptroller may carry out audits and publish reports on any body or matter within the scope of his or her authority, as he or she deems necessary, and freely decide on the timing of such reports. All the comptroller’s reports are publicized; however, a report or parts thereof may not be submitted to the Knesset and may not be publicized where necessary to safeguard state security or avoid impairing foreign or international trade relations.
The seventh principle deals with the existence of effective follow-up mechanisms on the SAI’s recommendations. The SAI should submit its reports to the legislature or one of its commissions for review and follow-up on specific recommendations for corrective action and should also operate its own internal follow-up system.
In Israel, once the audit report has been tabled in the Knesset as detailed above, the State Audit Affairs Committee of the Knesset studies it and submits its conclusions and proposals, including follow-up measures, for the Knesset’s approval. The State Comptroller Law also stipulates that the head of every audited body must appoint a team to rectify the defects disclosed in the audit report. The team is required to discuss ways to rectify the defects, make decisions regarding their rectification, and report to the head of the audited body on its discussions and decisions. The head of the audited body must report the decisions to the comptroller, detailing the method and time frame for rectifying the defects. The comptroller may at any time demand reports in addition to those enumerated above and may also set out a framework for reporting the rectification of defects, specifying the details to be included.
The eighth principle provides that the SAI should enjoy financial and managerial or administrative autonomy and the availability of appropriate human, material, and monetary resources. Accordingly, the executive should have no control over the access to these resources.
The Basic Law states that the budget of the State Comptroller’s Office shall be determined by the Finance Committee of the Knesset, upon the proposal of the state comptroller, and shall be published together with the state budget. It should be noted that to date the Office of the State Comptroller has enjoyed the full understanding and cooperation of the Knesset regarding its financial needs. The state comptroller manages his or her office’s budget and allocates it as he or she deems appropriate.
In conclusion, the State Comptroller’s Office has almost fully implemented the Lima Declaration principles, as outlined in the Mexico Declaration on SAI Independence. We hope that our experience helps other SAIs facing challenges in strengthening their independence.
For additional information, contact the Office of the State Comptroller at firstname.lastname@example.org.
1.The comptroller’s reports on other audited bodies are subject to a separate procedure, which also complies with the fifth principle.