Highlights

International Journal of Government Auditing – July 2014


“Side by Side with People:” Korea’s Experience with Participatory Auditing

This article is adapted from presentation material written by Dr. Seongjun Kim, Director General of the Board of Audit and Inspection of Korea. This presentation was delivered via a video conference sponsored by the World Bank held on April 15, 2014. Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, and Sri Lanka participated.

The Board of Audit and Inspection of Korea (BAI) has established various types of cooperative relationships with citizens. The BAI, for instance, takes advice, tips on fraud or misuse of public funds, petitions, complaints, and audit requests from citizens. The BAI also publishes all of its reports on its website to facilitate public access to them. This paper introduces the Audit Request for Public Interests as the BAI’s institution for enhancing participatory auditing, and uses previous BAI experiences to address three key issues associated with SAI cooperation with citizens: values and benefits of participatory auditing, risks and control mechanisms, and lessons learned and challenges faced.

Introduction of Audit Request for Public Interests

The BAI introduced the Audit Request for Public Interests (ARPI) in 1996 pursuant to the BAI’s internal regulations, under which Civil Society Organizations (CSOs) whose membership exceeds 300, or, a group of 300 or more citizens, can request the BAI to conduct an audit on specific issues for the purposes of public interests.

The Anti-Corruption Act of 2002 laid down a legal foundation for another channel through which the citizens could request a BAI audit: the Citizen Audit Request (CAR).

ARPI is much broader than CAR in terms of eligibility of requesters, audit scope, and time limit for reporting an audit result. To avoid any confusion among the citizens, the BAI is currently working with the National Assembly and other related agencies to integrate these two channels into one.

Table:  Audit Request for Public Interests (ARPI) and Citizen Audit Request (CAR)

Values and benefits of participatory auditing

(1) Active citizen participation in auditing and enhanced participatory democracy

The graph below shows a rapidly increasing trend of audit requests 1996–2013:

Bar Chart:  Overview of Audit Request Reception (1996-2013)

Of those requesting audits, citizens are the most active requesters, accounting for 59.5 percent of total audit requests. However, among the four categories of requesters, citizen requests have the lowest acceptance rate, at 28 percent.

CSOs account for 32.3 percent of total audit requests, second to citizens. The acceptance rate for the CSO requests is 40 percent, at least twelve percentage points higher than that of citizens. CSOs play an important role in shepherding citizens and acting as government watchdogs.

Local councils, having less power and narrower mandates than the National Assembly, have often requested BAI audits to check and oversee the performance of the heads of local authorities.

(2) Meeting citizens’ needs and redressing their grievances

As shown in the following graph entitled "Audit requests by subject area," those areas to which citizens’ livelihoods are closely linked—permits and licensing, construction, transportation and environment—account for 43 percent of total audit requests, which confirms the belief that citizens’ priority areas are most commonly requested in participatory auditing. The participatory auditing process helps the BAI troubleshoot citizens’ complaints and grievances.

Pie Chart:  Audit requests by subject area (1996-2013). Pie-slice labels read clockwise:  Permit and licensing, 289 (18%); Construction, 283 (18%); Transportaiton and environmnet, 116 (7%); Budget wast, 217 (13%); Management, 53 (3%); Others, 653 (41%)

Cases of redressed citizen grievance

  • The Haman County authority approved a new housing construction project, which exceeded the capacity of the land’s surface area. Concerned that the condition of the residential environment would worsen, county residents requested the BAI to conduct an audit. As a result of the audit, the BAI determined that the county authorities who had granted permission for the project had violated regulations, and the BAI delivered disciplinary measures accordingly.
  • When telephone users realized that they had been subscribed to an expensive phone plan without their consent, they requested an audit of the telephone company. The BAI found that there were more than two million cases of the same unauthorized subscriptions, and that the supervisory body, the Korea Communications Commission (KCC), failed to take appropriate actions against theop telephone company’s illegal practices. The BAI warned KCC of its negligent supervision and the telephone company was fined. As a result of the audit, the requesters were fully refunded.

(3) Improvement of public sector administration

About 64 percent of participatory audit requests have resulted in material outcomes that justified the requests. This indicates that the participatory auditing system, built on citizens’ participation in the oversight function, contributes substantially to enhancing the transparency and the impartiality of public institutions. Because citizens have participated actively in auditing, government officers now recognize that there is a much higher chance of being inspected by the BAI if they have done anything wrong. The preventative effects of overseeing the public sector through the eyes of citizens may outweigh the related costs.

Cases of improving public sector administration

  • The Eumseong County authority decided to allow a debt guarantee to the developers of a large-scale industrial complex. Concerned that the County authority might become bankrupt if the developers defaulted, County residents requested that the BAI conduct an audit. The audit resulted in the BAI delivering disciplinary measures to the parties responsible for providing the debt guarantee.
  • A civic group requested an audit of Masan City Government for giving inappropriate benefits to the contractor of the city’s public water reclamation project. The BAI found that the city government excessively reimbursed the contractor and recommended that the city government seek compensation for the losses and discipline the responsible officials for their mismanagement.

Risks and control mechanisms

There are many well-known risks associated with the practices of participatory auditing. Can these risks can be controlled at a reasonable cost? Here is a look at two of the major risks.

(1) Distorted purpose of audit requests

Although participatory auditing is gaining momentum as more citizens express their interests in government affairs, some audit requests tilt toward pursuing citizens’ personal interests, which may distort the public interest purpose of participatory auditing.

In order to prevent and control audit requests that are more personal than public in nature, the BAI has established various control measures, such as:

  • strengthening qualifications of requesters
  • defining “public interests” in a rigorous manner
  • setting up an audit request review committee to screen the requests

To request an audit, citizens must have a group of more than 300 people. To verify that number, everyone signing a request letter is required to provide his or her identification information, such as an address, date of birth, or contact information. Also, the BAI has redefined the concept of public interest as the "welfare of the general public and the whole society, not confined to a certain group or person," because this is one of the key criteria for selection.

(2) Politically motivated audit requests

The local councils and the heads of local governments tend to use the audit requests to fulfill their own political goals or agendas. Auditing can be an efficient tool to attack or humiliate their political opponents. This can be seen from the fact that the audit requests made by local councils tend to increase in the year prior to local elections.

In order to keep political neutrality and to meet the needs of the local council, the heads of local government, and CSOs and citizens who have diverse political interests, the BAI may accept requests after a thorough, item-by-item review. The Audit Request Review Committee, chaired by an external expert, is the key mechanism for assuring requesters that the BAI’s decision to accept or not to accept an audit request is not politically biased.

Lessons learned and challenges faced

The experiences of the BAI show that the risks associated with participatory auditing are manageable at a reasonable cost. The BAI was able to seize substantial benefits from participatory auditing, but this does not necessarily imply that the BAI model works in every circumstance. Priorities in audit resource allocation, of course, may vary from one SAI to another due to their respective missions, audit strategies and approaches, and audit environments. Here are some lessons learned about what makes participatory auditing successful:

  • Sound legal frameworks should be in place to ensure continued operation, resource inflow, and greater citizen attention
  • Continuous attention and support from top management is necessary in order to keep the auditors motivated
  • Enhanced access to the redress system can encourage more active participation from citizens: methods of access include Internet-based fraud reporting systems, a toll-free fraud hotline system, and a civil petitions and complaints reception center
  • Potential risks associated with citizen participation should be proactively dealt with
  • Higher standards for auditor ethics requirements can help deflect requester attempts to audit for private interests rather than public interests
  • Keeping good cooperative relations with local authorities and other service delivery organizations through their internal audit units can help expedite the entire process
  • Well-staffed CSOs seeking public interests is a prerequisite to participatory auditing’s proper functioning

Despite several positive developments, the participatory auditing of the BAI is evolving and the BAI still needs to respond to the following challenges:

  • Promoting citizen participation in public auditing while effectively precluding any requester attempts to pursue personal interests
  • Integrating the legal basis for different types of participatory auditing initiatives
  • Measuring the values and benefits of participatory auditing in a reliable and rigorous way and promoting the values and benefits of participatory auditing

For more information about Korea's experience with participatory auditing, contact the BAI at koreasai@korea.kr or visit http://www.bai.go.kr.