Highlights

International Journal of Government Auditing – October 2014


What is independence?

According to the Strategic Plan of EUROSAI for 2011-17, a highlighted objective is to take active steps to strengthen and support SAI independence. To enhance this objective, the French Court of Accounts and the State Audit Office of Hungary organized a Seminar on Independence of Supreme Audit Institutions held March 28, 2014 in Budapest. The author of this article was a presenter and facilitator at that seminar; this article reflects his views and opinions

Today, the main subject occupying the attention of Supreme Audit Institutions (SAIs) must be independence. The necessity of SAI independence is clearly stated in United Nations Resolution A/66/209: "the SAIs can accomplish their tasks objectively and effectively only if they are independent."

Why does an SAI need to be independent?

If our institutions are not truly independent, then they are not objective. Without objectivity, an SAI's recommendations are weakened and lack credibility.

The importance of how we define SAIs

The traditional definition of an SAI is based on three elements:

  1. There must be a law or other formal act that officially mandates the institution. (This is based on the first principle of ISSAI 10.)
  2. The institution must be "superior," exerting a kind of ultimate control. What does "superiority" mean? This is a political notion, since it is relative: An entity is considered "superior" in relation to something else being considered "inferior." This relational position is based on a value judgment, rendering this criterion ambiguous and fragile.
  3. The SAI must respect the eight principles from INTOSAI's ISSAI 10: The Mexico Declaration on SAI Independence, regarding status, resources, appointments, planning, access to information, communication of results, publication, and monitoring of recommendations.

Pillars of SAI Independence

Although the eight pillars of independence are essential, they must not be just pious hopes or simple formal texts. They must be rendered more tangible than mere ideals; they must be backed up by corresponding actions.

Status

From ISSAI 10: "The existence of an appropriate and effective constitutional/statutory/legal framework and the de facto application provisions of this framework"

It is better if status is reinforced by a constitution, a law, or a well-established tradition, but is even that enough? In the matter of status, the absence of any subordination of SAIs is crucial. The best system is one devoid of dependence, or one that is accountable to citizens. The subordination of the Public Accounts Committee is only acceptable if, as the British established a few centuries ago, its head is different from that of the parliamentary majority. Being subordinate to the head of state is only acceptable if the head of state has no power, i.e., is a representative or ceremonial head of state.

Resources

From ISSAI 10: "Financial and managerial/administrative autonomy and the availability of appropriate human, material and monetary resources"

What is real financial independence? For example, what resources are allocated, and according to which organization; what profiles are required for recruiting; and/or what level of equipment is provided? These resources should not be easily modifiable, and should be closely monitored.

Appointments

From ISSAI 10: "The independence of SAI heads and members of collegial institutions, including security of tenure and legal immunity in the normal discharge of their duties"

Who is appointed? The absence of any conflict of interest concerning appointments is paramount. For the majority of European SAIs, it is impossible to be appointed to responsible positions after having been a member of a government or of a political party. Where this is indeed possible, restrictive conditions are imposed, and/or a minimum period of time must be observed between positions.

Who appoints? The most ironclad system of appointment is that of a pluralist approach: recruitment, confirmation (by a parliament on a consensual basis), and appointment (by the head of state in cabinet session).

From a political point of view, appointment by simple majority in the parliament, which is the general rule in Europe, would seem to be less protective than would be an election by a qualified majority (for example, a two-thirds majority).

The length of office can be another sensitive point. If the term is too short, independence is fragile. If it is too long, then routine or collusion can take hold. And unless senior officers have the status of magistrates, their immunity must be guaranteed at the highest possible level in order to ensure objectivity.

Planning

From ISSAI 10: A sufficiently broad mandate and full discretion, in the discharge of SAI functions

What is the SAI's relationship with parliament: is it subordinate? How can the level of self-censorship exercised by the SAI be measured? Two points should be recognized. First, an SAI that is not able, beyond what the parliament and other stakeholders ask from it, to freely investigate—with sufficient scope—whatever issues it considers appropriate, cannot be considered independent.

Second, this ability to investigate must be subject to a guaranteed and verified consensual decision, whether taken individually or collectively. Neither the authoritarianism of an individual nor the collusion of a group can be accepted.

The organization of an SAI's internal structure is also important. Two mechanisms need to be checked: 1) the definition of consensual positions (even if the final decision rests with a single head) and 2) the type of work undertaken (financial audit, performance audit, routine audit, ability to hand down sanctions with or without judgments) must be guaranteed.

Access to information

From ISSAI 10: Unrestricted access to information

In many countries, numerous sectors are exempt from control by SAIs. People would say that this is not the case in Europe, but can we be sure? For example, do European SAIs have access to public accounts in a timely fashion?

Communicating results, publication of results, and monitoring of recommendations

From ISSAI 10: The rights and obligation to report on their work; the freedom to decide the content and timing of audit reports and to publish and disseminate them; the existence of effective follow-up mechanisms on SAI recommendations

These final three official characteristics of independence also need to be free of any influence. But why stop here? What about the freedom to hand out sanctions? If our recommendations have no real effect, what are they worth?

And finally, who audits the auditors? International resources such as the INTOSAI Development Initiative's "framework for performance measurement" are yet to be tested, and are based on a quantitative scoring mechanism. So should the SAIs open their doors to other inspectors? To private firms? To parliamentary committees? Will SAIs one day be required to certify their auditors in the use of ISSAI standards?

How we move forward

The first question might be obvious: is it feasible to create a summary of the best criteria, and arrive at the ideal SAI for the 21st century? Are we capable of establishing, for each criterion, the highest point of independence, in a rigorous and pluralist debate? This politico-judicial question is an important one to ask. But we cannot yet provide a definitive answer: INTOSAI envisions this examination as part of the agenda of the "Value and Benefits of SAIs" working group, which has begun discussion but is not yet fully developed.

The second question is slightly provocative: is it possible to know the reality of the status of our SAIs? Such an analysis needs to go to the heart of an institution's functioning to determine the real level of independence. Peer reviews can be a good start toward learning more; however, peer reviews are not audits, and their observations can be general when we require specific information. In the end, perhaps it is conceivable to establish a valuation system with, for example, triple As and triple Bs.

Finally, if there is a problem of dependence, what can be done? First, we can revise constitutions that define the status of an SAI. Second, the reform of SAI governance (work on standards and audit types, for example, and on human relations and the creation of performance indicators, on audit rules and ethics, and on quality) is our own responsibility, one that requires courage.

There are those who will say that this is a political question beyond our competence. To those people, we should ask just one question: is the public organization of society, over which we have the right of audit, not part of our responsibility?

One practical problem to consider is the risk of confusing roles. For example, certain politically influenced institutions give lessons to other SAIs, or SAIs handling internal controls advise others on methodology for external inspections.

Finally, leaving aside all other declarations—all reassuring and pro domo—one can understand why independence has to be won.

For additional information, contact the French Court of Accounts at courdescomptes@ccomptes.fr

To learn more about SAI independence: