Inside INTOSAI

International Journal of Government Auditing – April 2013

Capacity Building Committee Issues Guide to Strategic Considerations before ISSAI Implementation

Implementing the new ISSAIs is a major challenge facing the INTOSAI community. It will require careful consideration and planning and will affect the whole SAI community. To help SAIs address this challenge, the Capacity Building Committee (CBC), led by the Swedish National Audit Office (NAO), has issued the guide Implementing the International Standards for Supreme Audit Institutions (ISSAIs): Strategic Considerations.

In developing the guide, the Swedish NAO consulted widely, in particular with the Professional Standards Committee (as the INTOSAI standard-setting body) and the INTOSAI Development Initiative (IDI), which is providing training and support to INTOSAI regions on ISSAI implementation.

The guide is an important addition to the INTOSAI literature on the ISSAIs. It gives guidance on what to consider and how to establish priorities when making the strategic decision to implement the ISSAIs. The guide highlights areas such as the benefits of implementing the ISSAIs, change management considerations, different audit environments, and the use of resources. While the guide helps identify the steps to take before implementation, it cannot cover the unique circumstances of individual SAIs. Thus, each SAI will need to carry out an assessment based on its own mandate and jurisdiction.

At this stage, it is important for all SAIs to engage actively and openly in the implementation process so that challenges and experiences can be shared among members of the INTOSAI community. While using the same internationally applicable set of standards will take some effort and involve the whole INTOSAI community, the outcome will make it worthwhile in the long run.

The United Kingdom’s Department for International Development (DFID) has agreed to fund regional master classes to help INTOSAI members understand and implement this guide and other CBC guides. IDI is managing this funding on behalf of the CBC. All SAIs are encouraged to take advantage of these classes as they are rolled out across each region over the next few years. You can follow developments in your region on IDI’s website at http://www.idi.no/artikkel.aspx?MId1=110&AId=761.

All SAIs are also encouraged to read, download, and use the guide, which is available on the CBC website (http://cbc.courdescomptes.ma) under “Implementing ISSAIs.” For additional information contact the CBC at magnus.lindell@riksrevisionen.se.

Subcommittee on Peer Review

Evaluation of someone else´s work has been with us as long as humankind itself. While there may be multiple reasons, every evaluation has one principal goal: to assess performance to find shortcomings or gaps, to help to rectify them, and to avoid them in the future.

Open sources suggest that the first description of a professional peer review process is found in Ethics of the Physician, by Ishaq bin Ali al-Rahwi (AD 854–931). His work states that a visiting physician notes the patient's condition on every visit. Whether the patient was cured or died, the notes were examined by a local medical council composed of other physicians, who decided whether the treatment had met required standards of medical care.

In short, peer review is the evaluation of performance by other people in the same field in order to maintain or enhance the quality of work or performance in a given field. It is based on the concept that a diverse group of people will usually find more weaknesses and gaps in work or performance and will be able to make a more impartial evaluation than the person or group in question responsible for carrying out the work.

Given the importance of peer review, the Supreme Audit Office (SAO) of the Slovak Republic is proud to assume the chair of the Capacity Building Committee´s Subcommittee 3 (Promote best practices and quality assurance through voluntary peer reviews) subsequent to the decision taken at the INTOSAI Governing Board meeting held in China November 19–22, 2012, which approved the transition of the chair from the German SAI to the SAO. Given the results of the German SAI’s work, it is going to be a hard act to follow, but the SAO will to strive to continue its predecessor´s progress.

Since 1999, more than 50 peer review projects have been completed or are being worked on. The special issue of this Journal in October 2011 gave detailed inside information on this topic and included the following reflection by Ján Jasovský, the SAO President:

“A peer review enables you to answer the question: ‘Who audits the auditor?’ By voluntarily undertaking a peer review, you open your work to external assessment and audit based on internationally accepted auditing standards. This is of great importance at both the national and international levels. A peer review is very demanding, but its benefits and added value greatly exceed the demands. Recommendations confirm whether the institution’s management is headed in the right direction and advise management on ways to refine its methods to produce more effective work of even higher quality. Considering the unique position SAIs occupy in the public sector and the rapidly changing conditions and new challenges we face, a peer review is a worthwhile investment of time and resources for all participating SAIs.”

As a form of assessment, peer reviews may cover the audit work or organizational functions of an SAI in general or may be limited to only one activity. In regard to the audit area, peer reviews may be restricted to one type of audit—financial, compliance, or performance. In regard to organizational issues, peer reviews may be restricted to individual functions—for example, financial management, the strategic plan, internal control, information systems, or human resource management. It is also possible to combine individual review topics from both audit and organizational areas. When making recommendations, the reviewing SAI should pay due regard to the respective national context of the reviewed SAI. Any recommendations made need to be feasible and flexible. External independent review should show the state of implementation of international standards and overall correctness of internal procedures and provide recommendations for improvement.

Peer review may be carried out for many reasons. The most common is to receive quality assurance about the given SAI’s work. To date, the most frequent topics of peer review are (in random order)

  • audit approach,
  • SAI independence,
  • quality management,
  • organizational structure and culture,
  • financial and performance audit,
  • corporate, operational, and strategic planning,
  • audit methodology,
  • inputs and outputs,
  • audit work in general, and
  • public relations.

In 2010, the Peer Review Subcommittee prepared a Peer Review Guide and Checklist that were adopted as ISSAI 5600 at the XX INCOSAI in South Africa. ISSAI 5600’s aim is to

  • help SAIs to successfully complete all stages of the peer review process,
  • highlight the principles and differing options that present themselves when SAIs conduct a peer review,
  • present good practice examples (included from former SAI peer reviews), and
  • supplement the guide with a checklist that provides suggestions on the potential content and subject matter of peer reviews and may serve as guidance for the team of reviewers.

ISSAI 5600 is a living document that reflects the latest developments and progress in the field of peer review. It includes a feedback questionnaire that invites all INTOSAI members to share ideas and suggestions. The Peer Review Subcommittee will use the feedback to revise the guide and checklist. The first revision of ISSAI 5600 is being prepared and will be presented at the subcommittee’s first meeting under SAO chairmanship in June 2013 in Bratislava, Slovak Republic.

The Peer Review Subcommittee will continue to promote best practices and quality assurance through voluntary peer reviews by assessing and documenting existing peer review arrangements in the INTOSAI community, fostering an environment where SAIs are aware of the benefits arising from voluntary peer reviews, updating the peer review guide and checklist adopted in 2010 on the basis of lessons learned, supplementing both documents with further good practice examples where appropriate, and disseminating peer review results to a larger public as agreed by the SAIs involved.

For additional information, contact the SAO at info@nku.gov.sk.

Working Group on Environmental Auditing

Results of Seventh Survey Show Expansion of Environmental Auditing

The Secretariat of the Working Group on Environmental Auditing (WGEA) has issued a report on the results of the WGEA’s Seventh Survey on Environmental Auditing, which was conducted among INTOSAI members from February–May 2012. The WGEA Secretariat has been conducting surveys since 1993, and the most recent survey focused on the 2009–2011 period.

Some of the results reported for the WGEA survey (three bar charts and two pie charts).
Some of the results reported for the WGEA survey.

The report summarized contributions from 118 SAIs that either filled in the questionnaire or stated that they had not conducted or were not planning to undertake audits on environmental matters in the near future. The report identified many important trends that reflect general developments in the performance audit practices of SAIs around the world. The main observations in the survey report include the following:

  • The number of environmental audits SAIs conducted from 2009 to 2011 increased significantly over the previous period. About two-thirds of respondents indicated that their volume of environmental audits would increase in coming years. More SAIs have also used multilateral environmental agreements in their audits (e.g., as criteria).
  • Increased SAI activities in environmental auditing have likely resulted from SAIs becoming more aware of the ways in which their traditional mandate can be applied to examining environmental laws, programs, and policies, rather than as a result of updates to their legal mandates. Mandates had not been changed for 95 percent of respondents, and the mandate was less frequently regarded as a barrier to environmental auditing.
  • SAIs reported a remarkable increase in the impact of their environmental audits. Respondents regarded improvements in the functioning of government policies and programs as the area most improved as a result of their environmental audits. Communication of audit findings has been helpful in increasing the impact of audits for almost 80 percent of respondents.
  • The most frequent barriers to undertaking environmental audits reported were a shortage of environmental data; insufficient monitoring and reporting systems; and a lack of human resources, skills, and expertise. The survey also revealed a considerable gap between primary development needs (e.g., training in environmental issues and audit and development of environmental performance indicators) and the level of SAI activities to address those needs.
  • International cooperation in environmental auditing has intensified since 2009. The exchange of audit information and audits on multilateral environmental agreements have been the main areas of cooperation between SAIs.

The full report of the seventh WGEA survey, which includes results broken down by INTOSAI regions, is available at http://www.environmental-auditing.org/Home/WGEAPublications/Surveys/tabid/129/Default.aspx.

Upcoming Assembly Meeting of the INTOSAI Working Group on Environmental Auditing

The 15th meeting of the INTOSAI Working Group on Environmental Auditing (WGEA) will be held June 3–6, 2013, in Tallinn, Estonia. Assembly meetings have always been an excellent opportunity for participants to share experiences, learn from each other, and build a network of peers.

As the most recent WGEA survey indicates, environmental auditing is gaining ground in SAIs around the world. Hence, the meeting will focus on increasing the impact of environmental auditing and will also touch on sustainability issues facing the world today.

Several meeting sessions will be centered on the latest developments in public sector environmental auditing practice along with the challenges and success stories of SAIs that conduct environmental audits.

The WGEA’s work plans will also be discussed. The current work plan for 2011–2013 is coming to an end, and its products will include research papers, guidance materials, and other documents cooperatively compiled by more than 40 SAIs. Valuable knowledge gathered during these projects will be shared in tutorials and presentations.

The WGEA is also preparing for the next work period. At the upcoming assembly, all participating SAIs will be invited to sign up for projects in the draft work plan for 2014–2016, which will be presented for approval to the assembly.

All relevant material— e.g., the draft agenda, call for papers, hotel booking form, information on administrative matters, and the registration form—can be found on the WGEA website (http://www.environmental-auditing.org). For further information please contact the Secretariat at info@wgea.org.

Working Group on Accountability for and Audit of Disaster-related Aid

In January 2013 the Professional Standards Committee published for review and comment INTOSAI GOV 9250, Integrated Financial Accountability Framework (IFAF): Improving information on financial flows of humanitarian aid. It is available online at http://www.issai.org/composite-194.htm, and the review period ends on April 14, 2013.

The Working Group on Accountability for and Audit of Disaster-related Aid developed the IFAF after observing that transfers of humanitarian aid from donors to recipients were not simple, transparent, or easy to trace.

IFAF helps to clarify and simplify the flow of aid from donors to recipients. Each stakeholder in humanitarian aid provides a simple and transparent table showing where the funds it deals with come from and to whom (or on what) they are paid out. These IFAF tables are drawn up on a cash basis using the same data that is used to meet other reporting requirements. The tables are then verified by external auditors and made available to all stakeholders by publishing them on the Internet.

SAIs are asked to give assurance that humanitarian aid arrives at the intended destination. To do so, they need information on the aid that has been provided and how it has been spent. SAIs can use the financial data in the IFAF tables to construct an audit trail and cross-check data for the entity they are auditing to verified data available on the Internet and, where appropriate, to follow up on discrepancies. Data in the IFAF tables can also be used to identify which auditors have audited the same or similar aid flows with a view to coordinating, or collaborating on, audit work.

While SAIs can recommend the use of IFAF tables to stakeholders in humanitarian aid, IFAF implementation can only be carried out with full donor support. The working group has discussed the IFAF with a wide range of stakeholder organisations and tested the preparation of IFAF tables with donors and recipient entities. It is currently examining the inclusion of IFAF requirements into open data initiatives and humanitarian aid data repositories.

The endorsement version of INTOSAI GOV 9250 will be presented to the seventh meeting of the working group in Chile in May 2013 and then to INCOSAI in China in October 2013.

For additional information, contact the working group at http://eca.europa.eu/portal/ page/portal/intosai-aada/home.

Finance and Administration Committee Meeting

On October 16, 2012, the National Audit Office of the United Kingdom hosted the eighth INTOSAI Finance and Administration Committee (FAC) meeting in London. At the meeting, committee chair Osama Faquih summarized FAC accomplishments, drawing particular attention to the work associated with monitoring the implementation of the strategic plan, progress with the INTOSAI-Donor Cooperation, an evaluation of INTOSAI finances, and the Task Force on Financial Foresight. Representatives from the INTOSAI General Secretariat, Norway, Mexico, South Africa, China, Ecuador, Saudi Arabia, and the United States attended.

Photo: Participants in the eighth INTOSAI FAC meeting in London in October 2012.
Participants in the eighth INTOSAI FAC meeting in London in October 2012.

Dr. Josef Moser, INTOSAI general secretary, provided a number of administrative updates since the 62nd Governing Board meeting. These included the following:

  • The INTOSAI Financial Rules were changed to allow member SAIs to choose the most economical and efficient form to pay their INTOSAI dues. The change also clarified when SAIs and INTOSAI would pay related banking charges.
  • Regarding current assessment contributions, as of the end of August 2012, INTOSAI had received some 95 percent of the budgeted amount for annual contributions.
  • A transfer of 15,000 euros from financial year 2011 to 2012 enabled the General Secretariat to continue translating the executive summaries of the ISSAIs into all the official working languages of INTOSAI.
  • INTOSAI revenue for the first 8 months of 2012 (as of August 22, 2012) amounted to 265,549.67 euros, compared to a total budgeted amount for 2012 of 290,000.00 euros. Total expenses for the same period amounted to 130,067.59 euros compared to budgeted expenses of 231,800.00 euros.

The newly formed Task Force on Financial Foresight (TFFF), chaired by Norway, reported the results of its work to date. This task force was established to examine strengthening of the financial situation of INTOSAI, strategic planning, and emerging issues. The task force reported that about 71 percent of the cost of running INTOSAI comes from in-kind contributions from member SAIs, about 28 percent from the international donor community, and about 1 percent from membership fees. The task force also reported that some of the biggest funding gaps for INTOSAI lie in ISSAI development and maintenance, hosting of INTOSAI events by poorer or smaller countries, budgets for representatives from poorer or smaller countries to participate in INTOSAI, and support to chairs of INTOSAI bodies.

On strategic planning, the task force recommended, and the FAC agreed to, the establishment of a task force under the FAC to develop the next strategic plan. This task force will be led by the SAI of the United States. In addition, the task force recommended the establishment of a high level Standing Supervisory Committee on Emerging Issues. This entity will provide more structured environmental scanning, analysis of the results of this scanning, and development of a response to emerging issues. It will be chaired by the Governing Board chair and will report directly to the INTOSAI Governing Board. FAC members agreed to recommend this standing committee to the Governing Board.

An update on donor cooperation was also addressed at the FAC meeting. For additional information on this initiative, see the “INTOSAI-Donor Cooperation Update” section in this issue of the Journal.

For additional information on the FAC meeting, contact the chair at gab@gab.gov.sa.

Task Force on Financial Foresight

The Finance and Administration Committee (FAC) of INTOSAI created the Task Force on Financial Foresight to analyze INTOSAI's funding, strategic planning, and mechanisms for dealing with emerging issues. The task force completed its work in three meetings between January 2012 and January 2013.

Financial Issues

The task force presented the FAC a series of options for consideration to address financial issues identified in the course of the task force’s work. The options included the following:

  • Designing a financing plan linked to the next strategic plan.
  • Establishing a fund or separate budget line for voluntary contributions or external financing.
  • Allowing for future real increases in membership fees to go to areas other than the ones currently specified in the financial rules.
  • Examining whether INTOSAI could become a certification body for public sector audit.

Another part of the task force's mandate was to examine whether INTOSAI had any funding gaps. The task force surveyed the committee and working group chairs, heads of task forces, the INTOSAI Development Initiative, and this Journal. The task force presented some options for addressing funding gaps that survey respondents reported:

  • FAC cooperation with the Professional Standards Committee to find a more sustainable financing model for the ISSAI framework.
  • Guidance for what is expected from a meeting host (to reduce costs of hosting meetings).
  • Guidance for transition planning for committee chairs.
  • Strategic Planning

    Following the task force's reporting, the FAC decided to reestablish the Task Force on Strategic Planning, to be headed by the U.S. Government Accountability Office. The Task Force on Financial Foresight also identified some strategic issues facing INTOSAI. These include strengthening INTOSAI's outreach role, ensuring that sufficient effort and expertise are put into developing and maintaining the ISSAIs, supporting member SAIs that are attempting to become more independent in line with United Nations Resolution A 66/209, and addressing potential threats to SAIs' relevance that result from the global financial crisis.

    Emerging Issues

    The task force identified the structures INTOSAI has in place for dealing with emerging issues and suggested routines for using those structures. The INTOSAI Governing Board adopted the mechanism and decided at its meeting in November 2012, to establish a supervisory committee on emerging issues to be responsible for some of the routines the task force suggested.

    For additional information, contact the task force at ola.hoem@riksrevisjonen.no.

    EUROSAI

    10th Annual Meeting of EUROSAI Working Group on Environmental Auditing

    The Audit Office of the Republic of Cyprus hosted the 10th annual meeting of the EUROSAI Working Group on Environmental Auditing (WGEA) October 23-25, 2012. More than 70 participants from 30 supreme audit institutions and four other organizations participated in the meeting, which dealt with sustainable development and data in environmental auditing. A training seminar on auditing of forests was held on the day before the annual meeting.

    Photo: Participants in the EUROSAI WGEA meeting in Cyprus in October 2012.
    Participants in the EUROSAI WGEA meeting in Cyprus in October 2012.

    The session on sustainable development introduced SAIs to the subject and its status in Europe. It also provided an overview of government responsibility for sustainable development and how auditors can approach this area. To illustrate the latter, SAI presenters addressed different approaches to auditing sustainable development and integrating sustainable development perspectives in audits. The keynote speakers of the session presented (1) the role of the European Union as a driving force for sustainable development, (2) the status, national challenges, and role of sustainable development strategies as a management instrument, and (3) ways to measure the cost of unsustainable development, illustrated through case studies.

    The session on data in environmental auditing discussed information about data centers, identified trends, and shared experiences from environmental audits. Speakers presented common ways in which auditors collect and interpret such data and the options and challenges they face in their work. They also shared individual SAI experiences related to potential limitations and challenges when collecting and analyzing environmental data. They discussed the development of, trends in, and availability of environmental data in Europe and presented the results of the INTOSAI WGEA research project on environmental data for auditors.

    The 1-day seminar on auditing of forests introduced the 2010 INTOSAI WGEA guide Auditing Forests: Guidance for Supreme Audit Institutions and focused on sustainable forest management in the European region. The seminar emphasized the concept of auditing forests, climate change issues related to forestry, and audit methodology, as well as cases and specific audit issues relevant for Europe.

    For additional information, contact the EUROSAI WGEA at http://www.eurosai.org.

    New Audit Tool for IT Auditors

    The Control Space for e-Government Audit Project is designed to facilitate audits of e-government. Several SAIs from the EUROSAI IT Working Group are developing an “intelligent” Internet database of e-government audit reports from various SAIs that will provide easy access to information on other SAI reports on e-government audits as well as related articles, presentations, methodologies, databases, and other materials. The idea is to gather interesting information resources and provide them along with basic analysis. For the time being, the information is classified by topics, management functions, risk cases, and project goals.

    This database of documents is designed mainly for public auditors working in the e-government area but is available to anyone interested in modern auditing. The tool is available in its early development stage at http://egov.nik.gov.pl, and it is hoped that the tool will mature quickly with input from other SAIs.

    To read more about the project, please see the website of the SAI of Poland (http://www.nik.gov.pl/en). If your SAI has produced an audit report in the area of e-government, please send it to the SAI of Poland (wsm@nik.gov.pl) to be included in the database.

    For additional information, contact: pawel.banas@nik.gov.pl or gabriela.beszlej@nik.gov.pl.

    New Chair and General Secretariat of OLACEFS

    At the XXII Annual Meeting of OLACEFS, held in Gramado, Brazil, in November 2012, a new Chair and General Secretariat for the organization were appointed for the period beginning on January 1, 2013.

    The Tribunal de Contas da União do Brasil (Federal Court of Auditors of Brazil) will serve as Chair of OLACEFS until 2015. The General Secretariat will be held by the Contraloría General de la República of Chile (Comptroller General’s Office of the Republic of Chile) until 2018.

    For additional information, contact OLACEFS at relacionesinternacionales@contraloria.cl.

    PASAI: Management Workshop on ISSAI Implementation

    An INTOSAI Development Initiative (IDI)–PASAI Management Workshop was held December 3–5, 2012, in Nadi, Fiji, as part of IDI’s on-going ISSAI Implementation Initiative (3i Program). The 27 participants included 15 heads of SAIs from 16 SAIs in the PASAI region. PASAI is one of the five English-speaking INTOSAI regions in which this global project is being implemented. The workshop was geared for PASAI SAI heads and focused on creating awareness of the ISSAIs and implementing them at the SAI level. In November 2012, similar workshops were held for the CAROSAI and AFROSAI-E regions.

    Presentations from each participating SAI provided an understanding and awareness of the diverse issues that SAIs need to address in order to implement ISSAIs successfully. SAIs in the Pacific operate under three different models—the judicial model, the legislative-parliamentary model, and the legislative-congressional model. Because of the different models, crucial issues need to be considered and addressed before some SAIs can implement the ISSAIs. The presentations also focused on the SAIs’ understanding of the ISSAIs at levels 2 and 4 of the framework. The following issues were identified as crucial to successfully implementing the ISSAIs in the region:

    • how to promote ISSAI implementation in U.S.-affiliated and territorial offices,
    • the need for more awareness-raising on the ISSAIs,
    • major human resource concerns,
    • the need for SAIs to do detailed mapping using the ISSAI Compliance Assessment Tools (iCATs),
    • securing stakeholder buy-in for ISSAI implementation, and
    • how resistance to change affects the staff of the SAI and its stakeholders.

    Strategic considerations for implementing ISSAIs were discussed. The important role of SAI leadership was emphasized, in particular the importance of leading and managing change as a result of implementing the ISSAIs. Heads of SAIs signed an agreement of commitment with IDI and PASAI that will require the SAIs to conduct the iCATs. The SAI heads were asked to use the iCATs to map existing audit practices within their respective SAIs against ISSAI requirements and identify gaps. The SAIs will then formulate an ISSAI implementation strategy based on the results of the iCATs mapping.

    The workshop was very valuable and constructive as it provided SAI heads in the Pacific with more information and better understanding of the ISSAIs as well as the global 3i Program. Through discussion and the exchange of views and experiences, the participants became more aware of the numerous and diverse issues to consider when implementing ISSAIs.

    For additional information, please contact PASAI (enquiry@pasai.org).