Inside INTOSAI

INTOSAI Auditing Standards Committee –July 2007

Delegates from European and Latin American SAIs Meet in Lisbon, Portugal, to Discuss Fiscal Sustainability

On May 9 through 12, 2007, representatives of SAIs from 52 countries gathered in Lisbon, Portugal, for the fifth EUROSAI/OLACEFS Conference. The theme for the conference, hosted by the Tribunal de Contas of Portugal, was fiscal sustainability, presentation of accounts, and accountability. Guilherme d’Oliveira Martins, President of the Tribunal de Contas, opened the conference, noting that his country is “at the center of dialogue between Europe and Latin America” and that this conference was “an important opportunity to share different points of view” about the chosen theme.

Delegates to the EUROSAI/OLACEFS

Delegates to the EUROSAI/OLACEFS conference gathered in front of the meeting place, the former Session Hall of the Tribunal de Contas, an 18th century building in the heart of Lisbon.

The first working session—the presentation of accounts and accountability in the context of fiscal sustainability—featured four speakers who focused on reforms within their SAIs. Tullio Lazzaro, President of the SAI of Italy, said that the Corte dei Conti has become increasingly involved in the budget cycle and now advises Parliament on issues such as the feasibility of budget and public finance objectives and compliance with European Union fiscal sustainability indicators. Noemí Rojas Llanos, Deputy Comptroller General of Chile, noted the importance of transparency in communicating audit findings to the public and discussed her organization’s new use of electronic government mechanisms. Kurt Grüter, President of the SAI of Switzerland, discussed his country’s shift to an accrual budgeting system. Finally, Andrés Terrero, President
of the SAI of the Dominican Republic, delivered a presentation about the evolution of
his organization as it has become increasingly independent from the country’s executive
branch.

Picture of Conference delegates during one of the working sessions.

Picture of Conference delegates during one of the working sessions.

During the second working session, conference participants focused on the SAIs’ contribution to the fiscal sustainability of social sectors. Both Tuomas Pöysti, Auditor General of Finland, and Alexander Semikolennykh, Vice Chairman of the SAI of the Russian Federation, discussed how their organizations have addressed fiscal sustainability concerns when auditing their national health care programs.

Vítor Constâncio, Governor of the Bank of Portugal, delivered an informative lecture on how to define and assess fiscal sustainability. His lecture was followed by a presentation by Sir John Bourn, Comptroller and Auditor General of the United Kingdom (UK), who discussed new initiatives that his organization has undertaken to address fiscal sustainability. For example, the UK National Audit Office has been asked to review the budget assumptions used in formulating the country’s budget and to determine when the economic cycle begins and ends.

At the close of the conference, the participating SAIs agreed that they have a natural role to play in working towards fiscal sustainability. Methods for addressing this issue include disclosing the actual size of public debt; assessing the economic situation of the state; and monitoring the economy, efficiency, and effectiveness of public management. The conference resulted in several recommendations, including that SAIs closely monitor the development of budget, management, accounting, and social reforms in their countries and inform the public of the results of their assessments.

For more information and to obtain copies of the papers, visit the conference Web site:
www.tcontas.pt/eurosai/eurosaiolacefs/index.htm.

Professional Standards Committee

The INTOSAI Professional Standards Committee (PSC) Steering Committee met in Manama, Bahrain, April 23–24, 2007. The main purpose of the meeting was to discuss the results of the PSC survey, described in detail elsewhere in this issue,1 and the PSC’s mandate for 2007–2010.

Before the meeting, the draft framework for INTOSAI standards and guidelines was forwarded to all INTOSAI members for comment. At the meeting, the steering committee members discussed the final version that is to be presented at the INTOSAI congress in Mexico. They unanimously agreed to ask the congress to approve (1) the framework; (2) a new name for INTOSAI standards and guidelines—International Standards for Supreme Audit Institutions (ISSAI)—and (3) a new name for INTOSAI guidance related to administrative authorities, Guidance on Good Governance.

The PSC’s mandate is to develop a comprehensive set of standards and guidelines ready for presentation at the 2010 INTOSAI congress. Based on the survey results and already planned activities, the PSC proposes to undertake the following in 2007–2010:

  • Work to harmonize public sector audit internationally by recognizing, using, and building on standards issued by other standard-setting bodies and developing supplementary guidance in areas where SAIs have special needs.
  • Ensure that clear and user-friendly guidance on the special role of SAIs and specific features of public sector auditing is prepared in accordance with the following principle: Where the tasks are the same, the standards should be the same, and where the tasks differ, the standards should differ.
  • Prepare a decision on permanent maintenance of the set of ISSAIs, recognizing that individual SAIs decide on implementing the ISSAIs, the INTOSAI Communication Policy addresses communication issues, and the INTOSAI Capacity Building Committee addresses capacity building.

The PSC’s accomplishments and proposed mandate for 2007-2010, along with its strategic alignment plan, will be reported to the 2007 INTOSAI congress in Mexico City.

The PSC meeting was generously hosted by the SAI of Bahrain and led by Mr. Hassan Khalifa Al Jalahma, President of the National Audit Court. The PSC’s next meeting will take place on November 4, 2007, in Mexico City.

For further information, please contact the PSC:

Fax: ++45 33 14 38 28
E-mail: yvan.pedersen@rigsrevisionen.dk
Web site: http://psc.rigsrevisionen.dk


1 See “Developing International Standards and Guidelines for SAIs,” p. 12.

Subcommittee on Accounting and Reporting

The Professional Standards Committee’s Subcommittee on Accounting and Reporting observes and participates in the meetings of the International Public Sector Accounting Standards Board (IPSASB)— formerly the Public Sector Committee—an International Federation of Accountants (IFAC) board that issues international accounting standards for public sector entities. As part of the subcommittee’s activities, it will provide periodic updates of IPSASB activities to INTOSAI members through articles posted to this Journal’s Web site (www.intosaijournal.org) and updates in this section of the Journal.

A summary of the March 2007 IPSASB meeting is available on the IFAC Web site at www.ifac.org (click on the following links: IFAC Boards and Committees/International Public Sector Accounting Standards Board/IPSASB meetings). Participants discussed the following topics at the meeting and agreed on the following actions:

  • IPSASB’s strategic plan for 2007–2009: A strategy, operational plan, and work plan will be developed based on a detailed planning session at the meeting.
  • Social Benefits: Plans to develop an exposure draft dealing only with disclosure were reaffirmed.
  • Improvements Project: A project proposal was approved to realign selected International Public Sector Accounting Standards (IPSAS) with equivalent International Accounting Standards (IAS)/International Financial Reporting Standards (IFRS) that have been revised since those IPSAS were issued.
  • Heritage Assets: Some issues will be analyzed further to help decide on next steps.
  • Financial Instruments: A project proposal was approved to amend IPSAS 15, Financial Instruments: Disclosure and Presentation, in accordance with IAS 32, Financial Instruments: Presentation.
  • Entity Combinations: An issues paper will be developed addressing public sector issues related to entity combinations.

The next meeting of the IPSASB is July 3–6, 2007, in Montreal, Canada. The draft meeting agenda includes projects related to the strategic plan conceptual framework, social benefits, impairment of cash-generating assets (discuss comments on the exposure draft (ED)), employee benefits (discuss comments on the ED), financial instruments, service concessions, and external assistance (discuss comments on the ED).

For additional information, please contact the subcommittee chair at the U.S. Government
Accountability Office:
Fax: ++1 (202) 512-4021
E-mail: daceyr@gao.gov

16th Meeting of the INTOSAI Standing Committee on IT Audit

The 16th meeting of the INTOSAI Standing Committee on IT Audit (ISCITA) was hosted by the State Audit Institution of Oman in Muscat, March 5–7, 2007. At the meeting, 51 delegates from 20 countries discussed present and future committee projects.

The SAI of India presented the final product on e-governance along with the updated courseware on IT audit. IDI made a presentation on the alpha version of the e-course on auditing IT controls and informed the committee that User-IDs would be used in the final version to track participants’ progress. IDI thanked the SAIs of the United States and India for their contributions to the development of the courseware.

Future ISCITA projects include IT governance, e-governance risk, SAP applications in public administration, and auditing application/software development.

Delegates to the 16th meeting of the INTOSAI Standing Committee on IT Audit.

Delegates to the 16th meeting of the INTOSAI Standing Committee on IT Audit.

The meeting was preceded by the 5th Seminar on Performance Audit on IT Governance, March 3-4, 2007. The seminar was coordinated by the SAI of the United States along with the SAIs of Brazil, Canada, the Netherlands, and India.

The seminar was attended by 75 delegates from 28 countries. The key issues discussed were the causes of failure of IT projects, the use of external consultants, and the lack of IT security that leads to the loss of citizens’ personal and financial data.

For additional information, contact ISCITA:

Fax: ++91 (11) 2323 - 5446
E-mail: pdir@cag.gov.in
Web site: www.intosaiitaudit.org

ASOSAI Seminar on Managing Audit Results

On February 12-15, 2007, 24 participants from ASOSAI member countries and senior executives from the U.S. Government Accountability Office and the Office of the Comptroller and Auditor General of India attended a seminar focused on managing audit results. The seminar, held at the International Training Center of the SAI of India in New Delhi, was the first ASOSAI event targeted to middle-and senior-level SAI managers. The seminar’s purpose was to provide SAI staff with a forum to exchange audit management practices that could both improve the efficiency of the audit process and enhance accountability in the public sector.

During the seminar, participants identified three main challenges facing their SAIs and reached consensus on strategies that could be used to address these challenges. First, participants noted the difficulties in ensuring the quality of the audit plan, process, and results. In response, they agreed that it was important to establish annual and strategic plans, improve existing audit processes to comply with international and INTOSAI standards, provide continuous training for staff, conduct peer reviews, establish quality assurance units to review internal audit processes, and exchange information with other SAIs. Second, the participants highlighted the challenges in ensuring that audit results are effectively communicated to stakeholders. As a result, they recommended establishing protocols with audited entities to ensure their cooperation in implementing audit recommendations, preparing user-friendly summaries of audit reports, and developing a communications strategy for sharing audit results with intended audiences, including political stakeholders and the media. Third, participants identified approaches for following up on SAI findings, including establishing a database to facilitate audit recommendation follow-up, creating a unit dedicated to tracking and documenting recommendation
follow-up, and developing measures to track audit effectiveness in monetary terms.

For additional information, contact the ASOSAI General Secretariat:

Fax: ++91 (11) 2323 - 5446
E-mail: cag@cag.gov.in, pdir@cag.gov.in
Website: www.asosai.org

ASOSAI Financial Audit and Fraud Awareness Workshop

The ASOSAI Training Administrator chose the National Audit Department of Malaysia (NAD) to host the Financial Audit and Fraud Awareness Workshop. This was a cooperative program of ASOSAI, the INTOSAI Development Initiative (IDI), and the Asian Development Bank (ABD). The workshop was held May 3–24, 2007, at the Legend Hotel, Kuala Lumpur; 28 participants attended from the SAIs of Afghanistan, Cambodia, Laos, Maldives, Myanmar, and Vietnam. Six instructors from Indonesia, Nepal, Pakistan, the Philippines, and Malaysia conducted the workshop.

The Auditor General of Malaysia, Tan Sri Dato’ Setia Ambrin bin Buang, officiated at the opening ceremony; ambassadors/high commissioners from the respective countries and senior officers from the NAD of Malaysia also attended.

For additional information, contact the NAD:

Fax: ++60 (3) 88 88 97 01
E-mail: jbaudit@audit.gov.my
Web site: www.audit.gov.my

Meeting of OLACEFS International Liaisons

Twenty international liaison specialists from OLACEFS SAIs met in Bogota, Colombia, March 21-23, 2007. The SAIs represented were Bolivia, Brazil, Chile, Colombia, Costa Rica, Cuba, Dominican Republic, El Salvador, Guatemala, Honduras, Nicaragua, Panama, Paraguay, Peru, Puerto Rico, Uruguay, and Venezuela. This second meeting of international liaisons was a joint effort of the SAI of Colombia, the President of OLACEFS, and the OLACEFS Executive Secretariat. Experienced specialists within the group of liaisons made invaluable contributions to the discussion, which focused on the roles and competencies of the liaisons and the relationship between OLACEFS and their SAIs. Participants also discussed obstacles they face in carrying out their jobs and presented concrete proposals for overcoming these difficulties.

At the request of the OLACEFS Steering Committee, the delegates drafted terms of reference for the group, which were submitted to the Steering Committee at the end of March 2007.

OLACEFS international liaisons at their meeting in Bogota

OLACEFS international liaisons at their meeting in Bogota.

For additional information, contact OLACEFS:

General Secretariat
Office of the Comptroller General of Panama:
Fax: ++507 263-9322
E-mail: omarl@contraloria.gob.pa
Web site: www.olacefs.org.pa

President
Court of Accounts, El Salvador
Fax: ++503 2281-2563
E-mail: presidencia@olacefs.gob.sv

Meeting of Finance and Administration Committee

Picture of the fourth meeting of the INTOSAI Finance and Administration Committee

The fourth meeting of the INTOSAI Finance and Administration Committee was held in Oslo, Norway, on March 26 and 27, 2007. The principals (left to right, front row: Jørgen Kosmo, Norway; Osama Jafar Faquih, Saudi Arabia, Chairman; David M. Walker, United States; second row: Josef Moser, Austria (second from left); Clodosbaldo Russián Uzcátegui, Venezuela, Vice-chair; and Vijayendra Nath Kaul, India) discussed a number of issues, including updating the INTOSAI strategic plan, INTOSAI’s financial condition and legal status, and associate membership in INTOSAI.

SAIs of Baltic Countries Discuss Best Practices in Relations with Parliamentary Audit Committees and Ministries of Finance

The SAIs in the Baltic countries (Estonia, Latvia, and Lithuania) have seen great progress and change in recent years. Auditors from all three countries’ SAIs have developed key relationships with colleagues at their respective Ministries of Finance and more recently have undertaken initiatives to strengthen their relationships with Parliamentary Audit Committees (PAC).

In October 2006, the Lithuanian National Audit Office, together with SIGMA,2 organized a regional meeting for the SAIs of the three Baltic countries, senior experts from other the SAIs of other European Union (EU) Member States, and representatives of Ministries of Finance and Parliaments, the European Parliament, and the European Court of Auditors.

Participants in the regional best practices meeting in Lithuania

Participants in the regional best practices meeting in Lithuania.

The meeting’s specific purpose was to share experiences and best practices to make the relationships and functions of the PACs, Ministries of Finance, and SAIs better, stronger and more effective. The discussions focused on improving national accountability


2 SIGMA, a joint initiative of the European Union and the Organisation for Economic Cooperation and Development, provides support to partner countries in their efforts to modernize public governance systems.

processes and systems by comparing and understanding what is already working well in the Baltic region and learning from the experiences of other selected EU Member States and from the EU as a whole.

The meeting was organized under four discussion areas. The following sections highlight the main conclusions and best practices that emerged from each of the four areas discussed at the meeting.

The Effective Functioning of Parliamentary Audit Committees

To carry out effective and useful work, PACs need quality, fact-based, fair, and informative reports from fully functional and operationally independent SAIs. SAIs, in turn, need to provide practical support to PACs (and their chairmen) in their work. In the Baltic region, the degree of this support varies by country.

Witnesses who attend PAC meetings need to be sufficiently senior staff who are directly responsible for the audit topic under consideration and well prepared. PACs need to produce their own reports with clear conclusions and recommendations, and there needs to be effective follow-up of the implementation of audit and PAC recommendations.

The process needs to be unbiased and nonpolitical and focused on policy implementation. Key indicators of success are the authority and influence of the actors in the process and the benefits derived from implementing the recommendations.

Participants identified the following best practices:

  • The PAC should determine its own agenda for considering audit reports and should work with the SAI to ensure sufficient audit work has been done to meet its needs.
  • The SAI can support the PAC with prior briefings, suggested lines of questioning, and drafting PAC reports.
  • The chair of the PAC should be selected from the opposition, and the committee should operate and report in an unbiased and professional manner.

Relations between Baltic SAIs and Parliamentary Audit Committees

The PACs in the three Baltic countries are relatively new but are already functioning well. Relationships between SAIs and PACs are businesslike and professional, and many reports are considered.

The Lithuanian PAC has the power to direct the government to take actions arising from its consideration of audit reports. The chairman of the Estonian PAC often meets with the prime minister to discuss audit findings. Latvia has good processes for briefing the PAC and helping to draft its reports.

Participants identified the following best practices for relationships between SAIs and
PACs:

  • Given their mutual independence and different functions in the accountability process, the business and professional relationship between the SAI and PAC should be as close as possible.
  • The relationship between the auditor general and the PAC chairman is crucial to the success of the process and obtaining synergy.

Developing the Role of the Ministry of Finance in the Accountability Process

In all three Baltic countries, the Ministry of Finance’s role in the accountability process is relatively underdeveloped but should evolve through practice rather than by regulation.

The Ministry of Finance role can be one of leadership, coordination, and direct participation in the process.

Ministries of Finance should oversee follow-up of the implementation of audit and PAC recommendations in ministries and agencies. They can benefit from taking a more active role and being better informed of business in the accountability process.

Participants identified the following best practices for the Ministry of Finance role:

Ministries of Finance should

  • receive, analyze, and act on all audit reports;
  • provide guidance on corrective actions needed for systemic control failures and instances of poor value for money identified by the PAC and SAI;
  • actively participate in PAC meetings by standing alongside direct auditees; and
  • work with the PACs, SAIs, and spending ministries to efficiently implement recommendations.

The EU Accountability Process

Since 80 percent of EU funds are spent in member states, the accountability process for EU funds has a strong national dimension that may have been neglected up to the present. The same accountability process can be developed and strengthened at the EU level by involving the European Parliament Budget Control Committee (EPBCC), the European Court of Auditors (ECA), the Council, and the European Commission (EC).

Many of the best practices identified at the national level can also be applied at the European level.

Participants identified the following best practices for the EU accountability process:

Accountability for EU Funds:

  • Relevant audit reports from the ECA should be discussed at national PAC meetings. SAIs should report on EU trends and performance audits.
  • There is scope for further interaction between national parliaments and the European Parliament in the sound management of EU resources area.

Accountability at the EU level:

  • The technical standards underpinning the EU budget implementation should be more harmonized, and the exchange of best practices should be improved.
  • Functional relationships between the ECA, EPBCC, Council, and the EC should be strengthened.

For additional information, contact the Lithuanian SAI:

Fax: ++370 (5) 266 67 61
E-mail: nao@vkontrole.lt
Web site: www.vkontrole.lt