Technical Articles

International Journal of Government Auditing – April 2010

Can Auditors Make a Difference in Accounting for and Auditing Disaster-related Aid?

The aid sector, which has multiple donors and recipients at both the national and international levels, is very complex. In a disaster situation, this complexity increases, as does the risk of unaccounted-for funds, waste, fraud, and corruption.

In the aftermath of the 2004 tsunami, INTOSAI set up a task force to establish an audit trail for tsunami-related aid. With $13 billion pledged and 56 countries and a multitude of aid organizations involved, this proved to be virtually impossible for the task force. The lack of a single information structure and a framework for efficient and effective audit (single audit) hampered accountability and transparency. There was no overall picture of the disaster relief actions or funding; in some cases, this may have led to inefficient or duplicative activities, and in others people in need may not have received aid.

In November 2007, INTOSAI decided to broaden the scope of the task force to disaster-related aid in general and transform it into a formal working group. Currently, the working group, which is chaired by the European Court of Auditors, consists of 17 supreme audit institutions (SAI) from countries prone to natural disaster as well as donor countries.

Because the working group cannot address all aspects of disaster-related aid, it has limited the scope of its work program to the two following areas:

  • Accountability Work Package: the development of guidance and good practices in accountability for stakeholders such as multilateral and nongovernmental aid organizations, governments, and private sector auditors.

  • Audit Work Package: the development of guidance and good audit practices for SAIs.

Accountability for Disaster-related Aid

Accountability for humanitarian aid is important for both donors and potential beneficiaries. The lack of accountability and transparency increases the risk that the aid will be mismanaged or distributed inefficiently—a risk for which, in the worst case scenario, the beneficiaries may pay the price with their lives.

For the accountability work package, the working group’s objective is to promote increased and improved accountability practices with the support of international standard-setting or coordinating bodies. To that end, the working group has developed the Integrated Financial Accountability Framework (IFAF), a model for a financial accountability information system. The theory underlying IFAF is that accountability will automatically increase if all the donors and the implementing organizations (which actually provide the aid to people in need) use its standard template to report their contributions, receipts, and activities in a summarized and transparent manner. Furthermore, use of the template will diminish administrative burdens.

Humanitarian aid operations typically involve different levels of actors, whereby intermediary bodies receive funds from donors and their own sources and can either implement operations themselves or work through other implementing agencies. At each level, financial and operational information needs to be provided to ensure transparency. The working group envisions that all major donors will report their contributions by recipient and that the recipients (which are the intermediaries or the implementing agencies) will report the corresponding amounts as their revenues. On the expenditure side, the implementing bodies will report on their expenditures publicly by activity. These reports would be verified only once and certified accordingly, following the single audit principle. Figure 1 illustrates how the working group envisions that the information on funds and activities would be reported.

Figure 1: Integrated Financial Accountability Framework: A Model for the Flow of Funds and Transparent Financial and Operational Reporting on Activities for Disaster-related Aid

Integrated Financial Accountability Framework: A Model for the Flow of Funds and Transparent Financial and Operational Reporting on Activities for Disaster-related Aid

Based on this model, the working group has developed templates for reporting. Intermediate bodies and implementing agencies are currently testing the templates based on this model through a certification procedure developed by the Humanitarian Accountability Partnership (HAP), an international self-regulatory body that promotes accountability within the humanitarian aid sector. HAP has developed a standard that integrates accountability principles, requirements, and benchmarks. This standard is linked to HAP’s certification scheme, which is open to nongovernmental organizations and United Nations (UN) agencies. The working group has a representative on HAP’s steering committee, which is revising the standard to ensure that it addresses sufficiently the financial component of accountability.

The working group is seeking comments on IFAF from major donors and other actors in humanitarian aid (such as the European Commission, the U.S. Agency for International Development, the UN Office for Coordination of Humanitarian Affairs, and Price Waterhouse Coopers). The European Commission’s reporting requirements are generally considered to be the most demanding, but the Commission has, to date, given positive preliminary remarks on IFAF.

The working group is also in touch with (1) the Good Humanitarian Donorship (GHD), a voluntary association of 36 donor countries committed to a set of standards for humanitarian aid, and (2) the Organisation for Economic Co-operation and Development (OECD) Development Assistance Committee (DAC) to promote commitment to implementing accountability standards related to harmonized reporting based on the working group’s templates.

Finally, the working group is in touch with the staff of the International Public Sector Accounting Standard (IPSAS) Cash Basis Review Task Force to review the IPSAS cash basis accounting standard and to make recommendations to enhance the standard’s accountability and transparency for financial reporting.

Audit of Disaster-related Aid

INTOSAI is the standard-setting body for SAIs. However, two tasks of the audit work package are related to internal audit in the UN and private sector audit. Therefore the working group is addressing other standard-setting bodies for these two tasks and is using its power of advocacy.

The Indonesian SAI, vice-chair of the working group, drafted a guidance document on preparing, implementing, and reporting on audits of disaster-related aid and disaster preparedness. Based on feedback received and the results of a survey of INTOSAI members, this guidance document is currently being revised and coordinated with an audit questionnaire on disaster-preparedness developed by the Turkish SAI. In addition, a first draft of a checklist on awareness of fraud and corruption during an audit of disaster-related aid has been prepared; it is based, in part, on the many good guidelines, reports, and checklists that already exist.

To promote practical application of the single audit principle, the working group is in touch with UN Representatives of Internal Audit Services (RIAS). At its annual meeting in September 2009, RIAS discussed single audit and its potential for establishing an assurance framework. Several RIAS participants have shown interest in the working group’s ideas and proposals on this topic.

Can We Make a Difference?

The working group is aware that time and effort will be required before accountability in this area improves and that SAIs and auditors in general have only limited influence. Nevertheless, auditors can make a difference in many different ways. They can

  • influence donors to improve the transparency and accountability of humanitarian operations,

  • provide tools that organizations implementing the aid need to produce cost-effective accountability reporting, and

  • promote single audit principles and guidelines so that all funders receive single assurance.

In addition, SAIs of donor countries can influence their governments to implement the accountability requirements of the European Consensus on Humanitarian Aid (a commitment to principles for humanitarian aid and a common framework for efficient and effective delivery of humanitarian aid agreed to by all European Union member states) and the accountability principles of the Good Humanitarian Donorship.

Obviously, while one working group cannot change the world within its lifetime, it can succeed in being a catalyst for future change. If it does so, our work will have been more than fruitful.

For additional information, see the Web site of the Working Group on Accountability for and Audit of Disaster-related Aid (