1. Issues and Opportunities in Working with Supreme Audit Institutions (SAIs) Latin American and the Caribbean Region May 3, 2006

2. Regional Objectives  To enhance SAI independence, capacity and impact. Through:-  1) high level policy dialogue ;  2) innovative interactions;  3) financing to build capacity and;  4) leveraging the Bank’s portfolio.

3. Regional Context and Opportunities  Up to date analytical underpinnings of Country Economic and Sector Work.  Country Assistance Strategies in the last four years have increasingly contemplated interventions to modernize public sector institutions and strengthen governance.

4. Regional Context and Opportunities  Increases in Country Assistance through Budget Support.  Greater reliance on Client Country Systems.  Anti- Corruption Initiatives.  Strategic External Partnerships and Harmonization.

5. What do the diagnostic say?  In the last 4 years SAIs have done very well in improving their statutory position. Independence, audit scope and access has improved.  There has been some consistent efforts across the region to improve Human Resources, through recruitment, retention, qualification and training however results on the ground have been limited due to lack of budgetary resources.  The quality of Leadership, Strategy and Ownership of reforms is varied  The areas most in need of modernization continue to be in the areas of Governance, Audit methodology, External Relations and timeliness, monitoring and follow up of results.

6. Some examples of recent interventions  a) High level policy dialogue  Peru:- 2002/ 2003 strengthening of Congressional Oversight, Increased Independence of SAI.  Peru:-New Regulations Required to Implement and Support the National Control Law.  Haiti:-supporting the introduction of a new decree, facilitating the reorganization of the institution and implantation of capacity building activities.

7. Some examples of recent interventions  a) High level policy dialogue  Honduras:- New SAI created in 2002.Crafting and implementation of new organic law and regulations based on INTOSAI standards.  Poverty Reduction Support Credit supported execution of the first phase of the HR Strategy:- severance packages for unqualified staff, retooling of professional staff, establishment of vigilance committees.  Technical Assistance Loan is supporting the second phase of the HR strategy:- creation of a new University curriculum for public accounting. It is expected that not less than 70% of SAI staff be certified as public auditors in the next two years.

8. Some examples of recent interventions  b) Innovative interactions  Ecuador:- Memorandum of Understanding between National Audit Office of Ecuador and World Bank for contracting of private audit firms and for oversight of quality.

9. Some examples of recent interventions  c) Financing to build capacity  Trust Funds Institutional Development Grants Two (2) under implementation and One (1) satisfactorily completed.  Since 2001 we have been engaged with the Central American and Caribbean Organization of Supreme Fiscalization Entities (OCCEFS).

10. Some examples of recent interventions  c) Financing to build capacity  In Argentina, beginning in 2004, the Bank has partnered with the National Audit office, to implement a grant of US$ 600,000 for the training of professional accountants and the implementation of Computer Assisted Auditing techniques.

11. Some examples of recent interventions  d) Leveraging the Bank’s portfolio.  Investment Operations: In Brazil the Secretaria Federal de Controle handles 100% of the audits of bank- financed projects.  Borrower Country Systems and the Audit Arrangements in place including in Mexico, Brazil, Colombia, Peru.  Evolving practice has shown that for 2004, in LCR, 25% of project audits conducted were prepared by SAI. This percentage has progressively increased since then, but we are still below the Bank-wide average (45% in 2004).

12. Major Challenges and obstacles to further engagement  a) Low enforcement of auditor findings.  b) The lack of capacity to implement reform.  C)Limited financial and personnel management independence and insufficient resources for effective public external audit.

13. What we could do more of  a) Systematic support for human recourse development, by providing knowledge and learning opportunities, including peer learning.  b) Foster the creation of multi-year Peer Review Programs in conjunction with other development partners.  C)Mobilize grants to help SAIs beef up their non-staff resources, modernize their audit methodologies and improve their external relations and communication policies.