1. THE EVOLVING ROLE OF SUPREME AUDIT INSTITUTIONS Presentation to 22 nd International Conference on New Developments in Government Financial Management May 19-23 – Miami, Florida - USA

2. PRESENTATION POINTS Introduction Introduction The traditional role of the SAI The traditional role of the SAI Performance or value-for-money audits Performance or value-for-money audits Auditing of other state agencies Auditing of other state agencies Independence of the SAI Independence of the SAI SAI’s role in fighting corruption SAI’s role in fighting corruption Relations with the media Relations with the media SAI’s own accountability SAI’s own accountability Conclusion Conclusion Any questions? Any questions?

3. INTRODUCTION Michel (1991) on the basic elements of public accountability: Every act or action is done openly according to law and prudent judgment; Every act or action is done openly according to law and prudent judgment; Every actor is responsible for his or her action; Every actor is responsible for his or her action; Every act is documented and reported publicly; Every act is documented and reported publicly; Every act or action is subject to independent, professional, non-partisan audit review and public report of results; and Every act or action is subject to independent, professional, non-partisan audit review and public report of results; and Where the review shows that purposeful error has been made prompt corrective action, including punishment where appropriate, is taken. Where the review shows that purposeful error has been made prompt corrective action, including punishment where appropriate, is taken.

4. INTRODUCTION cont’d SAI helps legislators to monitor and control public expenditure. SAI helps legislators to monitor and control public expenditure. SAI carries out ex post evaluations against established norms, highlights deficiencies and make recommendations for improvement. SAI carries out ex post evaluations against established norms, highlights deficiencies and make recommendations for improvement. Geist (1981): Effective state administration depends on rigorous public accountability that state audit assures. Geist (1981): Effective state administration depends on rigorous public accountability that state audit assures.

5. THE SAI’S TRADITIONAL ROLE Review of government activities for regularity and compliance Review of government activities for regularity and compliance Certification audit includes regularity and compliance as well as fair presentation of financial statements. Certification audit includes regularity and compliance as well as fair presentation of financial statements. Inadequate to assure public accountability Inadequate to assure public accountability Transactions need to be examined against stated objectives, …and evaluation of outputs, outcomes and impacts. Transactions need to be examined against stated objectives, …and evaluation of outputs, outcomes and impacts.

6. PERFORMANCE/VFM AUDITING Auditing for performance not a new concept Auditing for performance not a new concept Previously undertaken under the guise of “avoidance of waste and extravagance” Previously undertaken under the guise of “avoidance of waste and extravagance” Involves evaluating extent to which resources are used in an economic, efficient and effective manner i.e. 3 Es Involves evaluating extent to which resources are used in an economic, efficient and effective manner i.e. 3 Es Considers objectives, outputs, outcomes and impacts Considers objectives, outputs, outcomes and impacts 3 other Es – equity, ethics and environment 3 other Es – equity, ethics and environment

7. PERFORMANCE/VFM AUDITING cont’d Not a usurpation of management role to secure good value for money Not a usurpation of management role to secure good value for money Effectiveness audit requires measuring performance and assessing matters of policy and politics. Effectiveness audit requires measuring performance and assessing matters of policy and politics. Policy objectives sometimes unclear, ambiguous or non- measurable Policy objectives sometimes unclear, ambiguous or non- measurable Performance audit more complex, time-consuming, and requires multidisciplinary approach and high skill and judgment Performance audit more complex, time-consuming, and requires multidisciplinary approach and high skill and judgment

8. AUDITING OTHER STATE AGENCIES SAI’s mandate should include the entire public sector and not just central government activities. SAI’s mandate should include the entire public sector and not just central government activities. Normanton: Many big fish, heavily nourished from taxation, swim through unscathed, and their transactions are not systematically studied, except by auditors with no constitutional reporting role. Normanton: Many big fish, heavily nourished from taxation, swim through unscathed, and their transactions are not systematically studied, except by auditors with no constitutional reporting role. Auditing of government’s privatisation programme essential part of the SAI’s work to provide independent assurance of transparency and good value Auditing of government’s privatisation programme essential part of the SAI’s work to provide independent assurance of transparency and good value

9. INDEPENDENCE OF THE SAI Foundation pillar of its work Foundation pillar of its work Emile Woolf: Concept of an audit and concept of independence twin sides of the same coil. A dependent auditor has lost his/her raison d’être and is a contradiction in terms Emile Woolf: Concept of an audit and concept of independence twin sides of the same coil. A dependent auditor has lost his/her raison d’être and is a contradiction in terms Important safeguards include constitutional/legislative mandate, unrestricted access, independent funding, flexibility to hire and remunerate staff. Important safeguards include constitutional/legislative mandate, unrestricted access, independent funding, flexibility to hire and remunerate staff. Minimum requirement: independence from the Executive Minimum requirement: independence from the Executive Emerging trend: corporate structure with legislative oversight Emerging trend: corporate structure with legislative oversight

10. SAI’S ROLE IN FIGHTING CORRUPTION Corruption is misuse of public power for private gain. Public interest sacrificed for private interest. Corruption is misuse of public power for private gain. Public interest sacrificed for private interest. Lambsdorff: Corrupt behavour is accompanied by blunt neglect of expectations and interest of the public. Lambsdorff: Corrupt behavour is accompanied by blunt neglect of expectations and interest of the public. Evidence suggests a link to poverty. Evidence suggests a link to poverty. Peter Eigen: The two scourges feed on each other, locking populations in cycle of misery. Peter Eigen: The two scourges feed on each other, locking populations in cycle of misery. SAI uniquely placed to fight corruption, should play a more direct role, and should be provided with resources to do so SAI uniquely placed to fight corruption, should play a more direct role, and should be provided with resources to do so

11. RELATIONS WITH THE MEDIA Several SAIs publish findings subject to appropriate safeguards concerning national security, foreign policy, commercial secrecy and personal privacy. Several SAIs publish findings subject to appropriate safeguards concerning national security, foreign policy, commercial secrecy and personal privacy. Geist & Mizrahi view this as a right and duty. Any lesser arrangement is less than ideal accountability. Geist & Mizrahi view this as a right and duty. Any lesser arrangement is less than ideal accountability. Normanton: Those who restrict the flow of information about public bodies are following an authoritarian line. Publication and open discussion help towards that elusive blessing, good government, and a token of at least one higher civilisation Normanton: Those who restrict the flow of information about public bodies are following an authoritarian line. Publication and open discussion help towards that elusive blessing, good government, and a token of at least one higher civilisation Friedberg laments the ‘annual roar’. Sees media as brokers between the SAI and the wider public. Friedberg laments the ‘annual roar’. Sees media as brokers between the SAI and the wider public.

12. SAI’S OWN ACCOUNTABILITY Who audits the auditor? Who audits the auditor? SAI cannot claim immunity by virtue of its independence. SAI cannot claim immunity by virtue of its independence. SAI should subject itself to external review and evaluation of its operations and results reported to the Legislature. SAI should subject itself to external review and evaluation of its operations and results reported to the Legislature. Such review enhances transparency, credibility and respect Such review enhances transparency, credibility and respect In final analysis, public are the final arbiters of the SAI’s accountability In final analysis, public are the final arbiters of the SAI’s accountability

13. CONCLUSION All SAIs should: Be provided with mandate to undertake performance or VFM audits Be provided with mandate to undertake performance or VFM audits Play a more direct role in fighting corruption Play a more direct role in fighting corruption Strive for greater independence from the Executive Strive for greater independence from the Executive Ensure that adequate resources are made available to discharge mandate. Ensure that adequate resources are made available to discharge mandate. Ensure that mandate includes all activities of the State Ensure that mandate includes all activities of the State Cultivate good relations with the media Cultivate good relations with the media Ensure that adequate mechanisms in place for their own accountability Ensure that adequate mechanisms in place for their own accountability

14. END OF PRESENTATION Thank you. Any questions or comments?