Guarantee for Financial Sustainability and Good Governance The STrengThening of exTernal Public...

The STrengThening of exTernal Public conTrol:Guarantee for Financial Sustainability and Good Governance

euroPean organiSaTion of SuPreMe auDiT inSTiTuTionS

STRATEGIC PLAN2011-2017

MAGAZINE No. 18 - 2012

ISSN: 1027-8982

ISBN: 84-922117-6-8

Depósito Legal: M.23.968-1997

EUROSAI magazine is published annually on behalf of EUROSAI (European Organisation of Supreme Audit Institutions) by the EUROSAI Secretariat.

The magazine is dedicated to the advancement of public auditing procedures and techniques as well as to providing information on EUROSAI activities.

The editors invite submissions of articles, reports and news items which should be sent to the editorial offices at TRIBUNAL DE CUENTAS, EUROSAI Secretariat, Fuencarral 81, 28004-Madrid, SPAIN.

Tel.: +34 91 446 04 66 - Fax: +34 91 593 38 94 E-mail: [email protected] - tribunalcta@tcu. eswww: http://www.eurosai.org

The aforementioned address should also be used for any other correspondence related to the magazine.

The magazine is distributed to the Heads of all the Supreme Audit Institutions throughout Europe who participate in the work of EUROSAI.

EUROSAI magazine is edited and supervised by Ramón Álvarez de Miranda, EUROSAI Secretary General; and Karen Ortiz Finnemore, Director of the EUROSAI Secretariat; Pilar García Rodríguez, Fernando Rodríguez del Portillo, Jerónimo Hernández, and Teresa García García. Designed, produced and printed by Cromotex, S.L. EUROSAI magazine is printed on environmentally-friendly, chlorine-free (EFC) 115 gsm coated art paper (Satimatt Club) which is bio-degradable and can be recycled.

Printed in Spain.

The articles and contributions of this Magazine are under the exclusive responsibility of their authors. The opinions and beliefs are those of the contributors and do not necessarily reflect the views or policies of the Organization.

mailto:[email protected]

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EUROPEAN ORGANISATION OF SUPREME AUDIT INSTITUTIONS

www.eurosai.org No. 18 - 2012

AFrosAI AfricanOrganisationofSupremeAuditInstitutions ArAbosAI ArabOrganisationofSupremeAuditInstitutions AsosAI AsianOrganisationofSupremeAuditInstitutions cArosAI CaribbeanOrganisationofSupremeAuditInstitutions cbc INTOSAICapacityBuildingCommittee cIs CommonwealthofIndependentStates EsP EUROSAIStrategicPlan EU EuropeanUnion EUrosAI EuropeanOrganisationofSupremeAuditInstitutions GT GoalTeam IDI INTOSAIDevelopmentIniciative IEA InternationalEnergyAgency IncosAI CongressofINTOSAIInTosAIGov INTOSAIGuidanceforGoodGovernance InTosAI InternationalOrganisationofSupremeAuditInstitutions IssAIs InternationalStandardsofSupremeAuditInstitutions ITWG InformationTechnologiesWorkingGroup olAcEFs OrganisationofLatinAmericanandCaribbeanSupremeAuditInstitutions PAsAI PacificAssociationofSupremeAuditInstitutions Psc INTOSAIProfessionalStandardsCommittee sAI SupremeAuditInstitution UnEP UnitedNationsEnvironmentProgramme Un UnitedNations WGEA WorkingGroupofEnvironmentalAuditing

Acronyms

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www.eurosai.orgNo. 18 - 2012

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EDITorIAL

EUrosAI AcTIVITIEsNew Secretary GeNeral of eUroSaI 9XXXIX eUroSaI GoverNING Board MeetING 11Summary of the Main Discussions and AgreementsAnkara (Turkey), 28 May 2012

vII eUroSaI–olacefS coNfereNce. Good GoverNaNce IN PUBlIc Sector: role of SaIS 15TheSAIofGeorgia

tBIlISI StateMeNt 19eUroSaI SeMINar oN aPPlIcatIoN of Software toolS IN aUdIt 21Prague (The Czech Republic), 18-20 September 2012TheSAIoftheCzechRepublic

eUroSaI actIvItIeS 2012 27advaNce of eUroSaI actIvItIeS 2013 28aPPoINtMeNtS IN tHe eUroSaI SaIS IN 2012 28

InFormATIon on EUMeetING of tHe coNtact coMMIttee of tHe HeadS of tHe SUPreMe aUdIt INStItUtIoNS of tHe eUroPeaN UNIoN 31Estoril(Portugal),18-19October2012

aNNUal rePort of tHe eUroPeaN coUrt of aUdItorS oN tHe IMPleMeNtatIoN of tHe eU BUdGet coNcerNING tHe 2011 fINaNcIal year 33otHer rePortS, oPINIoNS aNd docUMeNtS adoPted By tHe eUroPeaN coUrt of aUdItorS IN 2012 35New MeMBerS joINING tHe eUroPeaN coUrt of aUdItorS IN 2012 37

IssAI sPoTLIGHTNewS froM tHe ISSaI HarMoNISatIoN Project 41Dr.NorbertWeinrichter.MemberofEUROSAIGoalTeam2“ProfessionalStandards”,Rechnungshof(Austria)

tHe ISSaI IMPleMeNtatIoN INItIatIve. StaNdardIzatIoN of aUdIt SkIllS for StreNGtHeNING PUBlIc aUdIt 47INTOSAIDevelopmentIniciative(IDI)

rEPorTs AnD sTUDIEs

EUrosAIsTrATEGIcPlAn2011-2017eUroSaI Goal teaM 2—aPPlIcatIoN of ISSaI wItHIN eUroSaI 55Prof.Dr.DieterEngels.PresidentoftheBundesrechnungshof,ChairmanofGoalTeam2“ProfessionalStandards”

eUroSaI Goal teaM 3—kNowledGe SHarING 57TheSAIoftheCzechRepublic

eUroSaI Goal teaM 4—GoverNaNce aNd coMMUNIcatIoN 61TheSAIofPortugal

2012-2013 actIvItIeS of tHe eUroSaI workING GroUP oN eNvIroNMeNtal aUdItING (wGea) 65TheEUROSAIWGEASecretariat

taSk force oN aUdIt & etHIcS 67TheSAIofPortugal

PlaNS aNd ProSPectS of eUroSaI taSk force oN tHe aUdIt of fUNdS. allocated to dISaSterS aNd cataStroPHeS 71TheSAIofUkraine,ChairofTaskForce

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ThEsTrEnGThEnInGoFExTErnAlPUblIcconTrol:GUArAnTEEForFInAncIAlsUsTAInAbIlITyAnDGooDGovErnAncEreflectIoNS oN tHe IMPortaNce of StreNGtHeNING tHe BodIeS for tHe eXterNal coNtrol of PUBlIc ecoNoMIc-fINaNcIal actIvIty IN tHe PreSeNt coNteXt 77RamónÁlvarezdeMiranda.PresidentoftheSpanishCourtofAuditandSecretaryGeneralofEUROSAI

tHe StreNGtHeNING of eXterNal PUBlIc coNtrol: GUaraNtee for fINaNcIal SUStaINaBIlIty aNd Good GoverNaNce 81Dr.CarlosPólitFaggioni.ComptrollerGeneraloftheRepublicofEcuadorandPresidentofOLACEFS

tHe StreNGtHeNING of tHe PUBlIc eXterNal aUdIt “GUaraNtee for fINaNcIal SUStaINaBIlIty aNd Good GoverNaNce” 85GiocondaTorresdeBianchini.PanamaGeneralComptroller,ExecutiveSecretaryofOLACEFS

StreNGtHeNING eXterNal PUBlIc aUdItING tHroUGH eNHaNced relatIoN BetweeN SaI aNd INterNal aUdIt 89Dr.KunYang.ChairmanoftheBoardofAuditandInspection,Korea.SecretaryGeneralofASOSAI

StreNGtHeNING eXterNal PUBlIc aUdItING: a SafeGUard for fINaNcIal SUStaINaBIlIty aNd Good GoverNaNce. PrecoNdItIoNS to BecoMe a Good GoverNaNce SafeGUard 93IngunaSudraba.AuditorGeneraloftheRepublicofLatvia

tHe deBt Brake—aN effectIve tool for a SUStaINaBle fIScal PolIcy 97KurtGrüter.ChairmanoftheSwissFederalAuditOffice

SUPreMe aUdIt INStItUtIoNS aS a SafeGUard for fIScal SUStaINaBIlIty 101Assoc.Prof.Dr.RecaiAkyel.PresidentofTurkishCourtofAccounts

StreNGtHeNING eXterNal PUBlIc aUdItING: a SafeGUard for fINaNcIal SUStaINaBIlIty aNd Good GoverNaNce 105TheSAIofAzerbaijan

followING UP aUdIt fINdINGS aNd recoMMeNdatIoNS: aN eSSeNtIal SteP to Good GoverNaNce 107DilyankaZhelezarova.AuditorintheECA’sMethodologyandSupportUnit

StreNGtHeNING eXterNal PUBlIc aUdItING: a SafeGUard for fINaNcIal SUStaINaBIlIty aNd Good GoverNaNce 111TheSAIofFrance

attractIve IN tHe SHort-terM, rISky IN tHe loNG-rUN. aUdIt eXPerIeNce of tHe State aUdIt offIce of HUNGary IN relatIoN to HUNGarIaN PPP ProjectS 115TheSAIofHungary

traNSPareNcy, BUdGetary StaBIlIty aNd fINaNcIal SUStaINaBIlIty. a cHalleNGe for eXterNal coNtrol 119ManuelAznarLópez.MemberoftheSpanishCourtofAudit

traNSPareNcy IN PUBlIc MaNaGeMeNt: eXterNal coNtrol 123ÁngelAlgarraParedes.MemberoftheSpanishCourtofAuditJorgeFerránDilla.FinancialAdvisorattheserviceoftheSpanishCourtofAudit

SoMe IdeaS oN tHe jUrISdIctIoNal StreNGtHeNING of tHe coUrt of aUdIt 129JoséManuelSuárezRobledano.Judge.MemberoftheSpanishCourtofAudit.ProsecutionDepartmentno.3

tHe StreNGtHeNING of eXterNal coNtrol IN SPaIN: GUaraNtee for fINaNcIal SUStaINaBIlIty aNd Good GoverNaNce 133JoséAntonioMonzóTorrecillas.AuditoroftheSpanishCourtofAudit

StreNGtHeNING eXterNal PUBlIc aUdIt: SUPPort of fINaNcIal StaBIlIty aNd ProPer GoverNaNce 137TheAccountingChamberofUkraine

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Dear colleagues,

True to its annual date, the EUROSAI Magazine once more offers us a suitable framework for the communication and sharing of experiences among both members and non-members of the Organisation. This occasion is the first in which I have had the opportunity to use this vehicle of communication for addressing you all as Secretary General of EUROSAI, after my appointment as President of the Spanish Court of Audit last year.

I would first of all like to take the opportunity to express my most sincere acknowledgement and my profound gratitude to Manuel Núñez Pérez, the previous Secretary General of EUROSAI and President of the Spanish Court of Audit, for his untiring work at the head of the Secretariat over the past four years. His initiatives, his willingness and his dedication to the Organisation represent a model when it comes to taking over as Secretary General. I would also like to make special mention of María José de la Fuente y de la Calle for her invaluable dedication, both professional and personal, to the Secretariat up to 2012. Over the past 10 years she has shown an unsurpassable level of commitment and effort to the Organisation, thereby contributing to the proper functioning of EUROSAI. We in the Secretariat thank her for her valuable work and we wish her every success in the new tasks and responsibilities facing her as Member of the Court of Audit.

In 2012 the Goal Teams set up by the Strategic Plan 2011-2017 approved in the VIII EUROSAI Congress have carried out intense activity, holding various plenary meetings in order to make firm progress in the effective implementation of that Plan and in attaining the Strategic Objectives defined in it, and we can already see the splendid result obtained as the outcome of that effort. Likewise, the various working groups and taskforces of EUROSAI have also made solid progress in the implementation of the work programmes for 2011-2014, which were presented to the VIII Congress, tackling the continuation or completion of activities in progress and starting up new initiatives.

During the past year EUROSAI has continued to intensify cooperation and sharing of experiences with other Regional Groups of INTOSAI with which solid ties exist, especially via the VII EUROSAI-OLACEFS Conference held in Tiflis (Georgia) in September under the theme “Good governance in the public sector: Role of the SAI”. In the year which we are now starting, this path of international cooperation is going to be furthered by means of holding the IV EUROSAI-ARABOSAI Conference, which will be taking place in Azerbaijan in April 2013 and will be focusing on the main theme “Modern Challenges for SAIs’ Capacity Building”.

This year, the main theme chosen for the “Reports and Studies” Section of the Magazine has been “The strengthening of external public control: guarantee for financial sustainability and good governance”. I consider this to be a subject of great and topical interest, constituting a preoccupation and challenge for the Institutions of external control, both within the framework of our Organisation and within that of INTOSAI, and that it will undoubtedly be present in the debates that are going to be generated around the themes which will be discussed during the the XXI INCOSAI, due to take place in Beijing in October 2013.

I would not wish to end without expressing the willingness of this EUROSAI Secretariat to make itself available to all its members, and also special gratitude to those who have collaborated with their contributions to this issue of the Magazine, making its publication possible. I also want to offer this meeting place to all those wishing to contribute to this joint project, enabling it to act as a vehicle for information and sharing of experiences among the members of our Organisation. n

ramón Álvarez de mirandaPresidentoftheSpanishCourtofAuditSecretaryGeneralofEUROSAI

EDITorIAL

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EUrosAI AcTIVITIEs

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mrramónÁlvarezdemirandawasappointedPresidentofSpanishCourtofAuditbyHMtheKing,withathree-yearterm,on30July2012.

As President of the Spanish Court of Audit, he has alsotaken over, from Mr Manuel Núñez-Pérez, as SecretaryGeneralofEUROSAI.

The new President of Court of Audit of Spain holdsa degree in Economics and Business Studies fromUniversidadComplutensedeMadridandheisacharteredaccountant and member of the Official Registry ofAccountsAuditors.HewasalsoamemberoftheSpanishParliamentforseveralyearsandworkedintheeconomicstudiesdepartmentatUrquijoBank.Hehascontributedwith articles in several technical publications and hassat on the Public Sector Administration and AccountingCommissionoftheAECA(SpanishAssociationofBusinessAdministrationandAccounting).

MrÁlvarezdeMirandabecameanofficeroftheSpanishCourtofAuditin1986andhasheldvariouspositionsatsaid establishment throughout his professional career.In 2001, he was elected Member of the Institutionby the Spanish Parliament, being entrusted with thecoordination of the Department for Auditing LocalEntities.InJuly2012,hewasre-appointedasaMemberoftheCourtofAuditbytheSpanishParliamentforasecondnine-yearterm.n

nEw sEcrETAry GEnErAL oF EUrosAI

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TheXXXIXMeetingoftheEUROSAIGoverningBoard(GB)tookplaceinAnkara(Turkey)on28May2012,undertheChairoftheEUROSAIPresidentandhostedbytheTurkishSAI.Themaindiscussionsandagreementstakenreferredtothefollowingissues:

1. TheGBtooknoteofthe2011-2012EUROSAIActivityReport, the2011 EUROSAI Financial Report, and the2011 Report of the EUROSAI Auditors, which statedthat financial statements provided a true and fairviewoftheEUROSAIfinancialsituation.2011wasthelastyearcoveredbytheBudget2009-2011,approvedat theVII Congress, amounting the execution of thebudget along the tri-annual budgetary period to98’6%ofthetotal.

2. The GB was provided with information on thecurrent developments and further steps to begiven by the INTOSAI community in the light of the2011 UN Resolution on “Promoting the efficiency,accountability, effectiveness and transparency ofpublic administration by strengthening supremeaudit institutions”. An overview of the results of theEUROSAI annual survey for monitoring the actionstakenbyitsmembersinordertostrengthenexternalpublic control and SAIs independence was alsoreported, resulting that, at least 50% of them havemadeprogressinthisline.

3. In the framework of the implementation of theEUROSAI Strategic Plan, Goal Teams 1 (Chair: SAIFrance), 2 (Chair: SAI Germany), 3 (Chair: SAI CzechRepublic) and 4 (Chair: SAI Portugal) presentedtheir annual reports. An overall report on theimplementationofthePlan,includinganevaluationofcross-cuttingissues,wasalsopresented,resulting99%ofthetasksexecutedbyGoalTeamsasplanned.TheGBapprovedtheTermsofReferenceandoperational

plans of each Goal Team, as well as the document“Planning, Monitoring and Reporting Requirements”,aimedatguidingGoalTeams’action.Allthesepapersandmaterialsareavailableon theEUROSAIwebsite,undertheitem“StrategicPlanning”.

The GB also approved the mock up and the keyfeatures of the new EUROSAI website, which will beprofessionally designed and implemented under thecoordinationoftheEUROSAISecretariat.

4. The GB took note of the2011-2012 Activity Reportsof the EUROSAIWorking Groups on IT (Chair: SAI ofSwitzerland) and Environmental Audit (Chair: SAIof Norway); of the Task Forces on “Audit of FundsAllocatedtoCatastrophesandDisasters”(Chair:SAIofUkraine)and“Audit&Ethics” (Chair:SAIofPortugal)which was set up at theVIII Congress; as well as ofthe progress made by the “Monitoring CommitteeforsettingupandmonitoringtheDataBaseofGoodPracticesonAuditQuality”(Chair:SAIofHungary).

5. Several issues were discussed by the GB under theheading“EUROSAIcooperation”:

n Cooperation with INTOSAI, its Regional WorkingGroups,andexternalpartners:

• Fluent cooperation of EUROSAI with INTOSAIis developed through their Presidencies andGeneral Secretariats. EUROSAI and INTOSAICommittees, Subcommittees, Goal Teams,Working Groups and Task Forces collaboratein their respective framework. A relevantinteractionisalsodevelopedinthecontextoftheINTOSAI-DonorCooperation.

• CooperationwithINTOSAIRegionalGroups:

xxxIx EUrosAI GoVErnInG BoArD mEETInGSummary of the Main Discussions and AgreementsAnkara (Turkey), 28 May 2012

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— The VII EUROSAI-OLACEFS Conference tookplaceinTbilisi(Georgia)on17-19September2012, under the theme “Good governancein public sector: Role of the SAIs”. Thistheme was developed in two sub-themes:“Enhancingstakeholders’confidence:auditingmanagement, integrity, accountability andthe tone at the top quality” and “Publicfinance management reform: trends andlessonslearned”.

— The IV EUROSAI-ARABOSAI Conference willbeheldinAzerbaijanin2013.Preparationshavealreadystarted.

— TheGBsupportedASOSAIGB’sofferfortheSAI of the Russian Federation to host theII EUROSAI-ASOSAI Conference in 2014.The date for the Conference is still to bedetermined avoiding it to interfere the IXEUROSAI Congress. The GB also endorsedASOSAI’sproposalforwideningcooperationactivities by launching it at technical levelinthefieldofcapacitybuilding.

— The GB agreed to explore ways ofcooperation with AFROSAI, entrusting theEUROSAIPresidencyandSecretariatactionsaimedatapproachingthisgoal.

— TheGBsupported toconsiderfurtherwaysand formulas for promoting cooperationwith INTOSAI Regional Groups, at strategiclevel(byHeadsofSAIs)andattechnicallevel(amongauditors).TheSecretaryGeneralwasentrustedwithexploringnewopportunities.

n CooperationwithIDI:

• Cooperation with IDI remains a priority.The GB was reported on IDI’s activities andprojects, with special attention to those ofspecific interest for EUROSAI. In this context,the Trans-regional IDI Programme on ISSAIImplementation2012-2015waspresented,aswellasanapproachwasgiventotheprogressof the INTOSAI-Donor Cooperation, whoseSecretariatishostedbyIDI,andmainlyaimedthisyearatmatchingproposalsforSAIcapacitydevelopment initiatives with donors and SAIproviders.

n Cooperationwithexternalpartners:

• The GB was informed on the cooperationdeveloped under practical basis with theEuropeanConfederationofInstitutesofInternalAudit (ECIIA), developed mainly through GoalTeam 2, with the support of the EUROSAI

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Secretariat, in the area of the INTOSAI Gov ofcommoninterest.

6. TheGBagreedonthefollowingfinancialissues:

n Developing “EUROSAI Financial Rules”, compilingexisting rules displayed in diverse regulationsand agreements and adapting and developingthenecessaryrulesinaccordancewiththeneedsof the EUROSAI Strategic Plan. A draft will bepresented to the GB by the Secretariat, with thesupportofGoalTeam4,in2013.

n TheGBapprovedgrantingthefollowingfinancialcontributionsfromtheEUROSAIbudget:

• Funding technical equipment and conferenceroomfortheSeminar“ApplicationofSoftwareToolsinAudit”(Prague,September2012).

• Granting a commitment authorisation forfundsforfinancingthenewEUROSAIwebsite.

7. TheGBagreedonproposingtheSAIsoftheRussianFederationandPolandasthefuturerepresentativesofEUROSAIintheINTOSAIGB,toberenewedattheXXIINCOSAI(China,October2013).

8. TheGBapproved“Innovation”asthethemefortheIXEUROSAICongress.Thisthemewillbeapproached

from three perspectives: Innovation in auditingmethods and techniques, in SAI’s organisationand in public services and government. The DutchSAI presented some initiatives which will providethe Congress with an interactive and innovativeatmosphere.

9. Information was provided on the key actionsdeveloped for implementing the INTOSAI 2011-2016 Strategic Plan, in what concerns each of theStrategic Goals: Professional Standards (raisingawarenessandpromotingimplementationofISSAIsandINTOSAIGov),CapacityBuilding(strengtheningtheSAIssupplysideofcapacitybuildingandseekinga better coordination of the actions developed),KnowledgeSharing (INTOSAIWorkingGroups/TaskForces information, effective reinforcing INTOSAIcommunication,fosteringprofessionalnetworking,promoting partnerships) and Model Organisation(progress of F&A Task Force and INTOSAI-DonorCooperation). An updating was also made inrelation to the XXI INCOSAI. The 22nd UN/INTOSAISymposiumwasannouncedtobeheldinViennaon5-7March2013.

10. The GB supported the offer of the Turkish SAI ofhostingtheXEUROSAICongress,in2017.

11. TheGBagreedtoholditsnextordinarymeetinginBrusselson30May2013.n

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overview

On 17-19th September the VII EUROSAI–OLACEFSconference was held in Tbilisi, Georgia. The theme ofthe Conference was“Good Governance in Public Sector:Role of SAIs”. The topic was aimed at addressing theincreasing demand of the citizens for the better publicadministration and public funds management in thetimes of financial hardship for the governments andhighlighting the possibilities for SAIs to contribute tobetter accountability, transparency and efficiency of thegovernment activities. Under the heading there were2 sub-topics that are pivotal for the SAI for effectivelycarrying out its functions: Enhancing ManagementIntegrity, Accountability and Tone at the Top andfacilitatingPublicFinancialManagementReform.

The conference was succession of the cooperationstartedsince2000betweentheEUROSAIandOLACEFSwithintheINTOSAIcommunitythatenvisagessharingexperience and best practices between its membersand various Working Groups on important publicauditissuesforcontinuousimprovementofqualityofSAIwork.

The event coincided with the 20th Anniversary of theStateAuditOfficeofGeorgiaandhostingtheeventgaveSAI the opportunity to share its own experiences andchallenges in establishing the State Audit Office as animportant player of Public Financial Management withtheparticipants.

VII EUrosAI–oLAcEFs conFErEncE. GooD GoVErnAncE In PUBLIc sEcTor: roLE oF sAIs

The sAI of Georgia

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session I—Enhancing stakeholder confidence: Auditing management Integrity, Accountability and “Tone at the Top”

Credibility isakeyfactor forSupremeAudit Institutionsand it can be achieved by enhancing accountability,transparency, integrityandtoneat thetopwithintheseorganizations. This session was presided by the SAI ofPortugalaspresidentofEUROSAI.

As it was stated by the EUROSAI members in the lastCongress,heldinLisbon,“transparencyandaccountabilityarebothdemocraticvaluesandarefundamentalforgoodgovernance.Accountabilityisabroadconceptincludingawiderangeof responsibilities forpublicmanagers,suchasprofessionalandmanagementskills,compliancewithfinancial and other regulations, meeting performanceexpectationsandethicalconduct”.

SAI of Portugal in its presentation highlighted theimportanceofhavingmethodologicalbaseforensuringethical government that consists of audit manualdescribingstrategiesandrulesforethicalbehavior.ISSAI30,theINTOSAICodeofEthics,isalsoaconstantreferenceforauditors.Butprovisionsfortheethicalbehaviorisnot

enough, so SAIs should look into the implementationmeasuresaswell.TheSAIofPortugallooksat3aspectsofensuringtheethicalbehavior:

• Guidance.• Management.• Control.

Foreachof thesecertainactionsareneeded:guidancecan be reinforced by detailed advice for the code ofethics and training, the management should favorethical behavior of its employees and making ethicalcriteriaforannualperformanceevaluations.Forcontrol

n As it was stated by the EUROSAI members in the last Congress, held in Lisbon, “transparency and accountability are both democratic values and are fundamental for good governance. n

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measures, checklists and internal audits have beenconsidered. Following proposals of the PortuguesePresidency, the EUROSAI Governing Board agreed tosetupaTaskForce todealwithAudit&Ethics,aimingprimarily to promote ethical conduct and integrity,bothinSAIsandinpublicorganizations.ThegoaloftheEUROSAITaskForceonAudit&Ethics,asethicsinSAIsisconcerned,istoreinforce,frameandproviderobustnessto the management of ethical conduct, with practicalandfeasibletoolsthatintendtohelptheinstitutionsintheireverydaywork.

Spanish Court of Audit presented an interesting caseshowingthepositivecontributiontheSAIcanhaveonthe accountability in public sector. In2003 the CourtofAuditreportedtotheSpanishParliamentthattherewereproblemsregardingtheaccountabilityoftheLocalPublic Sector and informed about the possible legaland administrative solutions that could be adoptedinorderfor theLocalEntitiestorendertheiraccountscompleteandwithinthelegallyestablisheddeadlines.InresponsetothistheInformationandCommunicationTechnologywasintroducedthatsignificantlyimprovedthe reporting and reviewing activities of the localgovernments.

After successfully establishing the electronic reportingsystem,theSpanishCourtofAccountsmadethereportsandaccountsofthelocalgovernmentspubliclyavailablethat besides facilitating audit activities, increasedtransparencyandaccountabilitytothecitizens.

The Turkish Court of Accounts in its presentationemphasizedtheimportanceofthehighqualityofitsownwork and the need to follow the high moral values forachievingit.Besidestheconventionalmeansofachievingtherighttoneatthetopandindependencesuchasbroad

mandate laid out in the constitution, the TCA recentlyestablished audit management software program thatenables to organize audit work and gives managementthe opportunity to monitor the findings and workingdocuments.

TheBrazilianCourtofAccountspresentedtherecentpeerreviewthathasbeencarriedoutbytheOrganizationforEconomic Cooperation and Development (OECD). Thepurposeofpeerreviewistoassesstheauditoftheannualfinancialstatementof the federalgovernmentofBrazil.Potentialbenefitsofsuchreviewsamongothersare:

1. Report prepared by a multilateral institution (OECD)withbroadknowledgeofplanning,budget,finances,accounting,governance, transparency,accountability,andsoon.

2. Multidisciplinaryteam.3. Peerreviewperformedbyvariouscountries.

session II—Public Finance management reform: Trends and Lessons Learned

In order to live up to the high expectations of thesociety and further reinforce the principles of goodgovernance, many governments are embarking onsignificant modification of their Public FinancialManagementSystems.ThePFMservesasanoverarchingframeworkunderwhichmanyfacetsofpublicfinancialadministration are improved. The PFM concerns suchvitalissuesofpublicfinancialadministrationasbudgetplanningandexecution,establishmentofpublicinternalcontrols and internal audit, procurement, accountingand IT systems, treasury, etc. These issues constitutethe very core of the public financial management andultimately,thegoodgovernance.

Thereareanumberofsimilaritiesintheimplementationof the PFM within the EUROSAI, as countries aspireto fully implement common guidelines and bestpractice regarding the public financial management.Naturally,countriesareondifferentstagesoftheprocess,and potential to gain from each other’s experience is

n The goal of the EUROSAI Task Force on Audit & Ethics, as ethics in SAIs is concerned, is to reinforce, frame and provide robustness to the management of ethical conduct, with practical and feasible tools that intend to help the institutions in their everyday work. n

n The PFM serves as an overarching framework under which many facets of public financial administration are improved. n

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significant for state agencies as well as for SAIs. SAIscontribute to the implementation of the PFM, beingoneofthekeyplayers.TheytakepartinthePFMreformin many ways: participating in the formulation andrefinement of clear budgetary, financial, accounting,internalcontrolsandrelatedlegislation;byauditingPFMreformasawholeorseparatepartsofPFMsystemandkeyissues,sparkingnationaldebatesonmanypressingissuesaboutthemanagementofpublicfunds.

1. Recent developments have clearly demonstratedthe importanceof reasonablyplannedandexecutedfiscal policy ensured in mid and long term period.ConsequentlyroleoftheSAIsworkhavesignificantlyincreasedfromspecificaudits to thefiscaldisciplineandfiscalsustainabilityissues:

1.1. Debt Management—to increase oversight andperformance of in executive and operationalpublic.

1.2. Risk management and vulnerability analysis—enforce and encourage risk assessment andmanagementatagencylevelandPFMlevelasawhole.

1.3. Improved reporting framework and increasedmonitoring&controlofexternalauditfunctionofstateagenciesandfinancialinstitutions.

2. ContributiontoPFMreform:

2.1. Legislative initiative by SAI to improve mainregulatory PFM framework of the country acomprehensive, clear and implemented legalframeworkforPFMshouldbe:

• Structuredaccording to thePFMstructure inthecountry.

• With simple and transparent regulations-avoidingredundantbureaucracy.

• Promoting accountability and making thecooperation with the SAO obligatory (e.g. inHungariancase).

2.2. PerformanceauditbySAIofPFMreformorreformcomponenttoidentifysystemicdeficienciesandrespondtothemintimelymanner.

3. Disseminationsofgoodpractices—SAIshouldidentifyand disclose not only deficiencies and irregularitiesfound out during the course of audits, but goodpractices as well, to share knowledge and promotetheirroleasadvisorandpartneralongwithevaluator.

4. Guidelines—existence of guidelines solely does notguaranteethat thegoalsenvisagedbytheguidelinewouldbeachieved,asinthecaseofPublicDebtbestpractices and ISSAI guidelines that have alreadyexistedbeforethefinancialcrisis.n

n There are a number of similarities in the implementation of the PFM within the EUROSAI, as countries aspire to fully implement common guidelines and best practice regarding the public financial management. n

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EUROSAIandOLACEFS,gatheredattheirVIIJointConference,heldinTbilisi(Georgia)on17-18September2012,

recognize:

• The economic and social environment and citizens’demands require reforms from States aimed atmanagingpublicresourcesmoreefficiently,accordingto principles of accountability, transparency andintegrity,thusensuringfiscalsustainability;

• AsstatedintheUnitedNationsResolutionA/66/209of 22 December 2011, SAIs play an important rolein promoting the above-mentioned principles. InorderforSAIs tocontributetogreateraccountabilityof public institutions, it is essential to ensure theirindependence and the high quality of their work,increasingtheconfidenceoftheirstakeholders;

• Soundstrategies,internalandexternalcommunication,ethical requirements, quality control mechanismsandmonitoringarekeyelementsforSAIstoattaina“toneatthetop”operation.ITdevelopmentsandpeerreviewsarevaluableinstrumentsforenhancingSAIs’capacitiesandtheiraccountabilityandtransparency,therebyincreasingthetrustofcitizens;

• SAIs substantially contribute to good governance insafeguardingandsustainingtheefficientcontrolfunctionsdeveloped by parliaments, issuing recommendationsaimedatreinforcingpublicmanagementandprovidingpublic bodies and society with information on thesematters;

• The practices and experiences of each SAI representa valuable source of information for the others, socooperation becomes a masterpiece for improvingpublicmanagementandexternalauditatgloballevel,takingadvantageofinternationalsynergies;

Encourage:

• Both Organizations to spread these principleswithin their regional communities and to worktogether in order to audit and promote greaterefficiency, accountability, effectiveness, integrity andtransparencyinpublicmanagementforthebenefitofcitizens;

• Their Members to lead by example, improving thequalityoftheirworkandraiseawarenessofthevaluesandbenefitsoftheSAIsinachievinggoodgovernance;

• Both Organizations to intensify cooperation withinINTOSAI community, through their diverse levels ofdecision making and working structures, in orderto get the maximum synergies of each other andto achieve the greatest impact from their commonaction;

• The Presidents and the Secretaries General ofEUROSAI and OLACEFS to forward the Statement tothe President and Secretary General of INTOSAI, thePresidents and the Secretaries General of the otherINTOSAIRegionalWorkingGroups,aswellastootherstakeholders.n

TBILIsI sTATEmEnT

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The Supreme Audit Office of the Czech Republic, undertheauspicesandfinancialsupportofEUROSAI,hostedaninternational Seminar on Application of Software Toolsin Audits. The seminar was held in Prague, the CzechRepublicfrom18to20September2012.TheseminarwasofficiallylistedasaEUROSAITrainingEvent.

The EUROSAI seminar was attended by more than 70delegatesfrom26EuropeanSupremeAudit InstitutionsandfromtheEuropeanCourtofAuditors.RepresentativesfromtheinternationalorganizationASOSAIattendedtheseminarasobservers.

Themaintopicsoftheseminarwerefocusedon:

• The purchase, implementation and operation of theAudit Management System (AMS) for managing andevaluatingtheaudits.

• TheuseoftheAMSinpractice.• The use of data processing tools (CAATs) during the

audit.

The primary objective of the seminar was to exchangeideas, provide information and share best practiceregardingtheuseoftheAMSanddataprocessingtoolsinauditsbycomparingpositions,methodsandresultsusedbyparticipatingSAIsinthefieldofapplicationsupportofindividualauditsteps.

Implementing new systems and procedures for themanagement and control of audits should result inthe organization acquiring benefits to audit work byincreasedeffectivenessandefficiencyofworkprocessesand standardized audit procedures, facilitating theteam work, enhancing the accuracy and timeliness ofSAIs’outcomes.Ontheotherhand,itinevitablyrequireschanges within the organization, places increaseddemands on staff and often calls for significantfinancialsupport.Theimplementationofanewsystemor upgrading the current one without sufficient andproper information and care can also cause moredamagethanbenefit.

InanenvironmentofEUfinancialcrisis,SAIs,aswithallinstitutions financed from public money, are facing thechallenge to work more effectively and efficiently withfewer resources. To share information and to followlessons learned contribute to prevent possible mistakesandeconomizemoney.

Oneofthereasonsfororganizingtheeventwasthecallforinformationinthisfieldwhichwouldbediscussedinbroaderandcomparativeperspectiveintheinternationalcontext.BasedontheevaluationofthequestionnaireontrainingprioritiesoftheEUROSAImemberstateswhichwas circulated in 2011 the use of IT technologies inauditswas identifiedasa topicofcommoninterest. In2011theCzechSupremeAuditOfficethereforedecidedto organize an international seminar on Application ofSWToolsinAudit.

n The primary objective of the seminar was to exchange ideas, provide information and share best practice regarding the use of the AMS and data processing tools in audits by comparing positions, methods and results used by participating SAIs in the field of application support of individual audit steps. n

EUrosAI sEmInAr on APPLIcATIon oF soFTwArE TooLs In AUDITPrague (The Czech Republic), 18-20 September 2012

The sAI of the czech republic

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ThepreparatoryteamoftheSAOdraftedaquestionnaireinordertocollectrelevantinformationaboutthecurrentpositionofEUROSAISAIsontheuseofITtosupporttheauditprocesses.Inthisphase,theteamreceivedvaluableinputs from EUROSAI ITWorking Group, represented byMrKurtGrüter,theDirectorofSwissFederalAuditOfficeand the Chair of ITWG EUROSAI and from the Head ofsub-project of ITWG “Information System to SupportAudit Process”, Ms Magdalena Cordero Valdavida, theDirectorofInformationandTechnologiesDepartmentoftheEuropeanCourtofAuditors.

Based on the questionnaire answers, it was found outthathalfofaddressedSAIscurrentlyconsiderspurchasinganewAMSormodifyingtheexistingone.

The high level of respondents’ interest in proposedseminartopicsisindicatedinthegraphbelow.

More than70 participants from26 EUROSAI membercountries(Albania,Austria,Azerbaijan,Belgium,Bosniaand Herzegovina, the Czech Republic, Cyprus, Estonia,France, Georgia, Germany, Hungary, Latvia, Lithuania,the former Yugoslav Republic of Macedonia, Malta,RepublicofMoldova,theNetherlands,Norway,Poland,Romania,RussianFederation,Slovakia,SwitzerlandandTurkey),EuropeanCourtofAuditorsandrepresentativesfromASOSAI(India,theRepublicofKorea)attendedtheSeminar.

The Seminar provided opportunities for exchangeof experience and information related to recentdevelopments in the area of the AMS and computerassisted audit tools and techniques and for in-depthdiscussions.Itwasorganizedasaseriesofpanelsessions

n The preparatory team of the SAO drafted a questionnaire in order to collect relevant information about the current position of EUROSAI SAIs on the use of IT to support the audit processes. n

n The participants delivered 21 presentations during the two and a half days of the Seminar. n

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related to the main topics with each presentationfollowed by a discussion. The participants delivered21 presentations during the two and a half days of theSeminar.

Thefirsttwosessionsweredevotedtotheprocurement,implementation and operation of the AMS formanagingandevaluatingtheauditsintheoryandinpractice.Thethirdpartwasfocusedonuseofcomputerassistedaudittoolsandtechniques.Thecontributorsrepresented a wide range of professionals—managersresponsibleforimplementationofsystems,administrators, developers and auditors as the endusersoftheAMS.

The participants learned from presentations focused onparticularauditmanagementsystemsusedbydifferentSAIsmainlythat:

• To achieve an integrated environment sufficienttechnicalinfrastructureisnecessary.

• Technologieswhichhavenotbeentriedandtestedandsolutions with functionalities which do not complywithusersrequirementsarenotrecommended.

• The relationship/proportion between user orientedfunctionalities,maintenanceand,useracceptanceandcostshastobebalanced.

• ThedueimplementationoftheAMSincreasestheauditeffectivenessandstrengthentheauditmanagement.

• TheuseofAMSsimplifiesadministrationofrolesandrightsandmakesitflexible.

• The proper use, sharing and managing informationeliminates time consuming procedures not providingany added value and contributes to timeliness andcorrectnessofauditreports.

• Home-madetoolsbasedonstandardproducts(e.g.MSSharePoint)tailoredtoparticularSAI’sneedscontributestocost—savings,reducesdependencetowardsexternalcompanies,offersafulldevelopmentplatform.

• Totaginformationwithmetadatafacilitatesearching,extracting and retrieving documents and documentsets.

• The social intranet has already become the tool forsharingknowledgeandmakesthemavailable.

During the third panel session participants werefamiliarizedwith:

• Possibilities of CaseWare working papers used forauditingoffinancialstatements.

• Methods for collecting the data in electronic form byusingCAATs.

• ImplementationoftheIDEAforgatheringtheevidenceinauditworkincludingpracticalexamples.

• Functionalities of SW tool used for statistical dataanalysisinperformanceauditing.

All the presentations and other seminar papers areavailableonthewebsiteoftheSupremeAuditOffice:

http://www.nku.cz/en/mezinarodni/konference-seminare/seminar-IT2012/downloads-id6112/

Theseminarwasorganisedwithafinancialsupportofthe EUROSAI. The Supreme Audit Office applied for afinancial contribution. The application was approvedat the XXXIX Meeting of the Governing Board heldin Ankara. The total expenses spent on the seminar(covering themeeting room and technical equipmentrental, services provided during the seminar, workinglunches etc.) were approximately 14 400 €. Thecontributiongrantedfromthe2012EUROSAIbudgetofapproximately5200€(roughly1/3oftotalexpenses)coveredexpensesrelatedtorentingconferenceroomsandtechnicalequipment.

Theseminarwasverywellratedfrombothprofessionalandorganizationalviews,basedonresultsofevaluationquestionnaires which were completed by participantsandcontributorsonthelastdayoftheseminar.

Additionally,ontheoccasionofdraftingthiscontributionwe asked some of the participants to make theircommentsupontheSeminar.

n The seminar was organised with a financial support of the EUROSAI. The Supreme Audit Office applied for a financial contribution. n

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n mr massimo magnini, a representative of EUROSAI IT Working Group

“The participants had the opportunity to follow not only speeches but also several online demos and have demonstrated a large interest concerning self’s developed Audit management Systems, particularly for the different approaches concerning the Risk Management module and for the customized features. It is considered as very important that audit planning is automatically based on risk analysis and system is designed to track the action taken on the recommendations.

The presentations indicate that different SAIs are at different levels of development which range from automating a few processes to a fully integrated system; these systems have been developed using different platforms and methods ( SharePoint seems to be one of the most used).

These results can also constitute a valuable input to the activities of EUROSAI ITWG.”

n mr Emanuele Fossati, IT Service Manager, European Court of Auditors

“Being involved ourselves in a major project about the modernisation of our Audit Tools, we found all the

presentations very interesting (especially where live systems were shown) and thanks to the coffee breaks dedicated to networking, we came home with new ideas to be explored. We were mainly interested in seeing other Courts’ different approaches to Audit Document Management on one side, and Audit Process Management on the other: we could see good examples of very different strategies, mainly depending on the specific type of SAI’s management and institutional objectives. We wanted to see if there was a “best in class” approach, but we understood that everybody heavily tailored their systems. Another very rich area that captured our attention concerned the various experiences in CAAT, mainly “automated” data gathering and statistical analysis, because it could make auditors work more efficient and effective.”

n mr Darius salalis, Principal Auditor, National Audit Office of Lithuania—The seminar was surprisingly interesting and informative

“At the first glance more than 20 presentations during such a short period of time looked as overload of the seminar without giving a chance to know information systems of sister-institutions as well as to learn the principles and goals of their creation. The reality was completely converse to the first impression.

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Each presentation had plenty of room for those who were interested in the topic and willing to discuss and question various aspects of audit management as well as supreme audit office activity supervision information systems presented by each speaker. Discussions during the seminar and nonstop debates during the breaks showed that almost all the supreme audit offices, face the same challenges, i.e. ambitions to digitalize audit process and all its supporting activities in the office. The seminar gave a chance to make a step all together towards realization of this idea instead of searching the ways individually and making mistakes that could be avoided or reduced when the approach is discussed and “touched” in mutual assistance manner.

National Audit Office of Lithuania recognizes the outcome of the seminar as a constructive contribution to the information system renovation process in the Office.”

n mr Pawel- Banas, mr wiesl-aw Karlinski, mr Piotr Prokopczyk, the Supreme Audit Office of Poland—Added Value of the Seminar

“From perspective of the representatives from the Polish Supreme Audit Office, the Prague Seminar added most value in the following areas:

Characteristics and features of a well formed ITsystem supporting audit activities. Moreover, one ofthe presentations appeared to confirm the tendencyof still stronger position of agile methodologies in ITinvestments, which raised the question whether theyaregoingtodominatethe‘SAIcomputerizationindustry’nextyears?

Analysis of typical SAI processes almost ready to use by others.

Comparison of TeamMate and CaseWare advantages versus weaknesses.

Use CAAT software (IDEA) examples in financial audit (tax arrears) and compliance audit (unemployment benefits). Such an idea calls for a deep consideration within the EUROSAI family to think about a possibility of creation an open database of such examples. The IT Working Group is being developing a project (www.egov.nik.gov.pl) that would be ready to cooperate”.

n mr Joo Hee Kim, Senior Research Fellow, ASOSAI observer

“Sharing experience of outsourcing and in-house development of the AMS at different levels and various platforms would reduce the possibility of errors in specific environments. In Korean case, information accessibility and functionality improvements were not easy to reach. Bearing in mind limitations of budget and personnel without affecting the efficiency and effectiveness of the audit, I appreciated watching cases of in-house development. Furthermore, the comparison of using metadata in different SAIs was valuable.

I learned a lot from productive discussions where many questions and remarks were debated.

I would appreciate the continuation of such kind of knowledge sharing and possible active cooperation in this field in future.

I would like to thank EUROSAI for giving me the opportunity to attend this seminar in a role of observer and special thanks for the hospitality of the Supreme Audit Office of Czech Republic”.

Theseminarconfirmed that theapplicationofsoftwaretools in audit is a challenging issue which encouragedthe participants to consider new possibilities of mutualcooperationinthisareainfuture.n

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• 2ndJoInTmEETInGTAsKGroUPs“TErmsoFrEFErEncE”and“PlAnnInG,monITorInGAnDrEPorTInGrEQUIrEmEnTs”(GoalTeam4),Lisbon(Portugal),17January2012.

• 2ndmEETInGTAsKGroUP“rEvIEWEUrosAIWEbsITE”,Lisbon(Portugal),17January.

• 2ndPlEnArymEETInGGoAlTEAm4,Lisbon(Portugal),17and18January.

• 2ndPlEnArymEETInGGoAlTEAm1,Paris(France),14February.

• mEETInGoFThETAsKGroUPon“EUrosAIcommUnIcATIonPolIcy”(GoalTeam4),Warsaw(Poland),8and9March.

• IvmEETInGoFThEEUrosAITAsKForcEonThEAUDIToFFUnDsAllocATEDToDIsAsTErsAnDcATAsTroPhEs,Wroclaw(Poland),21to23March.

• 3rdPlEnArymEETInGGoAlTEAm4,TheHague(TheNetherlands),23and24April.

• KIcK-oFFmEETInGEUrosAITAsKForcE“AUDIT&EThIcs”,Lisbon(Portugal),7and8May.

• sEmInAr“sUsTAInAblEFIshErIEsAnDForEsTmAnAGEmEnT”,Oslo(Norway),15and16May.

• xxxIxEUrosAIGovErnInGboArDmEETInG,Ankara(Turkey),28May.

• ITAUDITsElF-AssEssmEnT(ITAsA)WorKshoP(EUrosAIITWorkingGroup),Vienna(Austria),11and12June.

• ITsElF-AssEssmEnT(ITsA)WorKshoP(EUrosAIITWorkingGroup),Vienna(Austria),20to22June.

• ITsElF-AssEssmEnT(ITsA)WorKshoP(EUrosAIITWorkingGroup),Amsterdam(Netherlands),26to28June.

• ITsElF-AssEssmEnT(ITsA)WorKshoP(EUrosAIITWorkingGroup),Warsaw(Poland),18to20July.

• vIIconFErEncEEUrosAI-olAcEFs,Tbilisi(Georgia),17-19September.

• EUrosAIsEmInAr“APPlIcATIonoFsoFTWArEToolsInAUDITs”,Prague(CzechRepublic),18-20September.

• ITAUDITsElF-AssEssmEnT(ITAsA)WorKshoP(EUrosAIITWorkingGroup),Amsterdam(Netherlands),15to19October.

• sEmInAroFThEEUrosAIWorKInGGroUPonEnvIronmEnTAlAUDITon“AUDITInGForEsTry”(Cyprus),22October.

• PlEnArymEETInGoFThEEUrosAIWorKInGGroUPonEnvIronmEnTAlAUDIT(sustainability,andapplicationandauditofdatasourcesinenvironmentalaudit),(Cyprus),23to25October.

• ITsElF-AssEssmEnT(ITsA)WorKshoP(EUrosAIITWorkingGroup),EuropeanCourtofAuditors(Luxembourg),23to25October.

• ITsElF-AssEssmEnT(ITsA)WorKshoP(EUrosAIITWorkingGroup),Ankara(Turkey),5to9November.

• mEETInGoFProJEcTTEAm“InFormATIonsysTEmsTosUPPorTThEAUDITProcEss(IssAP)”(EUrosAIITWorkingGroup),Luxembourg,6November.

• 3rdPlEnArymEETInGGoAlTEAm1,Paris(France),8and9November.

• 2ndPlEnArymEETInGGoAlTEAm2,Potsdam(Germany),8and9November.

• mEETInGoFProJEcTTEAm“ITAUDITsElF-AssEssmEnT(ITAsA)”(EUrosAIITWorkingGroup),Bern(Switzerland),13November.

• mEETInGoFProJEcTTEAm“E-GovErnmEnT”(EUrosAIITWorkingGroup),Warsaw(Poland),15and16November.

• 2ndPlEnArymEETInGGoAlTEAm3,Warsaw(Poland),4and5December.

• mEETInG oF ProJEcT TEAm “IT sElF-AssEssmEnT(ITsA)”(EUrosAIITWorkingGroup),Bern(Switzerland),11December.

EUrosAI AcTIVITIEs 2012

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ADVAncE oF EUrosAI AcTIVITIEs 2013

• PlEnArymEETInGEUrosAIITWorKInGGroUP,Paris(France),18and19February

• TrAInInGcoUrsEEUrosAIITWorKInGGroUP,Paris(France),20to22February

• 4thPlEnArymEETInGGoAlTEAm1,Paris(France),18March

• 2ndmEETInGoFThETAsKForcE“AUDIT&EThIcs”(Croatia),firsthalfofApril

• IvEUrosAI-ArAbosAIconFErEncE,Baku(Azerbaijan),16-18April

• 4thPlEnArymEETInGGoAlTEAm4,Madrid(Spain),25and26April

• xlEUrosAIGovErnInGboArDmEETInG,Brussels(Belgium),30May

• 1stsEmInArTAsKForcE“AUDIT&EThIcs”:“Auditing Ethics”, lastquarteroftheyear

• xxIIncosAI,Beijing(China),22to27October

APPoInTmEnTs In THE EUrosAI sAIs In 2012

• mr.ramónÁlvarezdemiranda,electednewPresidentoftheSpanishCourtofAuditandSecretaryGeneralofEUROSAI.

• ms.lonestrøm,electednewAuditorGeneralofDenmark.

• mr.lashaTordia,designednewAuditorGeneraloftheStateAuditOfficeofGeorgia.

• mr.seamusmccarthy,newComptrollerandAuditorGeneralofIreland.

• mr.Josephh.shapira,electednewComptrollerandOmbudsmanoftheStateofIsrael.

• mr.Aslanyespulayevichmussin,electednewPresidentoftheSAIofKazakhstan.

• mr.radoslavsretenovic,re-electedPresidentoftheSAIofSerbia.

• mr.romanmaguta,appointednewChairmanoftheSAIofUkraine.

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The2012annualmeetingof theContactCommitteeoftheHeadsoftheEUSupremeAuditInstitutions(SAIs)andof the European Court of Auditors (ECA) was hosted bythe Tribunal de Contas of Portugal, in Estoril, on18 and19October2012.Themeeting,chairedby thePresidentof Tribunal de Contas, Mr. Guilherme d’Oliveira Martins,wasattendedby93delegatesfromMemberStates’SAIsand the ECA, as well as the SAIs of Croatia (accedingcountry), four candidate countries (the former YugoslavRepublic of Macedonia, Montenegro, Serbia andTurkey)andrepresentativesof IDI-INTOSAI(Norway)andSIGMA(OECD).

ThefirstthemeofthemeetingwasaddressedthroughaSeminar:Challenges for SAIs in preparing for the next EU financial framework period.

The Seminar had the participation of a distinguishedguest speaker, the European Commissioner Mr. AlgirdasSemeta, responsible for Taxation and Customs Union,AuditandAnti-Fraud.RepresentativesofseveralnationalEU SAIs and the ECA presented their viewpoints andcurrentexperiences.

Itwasrecognizedthatthelargeandimportant“package”of legislative proposals regarding the next financialframework period will significantly alter the financialmanagementlandscapeoftheEU.

The ECA and the national EU SAIs, as external auditorsoftheEUanditsMemberStates,willbeaffectedbythereviewoftheexistingarrangementsforEUspendingandfunding launched on the occasion of the multiannualfinancial framework (MFF) 2014-2020. The ContactCommittee has been made aware of some of the

challenges raised by this process and has analyzed theproposals and their potential impact on the work of itsmembers,aswellasonthesoundmanagementofEUandnationalfinances—thediscussionsontherevisionoftheFinancialRegulationattheContactCommitteemeetingsheldin2010and2011havehelpedtoclarifythesubject.

ThenewFinancialRegulationwillreinforcetheaccountabilityofMemberStates.NewlegislativeactsoftheEUconcernfundamental matters such as strengthening budgetarysurveillance and economic policies surveillance ofMember States; enforcing the correction of excessivedeficits and macroeconomic imbalances and settingrequirementsfortheirfiscalframework.

SAIs of the Member States of the EU and the ECA aimatcontributing tobettersystemsand toenhancing theeffectiveness of the national use of Community funds,as well as to the new economic and fiscal governancemeasures of the European Union, and are concernedwith an independent and professional view on how toimprovethequalityofspending,includingbothnationaland EU contributions in co-financed projects; therefore,the importance of initiatives of cooperation betweennationalSAIsandtheECAwithregardtoEUfundsmustbehighlighted.

Inthecontextofthesecondtheme, Latest developments in responding to the financial crisis and SAIs’ experience of related audits, the results of some specific analysisrequested by the Contact Committee were delivered:the report of the Task Force to explore possibilitiesfor cooperation with Eurostat and national statisticalinstitutions; the state of play of the joint initiative ofthe Euro-area SAIs regarding the external audit of the

mEETInG oF THE conTAcT commITTEE oF THE HEADs oF THE sUPrEmE AUDIT InsTITUTIons oF THE EUroPEAn UnIonEstoril (Portugal), 18-19 October 2012

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EuropeanStabilityMechanism;thereportoftheWorkingGroup to undertake a pilot study to identify possiblepublicauditdeficitsintheareaofnewarrangements;theprogressreportoftheFiscalPolicyAuditNetwork.

Moreover, some SAIs presented their viewpoints andexperiences, mainly in the framework of the financialcrisis, considering recent developments regardingfinancial audit and the role of SAIs; implications onaccountingstandardsandthesuitabilityofIPSASforEUMemberStates;thebudgetaryrulesandtheincomesideoftheStateBudget.

After the discussions of both themes I and II, theintervention of another notable guest speaker must beregistered: Governor of Banco de Portugal, Mr. Carlos daSilvaCosta,whodelivered theclosingconferenceof thethematicpartoftheSeminar.

The debates on the above mentioned themes gaverise to the adoption of six resolutions on the followingsubjects: 1. Network on Europe 2020 Strategy audit; 2.Supreme Audit Institutions’ cooperation with Eurostat and National Statistical Institutions;3.The results of the pilot study on the Access of Supreme Audit Institutions to the main financial supervisors in EU Member States; 4. The 2013 future activities of the EU SAI Contact Committee;5.Public accounting standards;6.The tasks and roles of the external public audit in the light of recent developments in the European Union economic governance.

Intheframeworkof Contact Committee cooperation, SAIsapproveddecisionsonfutureactivitiesoftheCommittee

and were informed about the report on best audit practices and main audit recommendations for corporate governance audits of state and municipality owned enterprises (SAI of Latvia) and the Seminar Experience gained during the winding up of the programming period 2000-2006(SAIofHungary).

In the context of information of common interest, theContactCommitteehasgotinformationontwoEUrelatedauditsbyMemberStates’SAIs:Monitoring Risks to Public Finances(TheNetherlands)andResults of the Cooperative Audit of CO2 Emission Trading Systems(Denmark).

In the meeting there was also a presentation by theSecretary General of INTOSAI and President of the SAIofAustriaonthesignificantResolutionA/66/209oftheGeneralAssemblyoftheUnitedNations:“Promoting the efficiency, accountability, effectiveness and transparency

of public administration by strengthening Supreme Audit Institutions”.

The President and the Secretary General of EUROSAIreferredtothecurrentstatusofEUROSAIactivities.

TheNetwork of SAIs of Candidate and Potential Candidate Countries and the ECA also delivered information on itsactivities.

ThemeetingofOctober2013oftheContactCommitteemeeting will be held in Vilnius, hosted by the SAI ofLithuaniaandchairedbytheAuditorGeneralMsGiedr ·eSvedien ·e.n

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On 6 November 2012 the European Court of Auditorspublished its annual reports on the implementation oftheEUbudgetandtheEuropeanDevelopmentFundsforthe2011financialyear.

Theobjectiveoftheannualreportsistoprovidefindingsand conclusions that help the European Parliament,CouncilandcitizenstoassessthequalityofEUfinancialmanagement,andtomakeusefulrecommendationsforimprovement.

Central to the2011annual reportsare the18thannualstatements of assurance (or“DAS”) on the reliability ofthe EU accounts and the regularity of the transactionsunderlying them. Moreover, the 2011 annual report ontheimplementationoftheEUbudgetincludestwonewchapters in order to provide more focused results onagricultureandcohesion,anditaidscomparisonbetweendifferentareasandyearsbyincludingcomparativefiguresrelatedto2010fortheestimatederrorrates.Italsobringsmore insight into EU performance management andmeasurementfollowingthewell-receivedintroductionofthissubjectinthe2010annualreport.

In2011, theEUspent€129.4billion,witharound80%on agriculture and cohesion policies, where the task ofimplementingtheEUbudgetissharedbytheCommissionandEUMemberStates.

As regards the reliability of the EU accounts, the ECAconcluded that the 2011 consolidated accounts of theEU present fairly, in all material respects, the financialpositionof theUnionasof31December2011,and theresults of its operations and its cash flows for the yearthen ended, in accordance with the provisions of theFinancialRegulationandtheaccountingrulesadoptedbytheCommission’saccountingofficer.

Asfortheregularityoftransactions,intheECA’sopinion,EU revenue and commitments underlying the 2011

accountswere legalandregular inallmaterialrespects.In contrast, the ECA concluded that the examinedsupervisory and control systems were partially effectivein ensuring the legality and regularity of paymentsunderlyingthe2011accountsandthat thosepaymentsweremateriallyaffectedbyerror.TheECA’sestimateforthe most likely error rate for payments underlying the2011accountswas3.9%for theEUbudgetasawhole,whichmeansthattheleveloferrorremainedsimilar to2010whenitwas3.7%.

The ECA’s overall opinion on payments is supported byspecificassessmentsofthepolicygroups.AllindividuallyassessedareasofEUspendingwereaffectedbymaterialerror with the exception of administrative and otherexpenditure(€9.8billion)andexternalrelations,aidandenlargement (€6.2 billion), although in the latter areatheauditedcontrolsystemswereonlypartiallyeffectiveandinterimandfinalpaymentswereaffectedbymaterialerror.

ForAgriculture:marketanddirectsupport(€43.8billion)theestimatederrorratewas2.9%.Aroundthreequartersof quantifiable errors were “accuracy” errors, with themostfrequentbeingover-declarationbybeneficiariesofland area when claiming for EU funds. The majority oferrorsamountindividuallytolessthan5%oftheclaim.The effectiveness of the control systems—notably theintegrated administration and control system (IACS)—wasadverselyaffectedbyinaccuratedatainthevariousdatabases and incorrect administrative treatment ofclaimsbythepayingagencies.

rural development, environment, fisheries and health(€ 13.9 billion) was the most error prone area of EUspendingwithanestimatederrorrateof7.7% in2011.Themajorityof themost likelyerrorrateconcerned theeligibility of expenditure for non-area-related measures.Intheareaofruraldevelopment,theauditofthecontrolsystems revealed that administrative and on-the-spot

AnnUAL rEPorT oF THE EUroPEAn coUrT oF AUDITors on THE ImPLEmEnTATIon oF THE EU BUDGET concErnInG THE 2011 FInAncIAL yEAr

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checkswerenotsufficientlyrigoroustomitigatetheriskofdeclaringineligibleexpenditure.Intheareaofmaritimeaffairs and fisheries, the ECA found that unforeseenexpenditureresultedfrominsufficientmonitoringoffishcatches.

The estimated error rate for policy group regionalpolicy, energy and transport (€ 34.8 billion) remainedhigh at6.0 %.TheECA foundserious failures to respectpublic procurement rules. The second most frequenttype of error was ineligible payments with projectsfailingtofulfilthenecessaryconditions.For62%ofthetransactions affected by error, the ECA considers thatsufficient information was available for the MemberStateauthoritiestohavedetectedandcorrectedatleastsome of the errors prior to certifying the expenditureto the Commission. The ECA’s audits also showed thatthere was no assurance that financial correctionsmechanisms adequately compensated for the detectederrorsandresolvedallmaterialissuesattheclosureoftheoperationalprogrammes.

For Employment and social affairs (€ 10.3 billion) theestimatedmost likelyerrorratewas2.2%.Themajorityof errors detected concerned the reimbursement ofineligible costs. The results of the ECA’s audit indicatedweaknesses in the management and control systemsestablishedintheMemberStates,inparticularinthefirstlevelchecksofexpenditure.TheECAfoundthatsufficientinformation was available to Member State authoritiesforthemtohavedetectedandcorrectedatleastsomeoftheerrorsin76%oftheESFtransactionsaffectedbyerror,beforecertifyingtheexpendituretotheCommission.

Finally, in the policy group research and other internalpolicies (€ 10.6 billion) the ECA concluded that theestimatedmostlikelyerrorratewas3.0%.Themainsourceoferrorwastheover-declarationofcostsbybeneficiariesfor projects funded by the framework programmes forresearchand technologicaldevelopment (FPs).UnderFP

rules, beneficiaries’ cost claims should in certain casesbe accompanied by audit certificates from independentaudit firms.The control systems assessment of the ECArevealederrorsin81%oftheauditedprojectsthathadapositiveauditcertificate.

InChapter10ofthe2011annualreport,theECApresentsits observations on the Commission’s self-assessmentsof performance as stated in the annual activity reportsof the Commission’s directors-general, and highlightssome of the main themes arising from the ECA’s 2011special reports on performance. The Commission’sself-assessment on performance was evolving andrepresented some welcome improvements on previousyears. Nevertheless, ECA performance audits in 2011identified a lack of good quality needs assessments,weaknesses in the design of programmes which impairreporting on results and impacts, and a need for theCommissiontodemonstrateEUaddedvalue.

In conclusion, and as indicated by the ECA President inhispresentationsoftheAnnualReportstotheEuropeanParliamentandCouncil,therehavebeenimprovementsinEUfinancialmanagementoverthecurrentprogrammingperiod (2007-2013), but there is still some way to gobefore it is up to standard in all areas. The fall in theCourt’sestimatederrorratefortheEUbudgetasawholeunder this framework period shows that improving therules and design of spending schemes from one periodto the next does make a difference. Decisions on thelegislationgoverningspendingschemesunder thenextfinancialframework(2014to2020)shouldconsiderthatreducing the level of irregular payments and improvingperformanceandaccountabilityrequiresimplerspendingschemeswithclearerobjectives,easiertomeasureresults,andmorecost-effectivecontrolarrangements.

The ECA’s annual reports on the implementation of the 2011 EU budget and European Development Funds can be found on http://eca.europa.eu.n

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The European Court of Auditors adopted the followingspecialreportsin2012:

• Special Report No1/2012—Effectiveness of European Union development aid for food security in sub-Saharan Africa.

• Special Report No 2/2012—Financial instruments for SMEs co-financed by the European Regional Development Fund.

• Special Report No 3/2012—Structural funds: did the Commission successfully deal with deficiencies identified in the Member States’ management and control systems?

• Special Report No 4/2012—Using Structural and Cohesion Funds to co-finance transport infrastructures in seaports: an effective investment?

• Special Report No 5/2012—The Common External Relations Information System (CRIS).

• SpecialReportNo6/2012—European Union Assistance to the Turkish Cypriot Community.

• SpecialReportNo7/2012—The reform of the common organisation of the market in wine: Progress to date.

• Special Report No 8/2012—Targeting of aid for the modernisation of agricultural holdings.

• SpecialReportNo9/2012—Audit of the control system governing the production, processing, distribution and imports of organic products.

• SpecialReportNo10/2012—The effectiveness of staff development in the European Commission.

• SpecialReportNo11/2012—Suckler cow and ewe and goat direct aids under partial implementation of SPS arrangements.

• SpecialReportNo12/2012—Did the Commission and Eurostat improve the process for producing reliable and credible European statistics?

• Special Report No 13/2012—European Union Development Assistance for Drinking-Water Supply and Basic Sanitation in Sub-Saharan Countries.

• Special Report No 14/2012—Implementation of EU hygiene legislation in slaughterhouses of countries that joined the EU since 2004.

• Special Report No15/2012—Management of conflict of interest in selected EU Agencies.

• Special Report No 16/2012—The effectiveness of the Single Area Payment Scheme as a transitional system for supporting farmers in the New Member States.

• Special Report No 17/2012—The EDF contribution to a sustainable road network in sub-Saharan Africa (11FED228).

• Special Report No 18/2012—European Union Assistance to Kosovo related to the rule of law.

• SpecialReportNo19/2012—Follow-up of the European Court of Auditors’ Special Reports.

• Special Report No 20/2012—Is Structural measures funding for municipal waste management infrastructure projects effective in helping Member States achieve EU waste policy objectives?

• Special Report No 21/2012—Cost-effectiveness of Cohesion Policy Investments in Energy Efficiency.

oTHEr rEPorTs, oPInIons AnD DocUmEnTs ADoPTED By THE EUroPEAn coUrT oF AUDITors In 2012

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• Special Report No 22/2012—Do the European Integration Fund and European Refugee Fund contribute effectively to the integration of third-country nationals?

• Special Report No 23/2012—Have EU Structural Measures successfully supported the regeneration of industrial and military brownfield sites?

• Special Report No 24/2012—The European Union Solidarity Fund’s response to the 2009 Abruzzi earthquake: The relevance and cost of the operations.

• Special Report No 25/2012—Are tools in place to monitor the effectiveness of European Social Fund spending on older workers?

In addition the followingopinions were adoptedby theECAin2012:

• Opinion No 1/2012—on certain proposals for regulations relating to the common agricultural policy for the period 2014-2020.

• OpinionNo2/2012:

— On an amended proposal for a Council Decisionon the system of own resources of the EuropeanUnion.

— OnanamendedproposalforaCouncilRegulationlaying down implementing measures for thesystemofownresourcesoftheEuropeanUnion.

— OnanamendedproposalforaCouncilRegulationonthemethodsandprocedureformakingavailablethe traditional and GNI-based own resources andonthemeasurestomeetcashrequirements.

— On a proposal for a Council Regulation on themethods and procedure for making available theownresourcebasedonthevalueaddedtax.

— On a proposal for a Council Regulation on themethods and procedure for making available theown resource based on the financial transactiontax.

• Opinion No 3/2012—on a proposal for a Regulation of the European Parliament and of the Council on the Hercule III programme to promote activities in the field of the protection of the European Union’s financial interests.

• Opinion No4/2012—on the Commission’s evaluation report on the Union’s finances based on results achieved, established under Article 318 of the Treaty on the Functioning of the European Union.

• OpinionNo5/2012—on the proposal for a Regulation of the European Parliament and of the Council amending the Staff Regulations of Officials and the Conditions of Employment of Other Servants of the European Union.

• OpinionNo6/2012—on the proposal for a Regulation of the European Parliament and of the Council laying down the rules for the participation and dissemination in “Horizon 2020—the Framework Programme for Research and Innovation (2014-2020)”.

• Opinion No 7/2012—concerning a proposal for a Regulation of the European Parliament and of the Council introducing, on the occasion of the accession of Croatia, special temporary measures for the recruitment of officials and temporary staff of the European Union.

• OpinionNo8/2012—on the proposal for a Directive of the European Parliament and of the Council on the fight against fraud to the Union’s financial interests by means of criminal law.

• Opinion No 9/2012—on an amended proposal for a Regulation of the European Parliament and of the Council laying down common provisions on the European Regional Development Fund, the European Social Fund, the Cohesion Fund, the European Agricultural Fund for Rural Development and the European Maritime and Fisheries Fund covered by the Common Strategic Framework and laying down general provisions on the European Regional Development Fund, the European Social Fund and the Cohesion Fund and repealing Council Regulation (EC) N° 1083/2006.

Moreover, 49 specific annual reports on the Europeanagencies and other decentralised bodies have beenadopted.Thereportsincludeanopiniononthereliabilityoftheir2011financialstatementsandonthelegalityandregularityoftheunderlyingtransactions.

TheECA’sAnnualActivityreportfor2011waspublishedin April2012. It provides an overview of the key resultsandachievementsduringthepreviousyearaswellasthemaindevelopmentsinitsauditenvironmentandinternalorganisation.

All ECA reports and opinions can be found on the ECA’s websitehttp://eca.europa.eu.n

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Following nominations from their Member States, andafter consultation with the European Parliament, theCounciloftheEuropeanUnionappointedthefollowingnewMemberstotheEuropeanCourtofAuditorsin2012forrenewabletermsofsixyears:

• mr.henrikotbo(Denmark).• mr.Pietrorusso(Italy).• mr.villeItälä(Finland).• mr.Kevincardiff(Ireland).• mr.baudilioTomémuguruza(Spain).

Furthermore, the mandates of the following currentMembersoftheECAwererenewedin2012forfurthersixyearsterms:

• mr.vítormanueldasilvacaldeira(Portugal).• mr.KarelPinxten(Belgium).• mr.hansGustafWessberg(Sweden).

nEw mEmBErs JoInInG THE EUroPEAn coUrT oF AUDITors In 2012

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IssAI sPoTLIGHT

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Introduction—why it is important

The“ISSAI Harmonisation Project” is one of the currentcore endeavours of INTOSAI. It proposes to replace anentire level of ISSAIs by2013 to develop the ISSAIs intoa truly coherent set of standards within a consistentframework.Notanylevel,butthe“FundamentalAuditingPrinciples” on level 3 which describe the core of SAIs’activities—theauditprocess.

The four documents have been exposed to the INTOSAIcommunity on the ISSAI Framework for discussion. [1]They address important areas for the ISSAI and theINTOSAIcommunity—forexample,theywill,forthefirsttime, address the authority of the ISSAIs and containspecificguidance toSAIsconcerningoptionsonmakingstatementsofcompliancewiththeISSAI.Theyalsoprovideadescriptionoftheconceptofpublicsectorauditingandmarkthestructureofthestandards.

Therefore, it is essential that the EUROSAI communitycarefully considers the exposed documents and SAIsactively bring their experience and competence to theexposureprocess.Inordertofacilitatethatprocess,thefollowingarticletriestodescribesomeofthehistoricalbackground leading to the project, its mandate, somekey elements of the documents exposed and the nextsteps to be undergone by the INTOSAI communityundertheINTOSAIDueProcessforINTOSAIProfessionalStandards.[2]

some History—How it came about

Facingagrowingsophisticationoftherulesforprivatesector auditing and perceiving an expectation for

[1] http://www.issai.org[2] http://www.issai.org/media%281056,1033%29/Due_process_English.

pdf

similar standards for the public sector environment,thePSCSteeringCommitteeinWashington2006markedanimportantturningpointinthedevelopmentoftheISSAIs by establishing the “dual approach”: Existing(private sector) standards should be recognizedand used, complimentary public sector guidanceshould be developed where necessary. The PSC alsoredefinedtheGeneralAuditingStandardsof1992as“Fundamental Auditing Principles”. These, togetherwithguidelinesbasedon thedualapproachwere tobe the core of the public sector auditing standardsandguidelines.

After a survey on the use and needs for standardsin the public sector, INCOSAI XIX in 2007 in Mexicoadopted the current ISSAI Framework by classifying arange of different existing documents into four levelsand numbered them systematically. The first andsecond levels of ISSAI were to deal with institutionalrequirement for the SAI. ISSAIs 100-999 (“level 3”)should contain the fundamental principles of carryingoutauditingofsectorpublicentities.Levelfourshouldcontain detailed operational guidelines informing SAIshowtoimplementtheseprinciplesinspecificinstances(i.e.financialandperformanceaudits).

n The PSC also redefined the General Auditing Standards of 1992 as “Fundamental Auditing Principles”. These, together with guidelines based on the dual approach were to be the core of the public sector auditing standards and guidelines. n

nEws From THE IssAI HArmonIsATIon ProJEcTDr. norbert weinrichterMemberofEUROSAIGoalTeam2“ProfessionalStandards”Rechnungshof(Austria)

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Level3 was initially filled by the“old” INTOSAI AuditingStandards developed in 1992. Already at this stage,however,itwasforeseenthatarevisionwouldbenecessaryin light of newer documents. In 2010, INCOSAI XXapproved further documents on level 4 including over30 on financial audit, but also on performance andcomplianceaudit.

The INCOSAI XX also highlighted the relevance of theISSAI framework as a comprehensive set of standardsand guidelines that support SAIs around the world intheir daily auditing practice. It stated that the ISSAIspresenttheessenceofpublicsectorauditingandcalledupon INTOSAI’s members to implement the ISSAIs inaccordancewiththeirmandateandnational legislation.At the same time INCOSAI—as discussed already atthe PSC meetings in Brasilia 2009, Bruxelles 2010 andCopenhagen 2010—mandated the PSC to revise level

threeof theframework inorder toprovideanimprovedconceptualbasis forpublicsectorauditingand improveconsistencywithintheISSAIFramework.

mandate of the Project—what it should do

Thecentralgoaloftheprojectisto“revisetheISSAI100-999Fundamental Auditing Principles in order to ensure thattheydescribethegeneralroleandauditingfunctionofaSAIandarerelevantandusefulforallmembersofINTOSAI;theyprovideanoverviewandfurtherreferencesto thefullsetofISSAIswheremoreoperationalguidanceisprovidedandtheyprovideaconsistentsetofconceptsandanimprovedlink between ISSAI 1 The Lima Declaration and the newset of comprehensive guidelines that were launched in2010.” Subsequently the project group will consider howthe ISSAIs 10-99 and 1000-5999 can be aligned to therevised fundamental auditing principles where necessary.Members of the project group are Austria, Brazil, China,Denmark(Chair),EuropeanCourtofAuditors,India,Mexico,Norway,Slovakia,SouthAfrica,Sweden,UKandUSA.

content—what it proposes

structure of the documents

The revised ISSAI 100 will establish the fundamental,commonprinciplesandconceptsapplicabletoallpublic

n The INCOSAI XX also highlighted the relevance of the ISSAI framework as a comprehensive set of standards and guidelines that support SAIs around the world in their daily auditing practice. n

GrouppictureharmonisationProjectIssAIspotlight

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sector audits. The revised ISSAIs 200, 300 and 400 willelaborate the principles and concepts as they applyspecifically in financial, performance and complianceaudit.Thisstructuremayseemobvious,butitisactuallyafirstimportantstepforward.

Neither the LIMA declaration (which does not usethe concept of compliance audit), nor the “old” level3 documents (which are roughly organized accordingtostepsortheauditprocess)ormerereferencetotheframeworks used in private sector auditing were ableto form a conceptual high level basis for the currentstructure of the existing guidelines of level 4. Thecurrentproposalthuslaysagroundworkforabalancedviewofpublicsectorauditingwithaviewonallthreebranches.

The following graphic presented at the PSC SteeringCommittee in Johannesburg in June 2012 explains thewaythedocumentswillworktogether.

How does it work as a package?Mandates of SAIs—provide for different of audit work

ISSAI 100 Fundamental Principles of Public Sector Auditing

ISSAI 300Performance

Auditing

ISSAI 400Compliance

Auditing

ISSAI 200FinancialAuditing

GeneralAuditingGuidelines

TheISSAI100providesfundamentalprinciplesapplicableto all public sector engagements (represented by thebluebars)whatevertheirformorcontext.TheISSAI200,300 and400 further elaborate on the principles to beappliedinthecontextoffinancialauditing,performanceauditing and compliance auditing. They take up theideas of ISSAI100 and—when needed—further definethe principles in the context of the specific scope ofapplicability.

Public sector auditing

One of the topics discussed in the project was: shouldthenew level3defineauditing? Should itdefinepublicsectorauditing?Shouldtherebeasignificantdifferencein definition of auditing for the public sector comparedtocommonlyuseddefinitionsonauditing?Howshouldthebalancebefoundbetweenfindingnewfacts,makingrecommendations, providing assurance and reducingauditrisk?

Thecurrentproposaldescribesauditingasasystematicprocessofobjectivelyobtainingandevaluatingevidenceto determine whether information or actual conditionscorrespond with established criteria. Moreover, centralaspectsofthepublicsectorenvironmentoftheworkofSAIs are put into focus: The constitutionally mandatedtask of SAIs, its interrelationship with legislature anddemocracy, and its context of citizens paying taxes andentrusting them to public institutions. This proposal

strives to place public sector auditing with its centralideas of performance auditing, financial auditingand compliance auditing on the map of professionalauditing, while being flexible enough to integrate newmethodologicaldevelopments.

Elements

The proposed ISSAI 100 takes another step in settingthe background for public sector auditing by definingcrucialelementsoftheaudit:Theroleoftheauditor,theresponsible party, the intended users, subject matter,subjectmatterinformation,andcriteria.Bysettingtheseelements as fundamental principles, ISSAI 100 wouldstrengthen the consistency of all types of public sectoraudit. The necessary flexibility is retained by specific

n The current proposal thus lays a groundwork for a balanced view of public sector auditing with a view on all three branches. n

n The proposed ISSAI 100 takes another step in setting the background for public sector auditing by defining crucial elements of the audit: The role of the auditor, the responsible party, the intended users, subject matter, subject matter information, and criteria. n

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references to the underlying subject matter for eachbranchofaudit.

With reference to performance audit this proposalactually widens the application of these elements,since until now no ISSAI on performance auditsincluded these concepts. To do so, the proposalincludes broader concepts, such as on criteria, whichmay include “what should be according to laws,regulationsorstandards,what isexpectedaccordingtosoundprinciplesandbestpractice,andwhatcouldbe(givenbetterconditions).”

confidence and Assurance

One of the difficult tasks of the project group was toexplain and define the way the different types of auditrelatetotheconceptofassurance.Thisconceptisofkey

importance in the auditing standards for financial andcompliance audit, but does not appear in the INTOSAIstandardsforperformanceaudit.Theprojectgrouphaveaddressedthisinthefollowingway:

Depending on the purpose of the audit, the level ofconfidencemaybecommunicatedindifferentways;

A) By providing an explicit statement on the level ofassuranceinanopinioninastandardizedformatorinaconclusioninanon-standardizedform.

B) Byproviding aconsistentandpersuasive descriptionof the audit objective, the evidence obtained, thefindings,theconclusionsandrecommendations.

Inbothcasestheauditsarerequiredtobeobjectiveandtheresultsarebasedonfindingssupportedbysufficientandappropriateauditevidence.

Principles

Thefourdocuments—ISSAI100,200,300and400—willshare a common structure that is pointed out in thefollowing graphic that is actually part of the proposedISSAI 100: there are principles that relate to specificprocessstepsoftheaudit,andgeneralprinciplesthatarerelevantinallprocesssteps.

n This concept is of key importance in the auditing standards for financial and compliance audit, but does not appear in the INTOSAI standards for performance audit. n

Principles to be applied in conducting an audit

Ethics & Independence Quality control

General Principles

Engagement teammanagement & skills Audit / engagement risk

Materiality Profesional scepticismand judgement Documentation Communication with auditees

and other stakeholders

Principles related to the Audit Process

Activities related to planningthe audit

• Establish the terms of theengagement.

• Obtain an undestanding.• Conduct risk assessment or

problem analysis.• Consider risk of fraud.• Develop an audit plan.

Activities relatedto performing the audit

• Perform the planned auditprocedures to obtainaudit evidence

Activities related to evaluatingaudit evidence, concluding

and reporting• Evaluate audit evidence• Prepare report

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How to make reference to the use of the IssAIs

Forthefirsttime,theISSAIswilladdresstheauthorityoftheISSAIandcontainspecificguidancetoSAIsconcerningoptionsonhowtomakereferencetotheuseoftheISSAIs.Basically, the proposal defines two options on how toformulatestatementsofcompliance:

Option 1: “We conducted our audit in accordance with national standards based on (or consistent with) the Fundamental Auditing Principles (level 3) of the International Standards of Supreme Audit Institutions”.

Option2—IfISSAIsatlevel4areadoptedastheauditingstandard:”We conducted our (financial, performance and/or compliance) audit in accordance with the International Standards of Supreme Audit Institutions (on financial, performance and/or compliance auditing)”.

Thus, SAIs would need to adopt standards. These canbe national ones (which then need to comply with theISSAIsatlevel3,theFundamentalAuditingPrinciples),ortheycanbetheISSAIsat level4.AcarefulconsiderationofthesetwooptionswillbeatthecenterofmanySAI´schoicesofimplementation.

Thetwooptionsalsomean:therewillbenowayaroundcompliance with level3 if a SAI is interested in making

reference to the ISSAI framework. This considerationhighlights the relevance of active participation in theexposureprocess.

next steps—what your sAI should do

ISSAI 100 and 300 have been sent out for exposureaccording to the Due Process for INTOSAI ProfessionalStandards on30 August2012. ISSAI200 and400 wereexposedby15November2012.Theexposureperiodwilllastuntil15February2013.

This means that ISSAI 100 as the most fundamentalpaper is out for comments for a considerable time andcanbeconsidered togetherwith thedetailedpapersonthe threeauditbranches.Thus, the interactionbetweenthegeneralprinciples(e.g.oncompliance)andthemoredetailed principles about specific requirements for aspecifictypeofauditcanbeanalysed.

So what does that mean?The following graphic showsthestepsoftheDueProcess:

n The two options also mean: there will be no way around compliance with level 3 if a SAI is interested in making reference to the ISSAI framework. n

Due process

Initialassessment

ProjectProposal

ExposureDrafts

Endorsmentversions

Approvalby

SteeringCommittee

Approvalby

SteeringCommittee

Approvalby

SteeringCommittee

Confirmationby

GoverningBoard

(Preliminarydrafts)

Public Exp osure (90 days minimum)

ISSAI100, 200,300, 400

Endorsementby

INCOSAI

Maintenanceresponsibillity

(subcomittees)

Monitoringand regular

reviews Drafting byproject group/Subcommittee

Allcommentspublished

n This means that ISSAI 100 as the most fundamental paper is out for comments for a considerable time and can be considered together with the detailed papers on the three audit branches. n

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By the decision to expose the documents, the steeringcommitteeapprovedthat

• theexposuredraftfulfilsthepurposeoftheprojectandisofhighquality;

• that any overlaps and inconsistencies in the ISSAIframeworkhavebeenappropriatelyaddressedand

• that the exposure draft can be submitted for publicexposure.

However,itisuptoeverySAItogiveinputonthecontentofthedocument.

The final steps for the documents will be a PSCsteering Committee Meeting in June 2013 to decideon an endorsement version to be presented first to theGoverning Board in October 2013 and then to the XXIINCOSAIinOctober2013.

conclusion

Implementation of the ISSAIs is a strategic goal ofthe INTOSAI as expressed—among others—in theJohannesburg Declaration2010. A variety of measuresare taken to enhance and strengthen this process—from a CBC guide on Strategic Consideration beforeimplementing the ISSAI, to IDI initiatives, the SAIperformance measurement framework of the INTOSAIWorking Group on the Value and Benefits of SAIs totheworkoftheIDI tohelpSAIs intheday-to-dayworkof implementation. All of those measures assume agivenpurposeandstructureof the ISSAIson theauditprocess—theverybasisofwhichisformedthroughtheISSAIHarmonisationProject.

TheessenceofthisarticleistopointouttheimportanceofthedocumentsresultingfromtheISSAIHarmonisationProject, which are currently exposed for comments.They are worthy of your attention—in exposure and inimplementation.SowhathappensafterfinalizationoftheHarmonisationProject?ItwillbeuptotheindividualSAIsand to the INTOSAI community to deliver on the ISSAIsmain promises: quality, credibility and professionalismby further developing audit practices and sharingexperiences.

For more information about the ISSAI HarmonisationProject, documents etc. on the project’s website pleasevisitthefollowingwebsite:

http://www.psc-intosai.org/composite-280.htm

n So what happens after finalization of the Harmonisation Project? It will be up to the individual SAIs and to the INTOSAI community to deliver on the ISSAIs main promises: quality, credibility and professionalism by further developing audit practices and sharing experiences. n

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The INTOSAI Development Initiative has embarked on the ISSAI Implementation Initiative from 2012. This World Bank funded project, in collaboration with different stakeholders seeks to coordinate the implementation of ISSAIs across eligible SAIs. The Programme aims at strengthening the institution of Public Audit across the SAIs through Capacity Development in implementation of the standards.

Background

The20thINTOSAICongressadoptedacomprehensivesetofInternationalStandardsofSupremeAuditInstitutions(ISSAIs[1])thatcoverthecoreauditdisciplinesoffinancial,

complianceandperformanceaudits.TheadoptionoftheISSAIsrepresentsamilestoneinthestrengtheningoftheglobalpublicsectorauditprofessionandwill serveasakeytoolforsecuringgreateruniformityinthewaypublicsector auditing is conducted.This will in turn contribute to improving audit quality; facilitate benchmarking ofcurrentpracticesagainstinternationallyrecognizedbestpractices, and for ensuring increased credibility of SAIauditreports.

[1] TheISSAIsareavailableon:www.issai.org

For the ISSAIs to fulfil their potential, they need to beapplied globally by the SAI community. A vast majorityof the190 INTOSAI members are located in developingcountries. Many of these SAIs will face challenges inthe successful implementation of the voluminousISSAI framework. The ISSAIs are frequently technicaland complex, and may represent challenges in termsof securing coherence between national manuals andstandardsandtheISSAIs,andinbuildingstaffcapacitytoensuresuccessfulimplementation.

INTOSAI’sStrategicPlanenvisages“theroleoftheINTOSAIDevelopment Initiative (IDI) will be to take forward theimplementationoftheISSAIs”.TheSAIsthemselveshavealso expressed a need to become more professionalin their work, as reflected in the 2010 SAI StocktakingReport [2]. The INTOSAI Regional Secretariats have alsoemphasizedtheneedtostrengthenthequalityofauditworkintheirregions.

[2] Availableon:http://www.idi.no/artikkel.aspx?mId1=24&AId=407

ISSAIs will help SAIs globallyto enhance their…

Quality Credibility

Professionalism

n The adoption of the ISSAIs represents a milestone in the strengthening of the global public sector audit profession and will serve as a key tool for securing greater uniformity in the way public sector auditing is conducted. n

THE IssAI ImPLEmEnTATIon InITIATIVE. sTAnDArDIzATIon oF AUDIT sKILLs For sTrEnGTHEnInG PUBLIc AUDITInTosAI Development Iniciative (IDI)

n For the ISSAIs to fulfil their potential, they need to be applied globally by the SAI community. n

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The IssAI Implementation Initiative

TheISSAIImplementationInitiative(3iProgramme)2012-2014willbeplanned,designed,delivered,andmonitoredbytheIDIinpartnershipwithINTOSAIProfessionalStandardsCommittee (Chair-Denmark), Subcommittee on FinancialAudit(Chair-Sweden),SubcommitteeonPerformanceAudit(Chair-Brazil),SubcommitteeonComplianceAudit (Chair-Norway), INTOSAI Capacity Building Committee(Chair-Morocco)andtheINTOSAIRegions.TheWorldBankisthefinancingpartnerforphase1ofthisprogramme.Throughthe3iProgramme,IDIwouldberesponsibleforsupportingISSAIimplementationinSAIs.TheimplementationitselfistheresponsibilityanddecisionoftheSAIs.StandardsettinganddefiningtheISSAIswouldbedonebythePSCanditssubcommittees.All3iProgrammeproductsarefaithfultothedefinedISSAIs.Theprogrammewillcoverlevel4ISSAIs-pertaining to the three streams of audit, as also level 2ISSAIswhicharetheprerequisitesforfunctioningofSAIs.

Programme Description

objectives of the Programme

Theobjectivesoftheprogrammeare:

• The3iProgrammeplannedfor2012to2014willbethefirst phase in supporting ISSAI implementation. A longtermstrategyforISSAIimplementationwillbedeveloped.

• To facilitate ISSAI implementation rollout (financial,compliance and performance audit) at regional andSAI levelfordevelopingcountriesofEnglishspeakingregions beginning 2012 and in Arabic, French andSpanishbeginninginlate2013.

• Toprovideawebbasedknowledgesharingforumfor3iprogrammeandproducts.

strategy for programme implementation

The programme implementation strategy for the 3iProgrammemaybeanalysedattwolevels:

Global and regional level

Global Public Goods

The 3i Programme would aim at creating GlobalPublic Goods which would be used by the Public AuditcommunityovertheyearstoassessandrefinetheirlevelofimplementationofISSAIs.

iCATs as a vehicle for ISSAI implementation

In order to assess ISSAI compliance at level two andlevel four, three teams of ISSAI experts from the subcommittees and ISSAI mentors from the regions willdevelop ISSAI Compliance Assessment Tools (iCATs) forfinancial, compliance and performance audit. iCATs aretoolsforneedsassessmentvis-a-vis theSAIs.TheywouldseektoassessthelevelofcomplianceoftheSAIswiththe

Level 1Founding Principles

ISSAIs

Level 2Prerequisites for SAIs

Level 3Fundamental Auditing Principles

Level 4Auditing Guidelines (financial,

compliance and performance audit)

INTOSAIRegional Bodies

E-learning Partner:UNTAR

INTOSAICapacity Building

Commitee

IDI

World Bank

INTOSAI PSC• Financial Audit SC

• Performance Audit SC• Compilance Audit SC

Participating SAIs

n Through the 3i Programme, IDI would be responsible for supporting ISSAI implementation in SAIs. n

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ISSAI requirements.The compliance would be confirmedby seeking supplementary information. Wherever theSAI isnotabletomeetthecompliancerequirementsthereasonsthereofwouldbeascertainedandanalysed.ISSAIfacilitatorsfromtheregionswillbetrainedintheuseoftheiCATsasthefirstpartoftheISSAIcertificationprogramme.

Audit Template Manuals and Model Audit Files

ThesewouldbenefittheglobalpublicauditcommunitybyconsolidatingtherequirementsofISSAIs.Thesewouldbeworkeduponin2013.

ISSAI Certification Programmes [3]

iCATsandISSAIbasedauditsmanualsandmodelfilesforfinancialaudit,complianceauditandperformanceauditwillbeusedtocreateacertifiedpoolofISSAIfacilitatorsthrough an ISSAI Certification Programme. The ISSAIcertification programme will be offered to participantsfrom member SAIs of developing countries in INTOSAIregions. The ISSAI certification programme will consistofselectionofparticipants,e-courseoniCATsandISSAIsdeliveredthroughtheUNITARplatform,disseminationofISSAI compliant manuals and model audit files, projectworkandfacetofaceworkshopsforfacilitationskills.Allparticipants who successfully complete the programmewillbecertifiedasISSAIfacilitators.

[3] SAIsfromcountrieseligibleforsupportaspertheOECD-DAClist2012

ISSAI Knowledge Network

The IDI will partner with UNITAR [4] to develop a webbasedknowledgesharingforum.Theforumwillprovidedetailedinformationonthe3iprogramme,linkstootherwebsites, access to 3i programme products, interactiveforum for discussions and knowledge sharing relatedto ISSAIs, webinars and video conferences, project work,onlinementorsupportforimplementationofISSAIs.

regional Level and sAIs

• IssAIImplementationstrategy:Regional3iManagementworkshopswillbeconducted infiveregionsforSAI topmanagementtocreateawarenessofISSAIs,discussandstrategiseconsiderationsintheimplementationofISSAIsandshareexperiencesrelatedtoISSAIimplementation.

• IssAI based cooperative Audits would be facilitatedtowardsregionalcoordinationandcooperation

• IssAI implementation in regions:3i review meetingsand workshops will be held to ascertain the resultsoftheiCATsandgetcommitmentonimplementationstrategy. Based on the results of iCATs and level ofreadiness and commitment of SAIs, support will beprovidedforimplementationoflevelfourISSAIstoatleast30SAIsintheEnglishspeakingregions.

milestones of the Programme

ThePlanningMeetingfor3iProgrammeheldinJohannesburgin May 2012 kicked off the programme by finalising theProgrammedesignandsettingtherolesandresponsibilities.AcooperationmeetingwasheldinJune2012withUNITAR.

[4] UnitedNationsInstituteforTrainingandResearch

Global Public Goods

• ISSAI Compliance AssessmentTools (2012)

• Audit Template Manuals andModel Audit Files (2013)

ISSAI Certification Programmes

• E-learning courses in financial, performance & compliance Audit ( 2012-13)

• Global Pool of atleast 180 ISSAI Facilitators

Transregional ISSAIKnowledge Network

• Interactive web based forumfor expert support and knowledge sharing

n Wherever the SAI is not able to meet the compliance requirements the reasons thereof would be ascertained and analysed. n

ISSAI Implementation Strategy ISSAI Based Cooperative Audits

• By ISSAI Facilitators and auditteams

• Regional level coordinationand cooperation

• Regionl 3i Management Workshops

• ISSAI Compliance Assessmentsby SAIs

ISSAI Rollout in SAIs

• Support for startup of SAI levelrollout

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The3i Product Development Meeting was held in Osloin July-August 2012. The ISSAI experts and mentorswere exposed to UNITAR e-learning platform, design,development and delivery of online courses. The ISSAICompliance Assessment Tools were drafted. Threee-learning courses for iCATs were developed. ThereafterpreparationshavebeenunderwayforthenominationofparticipantsforISSAICertificationProgrammes.Invitationpackages were sent to 87 SAIs in five INTOSAI regionscallingfornominations.Theseonlinee-coursesarebeingheld from22 October to7 December2012 and at least261 participants are being trained. Three Managementworkshopsforthe3iProgrammearebeingconductedinNovember-December2012forSAIsbelongingtoCAROSAI,AFROSAI-EandPASAI.

3i Programme and EUrosAI

SomeoftheSAIsinEUROSAIareclassifiedasdevelopingcountriesandareeligiblefordonorsupport.Someofthemalsohavedualmembership.IDIwillpartnerwitheligibleSAIsinEUROSAIforregionalandSAIlevelactivitiesofthisprogramme.TheseSAIsareAlbania,Armenia,Azerbaijan,Belarus, Bosnia and Herzegovina, Former YugoslavRepublic of Macedonia, Georgia, Kazakhstan, Moldova,Montenegro,Serbia,TurkeyandUkraine.

3i management workshop for EUrosAI

This workshop is planned to be held in Sarajevo, Bosnia inFebruary2013foreligibleSAIsinEUROSAI.Itwillbeheldonthesamelinesastheotherregional3iManagementworkshops.

Long Term strategy for IssAI Implementation

Theprogrammedescribedintheprevioussectionsisonlythefirstphaseofthe3iprogramme.ImplementingISSAIsinaSAIwouldrequireacomprehensivelookattheinstitutional,organizationalandprofessionalstaffcapacityoftheSAI.Itisexpectedtobeastrategicchangemanagementprocess,veryakintothecapacitybuildingprocessinanSAI.Assuchthesupportfor ISSAI implementationneedstobelookedatfroma longtermperspective tosupportdevelopmentof institutional and organizational capacity in terms ofsupportingSAIsintermsofimprovingtheirindependenceand legal framework, assisting in enhancement ofleadership and SAI governance, promoting accountabilityand transparency mechanisms in SAIs and helping theSAIs in strengthening their strategic partnerships withkey stakeholders like Parliaments, audited entities, mediaand civil society organizations. Besides the institutionalaspects of ISSAI implementation, SAIs would also requiresupport in implementing ISSAIs pertaining to individualaudit areas, including present areas of continuingsignificance e.g. environment audit and new emergingaudit areas of INTOSAI focus. It is envisaged that theseconsiderations for ISSAI implementation would form thebasisoftheIDI’sfuturestrategicplan2014-2021.n

TheIssAIcertificationProgrammeisavailableatwww.unitar.org/idi3i

n The 3i Product Development Meeting was held in Oslo in July-August 2012. The ISSAI experts and mentors were exposed to UNITAR e-learning platform, design, development and delivery of online courses. n

n This workshop is planned to be held in Sarajevo, Bosnia in February 2013 for eligible SAIs in EUROSAI. n

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The key tasks of Goal Team 2 “Professional Standards”include:

1. RaiseawarenessoftheISSAIandINTOSAIGov.2. SupportEUROSAImembersinimplementingthem.3. Contribute to the further development of these

Standards.

Since its inaugural meeting in October 2011, GoalTeam2 has taken a number of actions to implementthesetasks.Oneofourmainactivitiesisthetranslationof ISSAI into Russian. The Accounts Chamber of theRussian Federation is providing the Russian ISSAItranslations, and we appreciate very much thisimportant contribution. As soon as the new EUROSAIWebsite has been launched, GoalTeam2 will publishtheRussianISSAItranslations.

To support the EUROSAI members in implementingthe ISSAI, Goal Team 2 has liaised with the INTOSAIDevelopment Initiative in launching their “ISSAIImplementationInitiative”,thatiscalled“3iProgramme”.Nine EUROSAI members participate in this globalprogramme:theSAIsofAlbania,BosniaandHerzegovina,Georgia,Kazakhstan,theFormerYugoslavianRepublicofMacedonia,Moldavia,Serbia,TurkeyandUkraine.

survey on the application of IssAI within EUrosAI

ToplacefurtheractivitiessupportingtheapplicationoftheISSAIonasolidfooting,inspring2012,GoalTeam2

conductedasurveyontheimplementationoftheISSAIwithinEUROSAI.About75%ofEUROSAImemberSAIs(37outof50)respondedtoourquestionnaire.TwoSAIsinformedusthattheywerealreadyapplyingtheISSAI,35SAIs(70%oftheEUROSAIcommunity)returnedthecompletedquestionnaire.

results

MostEUROSAImembersalreadyapplytheISSAI,usuallyaspecificpartoftheframework.ThefollowingISSAIlevelshavekeypriority:

1. Foundingprinciples.2. PrerequisitesforthefunctioningofSAIs.3. Fundamentalauditingprinciples.

At level 4, focus is placed on the implementationguidelines on financial, performance and complianceaudit.MostSAIsusethemasabasistodeveloporreviseauditmanualsandguidelines.

The main obstacles for applying the ISSAI are limitedhuman resources, followed by financial reasons andlanguageproblems.

Tosolvetheseproblems,SAIsrelyonvariousstrategies:SAIs conduct training, translate the ISSAI in theirnational languages, adapt their audit manuals to the

EUrosAI GoAL TEAm 2—APPLIcATIon oF IssAI wITHIn EUrosAIProf. Dr. Dieter EngelsPresidentoftheBundesrechnungshofChairmanofGoalTeam2“ProfessionalStandards”

n One of our main activities is the translation of ISSAI into Russian. n

n As soon as the new EUROSAI Website has been launched, Goal Team 2 will publish the Russian ISSAI translations. n

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ISSAI.Inaddition,theycooperatewithotherSAIsintheframeworkofINTOSAIandEUROSAI.

SAIs consider a top priority support for the applicationoftheISSAIwithregardtoISSAIlevel4,andtheINTOSAIGov.TheformsofsupportthatSAIsappreciatemostareseminars,cooperationorconsultingwithotherSAIsandguidelines,handbooksorgoodpracticeexamples.

IssAI Translations in national languages

BesidestheofficialEUROSAIlanguages,severalISSAIhavealso been translated into 16 other national languages(Azerbaijani, Dutch, Bosnian, Bulgarian, Croatian, Czech, Estonian, Macedonian, Hungarian, Lithuanian, Norwegian, Polish, Portuguese, Romanian, Serbian, and Slovak).

PartsofthesetranslationsareavailableontherespectiveSAIs’ websites. For further information please contactGoalTeam2([email protected]).

recommendations

1. Goal Team 2 should further focus on encouragingtranslations,organisingseminarsandworkshopsand

arrangecooperationorconsultationwithexperiencedSAIs,e.g.viaanexpertdatabasewithGoalTeam3.

2. As the large majority of SAIs already apply the ISSAI,there is no need for a second/follow-up awareness-raisingseminar.Ratherthanthat,GoalTeam2shouldplace focus on providing support on the applicationofISSAIandalsoexploretheoptionofprovidingISSAIsessionsaspartofotherGoalTeams’trainingcourses,e.g.forseminarsonfinancialorperformanceaudit.

3. Goal Team 2 should also focus on collecting anddisseminating to EUROSAI members any relevantguidelines,handbooksandgoodpracticeexamplesontheapplicationofISSAI.

4. Last but not least, Goal Team 2 should enhancecooperation with bodies of EUROSAI and INTOSAI,especially theProfessionalStandardsCommitteeanditssub-committees,aswellaswithexternalpartners(suchasECIIA—EuropeanConfederationof InstitutesofInternalAuditing).

ThereportontheevaluationofthesurveyispublishedontheEUROSAIWebsite.AtitsmeetinginNovember2012,GoalTeam2willdiscussonlessonslearntandnextstepstoimplementtheresultsofthesurvey.n

n The main obstacles for applying the ISSAI are limited human resources, followed by financial reasons and language problems. n

n The report on the evaluation of the survey is published on the EUROSAI Website. n

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Background

By adopting the EUROSAI Strategic Plan2011-2017, theVIIIEUROSAICongressheldinLisbonin2011setupfourGoalTeamstoimplementtheStrategicGoals.

Goal Team 3 “Knowledge Sharing” is in charge ofencouragingcooperationandexchangingofexperienceamong EUrosAI members, within InTosAI and withexternalpartners.

As of the end of September 2012 GT3 is composed ofrepresentativesfrom14sAIs:

chair:SAIoftheCzechRepublic.

members: SAIs of Austria, Belgium, Estonia, FormerYugoslav Republic of Macedonia, Hungary, Lithuania,Poland,theSlovakRepublic.

Members of GT3 are EUROSAI members who volunteertoparticipateintheworkoftheteam.Theywerechosenamongthevolunteerswithaviewtoensuretheteamhasrecoursetoeachofthespecialismsrequiredtoachieveitsobjectives.

Ex-officiomembers:SAIsofNorway(WGonEnvironmentalAudit),Portugal(TFforAuditandEthics),Switzerland(WGon Information Technologies), Ukraine (TF on Audit ofFundstoCatastrophesandDisasters).

EUROSAI Working Groups and Task Forces representsignificant achievements in the field of KnowledgeSharingwithinEUROSAI,fulfillingStrategicGoal3oftheEUROSAI Strategic Plan. From that reason are ex-officiomembers of GT3 and are represented by their chairs orrepresentatives appointed by them, with the necessarygivenauthority.

Invitedexpert:SAIofSpain.

TheEUROSAISecretariat(Spain)supportstheactivitiesofGT3 connected to training, cooperation, financial issues,EUROSAIwebsiteandEUROSAIpublication.

First steps

The first year of the implementation of the EUROSAIStrategicPlanwithinGT3wasdedicatedto:

n EstablishingGT3anditssubgroups.

GT3metforthefirsttimeinPrague,onthe16thand17thNovember2011.ThemeetingwasorganisedandchairedbytheCzechSAI.

At the meeting the concrete tasks for implementingStrategicGoal3werediscussed,thefirstdraftsofTermsofReferenceandofOperationalplanweredevelopedand the work schedule was fixed. At the same timefourGT3subgroupsformoreefficientandspecialisedoperationwereestablished:

EUrosAI GoAL TEAm 3—KnowLEDGE sHArInGThe sAI of the czech republic

n Members of GT3 are EUROSAI members who volunteer to participate in the work of the team. n

n From that reason are ex-officio members of GT3 and are represented by their chairs or representatives appointed by them, with the necessary given authority. n

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• SG1:foractivitiesconcerningtheuse/implementationof the results of the work produced by individualSAIs, EUROSAI and INTOSAI Committees and WGsas a tool for cooperation, and activities relating toauditcooperationwithinEUROSAI(3.1.1,3.1.2,3.1.4and3.2).

• SG2:fortrainingactivities(3.1.3).• SG3:forcooperationwithinEUROSAI(3.3).• SG4:forcooperationwithexternalpartners(3.4).

n DraftingoftheToR,OPandannualreport.

Terms of reference for GT3

InaccordancewithGeneralProceduresforEUROSAIGT3preparedadraftofitsToR,inliaisonwithGoalTeam4.

TheGT3ToRstateshowtheTeamsupportstheobjectivesof EUROSAI and its Strategic Plan, defines tasks,membership and invited experts, procedural provisions,relationship with INTOSAI and its Regional WorkingGroups and liaison with the Goal Team 4 and otherEUROSAIbodies.

TheGT3ToRstresses asignificant role ofEUROSAIWGsandTFstowardstheaccomplishmentofStrategicGoal3,performingknowledgesharingactivitiesforseveralyears.Thus,GT3considersandcloselycoordinatesitsstrategiesandtaskswiththeWGandTFactivities.

In spring 2012, Gt3 tor were adopted by Gt3 members and submitted to the eUroSaI Governing Board for approval.

operational plan for GT3

GT3 tasks and responsibilities are concretised by anoperationalplanasdefinedintheGeneralProceduresforGoalTeamsanddetailedinthePlanning,MonitoringandReportingRequirements(PMRR).

InaccordancewithGeneralProceduresforEUROSAIandPMRRGT3drafteditsoperationalplan.Theplaniscloselylinkedtotheobjectivesandimplementationactivitiesofthe Strategic Plan, covers the implementation period oftheStrategicPlanandissubjecttoannualreview.

In spring 2012, the Gt3 operational plan was adopted by Gt3 members and submitted to the eUroSaI Governing Board for approval.

Annual report

The GT3 Chair drafted the GT3 annual report for theGoverningBoardontheworkaccomplishedbytheteamtoachieveitsStrategicGoal.

The annual report summarises actions taken, resultsachieved,issuesforfollow-up,expectedoutcomesforthefuture,andanyotherrelevantinformation.

the Governing Board approved at its XXXIX Meeting in ankara in May 2012, Gt3 terms of reference and the operational Plan. the Governing Board also endorsed the annual report, and adopted the Gt3 financial request for organising an It seminar in Prague in September 2012.

Launching of key activities according to oP

Immediately after its establishment, GT3 started tooperateandhasalreadyseenthefirstresultsofitsefforts.

Implementation strategy 3.1

Enhance the use/implementation of the results of theworkproducedby individualSAIs,EUROSAIandINTOSAICommitteesandWGsasatoolforcooperation.

n At the meeting the concrete tasks for implementing Strategic Goal 3 were discussed, the first drafts of Terms of Reference and of Operational plan were developed and the work schedule was fixed. n

n The plan is closely linked to the objectives and implementation activities of the Strategic Plan, covers the implementation period of the Strategic Plan and is subject to annual review. n

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results already achieved

• AlistofexistingdatabasesofauditsconductedbytheEUROSAI members and existing products of INTOSAIandEUROSAIWGsandCommitteeswascreated.

• A list of questions regarding the new database ofauditsconductedisbeingdeveloped.

• PossibilitiesformarketingEUROSAIproductsandtoolsarebeingidentified.

• WGsandTFshavebeencontactedinordertofindouttheirplannedactivities.

• Relevant SAIs, which answered positively in the ETCsurveyaboutorganisingatrainingactivity,havebeencontacted in order to find out if they still plan toarrangetheseevents.

• TwoWGEAEUROSAIseminarsandonemeetingwereorganised:

— EUROSAI WGEA seminar on Best Practice inEnvironmental Auditing, October 2011 (WGEAChair-SAINorway).

— EUROSAI WGEA annual meeting, October 2011(WGEAChair-SAINorway).

— EUROSAI WGEA seminar on Sustainable FisheriesandForestManagement,May2012 (WGEAChair-SAINorway).

• TF on Audit of Funds to Catastrophes and Disastersmeetingwasorganised(TFChair-SAIUkraine).

• SeminaronApplicationofSoftwareToolsinAuditwasorganisedbytheCzechSAI inSeptember2012undertheauspicesandwithfinancialsupportofEUROSAI.

main expected results for the future

• The databases of audits conducted by the EUROSAImembersindifferentfieldsareestablished.

• Level of awareness of useable products and tools isincreased.

• Training events/knowledge sharing seminars carriedoutwithinEUROSAIarepromoted.

Implementation strategy 3. 2

EnhanceauditcooperationwithinEUROSAI.


• GT3surveyoninternshipsandstaffsecondmentswaslaunchedinSeptember2012(SAIofPolandasaprojectleader).

• GT3 survey on cooperative activities was launched inSeptember2012(CzechSAIasaprojectleader).


• Updatedlistidentifyingareasforcooperativeactivitiesatregionalandsub-regionallevels.

• Updated list of SAIs requesting or volunteering forcooperativeactivities.

• NumberofcooperativeauditswithinEUROSAI.• Number of EUROSAI members who have organised

internshipsorstaffsecondments.


EnhancecooperationwithinINTOSAI.


• JointconferenceEUROSAI/OLACEFSwasorganisedbytheSAIofGeorgiainSeptember2012.

• FurtherareasforcooperationwithinINTOSAIarebeingidentified.

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• New partnerships with INTOSAI Regional WorkingGroupsarebeingconsidered.

• On-goingcooperationEUROSAI-INTOSAIDonors.• MoUsignedwithASOSAI.


• Number of cooperation projects/activities withINTOSAIanditsRegionalWorkingGroupsandbodies.


Enhancecooperationwithexternalpartners.


• Areas for developing cooperation with ECIIA (TheEuropean Confederation of Institutes of InternalAuditing)areunderdiscussion.


• Listofpotentialexternalpartners indicatingpossibleformsandscopeofcooperationtobecreated.

• Numberofpartnershipswithexternalpartners.

Further steps

The second GT3 meeting will take place in Warsaw inDecember2012.

Duringtheworkingsessionsthefuturestepsconcerningcreatingauditdatabases,marketingofEUROSAIproducts,training, financing, cooperative audits and cooperationwithINTOSAIandEUROSAIwillbediscussed.

TheupdateofGT3operationalplanwillbeagreeduponaswell.

ThemembersofGT3areveryenthusiastic,hardworkingand completely devoted to the complex challengeswhich the field of Knowledge Sharing represents.Although GT3 is performing its activities for thefirst year only, it is already obvious that its memberssmoothly tackle the tasks assigned by the EUROSAIStrategicPlanandandhaveshownprogressandinitialresultsoftheirwork.

ForfurtherinformationpleasecontacttheCzechSAIasaChairofGT3:[email protected]

n During the working sessions the future steps concerning creating audit databases, marketing of EUROSAI products, training, financing, cooperative audits and cooperation with INTOSAI and EUROSAI will be discussed. n

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I. Implementation of the EUrosAI strategic Plan 2011-2017: setting up the governance framework and achieving the first results

The first year of the implementation of the EUROSAIStrategic Plan 2011-2017 was mainly dedicated tothe setting up and structuring of Goal Teams and tothe planning of their activities. Goal Teams are nowcompletely organised and all of them have completedtheir Terms of Reference and Operational Plans. TheseOperationalPlansincludethenecessarytaskstodevelopallthekeyactivitiesoftheStrategicPlan,complyingwithitandshowingthattheGoalTeamsareactuallyalignedwiththegoalsoftheorganization.

The teams have also organised themselves in order toimplement the Operational Plans. One must highlightthat all 4 Operational Plans assigned completely andveryclearly theresponsibilitiesfordeveloping tasksandactivities.ResponsibleSAIsandTaskGroupsareindicatedfor all of them.This is a very important key factor for asuccessfulimplementation,becauseeveniftasksarenotyetcompletelydetailed,itisclearwhoisaccountableforthem.

Besides the organisation of teams and the planningof activities, some concrete results have already beenachieved.

Aplanningandreportingframeworkisinplaceandsomeoperational activities have been completed, such as theredesignof theEUROSAIwebsiteand thesurveyon theimplementationofISSAIs.

Many concrete activities to achieve the Strategic Plandefinedoutcomesarenowinprogress.

During2011-2012EUROSAIGoalTeams implemented99%of the planned tasks and the whole of EUROSAI bodiesachievedresultsinallthe4StrategicGoals,mainlyinGoals3(knowledgesharing)and4(governanceandcommunication).

One must stress that EUROSAI had already a lot ofcooperativeactivitiesgoingon,carriedoutbytheEUROSAIGoverning Board, Secretariat,Working Groups, Task ForcesandCommittees.Theseactivitiesrelatemainlytoknowledgesharingandcooperation,andarealreadyfulfillingmanyoftheexpectedoutcomestoachieveGoal3ofEUROSAI.

II. The role of Goal Team 4: supporting, liaising and communicating

GoalTeam4putasignificanteffortinthefirstyearoftheimplementationoftheEUROSAIStrategicPlaninordertogiveitanadequategovernanceframework.

n The teams have also organised themselves in order to implement the Operational Plans. n

n This is a very important key factor for a successful implementation, because even if tasks are not yet completely detailed, it is clear who is accountable for them. n

EUrosAI GoAL TEAm 4—GoVErnAncE AnD commUnIcATIonThe sAI of Portugal

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Forthispurpose,GoalTeam4workedbytaskgroupsandheld 3 plenary meetings before the Governing Boardmeetingonthe28thMay,inAnkara,Turkey.

ThisGoalTeamissuedguidancetotheotherteamsandcoordinated the preparation of Goal Teams’ Terms ofReference,OperationalPlansandProgressReportstotheGoverningBoard.ItpreparedacompletesetofPlanning,Monitoring and Reporting Requirements (PMRR), to beused by all teams during the whole implementationperiod,andpresentedthefirstoverallassessmentreportontheimplementationoftheStrategicPlan.

The planning and reporting exercise allowed us toidentify important cross cutting issues that are criticalfor the success of the Strategic Plan implementation,

such as training, funding, surveys, cooperation andcommunication.

Workhasbeendoneandwillcontinueonthefollowingissues:

• Detectingoverlappingrisksbothintasksandworkingmethods and dealing with them, by removingredundant tasks, assigning specific coordinationresponsibilitiestoGoalTeam4taskgroups(aswasthecaseofsurveys)orbyrecommendingtoGoalTeamstocoordinate some specific activities with others. GoalTeamsarenowconsciousofthoserisksandareawareand organised to coordinate their efforts to avoidoverlapsandtooperatejointlywherecomplementaryorhingedactivitiesexistamongthem.

n This Goal Team issued guidance to the other teams and coordinated the preparation of Goal Teams’ Terms of Reference, Operational Plans and Progress Reports to the Governing Board. n

n During 2011-2012 EUROSAI Goal Teams implemented 99% of the planned tasks and the whole of EUROSAI bodies achieved results in all the 4 Strategic Goals, mainly in Goals 3 (knowledge sharing) and 4 (governance and communication). n

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• Clarifying theareaswhere trainingwillbedevelopedby the several GoalTeams,Working Groups andTaskForces.

• Coordinating Goal Team’s surveys, checking forpotentialoverlaps,keepinganupdatedlistofplannedsurveysandofsurveyresults;

• InteractingwithINTOSAIinseveral levels(Secretariat,Planning Director, Capacity Building Committee,Professional Standards Committee and SubCommittees, IDI and INTOSAI-Donor SteeringCommittee), through the Secretariats and throughmembers and invited experts in the several GoalTeams.

• Fosteringtheimplementationofpracticalcooperationactivities with other INTOSAI Regional Organisations,such as OLACEFS, ARABOSAI and ASOSAI, and otherpartners.

Besides the strong direct liaison with the other GoalTeams,GoalTeam4hasapproachedthecommunicationissue in the first year also by redesigning the EUROSAIwebsite with the aim of enhancing its communicatingrole,since itgives transparency toEUROSAIactivityandenablesafullandwiderdisseminationofinformation.

The content of the current website was updated andimproved,inordertorestructureitinafriendlywayandadapt it to the Strategic Plan.The website now houses

the documents produced by the Goal Teams and otherrelevant information (a more complete calendar, list ofsurveys,etc.).

AmockupofanewEUROSAIwebsitehasbeencompleted,followingawideconsultationprocess,andwasendorsedby the XXXIX GB meeting, bringing the communicationpossibilitiesevenfurther.

III. Goal Team 4’s next activities

For the following period, some major cross cuttingprojects are to be developed by GoalTeam4, namely inthefieldofcommunication:

• Theimplementationofthenewwebsite.• Adecisiononcollaborationtoolstobeused.• Acommunicationpolicytobeadopted.

n A mockup of a new EUROSAI website has been completed, following a wide consultation process, and was endorsed by the XXXIX GB meeting, bringing the communication possibilities even further. n

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The mentioned projects will be based in the followingassumptions:internalcommunicationshouldbethefirstpriority, communication within EUROSAI should be aselectronic as possible and networking for auditors andother professionals within EUROSAI community shouldbeimproved.

AnotherGoalTeam4’sprojectforthesecondyearisthereviewofEUROSAIfinancialrulesinordertoadaptthemtothenewEUROSAIframework.

In this period, specific attention will also be devoted tocoordinatetrainingandcooperation.

AllthetasksincludedintheGoalTeam4OperationalPlanareassignedto6TaskGroups(TG),whichweresetuptodealwith:

• Planningandreportingissues(TG1).• Liaisonandgoodpractices(TG2).• Training(TG3).• Funding(TG4).• Communicationandsustainabilitypolicies(TG5).• EUROSAIwebsite(TG6).

Next GoalTeam4 meeting will be held in late April, inMadrid, preparing the XL EUROSAI Governing Boardmeeting.n

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The EUROSAI WGEA Secretariat is currently focusing on the topic of sustainable development, as well as focusing on cooperative audits and other initiatives relevant for knowledge sharing and capacity building.

sustainable development

InlinewithXXINCOSAI’srecommendations,theEUROSAIWGEA is putting a special emphasis on the topic ofsustainable development. The topic of sustainability isincluded as a major focus area in the EUROSAI WGEAStrategy and Activity plan for the period 2012–2014,andhasbeenandwillbe implementedthroughvariousEUROSAI WGEA activities including seminars andmeetings.

Sustainable development is the main environmentaltopic of the upcoming 10th annual EUROSAI WGEAmeeting, which will be organised in Cyprus, 23-25October.RepresentativesfromkeyinstitutionssuchastheEuropeanSustainableDevelopmentNetwork(ESDN),andthe European Commission/DG Environment will sharetheir reflections on the current and future challengesrelatedtosustainabledevelopmentnationally,regionallyandglobally.Withthisfocusonsustainabledevelopment,the EUROSAI WGEA hopes to highlight the importanceof the topic forauditors,aswellasstrengthenauditors’capacities of integrating the issue into environmentalaudits. Prior totheannualmeeting,atrainingseminaronAuditingForestswillbeorganised.The trainingseminar

will focuson the implementationof the INTOSAIWGEAguidance on Auditing Forests, where a main topic issustainableforestmanagement.

The EUROSAI WGEA seminar Sustainable Fisheries and Forest Management, conducted in May2012, addressedchallenges related to sustainable management withinthe sectors of fisheries and forests in Europe, and howto approach the topic of sustainability in such audits.Keynote speakers concluded on the basis of existingknowledgethattheoutlookforforestsectorisgenerallypositive, whereas the fisheries sector faces much moresevere challenges as regards sustainable managementand development. Following the keynote speechesand SAI presentations, seminar participants discusseddifferentwaysinwhichSAIscouldintegratethetopicofsustainabilityintoenvironmentalaudits.

cooperative audits

Severalcooperativeauditsareon-goingwithinthefieldofenvironmentalauditing.ThecooperativeauditAdaptation to Climate Change — Are Governments Prepared? willbepublishedduringautumn2012.Theauditwaspresentedat the VII EUROSAI-OLACEFS conference in September2012, and the EUROSAI WGEA is working on bringingattention to the audit in relation to other international

n Sustainable development is the main environmental topic of the upcoming 10th annual EUROSAI WGEA meeting. n

n Following the keynote speeches and SAI presentations, seminar participants discussed different ways in which SAIs could integrate the topic of sustainability into environmental audits. n

2012-2013 AcTIVITIEs oF THE EUrosAI worKInG GroUP on EnVIronmEnTAL AUDITInG (wGEA)The EUrosAI wGEA secretariat

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events.Twoothercooperativeauditswillalsobefinalisedduringautumn2012;theNordic-Baltic-PolishCooperative Audit on Emissions Trading will finalise its report inOctober/November 2012, and the Cooperative Audit on Shipment of Wastewillbefinalisedbytheendoftheyear.Inadditionto thementionedcooperativeaudits,severalnew initiatives have been taken and some audits havestartedupin2012.

other activities

The EUROSAI WGEA is very pleased to be an ex-officiomember of EUROSAI Goal Team 3-Knowledge Sharing,and will work towards contributing productively andpositivelytothecooperationandexchangeofexperienceamongEUROSAImembers.

Currently, the EUROSAI WGEA secretariat is exploringoptionsforactivitiesrelatedtodataandmethodologyinenvironmentalauditing.TheaimistostrengthenmemberSAIs’capacitiesinthiscross-topicalarea,recognisingthatsolid data coverage and knowledge about methodologyisvitalforproducinghighqualityenvironmentalaudits.

Fact box

Background

TheEUROSAIWorkingGrouponEnvironmentalAuditing(EUROSAIWGEA)wasestablishedbya resolutionof the4th EUROSAI Congress held in Paris, 3 June 1999. ThecurrentChairof theEUROSAIWGEA is theOfficeof theAuditor General of Norway. Today, 44 European SAIs,including the European Court of Auditors, are membersoftheWGEA.

The EUROSAI WGEA Steering Committee supports thechair and gives strategic direction to the work of theEUROSAIWGEA.MembersoftheSteeringCommitteearethe European Court of Auditors, the Account Chamberof the Russian Federation, the Accounting Chamber ofUkraine, the Netherlands Court of Audit, the SupremeAuditOfficeoftheRepublicofPoland,Sweden’sNationalAuditOffice, theCourtofAuditofSlovenia, theINTOSAIWGEAsecretariat,andtheOfficeof theAuditorGeneralofNorway(Chair).

website and newsletter

Informationabouttheworkinggroup’sactivities,reportsfrom events, environmental audits and other relevantmaterialareavailableatEUROSAIWGEAwebsite:http://www.eurosaiwgea.org.Theworkinggroupalsopublishesabi-annualNewsletterwithnewsfromthememberSAIsand the EUROSAIWGEA secretariat, also available fromthewebsite.n

n Currently, the EUROSAI WGEA secretariat is exploring options for activities related to data and methodology in environmental auditing. n

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I. context

TheVIII EUROSAI Congress, held in Lisboa in June2011,in its final Conclusions and Recommendations, on thethemechallenges,demandsandresponsibilitiesofpublicmanagers and the role of supreme Audit Institutions, stated that “Within the framework of the EUROSAI Strategic Plan adopted by this Congress, EUROSAI build upon this theme, via a structured dialogue or any other adequate form of joint efforts, such as a taskforce, in order to be able to meet the challenges of change and share the results with the wider INTOSAI community. Mutual experience benefits all.”

Consideringthisrecommendation,andupononeofthestrategies of the Portuguese presidency, the EUROSAIGoverning Board agreed to set up a Task Force to dealwith Audit & Ethics, aiming primarily to promoteethicalconductandintegrity,bothinsAIsandinpublicorganisations.

Thisapproachmeetschallengesthathavebeenincreasinginaperiodofawidefinancialandeconomiccrisis,whichhas been causing growing difficulties for citizens. It isgenerally agreed that the roots of the problem lie onfailures of regulation and also on values’ breakdowns.These assumptions, in times of uncertainty and needto recall the basic principles, enhance the opportunityand the advantages of exploring and consolidating thistheme.

A meaningful number of European Supreme AuditInstitutions decided to participate in this Task Force,which,atthemoment,iscomposedbythefollowingSAIs:

• Tribunal de Contas,Portugal(Chair).• Drzavni ured za reviziju,Croatia.• Κυπριακη′ς Δημοκρατι′ας,Cyprus.• European Court of Auditors,EuropeanUnion.• Cour des comptes,France.• Állami Számvevoszék, Hungary.

• Ríkisendurskod un,Iceland.• Dr;fdtn zavo∂ za revυzυ©f, former yugoslavian

RepublicofMacedonia.• Algemene Rekenkammer,TheNetherlands.• Curtea di Conturi,Romania.• Racunsko Sodisce,Slovenia.• Tribunal de Cuentas,Spain.

AlbaniahasalreadyshownitsinterestinparticipatingintheTF,sowearegladlyexpectingthatsoontheSAIofthiscountrywilljoinourefforts.

OtherSAIsfromEuropearealsowelcometojoinus.

2. Kick-off meeting

The Task Force on Audit & Ethics (TF), under thechairmanship of Tribunal de Contas of Portugal, heldits 1st meeting (7-8 May), in Lisbon, aiming to shareexperiencesandpracticesand,mostofall,toprepareitsworkingplan,detailingtheobjectives,prioritiesandtasksandtheirscheduleandresponsibleSAIs.

Itwasafruitfulmeeting,almostlikeasmallseminar,duetotherelevantandinterestingpresentationstheredone.

• Ethicsandmitigationofconflictsof interests in theFrench“CourdesComptes”.

• TheCodeofEthicsoftheRomanianCourtofAccounts.

• EthicaltoolsusedintheCroatianStateAuditOffice.

• TheexperienceoftheEuropeanCourtofAuditors.

TAsK ForcE on AUDIT & ETHIcs

The sAI of Portugal

n Ethics is about making conscious choices in line with a framework of values and principles. n

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• Atoolforassessingintegrity:INTOSAINT.

• AuditofEthics:principles,modelsandmeasurementoftheethicaldimension—presentationofaBrazilianconcept.

• Evaluation of ethical infrastructure within Croatianpublicsector.

• AuditsperformedbytheNetherlandsCourtofAudit.

• Summaryofotherauditexperiences.

Our approach will face existing rules on minimums tobe complied but should also deal with the expectedappropriate behaviours. It will cross issues of fightingfraud and corruption, avoiding conflicts of interestsandcontrollingconducts.But itshouldalso touchuponmakingmoralexpectationsknownandguidingstaffanduponpossibleorganisationalmeasurestominimiserisks.

Inthat1stmeetingitwasagreedthatthemainprioritiesoftheTFshouldbetocollectalltherelevantexperiences,informationandgoodpracticesinthefield,todisseminate

this information, to promote a wide discussion on thepossible SAI’s role in enhancing ethical behaviour inpublicorganisationsandtofocusonmethodologiesandtraining.

The TF members also agreed on the main objectives,activities/projects, deadlines and expected resultsand outcomes. Several representatives offered to beresponsiblefortheseveralprojects.

AWorkingPlanfortheperiod2012-2014,comprisingtheassignment of responsibilities, was approved with thefollowinggoals:

Goal1

Contribute to raise public confidence in SAIs by supporting the implementation of ISSAI 30 (Code of Ethics).

In this context, the objective is to reinforce, frame andprovide robustness to the management of ethicalconduct, with practical and feasible tools that intendto help the institutions in their every day work. Someworkswereunanimouslyagreed:

• To list and gather all relevant guidance alreadyavailable.

• TolistandcomparehowtheseveralSAIsimplementtheethicalprinciplesofISSAI30.

• Toshareinformationandexperiencesonthefield.

n This approach meets challenges that have been increasing in a period of a wide financial and economic crisis, which has been causing growing difficulties for citizens. n

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• Tocompileasetofgoodpractices.• Tolistasetofexamplesofconcreteethicaldilemmas

arisingfromeachbasicprincipleandofpossiblewaystosolveorminimisethem.

• Toidentifygoodpracticesanddefinemodelcoursesforethicaltraining.

• Toincludetheinformationinthewebsite.

Goal2

Promote ethical conduct in public organisations through the SAIs’ activities.

Maintenanceofahighlevelofethicalbehaviourwithinthe organization will probably reduce corruption aswell as mismanagement and allow it to enjoy a highreputationwithinstakeholdersandthewholesociety.

Auditingethicscomesupasapracticalwaytoregularlymake the assessment of compliance with thosedemands,toevaluateatwhatlevelcontrolsystemsarestrongandrobust,andthatethicsstandsatahighlevelwithintheorganisation.

TheTFdecidedtoprovidesupporttoEuropeanSAIsonthismatterby:

• Listing and gathering material on all relevantexperiencesinauditingethics.

• Discussing the possible role of SAIs in auditingintegritymanagement.

• Sharinginformationandexperienceinaseminarandinthewebsite.

3. Upcoming Activities

The Task Force on Audit & Ethics will launch, earlyDecember, a survey on Promoting ethical behaviour within SAIs and in public institutions, addressed to allEUROSAImembers,tocollectandanalyseinformationonSAI’spractices.

The main purpose is to develop an in depth study overthismatterandmakeitavailabletotheotherSAIs.

Twoseminarsarealsopreviewedtobeheld:

• Thefirstone,aimingtoallowdiscussionandtoshareexperiencesandknowledgeabout theauditofethics,likelytobeheldinSeptember2013.

• Andanotherone, in thebeginningof2014,aimingtoshare experiences and the results of the TF works inwhatconcernsethicswithinSAIs.

TheTaskForceisseekingtocomplementitsactivitywithother INTOSAI initiatives, such as INTOSAINT and toshare experience with other INTOSAI Regions. A fruitfulcooperation is envisaged with CEPAT (Committee forPublicEthics,IntegrityandTransparency)fromOLACEFS.

The2ndTF meeting should be held in the1st quarter of2013,intheSAIofCroatia.n

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AccordingtotheUnitedNations, thenumberofnaturaldisasters in theworldhas increasedby4 timesand theeconomic damage because of disasters has increasedalmostby8timesoverthepast35years.

NolessdamagedcausedbyMan-causeddisaster.UnitedNations shows that Europe is second after Asia in thenumberofman-causeddisastersandthird in theworldinthenumberofvictimsintheseaccidents.

In this connection there is a real need to evaluate theeffectiveness of use of budgetary funds allocated toconsequenceseliminationofdisasters, theeffectivenessof existing methods of forecasting, the impact of takenmeasures to prevent or reduce to a minimum theconsequences of these disasters and the developmentof new methodological approaches for solving theseproblems.

Forthispurposein2004duringIIIEUROSAIWGEAMeeting(Sofia, Bulgaria) the Accounting Chamber of Ukraineemphasizedonneedforin-depthstudyandawarenessoftheSAIandcommunitytothethreatsofman-causedandnaturalcatastrophesaswellasenvironmentalthreatsinEurope.

InNovember2006at the IVEUROSAIWGEAMeeting inLuxemburgtheEUROSAIWGEASpecialSub-grouponthe

Audit of Natural, Man-Caused Disasters Consequencesand radioactive Wastes Elimination was established. Itbecametheresultofourpreviousinitiative.

The main achievement of the sub-group in 2007-2008wasaninternationalcoordinatedAuditoftheChernobylShelter Fund.9 SAIs took part in this audit. Should payattention to thefact, that internationalauditwithsuchamount of participants become the precedent in theEuropeanandevenintheworldpracticeofSAIs.

Taking into account the need for a deeper study ofthe problem of rising number of accidents, naturaldisasters and made-caused catastrophes, as wellas the need to involve the efforts of SAI for thepreventionandeliminationofhazards,atVIIEUROSAICongress (2-5 June 2008, Krakow, Poland), it wasdecidedtoestablishEUROSAITaskForceontheAuditofFundsAllocatedtoDisastersandCatastrophes.TheAccountingChamberofUkrainewaselectedChairmanoftheEUROSAITaskForce.

Since its establishment, the Task Force has carry outconsiderable work. Full Report about results of theTaskForce activities in 2008-2011 was presented on VIIIEUROSAI Congress (30.05-2.06.2011, Lisbon, Portugal),wheretheresolutiononextendingthemandateofTaskForceuntil2014wasaccepted.

Task Force consists of 13 Supreme Audit Institutions(SAIs): Armenia, Azerbaijan, Belarus, Belgium, Bulgaria,Hungary,Kazakhstan,Lithuania,Moldova,Poland,RussianFederation,Ukraineand theEuropeanCourtofAuditorsand3SAIsinvolvedasobservers:SAIofNorway,SlovakiaandItaly.

At the 39th EUROSAI Steering Committee Meeting(28-30.04.2012, Ankara, Turkey) the Chairman of theAccountingChamberofUkraineonthebehalfoftheTaskForcepresentednewWorkPlanon2012-2014.

n No less damaged caused by Man-caused disaster. United Nations shows that Europe is second after Asia in the number of man-caused disasters and third in the world in the number of victims in these accidents. n

PLAns AnD ProsPEcTs oF EUrosAI TAsK ForcE on THE AUDIT oF FUnDs. ALLocATED To DIsAsTErs AnD cATAsTroPHEssAI of Ukraine, chair of Task Force

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ThisdocumentsetsoutthestrategicgoalsandactivitiesofEUROSAITaskForcefortheperiodbetweentheVIIIandIXEUROSAICongressfrom2012to2014.

The EUROSAI Task Force Mission is to coordinate andconsolidatetheeffortsofEuropeanSAIstowardsincreasingtheir awareness of the disasters and catastrophes andto help governments develop the effective and efficientinstruments of disasters and catastrophes preventionandconsequenceselimination.

Inordertoachieveitsvision,EUROSAITaskForcewillworktowardsthefollowingstrategicgoals:

1. Encouraging joint, coordinated and parallel auditsof funds allocated to prevention and consequenceselimination of disasters and catastrophes within theframeworkofEUROSAI.

2. Developing the methodology in the field of auditingfunds allocated to prevention and consequenceseliminationofdisastersandcatastrophes,alsocapacitybuildingofSAIsinthissphere.

3. Enhancing the collaboration and setting up newcontacts between SAIs within the framework ofthe EUROSAI Task Force activities, conducting jointactivities, sharing information and experiences,trainings.

4. Developing a common approach and coordination oftheeffortswithINTOSAIandEUROSAIWorkingGroupsandbodies,aswellasotherinternationalorganizations.

Theachievementofmentionedgoalsshouldensure:

1. Maintaning a database of the audits of natural andman-causeddisastersinEurope.

2. Updating of the glossary of terms on auditing thefunds allocated to prevention and consequenceseliminationofdisastersandcatastrophes.

3. Completion and approval of Recommendations ofthegoodpracticesontheAuditofFundsAllocatedtoDisastersandCatastrophes.

4. Conducting of the audits of the funds allocated topreventionandconsequenceseliminationofdisastersand catastrophes within the framework of EUROSAITaskForce.

Itshouldbenotedthatthegrouphasalreadystartedtoimplementtheapprovedplan.

In2011theCoordinatedParallelAuditonProtectionoftheBlack Sea Against Pollution was completed. Joint reportwas signed and presented by Accounting Chamber ofUkraineattheIXMeetingoftheEUROSAIWorkingGroupon Environmental Auditing (October 2011, Stockholm,Sweden).

In 2011 the Accounting Chamber of Ukraine hasconductedfollowupauditofthepublicfundsandothersources of funding allocated to regulation, protection,research and reproduction of water biological resourcesandprovisionofenvironmentsafetyinthefishingbasinsof the Black Sea and the Sea of Azov conducted jointlywiththeAccountsChamberoftheRussianFederationin2010.

The follow-up audit revealed that there remainedpoor coordination of activities in the area of provisionof environmental safety in the fishing basin of theBlack Sea and the Sea of Azov. At the same time therecommendations on enhanced performance whileusingthestatefundsarestillrelevant.Inthisconnectionthe Accounting Chamber of Ukraine together with ourRussian colleagues initiated further audit activities,namely,fortheBlackSeaprotectionagainstpollution.

According to the findings of the Coordinated Black SeaAudit the Danube, the Dnieper and the Don rivers areamongthemainpollutantsoftheBlackSea.

Therefore the Accounting Chamber of Ukraine initiatedthe Coordinated Audit of the Implementation of theConvention on Cooperation for the Protection andSustainableUseoftheDanubeRiverin2013asthefirstphaseofanintegratedauditoftheBlackSeaprotectionagainst pollution that was supported by theTask ForcemembersandlistedinitsPlan.

Soon we are planning to determine the participants ofthisaudit,andduringtheannualEUROSAITFMeetingin2013,tosignajointpositionaboutconductingthisaudit.

Next stages of this work are audits in the sphere ofprotection the Dnieper and the Don rivers againstpollution.

n At the 39th EUROSAI Steering Committee Meeting (28-30.04.2012, Ankara, Turkey) the Chairman of the Accounting Chamber of Ukraine on the behalf of the Task Force presented new Work Plan on 2012-2014. n

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Asaresulttheseactivitieswillallowuscomprehensivelystudy the problem of pollution of the Black Sea and tomakeappropriaterecommendations.

Now in the framework within EUROSAI Task Forcethe coordinated audit of budget funds allocated forpreventionandconsequenceseliminationofdisasters isconducting. It is attended by representatives of 8 SAIs:Azerbaijan, Belarus, Italy, Kazakhstan, Moldova, Russia,PolandandUkraine.

Among planned activities of EUROSAI TF—conductingthe coordinated audit of funds allocated to preventionandsuppressionofnaturalfires.

WithinStrategicGoal2inanewWorkPlantheAccountingChamber of Ukraine has prepared the second draftGoodPracticeRecommendationsforauditsofthefundsallocated todisastersandcatastrophesfor thereportedperiod.

ThepurposeofthisdocumentistohelpSAIstoimprovethequalityofauditsinthefieldofpreventionanddisastermanagement through the selection, generalization anddisseminationofthebestpracticeauditsinthisarea.

InResolutionVIIIEUROSAICongressacknowledged thatthispaperservedausefulpurposebothfortheauditorsthemselvesandauditsingeneral.

ThispaperispublishedattheTaskForceweb-siteinthe“Documents” and any comments and suggestions arewelcomed.

The Recommendations are drawn upon the followingfindingsandresultsof:

• QuestionnairescompletedbytheTaskForcemembers.• MethodologydevelopmentsofSAIsinthisarea.• Analysisof thedatabaseof theauditsofnaturaland

man-causeddisastersandcatastrophesasappearsat

theTaskForceweb-site.Atthismomentthedatabasecontainsinformationabout50auditsconductedby17SAIssince2004.

Besides, the following papers documents andpresentations were summarized and studied whileupdatingtheRecommendations:

• MaterialsandpresentationsdeliveredattheTaskForcemeetings.

• Documents prepared by the United Nations,international and national organizations carryingon investigations of disasters, catastrophes andmechanismsoftheirmanagement.

• Materials of the INTOSAI Working Group onAccountability for and Audit of Disaster-related Aidand the INTOSAL Working Group on EnvironmentalAuditing.

• ExperienceoftheAccountingChamber’sparticipationintheCoordinatedDisaster-preparednessAuditwithinactivitiesof the INTOSAIAADA inorder toput to thepractical use of the Guidance for Supreme AuditInstitutionsonauditsofdisasterpreparednessthataretobeapprovedastheINTOSAIstandard(ISSAI).

The comments received from the members of the TFreaffirmedtheappropriatenessoftheconceptdocument,witnessed its usefulness and interest of the SAI—theparticipants of ourTask Force—in its improvement andfurtheruse.

Next year we will finalize the draft RecommendationswithpurposetoadoptitatthenextTaskForcemeetingandapproveatEUROSAICongressin2014.

Glossary of terms to conduct audits in the field ofprevention and consequences elimination of disasters,

n According to the findings of the Coordinated Black Sea Audit the Danube, the Dnieper and the Don rivers are among the main pollutants of the Black Sea. n

n Next stages of this work are audits in the sphere of protection the Dnieper and the Don rivers against pollution. n

n In Resolution VIII EUROSAI Congress acknowledged that this paper served a useful purpose both for the auditors themselves and audits in general. n

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whichcontainsmorethan40standardizedterms,createdbyTFmembers.

IV Meeting of the EUROSAI Task Force was held onMarch 21-23, 2012 in Poland that was attended by 28representativesfrom11EuropeanSAIs.

EUROSAI TF provides to establish permanent exchangeof experience among interested SAIs through thematictrainingsaswellastomaintaintheEUROSAITFweb-siteonthewebportaloftheAccountingChamberofUkraine.

EUROSAI TF plans to regularly report about the resultsof their work in print and electronic media of INTOSAIand EUROSAI, make progress report to the EUROSAI

Governing Board. Besides, the new Work Plan providesthe interaction with newly formed EUROSAI GoalTeam3“SharingKnowledge”,whichshouldconsolidateeffortstoshareexperiences,knowledgeandinformationamongthemembersofEUROSAI.

The active participation of EUROSAI TF members incoordinated audits shows the urgency and usefulnessof the TF, as well as interest in the chosen subjectconducted audits. The positive reaction of the public,governance of our countries on the objective resultsof ongoing audits is the evidence of the usefulness ofour activity. Methodological activities of our group isimportant too. It gives us confidence in direction andtacticsofourwork.n

n The active participation of EUROSAI TF members in coordinated audits shows the urgency and usefulness of the TF, as well as interest in the chosen subject conducted audits. n

n IV Meeting of the EUROSAI Task Force was held on March 21-23, 2012 in Poland that was attended by 28 representatives from 11 European SAIs n

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The strengthening of External Public control: Guarantee for Financial sustainability and Good Governance


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The role of the external control bodies for publicmanagementhasbeenacquiringanevermoreimportantcharacter for the proper functioning of democraticsocieties, especially on account of their importance forpromoting efficacy and efficiency in that management,and also because of their active intervention andparticipation in improving the governance andtransparencyofthebodiesresponsiblefordevelopingthepubliceconomic-financialactivity.

As well as the serious economic and social problemsoccasionedamongcitizensasawhole,theextraordinaryrelevance of the international economic and financialcrisisinrecentyearshasledtoaconsiderabledeteriorationin public finances, leading to high levels of deficit andborrowing, which is inevitably affecting the financialsustainabilityofthepublicsector.

WithinthescopeoftheEuropeanUnion,theseverityofthecrisisinthefinancialsystem—whichhasbeenespeciallysignificantintheSpanishcase—togetherwithproblemsof access to the capitals markets for some memberStates, has made it necessary to reinforce mechanismsofeconomicandfiscalintegration,amongwhichspecialmentioncanbemadeoftwoveryimportantinstrumentsadoptedin2012:theTreatyonStability,CoordinationandGovernanceintheEconomicandMonetaryUnion,knownastheFiscalPact,andtheEuropeanStabilityMechanism(ESM),whichconstitutesaveryimportantinstrumentforguaranteeingthefinancingofgovernmentsindifficulties,at a reasonable cost, with the aim of safeguarding thestabilityoftheEurozoneasawhole.

In relation to these questions, the role played by theexternal bodies in public control in economic-financialactivity becomes essential, given that they have todirect their efforts towards evaluating the proper way

to conduct that activity, not just from the point ofview of complying with the law and the principles ofgood financial management but also placing specialemphasis to make sure that the development of thatactivityaccordswiththeaimsofbudgetarystabilityandfinancialsustainability.Aswellascoveringthedifferentphases of the budgetary cycle, this control mustalso extend and give priority to verifying the properaccountability of the activity developed by the publicsectorineachfinancialyear.

At the same time, it is necessary for the control workto extend to any kind of manifestation of publiceconomic-financial activity, even when it is not beingdirectlydevelopedbypublicsectorbodies.So,therehasrecentlybeenaproliferationoftheappearanceofalargenumberoflegalinstrumentsinwhichitismoredifficultto accredit their public nature, but which form part ofthatpublicactivity.Amongotherexamples,onecancitebodieswhicharemostlyprivatelyownedbutwhichareeffectivelysubjecttocontrolbythepublicsector,certainassociative or merely instrumental figures, the newclasses of public contracts, the instruments of public-privatecollaboration,etc.

Therefore,sothattheexternalcontrolbodiescanperformtheir role properly, it is necessary to take a closer look

rEFLEcTIons on THE ImPorTAncE oF sTrEnGTHEnInG THE BoDIEs For THE ExTErnAL conTroL oF PUBLIc EconomIc-FInAncIAL AcTIVITy In THE PrEsEnT conTExTramón Álvarez de mirandaPresidentoftheSpanishCourtofAuditandSecretaryGeneralofEUROSAI

n It is necessary for the control work to extend to any kind of manifestation of public economic-financial activity, even when it is not being directly developed by public sector bodies. n

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at the scope of their auditing action in two aspects:on the one hand, to intensify control over the activityof organisations and bodies of the public sector, fromthe point of view both of examining the legality andcompliancewiththeprinciplesofeconomy,efficacyandefficiencyintheiractionsandfromthatoftheexerciseofthecontrolbasedontheprinciplesofbudgetarystabilityand financial sustainability; and, on the other hand, toextendtheexerciseoftheirauditingworktoallclassesofrealitiesorbusinessesimplyingapublicactivity, inspiteof being developed via instruments which traditionallydidnotcomewithinthescopeoftheauditingactionsofthecontrolbodies.

Moreover,wemustnotforgetthesignificantroleoftheexternalcontrolbodiesineverythingtodowithauditingcompliance with the rules of transparency and goodgovernance,whichishavinganevergreatereffectonthepublicpowersasawhole.Suchcontrolbodiesundertaketheirauditingfunctiononarangeoftheeconomicreality,suchasthepubliceconomic-financialactivity,whichhasahighdegreeofcomplexity,andsuchcontrolworkisofgreat importance since it is directed towards checkingtheproperaccountabilityofpublicbodies,thecorrectuseofresourcesandpublicfundsand,ingeneral,evaluatingpublicmanagementasawhole.

In relation to the foregoing, it can be highlighted thatdemocratic societies are characterised by a progressiveinterest of citizens in knowing about and activelyparticipating in affairs related to public management.Citizens demand not just more and better results fromthepublic Institutionsbutalsoincreasinglysoagreaterknowledgeoftheiractivity.

The transparency and accessibility of informationcoming from the public sector bodies constitutestrategic objectives for advanced societies. The PublicAdministration must be open to all citizens, informingthemoftheirdecisiontakingprocess,oftheexecutionofpublic policies and of the results of their management,doing so by means of providing information that isaccessible,periodicalandwhichcanbecompared.

The Spanish Court of Audit has been firmly in favourof transparency in public management, especially asfar as the accountability of bodies forming part of thepublic sector is concerned. In this respect, in relationto the annual accounts of local administration bodies,a Platform for accountability by telematic means hasbeen developed in recent years, which has meanta considerable advance in the economic-financialmanagementof localbodies,permittinganexhaustivecontroltobecarriedoutonaccountabilityandtomakethenecessarychecksinordertoverifytheintegrityandcoherenceofthoseaccounts.

In an additional step towards greater transparency, theCourtofAuditdecidedtomaketheinformationprovidedbybodiesinthelocalpublicsectoravailabletoallcitizens,bymeansofwhatisknownastheAccountabilityWebsiteor the CitizensWebsite (www.rendiciondecuentas.es).The information made available for the public includesdataonlocalbodies,theirstateofaccountabilityandthemain content of their accounts, all this organised in away that isaccessibleand transparent,whichfacilitatestheconsultingofthecorrespondinginformationbothonany localbodyandonagroupof thesebodies,selectedaccordingtodifferentparameters.

Equally,thestrengtheningofexternalcontrolalsohastotakeplaceviaanincreaseincooperationandcollaborationamong different Supreme Audit Institutions, within theframework of the international organisations, includingaspectssuchasthesharingofexperiences,collaborationamong theRegionalGroupsof INTOSAI,peer reviewsortheimplementationofISSAIs,amongothers.

n We must not forget the significant role of the external control bodies in everything to do with auditing compliance with the rules of transparency and good governance. n

n Democratic societies are characterised by a progressive interest of citizens in knowing about and actively participating in affairs related to public management. n

n The Spanish Court of Audit has been firmly in favour of transparency in public management, especially as far as the accountability of bodies forming part of the public sector is concerned. n

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In the case of EUROSAI, significant advances have beentakingplace inrecentyearsaimedatstrengtheningtheexternal control and independence of Supreme AuditInstitutions. Among other activities, a monitoring hasbeen carried out of the actions adopted for promotingthestrengtheningofpublicexternalcontrol,inlinewiththeAgreementoftheUnitedNationsGeneralAssemblyof 22 December 2011 and the EUROSAI Agreement ofthe same year to strengthen the independence of theSupreme Audit Institutions. Measures have also beentaken to strengthen and support that independencewithin the framework of Strategic Goal 1 of EUROSAI,relating to “Capacity Building”. Moreover, promotingthe implementation of the ISSAIs and of INTOSAI GOVand the increase in cooperation and the sharing ofexperiences are designed as essential aspects in theprocess of strengthening EUROSAI members. These areall initiatives which, together with other similar ones,leadtoanimprovementinpublicexternalcontrolandaguaranteeforachievingitsmaximumindependence.

conclusion

The serious economic and social situation and thegrowingdemandsforbudgetarydisciplineandausterityrequire the external control bodies to exert a greatereffort in verifying the correct and proper use of publicfunds. A principle that has to guide their actions is the

standingcommitmenttoimprovethefulfilmentoftheirduty in order to satisfy the aim of controlling publicmanagement in its various aspects and to achieve agreaterpublic repercussionof theiractivity.For this, therules of budgetary stability and financial sustainabilityconstituteanessentialcontrolelementover theactivityoftheentirepublicsector.

Equally, the external control bodies also have to playa key role in fostering the transparency of economic-financial management and good governance of thePublic Administrations. In this field of transparency,the external control bodies can and must be afundamentalinstrumentforpromotingthesatisfactionof citizen’s rights, informing society, immediately andinaway that isaccessible,about thoseaspectsof theaudited economic-financial activity that is of interest.The Spanish Court of Audit has responded to thisgoal by means of developing and implementing anAccountability Website on local public sector bodies,allowingknowledgeof theaccountsof localbodies tobemadeaccessibletoallcitizens.

Finally, the strengthening of the role of the externalcontrolbodiesistakingplacebymeansofstrengtheninginternational collaboration and cooperation, especiallyat the level of the organisations of Supreme AuditInstitutions,asareEUROSAIorINTOSAI,whichpermitthefostering of independence and sharing of experiencesamongthecontrolinstitutionswhichtheycomprise.n

n In an additional step towards greater transparency, the Court of Audit decided to make the information provided by bodies in the local public sector available to all citizens, by means of the Accountability Website or the Citizens Website. n

n The external control bodies can and must be a fundamental instrument for promoting the satisfaction of citizen’s rights, informing society, about those aspects of the audited economic-financial activity that is of interest. n

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TheValueandBenefitofSupremeAuditInstitutionsisaconceptthathasbeenincludedintheworkagendaoftheInternationalOrganisationofSupremeAuditInstitutionssince, following intense processes of reflection andanalysis regarding the role of the control bodies withregard to the structures of the State and regarding thecitizensofeachcountry,wehaverealisedthatthesamecontrol bodies have to be aware of the value that theyhavetoincorporateforthemanagementofpublicaffairs.

This incorporation of value has to be focused on thetechnical, administrative or methodological enrichmentoftheprocessesinvolvedintheadministrationofpublicresources.

Audit reports, the recommendations drawn up by theauditors,theresultsoftheevaluationofinternalcontrolsystems, and the advice that is provided for the bodybeing evaluated, as a part of the process of auditingfor on-going improvement, have to generate value forthe auditees and not just become a mere exhibition ofweaknessesorshortcomingswhichmakesthetaskofthepublicadministratorevenmoredifficult.

The benefit of supreme audit institutions has to beunderstoodasthefinalconsequenceofthemanagement

of the control bodies, in the same spirit as the citizens,whenitcomestoreducingpoverty,winningtheguaranteeand confidence of the population, in the fight againstcorruptionandthesustainingofdemocracy.Politicalandsocialchangesinallcontinentsmakeusseethatcitizensaremoreawareof theirrightsandwiththatawarenessthey are demanding that the apparatus of the Stateshould comply with its obligations to safeguard thoserightsandachievebetterlivingconditionsforall.

That is where the need to strengthen the controlinstitutionstakesonitsvalidity, inordertocomplywiththeexpectationsofcitizens, toprotect their interestsassole beneficiaries of the resources of the State in orderto guarantee confidence in public management, withobjectivity, with opportunity, with quality in complyingwiththeirobligations.

But the strengthening of external public control hasto be founded on the strengthening of the institutionsfrom the same powers that are assigned to them bytheconstitutionsorthelegalframeworkonthebasisofwhichthosepowersareexercised.

n Independence as a general concept is related to the characteristics of freedom, of autonomy, of capacity to take decisions and to carry out or not actions that are regarded as appropriate, though of course within the sovereignty of the State and a juridical, moral and ethical framework. n

THE sTrEnGTHEnInG oF ExTErnAL PUBLIc conTroL: GUArAnTEE For FInAncIAL sUsTAInABILITy AnD GooD GoVErnAncEDr. carlos Pólit FaggioniComptrollerGeneraloftheRepublicofEcuadorandPresidentofOLACEFSuntilDecember31st,2012*

n This incorporation of value has to be focused on the technical, administrative or methodological enrichment of the processes involved in the administration of public resources. n

* Asfromthe1stofJanuary,2013,thePresidencyofOLACEFSisheldbytheSAIofBrazil.

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Independence as a general concept is related to thecharacteristics of freedom, of autonomy, of capacity totake decisions and to carry out or not actions that areregarded as appropriate, though of course within thesovereigntyoftheStateandajuridical,moralandethicalframework.

In the origins of modern States the advisability wasanalysedofwhethercertainfunctionsoughttobecarriedout by organisations that are attributed the power oftaking decisions without submitting them to anotherauthority.

This would permit, within the appropriate regulatoryframework, functions to be carried out which wouldotherwisenotmanagetoachievetheexpectedeffects.

Thisisthespecificcaseofgovernmentalcontrolactivitiesand supervising the use of public resources. Otherwise,the dependence and submittal to another authority ororganisationwouldresultinnegativeinfluencesagainsttheeffectiveness,efficiencyandobjectivityofthatcontrol.

Effective, transparent, professional and objective controlof public resources has to prevent interference fromother functions of the State, otherwise the controlactionsubmittedtotheinterestsoftheGovernment,tothe dispatching of resources for paying its expenses, tothe vision which other instances might have over thetechnicalactivitiesofgovernmentalcontrol,would limitthe capacity for adopting objective and transparentdecisions.

The majority of countries in the world have, in theirconstitutionalorganisation,recognisedandsetdownthisindependencefortheircontrolbodies.

The Lima Declaration on the Basic Lines of Auditingof 1977 or the Mexico Declaration of 2007 onindependence, along with ISSAI 11 on Guidelinesand Good Practices related to SAI Independence, aredocuments of enormous value for endorsing and

strengthening external public control, which has tobe promoted before the legislative bodies and theexecutive power in order to secure the managementcapacityofthecontrollingbodies.

The United Nations Declaration on Autonomy andIndependence of Supreme Audit Institutions hasconstituted a historic landmark in this field since2011,anditalsofortifiesthepositionandelementsofsupportforthecontrolbodies.

Within the scope of the Latin American and CaribbeanOrganisationofSupremeAuditInstitutions,theCartagenade Indias Declaration of2006 also set down the pillarson which fiscal control action is based: autonomy,accountabilityandcitizenparticipation.

Inthisconstitutionalframework,thecontributionoftheSupreme Audit Institutions to financial sustainabilityandgoodgovernanceineachofourStatesismademoreviable,itbeingunderstoodthatthefirstoftheseconceptsisthatofextensioninthefieldofsecurityandconfidence,ofphilosophyandofthepraxisoftheadministrationofpublicresources.

Goodgovernancecanalsobecontributedbythecontrolbody, though with complete freedom for being ableto pronounce on any of the elements comprising theadministration of the State and ensuring its properfunctioning via its periodical examination and thedrawing up of those recommendations of value thatmightbenecessary.

We cannot avoid the fact that this entire contributionof the Supreme Audit Institutions to the equilibrium inthe co-existence of society within a framework of rulesandrespectinharmonymustalsobecontributedbythecitizen.

n The majority of countries in the world have, in their constitutional organisation, recognised and set down this independence for their control bodies. n

n Within the scope of the Latin American and Caribbean Organisation of Supreme Audit Institutions, the Cartagena de Indias Declaration of 2006 also set down the pillars on which fiscal control action is based: autonomy, accountability and citizen participation. n

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That isoneof thecharacteristics thathas tobeworkedon thoroughly, since, beyond the laws and rules, it isthe people who recognise the legitimacy of the publicplayers. It is thepeoplewhoare thesuprememandatorand prime auditor of the State, and to whom all formsof participation must be acknowledged without theminterfering in the normal development of the publicmanagementandtotallyoutsideofpoliticalinfluenceorinterestedsectors,whocoulddistortoradministratethecapacityandtherightofparticipationtowardstheirowninterests.

All we elements of the scaffolding of the State mustcontributetosustainabilityandgoodgovernance,topicswhichhaveformedthesubjectofthesebriefreflectionsfromtheLatinAmericanpointofview.n

n We cannot avoid the fact that this entire contribution of the Supreme Audit Institutions to the equilibrium in the co-existence of society within a framework of rules and respect in harmony must also be contributed by the citizen. n

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TheUnitedNations“Globaleconomicprospectsfor2012and 2013” document emphasized, among other things,thattheworldeconomyisonthevergeofanothermajorcrisis:thattheirproblemsaremultipleandinterconnected,the production growth has slowed considerably duringthe2011yearandfortheyears2012and2013isexpectedthatgrowthwillbeanemic;thatchallengesmosturgentareaddressingthejobscrisisandthecontinueddecreaseof the economic growth; that the unemployment rategoesaround9%andrevenuegrowthhasstagnated,thatmedium-termgrowthprospectsarealsoaffectedby thegraduallossofskillsandtrainingofworkers.

Despite this situation, the Republic of Panama has hadfavorable economic growth rates the past two years,calculating that the current will keep that result. Majorworksare inprogress,asadvanced: theexpansionof theinter oceanic Canal, the construction of long distancesubway, the expansion of two international airports, therehabilitationofthesewagesystemandsanitationofthePanamaBay,amongotherprojects.

Whathasbeenstatedisachallengetotheperformanceof tasks that we have to practice, with regard to thetwelve principles that our Constitution provides forthe elaboration, examination, modification, rejectionor adoption of the National General Budget andits public policy, developed through policy such asthe Fiscal Code bodies, Act 34 of 2008 as SupremeAudit Institution the general standards of financialadministration and law 32 of 1984, Social FiscalResponsibility,OrganicLawoftheComptrollerGeneraloftheRepublicofPanama.

strategic Plan of the General comptroller of the republic of Panama

To comply with this regulatory order, we prepare theStrategic Plan which sets the activities of the five- yearperiod of2010-2014 and details concrete measures thatputtothetesttheabilityofmanagementandcoordinationofourEFS-SAIandidentifieshisvisionofachievingthroughfourstrategicgoalsthathighlightstheimpacttoachieveon the operation of the Panamanian public financialmanagement;withactionsthatfromthemonitoringandcontrol of public expenditure, will ensure correction toinstitutions of the State in the management of use andmanagementofpublicfunds.

GiocondaTorresdebianchini

n Despite this situation, the Republic of Panama has had favorable economic growth rates the past two years, calculating that the current will keep that result. n

* Asfromthe1stofJanuary,2013,theExecutiveSecretaryofOLACEFSisheldbytheSAIofChile.

THE sTrEnGTHEnInG oF THE PUBLIc ExTErnAL AUDIT “GUArAnTEE For FInAncIAL sUsTAInABILITy AnD GooD GoVErnAncE” Gioconda Torres de BianchiniPanamaGeneralComptrollerExecutiveSecretaryofOLACEFSuntilDecember31st,2012*

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One of the strategic goals is directly linked to thestrengthening of the external control, “review andcentralizationofGovernmentcontrolmethods”inordertoalign themwith thebestpractices in theworld.Forthis purpose, objectives that guide us towards thisachievement were established: the promotion of thedesignandimplementationofasystemofGovernmentcontrol,thereviewandmodernizationofthepostcontrolmanagement model and updating of regulations andstandards in the field of Government internal controlandaudit.

Therefore,wehavebeenpromotingsomestrategiclinessuchas theadoptionof the INTOSAIGOVs,updatingtheregulations to obtain an adequate system of internalcontrol; the strengthening of the national AuditorGeneral,throughtheincreaseofjobstobeabletomonitorin a timely manner the different entities, together withthe increase of the salary of the staff; the exchange ofexperience with other SAI-EFS of the OLACEFS throughparticipations Audits in Cooperation; the strengtheningof multidisciplinary audit teams responsible for thequalitycontrolintheauditreports.

Attheforefrontofthetechnologicalchallengeswehavemade investments in computers and as the ACL audittools and working to apply the Govern system of theauditing with the support of the General Comptrollerof Accounts of Guatemala, in order to improve themethodologies and processes, looking for efficiency intheimplementationofauditsandpresentationofresults.Equalattentionhasbeencoordinatingwithgovernmentagencies that contribute to effective control, as theCourt of Auditors, Court Prosecutor, Public Prosecutor’sOfficeandtheNationalCouncilofTransparencyagainstCorruption.

We are faithful believers of the need to update theregulations in the field of audit, by such reason theadoption of the ISSAI manages and promotes thedevelopment of the Manuals of Financial Audit andPerformance. Additional, it has been given trainings onthe ISSAI and best auditing practices applicable to thepublic sector and in turn, it has strengthened ties withSAI-EFSintheregion,tocountwithfacilitatorsfromothercountriesandparticipationininternationaleventswhereissuesthatareofspecialinteresttoourorganizationsareconsidered.

Citizenparticipationisanotherelementwhichweconsideressential.ItsstrengtheningasalinkbetweentheGeneralComptroller and the society is done through programsthat guide the citizens to develop a control culture andarecommittedtohonesty,suitabilityandprobityinpublicand private performances. We have achieved throughdifferentcampaignstheproperuseofthepropertyoftheStatesuchas:advocacyofthevaluesindifferentschools,withtheaimthatatanearlyage,studentsbecomeawareof the importance of the proper use of the funds andproperty of the State; also there has been more contact

n One of the strategic goals is directly linked to the strengthening of the external control, “review and centralization of Government control methods” in order to align them with the best practices in the world. n

n Equal attention has been coordinating with government agencies that contribute to effective control, as the Court of Auditors, Court Prosecutor, Public Prosecutor’s Office and the National Council of Transparency against Corruption. n

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withthepublic,throughphonelines,Webpage,personallythroughassistanceintheofficeanddirectaccesstomakecomplaints.

The comptroller General and External control

According to the constitutional mandate, externalcontrolcorrespondstotheGeneralComptrolleroftheRepublic. The organic law of the institution providesthat any person who receives, handling, custody andmanagefundsorpublicassets, is in theobligationofaccountabilitytotheGeneralComptroller,intheformandtimetobedecided,reachingtheaboveobligation,peoplewhomanagebyorderofapublicentity,fundsor property belonging to third parties and to therepresentatives of companies or associations thatreceivesubsidiesofpublicentities.

Despite the vast scope of application involving theaforementionedmandate,untilrecently,theexerciseofexternalcontroloftheComptrollerGeneralwasmainlyconcentratedontheimplementationoftheprioractsofmanagement control, and on the subsequent control,through financial and special audits by complaints; byhardly demanding “accountability”, as a mechanismthrough which, the forced accountable report on theiractivities related to public funds received, handling,custody,ormanaged.

More recently, the 34 Act of 2008, for Fiscal SocialResponsibility,hasdeterminedthatthemanagementofpublic financeswillberununder theprinciplesoftransparency,responsibilityandaccountability,whichseeks to strengthen democratic institutions. Thusin the Strategic Plan one of the strategies searchesin addition to strengthen accountability. On thedomestic side, for example, we have emphasis onproviding information about our management bydifferent means, met in one hundred percent withthe Transparency Act which has promoted that theinstitution has been awarded with the Prism Awardof Excellence, awarded by the National Council ofTransparencyagainstCorruption.

Preventive, concomitant control and Accountability scheme

Previous control have promoted a range of activitiesaimedattheirflexibility,whichgofromthetotaltransferofriskmanagementtosomeexecutingagencies,usingaselectivecontrolthatincludesaccountability;increaseddecentralization of verification and endorsementof documents of fax impairment, maximizing ourresources and services; concomitant, selective controlpractice, with focus on the evaluation of operationalrisks, which facilitates and makes more expeditiouslytoobtaininformationusefulfordecision-makingratherthan fiscal involvement occurs or run administrativeactions that ultimately represent an affectation to theadministrationofpropertyandpublicfunds.Therefore,considering the experience of a preventive and backcontrol, was formalized institutional multidisciplinaryteam prepared a standard of accountability, basedon the progresses which, in this field, have developedinternationalorganizations.

modernization of the control Target Audience, strengthening Internal control

In addition to this effort, we started a program ofmodernizationofGovernmentcontrolandstrengtheningofinternalcontrol,throughtheunitsofinternalauditofpublicentities,withwhatweseektosupporttheeffortsof the Executive to make more efficient and effectivefinancial management, which has led us to initiate thefollowingactions: to)developaGeneralLawonInternalControl, b) strengthen and modernize public Sectorinternal audit and, c) develop the Panamanian IntegralControlSystemModel.

n According to the constitutional mandate, external control corresponds to the General Comptroller of the Republic. n

n More recently, the 34 Act of 2008, for Fiscal Social Responsibility, has determined that the management of public finances will be run under the principles of transparency, responsibility and accountability, which seeks to strengthen democratic institutions. n

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conclusions

The Panamanian economy shows signs of growth,despiteaglobalpicturewithlittlepleasingexpectations.Thechallengeistoenhanceourcompetitiveadvantagesto maintain our growth and achieve substantialimprovementsinthesocialconditionsofthepopulation.In this context, the strength and transparency of publicfinances, is particularly important and consistent, theexternalcontrolexercisedbytheOfficeoftheComptrollerGeneralneedstobemodernizedtoadapttothepaceoftheGovernmentfinancialsystem.

ThemodelthatwehavechosentoexerciseGovernmentcontrolisonethatconceptualizestheintegrityofcontrol,understood as the coordinated exercise of the internaland external control, under a scheme of centralizedregulationandoperationdecentralized.ThePanamaSAIEFSiscommittedtomodernizeitsmethodsofcontroltomovefromapurelycentralizedpreviouscontrol,schema,concomitant, accountability and audit.The roadmap forthischange,istheInstitutionalStrategicPlan2010-2014;ourMissionSuccess.n

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n The challenge is to enhance our competitive advantages to maintain our growth and achieve substantial improvements in the social conditions of the population. n

n The Panama SAI EFS is committed to modernize its methods of control to move from a purely centralized previous control, schema, concomitant, accountability and audit. n

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Introduction

Asthesheersizeandthecomplexityofpublicsectorworkcontinuetogrow,publicentitiesarefacinganongoingchallengeofachieving theirobjectiveswhileoperatinginaccordancewiththeirlegalandpolicyresponsibilities.Issues of internal control in the public sector becomeincreasingly complex as governments delegate moreandmoreservicestootherentitiesincludingtheprivatesector.Notsurprisingly,since2000,theemphasisinthepublicsectorreformhasshiftedfromthemoregeneral“new public management (NPR)” in the 1990s to themorespecificissueofpublicinternalcontrol.Thistrendhasbecomemoreevidentas theglobaleconomysinksin the turmoil of financial crisis. One of the interimlessonslearnedfromthecurrentglobalfinancialcrisisisthatestablishingfiscal rules, sounddebtmanagementin particular, is critical in order to meet the immensefinancing and fiscal challenges. In other words, thebenefits of risk assessment and risk management arehighlighted one more time, and the potential role ofthe Supreme Audit Institutions (SAIs) in assessing thequalityofriskcontrolsystemsisreaffirmedagain.

INTOSAI has been an active advocate of sound internalcontrolandcheckingsystem,emphasizingtheimportanceof internal auditors as SAI’s close partner in promotinggoodgovernancethroughcontributionstotransparency

in and accountability for the use of public resources, aswell as in promoting efficient, effective and economicpublic administration. These collective objectives offera good opportunity for coordination and cooperationbetweenSAIsandinternalauditors,throughwhichbothof themcan improve theefficiencyandeffectivenessoftheirownworks.FurtherattentionshouldbedirectedtoSAI’sresponsibilityforevaluatingtheeffectivenessoftheinternalauditfunctionfromthisrespect.Thisenhancedrelationship gains more attention in the ASOSAI regionwherethelackofcompetentauditorshasbecomeanormratherthananexceptioninthepublicsector.

The 9th AsosAI research Project on the relation between sAI and Internal Audit Unit

Againstthisbackdrop,ASOSAIselected“EvaluationandImprovementofInternalAuditSystemsandRelationshipbetween the IAUs and SAIs” as the theme of the 9thASOSAI Research Project at the41st ASOSAI GoverningBoard meeting held in Pakistan in 2009. This decisionwasespeciallymeaningfulbecausetheauditcapacityoftheIAUs(InternalAuditUnits)inmanyASOSAImembercountriesremainedimmature.

The final report which contained the yield of two-yearintensive research was approved by the 12th ASOSAIAssemblyheldinIndiainMarch2012,andisnowavailableattheASOSAIwebsite(www.asosai.org).

sTrEnGTHEnInG ExTErnAL PUBLIc AUDITInG THroUGH EnHAncED rELATIon BETwEEn sAI AnD InTErnAL AUDITDr. Kun yangChairmanoftheBoardofAuditandInspection,KoreaSecretaryGeneralofASOSAI

n Issues of internal control in the public sector become increasingly complex as governments delegate more and more services to other entities including the private sector. n

n These collective objectives offer a good opportunity for coordination and cooperation between SAIs and internal auditors, through which both of them can improve the efficiency and effectiveness of their own works. n

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ASOSAI has carried out research projects to promotegathering and sharing knowledge of and experiencesin auditing and related fields pursuant to its Chartersince1985.

The objectives of the 9th Research Project were toassess the public sector internal audit system andthe relationship between IAUs and SAIs of the ASOSAImembercountries,andto identify theareasto improve.AsetofsurveyquestionnaireswasdevelopedandsenttothememberSAIsandtheMinistriesofFinance(MOF)ofall45 ASOSAI member countries. A total of26 memberSAIsand18MOFsrespondedtothesurvey.GoodpracticeswerealsoidentifiedfromthecountryreportscontributedbythetwelveASOSAImemberswhoparticipatedinthe9th ASOSAI Research Project—the SAIs of China, India,Indonesia, Iran, Iraq, Korea, Kuwait, Malaysia, Pakistan,Russia, Saudi Arabia, andVietnam.These good practicesas well as other research findings shall contribute tostocktakingbestpracticesandtoolsforINTOSAIGov9150titled “Coordination and Cooperation between SAIs andInternalAuditorsinthePublicSector.”

Internalauditsystemat thecentralgovernment level isassessedintermsofgovernance,organization,standardsandreviewsystem,humanresourcesandauditservices,inaccordancewiththecapabilitymaturitymodeloftheInstitute of Internal Auditors (IIA). Also analyzed is theextentofcooperationandcoordinationbetweenSAIsandIAUs,aswellasthebarrierstocooperation.

Assessment of Internal Audit system

All the26 countries that have responded to the surveyhave their own internal audit function in place. For the19non-respondents,ithasnotbeenknownyetwhetherthey have internal audit function in place. Out of 26respondents,16countrieshaveestablishedtheirinternalaudit function based on specific laws, cabinet decreesorMOFregulations,whilefor8countriesestablishmentis through the management decision. A majority ofrespondents (17 out of26) answered that IAUs are notsufficiently independent of the Executive. The lack ofindependenceisascertainedbythesurveyfindingsthatthe head of many IAUs are middle management level,that audit committee is not used in all but one country,andthatthereisnocaseoflegislativefundingforIAUs.

AsfarastheprofessionalismoftheIAUsisconcerned,bothSAIsandMOFsidentifiedalackofstaffwithadequateskillsandknowledgeinadditiontothemereshortageofstaffper se asthemainconstraintstotheproperfunctioningofinternalaudit.Thisshortageofauditstaffaffectsthescopeofauditservices;subsequently,performanceauditiscarriedoutinonlyninecountries.SomeIAUs,however,have extended their audit services from the traditionaltransaction review or compliance audit to performanceaudit,ITauditandconsultingservice.

Audit quality is another challenge confronted by IAUsin the ASOSAI region.14 countries answered that IAUsperform their duties in accordance with the generallyacceptedauditstandards.However,theIAUsofmorethanhalfofrespondentcountries,werenotevenawareoftheIIA standards because they do not have written policies

n The final report which contained the yield of two-year intensive research was approved by the 12th ASOSAI Assembly held in India in March 2012, and is now available at the ASOSAI web site (www.asosai.org). n

n Lack of a central coordination, policy and/or monitoring unit to oversee internal audits may have acted negatively on the audit quality problem. n

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andproceduresortheyhaveonlyminimumpoliciesandprocedures. Rigorous internal and/or external reviewmechanism to assure audit quality is in place only infourrespondentcountries.Lackofacentralcoordination,policyand/ormonitoringunit tooversee internalauditsmayhaveactednegativelyontheauditqualityproblem.

coordination and cooperation between sAIs and IAUs

As the modes of coordination and cooperation, INTOSAI(GOV 9150) suggests a broad range of activities to beimplementedthroughoutthevariousstagesofauditing.They include: regular meetings between SAIs andIAUs, arrangements for information sharing, sharingtraining material and/or program, audit methodologies,secondment of staff, and collaboration on certain auditprocedures over the course of, for example, collectingauditevidenceortestingdata.

The majority of responding countries reported that SAIsreview internal audit reports and/or evaluate internalaudit functions. Also, some of them hold formal and/orinformalmeetingsbetweenSAIsandIAUs.Thosecountrieswith legal mandate or those countries that hold formalmeetingsbetweenSAIsandIAUsratehighlytheextentofcooperationandcoordinationatvariousstagesofauditing.OneofthebarrierstocooperationidentifiedbySAIsand/orMOFsofthemajorityofthecountriesisalsotheabsenceoflegalbasisforthecooperationandcoordination.

To help internal audit function well, the SAIs of Korea,Malaysia, and Pakistan dispatch their staff to IAUs.Besides, some SAIs offer training facilities to IAUs. Thesurveyresultindicatedthat,thoughtheremayexistgreatdifferences between countries, SAIs could take certaininitiatives tomake IAU integral toensureaccountabilityandgoodgovernance.Theyare:

• Prescribingstandardsforinternalauditdulyspecifyingduties,powers,andindependenceoftheIAU.

• Formalizingmodalitiesforensuringnon-duplicationofworkthrough.

• Structured meetings between the SAI and theIAU, enabling better communication and clarity inrespectiveroles.

• Submission of the IAU audit plan to the SAI whichcouldbeconsideredbytheSAIbeforefinalizingitsownauditplan.

• Planningcommon/jointtrainingprograms.• Ensuring formal structure which enables cooperation

betweentheSAIandtheIAU.

concluding remarks

Independence principle as a prerequisite of publicauditingdoesnotmeanthatanexternalauditshouldgoallalone.Onthecontrary,theSAIexistsonlyasavitalpartof overall governance and accountability arrangements.Internal accountability arrangements need to beexplicitlyrecognizedwhenmodernizationofpublicsectorgovernance is attempted. Cooperation and coordinationbetweenSAIandIAUsshouldbeseen,therefore,asagreatopportunity to improve the effectiveness of auditing aspointedoutintheINTOSAIGov9150.

The 9th ASOSAI Research Project is an example of suchattempts made recently in this respect. It providesa snapshot of the situation in the ASOSAI region byexamining how well internal audit function is workingand,inparticular,howwellitworkswithSAIs.Inalmostall the countries, improvements are required in all coreelements, from ensuring independence, providing legalmandate, and improving audit quality, to providingsufficient audit resources, such as budget and staff.Another interesting finding is that most countrieslack central policy units for internal audit, which givesadditional urgency on SAIs to take leadership in theirrespective relations with IAUs. Given the fact that IAUslackexpertiseandresources inauditing, theSAIs in theASOSAIregionshouldplaymoreactiveroleinestablishinganinternalcontrolsystem.Ifnecessary,theymayformapartnership with their respective MOF in this endeavor.Thosecountries thathavebestpracticescansharewiththeir ASOSAI peer SAIs their experience and help themdeveloptheinternalcontrolframeworkaswellasinternalauditstandards.

Although this Research Project has provided a goodfoundation for understanding the current status of theinternal audit system and the relationship betweenIAUs and SAIs in the ASOSAI region, more researchshouldbedoneonthistopic.So,Iwouldliketoconcludeby suggesting further work that needs to be done forenhanced relation between the SAIs and the IAUs. Firstofall, theSAIsneedmoreinformationtohavecomplete

n One of the barriers to cooperation identified by SAIs and/or MOFs of the majority of the countries is also the absence of legal basis for the cooperation and coordination. n

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understanding of the internal audit system. They alsoneed detailed information on the following subjectsso that theycanfulfill the requiredrolesofadvisorandsupporterforpublicsectorinternalauditorsinadditiontothatofcontrollerorsupervisor:

• Developinginternalauditstandardsandguidelinesforinternalauditpractice.

• Ensuringthatariskmanagementsystemisinplacevis-a-visaninternalauditplan.

• Enhancingprofessionalismofinternalauditors.• Systemizing the areas identified for cooperation

betweentheSAIandIAUs.n

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The sustainability of a state’s policy and the provisionofgoodgovernancehavealwaysbeen thefundamentalconditions of an effective state mechanism. However,it seems that a number of national governments haverealizedthemeaningofthesetermsandtheimportanceoftheirimplicationsinlifeonlyduetotherapideconomicdownturn that many countries have been forced toexperience within the recent years. It has been thefortune of those nations, whose governments haveensured sustainable state policies. A fortune becausethesecountrieshavehadtheconceptsinplacetotimelycomprehendthepriceofsustainabilityandhaveworkedfordecadestodevelopsustainablestatefinancialsystemsevenpriortofacingtheconsequencesoffinancialcrisis.The development of such systems prepares a countryfor financial downturns and is capable of protecting itscitizensfromtherepercussionofsuchdownturnasmuchaspossible.

Sustainable state policy and good governance are themostessentialmechanisms,thepreconditionsofastate’sefforts towards theachievementof itsgoals.These twoelements cannot be separated, but it is also impossibleto discuss them without looking at the state systemas a whole. Simultaneously with the provision of goodgovernanceprinciples,itisofgreatimportancetoclarifywhether the state has determined or asked itself suchfundamentalquestionsas:“Whatistheobjectiveofthe

country?”;“Onwhosebehalfdoesthestateneedtoensurefinancial sustainability and good governance!?” ManyeffortsoftheStateAuditOfficeoftheRepublicofLatviaintherecentyearshavebeendevotedtoachievingactionsin this respect on the national level.The state needs toclearlydefineitsobjectivestobefulfilled,ithastorealizethe results to be achieved and the necessary resourcesforaccomplishingtheseresults.Itissubstantialtofinallydevelop the state governance structure in accordancewith the goals to be achieved, strictly determining theresponsibilitiesandcompetences.

If every person within the public sector works like atiny detail in a joint mechanism, which operates jointly,interlinkingwithotherelementsof themechanism, thepublic administration is able to work like a clock thatshowsaccuratetime.Howeverthisispossibleonlyifthemechanism precisely performs the entrusted functionsandthusachievestheobjectivesputforward.Everytinydetailinthemechanismshallbeawareofwhatitisdoingandwhy,aswellaswhattheobjectiveofitsoperationis.Inturn,theclockmakershallknowwhatcomponentsneedtobe thereandwhichmaybeunnecessary—weshouldnot add fancy decoration on the clock—it is essentialthattheclockkeepsaccuratetime.Ifaccuratetimeisnotdisplayed,thisindicatesthatthepublicadministrationisnotworkingsufficientlyenoughandinaccordancewiththeobjectivesputforward.And, justaswesee that thetime is not displayed accurately, we can search for thereasonswhyaparticularobjectiveisnotachieved—itmaybeincompetenceofemployees,lackofprofessionalismoradministrative capacity, or personal interest and otherreasons. Altogether it is very important to justify anyaction the government performs with a clear strategyandobjective,which in turnmakes itpossible toassessadequate need for resources and perform predictableutilisation supervision and control, thus diminishing

sTrEnGTHEnInG ExTErnAL PUBLIc AUDITInG: A sAFEGUArD For FInAncIAL sUsTAInABILITy AnD GooD GoVErnAncE. PrEconDITIons To BEcomE A GooD GoVErnAncE sAFEGUArDInguna sudrabaAuditorGeneraloftheRepublicofLatvia

n What is the objective of the country? On whose behalf does the state need to ensure financial sustainability and good governance? n

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corruption risks in the public administration.To achievethis,thegovernmentprimarilymustimplementapolicythatfocusesonspecificresults.

The necessity for supreme audit institutions to setthemselves as the safeguard of state’s financialsustainability and maintenance of good governanceprinciples within public administration is obvious.Whatever the question of each audit conducted is,the fundamental objective of all audits is to detect thevalue for money of the actions performed within eachparticular sector. In other words—whether the actionstaken and the resources utilized have been in the mostefficient and effective way according to the interests ofsociety.Thisisthepointatwhichtheproblemevolves—howtoevaluatewhethertheactionstakeninachievingtheobjectiveshavebeeneffective,ifthereisnouniformstrategy in the country with clear goals and objectivesandresourcesdetectedfortheirachievement.Therefore,theStateAuditOfficehascarefullyandconsistentlybeenworking over the recent years to attain that its opinionon this matter is heard and listened to. But to achievethis,ithasbeenastrategicandvitalstepforthesupremeauditinstitutionofLatviatoitselfdevelopasastrongandrespectedinstitution.

Oneofthemajorpracticalachievementsinrecentyearsinthisdirectionhasbeentargetedworkonthedevelopmentand implementation of a quality management systemwithintheStateAuditOffice.Itisimportanttopointoutthat State Audit Office’s quality management systemhas been developed on the basis of its mission, vision,values and objectives. The system created aims todocumenttheStateAuditOffice’soperations, indicatingthe sequence of its processes, their interrelationships,employeecollaborationandaccountability,thusensuringthe continuous supervision of auditing quality controland facilitating the overall development of the Office’s

activities.Thetaskofthequalitymanagementsystemistoensurethateveryemployeeunderstandsandworksincompliance with regulatory measures, and is personallyresponsible for accomplishing his/her work duties andensuring its quality. The head of each structural unitis responsible for: the qualitative performance of theduties and the management of the unit, compliancewith the Office’s requirements, the identification ofnon-compliances in the working processes of the unit,and the introduction of operational improvements. It issubstantialthataftertheimplementationofthesystemit is to be analyzed and the actions of the State AuditOfficearetobecontinuouslyassessedandreviewed.Thusthesystemwillensurethattheprocessesthattakeplaceareinappropriatequality,thelabourstabilityisensured,theoperationalefficiencyoftheOfficeisfacilitated,andtheactionstakencorrespondtotheneedsoftheOffice.

Sinceourmissionis toconductaudits,avery importantrole is devoted to ensuring audit quality. In order toensure such quality and to make sure that the auditorscarryoutauditsinaccordancewithinternationalauditingstandards and ethical norms, the State Audit Officecarriesoutauditqualitycontrol,whichcanbeclassifiedaccordingtoseveralstages:

• Auditqualitycontrolduringtheaudit(hotreview).• Qualitycontrolofclosedaudits(coldreview).• Qualityimprovementmeasures.

The audit quality control during the audit is performedbyauditdepartmentsduringallstagesoftheaudit,thusensuring a timely identification of deviations and errors.Duringeachparticularauditstagetheauditdepartmentdirectorandsectorheadevaluatestheperformanceoftheauditors, the options to reduce audit risks and the auditquality improvements for the future. In order to assesscomplianceoftheauditwiththemethodologyoftheStateAudit Office and the requirements of the internationalauditing standards, as well as to identify best auditpractice and the necessary improvements of the auditmethodology,onceayearacoldrevieworaqualitycontrolof a closed audit is performed. Quality improvementmeasures are provided by the Audit and MethodologyDepartment and the Legal Division. To ensure that theaudit plan is legally correct and accurate, as well as toensure that the audit report is in accordance with thelawsandregulations,theirexaminationandinspectionisconductedbytheLegalDivision.Toensurethattheauditmethodologyisproperlyapplied,theauditsareexaminedby the Audit and Methodology Department. As a result,the recommendations for the clarification of audits andconsequentimprovementoftheactivitiesareprovided.

n This is the point at which the problem evolves—how to evaluate whether the actions taken in achieving the objectives have been effective, if there is no uniform strategy in the country with clear goals and objectives and resources detected for their achievement. n

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Bycarryingouttheabovementionedqualitymanagementand audit control measures, supervision of qualitycontrol is ensured at all levels and processes and thusa continuous overall improvement of the State AuditOffice’s work is provided.The achievement of such levelwheneachaudit recommendationcanbebasedonourown good practice and example, has entitled the StateAudit Office the moral rights to evaluate the efficiencyand effectiveness of resource utilization of any otherpublic authority. It has allowed strengthening the roleof theStateAuditOffice in thecountryandourduty tothepublic is tokeep thisbar.Clearobjectivessetout inthe medium-term strategy, objectives to be achieved asreflectedintheannualworkplan,butinthecentreofallthe biggest value of the organization—the employeesand their development.These are inseparable elementsthathaveensuredsustainableandefficientoperationoftheStateAuditOfficeofLatvia.

TheprincipleoftheStateAuditOfficeofLatviahasalwaysbeen that our main values—honesty, effectiveness andtransparencyarenotonlywordsthathavebeenincludedwithinourStrategy,butthesevaluesandhighestmoral

standards have been the essence of our Office and thebasisofoureverydayfulfilmentofduties.Onlybyfulfillingourowndutiesatthehighestlevelofqualityandhelpingthe state manage its resources in a more efficient waythrough our own example, it is possible to expect andhopethatthereputationandroleofthesupremeauditinstitution canbeatsucha level,whichmayguaranteethe supervision of processes significant on the nationallevel. The term “good governance” can definitely beequated with such values as honesty, effectiveness andtransparency.Thesevaluesshallbeinplaceineveryactionperformedbythesupremeauditinstitutionandanyotherpublicauthority.

Therefore it is the responsibility of the supreme auditinstitution to present true and clear information to thegeneralpublic.Throughthat,clearsignalscanbeprovidedtotheofficialauthoritiesthatthepublicisinformedandcondemns any abuse of power and/or privileges takingplace.This should serve as a mechanism for requestingactions from the authority in the public’s interests andthesupremeauditinstitutionsdefinitelycanplayacrucialroleinthismechanism.n

n As a result, the recommendations for the clarification of audits and consequent improvement of the activities are provided. n

n Therefore it is the responsibility of the supreme audit institution to present true and clear information to the general public. n

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With the general government sector’s debt totallingalmost 40% of GDP and balanced budgets posted bythe confederation, cantons and communes in 2011,switzerland is in very good shape by internationalstandards. This favourable situation is due amongother things to the federalist system, which gives thecantons (member states) and communes significantfinancial autonomy, the right of the people to have asay regarding tax increases, and fiscal rules applied atallthreelevelsofgovernment.

The confederation introduced a debt brake with the2003 budget.This marked the start of a success storyas regards fiscal policy.The debt brake is enshrined inthe constitution. A mechanism for managing federalexpenditure, it is designed to prevent chronic deficitsand thereby an increase in debt. A sustainable fiscalpolicyalsofeaturesareceiptsandexpenditurestructurethat fosters growth and prosperity. Tax reforms aswell as regular federal task evaluations are aimed atachievingthis.

In the spirit of self-disciplinary measures, the FederalAssembly adopted both an expenditure brake anddebt brake, which were approved by an overwhelmingmajority of Swiss voters in 1995 and 2001 and havesince been enshrined in the Federal Constitution. Thedebtbrakewasapprovedby85%ofvoters.Thisstrong

support from the population contributed significantlyto the successful implementation of the debt brake inrecentyears.Asaresultof thiseffectivefiscal rule, theroleoftheSwissFederalAuditOfficeisessentiallylimitedtocheckingcompliancewiththeregulatoryframework.Therefore,thisregulatoryframeworkhastobepresentedingreaterdetail. Itgoeswithoutsaying,thattheSwissFederalAuditOfficehasacomprehensiveauditmandate.However,inviewofthevariousconstitutionalprovisionson fiscal policy and the right of citizens to have a sayontaxissues,itdoesnothavearolethatiscomparablewith other countries. The explanations below are incompliance with the basic documentation publishedby the finance ministry.They are limited to the centralgovernmentlevel.

Background

The nineties were difficult times for the finances ofthe Confederation. In the space of a few years, billionsin deficits led to a sharp increase in debt, which wasexacerbatedbythefundingoffederalpensionfundsandenterprisesaffiliatedwith theConfederation.Althoughthe Federal Constitution stipulates that the budgetmustbebalanced,thisobjectivewasnotachievedasaresultofvariouspowersontheexpenditureandreceiptsside.Consequently,anincreaseinthemainfederaltaxes

n The debt brake was approved by 85% of voters. This strong support from the population contributed significantly to the successful implementation of the debt brake in recent years. n

n In the space of a few years, billions in deficits led to a sharp increase in debt, which was exacerbated by the funding of federal pension funds and enterprises affiliated with the Confederation. n

THE DEBT BrAKE—An EFFEcTIVE TooL For A sUsTAInABLE FIscAL PoLIcyKurt GrüterChairmanoftheSwissFederalAuditOffice

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requires an amendment of the constitution and thustheapprovalof thepeopleandcantons. Incontrast,anincrease in expenditure was resolved by parliament,generallybymeansofasimplemajority.Thisasymmetryofpowerstendedtoleadtobudgetdeficitsinthepastand a corresponding increase in debt. The debt braketherefore stipulates that expenditure must be basedon receipts. Furthermore, there was no willingness toexercise financial restraint during an economic upturnto counter deficits during recessionary phases. Therewas a lot of pressure to use the additional cyclicalreceiptstofinancenew,lastingtaskswithoutforegoingexistingexpenditure.Theresultwasaseriesofdeficitsandhigherdebt.

Withthisfiscalpolicyexperience,therewasagrowingwillingness on the part of the government andparliament to impose fiscal policy restrictions onthemselves via concrete and effective expenditurerules in order for the good intention to be observedin practice: the debt brake requires expenditure tobe linked to receipts when budgeting. Expendituremay be increased only if its financing is secured byadditionalreceiptsorcorrespondingsacrifices,andtaxreductions must be accompanied by correspondingspendingcuts.

what is the aim of the debt brake?

Toparaphrase,theaimofthedebtbrakeistoachieveabalancedbudgetinthemediumtermandthusstabilisenominaldebt.Intheshortertermanddependingontheeconomicsituation,deficitsarepermittedorsurplusesnecessary in order for the economic compatibilityrequired under the Federal Constitution to be takeninto account. This feature contributes to a “passivecountercyclical”fiscalpolicyandintheprocesstargetsasconstantaspossibleatrendforexpenditureandthustask performance that can be planned. Expenditureshould not be increased during an economic upturnand then be curtailed during a recession. A cyclicalsurpluscannotbeusedtofinanceexpenditureduringanupturn.

Flexible but effective nevertheless

Thecornerstoneofthedebtbrakeconsistsofasimplerule:ordinaryexpendituremaynotexceedreceiptsoveraneconomiccycle.TheConfederationmustgenerateasurplus during a strong economy, while expendituremayexceedreceiptsduringadverseeconomictimes.Inorderforafiscalpolicyruletowork,itmustbestringentand binding; however, it must also allow sufficientleeway to be able to react appropriately to externaldevelopments. The debt brake ensures this flexibilitybytakingthecurrenteconomicsituationintoaccount.Furthermore, the debt brake contains an exemptionclause: in extraordinary situations (e.g. naturaldisasters, severe recessions), it is possible to deviatefromtheruleandincurextraordinaryexpenditure.Thisextraordinary expenditure must be compensated foragaininsubsequentyears.Undueuseoftheexceptionshouldbepreventedinthisway.

How the debt brake works

In the medium term, i.e. over an economic cycle, thefederal budget is balanced by using the debt brake.Surpluses have to be managed in boom periods so astocompensatefordeficitsinsubsequentrecessions.Byandlarge,nonewborrowingisincurred.

Implementation in practice

The debt brake is applied to the budget. It restrictsexpenditure over an economic cycle to the amount ofreceipts, thereby ensuring that the federal budget isbalanced. If its specifications are circumvented whenimplementing the budget, the regulatory frameworkcontains a clear sanction mechanism: overruns mustbe fully compensated for. When the accounting resultsare available, the final figures are checked against therequirementsanddeviationsfromtherulearerecorded.In a manner of speaking, the so-called “compensation

n To paraphrase, the aim of the debt brake is to achieve a balanced budget in the medium term and thus stabilise nominal debt. n

Source: FederalFinanceAdministration,Bern2012

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account” acts as a “memory” for deviations from thedebt brake rule. All overruns and underspends relativeto the maximum permissible expenditure are recordedand added up in these statistics.This account primarilyprovides transparency and allows for application of theruletobecheckedatalltimes.Thedebtbrakethusactsinanextremelyeffectivemanner.

Sanctions of varying severity are provided for in theevent of the maximum permissible expenditure beingexceeded.Deficitsinthecompensationaccountgenerallyhavetobecompensatedforinsubsequentyears.Amoreseveresanctionappliesifadeficitexceedsthethresholdof6% of expenditure. In this case, the law provides fora binding timetable for bringing the deficit below thethresholdonceagain.

Thekeyelements

ThecornerstonesofthedebtbrakeareenshrinedinArticle126oftheFederalConstitution:

Principle The Confederation shall maintain itsincome and expenditure in balanceovertime.

Expenditurerule Theceilingfortotalexpenditurethatistobeapproved in thebudget isbasedon the expected income after takingaccountoftheeconomicsituation.

Exception Exceptional financial requirementsmay justify an appropriate increase intheceilingintermsofparagraph2.

sanctions If the total expenditure in the federalaccounts exceeds the ceiling in termsofparagraphs2or3,compensationforthis additional expenditure must bemadeinsubsequentyears.

Implementation Thedetailsareregulatedbylaw.

The effect of the rule is independent of the amountofthetaxburden.Itallowsforbothtaxincreasesanddecreases, and in the past few years it has permittedvarious tax reforms that have been significant forgrowth and the distribution of income and assets.Extraordinary expenditure has also been subject to arulesince2010.Consequently,itcannolongerleadtoanincreaseindebt.

Tests for long-term credibility

ThedebtbrakeenshrinedintheConstitutionwasappliedforthefirsttimetothe2003budget.Itpreventsstructural

deficitsandtherebyanincreaseindebt.Theintroductionofthedebtbrakemarkedthestartofasuccessstoryasregards fiscal policy. Since2006, it has been possible toachieve substantial surpluses in the ordinary budgetandreducefederaldebtbyapproximatelyCHF20billion.As a result of the reduction in debt over the past fewyears,aroundCHF1billioncannowbesavedoninterestexpenditure, therebycreatingthescopefor investmentsandnewimportanttasks.Experiencewiththedebtbrakehas been consistently positive. The reduction in federaldebthasgeneratedsubstantialsavingsintermsofinterestpayments,creatingextrascopeforotherexpenditure.Theswitchfromadiscretionaryfiscalpolicytooneboundbyruleshaspaidoff.Switzerland’sregulatoryframeworkhasbeenmeetingwithkeeninterestinternationally.

Thedebtbrakehaspassedthreetestssinceitsintroduction2003:

• Firstly, the federal budget was not balanced whenthe debt brake was introduced, and instead posted aconsiderable structural fiscal deficit. Thanks to thefiscalrule’sbindingrequirements,thegovernmentandparliamentmanagedtoimplementreliefprogrammesquicklyandconsistently.

• Secondly,thedebtbrakepreventedthehightaxreceiptsfrom years of robust economic growth before 2009frombeingusedforadditionalexpenditure.Instead,itwaspossibletobuildupsurplusesandreducedebt.

• Thirdly, during the financial and economic crisis,the debt brake proved its worth also for inclementtimes. The economically compatible structure of therule prevented expenditure from having to be cut inthe recession when the crisis struck. Furthermore, itprovidedscopeformoderatestabilisationmeasures.

n Sanctions of varying severity are provided for in the event of the maximum permissible expenditure being exceeded. n

n The introduction of the debt brake marked the start of a success story as regards fiscal policy. n

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As already mentioned, the debt brake described appliesonlyforthefederalbudget.Thecantonsandcommunesare autonomous regarding their fiscal policy. Mostcantonshavetheirownformulationsforlimitingdeficits

or debt. Furthermore, the cantonal fiscal referendum,which enables the people to vote on new governmentexpenditure,iswidelyused.

Experience in Europe demonstrates that internationalrulesaloneareoflittleuse.Mechanismsthatautomaticallytriggercorrectionshavetobeintroduced.Asupremeauditinstitution’staskisthentomonitorcompliancewiththeapplicablefiscalrules.Togetherwithrisk-orientedauditsof expenditure and receipts in accordance with thecriteriaofsavings,economicefficiencyandeffectiveness,it can make an important contribution to a sustainablefiscalpolicy.

Berne,October2012.n

n Experience in Europe demonstrates that international rules alone are of little use. Mechanisms that automatically trigger corrections have to be introduced. n

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Introduction

Thebasisoftheeconomicstheoryiswithinthequestionof “how do we satisfy unlimited wants with limitedresources?”This question is also valid for public sectorand governments. Public sector is confronted with thechallenge of meeting the increasing demands withrestrictedresources.Thisrestrictionrenderseffectiveuseofpublicresourcescrucial,sincepublicserviceshavetobesustainable.Atthispoint,SupremeAuditInstitutions(SAIs) have a vital role as institutions working forassuringeconomic,effectiveandefficientuseofpublicresources. Citizens expect to get the assurance of SAIsforeffectivefunctioningofpublicinstitutionsandthus,thegovernment.

AlloftheseconcernsrevealtheneedforstrengtheningSAIs so that they can function effectively andappropriately. In recent years, with all the economicproblems governments are facing, SAIs’ role insustaining good governance has become more of anissue.Good governance encompasses several elementssuch as giving assurance regarding the effective useof public resources, informing public as to the resultsand outcomes of government objectives and ensuringthat public institutions operate in accordance withaccountability and transparency principles. In additiontothese,fiscalsustainabilityisalsoanelementofgoodgovernance and needs to be considered within thefinancialmanagementandcontrolsystem.

changing role of sAIs in public sector

When it comes to SAIs’ role in public sector, twoinseparableconceptscomeintomind:accountabilityandtransparency.InternationalStandardsforSupremeAuditInstitutions (ISSAIs) also state that these two conceptsareessentialelementsofgoodgovernance.Transparencymeans providing sufficient information on public

activitiestoenablepublicscrutiny.Accountability,ontheotherhand,isaboutensuringthatthepublicinstitutionsand theirperformancearesubject tomonitoring. ISSAIsdefine promoting accountability and transparency overpublicactivitiesasoneoftheresponsibilitiesofSAIs.

In a globalized world and economy, modern statesface the issue of fiscal sustainability besides therequirements of accountability and transparency.In addition to the above-mentioned constraints likerestricted resources and increasing demands, there istheconstraintforsustainingpublicservicesofthesamequality. Financial crises that affect the governmentsmakeitevenmorechallengingtoachievetheobjectiveofmaintaining thesame levelofpublicserviceat thesame level of quality within reasonable debt limits.Governmentsdealwiththeproblemofincreasingcostsof public services and in some cases, cannot achieveobjectiveswithinbudgetarylimits.Thisproblembringsforwardtheissueoffiscalsustainability.

n Supreme Audit Institutions (SAIs) have a vital role as institutions working for assuring economic, effective and efficient use of public resources. n

n Financial crises that affect the governments make it even more challenging to achieve the objective of maintaining the same level of public service at the same level of quality within reasonable debt limits. n

sUPrEmE AUDIT InsTITUTIons As A sAFEGUArD For FIscAL sUsTAInABILITyAssoc. Prof. Dr. recai AkyelPresidentofTurkishCourtofAccounts

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In the most general terms, fiscal sustainability meansprovidingthenecessaryresourcesforaspecificprogram,sectororeconomyinadefinitetimeframe.Itistheabilityof a government to sustain its current spending in thelong run without defaulting its liabilities or promisedexpenditures.Asitisseenclearlyfromthesedefinitions,fiscalsustainabilityisanissueforallmodernstates,butthecriticalquestionishowfiscalsustainabilityisrelevantforSAIs?

TherelevanceoffiscalsustainabilityforSAIsisapopularanddebatedtopicespeciallyamongstauditcommunitydue to its importance. This topic has been handled inseveral conferences until now. “Fiscal Sustainability,PresentationofAccountsandAccountability”waschosenas the main theme for EUROSAI-OLACEFS Conferencein2007. Inaddition,severaldeclarationson thisspecificsubject have been submitted in the InternationalSymposium held as part of celebration of 150thAnniversaryoftheTCAinAnkara-2012.AsstatedintheEUROSAI- OLACEFS Conference in 2007, the increasingimportanceandtechnicalcapacityinherenttothefiscalsustainability practices advise the reinforcement ofthe SAIs role in different states. As a conclusion of thisconference,theparticipantsagreedthatSAIsshouldtakearoleinensuringfiscalsustainability,sinceitisanissueof great importance and needs to be dealt with by anindependentandwell-respectedinstitution.

sAIs as a safeguard for fiscal sustainability

Acknowledging the importance of the role of SAIs as asafeguardforfiscalsustainability,thequestionofhowtoperformthisrolecomesalong.Thisisanissue,whichhasbeendiscussedforseveralyears,especiallyafterthecrisesthataffectedtheEuropeancountriesin2007.Nowadays,European countries are dealing with a sovereign debtcrisis, which made financial sustainability issue evenmoreimportant.

Since the role of SAIs in ensuring fiscal sustainabilityisanewlyemergingtopic,thereisnotmuchclarityonthemethodsSAIsneedtoapply.ItispossibletosaythatSAIscanfunctionasasafeguardforfiscalsustainabilityin three co-related ways. First of all, SAIs can monitortheapplicationofbudgetaryprovisionswitha resultsor outcome based approach. To understand this roleof SAIs, it would be beneficial to mention about oneof themost importantreformmovementscarriedouttoensurefiscalsustainability:thetransitionfromcashbasedaccountingsystemtoaccrualbasedaccountingin public sector.This change allowed governments toensurefiscaldiscipline,accountabilityandtransparencyin use of public resources. The reform in accountingsystem brought along the transition in budgetarysystems,which led toadoptionofperformance-basedbudgeting based upon determination of aims andobjectivesanduseofpublicresourcesinlinewiththese.Thesereformsinpublicfinancialmanagementsystembasicallyaimedateffectiveuseofpublicresourcesandbrought along additional responsibilities for SAIs intermsofensuringgoodgovernanceinpublicfinancialmanagement. In accordance with these reforms, SAIsare expected to comment on the implementationof public programs and the results and outcomesof these programs for ensuring accountability andtransparency,andindirectlyactasasafeguardforfiscalsustainability.Suchkindofanauditaimsatpromotingsuccessful implementation of public policies andaddingvalue.Inaddition,accordingtotheirrespectivemandate, SAIs may warn about the deviations fromestablished objectives and develop suggestions forcorrective actions. This would also help governmentssee the deficiencies and correct them on a timelymanner, which in turn, would contribute to ensuringbudgetarystability.

Secondly, SAIs can serve as a safeguard for fiscalsustainability through auditing public debt. There is adirect linkbetweenfiscalsustainabilityandpublicdebt.The definition of fiscal sustainability explicitly statesthat sustainability for governments means providingthesamelevelofservicesinthelongrunwithprotecting

n As a conclusion of this conference, the participants agreed that SAIs should take a role in ensuring fiscal sustainability, since it is an issue of great importance and needs to be dealt with by an independent and well-respected institution. n

n The definition of fiscal sustainability explicitly states that sustainability for governments means providing the same level of services in the long run with protecting its solvency level. n

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itssolvency level.Therefore,as theexternalpublicauditbodies SAIs may comment on the volume of publicdebt and its sustainability according to their mandate.This kind of a work would be of great significance dueto the independent and reliable reputation of SAIs.As stated in the International Symposium in Ankara,May 2012, the independent position of SAIs and theirconnectionwiththeparliamentgivesSAIsanappropriatestatus for dealing with public debt. ISSAI 5430 states:“SAIs may wish, within the limits of their powers andresponsibilities,toencouragetheirgovernmentstoadoptsound practices for the assessment, financial reporting,budgeting,andoversightofacountry’sfiscalexposures.SAIs also may wish to be aware of and support theadoptionof‘bestpractices’fordealingwithrisk”.Itisalsomentionedinthesamestandardthat“giventhecomplextechnical and conceptual issues associated with fiscalexposures,SAIsmayneedtodevelopnecessaryskillsbothinternally and across their governments”. Oversight ofloans,guaranteesandinsurance,andreviewof thelongterm budgetary implications can be given as examplestotheoversightoffiscalexposures.ThemethodeachSAIimplementsvaryaccordingtotheirmandateandrelevantconditions. However, what is important and commonis auditing public debt and developing suggestions forgovernmentsonthisissuesothatfiscalsustainabilitycanbemaintained.

ThethirdwaySAIsmaycontributetofiscalsustainabilitywould be their work for maintaining good governance.SAIsarethekeyinstitutionsforensuringgoodgovernancethrough their audit findings and recommendations.Goodgovernancerequiresmonitoringandauditinorderto ensure implementation of established policies in arelevantwayandrealizationofstrategicaims.Atoolforcontributing to good governance may be commentingon internal controls. Some SAIs have the authority to

comment on effective functioning of internal controlsystems of public institutions.This function would helppublicinstitutionsandpublicsectorbecomeawareofthedeficienciesininternalcontrolsandmakeimprovementsaccordingly.Inthisway,itwouldbepossibletoachievegoodgovernance in public sector through the contributionsof SAIs with their findings and recommendations. Thiscontributionofcoursewouldindirectlyserveasatoolformaintainingfiscalsustainability.

conclusion

As noted previously, fiscal sustainability is today acommon international challenge. To overcome thischallenge, governments have adopted reforms in publicsector,whicharestillcontinuing.Inlinewiththese,SAIsshould also keep abreast of these reforms and adjusttheirmethodologiesaccordingly.

SAIs are responsible for auditing effective, economicand efficient use of public resources and this functionisanindirectsafeguardforensuringfiscalsustainability.Each SAI should define its role in promoting fiscalsustainability in their countries. There is no definitemethodforperformingthisrolebutaccordingtocurrentimplementations, it is possible to say that it may beperformed through three different ways: auditing andcommenting on results and outcomes of budgetarypolicy objectives, auditing public debt and developingrecommendations, and auditing and commenting ontheeffectivenessof internalcontrolsystems.ThesearethemethodsSAIsmaychoosetouseaccordingtotheirrespective mandate, but, of course, these are neitherprecise nor complete. Since this is a newly emergingissue for SAIs, it is for sure that SAIs will develop theirown methods to handle fiscal sustainability in duecourse.

Inconclusion,SAIs’roleinmaintainingfiscalsustainabilityis crucial for governments. However, the extent andmethodforperformingthisroleisnotdefiniteyet.That’swhy it is quite important to share experiences amongSAIs to find a common and applicable method to dealwith this issue. SAIs should exchange information withtheir counterparts and continue to share experiences,methodologies and results so that they can serveeffectivelyasasafeguardforfiscalsustainability.n

n To overcome this challenge, governments have adopted reforms in public sector, which are still continuing. In line with these, SAIs should also keep abreast of these reforms and adjust their methodologies accordingly. n

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In a present-day world one of the foreground spheresof public economic policy is ensuring financial stabilityand good governance. So that improper and inefficientutilization, misuse, misappropriation of public financialand material resources, as well as drawbacks andshortcomings in legislative acts allowing illegal useof financial funds are specified as the most risky andproblematic areas threatening economic security. Thedrawbacks and shortcomings in financial control, aswell as lack of unitary financial control policy, existenceof numerous public control authorities with the samefunctionsandpowersandlackofnecessarycoordinationamong them, delays in improving control forms andmethods preventing possible financial irregularities,lack of essential methodological support defininggovernment’s influence on these processes and otherissuesfurthercomplicatethesolutionoftheproblemindifferentcountries.

For this reason, establishing efficient, flexible andoperationalpublicfinancialcontrolsystemisconsideredto be one of the significant responsibilities for allcountries. Analyses show that the establishment ofefficient and effective financial control system is one ofthe essential factors of statehood besides being one ofthekeyattributesofstate’seconomicpower.

Establishing flexible control system with clear outlinesand coverage which defines multilevel budget relationsandunitarypublicfinancialadministrationisanecessaryelement for forming and improving financial-budgetarypoliciesofallcountries.Fromthispointofview,definingtheplaceandroleofexternalpublicfinancialcontroloraudit,aswellasgeneralprinciplesandmechanismsofsupremeaudit institution’s performance allow coordinatingthe control on redistribution and utilization of publicfunds and evaluating intended targets and achievedresultsintermsofpublicinterest.Preciselythesefactorsdefine the enhancement of the public financial controlsystem’sefficiencyandimprovementofitsallspheresas

publicdemandandoneoftheforegrounddutiesforthegovernment. At the same time, the extension of publicactivitytosocialandeconomicfieldsandthus,operatingbeyond traditional financial framework serves for thefurther improvement of external financial control forensuringefficiency.

Sinceprovidingtheefficient,transparentandaccountableutilization of budgetary funds is always topical for allcountries and for all periods, it is especially importantto enhance and constantly to improve control in thissphere.Due to thefact thatbudgetary fundsarepublicfunds which generally belong to each citizen, it makessignificantimpactonitssupervision,inparticular,onthecharacteristics of control system in this field, as well asmakes it necessary to carry out the control by a specialinstitutionwhichmostlyreportstothelegislativepowerratherthananauthoritywhichcontrolsthemanagement

ofthebudgetaryfundsandthisleadstotheenhancementof the position, as well as the role of Supreme AuditInstitutionsinthepublicfinancialcontrolsystem.

It should be considered that regardless of its statuarymandateandplaceinthemanagementhierarchyallSAIs,as they have the right to conduct external public audit,playmoreorlessactiveroleinsocio-economiclifeoftheircountriesdependingontheirpotential.

sTrEnGTHEnInG ExTErnAL PUBLIc AUDITInG: A sAFEGUArD For FInAncIAL sUsTAInABILITy AnD GooD GoVErnAncEThe sAI of Azerbaijan

n Analyses show that the establishment of efficient and effective financial control system is one of the essential factors of statehood besides being one of the key attributes of state’s economic power. n

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Efficient and effective utilization of budgetary funds,development of reliable financial management, properorganization of administrative activity, exchange ofinformationbetweenpublicauthoritiesandsocietythroughpublishingobjectivereports,fromourpointofview,areverysignificantasspecialgoalsofexternalpublicaudit.

Following the requirements of the existent legislation,achievinggoalsondirectingthosefundstodefinedsocial-economicprioritiesinutilizingpublicfinancialresources,in other words, attaining the expected efficiency in theimplementation of expenditures is one of the taskswith the highest priority. It is more topical in terms ofcontrolofexpenditurescoveringsocialspheres.Thereby,considering that the main goal of social expenses is toincrease livingstandards,assessmentof theseexpensesallows the socialization of those expenses along withmore efficient utilization of financial resources. In thisrespect,inaccordancewiththerequirementsofmodernperiodtransitiontofinancialcontrolprinciplesbasedonefficiency assessment is one of the important stages inorganizingexternalpublicaudit.

It should be especially noted that on 22 December2011 the UN General Assembly adopted an importantResolution “Promoting the efficiency, accountability,effectiveness and transparency of public administrationby strengthening supreme audit institutions” recallingEconomic and Social Council resolution 2011/2 of 26April2011, resolutions 59/55 of2 December2004 and

60/34 of30 November2005, as well as UN MillenniumDeclaration.ThishistoricalResolutionnotesthatefficiency,accountabilityandtransparencyofpublicadministrationplays an important role in achieving internationallyagreed development goals, including the MillenniumDevelopment Goals. The document acknowledges thatthe accomplishment of tasks objectively and effectivelyby SAIs being independent of the audited entity andprotectedagainstoutsideinfluencearethekeyprinciplesin promoting efficiency and accountability in publicmanagement.

The Resolution also takes note with appreciation oftheLimaDeclarationonAuditingPreceptsof1977andthe Mexico Declaration on Supreme Audit InstitutionsIndependence of2007 and encourages Member Statesto apply, in a manner consistent with their nationalinstitutional structures, the principles set out in thoseDeclarations.

Atthesametime,theUNencouragesthememberstatesandrelevantUnitedNations Institutions tocontinueandintensifytheircooperation,includingincapacity-building,with INTOSAI in order to promote good governancethroughstrengthenedSAIs.

We think that the above-mentioned issues willsignificantly stimulate the enhancement of financialadministration and external public audit, improvementof financial stability and good governance, as well ascreateconditionsforauditingeconomy,effectivenessandefficiency of public funds and adjusting external publicaudittointernationalcontrolprinciples.n

n In accordance with the requirements of modern period transition to financial control principles based on efficiency assessment is one of the important stages in organizing external public audit. n

n The UN encourages the member states and relevant United Nations Institutions to continue and intensify their cooperation. n

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The EUROSAI Strategic Plan 2011-2017 provides theframework for supporting staff of member SupremeAudit Institutions (SAIs) in their work, and is based onstrategicgoalsthatreflecttheneedsandprioritiesoftheorganisation’s membership.The strategy underlines theuseofprofessionalstandardsandsharingknowledgetofurther strengthen public sector auditing by promotingaccountability, transparency and integrity that arenecessarytoachievegoodgovernance.

Recent events have highlighted the critical roleof external auditing in promoting good corporategovernance. The auditor’s task is to comment on theimplementation of policies and programmes and tocall for any changes that are deemed necessary byindicatingwhat,whereandwhychangesshouldoccur,bymeansofissuingauditrecommendations.Followingpublicationoftheauditreportandanydeliberationsbythelegislature,theauditeemayberequiredtorespondtotheSAIorthelegislatureontheactionsithastakentoaddressreportedfindingsandauditrecommendations.

The following looks at the practice of audit follow-upwithin performance audit, the current practices acrosssome SAIs and the European Court of Auditors’ (ECA)experiencesindevelopingandreportingonitsfollow-upactivities.

what follow-up means (the InTosAI standards)

In audit literature follow-up is defined as a process bywhichtheauditorsdeterminetheadequacy,effectiveness,and timeliness of actions taken by the auditee onpreviously reported findings and recommendations.Thepurpose is to facilitate the effective implementation of

reportrecommendationsandprovidefeedbacktotheSAI,thelegislatureandthegovernmentonimprovementsinfinancialmanagementandtheeffectivenessofaudit.

In following up the audit report the auditor should focusonwhethertheidentifiedweaknesseshavebeencorrectedratherthanonlyonwhetherspecificrecommendationshavebeenimplementedornot.However,whiletheseshouldbesimilar,theimplementationoftherecommendationsbytheauditeemayoftenbetheonlyreadilymeasurableindicatorofchangeorimpact[2].

why is follow-up important?

Following up on audit findings and recommendationsservesfourmainpurposes:

• It expands the effectiveness of audit reports, byincreasing the probability that recommendations willbeimplemented.

• It assists the legislative and budgetary authorities,by providing updated independent information onfinancial management which may be valuable ininformingtheirdecision-making.

[1] With contributions from her Head of Unit, John Sweeney, and fellowauditor,CsabaHatvani. [2] ISSAI3000§5.5

FoLLowInG UP AUDIT FInDInGs AnD rEcommEnDATIons: An EssEnTIAL sTEP To GooD GoVErnAncEDilyanka zhelezarovaAuditorintheECA’sMethodologyandSupportUnit[1]

n The purpose is to facilitate the effective implementation of report recommendations and provide feedback to the SAI, the legislature and the government on improvements in financial management and the effectiveness of audit. n

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• Itallows theauditor toassess the impactof itsauditwork.

• It creates incentives for learning and development—followingupactivitiescontributestobetterknowledgeandimprovedauditpractice.

Practices across a number of sAIs

In2009theECAlaunchedasurveyofseveralSAIswiththeaimofobtainingtheirviewsandexperiencesconcerningtheprocessoffollowing-upauditreports.AnanalysisofthereplieswassubsequentlypresentedtotherespondentSAIsinasummaryreport,whichaddressedthefollowingquestions:

• How is the follow-up process organised and whicharethemainelementsoftheprocess?

• Whatisthescopeofthefollow-upreviewandhowisthistaskpositionedwithintheSAI’smainactivities?

• What is the outcome of the review and how is itcommunicatedtotheauditeeandthegeneralpublic?

• Howistheimpactoftheauditreports(findingsandrecommendations)measured?

Thefollowingprovidesanon-exhaustiveaccountof thegeneralfollow-upmethodologyofthesurveyedSAIs.

How is the follow-up process organised?

TheSAIsplantheirfollow-upactivitiesasseparatetasksoraspartofaudittasksplannedforthecurrentyear.SomeSAIs do not follow-up all the recommendations fromtheir audit reports, but apply a risk-based assessmentin deciding which audit reports and recommendationsare to be followed-up. In these cases, the findings andweaknesseswhichhavethehighestimpactand/orwhichposethehighestriskarefollowed-up.

what is the scope of the follow-up review?

In some SAIs the audit reports are followed up quiteregularly, e.g. twice in a period of21/2 years after the

publicationofthereports.Becauseoftherisksidentifiedandinordertoreviewtheprogressmadebyauditeesinaddressingauditrecommendations,onceayearasampleof5to10auditreportswouldalsobefollowedupmoredeeply for a second time. In other SAIs a formal follow-upofaudit reports iscarriedoutevery3 to5yearsandacollectionoftenormorereportsareexaminedineachfollow-upprocess.

Follow-up is carried out by most survey respondents inrespectofauditfindingswhichwerenotbeingaddressedby the auditee, depending on the level of assessed risk.Suchfollow-upscanleadtoanewaudit.

According to the surveyed SAIs, the implementation offollow-up generally takes one of two forms: they areincludedwithinthescopeofcurrentaudittasksortheyarecarriedoutasseparateaudittasks/orasfollow-upreviews.

How is the outcome and impact of audit reports?

ThevarietyofreportingpracticesofSAIsidentifiedinthisareacanbesummarisedasfollows:

• Issuing a specific Annual Follow-up Report with theresultsofthefollow-upactivities.

• Issuing a Status Report every two years with theresultsofthefollow-upworkcarriedout.

• Reportingtheresultsoffollow-uptasksasapartoftheAnnualActivityReport.

Thecontentofeachofthefollow-upreportsofSAIsalsovaries considerably. The different approaches taken bySAIsareasfollows:

(I) Quantificationofthenumberoftherecommendationsimplemented,asreportedbytheauditee.

(II) Reporting in qualitative terms on the remedialactionstakeninresponsetorecommendations.

(III) Quantificationofthenumberofrecommendationssubstantially implemented four years after theywere issued and an assessment of whether theentity made satisfactory progress in addressingthe findings and recommendations, given thesignificance and complexity of the issue, and thetimethathadelapsed.

n It is considered that robust and systematic planning of follow-up tasks is essential for their implementation. n

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(Iv) Inclusion of a summary of the status of non-implementedrecommendations.

(v) Measuring the impact and the costs ofimplementing audit recommendations, or takingnecessarycorrectiveactions,whicharethenusedbytheSAIasperformanceindicators.

Notwithstanding the differences of emphasis betweenthe approaches of the SAIs, their reports on follow-upreviews place the principal emphasis on the auditee’simplementationofcorrectiveactionsandtheresultsthereof.

EcA’s situation and experience with follow-up and new developments

The main impact of the Court’s work on improvingfinancialmanagementisthroughitspublishedreports.The Court’s “Special Reports” in general, examinesystems, programmes and organisations concernedin the implementation of the EU budget (or those ofthe European Development Funds), with regard toone or more of the three aspects of sound financialmanagement:economy,efficiencyandeffectiveness.

Assessing and measuring the impact of the ECA’sperformance audit reports is considered as a necessaryelement in the cycle of accountability. Furthermore, theveryexistenceofthefollow-upprocesscanencouragetheimplementationofreportrecommendationsbyauditees.

In 2010 the ECA updated its methods and proceduresforthefollow-upofitsSpecialReportsbysettingoutthecontext of the activities and the steps to be followed.Theobjectiveof therevisedfollow-upprocedurewas toimprove the ECA’s system for systematically monitoringandreportingonhowtheauditee(principally,theEuropeanCommission) has addressed weaknesses in financialmanagement, as identified by the ECA’s performanceaudits and addressed in audit recommendations onfinancialmanagementtotheauditee.

The nature and programming of the follow-up task

Prior to 2012, the ECA presented the results of itsfollow-up reviews of Special Reports as observationswithinitsAnnualReport,inthechaptersrelatingtotherelatedbudgetaryareas.In2010thedecisionwastakentore-defineandcoordinateallfollow-upreviewsandtopresent the results in a single report to be published

annually from 2012. The follow-up takes the form of“limitedreviews”whichassesstheextenttowhichtheauditee has addressed the audit report, but does notassesstheeffectivenessofthoseactions,asthiswouldrequireadetailedauditenquiry.

This follow-up process also meets the informationneedsofoneofECA’sKeyPerformanceIndicators,whichmeasures the number of audit recommendations (fromfinancial, compliance, and performance audits) whichhavebeenacceptedandimplementedbytheauditee.

Therevisedproceduresalsoprovidedthatseparatelyfromtheannualfollow-upactivities,adetailedexaminationofa specific Special Report could be carried out as an“in-depth”follow-upaudit,ifconsiderednecessary.

Thereportstobefollowed-upareselectedonthebasisoftwocriteria:whethermorethantwotothreeyearshaveelapsedfortheauditeetoaddresstherecommendations,andwhethertherecommendationsarestillrelevant.”

carrying out the follow-up enquiry

Thereviewisconductedinthreestages:

1) The European Commission’s management databaseoffollow-upactionstakeninresponsetotheCourt’srecommendation, is used as a preliminary source ofdatainrespectoftheauditreportsbeingreviewed.

2) Adocumentaryreviewofannualreports,actionplans,policy documents, specific reports and their analysistakesplace.

3) Oral,writtenandotherdocumentaryevidenceistakenfromtheauditee.

InJuly2012theECAadoptedforthefirsttimethefollow-upreportonsevenSpecialReportspreviouslypublishedbyECA.Thereportconsistedoftwoparts:asummaryof

n The implementation of the follow-up reviews generally takes one of two forms: they are included within the scope of current audit tasks or they are carried out as separate audit tasks / or as follow-up examinations. n

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the Court’s review of actions taken by the auditee on51 recommendations, and individual accounts of thefollow-up actions for each Special Report. The reviewalso categorised the state of implementation of therecommendationsbytheauditee.

challenges and successes

Auditors carrying out follow-up reviews, particularly ofperformanceaudits,arefacedwithanumberofchallenges.Firstly, they must apply a high degree of professionaljudgementindecidingwhethertheweaknessesoriginallyidentified some years earlier have actually been fully orsatisfactorily resolved and the extent to which morecan realistically be done in addressing the findings andrecommendations. Issues of improvements to financialmanagement evolve with time and may be dependenton factors such revisions to regulations and legislation,which take considerable time to implement and whicharenotwithinthedirectcontrolofthemanagingservices.Therecommendationsmayalsobenolongerapplicabletothenewcircumstancesfacingtheauditee.

Secondly, the auditees’ and auditors’ focus on specificactionstoaddressauditrecommendationsmaynotprovidean accurate or full picture of improvements to financialmanagement.Andas theselectionofreportsfollowed-upwillnotusuallyberepresentativeduetotheirlimitednumber,any general conclusions on the overall implementation ofrecommendations,shouldbehandledwithcare.

Somekeysuccessfactorsforaqualityfollow-upexerciseare: a readily available, updated, and reliable databaseoffindings/recommendationsandactions;clearfollow-up methodology consistently used by auditors; beingable to obtain sufficient and reliable evidence, andreachingagreementwiththeauditeeonkey/significantremainingweaknessesbasedonthatauditevidence.

Coming tosuch judgementsandunderstandingrequiresearlyandopencommunicationsandafrankexchangeof

viewsandperspectivesbetween theauditorandauditeethroughout the follow-up review process. This dialogueshouldensurethatafairandbalancedappreciationoftheimprovements and remaining weaknesses is reported tostakeholders,intheinterestsofaccountability,transparencyandintegrity,whicharetheessenceofgoodgovernance.

Follow-up as a means of assessing the impact of the external audit effort

Ordinary practise among SAIs is to apply performancemeasurementtoolstoassesstheefficiencyandeffectivenessof their performance, by means of quantitative andquantitative targets to be achieved throughout the auditprocessandofthefinalproduct,theauditreport.

Theneed tomeasure theresultsandefficiencyofauditservices is recognised by the ECA in its Audit Strategy2013-2016, where it commits itself to “...updating itsperformance indicators for measuring, monitoring andcommunicating on the implementation of its strategyandperformanceasaninstitution”.

AlongwithanassessmentofECA’sproductsbyexternalexperts and stakeholders, an important indicator forthe ECA is the impact achieved from its Special Reportsand the results of reviewing the follow up given tothe reports and opinions, as measured by the actionstaken by auditees in response to its audit reports. Thequantification of financial management improvementsresulting from SAIs auditwork isanaspiration ofmanySAIs.Developingarobustandeffectivefollow-upprocessforauditreportsisthekeystonetosuchanendeavour.n

n This follow-up process also meets the information needs of one of ECA’s Key Performance Indicators, which measures the number of audit recommendations which have been accepted and implemented by the auditee. n

n Some key success factors for a quality follow-up exercise are: a readily available, updated, and reliable database of findings/recommendations and actions; clear follow-up methodology consistently used by auditors; being able to obtain sufficient and reliable evidence, and reaching agreement with the auditee on key/significant remaining weaknesses based on that audit evidence. n

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TheyearningfortransparencyinStatemanagementandfinanceshasgrownduringthelastfewyears:itrepresentsboth a democratic and economic need. First of all, “anindependent external control is a democratic necessity”recently highlighted the First President of the FrenchCourt of Accounts: the use of public resources must becontrolled independently and transparently. Moreover,in the wake of the recent economic and financial crisis,citizens,oftenaskedtomakesubstantialeffortstofightthe debt crisis, as well as financial markets, remainobservantforsignalscomingfromtheStates:informationmustbereliableandobjective.

External public auditing: a necessary tool usefully complementing internal auditing

Thestrengtheningofpublicauditing—externalorinternal—isachallengingtaskthataimsatfulfillingthisdemandforpublicentities’transparencyandresponsibility.Therolesofexternal and internal audit may seem redundant at firstsightbutoneshouldbearinmindtheirdifferences.Infact,somecountriescouldseeawayofsavingfundsinmergingexternal and internal public audit offices: they would bedangerouslymistakenandjeopardizedemocracy.

Infact,internalandexternalcontrolsarecomplementaryand must be carefully distinguished. Their co-implementation contributes to frequent and rigorouscontrol of public entities: they are necessary tools forfinancialsustainabilityandbettergovernance.

Internalcontrolsareaimedatverifyingthatthefollowingobjectives are being achieved: (a) executing orderly,ethical, economical, efficient and effective operations;(b) fulfilling accountability obligations; (c) complyingwith applicable laws and regulations; (d) safeguardingresourcesagainstloss,misuseanddamage[1].

These aims are ambitious—some would say hardlyattainable—: internalcontrolscan’tpretend toabsoluteindependence—they depend on Government—andthereforecan’tpretendtomapoutaglobalvisionofStateentities’efficiencyandeffectiveness.

Thisisthemainreasonwhyexternalcontrolisnecessaryand complementary. Unlike internal audit services,“externalauditservicesarenotpartoftheorganizationalstructureoftheinstitutionstobeaudited”[2].However,theyarenotabsolutelyunrelatedsinceSAIshavethetaskof“examiningtheeffectivenessofinternalaudit”[3]andtheir aims are very similar to the internal audit offices’mentionedabove.

Thewholemeaningofexternalpublicauditingisbasedononemainprinciple:independence.SAIsmustbewaryofpreservingtheirindependencewithregardtothethreepowers (legislative, executive and judiciary), thanks tointernationalstandardsandethicalprinciples.TherecentUN Resolution A/66/209 concerning the independenceof SAIs [4] raised consciousness in several countriesand hopefully led to the implementation of measuresreinforcing independence. Initiating these measuresis a tricky exercise insofar as independence does not

[1] INTOSAI Gov9100, Guidelines for Internal Control Standards for PublicSector,1.1Definition.

[2] Lima Declaration, 1977, Section 3. Internal audit and external audit,paragraph1.

[3] Lima Declaration, 1977, Section 3. Internal audit and external audit,paragraph3.

[4] Resolution A/66/209, “Promoting the efficiency, accountability,effectivenessandtransparencyofpublicadministrationbystrengtheningSupremeAuditInstitutions.”AdoptedonDecember22,2011bythe66thUnitedNations(UN)GeneralAssembly.

sTrEnGTHEnInG ExTErnAL PUBLIc AUDITInG: A sAFEGUArD For FInAncIAL sUsTAInABILITy AnD GooD GoVErnAncEThe sAI of France

n In fact, some countries could see a way of saving funds in merging external and internal public audit offices: they would be dangerously mistaken and jeopardize democracy. n

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imply a total absence of interaction with the executiveand legislative powers: instead, SAIs have to bettercooperatewiththeminordertoachievetheiraimofgoodgovernance.

Finally, external public auditing is the privileged wayof promoting transparency and responsibility of Stateentities. In fact, coordinated and reliable informationmust be broadcasted by SAIs to supply the democraticneedfortransparency.SAIscontrolscanleadtoconsistentrecommendationsand,sometimes,topenaltyprocedures.The latter point shouldn’t be neglected. Since penaltyprocedures differ from a SAI to another, with variousresults—dependinginparticularontheirproximitytothejudiciarypowerandtothelegislativepower—,EUROSAImust foster knowledge sharing and reflection on thepublicaudits’follow-ups.

The French court of Accounts has taken major steps in upholding several principles

Independence and objectivity: guarantees of quality and impartiality

As pointed out by François Hollande, President of theFrench Republic, “the Nation needs independenceand impartiality for democratic control”. These area sine qua non for an effective external control. Theequidistant position with regard to the executiveand the judiciary powers is one of French Court ofAccounts particularities.The status of its members alsostrengthenstheindependence:theyaremagistratesandtheirappointmentisirrevocable.

Severalmeasureshavebeentakenintherecentyearssoastoachievetheobjectiveofindependence.Freedomofplanningremainsguaranteed:auditannualprogrammesare debated and decided each year in a committeegathering the Presidents of the Court. However, theParliament can also ask for a few annual reports onspecific topics. Since2006, the budget of the Court hasbeen associated with the budget of the Prime Minister,and does not depend anymore on the budget of theMinistryofEconomy:afairnegotiationtakesplaceevery

three years involving the Court, the Parliament and theGovernment.The Court decides on its organisation andon the allocation of its budget without any externalinterference.

The autonomous organisation of the Court of Accountsis based on collegiality and contradiction, in a constantsearch of objectivity. The court is not ruled by a singlehead but by seven Presidents—each of them chairinga Chamber working on precise sectors—and a Firstpresident.DecisionsaretakenwhenthemembersoftheCourtortheChamberconcernedaregathered.Moreover,each report is followed by a “counter-rapporteur” incharge of verifying each statement. The quality controlprocessisalsoensuredbytheGeneralProsecutor’sofficeateachstepoftheprocedure.

responsibility, information and transparency: a democratic duty

Responsibility of the public entities is an importantvaluetoachievebettergovernance.HereisonethemainparticularityoftheFrenchsystem:theCourtofAccounts,judgingpublicaccountants,and theCourtofBudgetaryand Financial discipline (that is linked to her and thatis able to prosecute public managers) are jurisdictions.Their members are magistrates and have the ability tojudge misappropriation. This ability was enhanced in2011 concerning the public accountants: the financialpenalties imposed to the accountant now depend ontheseverityofthemisconduct,andarenotmechanicallyequal to the amount in consideration lost by publicauthorities.Moreover,thejurisdictionalframeworkisstillevolvingandacurrentreflexion is ledonanewpenaltysystem for the authorising officer—most of the time aminister—: a system balanced between impunity andabusiveprosecutionistobeimplemented.

Permanent efforts are made to achieve the informationduty towards the citizens. Precisely defined cooperationbetween the Parliament—often through its Finance

n The whole meaning of external public auditing is based on one main principle: independence. n

n As pointed out by François Hollande, President of the French Republic, “the Nation needs independence and impartiality for democratic control”. These are a sine qua non for an effective external control. n

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Commissions—and the Court strengthens the efficacyofitswork.TheFrenchCourtofAccountscontributesforexampletoimportantpoliciesconcerningdecentralizationorSocialSecuritythroughcontrolsandsurveysfocusingonveryspecificmatters:itcanthereforeuncoverpreciousdataforParliamentandGovernment.Publicreportsandpressconferenceguaranteethecitizens’directaccesstotheworkoftheCourtofAccounts.

Inordertofosterfinancialsustainabilityandtransparency,the role of the French SAI in external auditing wasstrengthenedduringthelastdecadeandnewprerogativeswere added: the Court of Accounts now certifies State’s(2001) and Social Security’s (2005) accounts. Attesting

theseriousnessandtheimportanceoftheCourt,arecentdeclaration of the President of the Republic revealedthe establishment of a “Haut Conseil des FinancesPubliques” (High Council of Public Finance) broadeningthe Court’s scope of action.This new Council would beconcerned with finance laws and would be aimed atapproving macro-economic assumptions, verifying therespect of announced objectives and their regular anddue implementation. It would also contribute to assessthe balance State’s budget so as to achieve Europeanstandards[5].ThecouncilwouldbehostedbytheCourtofAccounts,chairedbyitsFirstPresidentandcomposedinadditionbyfourmagistratesfromtheCourt,appointedby the First President, and four qualified personalities,appointedbythePresidentoftheParliament.

Externalpublicauditingcontributestoabetterunderstandingof public finance through its complementarity withinternal auditing and the continuous enhancement offundamental principles. The French Court of Accountsfocuses on the quality of its reports and the usefulnessofitswork:itfostersindependenceandobjectivityaswellas information, transparency and responsibility. Thesemeasuresfind theirplace inageneral trendconcerningEuropean SAIs in particular: they tend not only to be acorrective instrument but also to guarantee financialsustainabilityandgoodgovernanceinadecisivepoliticalandeconomicsituation.n

[5] Inparticularthe2012EuropeanFiscalPact,soontoberatifiedinFrance,establishinga“balancedbudgetrule”.

n The French Court of Accounts contributes for example to important policies concerning decentralization or Social Security through controls and surveys focusing on very specific matters: it can therefore uncover precious data for Parliament and Government. n

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Overthelast15-20years,therethinkingofthescopeofstatetasksandpublicservicesaswellastheirfinancing,maintenance and operation has become an issue ofurgencyonaglobalscale.

One direction of the search for solutions was theapplicationofmarketmechanismsinthepublicsector,and on a related note, the cooperation of the publicand private sectors and the harmonisation of theiractivities.TherelevantauditsoftheStateAuditOfficeof Hungary (SAO) were primarily aimed at the PublicPrivatePartnership(PPP)schemesthatwerebecomingincreasinglycommoninHungaryasof2003andwhichrepresented a partnership of the public and privatesectors. This is why we will now share our findings,observationsandconclusionsonthisissue.

short-term benefits, long-term costs

The spread of this scheme in Hungary is primarily dueto the fact that PPP projects hold out the prospect ofseveral short-term benefits. Even though the long-termdisadvantageshavealsobecomeapparenttoall,itseemsthat prior to 2010, decision makers hardly took non-immediatecostsintoconsideration.

Someof themost importantexpectedbenefitsof thePPP scheme include sparing the budget, and on theother hand, stimulating investment. From the aspectof thestatebudget,oneof themostpositivefeaturesof PPP contracts is that they enable the decrease ofgovernment expenditures incurred at the start ofinvestment projects. This means that projects canbe launched without impacting public debt, which isbecoming an increasingly difficult problem in severalcountries.Giventheobligationtomeetdeficittargets,any otherwise necessary tax hikes and expenditurecuts as well as additional government borrowing can

be postponed. According to the optimistic approach,investment projects implemented in PPP improvemacroeconomic indicators, stimulate economicdevelopment, while due to decreasing (or at leastnon-increasing) public finance deficit, more financialresourcesareavailableforpublictasksandthesupportof the private sector. This genuinely appears to bean attractive option, particularly because costs onlyappeardowntheline,andtherefore,donotnegativelyimpactthebudgetnumbersinthegivenyear.

In Hungary, the application of these new forms ofdevelopment-oriented cooperation between the publicandprivatesectorswasmadepossiblebyagovernmentdecision announced in 2003. The first consciousgovernmentapplicationofthePPPscheme—onthebasisofseveralgovernmentdecisionsandNationalAssemblyresolutions from 2003 and 2004—first appeared inthe 2005 draft budget. The magnitude of investmentsimplemented as PPP is well illustrated by the factthat in 2005 motorway, prison and student dormitoryconstructionrepresentedanetpresentvalueofEUR1.86billion [1]whichwasmore than2percentof thegrossdomesticproduct(GDP)atthetime.

On the state side, the domestic application of thePPP scheme was helped along, on the one hand, by a

[1] EquallingHUF460billion,asoftheexchangerateofJune2005.

ATTrAcTIVE In THE sHorT-TErm, rIsKy In THE LonG-rUn. AUDIT ExPErIEncE oF THE sTATE AUDIT oFFIcE oF HUnGAry In rELATIon To HUnGArIAn PPP ProJEcTsThe sAI of Hungary

n This means that projects can be launched without impacting public debt, which is becoming an increasingly difficult problem in several countries. n

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significant need for development convergence, and ontheother,bythescarcityofbudgetresourcesandcurrentbudgetdeficit.Inthecaseofthelocalgovernmentsector,whichwasalsoaffected,thetrueappealofPPPwasthatcentralfunds(fundsfromthecentralbudgetorfromtheEuropeanUnion)orfundsavailablefromlocalgovernmentrevenue were generally insufficient to implement theplannedinvestmentprojectsoftheselocalgovernments.In summary, therefore, we could say that this particularform of financing and operation spread, because itallowedfordevelopmenttomakeonlyitsbenefitsfeltintheshort-term,withthebilltobepaidlater.

From motorways to local government sports developments

The “golden age” of this financial scheme inHungary was between2003 and2009. In this period,developmentsimplementedinPPPmodecoveredawidearea. Of these, we should mention the motorway andprison construction projects, the construction of thePalaceofArts(MÜPA),theinfrastructuredevelopmentand dormitory investment programme of highereducation as well as the sports facility developmentprogrammes of local governments. The investmentprojectsmentionedabovealsovariedgreatly in termsofcostrequirements;thelargestcostitemswerethoseof motorway construction, while the smallest theconstructionofsportsfacilities.

The year2010 brought about a fundamental change inconnection with public and private sector partnerships,as this was the year when the government stoppedsubsidisingthePPPcontractschemeandfromthispointonnonewPPPschemeinvestmentprojectscommencedin the country. This, however, did not mean that PPPvanished from the Hungarian public finance systementirely,asinvestmentsrealisedearlier,duetotheirlong-term of typically 15-30 years, continue to incur centralbudgetexpendituresofEUR0.4-0.5billion[2]everyyear.

[2] EquallingHUF100-120billion,asoftheexchangerateofOctober2012.

InHungary,themostwidespreadformofPPPschemes—andasaresulttheonetheStateAuditOfficeofHungaryencountered most frequently—involves the privatecompanynotjustplanning,implementingandoperatingthe infrastructure, but also financing the project. Thisis significant because in these cases public financeexposureisgreater,andsubsequentcostsmaybehigher.Inmostcases,theprimarypurchaserofservicesofferedinaPPPschemewasthegovernment,andthiswastypicallyrealisedinoneoftwoforms.Oneofthesewaswhenthepurchaser and user of the service was the public sector(forinstancetheconstructionofagovernmentbuilding),theotherbeingwhentheservicewasinfactorderedbythestate,notforitself,butforawell-definableend-usergroup(suchastheconstructionofschoolsordevelopmentofeducationinfrastructure).

Giventhenatureandlegislativeauthorisationofitswork,SAO typically conducts audits after the fact, that is itassesses the projects after investments are completed.Asaresult,inthecaseofPPPprojects,auditsperformedbytheauditinstitutionprimarilyfocusedonpreparation,the assessment of legal and organisational backgroundand project implementation, i.e. the management andimplementationofpublicprocurementprojects.

Below we shall present the experience gained fromauditsperformedby theStateAuditOfficeofHungaryinfiveareas.SAOpaidparticularattentiontomotorwayconstructionbetween2007and2010,asthesenotonlyrepresentedthelargestamountamongPPPprojects,butalso the greatest public commitment by the state.TheStateAuditOfficeofHungaryaudited theprofessionalpreparation of prison construction projects for theperiod 2001-2004. The Palace of Arts project, realisedthrough the cooperation of the public and privatesectors,wasfirstauditedbytheSAOin2006,whilethedormitory investment programme of higher educationwasauditedin2007.Atthispoint,auditswerebasicallyaimed at the preparation and implementation of theprogrammes, and in2011, in connection with this, thedevelopment and dormitory investment programmeof higher education was audited, also focusing on theHungarianpracticeofPPP.

General experience and conclusions

What were the main findings and what generalconclusionscanbedrawnfromtheseaudits?

One of our most significant findings in the case ofpracticallyallauditswasthatschemeswerenotprepared

n The “golden age” of this financial scheme in Hungary was between 2003 and 2009. In this period, developments implemented in PPP mode covered a wide area. n

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adequatelyandwithduediligence.TheStateAuditOfficepointedoutthepoorrisksharingbetweenthestateanditsprivatepartneronseveraloccasionsaswellasoccasionallate performance and unjustified overpayment. Inpractically all cases, the state was adversely affected bythisimbalance,anditwastypicalofcontractsthatmostoftheprofitwasdirectedtotheprivatepartner,whilethestatewaslefttobearthemajorityoftherisk,andallcoststhusincurredhadtobebornebythebudget.

ThereportsofthevariousauditsalsohighlightedthattheselectionofPPPschemesovertraditionalstateinvestmentswasfundamentallynotduetothebenefitsshownbycost-benefitanalyses,butalmostexclusivelytotakingtheaspectsof the budget of the given year into account.This meantthatinmanycasestheseprojectswerenotactuallycheaperthan they would have been with a classical form of stateinvestment,anddecisionmakersonlyselecteditbecauseitwastheschemethathadthe least impactonthebudget

and deficit of the given year. Unfortunately, however, thismentalityandmethodofdecision-makinghadandstillhaveseriousandadversemediumandlong-termrepercussionsfortheentiresystemofpublicfinances,withtheassociatedcostsbeingpaidbytaxpayerstothisday.

Ourauditsalsoclearlyshowedthattheareasconcernedexhibit serious regulatory shortcomings. In connection

subjectmatterofcontractPlanneddirectbudgetarypaymentperyear(EUrmillion)[1]

Altogetherlast

yearofcontract2004-2010 2011 2012 2013 2014 2015 2016 from

2017

Operationofcertificateofficebranches(hiringappliance) 38,9 14,6 2,3 0,0 0,0 0,0 0,0 0,0 55,8 2012

Complex,centralisedone-channelproductionofdocuments 24,9 27,3 19,0 18,2 17,5 16,8 16,1 10,4 150,2 2017

Provisionofbackbonenetworkservices 4,3 0,0 0,0 0,0 0,0 0,0 0,0 0,0 4,3 2010

PrisonPPP 41,5 14,1 14,2 14,4 14,7 15,1 15,5 103,5 232,9 2023

Establishmentandoperationofmonitoringsystem 18,9 2,1 2,1 2,1 0,0 0,0 0,0 0,0 25,2 2013

DormitoryPPP 32,9 8,1 8,0 7,9 7,8 7,7 7,7 78,5 158,5 2029

DormitoryPPP 141,4 52,1 52,5 51,9 51,5 51,2 50,8 550,1 1001,5 2030

Expendituresrelatedtohiringrespirator,anaestheticapparatusandmonitor

19,0 4,9 4,9 4,9 0,0 0,0 0,0 0,0 33,6 2014

Expendituresrelatedtohiringequipmentforemergencymedicalflights

12,6 3,8 3,8 3,8 3,8 3,8 3,8 0,0 35,1 2016

GymnasiumandtrainingswimmingpoolPPP 11,3 7,6 6,9 6,5 6,7 6,9 6,8 50,4 103,3 2025

KiskunfélegyházasportshallPPP 0,5 0,3 0,3 0,2 0,2 0,2 0,2 1,5 3,5 2022

ContributiontotheoperationofthePalaceofArts 146,6 35,3 39,0 38,4 38,9 39,6 38,4 720,1 1096,3 2035

OperationofaSingleDigitalRadioTelecommunicationSystem 0,0 22,5 45,9 45,9 45,9 15,3 0,0 0,0 175,6 2015

M5motorway(Budapest-Röszke)concession 757,1 132,9 138,2 140,0 141,5 143,1 147,3 2284,0 3884,0 2031

M6motorway(phasesI.-II.-III.)concession 331,4 220,7 210,9 213,9 216,9 219,2 226,2 4505,9 6145,0 2038

1581,1 546,1 548,0 548,1 545,6 518,8 512,7 8304,3 13104,8

[1] AsoftheexchangerateofOctober2012.Source: SAOreportnr.1294onpublicdebt

n SAO paid particular attention to motorway construction between 2007 and 2010, as these not only represented the largest amount among PPP projects, but also the greatest public commitment by the state. n

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withprisonconstruction,wehavestatedveryfirmlythatdue to regulatory deficiencies and problems, significantexcess risk could be generated even in the preparatoryphaseofPPPprojects,whichriskswouldhavetobebornebythestate.

It was characteristic of the majority of Hungarian PPPprojects thatdecisionsandcontractson theapplicationof theschemeweremadeandentered intoevenbeforethenecessarylegalbackgroundandproceduralruleswereestablished.Initsauditreports,theStateAuditOfficeofHungary every single time very clearly called attentionto the resulting risks, and called for the completion ofregulatory work, without which we cannot even talkabout the basics of responsible, effective and efficientpublicfundutilisationinconnectionwiththeseprojects.

The management of projects, the operation of facilitiesand the appropriate quality and level of services canonly be properly audited and assessed years after thecompletion of the investment project, having gainedsufficient experience. The SAO audit published in July2012onPPPwasthefirstaudit,whereanopportunitywasprovidedtofocusonprojectoperationandmanagement.We sought to answer whether the economy of publicfund utilisation was ensured when the contractualterms of the PPP projects were complied with, whetheroperationwasperformedwiththecontentcontainedinthe contract and ensuring the economy of public fundutilisation,andwhether thesocialuseof theutilisationof public funds was ensured. As part of this audit, theSAOre-audited thePalaceofArtsprojectaswellas thedormitory investment programme of higher education,asduringtheearlieraudits,nosufficientinformationandexperience was yet available to make a substantiatedassessmentof theperformanceofcontractcontent, thequalityofserviceprovisionorthesocialutilisationoftheprojects.

Accordingtothelessonslearntduringtheauditsof thedormitoryinvestmentprogrammeandthePalaceofArtsproject, even though utilisation/visitor numbers wereoverallacceptable,thecontractualtermsandconditionsdidnotensuretheenforcementofstateinterests.Inthe

case of the Palace of Arts for instance, the contract didnotspecifythepreciseserviceparametersrequired,whichmeantthatincaseofinappropriateserviceprovision,theincentive effect of sanctions was limited. We showedthatthelump-sum,flatratetypeoperatingfeesmakeitimpossibletoassesstheeconomyofpartialtasks,andthattheobligationtofinancetherenovationofassetsbeyondrestoration to their original state and modernisation isasignificantadditionalburdenfor thestate. In thecaseofthedormitoryinvestments,pursuanttothecontracts,the institutions of higher education bear the majorityof the financial risk (exchange rate, interest, inflation),which represents a significant additional burden onthe commissioning state-owned institutions due to theadverseeconomictrends.Alsonotservingclientinterestswasthecontractprovision,accordingtowhich,inthecaseof erroneous or incomplete performance, the deductionshallnotbemadefrom the total fee,butonlyfrom theoperatingfee.

conclusion

During its audit covering PPP projects, the State AuditOffice of Hungary determined that the contracts ofinvestmentsrealisedassuchschemesviolatedthepublicinterestinseveralaspects.Inmanycases,theconditionsfailedtoenforcetheinterestsofthegovernmentasthecustomer, and in turn, of society. Our experience was,therefore,ratherdistressing,however,thisdoesnotmeanthatwedonotseethepossibilityofcooperationbetweenthe public and the private sector. Under control publicfundmanagementrequiresthatcalculationsalsoextendto long-term impacts, and that the assertion of stateinterestsbeatleastasstrongastheassertionofprivateinterests. In themeanwhile,publicassetsshouldnotbeviewedasunused,butasproduction-generatingcapital,andpublicfundsshouldnotbeviewedasexpenditures,butasinvestments.n

n Under control public fund management requires that calculations also extend to long-term impacts, and that the assertion of state interests be at least as strong as the assertion of private interests. n

n Our audits also clearly showed that the areas concerned exhibit serious regulatory shortcomings. n

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I. The Principles of Transparency, Budgetary stability and Financial sustainability in spanish Legislation

Sinceitsoriginalformulationbyarticle5ofAct18/2001,of12December2001, theprincipleof transparencyhasbeenjoinedtothatofbudgetarystability[1],atiewhichwasmaintainedinthenewwordingoftheprovisiongivenbyAct15/2006,of26May2006,whichwastranscribedin the Revised Text of the General Act on Budgetarystability[2].

In comparison with what has been the rule in Spanishconstitutional history, the 1978 Constitution has beencharacterised by its longevity and by its stability, to thepointthatithasonlyundergonetworeforms:thefirst,in1992,inordertograntalienstherighttovoteinmunicipalelections;thesecond,inSeptember2011,withtheaimofguaranteeing the principle of budgetary stability, whichwas thus constitutionalised in article 135 in the formof a mandate directed at the Public Administrations forthemtobringtheiractionsintolinewiththatprinciple.

[1] According to this provision, “the budgets of subjects included withinthescopeofapplicationofthisActandtheirsettlementsmustcontainsufficient and adequate information for allowing verification ofcompliancewiththeprincipleofbudgetarystability”.

[2] ApprovedbyLegislativeRoyalDecree2/2007,of28December2007,andlaterrepealedbyOrganicAct2/2012,of27April2012.Initsnewwording,theprovisionstatedasfollows:“ThebudgetsofsubjectsincludedwithinthescopeofapplicationofthisActandtheirsettlementsmustcontainsufficientandadequateinformationforallowingtheverificationof theadaptationtotheprincipleofbudgetarystability,alongwithcompliancewiththeobjectiveofbudgetarystabilityandobservanceoftheobligationsimposedbyCommunityrulesonthesubjectofnationalaccounting”.

Spain was the pioneer in this latter reform since itbrought forward the requirement—included later on intheTreaty on Stability, Coordination and Governance inthe European Union, of 2 March 2012—to incorporatethe stipulations of that Treaty on budgetary stability,deviations in time from the medium term objective inexceptional circumstances and corrective mechanismsintotheinternalcodeoflawsbymeansofprovisionsthatarepermanentandhavingbindingforce,preferablyattheconstitutionallevel.

In compliance with the contents of that constitutionalprovision, Organic Act 2/2012, of 27 April 2012, hasdevelopedandregulated,amongothers,theprinciplesofbudgetarystability[3]andofsustainabilityfinancial[4],as well as of transparency. The last of these is tied tothe first two in that it leads to the requirement thattheaccountingandbudgetsof thepublicsectorshouldcontainsufficientandadequateinformationforallowingthe verification of the financial situation, compliancewith the objectives of budgetary stability and financialsustainabilityandobservanceoftherequirementsagreedintheEuropeanregulation.

II. Auditing of the compliance with these Principles by the court of Audit of spain

In its audit programme for 2010 the Court of Auditincludedtheproductionofareportoncompliancewiththeprinciplesoftransparencysetdowninthelegislation

[3] Understood as “the situation of structural equilibrium or surplus”, inthe case of Public Administrations and of “the position of financialequilibrium”,inthecasepubliccorporations,companiesandotherpubliclaw bodies. According to article 3 of Organic Act 2/2012, of 27 April2012, thisprincipledoesnotjustconcernthedrawingup,approvalandexecutionofbudgetsbutalsoextendstootheractionsaffectingrevenuesandspending.

[4] Defined as “the capacity to finance present and future spendingcommitments with the limits of deficit and public debt, as set downin this Act and in the European regulation”. The background to thisformulationistobefoundinarticle32.1oftheSustainableEconomyAct2/2011,of4March2011.

TrAnsPArEncy, BUDGETAry sTABILITy AnD FInAncIAL sUsTAInABILITy. A cHALLEnGE For ExTErnAL conTroL manuel Aznar LópezMemberoftheSpanishCourtofAudit

n The 1978 Constitution has been characterised by its longevity and by its stability, to the point that it has only undergone two reforms. n

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on budgetary stability in relation to the State GeneralBudgetsforthefinancialyears2007and2008.ThisreportwasapprovedbythePlenaryMeetingoftheCourton30June2011,alittleearlierthereforethanwhenthereformofarticle135oftheSpanishConstitutiontookplace.

Inparticulartheauditreferredtotheapplicationoftheaforementioned principle of transparency in the phaseof drawing up preliminary drafts for budgets for thestated financial years, focusing on the audit actions inthe analysis of the informative documentation whichpreceded or accompanied the drafts, or which wouldhavebeennecessaryoradvisabletoaccompanythem,allthiswiththeaimofassessingthedegreeoftransparencyof the budgetary procedure and of facilitating futurechecks during the settlement phase, which must beaimedatevaluatingthecausesofthedeviationswhichmight,asappropriate,havebeenproducedwithregardtotheschedulingphase,asaresulteitherofanimproperexecutionorofpoorplanning.

The regulating framework existing at that time which,alongwiththespecificlegislationonbudgetarystability,also included the provisions of the General BudgetaryAct 47/2003, of 26 November 2003 (articles 26 and27), was notable for its brevity. This meant that it wasalsoadvisable to take intoconsideration, thoughnotascontrolparametersoverlegalitybutratherasareferenceframeworkforgoodpractices,the2007FiscalTransparencyManualoftheInternationalMonetaryFund(IMF),whichexpands on the pillars and principles set down in theIMF Code of Good Practices on FiscalTransparency, andalso the Best Practices for Budget Transparency of theOrganisationforEconomicCooperationandDevelopment(OECD)[5].

Thenewregulatingframework,derivingfromthereformmadeofarticle135oftheSpanishConstitutionandofOrganic Act 2/2012, of 27 April 2012, would make itadvisablefortheCourtofAudittocontinuetoplayarole

[5] Inthispaperbudgettransparencyisdefinedas“thecompletedisclosure,in the appropriate manner and systematically, of all the pertinenteconomic information” (see Best Practices of the OECD for achievingbudgettransparency,intheInternational Journal of Public Budget Nº56,2004,www.asip.org.ar/es).

inauditactivityontheprincipleoftransparency,takingspecialaccountof itsconnectionwiththatoffinancialsustainability. The appropriateness of acting in thisdirectioncanalsobeadvisedduetothepossibleextensionof the said regulating framework as a consequence ofthefuturepassingoftheTransparency,AccesstoPublicInformationandGoodGovernmentAct[6],theDraftBillofwhichwasapprovedbytheCouncilofMinisterson27July2012andwhosecontent,thoughitgoesbeyondthestrictly economic-financial field, nevertheless includesprovisions concerning the publicising of informationrelating to acts of administrative management havingeconomicorbudgetaryrepercussions.

Although neither the new wording of article 135 ofthe Spanish Constitution nor Organic Act2/2012, of27April 2012, expressly mentions the Court of Audit, thecompetenceforauditingtheapplicationoftheprincipleof transparency is granted to it by the constitutionalattributionofcompetenciesforcarryingouttheauditingof the economic management of the public sector(article136oftheSpanishConstitution),aswellasbyaninterpretationofarticle9oftheOrganicActoftheCourtofAuditadaptedtothecurrentsocialreality,assetdownbyarticle3oftheCivilCode,whichallowsthatprincipletobeaddedtothoseoflegality,efficiencyandeconomy,tothesubjectionofwhichtheauditingrolemustrefer,byimperativeofthisprovision[7].

Nevertheless, it must not be forgotten that, in spite ofthis, the auditing action of the Court was not, in thissituation,thatofpeacefulacceptance[8],insuchawaythatitwouldbeveryadvisableforanydoubtsthatmightexistregardingthescopeofcompetenceoftheCourtofAudit for exercising its role in compliance concerningthe principles considered in Organic Act2/2012, of27

[6] Theurgencyofhavingalegalruleinthismatterhasbeenhighlightedbyadministrativedoctrine(seeforexample,J.L.PiñarMañas:Lanecesidaddeunaleydetransparencia(Theneedforalawoftransparency),inA.BlascoEsteve (coord.): El Derecho público de la crisis económica. Transparencia y sector público. Hacia un nuevo Derecho Administrativo (Public law of the economic crisis. Transparency and public sector. Towards a new Administrative Law).Madrid,INAP,2011,pp.241-245.

[7] See Court of Audit: Informe de Fiscalización sobre el cumplimiento del principio de transparencia establecido en la legislación sobre estabilidad presupuestaria, en relación con los Presupuestos Generales del Estado para los ejercicios 2007 y 2008 (Audit Report on compliance with the principle of transparency set down in the legislation on budgetary stability, in relation to the State General Budgets for the financial years 2007 and 2008).Madrid,NationalPressoftheStateOfficialJournal,2011,pp.15-16.ThereportcanalsobeconsultedonthewebsiteoftheCourtofAudit(www.tcu.es).

[8] The then Ministry of Economy and Finance, with the support of anopinionfromtheStateLegalServices,maintainedthattheCourtofAuditlackedcompetenceforcarryingoutthesaidauditoncompliancewiththeprincipleoftransparency,anopinionsharedbyfiveAccountsCouncillorswhoformulatedprivatevotesontheAgreementbywhichthereportwasapproved.

n In its audit programme for 2010 the Court of Audit included the production of a report on compliance with the principles of transparency. n

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April 2012, to be dispelled by means of regulations.Independently of this, it is not idle to state out thatduring the Motion on improving the legal regulationonthedutyofcollaborationwiththeCourtofAudit intheexerciseofitsauditingrole,approvedbythePlenaryMeeting of the Court on 24 February 2011, various

regulatingmodificationsweresuggested,amongwhichappearedoneaimedatdirectlyprovidingtheCourtwithdataonthelevelofdebtofallthePublicAdministrationsandtheirdependentbodies,whichisdirectlyrelatedtotheprincipleoffinancialsustainability,asrevealedfromarticle13ofOrganicAct2/2012,of27April2012,whichregulatestheimplementationofthisprinciple.

In any case, the new legal framework aims to respondto an economic-financial scenario characterised by aconsiderable complexity. The challenge that the CourtofAuditwillhavetofaceisoneofnotablescaleforthatreasonandwouldhavetobefocusedonthesystematiccontrol of compliance with the three principles statedaboveinthephasesofdrawingupandsettlingofbudgets,alongwithcontroloverthereliabilityoftheinformationcontained in the accounts being rendered and theirimpactonthequantificationofthecapacityorneedforfinancingandofindebtedness,inaccordancewiththeEUrulesonthesubjectofnationalaccounting.n

n The challenge that the Court of Audit will have to face is focused on the systematic control of compliance with the three principles stated in the phases of drawing up and settling of budgets, along with control over the reliability of the information contained in the accounts being rendered. n

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1. Good Government

The organisation of men is sometimes faced with theterrible dilemma of choosing one of the two pillars ofsocial life: Justice or Order; with the certainty that oneexcludes the other and with the evidence that error intheexecutionof theformer issociallyrectifiablebut,asfarasthesecondofthepillarsisconcerned,evenarightdecisionceasestobesoifitgeneratesdisorder.ItcouldbesaidthatJusticecanandmustbeblindbuttheGovernorwaits to see the consequences of his decisions, movingbetween thenarrow confines whichcowardice imposesonprudenceandrecklessnessonbravery.

Forsome,injusticeispreferabletodisorder,forothers[1]all actions referring to the rights of other men whoseprinciplesdonotwithstandbeingpublishedareunjust.

Order, publicity, right and criticism of public actions areessential elements of the social organisation proper toadvanced democracies, and properly speaking they areall nothing other than a system which facilitates theknowledge of public management. Habitually runningupagainstthisethicalprinciplewithanopposinginertiais bureaucratic government which, by virtue of its same tendency, is government that excludes publicity [2].

Even though it issometimesforgotten,at thesourceofoursocialorganisationistheconsiderationthatonewhois not interested in public affairs and who takes partin them is not so much inactive as useless [3], and thisparticipation requires knowing, it requires transparencyinmanagement,accesstothetechnicaldocumentsthatevaluateitand—whynotsayso—clarityandsimplicityinthose documents which make them comprehensible towhosewho,indeed,aretheirtruerecipients:thecitizens.

[1] Kant,E.Perpetualpeace.[2] Weber,M.[3] Thucydides.EldiscursofúnebredePericles(Pericles’funeraloration).Ed.

Sequitur.Madrid.2007s

Thisethicalandlegalprinciplehabituallyrunsupagainstanopposinginertia,introducedbyWeberas“bureaucratic government which, by virtue of its same tendency, is government that excludes publicity”.

We thus arrive at governance and, within it, GoodGovernment, conceived as a question of voluntaryarrangements for self-regulation, in the manner of anethicalcommitmentofthePublicAdministrations,whichseek to guarantee an efficient, integral and transparentmanagement inthepublicadministrationwith theaimof generating confidence in the internal and externalpublicstowardsthestatebody.

This has to be considered without forgetting that thestate body is subject to certain necessary conditions ofgovernment which make it feasible to carry out a realexercise of power for fulfilling the objectives and endsinherenttotheresponsibilityofitspost.Butformalpower,which is inherent to top management, to managementingeneral,cannotoverlookthefactthatinitsoriginswefindthedegreeoflegitimacythatisgrantedtoitbythoseinterestgroupsthatareaffected.Thereforethedirectivewillfindthatitsrecognitionisaffectedbythreeprinciples:

a) Efficiency, capacity for achieving the strategicobjectivesoftheorganisation.

TrAnsPArEncy In PUBLIc mAnAGEmEnT: ExTErnAL conTroL Ángel Algarra ParedesMemberoftheSpanishCourtofAudit

Jorge Ferrán DillaFinancialAdvisorattheserviceoftheSpanishCourtofAudit

n Order, publicity, right and criticism of public actions are essential elements of the social organisation proper to advanced democracies, and properly speaking they are all nothing other than a system which facilitates the knowledge of public management. n

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b) Integrity,principlesandvaluesofthedirective,whichprioritisethegeneralinterestovertheparticularinitsbehaviour.

c) Transparency,howthewayinwhichitisadministratedandtheresultsobtainedarecommunicatedandmadevisible.Weconfineourselvestothislast.

2. Transparency in Public management

TransparencymanifestsitselfasthesimplestmechanismforcontrollingpoliticalactionandguaranteeingthesuitabilityofwhatisdonefortheNationasawholeand,therefore,inorder toaccessGoodGovernment. It impliesarelationofrights/dutieswhichbindthecitizentothepublicpowers:on the one hand, making the right of citizens a realityallows access to information on the public managementbeing carried out, allowing a reasoned opinion to bereachedonit;ontheotherhand,publicduty,thisprincipleimposesanorderedandforeseeablemodeofmanagement,whosedocumentedrecordallowsfor itspublicexhibitionandtherebymakesrealityof therightofcitizens to learnthe management being carried out with the resourcesthathavebeenentrustedtothepublicrepresentatives,thecriterionadoptedbytheminthedecision-taking,andtheadaptationofoneandtheother to theendsprovidedforintheLaws.

As a consequence, transparency becomes a crucialelementofknowledgeforcitizenswithregard topublicmanagement, and a necessary and simultaneouscondition for the establishment of the internal andexternal control mechanisms that have been set up inthe different legislations. In any case, even in the 17thcentury[4],transparencywaspresentedasarequirementforcontrolwithStatesbeingassessedasunstableiftheirsecuritydependedonthegoodfaithofacertainindividual

[4] Spinoza,Baruch.TractatusTheologico-Politicus.

andoftheadministrators;onthecontrary,itisstated:“In order to be stable, the administration must organise itself in such a way that the men in charge of making it function cannot be induced by reason or by feelings to act in bad faith or to prevaricate”.

Thefinancialcrisishas,forotherreasons,revitalisedtheneed to encourage transparency in management, evenwhenitappearstobefocusedexclusivelyonthefinancialside.FromtheDeclarationoftheSummitontheFinancialMarketsandtheWorldEconomyadoptedinWashingtoninNovember2008uptotheG-20summitheldinTorontoin June2010, there has been an insistence on the needto make headway in the transparency of institutions,the financial markets and the regulating bodies, withlack of transparency being considered as one of thecausesofthatcrisis.Transparencyis,therefore,amultiplepremise and guarantee of the social organisation andof the democratic system of government; as has beenrecognisedbytheJudgmentof1July2008,handeddownbytheEuropeanCourtofJustice.

In a joint declaration of 6 December 2004 the UN,the OECD and the OAS asserted the right of accessto information held by the public authorities asa fundamental human right, with the Charter ofFundamentalRightsoftheEuropeanUnionestablishingtransparency as a fundamental element of the right togood administration (arts.41 and42), to the point thatCommunity jurisprudence on the limits of access topublicinformationisclear:anylimitisanexceptionandpublicityistherule[5].

[5] Foramoredetailedanalysis,seePIÑARMAÑAS,J.L.(2009),“Por una Ley de Transparencia”(“For a Law on Transparency”)articlepublishedin“Reggio’s”19October2009.

n But formal power, which is inherent to top management, to management in general, cannot overlook the fact that in its origins we find the degree of legitimacy that is granted to it by those interest groups that are affected. n

n As a consequence, transparency becomes a crucial element of knowledge for citizens with regard to public management, and a necessary and simultaneous condition for the establishment of the internal and external control mechanisms that have been set up in the different legislations. n

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The White Paper on European Governance, approvedon 25 July 2001, established that transparency formsadirectpartof twoof thefivepoliticalprinciples thatare proposed: openness, participation, responsibility,efficacyandcoherence:“A greater degree of participation and openness will be produced thanks to transparency”.TheRecommendationoftheCouncilofMinistersoftheEUof6December2001approvedtheneedtoencourageparticipationbycitizensinpubliclifeatthelocallevel,putting forward to the political decision-takers a setof coherent measures for “involving citizens moredirectlyinthemanagementoflocalaffairs,atalltimessafeguarding efficacy and efficiency in management”.The essential principles of a policy of democraticparticipation in local life with respect to transparencyarethefollowing:

• To guarantee the right of citizens to have access toclearandcompleteinformation.

• To seek ways for promoting a culture of democraticparticipation.

• To development awareness of belonging to acommunity.

• To draw up codes of conduct that will contribute toimproving transparency in the functioning of localinstitutionsandAdministrations.

• To use the new information and communicationtechnologies in order to bring citizens closer to thelocaldecisiontakingprocessandtothemanagementoflocalaffairs.

3. Transparency in spanish Legislation

The Spanish Constitution does not directly andexpressly recognise a principle of “transparency” of

the Administration, though its coverage is indeedmaterialised in different stipulations: the publicisingof legal statutes and security (arts. 9.3), the necessarymotivation of administrative acts (arts.9.3 and24), theright to informative self-determination with respect totheAdministration(art.18),therighttoinformation(art.20) and access to administrative files and registers (art.105b).

TheConstitutionalCourt,initsjudgment362/1993,of13December1993,hasconsideredthatthis“duty to inform within the scope of transparency proper to the Public Administrations in a democratic system, which is not a mere courtesy, even though this can be demanded of it, in turn fulfils the role of guarantee inherent to the form in a positive sense, in order not to fall into formalism, which is its perversion”.

Act 30/1992, of 26 November 1992, on the LegalRegime of the Public Administrations and the CommonAdministrative Procedure states in its art. 3.5 that “in its relations with citizens, the Public Administrations act in accordance with the principles of transparency and participation”.

Also Act11/2007, of22 June2007, on electronic accessfor citizens to the Public Services, has examined thenecessaryinformationforcitizensonthemanagementofpublicfunds.

4. External control and Transparency: main conclusions

The action of external control bodies, and in particularthose of Spain, have sought to satisfy this principle oftransparencybymeansofthemerepublicationofreportsissued with a greater or lesser degree of profusion oftheir contents. In the opinion of the present authors, aproperapplicationofthisprincipleoftransparencywould

n Transparency is, therefore, a multiple premise and guarantee of the social organisation and of the democratic system of government; as has been recognised by the Judgment of 1 July 2008, handed down by the European Court of Justice. n

n The White Paper on European Governance, approved on 25 July 2001, established that transparency forms a direct part of two of the five political principles that are proposed: openness, participation, responsibility, efficacy and coherence. n

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requireadoptingcertaincorrectivemeasures inthewaythese Institutions act, in three major fields that wouldaffect their own ordinary activity, for the purposes ofthisordinaryactivityand,intheSpanishcase,thereviewof certain actions which we could call inappropriateactivities, entrusted to the external control bodies bymerelegislativeoccurrence.

a) The principle of transparency in the ordinary control activity

Foralongtime,publicaccountinginformationhasbeendirected at the internal managers as an instrument formonitoring budgets and for controlling the necessarydocuments for the rendering of accounts to the CourtofAudit.Thismechanismhasfavouredthecontrolbeingcarriedoutsolelybythepoliticalrepresentativesandbythe external control bodies, with the citizen being leftin the background. Nowadays, the culture of renderingofaccountsisconceivedasaninternalphaseawayfromthecitizens, insuchawaythat theirroleasrecipientofpublic informationhasbecomeresidual inSpain.This isa situation which necessarily has to change in order tobringthat informationcloser tocitizensand, ingeneral,to whatever groups that in one way or another findthemselves affected by the economic-financial activityof the public sector, which, for one reason or anotherand from different viewpoints, are practically all thosemakingupthepolitical,economicandinstitutionalfabricofsociety.

For this, the public powers are required to bring therendering of accounts closer to citizens, adapting theinformationthatispresent,thoughwithoutdiminishingitsquality,andinparticularbymeansof:

a) A greater dissemination of economic-financialinformation,especiallyviatheInternet.

b) specificreportsaimedatcitizens.

c) Explanatoryreportsoneconomicdata.d) Theissuingoftheabovedocumentsascloseaspossible

intimetothemanagementbeinganalysed.

b) The consequences of the control activity in Good Government

Aswiththeabove,thequestiondoesnotariseinviewoftheexistinglegislation,lex data,butratherde lege ferendaandimpliesachangeintheeffectsofthereceptionofthefacereofthecontrolbody,fromwhichcouldbeexpected,among other consequences, a greater interest amongcitizensinknowingtheresultsofthecontroltowhichthepublicsectorissubjectandtherebyofthetransparency.

The effects of the controls undertaken by the controlbodies, due to the mechanics which their considerationof being technical bodies of Parliament leads to, are,apartfromthosewhichmightconstitutenotitia criminis,reduced to thediscussionat theparliamentarystageoftherelatedfactsandcriticismsorshortcomingsobservedinthereportsissuedbymembersoftheChambersandofParliament.

In other words, the action of the control body is, fortheseeffectsandmutatis mutandi, fullycomparabletothose undertaken by the auditor in a private company.His report is targeted at a small subjective field ofrecipients;theshortcomingsobservedareinthemselvesunimportant as far as the professional career of thepublic authorities and officials are concerned whoseactivity is being analysed; and the conclusions andrecommendations that are included lack binding force,whichmeansthattheomissionofanyrectificationthatwouldcomplywiththemis,principle,unimportant.

Forthisreason,thetransparencyofpublicmanagementandthecarryingoutofGoodGovernmentseemtorequirethattheevaluationoftheprofessionalundertakingofthepublic directive and of the authorities who take on theeconomic-financialmanagementofthepublicsectorhasanintimatelinkwiththeanalysisthattheactivitycarriedout by them should be done by the external ControlBody.Itdoesnotseemappropriatethattheprofessionalcareerofthosewhoareentrustedwiththemanagementofpublicfinancesshouldbesubjecttotheneedsofthepolitical situation andnot tocompliance with technicaldemands,whicharepropertothatmanagementandcanbedemandedofthatactivity.

Equally, it seems necessary that the consequences ofparliamentary control over the economic management

n The action of external control bodies, and in particular those of Spain, have sought to satisfy this principle of transparency by means of the mere publication of reports issued with a greater or lesser degree of profusion of their contents. n

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that iscarriedoutdemandscloseness in relation to thefactbeinganalysedandanimperativemandatetowhichthe public manager must be subjected, in accordancewiththemethodssetdownbyparliamentaryuses.

Therefore, the proposals of the control body taken onby Parliament ought to be indicative not of a mererecommendationbutratherofatrueimperativemandateaimed at the management bodies of the concernedpublicsectorandwiththeconsequencesthatderivefrombreachoftheparliamentarymandates.

c) Inappropriate activities entrusted to the external control bodies and their consequences in Good Government.

One of the most striking questions of the attributionofcompetenceregarding thecontrolbodies,and in thisrespectwecouldsayinternalandexternal,isperhapsthepresenceofagroupofsmallfunctionswhich,attributedtothosebodiesortakenonbythem,enduporcanendupbyunderminingtheircapacityfordevelopingtheirmainfunction:controloftheeconomic-financialmanagement;provokinganerroneousdisplayoftheirfunction.

Thewishtoimprovepublicmanagementandtheexpressrecognitionofthemagnificenttrainingofthemembersmakingupthebodies towhichthedevelopmentof the

formation control functions corresponds, would notjustifyallowingthemtotakepartinpublicmanagement,thereby becoming the controllers of their ownmanagement—as has occurred in some sectors of localadministration in Spain—or entrusting them with rolesthatmightbeinappropriate,ifnotcontradictorytotheirmainrole.

On the contrary, the external control bodies have onoccasions been assigned roles that are outside theirown competence, the later and external control of themanagementbeingcarriedout.Thisoccurswhentheaimistomakethecontrolsimultaneousandnotconsumingof that management, overlapping with internal controlandgeneratingdysfunctionswhichwillundoubtedlyendinaffectingtheGoodGovernmentofthepublicfinances,sinceitintroducesafactorofinstability:theconcurrenceofdirectives;andthedistortionof its image,harmedbyitsclosenesstothepublicstruggle,whichithastocontrolintheeconomicfinancialsphere.

Finally,theexerciseofexternalcontrolmustbeconductedin full conviction of its own integration in the PublicSectorcontrolledforpurelyadministrativeeffects,sinceitisnotitsroletostandinfortheadministrativebodiesnor,in its internal functioning, to overlook the institutionalcontributionswhichcouldfacilitateitstask.

It is not for the external control bodies to make up forthe shortcomings of the Public Services and Registriesbut instead to highlight them in order to achieve theirbestfunctioning;it isnotforthemtosubstituteforthemanagersbutinsteadtocheckwhattheydo.

Indeed, External Control is directly implicated inthe attaining of Good Government, and a notableimprovement could be achieved in the levels of efficacyoftheactionscarriedoutbyourinstitutionsbyimprovingtransparencyinthefunctionandclarifyingtheconditionsinwhichtheyhavetobeundertaken.n

n In other words, the action of the control body is, for these effects and mutatis mutandi, fully comparable to those undertaken by the auditor in a private company. n

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1. The present situation

As is well known, article 136.1 of the SpanishConstitution sets down that the Court of Audit is the supreme audit body for the accounts and the economic management of the State, as well as of the public sector. It shall be directly accountable to the Spanish Parliament and shall exercise its functions by delegation of them in the examination and approval of the State General Accounts. Given that the need or the advisability ofincluding external control of public accounts in thejurisdictionalorganisationof theStateor,asoccurs inSpain right now, in the Legislative Power of the State,is debatable, it would seem that, notwithstandingthe improvement in the present situation, such aconstitutional approach ought to be maintained tothedegreethatthereareconsideredtoexistsufficientguarantees of the independence and quality of itsjurisdictional and, above all auditing, decisions due tobeing a constitutional body which is embodied in theotherstogetherwiththeGeneralCounciloftheJudicialPowerandtheConstitutionalCourt.

These considerations have been set down, with aclear and complete explanation and establishing thedifference between the auditing function and thejurisdictional,bytheactualJusticeDivisionoftheCourtof Audit when it states that article 136 of the Spanish Constitution and Organic Law 2/1982, of 12 May 1982, shaped the two functions attributed to the Court of Audit in a way that is clearly separated, since it is not for nothing that their nature and purpose are also distinct. So, while in the exercise of the auditing function which is the competence of the Plenary Session of this Court (article 21 of the Organic Law on the Court of Audit, or LOTCU) a technical activity is undertaken prior to the political function of Parliament in which the parliamentary body is informed of the adaptation of the economic financial activity of the entities comprising the public sector

(article 4 LOTCU) to the principles which, in our Legal Code, inform on the execution of public spending, in other words, the legality, efficiency and economy (article 31.2 of the Spanish Constitution, in relation to article 9.1 of the LOTCU) or, if preferred, to those making up what is known as good financial management; the function of the accounting prosecution is, in the words of our Constitutional Court in the Ruling of 29 October 1996 and Judgment 187/88 of 17 October 1988, an activity of a jurisdictional nature, consisting of trying and carrying out that which is judged in accounting matters. The accounting function does not, therefore have as its natural purpose that of leading to the exercise of the jurisdictional function, rather it ends with the task of reporting to Parliament or, as the case might be, to the Legislative Assemblies of the Autonomous Regions or to the Plenary Sessions of Local Authorities, though of course this does not mean that if the investigation required by the auditing were to reveal facts pointing to the possibility of an accounting responsibility, then the Law would provide for a procedural phase—the preliminary actions of art. 45 and 47 of the Law on the Functioning of the Court of Audit, or LFTCU—in order to link up the exercise of both functions and bring those facts before the bodies of the Court to whom the Law entrusts the accounting jurisdictional function.

That is the present situation, perfectly defined by theJusticeDivisionitselfoftheCourtofAuditinitscase-lawdoctrine.Thequestionwhichweventuretoraiseisthefollowing:doessucharegulationhavetobemaintainedin its essence or, on the contrary, is there a need for anewandurgentregulationexpandingonthepowersoftheCourtofAuditand, in turn,on itsowncapacity toresolvematterseveninthefieldofauditing?Wewilltrytoprovideananswertothisquestionbelow,thoughwewill state in advance that, maintaining the essence ofthe present configuration, some improvements can bemadeinthecurrentlegislationonthebasisofit.

somE IDEAs on THE JUrIsDIcTIonAL sTrEnGTHEnInG oF THE coUrT oF AUDITJosé manuel suárez robledano, Judge,MemberoftheSpanishCourtofAudit,ProsecutionDepartmentno.3

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2. Procedural and organic measures referring to the investigation and to the judicial function

AlthoughnooneIbelieve,noteventheactualauthoritiesoftheEuropeanUnion,wouldinitiallyfinditlogical,itmightperhapsbethoughtthattheauditingactivityoftheCourtofAuditcanincludeontheonehand,andintermsofachievingthecollaborationoftheinstitutionsinthatessentialwork,thescarcecoercivemeasuresofsanctionorcoercivefineoflittleconsiderationprovidedfor in articles 7 of the LOTCU and 30 of the LFTCU,apartfrom thepossible inspectionsandchecks,alongwith theopeningofcasesof reimbursement. Itssum,amounting to the maximum figure of150,000 of theold pesetas, which can be repeated until the complete compliance of the interested party has been obtained and that it would be graduated taking into account the importance of the disturbance suffered, in otherwords the present sum of €902, seems ridiculous inrelation to the scale of the possible omissions andobstaclestothetaskofauditingandtoitsimportance.Thestrengtheningof theexternalcontrol institutionsrequiresmoreoverthatpowersofanexecutivenaturebe added since otherwise it becomes difficult to talkabout a true and effective external control of publicaccountsinStatesoftheEuropeanUnion.Thepresentcrisis, also in relation to public accounts, has revealeda notable insufficiency of external control media andof regulating private banking and public accounts innumeroussectorsofvariousStates.

Curiously, with respect to the jurisdictional function ofthe Court of Audit, both the Directors in charge of thevarious judicial matters and the Justice Division have,on the basis of the supplementary application of therulesofcivilprocessreferredtoinFinalProvision2oftheLOTCU, thepossibilitiesderivingfrom theapplicationofarticle 247 of the Civil Procedure Law 1/2000 (LEC) totheaccountingprosecution.Saidprincipleofthegeneralprocedurallegislationsetsdownthattheinfringementoftherulesofgoodfaith, theabuseofprocedural rightorfraudoflawwillbeabletoentailrejectionoftheclaimsandincidentsformulatedwithsaidabuseorfraud,withfinesofupto€6,000beingable tobe imposedfor thecaseofproceduralbadfaiththoughwithoutexceedingathirdpartofthequantityoftheprocess,beingsetdowninaseparatemotionandwiththeapplicationoftherulesoftheOrganicLawoftheJudicialPower.

And with respect to the collaboration of the organs ofthe Administration and of the judicial organs of theState Judicial Power, the rules of judicial assistance

containedinarticles169to177oftheLEC1/2000haveto be abided by which, specifically, establish that theperiodwillbesetwithinwhich theactionsrequiredofthecorrespondingJudicialOfficehavetobeundertaken,thatdelayincompliancewiththerequestwillgiverisefirst to its reminder to the judicial organ to which therequest is made and then to the ex officio referral tothecorrespondingGoverningDivisionoftherespectiveHigherCourtofJusticeif thedelayincomplianceweretopersist.Ithastoberememberedthatarticle417.9ofthe Organic Law of the Judicial Power establishes thatany delay in carrying out judicial functions is a veryserious disciplinary violation and that, with respectto the Judicial Secretaries, article155.6 of the OrganicRegulationontheCorpsofJudicialSecretariesestablishestheir correlative and current primary responsibility incasesofjudicialassistance.Otherwise,article51oftheLFTCUhastobeabidedbywhenitsaysthatthe organs of the accounting jurisdiction shall be able to obtain the assistance of Judges and Courts of all ranks for the exercise of their jurisdictional functions, which must be provided for them in the manner regulated in the Organic Law of the Judicial Power and in the procedural laws for jurisdictional cooperation.

Anattemptmustbemadetoreducecasesofsuspensionoftrialsasmuchaspossibleinsuchawaythatthisoccursevenintheeventofdelayincomplyingwiththeactsofjudicial assistance that have just been mentioned, orof official letters or orders to Authorities, Notaries andRegistrars, pursuant to the provisions of articles 188,429.3 and 5, 435 and 436, and all this in spite of thepossibilitiesofinterruptionofthehearingsifnotoftheirsuspension, considered in article 193.2nd and 3rd of theactual lawjustcited.Unduedelaysprohibitedbyarticle24 of the Constitution must try to be avoided, makingthe prosecutions more flexible, without prejudice to

n The question which we venture to raise is the following: does such a regulation have to be maintained in its essence or, on the contrary, is there a need for a new and urgent regulation expanding on the powers of the Court of Audit and, in turn, on its own capacity to resolve matters even in the field of auditing? n

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applying the procedural remedies which, like those oftheFinalProvisions,seemtobeadvisableinthesecasesof communications being provided that are outside ofthe periods set for this, without giving rise to constantsuspensions.

In terms of the cases entering the Prosecutions SectionandtheirsubsequentdistributionamongtheDirectorsincharge of the decision on admission and, and as mightbe the case, the subsequent processing of the trial orprocedure for reimbursement for misappropriation,article 12 of the LFTCU confines itself to stating thatcorresponding to the Prosecutions Section is, amongothers, the function consisting of setting the criteria in accordance with which the distribution of cases has to be made among the Divisions and among the Directors of the Prosecutions Section.Thismatterofdistributionissoimportant that, turning to the supplementary provision(FinalProvision2oftheLOTCU)setdowninLEC1/2000,it can be cited that article 68.4 of that formal Law 4provides for the nullity of resolutions issued by judicialorgansotherthanthosetowhichitcorrespondstohearthedifferentcasesaccordingtotherulesofdistributioninforceatthatmoment.

Such is the importance, therefore,of therulesornormsfor the distribution of accounting jurisdictional cases,with the rule of distribution according to which thechronological presentation of the specific case will beheeded,givenitsarchaicnatureandthefact that ithasbecomesupplantedbyrandomrulesofdistributionwithcomputingapplicationsincorporated,andthenowbroadexperienceofthePresidentsofthevariousorgansoftheStateJudicialPower,thatitisconsideredasnothingotherthanindispensabletoproceedtoamodernisationoftheProsecutions Section by means of the incorporation ofsuch techniquessupplanting thepossibility, remotebutfar from impossible, of selecting the Director by meansoffraudconsistingoftheintroductionoffictitiouscaseswiththeaimofbypassingwhatiscorrectandachievingthe desired result in the distribution, which would be

unrealandunjust.Thereformreferredtomustthereforebecarriedoutwithoutdelaybyapplyingthetechniquesof randomnessandequality in thedistributionofcasesenteringtheProsecutionsSectionviathevariouschannelsthatarelegallypossible.

Ingeneral,and thisservesforallactionsofProsecution,includingthoserelatingtoinvestigation,adigitalizationplan must be instigated immediately with the aimof making the processing as flexible as possible andfacilitatingthehandlingoftheenormousnumberoffilesthat have to be taken into consideration nowadays intrialsconcerningresponsibilityformisappropriationandinotheraccountingproceedings.Ofcourse,theproblemsoflivefilingwouldtoalargedegreebecomeattenuatedbyhandlingdigitaliseddocumentation.

3. The execution and the investigation

Asfarastheexecutionofjurisdictionaldecisionsreachedby the Court of Audit is concerned, it suffices to pointoutthatitwouldbedesirablethatthepresentandbriefregulation (articles 85 to 87 of the LFTCU) were to becomplemented with a swift undertaking of the acts ofexecution in the corresponding cases. The execution isthe competence of each Prosecutions Department andthegeneralruleshavetobeappliedpromptlyandswiftly,without any lessening of the corresponding proceduralguaranteesineachcase.

As far as the examination or investigation ofactions having possible accounting responsibility isconcerned, article22 of the present LOTCU attributesthe designation of the Examining Delegates to theGoverningCommission.Giventhat,byassimilationanddue to the good results that it has provided, it seemsthat the logical thing would be that, as occurs in thecriminalprocess, it is theactualProsecutionsDivisionwhich would be able to make that designation, withbroadpossibilitiesofconsideringthatalargernumberof Examining Delegates ought to be designated,according to the needs demanded by the service, inall cases expanding their present small number. Theconsequence of this is that the mention containedin article 11 of the LFTU regarding the existence inthe Prosecutions Section of an administrative unit inchargeofthesurveillance of the examining actions prior to the requirement of accounting responsibilities in the proceedings for reimbursement for misappropriation is regarded as insufficient. Notwithstanding theattentionwhich thatunithas topay to theregularityand promptness of the examinations for possible

n The present crisis, also in relation to public accounts, has revealed a notable insufficiency of external control media and of regulating private banking and public accounts in numerous sectors of various States. n

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responsibility for misappropriation, it is consideredthat the best unity of action ought to lead to thedesignation and control of the Examining Delegatesin charge of Preliminary Proceedings to be examinedin each case residing in the Court of Justice or in theactualProsecutionSection.

In this case, moreover, the measure of controlattributed to each Director of the Departments ofthe Prosecution Section would also have full and realvirtuality,asameasureofrationalityinthefunctioningoftheproceedings,seeinghowarticle14oftheLFTCUstates that it corresponds to them to exercise the surveillance and inspection on the proceedings and the disciplinary powers over staff in the section in the event of minor violations. Rather, It is evident thatthe excessive compartmentalisation of functionsand controls results in the detriment of the real aimof proper control and of rationality, as well as of theswiftnessindealingwithproceedings.Forthatreason,suchcompartmentalisationmust,nomatterhow it islookedat,beregardedasexcessive.

The repeated reference which article47 of the LFTCUmakestotheGeneralRegulationonRevenuesinrelationtotheguaranteedepositonpresumedresponsibilitiesofthemisappropriationofwhichtherearesignsdoesnot, moreover, cease to be curious, and nor is thereference made to the distraint to be decreed in itsabsence.IftheLawintendedtoapplyLEC1/2000onasupplementarybasis,thenitcannotbeseenwhatthepurpose is of this other speciality of the examinationor of the Preliminary Proceedings when the formerhasmeasuresthataresimilarandasvalidasthoseofthe administrative enforcement. It would perhaps beadvisable todelete that reference inorder avoid legaldistortions.

4. conclusions

The following conclusions can be reached, bearing inmindwhathasjustbeenstated:

1st. WhileintheexerciseoftheauditingfunctionfallingtothePlenarySessionoftheCourtofAuditatechnicalactivity is carried out prior to the political functionof the Parliament in which the parliamentary bodyis informed on the adaptation of the economicfinancialactivityoftheentitiescomprisingthepublicsector to the principles informing on the executionofpublicspending,inotherwords,legality,efficiencyand economy or what is known as good financialmanagement; the function of the accountingprosecution is an activity of a jurisdictional nature,consisting of trying and executing what has beentriedinaccountingmatters.

2nd.Thestrengtheningoftheexternalcontrolinstitutionsdemandsthatpowersbeaddedofanexecutivenatureandoftheimposingofeffectivefinesamountingtosubstantial sums in cases of lack of collaborationsince otherwise one can hardly speak of a true andeffectiveexternalcontrolofpublicaccountsinStatesoftheEuropeanUnion.

3rd. Usemustbemadeofthecollaborationandassistancemeasures provided for making accounting trialsmoreflexibleandaimingtoavoidthesuspensionsofaccountingtrialsbymakingmoderateuseoftheFinalProvisions.

4th. Therecanbenodelayinreformingthedistributionbyapplyingthetechniquesofrandomnessandequalityto cases coming into the Prosecutions Section viathevariouschannelspossiblebylaw.Themaximumdigitalizationoftheactionsandofthefilesmustbeintroduced.

5th. Regarding the execution of the jurisdictionaldecisions of the Court of Audit, swift action in theacts of execution in the corresponding cases wouldbedesirable.

6th. It seems that the most logical thing would be forthe Prosecution Division itself to be the one thatwould proceed to the designation and control oftheExaminingDelegates,withbroadpossibilitiesofproceedingtodesignatealargenumberofExaminingDelegates.n

n It is evident that the excessive compartmentalisation of functions and controls results in the detriment of the real aim of proper control and of rationality, as well as of the swiftness in dealing with proceedings. n

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Europeanpublicfinances,especiallythoseofthecountriescomprising the euro zone, find themselves today morethaneverinthelineofsightofeconomicagents.

With a view to remedying the serious macroeconomicandbudgetaryimbalancesthatwererevealedonaccountof the international financial crisis of 2008, in March2010 European institutions approved a programmewhichsoughttocoordinatebettertheeconomicpoliciesof Member States, which was titled“European Strategy2020”. With this approach, institutions considered thatthemaincausesofthecurrentcrisisintheeurolayinthe“insufficiencyofmacroeconomiccoordinationmeasuresand in the absence of effective limitations” whichcompelledtheStatetorespecttheprincipleofbudgetarybalance.

So, in the Communication from the Commission, of30June2010,senttotheEuropeanParliamentandotherCommunity bodies, titled “Enhancing economic policy coordination for stability, growth and jobs and tools for stronger EU economic governance”[1], itwasmentionedthat the budgetary imbalances of Member States,especially the high level of their sovereign public debts,couldquicklyleadtocrisissituations.Inordertopreventthis, national budgetary scenarios had to be startedup aimed at reducing their deficits and at achievingsustainablepublicfinances.

RespectingthebudgetaryautonomyandresponsibilityofMemberStates,thenewEuropeanlegislation[2]imposedasetofobligationswhichsoughttoimplementsuitablemechanisms of coordination among all the subsectorsof the Public Administrations, with the aim of ensuringthe integration of their regional policy in national andEuropeanbudgetaryprogramming.

[1] COM(2010)0367/2[2] Directive2011/85/EUoftheCouncil,of8November2011,onrequisites

applicabletothebudgetaryframeworksofMemberStates.

Therealityoftheeconomiccrisisdemandstheadoptionby Member States of fiscal consolidation measures inorder to comply with the agreed limits of public deficit,resolving the most important imbalances in publicaccounts.Atthenationallevel,thestabilityobjectivesetby the Spanish Government for the period 2013-2015provides forachievingamaximumdeficit for thePublicAdministrationsasawholeof4.5%oftheGDPfor2013,2.8%for2014and2.1%for2015.Thispathofprogressivereduction of the deficit requires a greater rigour incontrollingbudgetarydeviationsandanoptimisationofthepublicfinancialmanagement.

In view of this panorama, the present article considerswhat must be the role which the supreme AuditInstitutions(SAI)havetocarryout,or,whichisthesamething, what contribution can be expected of them forencouraging financial sustainability, transparency andtheproperuseofpublicfunds.

The current situation of public finances and theconsequences this entails for the eurozone countriesregarding their capacity to finance themselves on theinternational markets have placed the focus of citizenattention on the SAIs, questioning whether theirsupervisory action would not have helped to anticipatethebudgetaryimbalancesoftheAdministrationsandto

THE sTrEnGTHEnInG oF ExTErnAL conTroL In sPAIn: GUArAnTEE For FInAncIAL sUsTAInABILITy AnD GooD GoVErnAncEJosé Antonio monzó TorrecillasAuditoroftheSpanishCourtofAudit

n The reality of the economic crisis demands the adoption by Member States of fiscal consolidation measures in order to comply with the agreed limits of public deficit, resolving the most important imbalances in public accounts. n

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sound thealert in relation to the levelsofdeteriorationof the public accounts. We are not being faced with asituation that is unknown, but, with the crisis, it hasindeedtakenonagreaterdimensionandthelimitationsand inefficiencies of the SAIs have been made moreevident.

Looking ahead, towards which fields ought the activityof the Court of Audit of Spain be directed in order tostrengthen its utility as a public service? There is noneedtolooktoofar;confiningourselvestothecountriesof the euro zone, in order to discern potentials ways ofimprovement that could serve as a reference model forourcountry.

In France the Cour des Comptes has the constitutionalmandatetoprovideassistancebothtoParliamentandtotheGovernmentintheevaluationofpublicpolicies[3],which has to serve for establishing mechanisms ofcommunication with citizens. In the development ofthis task, each year the Cour publishes a report on the situation and prospects of public finances [4], whoseaimscontributetotheguidelinedebateonFrenchpublicfinanceswhichisheldinParliamentduringthesecondquarteroftheyear.

FollowingthecomingintoforceoftheLawof3February2011 [5], the president of the National Assembly andthe president of the Senate are authorised to bringevaluation requirements before the Cour, in the formof reports to be issued within a maximum period ofa year. So, we have recently had news that, followinghis appointment, the French prime minister requiredthe Cour des Comptes to conduct an audit of publicfinances, prior to the new Government proceedingto draw up its financial and budgetary strategy. Thereport, published in July 2012, highlighted the mainriskswhichcouldpreventtheExecutivefromachievingthedeficittargetsplannedforthefollowingyears,andwhich had to be taken very much into account whensetting the priorities of public spending and revenueexpectations.

Fromareadingofit,someofitsassertionsarestrikinglyforcefulwhentheyestablishcutsincertainexpenditureitems as being imperative, such as functioning and

[3] Article47.2oftheConstitutionof4October1958,inthewordinggivenbytheconstitutionallawof23July2008.

[4] Rapport sur la situation et les perspectives des finances publiques.http://www.ccomptes.fr/Publications/Publications/situation-et-perspectives-des-finances-publiques-2012

[5] LOI n° 2011-140, du 3 février 2011, tendant à renforcer les moyens du Parlement en matière de contrôle de l’action du Gouvernement et d’évaluation des politiques publiques.

personnel expenses, with all the Public Administrationsas a whole being involved in the process. It likewisemaintainsthattheconsolidationofthespendingbudgetwillnotby itselfeliminate theneedforamoderateriseintaxes,furthermoredemandingthatfiscalexpenditureshould be reduced in, for example, tax allowances andwelfarecontributions.

Thepublicdiffusionwhichthisreporthashad,amplifiedbytheechowhichthecommunicationsmediahavemadeoftheconclusionsandrecommendationsdrawnfromit,haveundoubtedlyhelpedtoboosttheimageandsocialrelevanceoftheCour des Comptesasaninstrumentattheserviceofcitizens[6].

FairlysimilartotheFrenchcaseistheCour des Comptesofbelgiumwhich,onanannualbasisandaspartof itsmission to inform on budgetary matters, presents theBelgian Parliament with a report containing commentsand remarks relating to the examination of generalbudgetaryprojectsoftheState.Thelatestonepublished,referring to the financial year2012 [7], reveals that thebudget presented by the Government conforms to thestabilityprogrammeforagradualreductioninthedeficitapprovedfortheperiod2011-2014.

These brief examples aim to illustrate how in certaincountriestheroleoftheSAIsgoesbeyondadeclarationofconformitywiththepublicaccountsforyearsalreadyclosed,andcriticisesanybudgetarydeviationsthathaveoccurred,settingthemselvesupasactiveagentsoftheprocess of designing budgetary plans by pointing outthe directions to follow in attaining the public deficittargets, not just in order to safeguard its monitoring

[6] For further informationon theconsultative roleplayedby theCour des Comptes, it is recommended to go to the communication“La Cour des Comptes, entre assistance et conseil”,byFannyGrabias.NationalCongressofConstitutionalLaw,Nancy,2011.

[7] Commentaires et observations sur le projet de budget de l’état pour l’année budgétaire 2012 https://www.ccrek.be/En/Publications/Fiche.html?id=72e47cde-693f-413f-80ed-ed99d364d92d

n The consolidation of the spending budget will not by itself eliminate the need for a moderate rise in taxes, furthermore demanding that fiscal expenditure should be reduced in, for example, tax allowances and welfare contributions. n

www.eurosai.org

http://www.ccomptes.fr/Publications/Publications/Situation

https://www.ccrek.be/EN/Publications/Fiche.html?id=72e47cde-693f-413f-80ed-ed99d364d92d

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at the national level but also, fundamentally, at theEuropeanone.

Current Spanish legislation does not consider thatthe court of Audit can, like the cases examined, fulfil aconsultative role. It can, none the less, bring motions tothe Spanish Parliament proposing modifications in theapplicable rules or other measures for improving themanagementthathasbeenanalysedinviewoftheresultscontainedinauditreports.Nevertheless,situationshaveoccurred that have highlighted the insufficiency of thepresent legislative framework. In this regard, referencecan be made to auditing on the compliance with the principle of transparency set down in the legislation of budgetary stability, in relation to public sector budgetsfortheyears2009and2010,whichtheCourtofAuditofSpainhasincludedinitslatestannualauditprogrammes,concerning which that institution has run into seriousobstaclesincarryingthemoutowingtotheenforcedlegalchannelsthatareprovidedforextendingitssupervisiontaskstobudgetaryscenarios.

This is possibly the moment for adopting legislativechanges that would grant the Court new duties thatwould to a greater degree connect with the tendenciesexisting in the countries of our economic environmentand which would at the same time serve to make theinstitutionmorevisibletosociety[8].

SAIs cannot remain impassive in the face of growingdemands for transparency and accountability fromsociety, both of which are principles at which standardISSAI20issuedbyINTOSAI[9]isdevoted,andwhichlinkupwithcurrentsofacademicandintellectualthoughtonaccountabilityandwhicharepostulatedaskeyelementsfor good governance. On this particular point, the draft“Law of transparency, access to public information andgood governance”, passed by the Spanish Council ofMinisterson27July2012,providestheCourtofAuditofSpain—includedwithinitsscopeofapplicationalongwithother constitutional bodies—with a golden opportunityfor takingdecisivesteps towardsagreatervisibilityandsocialvaluationofthedutiesitperforms.n

[8] The Secretary General of INTOSAI, Dr. Josef Moser, in the I ASOSAI-EUROSAIConferenceheld in Istanbul inSeptember2011,affirmed that“the visibility of SAIs and the cooperation with the public, especiallywith citizens, represent important conditions for the strengthening ofindependenceinSAIs”.

[9] InternationalStandardsofSupremeAuditInstitutions(ISSAI)20,Principles of transparency and accountabilityhttp://www.issai.org

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http://www.issai.org

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Public finances is the complex system which in manyrespects defines the development level of a State, itseconomy,socialsphereandsocialinterrelations.Financialsecurity of a State, its financial system’s efficiency andviability depends on the way the system is set up, howit works and how well it’s protected from corruption,protectionismetc.

Howevereachsystemneedsforongoingmaintenance.Inthecaseofpublicfinancessuchmaintenanceissecuredbycontrolmeasuresandtheprimaryroleisplayedbyexternalpublicaudit.AccordingtotheConstitutionofUkraineforprevious 15 years such function has been successfullyperformedbyAccountingChamberofUkraine.

The cornerstone of any control is based on rigorouscompliance with such principles as legality, regularity,unprejudicedness and openness. They are the sourceof sound and proper management which provides forfinancialstability.

AccountingChamberofUkraineasamemberofinternationalauditors’ community is guided by abovementionedprinciples.ResultsofACUactivitiesprovidedforanimageofcompetentinstitutioncapabletoprovideindependentand

unprejudiced evaluation of economic environment, publicfinances,bankingsectorandeconomicreformsingeneral.

AccountingChamber,accordingtoitstasksandfunctions:

• Provides expert assessment of Draft State Budgetof Ukraine and proposals on Budget items, whichincludesproposalsonsolutionofeconomicproblems,increase or reduce of budgetary expenditures withclearmacroeconomicgrounds.

• Audits all public expenditures, including those atregional level, and provides in-depth expertise of thestateandregionaldevelopment.

• Appliesvariousauditingformsandmethods,inparticular,performance audit, financial audit, compliance auditanddefinesthebackgroundofrevealedviolations.

• Performs system control over implementation ofnationalandcomplexprograms.

• Performs analysis, assessment of auditees’management efficiency and reasonability of decisionmakingprocess.

• Follows up ACU recommendations and proposalsmadeasaresultofauditandexpertiseactivities.

• TakespartinactivitiesofrespectivecommitteesoftheParliament of Ukraine with regard to managementofpublicfundsandresourcesandimplementationofnationalprograms.

We understand that achievement of socio-economicgrowth and financial stability is impossible withoutchanges within the public management system aimedat provision of efficiency and feasibility of managers’

sTrEnGTHEnInG ExTErnAL PUBLIc AUDIT: sUPPorT oF FInAncIAL sTABILITy AnD ProPEr GoVErnAncEThe Accounting chamber of Ukraine

n The cornerstone of any control is based on rigorous compliance with such principles as legality, regularity, unprejudicedness and openness. They are the source of sound and proper management which provides for financial stability. n

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decisions. This is why the ACU’s major priority is theperformanceauditaimedat:

• Defining and assessment of economy and efficiencyproblemsandexpertiseinareaswheremanagementisimproperinordertoprovideauditeeandGovernmentwith practical assistance in improvement of theiractivities.

• Providing legislative and executive powers withindependentassessmentofpublicfundsmanagementandimplementationofgovernment’sprograms.

• Providing reports on direct and indirect results onprograms implementation and achievement or non-achievementoftheState’sobjectives.

• Informing society e.g. taxpayers on management ofpublicfundsandresources.

ACU working plans reflect process taking place incountry’s financial, economic and social areas.With thepurpose of the complex evaluation of managementefficiencywepayspecialattentiontoauditsrelatedwithglobalnationalproblems.Indeed,AccountingChamberofUkraineistheonlyinstitutioninUkrainewhichmonitorsand investigates State special-purpose programs aimedatsolvingglobalnationalmattersreferringtoallspheresoftheState’sconcern.

Accounting Chamber studies and evaluates everystage of such programs from planning to conclusion.

And what is more important we present clear andcomplex recommendations on actions necessary forovercomingnegativetrendsatnationallevel.Theyincluderecommendations on initiating new legislative acts andregulationsaswellasprovideamendmentstoeliminatedetecteddefectsorcontradictions.

Ouractivities’taskisbothtodetectviolationsandcasesofinappropriatemanagementofpublicfundsandtofocusattention of public authorities and society on problemspresent in socio-economic and administrative areas aswellastoproposeclearwaysforeliminationofdetectedlacksandviolations.

Day-to-day concern of Accounting Chamber also relatestofollow-upofrecommendationsandproposalsapprovedbyACUBoardasaresultofaudits.Inoropinion,theauditcanbeconsideredasfulfilledjustifandwhenParliament,Government and central public authorities positivelyconsideredourauditconclusions.

Significant improvement of ACU recommendations andproposalsandhigherinterestforourauditreportswastheresultofeffectiveandefficientactivityofourinstitution.

Conclusions of ACU Board are normally taken intoconsiderationinGovernmentaldecisionsandactsoftheParliament.

During recent years Accounting Chamber boostedparticipation in activity of Parliamentary committees.It’s worth mentioning that in 2009 Parliamentarycommitteesconsideredonly11audit reportssubmittedbyAccountingChamber5,in2010–43andin2011–68.

The follow-up results show that auditees have takennecessary measures to eliminate detected budgetary

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n We understand that achievement of socio-economic growth and financial stability is impossible without changes within the public management system aimed at provision of efficiency and feasibility of managers’ decisions. n

n With the purpose of the complex evaluation of management efficiency we pay special attention to audits related with global national problems. n

n Our activities’ task is both to detect violations and cases of inappropriate management of public funds and to focus attention of public authorities and society on problems present in socio-economic and administrative areas as well as to propose clear ways for elimination of detected lacks and violations. n

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violations and to prevent their recurrence as well as toprevent inefficient management of the State Budgetfunds.

All of abovementioned provide the basis for opinionthat our activity, audits results and proposals aimedat implementation of proper management principlein public sector, in general promote improvements ofpublic financial and budgetary policy, strengthening offinancial stability and socio-economic development ofourcountry.n

n The follow-up results show that auditees have taken necessary measures to eliminate detected budgetary violations and to prevent their recurrence as well as to prevent inefficient management of the State Budget funds. n

www.eurosai.org

EUROSAI SECRETARIATE-mail: [email protected]://www.eurosai.org

State Supreme AuditBulevardi Deshmoret e Kombit 3TiranaAlbaniaTel: 0035542247294 - Fax: 003554232491E-mail: [email protected] [email protected]://www.klsh.org.al

Tribunal de ComptesC/ Dr. Vilanova, nº 15 – Planta -3AD 500 Andorra la VellaPrincipality of AndorraTel: 376 80 60 20 - Fax: 376 80 60 25E-mail: [email protected]://www.tribunaldecomptes.ad

Chamber of Control of the Republic of ArmeniaMarshal Bagramyan Ave, 190095 YerevanArmeniaTel: 374 2 52 33 32 - Fax: 374 2 58 85 42E-mail: [email protected] [email protected]://www.coc.am

RechnungshofDampfschiffstr. 2A-1031 WienAustriaTel: 43171171-8456 - Fax: 4317129425E-mail: [email protected] [email protected]://www.rechnungshof.gv.at

Accounts Chamber of the Republic of AzerbaijanGovernment House33 Khagani Str. Baku AZ 1000Republic of Azerbaijan370016 BakuAzerbaijanTel: (+994 12) 493 60 86/(+99412) 4936920Fax: (+994 12) 493 20 25E-mail: [email protected]://www.ach.gov.az/?/en/

The Committee of State Control of the Republic of Belarus3, K. Marx St.Minsk 220050BelarusTel: 003750172272422 - Fax: 003750172891484E-mail: [email protected]://www.kgk.gov.by

Cour des Comptes2, Rue de la Régence1000 BruxellesBelgiumTel: 3225518111 - Fax: 3225518622E-mail: [email protected]://www.ccrek.be

The Audit Office of the Institutions of Bosnia and Herzegovina-Ured za reviziju institucija Bosne i HercegovineHamdije Cemerlica 2/XIII71000 SarajevoBosnia and HerzegovinaTel: + 387 33 703 573 - Fax: + 387 33 703 565E-mail: [email protected]; [email protected]://www.revizija.gov.ba

National Audit Office37, Exarch Joseph Str.1000 SofiaBulgariaTel: 35929803690 - Fax: [email protected]://www.bulnao.government.bg

State Audit OfficeTkalciceva 19Hr-10000 ZagrebCroatiaTel: 385 1 4813 302 - Fax: 385 1 4813 304E-mail: [email protected]://www.revizija.hr

Audit Office of The Republic6, Deligiorgi Street CY - 1406 NicosiaCyprusTel: +357 22 401 490 - Fax: + +357 22 668 153E-mail: [email protected]:// www.audit.gov.cy

Supreme Audit OfficeJankovcova 1518/2170 04 Prague 7 HotesoviceCzech RepublicTel: 420 2 33045350 - Fax: 420 2 33045336E-mail: [email protected]://www.nku.cz

RigsrevisionenSt. Kongensgade 45DK-1264 Copenhagen KDenmarkDenmarkTel: + 4533928400 - Fax: + 4533110415E-mail: [email protected]://www.rigsrevisionen.dkThe State Audit Office of EstoniaNarva Mnt. 11A15013 TallinnEstoniaTel: 372 6 400700-400721Fax: 372 6616012E-mail: [email protected]://www.riigikontroll.eeEuropean Court of Auditors12, Rue Alcide de GasperiL-1615 LuxembourgEuropean Court of AuditorsTel: 35243981 - Fax: 352439846430E-mail: [email protected]@eca.eu.inthttp://www.eca.europa.euState Audit OfficeAntinkatu 100101 HelsinkiFinlandTel: 35894321/4325700Fax: + 35894325820/5818E-mail: [email protected]://www.vtv.fiState Audit OfficeM.Tito-12/3 Macedonia PalaceSkopje, 1000Former Yugoslav Republic of MacedoniaTel: 38923211262/520 - Fax: 389 2 3211272E-mail: [email protected]://www.dzr.gov.mkCour des Comptes13, Rue Cambon75100 Paris RpFranceTel: 33142989500 - Fax: 33142989602E-mail: [email protected]://www.ccomptes.frState Audit OfficeAuditor General: Levan Bezhashvili96 Ketevan Tsamebuli AveTbilisi 0144GeorgiaTel.: +995 32 438118Fax: +995 32 438123E-mail: [email protected] [email protected]://www.control.geBundesrechnungshofAdenauerallee 8153113 BonnGermanyTel: 004922899/7212612Fax: 004922899/7212610E-mail: [email protected]://www.bundesrechnungshof.de

Supreme Court of Audit of Greece4, Vournazou & Tsoha str.101 68 AthensGreeceTel: 302106494836 - Fax: 302106466604E-mail: [email protected]://www.elesyn.gr

State Audit OfficeApaczai Csere Janos Utca 101052 BudapestHungaryTel: 003614849100 - Fax: 003614849200E-mail: [email protected]://www.asz.hu/en/home

Skúlagata 57105 ReykjavikIcelandTel: + 3545697100 - Fax: + 3545624546E-mail: [email protected]://www.rikisend.is

Office of the Comptroller and Auditor GeneralDublin CastleDublin 2IrelandTel: 3531 6793122 - Fax: 3531 6793288E-mail: [email protected]://www.audgen.gov.ie

State Comptroller’s officeBeit hadfus 12P.O. Box 1081Jerusalem 91010IsraelTel: 972 2666 51 06/1 - Fax: 972 2666 51 50E-mail: [email protected]://mevaker.gov.il

Corte dei ContiVia Baiamonti 2500195 RomaItalyTel: 390638768704 - Fax: 390638768011E-mail: ufficio.relazioni.internacionali@

corteconti.ithttp://www.corteconti.itAccounts Committee for Control over Execution of the Republican Budget8, House of Ministries, Orynbor Str., 10th EntranceAstana, 010000KazakhstanTel: +7 7172 70-69-68 / +7 7172 70-69-97 +7 7172 70-70-37 (fax)E-mail: [email protected]://www.esep.kzThe State Audit Office Republic of Latvia50 Skanstes StreetRiga, LV 1013LatviaTel: 371 7017500 - Fax: 371 7017673E-mail: [email protected]://www.lrvk.gov.lvLandtag des FürstentumsDr. Grass-Strasse9490 VaduzLiechtensteinTel: 004232366115 - Fax: 4175 2366580E-mail: [email protected]://www.fk.llv.liNational Audit Office of The Republic of LithuaniaPamenkalnio 27LT-01113 VilniusLithuaniaTel: 37052621646 - Fax: 37052666761/ 25092E-mail: [email protected] [email protected]://www.vkontrole.ltCour des Comptes2, Av. MontereyL-2163 LuxembourgLuxembourgTel: 352474456-1 - Fax: + 352472186E-mail: [email protected]://www.cour-des-comptes.luNational Audit OfficeNotre Dame RevelinFloriana CMR 02MaltaTel: 356 22 40 13 - Fax: 356 22 07 08E-mail: [email protected]://www.nao.gov.mtCourt of Accounts of the Republic of MoldovaStefan cel Mare Ave., 692021 ChisinauMoldovaTel: +373 22 232579 / + 373 22 266026Fax: + 373 22 233020E-mail: [email protected]://www.ccrm.md

Commission Supérieure des Comptes de la Principauté de MonacoMinistère d’EtatMC 98015 Monaco CEDEXMonacoTel: + 37798988256 - Fax: + 377 98 98 88 01E-mail: [email protected]

State Audit InstitutionNovaka Miloseva bb81000 PodgoricaMontenegroTel: 0038220407407 - Fax.: 0038220407417Email: [email protected]://www.dri.cg.yu

Algemene RekenkamerLange Voorhout 8P.O. 200152500 EA The HagueThe NetherlandsTel: 31703424344 - Fax: 31703424130E-mail: [email protected]://www.rekenkamer.nl

RiksrevisjonenPilestredet, 42N-0032 OsloNorwayTel: 4722 241000 - Fax: 4722 241001E-mail: [email protected]://www.riksrevisjonen.no

Najwyzsza Izba Kontroli57 Filtrowa Str.00-950 Varszawa 1PolandTel: 4822 8 254481 - Fax: 4822 8 250792E-mail: [email protected]://www.nik.gov.pl

Tribunal de ContasAv. Barbosa du Bocage, 611069-045 LisboaPortugalTel: 351217972863 - Fax: 351217970984E-mail: [email protected]://www.tcontas.pt

Curtea de Conturi a României 22-24, Lev Tolstoi St. Sct. 171289 Bucharest RomaniaTel: +40213078818 - Fax: +40213078875E-mail: [email protected]://www.curteadeconturi.ro

Accounts Chamber of The Russian FederationZubovskaya Street 2121901 MoscowRussian FederationTel: + 74959860190Fax: + 74992553160E-mail: [email protected]://www.ach.gov.ru

State Audit Institution41 Makenzijeva Street11000 BelgradeSerbiaTel: +381113042212Fax: 381 113 042 236E-mail: [email protected]

Supreme Audit Office of The Slovak RepublicPriemyselna 28K 82473 Bratislava 26Slovak RepublicTel: 421 2 55423069 - Fax: + 421255423005E-mail: [email protected]://www.sao.gov.sk

Court of Audit of The Republic of SloveniaSlovenska cesta 50SI -1000 LjubljanaSloveniaTel: 003864785810/00/88Fax: 003864785892/91E-mail: [email protected] [email protected]://www.rs-rs.si/rsrs/rsrseng.nsf

Tribunal de CuentasFuencarral 8128004 MadridSpainTel: 0034914460466 - Fax: 0034915933894E-mail: [email protected] [email protected]://www.tcu.es

RiksrevisionenNybrogatan 55S-11490 StockholmSwedenTel: + 46(0)851714000Fax: + 46(0)851714111E-mail: [email protected]://www.riksrevisionen.se

Contrôle Fédéral des Finances de La Confédération SuisseMonbijoustrasse 45CH 3003 BernSwitzerlandTel: 41313231111 - Fax: 41313231100E-mail: [email protected] [email protected]://www.efk.admin.ch

Turkish Court of AccountsSayistay BaskanligiInonu Bulvari 45Balgat06530 AnkaraTurkeyTel: 90 312 2953030/720Fax: 90 312 3106545E-mail: [email protected] [email protected]://www.sayistay.gov.tr

The Accounting Chamber of Ukraine7M. Kotzyubynskogo Str.01601, Kiev-30GSP 252601UkraineTel: 380 44 224 26 64Fax: 00380442240568E-mail: [email protected]://www.ac-rada.gov.ua

National Audit Office157-197 Buckingham Palace RoadVictoriaLondon SW1W 9SPUnited KingdomTel: + 442077987777 - Fax: + 442077987466E-mail: [email protected]://www.nao.org.uk

Addresses of EUROSAI members


http://www.eurosai.org



http://www.klsh.org.al


http://www.tribunaldecomptes.ad



http://www.coc.am



http://www.rechnungshof.gv.at


http://www.ach.gov.az


http://www.kgk.gov.by


http://www.ccrek.be



http://www.revizija.gov.ba


http://www.bulnao.government.bg


http://www.revizija.hr


www.audit.gov.cy


http://www.nku.cz


http://www.rigsrevisionen.dk


http://www.riigikontroll.ee



http://www.eca.europa.eu


http://www.vtv.fi

M.Tito


http://www.dzr.gov.mk


http://www.ccomptes.fr



http://www.control.ge


http://www.bundesrechnungshof.de


http://www.elesyn.gr


http://www.asz.hu/en/home


http://www.rikisend.is


http://www.audgen.gov.ie


http://mevaker.gov.il



http://www.corteconti.it


http://www.esep.kz


http://www.lrvk.gov.lv


http://www.fk.llv.li



http://www.vkontrole.lt


http://www.cour-des-comptes.lu


http://www.nao.gov.mt


http://www.ccrm.md



http://www.dri.cg.yu


http://www.rekenkamer.nl


http://www.riksrevisjonen.no


http://www.nik.gov.pl


http://www.tcontas.pt


http://www.curteadeconturi.ro


http://www.ach.gov.ru



http://www.sao.gov.sk

rs-rs.si

rs-rs.si

http://www.rs-rs.si/rsrs/rsrseng.nsf



http://www.tcu.es


http://www.riksrevisionen.se



http://www.efk.admin.ch



http://www.sayistay.gov.tr

ac-rada.gov.ua

http://www.ac-rada.gov.ua


http://www.nao.org.uk

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