INDEPENDENCE OF SUPREME AUDIT INSTITUTIONS (SAIS) PROJECT Final Task Force Report March 31, 2001 INDEPENDENCE OF SAIs PROJECT Final Task Force Report TABLE OF CONTENTS Page 1. Background 1 2. Project Methodology and Implementation Process 1 3. Project Report Overview 2 4. Outcome of Literature Search 2 5. Description of Survey 2 5.01 Survey Purpose 5.02 Survey Methodology 5.03 Target Population and Return Rates 6. Survey Findings 4 6.01 SAI Organisational Structure 6.02 SAI Mandate 6.03 Constitutional/Statutory Guarantees of Independence 6.04 Functional/Operational Independence 6.05 Freedom of Reporting 6.06 Financial Autonomy 6.07 Managerial/Administrative Autonomy 6.08 Status of SAI Independence 6.09 Potential/Prospects for Improvement 6.10 Recommended Actions by Survey Respondents 7. Regional Characteristics/Differences Derived from Survey Responses 14 8. Outcome of Consultations 16 9. Overall Conclusions 17 10. Task Force Recommendations 19 INDEPENDENCE OF SAIs PROJECT Final Task Force Report Appendices A. Task Force Terms of Reference and Membership B. Survey Questionnaire C. Bibliography (Publications and Internet Sites of Interest) D. Consultations Reports E. Outcome of Lisbon Seminar (1998) and IVth EUROSAI Congress (1999) INDEPENDENCE OF SAIs PROJECT Final Task Force Report ACKNOWLEDGEMENTS We would like to express our gratitude to the following organisations for their valuable contributions to the work of the Task Force: - the SAIs that took the time to respond in great detail to a relatively long survey questionnaire and those that participated in consultation meetings; - the various donor organisations (the International Development Agencies of Canada, Denmark, Norway and Sweden; the Regional Development Banks of Africa, Asia and Latin America; the United Nations Development Program and the World Bank) for their time, comments, suggestions and offers of support; - the General Accounting Office for its important contribution to the design of the survey instruments and the analysis of the survey responses; - the IDI Secretariat for its logistical and administrative support; - and the Office of the Auditor General of Canada for its contributions in kind and for bearing a substantial portion of the costs of this project. INDEPENDENCE OF SAIs PROJECT Final Task Force Report PREAMBLE INDEPENDENCE AND ACCOUNTABILITY OF SUPREME AUDIT INSTITUTIONS Supreme audit institutions (SAIs) play a vital role in holding governments accountable to legislatures and the public for their stewardship of public funds, and helping to ensure the transparency of government operations. They are uniquely suited to provide independent views on the quality of public sector management and the extent to which the bureaucracy operates within stated authorities. It is thus very important that the main parties involved in democratic governance (legislators, governments, public servants, civil societies and the public) understand, acknowledge, accept and support the fundamental principles under which SAIs must carry out their mandates, and the manner in which they should be held accountable in doing so. It is also essential that the mandate of SAIs and the authority and protection that they need to discharge their responsibilities be set out clearly in the constitution and/or legislation. This is required if SAIs are to be in a position to fulfil their mandate, independent from undue direction or interference from government. SAIs should also be accountable for the discharge of their legal responsibilities and for the administration of their offices. This implies that SAIs should carry out their audit work and report on it in a fair and objective manner and with due care. They should also conduct themselves in a professional manner. These requisites ensure that their independence is used in the public interest and that their integrity is preserved. Finally, SAIs should be prepared to voluntarily submit themselves to some form of review of their operations, appropriate to their environment and respectful of their independence. In these days of privatisation, decentralisation, public sector reforms and the fight against corruption, ensuring that SAIs have the independence, competence and resources needed to fulfil their mandates is more important than ever. The results of the survey and consultations that we conducted among 113 SAIs, as well as the conclusions of the Lisbon Seminar and the IVth EUROSAI Congress, and the subsequent deliberations among Task Force members clearly reveal an urgent need for extensive improvement in the current status of many of them. We hope that the recommendations of the INTOSAI Task Force on SAI Independence will contribute to the achievement of this goal. L. Denis Desautels, FCA Task Force Chairperson 1 INDEPENDENCE OF SAIs PROJECT Final Task Force Report 1. Background At its 44th meeting in Montevideo, Uruguay, the INTOSAI Governing Board established a task force to examine the state of independence of member supreme audit institutions, and to make recommendations on ways and means to bring about realistic improvements in a proactive and productive manner. The Task Force membership and terms of reference are outlined in Appendix A. The Task Force first met in Vienna on 27 May 1999 and agreed on the content of a survey questionnaire, on a work plan and timetable, and on the project methodology and implementation process outlined in Section 2 of this report. It was agreed at that meeting that the results of the survey and consultations would be presented in summary form only and that individual responses would remain confidential and not be used for purposes other than those of this project. The Task Force held two other meetings to carry out its work: one in Seoul, in May 2000; and one in Vienna, in March 2001. 2. Project Methodology and Implementation Process 2.01 The agreed-upon methodology consisted of the following: - the conduct of a literature search; - the conduct of a survey of all SAIs except those of the EUROSAI region. (EUROSAI has already surveyed the SAIs in this region); - consultations with selected SAIs in as many regions as possible as a way of complementing the survey results; and - meetings with selected international financial institutions and technical co- operation agencies to inform them about the project and to become familiar with their policies and current or intended actions in the areas of public sector accountability and transparency, particularly in relation to the issue of SAI independence. 2.02 The agreed-upon process for the implementation of this project was as follows : - submission to the Task Force of the results of the literature search and the survey; - review by the Task Force of the report’s draft conclusions and recommendations; 2 INDEPENDENCE OF SAIs PROJECT Final Task Force Report - presentation of a draft Task Force Report to the 47th meeting of the INTOSAI Governing Board in Seoul in May 2000; - modification of the draft Task Force report as directed by the INTOSAI Governing Board; - submission of the final draft report to the 48th meeting of the INTOSAI Governing Board in Seoul in 2001; and - submission of the final report to the general assembly at INCOSAI XVII in 2001. 3. Project Report Overview This report contains the results of the literature search, the survey and the consultations that were conducted and the deliberations that took place over the period 1 June 1999 to 30 March 2001. It also contains the Task Force recommendations to the INTOSAI Governing Board. 3.01 The outcome of the literature search is presented in Appendix C to this report. 3.02 The findings of the SAI survey are presented in Section 6 of this report 3.03 The overall conclusions drawn from the survey and SAI consultations are presented in Section 9 of this report. 3.04 The Task Force recommendations to the INTOSAI Governing Board are presented in Section 10 of this report. 4. Outcome of Literature Search A literature search was conducted on subjects related to the Independence of SAIs. A number of publications and Internet sites of interest were inventoried and are listed in the bibliography in Appendix C. 5. Description of Survey 5.01 Survey Purpose The purpose of the survey was to gather data on the issue of SAI independence and suggestions on ways to address it in a realistic, co-ordinated and productive manner. 3 INDEPENDENCE OF SAIs PROJECT Final Task Force Report As stated earlier, the SAIs of Europe were excluded from this survey, as they had been surveyed recently by the EUROSAI regional group on the same topic (see Appendix E). A copy of the survey report can be obtained from the EUROSAI Secretariat. It is listed in Appendix C. 5.02 Survey Methodology - The survey was conducted by means of a questionnaire that addressed the following points: - SAI Organisation - SAI Mandate - Constitutional/Statutory Guarantees of Independence - Functional/operational Independence - Freedom of Reporting - Financial Autonomy - Managerial/Administrative Autonomy - Current Status of SAI Independence - Potential/Prospects for Improved Independence - Recommended Actions by SAI, INTOSAI and Others - SAIs were given a number of multiple-choice questions with the option of selecting more than one response. In such cases, the number of responses often exceeds the number of respondents (see sample questionnaire in Appendix B). - All of the SAIs surveyed belong to INTOSAI, and most of the SAIs who responded to the survey also belong to an INTOSAI regional group. Four ARABOSAI SAIs have dual membership with the AFROSAI group, and three with the ASOSAI group. For the purposes of the survey, all ARABOSAI SAIs were classified as part of the ARABOSAI group only. In other cases of dual membership (such as the SAIs of New Zealand and Papua New Guinea), which belong to both the ASOSAI and SPASAI groups), SAIs were considered to belong to only one of these groups, the latter in these two cases. 5.03 Target Population and Return Rates - The survey was intended to cover all SAI members of INTOSAI except the SAIs of Europe. 4 INDEPENDENCE OF SAIs PROJECT Final Task Force Report - The survey was originally addressed to 137 SAIs. It was totally impossible to contact 11 of them, despite repeated attempts by various means. This may be due to the fact that these SAIs are not functioning at the moment because of a breakdown in local communication systems. The survey reached 126 SAIs and 113 (90%) responded. The response rate by region was as follows: A B C D POP. REACHED REPLIED RESP. RATE (C/B) - AFROSAI-E 19 18 17 94% - AFROSAI-F 21 16 11 69% - ARABOSAI 19 17 16 94% - ASOSAI 27 24 23 96% - CAROSAI 15 15 13 87% - OLACEFS 21 21 19 90% - SPASAI 13 13 12 92% - OTHERS 02 02 02 100% - TOTAL 137 126 113 90% The survey findings arising out of the 113 responses are presented in Section 6 of this report and are structured in the same fashion as the survey questionnaire (see Section 5.02). Note that number of responses rather than percentages are generally used because it is often difficult to distinguish between “no” responses and responses that have been omitted. 6. Survey Findings (based on the responses of a total population of 113) 6.01 SAI Organisational Structure (QI-A.1, QI-A.6)1 The SAIs who responded to the survey have various structures: 73 have a “monocratic” structure, for example, Auditor General, Comptroller and Auditor General, Controller General or State Inspector; 17 have a “collegial” structure, for example, Board of Audit, Court or Chamber of Accounts or Commission of Audit; The rest have other forms of organisational structure such as an Audit Department or State Committee. Note 1: “Q-“ refers to the question numbers of the survey questionnaire (see Appendix B). 5 INDEPENDENCE OF SAIs PROJECT Final Task Force Report 6.02 SAI Mandate (QI-A.2, QI-A.3, QI-A.4, QI-A.5) Most of the survey respondents (at least 108 of 113) derive their mandate from either constitutional or statutory provisions, specific legislation, or a combination of these. For 79 respondents, their mandates are enshrined in the constitution of their countries. Other SAIs derive their mandate from other sources, such as a decision of the Head of State, a circular or a decree of government. SAIs are mandated to carry out a broad range of audit work (for example, financial, legislative compliance and performance audit or jurisdictional control) and most do perform these types of work as illustrated in the following chart: Types of Auditing/Control Mandated and Performed: 120 80 40 0 Financial Legislative Performance Jurisdictional Other Compliance Control Mandated Performed The survey found that 111 SAIs audit central ministries/departments; 105 audit other government agencies; and 96 audit state corporations/autonomous agencies. The mandates of more than 70 of these also include the audit of entities at the regional and/or local level. 6.03 Constitutional/Statutory Guarantees of Independence Appointment of Head of SAI (QII-1, QII-2, QII-3) The Head of State appoints 77 Heads of SAIs to their post. Only 34 are appointed by the legislature. In at least 8 cases, Heads of SAIs are appointed by joint action of the legislature and the Head of State. 6 INDEPENDENCE OF SAIs PROJECT Final Task Force Report The term of office of the Head of SAI is fixed by law in 72 cases and by other means in 19 cases. Terms of office can take the form of a fixed number of years (from 1 to 15 years), a life appointment or can have an age limit (usually 55-65 years). The authorities that determine the terms and conditions of the SAI Head’s remuneration are indicated in the following chart: Terms and Conditions of SAI Head’s Remuneration Determined by: 50 40 30 20 10 0 Const/Statutory Legislature Head of Others in Other Provision State Executive Removal of Head of SAI (QII-4) SAIs were asked to indicate the circumstances under which Heads of SAIs could be removed. Respondents often stated multiple reasons under each of the following categories, and all reasons are reported here. The survey results are as follows: - Inability to perform functions 55 (illness, incapacity, etc) - Misbehaviour 44 (misconduct, irregularities, etc) - Conviction of serious offence 16 - Other reasons 28 7 INDEPENDENCE OF SAIs PROJECT Final Task Force Report SAIs were asked who could remove Heads of SAIs. The most commonly mentioned categories were the following: - Head of State, Prime Minister, Executive Branch 38 - Legislature 32 - Head of State on recommendation of tribunal 11 - Judiciary Branch 8 - Combination of above 23 Appointment of Deputy Head of SAI (QII-5) Twenty-seven SAIs report that they have no Deputy Head. As for the others, only 12 are appointed by the Legislature, 27 by the Head of State, and 16 by “others in the Executive Branch of government”. In 31 cases, other forms of nomination (such as appointment by the Head of the SAI or by the public service commission) are used. Accountability of senior officers (QII-6) Only 15 SAIs report that their senior officers are accountable to persons or entities external to the SAI. Accountability of SAI (QI-B.1) Most of the responding SAIs state that they are primarily accountable (or subordinate) to the legislature, as the following chart indicates: SAI Primary Accountability to: 80 60 40 20 0 Legislature Head of State Others in Executive 8 INDEPENDENCE OF SAIs PROJECT Final Task Force Report Decisions about internal structure of SAI (QII-7) A majority of SAIs (84) report that they make decisions about the organisational structure of their institutions. In 31 cases, it is the Head of State or others in the Executive Branch of government who approve the organisational structure of SAIs. Audit of accounts and/or performance of SAIs (QII-8) Forty-six SAIs report that no one audits their accounts or performance. In 39 cases, audits are carried out by either the Legislative Branch of government (12), the Executive Branch (14) or independent non-governmental auditors (13). In 40 other cases, the audits are carried out by other entities. Appointment of external auditors of SAIs (QII-9) In a few cases, the external auditors of the SAI are appointed either by the Legislature (14) or by the Executive Branch of government (8). Other cases (22) include appointment by the Head of State or the Head of the SAI. 6.04 Functional/Operational Independence Access to information (QII-10, QII-13) Most SAIs (102) state that there is no restriction on their access to the information needed to conduct their audits. About 30 SAIs report, however, that certain government entities are excluded from their examination, usually for reasons of national security. Selection of audit issues, approaches and methods (QII-11, QII-12) Almost all SAIs report that they have full discretion in the selection of issues for audit (109) and in the selection of audit approaches and methods (110). 6.05 Freedom of Reporting (QII-14, QII-17, QII-16, QII-15) A majority of SAIs (88) state that they present their annual and/or audit reports to the legislature, in many cases through - or at the same time as they present them to the Head of State (45). Most SAIs (98) include recommendations in their reports. Only 6 SAIs report that limitations are imposed on the content of their reports. 9 INDEPENDENCE OF SAIs PROJECT Final Task Force Report Most SAIs also state that they are free to make available either their annual or audit reports, or both in some cases, as illustrated here: Annual and/or Audit Reports Available to: 120 100 80 60 40 20 0 Audited Entities Media General Public 6.06 Financial Autonomy (QII-18, QII-19, QII-20, QII-21) The budget of 109 SAIs is financed directly from the national budget while 15 SAIs report that their budget is financed in whole or in part by income for services rendered. The annual budget of 77 SAIs is approved by the legislature, but only 69 have the opportunity to defend their budget before the legislature or a committee thereof. The Head of State approves the budget for 11 SAIs, while “Others in the Executive Branch of Government” approve the budget for 31 others. Finally, 81 SAIs report that they manage their budget once approved and make decisions about how to spend it “to a great or very great extent”, while 25 SAIs report that they only manage their budget “to some extent”. 10 INDEPENDENCE OF SAIs PROJECT Final Task Force Report 6.07 Managerial/Administrative Autonomy (QII-22) Recruitment, dismissal of personnel The ability of SAIs to recruit or dismiss personnel is limited in more than half the cases. For example, only 59 SAIs state that they have substantial authority to recruit senior personnel, and only 41 to dismiss them. In the case of audit and other personnel, these numbers are 69 and 54 respectively. Job descriptions, promotions, discipline, remuneration On the other hand, the number of SAIs that can approve job descriptions (91), determine promotions (71) and discipline staff (73) “to a great or very great extent” is higher. But the ability of SAIs to fully determine remuneration scales (30) and authorise individual remuneration (36) is quite limited. Contracting and purchasing Sixty SAIs report that they have the authority, “to a great or very great extent”, to recruit and dismiss consultants. And 76 state that they have the authority to buy equipment. However, only 48 of them have the authority to dispose of equipment. 6.08 Status of SAI Independence (Q-III) SAIs were asked to describe the extent to which they enjoy independence under five categories, and to state in each case whether independence is needed to fulfil their mandate and function effectively. 11 INDEPENDENCE OF SAIs PROJECT Final Task Force Report Most responding SAIs indicated that all five types of independence were needed to a great or very extent, and that financial autonomy and managerial/administrative autonomy were in fact enjoyed much less frequently than the other three types. The survey results were as follows: Types of Independence Enjoyed or Needed to a great or very great extent 100 80 60 40 20 0 Constit/ Functl/ Freedom of Financial Manag/ Statutory Operational reporting autonomy admin Independence needed Independence enjoyed 6.09 Potential/Prospect for Improvement (QIV-1, QIV-2, QIV-3, QIV-4) SAIs were asked to indicate areas where there was significant room for improvement in their institutions under the following categories. YES NO Constitutional/statutory guarantees 41 59 Functional/operational independence 42 56 Freedom of reporting 33 65 Financial autonomy 73 33 Managerial/admin. autonomy 63 40 12 INDEPENDENCE OF SAIs PROJECT Final Task Force Report SAIs were asked whether they expected significant improvements under the following categories over the next five years. Survey results were as follows: Likely Possible Not likely Constitutional/statutory guarantees 29 30 32 Functional/operational independence 34 30 28 Freedom of reporting 36 20 34 Financial autonomy 32 38 32 Managerial/admin. autonomy 34 33 28 SAIs were asked to rate the extent to which certain factors are a significant obstacle to achieving a realistic degree of independence. Survey results are illustrated in the following chart: Obstacles to Independence: 80 60 40 20 0 Const/ Political Lack of Auditee Other Statutory constraints resources resistance factors Very great/great extent Some extent Little/no extent 13 INDEPENDENCE OF SAIs PROJECT Final Task Force Report SAIs were asked what actions were currently planned that might realistically improve the overall degree of their independence in the foreseeable future. Survey results follow: - New or improved constitutional/statutory/legislative provisions being considered or implemented (46) - Actions aimed at obtaining more financial autonomy and more financial resources (32) - Actions aimed at obtaining more managerial/administrative autonomy (particularly in the field of personnel management) (21) - Actions aimed at modernising and strengthening SAIs (and producing better quality work and reports) (11) 6.10 Actions Recommended by Survey Respondents (QIV-5) SAIs were asked what actions could be taken by their institutions, their governments, INTOSAI and others to increase their level of independence. The main suggestions were: By the SAIs - Lobby government, legislature and individual politicians to improve legislation, conditions, etc. (27) - Promote awareness of crucial need for SAI independence. (10) - Modernise SAI, improve quality of work, reporting and work ethics. (10) By SAI’s government - Promote need for legal, operational, reporting, financial and administrative independence (32) - Support need for specific legislation/statute covering SAI (18) - Provide necessary resources and related autonomy to SAI (73) - Promote a culture of transparency and accountability (6) By INTOSAI - Provide continued technical assistance, training, information exchange and opportunities to improve capacity of SAIs. (25) - Pro-actively inform governments and other interested parties about need for independent SAI. (19) 14 INDEPENDENCE OF SAIs PROJECT Final Task Force Report - Issue standards, guidelines on SAI independence and monitor their application. (16) By other parties - Donors/technical co-operation agencies should make existence of sufficiently resourced and independent SAI a condition of assistance to national governments (14) - Donors/technical co-operation agencies should provide financial and technical support to SAIs to improve their audit capacity (12) - Independence of SAIs should be promoted and supported by donors, technical co-operation agencies and advocacy organisations (11) Other suggestions/ideas (QIV-6) SAIs were asked whether they had other suggestions/ideas for improving their actual independence. Most of the suggestions/ideas were in support of actions recommended previously, with emphasis on the need to "operationalise" existing constitutional/statutory/legislative provisions, the need for financial and administrative autonomy and the need for sufficient monetary resources. 7. Regional Characteristics/Differences Derived From Survey Responses In interpreting the results of this survey, it is important to take into account the key regional characteristics/differences identified in the survey. The main ones are outlined below: 7.01 SAI Organisational Structure In the SAIs of the AFROSAI-E, ASOSAI, CAROSAI and SPASAI regions, there is a predominance of Auditor General or Comptroller and Auditor General Offices. The ARABOSAI region generally has Audit Bureaus in the Arab Peninsula and mostly Courts of Accounts and State Inspectorates (or equivalent) in North Africa. AFROSAI-F has an equal number of Courts or Chambers of Accounts and State Inspectorates. In OLACEFS, the Contraloria form predominates. 15 INDEPENDENCE OF SAIs PROJECT Final Task Force Report 7.02 SAI Mandate Financial and legislative compliance auditing is performed in all regions, and most SAIs state that they conduct some form of performance audit. The jurisdictional control function, however, is mostly performed in the AFROSAI-F region (5 SAIs), in the ARABOSAI region (5 SAIs, largely in North Africa) and in the OLACEFS region (4 SAIs). 7.03 Constitutional and/or Statutory Guarantees of Independence Appointments of Heads of SAIs by the legislature or by a combination of legislature and Head of State are prevalent in the AFROSAI-E, OLACEFS and ASOSAI regions. In the AFROSAI-F, ARABOSAI, CAROSAI and SPASAI regions, these appointments are generally made by the Head of State. Appointments of Deputy Heads are generally made by the Head of State or “others in the Executive Branch” in all regions except for OLACEFS, where in 6 cases, these appointments are made by the legislature. Most SAIs are primarily accountable to the legislature in the AFROSAI-E, CAROSAI, OLACEFS and SPASAI regions; and to the Head of State (or others in the Executive Branch) in the ARABOSAI, ASOSAI and AFROSAI-F regions. 7.04 Freedom of Reporting A majority of SAIs stated that they submit their annual and/or audit reports to the legislature. But in the ARABOSAI and AFROSAI-F regions, reports are generally presented to the Head of State. A majority of SAIs state that they are free to present their annual and/or audit reports to the media or to the public, except in the ARABOSAI and AFROSAI-F regions. In interpreting these responses, one should take into account the fact that a number of annual reports are activity reports and not audit reports. 7.05 Financial Autonomy A majority of SAIs (except those of the AFROSAI-F region) state that they manage and decide on the use of their budgets once they have been approved. But the financial autonomy of SAIs is otherwise severely limited in most cases, particularly in the AFROSAI-E, SPASAI, CAROSAI and AFROSAI-F regions. 16 INDEPENDENCE OF SAIs PROJECT Final Task Force Report Moreover, a great number of SAIs seem to suffer from a serious lack of financial resources, which prevents them from fulfilling their mandates adequately. 7.06 Managerial/administrative autonomy Most SAIs state that they make decisions about their organisational structures, except in the AFROSAI-E and AFROSAI-F regions. But the implementation of these structures is often tied to the budgetary process, which in turn is often controlled by the government. In the ASOSAI, ARABOSAI, OLACEFS and SPASAI regions, most SAIs state that they have the authority to recruit and dismiss staff “to a very great extent”. This authority is quite limited in the other regions. The authority to fix staff remuneration is very limited in most regions, except for SAIs in the ARABOSAI (10 of 16) and ASOSAI (7 of 21) regions. SAIs in the ARABOSAI, ASOSAI and OLACEFS regions state that they have the authority to buy and dispose of equipment “to a very large extent”. This authority is quite limited in the other regions. The extent of managerial/administrative autonomy is particularly limited for most SAIs in the AFROSAI-E, AFROSAI-F, CAROSAI and SPASAI regions. 8.01 Outcome of Consultations 8.01 Consultations with selected groups of SAIs were carried out to complement the results of the survey. Meetings with national technical co- operation agencies and international donor agencies were arranged to inform them about the project and to gain knowledge of their policy objectives as well as their current programs and practices in the areas of public-sector accountability and transparency. 8.02 For reasons of economy, consultations meetings were scheduled to coincide with activities that the INTOSAI Development Initiative (IDI) had already planned, such as attendance at regional group meetings, meetings of regional training committees or regional group board meetings. 17 INDEPENDENCE OF SAIs PROJECT Final Task Force Report 8.03 As of 30 April 2000, the following consultations/meetings had taken place: - With selected groups of SAIs in the AFROSAI-F, AFROSAI-E, ASOSAI, CAROSAI, OLACEFS and SPASAI groups. (Consultations with SAIs of the ARABOSAI group were not carried out because they could only take place in late June). - With the International Development Agencies of Canada, Denmark, Norway and Sweden. - With the African, Asian and Inter-American development banks. - With the United Nations Development Programme (UNDP - South Pacific) and the World Bank. 8.04 The outcome of the consultation meetings that had taken place as of 30 April 2000 are outlined in Appendix D. No other consultation took place after that date. 9. Overall Conclusions 9.01 The concept of SAI independence in this report is generally understood to mean the absence of undue subordination to, direction and/or interference from, government. The interpretation and effective application of this concept and of related constitutional/statutory guarantees are very much affected in practice by the particular political and civil society structures and systems of countries within which SAIs operate. For example, SAI independence has little meaning in an environment where proper checks and balances do not exist or are severely limited. It is also dependent, to a considerable extent, on the degree of democratisation of the environment in which SAIs evolve. De facto SAI independence is also a function of the extent to which constitutional/statutory guarantees are “operationalised” or applied in practice and of the extent to which sufficient human, material and monetary resources are available. 18 INDEPENDENCE OF SAIs PROJECT Final Task Force Report 9.02 This being said, the current SAI situation, derived from the survey responses and consultations outlined in sections 1 to 8 of this report, can be summarised as follows: 1. The vast majority of SAIs derive their mandate from either constitutional or statutory provisions, legislation, or a combination of these, and most SAIs are mandated to carry out a broad range of audit work. Out of 113 respondents, 70 SAIs state that they are accountable to the legislature, and 84 state that they make the necessary decisions about their organisational structures. 2. Although in a majority of cases the tenure of Heads of SAIs is determined by law, the appointment, remuneration and removal of Heads of SAIs are determined by the legislature in only about 25 percent of the cases. 3. The vast majority of SAIs state that they are not impeded in their work by restrictions on access to information. And most SAIs state that they have the authority to develop and implement their own work program. 4. Although 88 SAIs indicate that they submit their reports to the legislature, only about 60 have the freedom to disseminate these reports to the public. 5. Although 77 SAIs state that their budget is approved by the legislature, 55 indicate that the lack of financial resources prevents them from fulfilling their mandates appropriately and is a serious obstacle to their achieving a reasonable degree of independence and effectiveness. Only 20 SAIs state that they enjoy a reasonable degree of financial autonomy. The general expectation is that this situation is not likely to improve in the near future. 6. An even more serious situation prevails in terms of SAI managerial/administrative autonomy (especially in the area of human resources). In this as in the preceding case, respondents see no significant improvements on the horizon. 7. This really means that a considerable number of SAIs do not have the means at their disposal to discharge their responsibilities fully. 9.03 Considering the above, it can be concluded that a considerable number of the SAIs surveyed are not really in a position to fulfil their mandates in a manner consistent with the requirements of the Lima Declaration of Guidelines on Auditing Precepts. 9.04 The following core principles of SAI independence are generally recognised in the SAI community as essential requirements of proper public sector auditing. These include: 1. The existence of an appropriate and effective constitutional/statutory/legal framework and of de facto application provisions of this framework. 19 INDEPENDENCE OF SAIs PROJECT Final Task Force Report 2. The independence of the SAI Head and “Members” (in collegial organisations), including security of tenure and legal immunity in the normal discharge of their duties. 3. A sufficiently broad mandate and full discretion in the discharge of SAI functions. 4. Unrestricted access to information. 5. The right and obligation to report on their work. 6. The freedom to decide on the content and timing of audit reports and to publish and disseminate them. 7. The existence of effective follow-up mechanisms on SAI recommendations. 8. Financial and managerial/administrative autonomy and the availability of appropriate human, material and monetary resources. 9.05 SAIs should apply the same standards to their own operations that they apply to organisations that they audit if they are to establish and maintain their reputation and credibility. To this effect, they should: 1. use appropriate work and audit standards as well as adhere to a code of ethics; 2. provide evidence of the economy, efficiency and effectiveness of their operations; and 3. be prepared to voluntarily submit themselves to some form of review of their operations, appropriate to their environment and respectful of their independence. 9.06 It is recognised, however, that although SAIs should have full discretion in the discharge of their responsibilities, they should be responsive to the interests and wishes of the legislature and should co-operate with governments that pursue improvements in the use and management of public funds. 10. Task Force Recommendations The following recommendations are based on the results of the survey and of the consultations described in this report; on the conclusions of the Lisbon Seminar (1998) and of the IVth EUROSAI Congress on SAI independence held in June 1999 (see Appendix E); and on the outcome of the deliberations of the Task Force on SAI Independence. The purpose of these recommendations is to help bring about, where needed, the independence of SAIs in accordance with the core principles listed in section 9.04 of this report. These are based on the Lima Declaration of Guidelines on Auditing Precepts. 20 INDEPENDENCE OF SAIs PROJECT Final Task Force Report 10.01 The Task Force recommends that INTOSAI carry out the following actions: 1. Put added emphasis on the promotion of a culture of accountability and transparency in public-sector management and auditing. 2. Actively promote awareness of the need for independence and for proper resourcing in SAIs as essential elements of public sector reforms. 3. Periodically provide SAIs with information and guidance on SAI independence and, to the extent possible, support SAIs, where appropriate, in their efforts to improve their status, credibility and independence. 4. Determine how contacts with selected advocacy organisations, international financial institutions and donor agencies could usefully be established to promote SAI independence, within the boundaries of INTOSAI Statutes and in accordance with the Lima Declaration of Guidelines on Auditing Precepts. 5. Encourage SAIs to continuously improve the quality of their work, reports and work ethic, and continue to assist them through capacity-building programs, including the provision of audit guidance, training, technical assistance and information exchange. 10.02 The Task Force recommends that a new sub-committee of the INTOSAI Standing Committee on Auditing Standards be established at INCOSAI XVII to implement the recommendations outlined in section 10.01 of this report, within the framework of the following terms of reference: 1. Explore ways of promoting SAI independence at international, regional and local levels, including the development of an awareness and communications program on SAI independence, by means of studies, publications and seminars. 2. Gather information on the status of SAI independence through periodic confidential surveys and develop draft guidance on SAI independence for the use of SAIs. 3. Explore and propose ways and means of establishing contacts with external organisations for the purpose of strengthening SAI independence. 21 INDEPENDENCE OF SAIs PROJECT Final Task Force Report In the fulfilment of these terms of reference, the Sub-Committee shall carry out the following: 1. Submit detailed annual plans of activities to the INTOSAI Governing Board for its consideration and prior approval. 2. Submit to the INTOSAI Governing Board an annual report of its past activities and achievements. 3. Work in close co-operation with the INTOSAI General Secretariat. 10.03 Rationale for the Establishment of a Special sub-Committee on SAI Independence 1. It is crucial to proactively address the issue of SAI independence now. Otherwise, efforts at and investments in capacity-building (through the work of INTOSAI committees and groups, IDI training and information exchange programs, IDI satellite programs and other means) in SAIs that have insufficient independence and inadequate resources will be in jeopardy. 2. The timing is right: public sector reforms are taking place, good governance, including accountability and transparency, are promoted everywhere and there is a strong movement toward eradicating corruption. 3. A special sub-committee would provide a focal point and the needed visibility to address the important issue of independence as well as provide support for SAIs’ efforts in their respective countries. APPENDIX A INDEPENDENCE OF SAIs PROJECT Final Task Force Report TASK FORCE TERMS OF REFERENCE AND MEMBERSHIP APPENDIX A-1 INDEPENDENCE OF SAIs PROJECT Final Task Force Report Task Force Terms of Reference of the Task Force 1. Carry out a survey in each region to determine the current situation and the extent to which the lack of independence is seen as a problem in the INTOSAI community. 2. Consult SAIs in the different regions of INTOSAI as to their suggestions for ways in which INTOSAI could support and assist them in strengthening their independence in their respective jurisdictions. 3. Develop a set of basic application provisions or criteria, based on the Lima Declaration and the INTOSAI Auditing Standards, that reflect the essential elements of SAI independence and that also take into account the particularities of the different systems of public-sector auditing and the realities of the various regions of INTOSAI. 4. Develop recommendations and strategies to help SAIs achieve or maintain a realistic level of independence. 5. Present a final draft report of the results of its work at the 2000 INTOSAI Governing Board meeting. In the conduct of its work, the Task Force will consult with EUROSAI to take full advantage of the research that will have been done on the topic of SAI independence in the European context. The identification of suggestions to be retained and of the organisation of its work is left to the discretion of the Task Force. The Task Force will start its work any time after January 1, 1999. APPENDIX A-2 INDEPENDENCE OF SAIs PROJECT Final Task Force Report Task Force Membership CANADA Chair Mr. L. D. Desautels, FCA, Head of SAI of Canada INTOSAI Secretary Dr. F. Fiedler, Head of SAI of Austria AFROSAI Member H.E. Ms. Lucy Gwanmesia, Head of SAI of Cameroon ARABOSAI Member Dr. Gawdat El-Malt, Head of SAI of Egypt ASOSAI Member H.E. Mr. T. Ibrahim Tawfik, , Head of SAI of Saudi Arabia CAROSAI Member Ms. A. Armstrong, Head of SAI of Antigua and Barbuda EUROSAI Member Dr. A. José de Sousa, Head of SAI of Portugal OLACEFS Member Cont. Gral. G. Ramirez Rodriguez, Head of SAI of Uruguay SPASAI Member Mr. Pohiva Tu’i’Onetoa, Head of SAI of Tonga APPENDIX B INDEPENDENCE OF SAIs PROJECT Final Task Force Report SURVEY QUESTIONNAIRE APPENDIX B SURVEY ON THE INDEPENDENCE OF SUPREME AUDIT INSTITUTIONS Purpose of the Survey At its 44th meeting in Montevideo, Uruguay, the INTOSAI Governing Board established a task force to examine the state of independence of member Supreme audit institutions (SAIs). This survey is the first step in this undertaking, and its purpose is to gather data on the issue of SAI independence and suggestions as to ways to address it in a realistic, co-ordinated and productive manner. This survey, which is being sent to all SAIs that are members of INTOSAI (except those belonging to EUROSAI who were previously surveyed), will be followed by a number of consultations with selected respondents (individual SAIs or groups of SAIs) to complement its results. These results will be compiled and presented in summary form only as part of a report by the INTOSAI Task Force on SAI independence. The report will be submitted to the INTOSAI Governing Board at its 47th meeting in Seoul, in the year 2000. Individual survey responses will remain confidential to the Task Force and will not be used for purposes other than this report. Instructions This questionnaire is addressed to you as the Head of your SAI. You are kindly requested to specify below the name of the person(s) completing this questionnaire on your behalf, if applicable. Completing this questionnaire should take approximately 60 minutes. If clarification is required, do not hesitate to communicate with Yvan Gaudette (see address below). You are requested to send the completed questionnaire to the following addressee, no later than September 30, preferably by fax or e-mail. Your cooperation is greatly appreciated. Yvan Gaudette Room 1145, 240 Sparks St Ottawa, ON K1A OG6, Canada Tel: 1-613-9953708 ext. 6274 Fax: 1-613-9413587 Email: email@example.com Identification of respondent Name of Institution: ______________________________________________________ Name/Title of Head of SAI: ________________________________________________ Name/title of person(s) completing the questionnaire: ____________________________ Telephone: _______________ Fax: ________________ Email: _______________ Mailing Address: _________________________________________________________ 1 APPENDIX B I. Information on your SAI A. Background of your SAI 1. To which INTOSAI regional group(s) does your SAI belong? ___________________ 2. From where does your SAI derive its audit mandate? (Check all that apply.) 1. ! Constitution 2. ! Statutes/laws - specify: __________________________________ 3. ! Other - specify: _______________________________________ 3. In column “A” below, indicate which of the following activities your SAI is mandated or authorized to perform; and in column “B” below, indicate which of those activities your SAI actually performs. (For each row, check one box under columns A and B, as applicable.) A. B. Is your SAI mandated (by If you answered YES in constitution or statute) or column “A”: authorized (by legislature or government) to perform this Does your SAI actually activity? perform this activity? Activity Yes No Does Does NOT perform perform a. Financial audits b. Performance audits c. Legislative compliance/regularity audits d. Jurisdictional control (for Courts of Accounts, etc.) e. Other activities – specify (including “pre-audit” work and other direct involvement in government processes): 2 APPENDIX B 4. For whatever type(s) of work your SAI carries out (as reported in question 3 above), which of the following entities does your SAI audit? (Check one box in each row.) Institutions Yes No a. Central ministries and/or departments b. Other government agencies c. State corporations/autonomous agencies d. Other, at regional level (province, state or district) - specify type(s): e. Other, at local (municipal, urban) level - specify type(s): f. All other - specify type: 5. If your SAI does not audit state corporations/autonomous agencies, who does? (Check all that apply.) 1. ! Another government body - specify: __________________________________ 2. ! Private sector audit firms: __________________________________________ 3. ! Other - specify: __________________________________________________ 6. Which one of the following best describes your institution? (Check one box.) Single head 1. ! Auditor General Office 2. ! Comptroller General/Comptroller and Auditor General Office 3. ! Contraloria/Contaduria (in Latin America) 4. ! Inspectorate Collegial 5. ! Court, Chamber of Accounts 6. ! Board or Commission of Audit 7. ! Other – specify: __________________________________________ 3 APPENDIX B B. Your SAI’s environment 1. To which of the following bodies/persons is your SAI primarily accountable (or subordinate)? (Check one box in each row.) Body Yes No a. Legislative b. Judiciary c. Head of State d. Other part of Executive Branch - specify: e. None of the above - specify: 2. To what extent does your SAI rely in its work on each of the following institutions? (Check one box in each row.) Your SAI relies on each of the following: To a To some To little great extent or no extent extent a. Government internal audit groups b. Other government audit organizations c. Private sector audit firms d. Other – specify: 3. Does your SAI, acting within its statutory authority, do any of the following in regard to other public/private-sector audit bodies? (Check one box in each row.) Does your SAI: Yes No a. Exchange information with other audit bodies b. Use internal audit reports from other audit bodies c. Carry out joint audits with other audit bodies 4 APPENDIX B 4. Does your SAI carry out audits of development projects financed by major donor organizations? (Check one box.) 1. ! No – GO TO SECTION II 2. ! Yes - A. Do your audits meet the audit requirements of these donor organizations? (Check one box below.) 1. ! Yes 2. ! No B. Do you carry out audits of development projects on behalf of the major donor organizations that finance them? (Check one box.) 1. ! Yes 2. ! No II. How your SAI operates 1. By whom is the head of your SAI appointed? (Check all that apply.) 1. ! By Legislature (Senate, House of representatives, other) 2. ! By the Head of State 3. ! By others in Executive Branch - specify: _____________________________ 4. ! By the Judiciary 5. ! Elected by peers who are “members” of SAI (as in a collegial organization) 6. ! Other forms of nomination - specify: _________________________________ 2. Is the term of office of the head of your SAI fixed: (Check all that apply.) 1. ! By law? - Specify length of term of office: _____________________________ 2. ! By other means? - Specify means and length of term of office: _____________ 3. Who determines the terms and conditions of the remuneration of the Head of your SAI? (Check all that apply.) 1. ! Constitutional or statutory provision 2. ! The Legislature 3. ! The Head of State 4. ! Others in Executive Branch 5. ! The Judiciary 6. ! Others - specify: ___________________________________________ 5 APPENDIX B 4. Under what circumstances, if any, and by whom, can the head of your SAI be removed or his/her term of office interrupted? Circumstances: Who can remove: ____________________________ _____________________________ ____________________________ _____________________________ 5. By whom is the Deputy-Head (with delegated authority in the absence of the Head) of your SAI appointed? (Check all that apply.) 1. ! No Deputy/Not applicable 2. ! By Legislature (Senate, House of representatives, other) 3. ! By the Head of State 4. ! By others in Executive Branch - specify: ______________________________ 5. ! By the Judiciary 6. ! Elected by peers who are “members” of SAI (as in a collegial organization) 7. ! Other forms of nomination - specify: _________________________________ 6. Are any of the senior officers in your SAI accountable to persons or entities other than you or your SAI? 1. ! Yes - specify: ___________________________________________ 2. ! No 7. Who makes decisions about the internal organizational structure of your SAI? (Check all that apply.) 1. ! SAI 2. ! Legislature 3. ! Head of State 4. ! Others in Executive Branch 5. ! Judiciary 6. ! Other - specify: __________________________________________________ 8. Who, if anyone, audits the accounts and/or the performance of your SAI? (Check all that apply.) 1. ! No one/Not applicable 2. ! Independent non-government auditing organization (i.e. public accounting firms, etc.) 3. ! Executive Branch or agent thereof 4. ! Legislative Branch or agent thereof 5. ! Judiciary Branch or agent thereof 6. ! Other - specify: ___________________________________________________ 6 APPENDIX B 9. Who, if anyone, appoints the external auditor of the accounts of your SAI? (Check all that apply.) 1. ! No one/Not applicable 2. ! Independent non-government auditing organization (i.e. public accounting firm, etc.) 3. ! Executive Branch or agent thereof 4. ! Legislative Branch or agent thereof 5. ! Judiciary Branch or agent thereof 6. ! Other - specify: ___________________________________________________ 10. Are there any restrictions on your SAI’s access to the information needed to conduct its audits? (Check one box.) 1. ! No 2. ! Yes - specify and state why: _________________________________________ 11. Does your SAI have full discretion (or the freedom) to select issues for audit and determine the scope of its work within its mandate? (Check one box.) 1. ! Yes 2. ! No 12. Does your SAI have full discretion in the choice of audit approaches and methods used in its work? (Check one box.) 1. ! Yes 2. ! No 13. Within your audit mandate, are there any specific entities your SAI cannot audit (for security reasons for example)? (Check one box.) 1. ! No 2. ! Yes - specify and state why: ________________________________________ 14. To whom does your SAI present its audit reports? (Check all that apply) 1. ! Legislature (if reports are referred to committee of legislature, please explain in 5). 2. ! Head of State 3. ! Other parts of Executive Branch - specify: _____________________________ 4. ! Judiciary Branch 5. ! Other - specify: __________________________________________________ 7 APPENDIX B 15. Does your SAI have the freedom to make its audit reports available to any of the following parties? (Check all that apply) Yes No IF YES: Describe the nature of those reports:* a. Audited entities b. The media c. The general public * For example, annual activity report, audit reports. 16. Is there any kind of limitation imposed on the content of your SAI’s audit reports? (Check one box.) 1. ! No 2. ! Yes - specify and state why: _______________________________________ 17. Does your SAI only report audit findings, or does it also make recommendations for improvements in its audit reports? (Check one box.) 1. ! Only reports audit findings 2. ! Also makes recommendations 3. ! Other - specify: __________________________________________________ 18. Who approves your SAI’s budget? (Check all that apply.) 1. ! Legislative Branch (or committee thereof) 2. ! Head of State 3. ! Others in Executive Branch - specify: __________________________ 4. ! Judiciary Branch 5. ! Other - specify: ______________________________________________ 19. Does your SAI have the opportunity to defend its budget in front of the legislature or a committee thereof? (Check one box.) 1. ! Yes 2. ! No 20. How is your SAI’s budget financed? (Check all that apply.) 1. ! From the national budget directly 2. ! From income for services rendered 3. ! Other - specify: ______________________________________________ 8 APPENDIX B 21. To what extent does your SAI manage and make decisions about spending its own budget during the year? (Check one box.) 1. ! To a very great or great extent 2. ! To some extent 3. ! To little or no extent 22. To what extent does your SAI have the authority to perform the following activities? (Check one box in each row.) To a very great To some or little To no extent or great extent extent a. Recruit senior personnel b. Recruit audit/other staff c. Dismiss senior personnel d. Dismiss audit/other staff e. Discipline personnel f. Approve job descriptions g. Determine remuneration scales/levels h. Determine individual remuneration i. Determine promotions j. Recruit consultants k. Dismiss consultants/end contracts l. Acquire/buy equipment m. Sell/dispose of equipment 9 APPENDIX B III. The independence of your SAI The “Lima Declaration of Guidelines on Auditing Precepts” outlines broad basic tenets of public sector auditing relating to, among other things, the nature of public-sector auditing, the need for independence for SAIs, the audit powers of SAIs, their relationships with the Legislative Branch and the Executive Branch (including administration), as well as the nature of their reporting. 1. Based on the Lima guidelines but also taking into account the particular environment in which your SAI currently operates and the nature of the audit system that your SAI is part of, to what extent do you feel that (A) your SAI enjoys independence under the categories listed below (“a” to “e”), and (B) to what extent having independence under these categories is particularly important to fulfil your SAI’s mandate and function effectively? (Check one box under both the A and B columns for each row.) A. B. Your SAI enjoys Having independence in independence in this this category is needed for Categories of independence category: your SAI to fulfil its mandate and function effectively: To a To some To little To a To To great or extent or no great or some little very extent very extent or no great great extent extent extent a. Constitutional/statutory guarantees of independence b. Functional/operational independence (in SAI work) c. Reporting independence (freedom of reporting) d. Financial independence e. Managerial/administrative independence (Personnel, administration, etc.) 10 APPENDIX B IV. Potential for improvement and suggestions for change 1. For each of the five categories of independence listed in the matrix you have just completed in Section III, please indicate whether there are any specific areas where you believe there is significant room for improvement in your SAI. (Check one box in each row.) Room for improvement? Categories of independence: No Yes a. Constitutional/statutory guarantees of independence b. Functional/operational independence c. Reporting independence d. Financial independence e. Managerial/administrative independence 2. How likely is it that your SAI will experience any significant improvements in the next five years in each of these five categories of independence? (Check one box in each row.) Likelihood of experiencing significant Categories of independence improvements in the next five years: Likely As likely as Unlikely unlikely a. Constitutional/statutory guarantees of independence b. Functional/operational independence c. Reporting independence d. Financial independence e. Managerial/administrative independence 11 APPENDIX B 3. What actions, if any, are currently planned which may, in your opinion, realistically improve the overall degree of independence of your SAI over the next five years or so? (Please describe up to 4 different actions below.) Action a. b. c. d. 4. To what extent is each of the following factors a significant obstacle to the achievement of a realistic level of independence in your SAI? (Check one box in each row.) Factor Very great Some Little or or great extent no extent extent a. Constitutional/statutory issues b. Political constraints c. Lack of resources (monetary, human, material) d. Resistance from audited entities e. Other - specify: 12 APPENDIX B 5. What actions, if any, could be taken by each of the following parties to increase the level of independence in your SAI? (Describe possible actions, or write “none” in each box.) Party Possible actions a. By your SAI b. By INTOSAI c. By the government of your country d. By other parties (e.g. donors, etc) – specify: 6. Do you have other specific ideas/suggestions for improving the actual independence of your SAI? If so, please provide them below or on separate sheets of paper. 13 1 APPENDIX C INDEPENDENCE OF SAIs PROJECT Final Task Force Report BIBLIOGRAPHY (Publications and Internet Sites of Interest) 1 APPENDIX C-1 INDEPENDENCE OF SAIs PROJECT Final Task Force Report Literature Search Publications of Interest 2000 New Zealand. Office of the Controller and Auditor-General. Role & function. January 2000 <http://www.oag.govt.nz>. 1999 Australasian Council of Auditors-General. Statement of Principles : Independence of the Auditor-General. 24 August 1999 last update <http://www.acag.org.au/indep297.htm>. Boorman, Jack. Transparency, Standards, and CCL. International Monetary Fund press briefing, Monday, 26 April 1999 <http://www.imf.org/external/np/tr/1999/tr990426.htm>. Flizoit, Stéphanie. Les relations entre les institutions supérieures de contrôle financier et les pouvoirs publics dans les pays de l’Union Europénne. Paris : Université Jean Moulin Lyon III, 1999. L’indépendance des cours des comptes en Europe, 4ème congrès de l’Organisation des institutions supérieurs de contrôle des finances publiques d’Europe (EUROSAI), Paris 31 mai–3 juin 1999.” Revue française d’administration publique 90 (avril-juin 1999). International Monetary Fund. Fiscal Transparency. 1999 last update <http://www.imf.org/external/np/fad/trans/index.htm>. International Monetary Fund. Code of Good Practices on Transparency in Monetary and Financial Policies. 26 September 1999. <http://www.imf.org/external/np/mae/mft/index.htm>. International Monetary Fund. Communiqué of the Interim Committee of the Board of Governors of the International Monetary Fund, 27 April 27 1999 <http://www.imf.org/external/np/cm/1999/042799A.HTM>. 2 APPENDIX C-1 INDEPENDENCE OF SAIs PROJECT Final Task Force Report International Monetary Fund. Communiqué of the Interim Committee of the Board of Governors of the International Monetary Fund, 26 September 1999 <http://www.imf.org/external/np/cm/1999/092699A.HTM>. SADCOSAI. The Blantyre Declaration of the SADCOSAI Congress in Malawi. 1999. Saudi Arabia. General Auditing Bureau. The Independence of SAIs. Working paper. 1999. 1998 British Columbia. Legislative Assembly. Statutory Officers of the British Columbia Legislature : Fundamental Operating Principles and Related Legislation. Vancouver, B.C. : The Office, 1998 <http://www.aud.gov.bc.ca/PUBS/pubs.htm>. Corruption & Integrity Improvement Initiatives in Developing Countries. 1998 <http://magnet.undp.org/Docs/efa/corruption/Corrupti.htm>. Documents. [Theme: Independence of SAIs]. Lisboa EUROSAI Seminar, 24-26 June 1998. Portugal : Tribunal de Contas. Dye, Kenneth M. and Rick Stapenhurst. Pillars of Integrity : The Importance of Supreme Audit Institutions in Curbing Corruption. Washington, D.C.: Economic Development Institute of the World Bank, 1998. <http://www.worldbank.org/wbi/governance/working_papers.htm>. Gray, Cheryl W. and Daniel Kaufmann. “Corruption and Development.” Finance & development (March 1998): 7-10 <http://www.worldbank.org/wbi/governance/working_papers.htm or http://www.worldbank.org/fandd/english/0398/articles/020398.htm>. International Federation of Accountants. Code of Ethics for Professional Accountants. Issued July 1996, revised January 1998 <http://www.ifac.org/StandardsAndGuidance/Ethics/CodeOfEthicsForProfAccnts. html>. 3 APPENDIX C-1 INDEPENDENCE OF SAIs PROJECT Final Task Force Report Kaufmann, Daniel. Challenges in the next stage of anti-corruption. In New perspectives on combating corruption. Washington, D.C. : Transparency International and the Economic Development Institute of the World Bank, 1998. Kaufmann, Daniel. New Frontiers in Diagnosing and Combating Corruption. Prem notes. Public sector 7 (October 1998). 6 p. Kpundeh, Sahr J. Political Will : The Core of Anti-Corruption Reforms. Paper presented at National and International Approaches to Improving Integrity and Transparency in Government, Paris, 15-16 July 1998 <http://www.oecd.org/daf/nocorruption/pdf/KPUNDEH.pdf>. New Zealand. Finance and Expenditure Committee. Inquiry into Audit Office Legislation. David Carter, chairperson, 1998 <http://www.netlink.co.nz/~oag/Reports/FEC/fec_all.html>. 1997 Corruption and Good Governance. New York : Management Development and Governance Division, Bureau for Policy and Programme Support, United Nations Development Programme, 1997. <http://magnet.undp.org/docs/efa/corruption3/corruption3.htm>. Funnell, Warwick. The Curse of Sisyphus : Public Sector Audit Independence in an Age of Economic Rationalism. Australian journal of public administration 56:4 (December 1997): 87-105. Henderson, Hazel. Good Governance and Participatory Development. Paper presented at the International Conference on Governance for Sustainable Growth and Equity, Special plenary session, United Nations, New York, 28-30 July 1997 <http://magnet.undp.org/Docs/speeches/Hender.htm>. International Monetary Fund. Good Governance : The IMF's Role. Washington, D.C. : International Monetary Fund, 1997 <http://www.imf.org/external/pubs/ft/exrp/govern/govern.pdf>. Langseth, Petter and Rick Stapenhurst. National Integrity System Country Studies. Washington, D.C. : Economic Development Institute of the World Bank, 1997 <http://www.worldbank.org/wbi/governance/working_papers.htm>. 4 APPENDIX C-1 INDEPENDENCE OF SAIs PROJECT Final Task Force Report Langseth, Petter. Good Governance in Africa : A Case Study from Uganda. Washington, D.C. : Economic Development Institute of the World Bank, 1997 <http://www.worldbank.org/wbi/governance/working_papers.htm>. Langseth, Petter, Rick Stapenhurst and Jeremy Pope. The Role of a National Integrity System in fighting corruption. Washington, D.C. : Economic Development Institute of the World Bank, 1997 <http://www.worldbank.org/wbi/governance/working_papers.htm>. McCrae, Michael and Henni Vada. Performance Audit Scope and the Independence of the Australian Commonwealth Auditor General. Financial accountability & management 13:3 (August 1997): 203-223. Pollitt, Christopher and Hilkka Summa. Reflexive Watchdogs? How Supreme Audit Institutions Account for Themselves. Public administration 75:2 (summer 1997): 313-336. Richardson, Ruth. Governing Within Limits. Paper presented at the International Conference on Governance for Sustainable Growth and Equity, Ministerial/Senior Officials Forum, Session 1, Re-defining the Frontier of the Public Sector, United Nations, New York, 28-30 July 1997 <http://magnet.undp.org/Docs/speeches/Richard.htm>. U.S. Securities and Exchange Commission. Policy Statement : The Establishment and Improvement of Standards related to Auditor Independence. 09/19/97 last update. Release no.33-7507 <http://www.sec.gov/rules/concept/33- 7507.htm>. 1996 Australia. Parliament. Joint Committee of Public Accounts. Guarding the Independence of the Auditor-General. Canberra : Australian Government Publishing Service, 1996. Report ; 346. Barrett, P. Some Thoughts about the Roles, Responsibilities and Future Scope of Auditors-General. Australian journal of public administration 55:4 (December 1996): 137-146. 5 APPENDIX C-1 INDEPENDENCE OF SAIs PROJECT Final Task Force Report Funnell, Warwick. Executive Encroachments on the Independence of the Commonwealth Auditor-General. Australian journal of public administration 55:4 (December 1996): 109-123. Pope, Jeremy, ed. National Integrity Systems : the TI source book. September 18, 1996 last update <http://www.transparency.de/documents/source- book/index.html>. Spending Public Money: Governance and Audit Issues. London, UK : Dept. of the Treasury, 1996. Cm 3179. State Audit in the European Union. [London, Eng.] : National Audit Office, c1996 <http://www.nao.gov.uk/publications/state_audit/state.htm>. Taylor, J. What Should be the Role of the Auditor-General in the Context of Managerialist Government and New Public Management? Australian Journal of Public Administration 55:4 (December 1996): 147-156. Washington, Sally and Elia Armstrong. Ethics in the Public Service: Current Issues and Practice. Paris : Organisation for Economic Co-operation and Development, 1996. Public Management Occasional Papers ; no. 14 <http://www.oecd.org/puma/gvrnance/ethics/pubs/eip96>. 1995 Gaudette, Yvan. The SAI : Building Capacity for Good Governance. Paper presented to the Conference for Supreme Audit Institutions and International Donors in Latin America and the Caribbean, San José, Costa Rica, May 8-11, 1995 - La EFS fortalecimiento de la capacidad para un buen gobierno. Conferencia para entidades fiscalizadoras superiores y los donantes internacionales en América Latina y el Caribe, San José, Costa Rica, 8-11 de Mayo de 1995. Hengstschläger, Johannes und Janko Andreas. Der Rechnungshof – Organ des Nationalrates oder Instrument der Opposition? in 75 Jahre Bundesverfassung. [Wien?] : Österreichische Parlamentarische Gesellschaft (Hrsg.), 1995. 6 APPENDIX C-1 INDEPENDENCE OF SAIs PROJECT Final Task Force Report International Organization of Supreme Audit Institutions. Auditing Standards Committee. Auditing standards. Sections 53-81. [Washington?] : INTOSAI, 1995 <http://www.intosai.org/3_AUDSTe.html>. Sahgal, Vinod. Strengthening Legislative Audit Institutions in Developing Countries: A Catalyst to Enhance Good Governance. Ottawa: INTOSAI Development Initiative, 1995. Wilkins, Peter. Performing Auditors? Assessing and Reporting the Performance of National Audit Offices : aThree-Country Comparison. Australian Journal of Public Administration 54:4 (December 1995): 421-430. 1994 The Importance of the Role of Independent Auditors-General. Melbourne : Australian Society of CPAs, 1994. Discussion paper ; 8. Mazur, Jacek. The SAI's Right to Select Audit Topics. International Journal of Government Auditing 21:2 (April 1994): 13-15. Tuionetoa, Pohiva. Public Accountability : Tongan People Perceptions of Independent Auditor General. [Melbourne, Aust.] : Syme Dept. of Accounting, Faculty of Business & Economics, Monash University, 1994. 1993 Fiedler, Franz. Staatspolitische Funktionen des Rechnungshofes. Schriftenreihe des Rechnungshofes 1993, 6. [Wien: Rechnungshof, 1993]. XIV INCOSAI: Cooperation Produces Results. International Journal of Government Auditing 20:1 (January 1993): 2-21. 7 APPENDIX C-1 INDEPENDENCE OF SAIs PROJECT Final Task Force Report 1992 Australia. Parliament. Joint Committee of Public Accounts. Review of the Independent Auditor : Watching the Watchdog. Canberra : Australian Government Publishing Service, c1992. Report ; 319. Fundamental Audit Challenges. International Journal of Government Auditing 19:2 (April 1992): 1. 1991 Mair, Burkhard. Die Stellung des Rechnungshofes im Staatsgefüge Österreichs unter Besonderer Berücksichtigung des Bundesstaatlichen Prinzipes. Wien : Eigenverl, 1991. Univ., Innsbruck, Dipl. Arb., 1991. Western Australia. Office of the Auditor General. Recommendations on Independence of the Auditor General and the Office of the Auditor General. May 1991. 1990 Western Australia. Office of the Auditor General. Independence of the Auditor General and the Office of the Auditor General . September 1990. 1989 Uher, Thomas. Die Verantwortlichkeit des Präsidenten des Rechnungshofes und seiner Mitarbeiter in Staatsrechtlicher und Zivilrechtlicher Sicht. Wien : Eigenverl, 1989. Univ., Wien, Diss., 1989. 8 APPENDIX C-1 INDEPENDENCE OF SAIs PROJECT Final Task Force Report 1988 Asian Organization of Supreme Audit Institutions. The Bali Declaration on the Role of Audit in Promoting Reforms for Efficient Public Administration and Corporate Management. Bali : Secretariat General of Bepeka R.I., 1988. Dewar, David A. Independence of State Audit. International journal of government auditing 15:3 (July 1988): 10-12. 1982 International Organization of Supreme Audit Institutions. Lima Declaration of Guidelines on Auditing Precepts, October 1977. Vienna, Austria : INTOSAI General Secretariat <http://www.intosai.org/2_LIMADE.html>. 1975 Independence and the Government Auditor.” International Journal of Government Auditing 2:1 (January 1975): 1. 1 APPENDIX C-2 INDEPENDENCE OF SAIS REPORT Final Task Force Report Literature Search Internet Sites of Interest African Development Bank http://www.imf.org/external/np/sec/decdo/afdb.htm African Development Bank Group http://www.afdb.org American Institute of Certified Public Accountants (AICPA) http://www.aicpa.org/index.htm Asian Development Bank http://www.adb.org Bank of Canada http://www.bank-banque-canada.ca/english/intro-e.htm Canadian Institute of Chartered Accountants http://www.cica.ca/cica/cicawebsite.nsf/public/homepage Canadian International Development Agency http://www.acdi-cida.gc.ca/index.htm Caribbean Development Bank http://www.imf.org/external/np/sec/decdo/cdb.htm European Bank for Reconstruction and Development http://www.ebrd.com/english/index.htm FinanceNet : financial management in government http://www.financenet.gov FinanceNet. International financial management associations / organizations http://www.financenet.gov/financenet/inter/int_org.htm Governance Institute http://www.governanceinstitute.com/index.html 2 APPENDIX C-2 INDEPENDENCE OF SAIS REPORT Final Task Force Report Literature Search Governmental Accounting Standards Board. Links to useful and relevant web sites http://www.rutgers.edu/Accounting/raw/gasb/rlinks/index.html Institute of Chartered Accountants in England and Wales http://www.icaew.co.uk Institute of Chartered Accountants of Ontario http://www.icao.on.ca Institute of Chartered Accountants of Ontario. Inquiries about CA members and students http://www.icao.on.ca/public/public/inquiry.html Inter-American Development Bank http://www.iadb.org/exr/english/index_english.htm International Federation of Accountants http://www.ifac.org/home.html International Finance Corporation http://www.ifc.org International Fund for Agricultural Development http://www.ifad.org/home.html International Monetary Fund http://www.imf.org International Monetary Fund. Directory of Economic, Commodity and Development Organizations. http://www.imf.org/external/np/sec/decdo/contents.htm Korea Development Bank http://www.kdb.co.kr 3 APPENDIX C-2 INDEPENDENCE OF SAIS REPORT Final Task Force Report Literature Search Microcredit Summit. Council of International Financial Institutions http://www.microcreditsummit.org/campaigns/ifi.htm Nanyang Technological University Library. Accounting and auditing resources http://www.ntu.edu.sg/library/acc/acct.htm National and International Approaches to Improve Integrity and Transparency in Government, OECD-OSCE Conference Paris, 15/16 July 1998 http://www.oecd.org/daf/nocorruption/pariscon.htm Office of the Auditor General of Canada and the Commissioner of the Environment and Sustainable Development http://www.oag-bvg.gc.ca Organisation for Economic Co-operation and Development http://www.oecd.org South Pacific Forum Secretariat (Password required) http://www.forumsec.org.fj/default1.htm Standards Council of Canada http://www.scc.ca Transparency International http://www.transparency.de/mission.html United Kingdom Open Government http://www.open.gov.uk United Nations http://www.un.org United Nations Development Programme http://www.undp.org/indexalt.html 4 APPENDIX C-2 INDEPENDENCE OF SAIS REPORT Final Task Force Report Literature Search United Nations High Commissioner for Human Rights, International Human Rights Instruments http://www.unhchr.ch/html/intlinst.htm United Nations System of Organizations http://www.unsystem.org World Bank http://www.ciesin.org/datasets/wbank/WBank-home.html World Bank Group http://www.worldbank.org APPENDIX D INDEPENDENCE OF SAIs PROJECT Final Task Force Report CONSULTATIONS AND MEETINGS REPORTS 1 APPENDIX D-1 INDEPENDENCE OF SAIs PROJECT Final Task Force Report Consultations with Selected Groups of SAIs Consultations were held with selected groups of SAIs to complement the survey results. These consultations were scheduled to coincide with already planned IDI activities, such as regional group meetings, regional committee meetings and regional group Board meetings (see section 8 of Task Force Report for more detailed information). The results of these consultations are presented in the form of comments and suggestions made by individual SAIs in the course of consultation meetings. General Comments - Independence is the cornerstone of SAI practice but it must be coupled with sufficient resources, which is often not the case. - Some SAIs see the Independence project as the catalyst for a “quiet revolution” of legislative auditing. - All SAIs are very supportive of the independence project. They expect tangible results from its implementation. - SAIs should submit the final Task Force report to the legislative and executive branches of their governments - SAIs should make full use of opportunities resulting from public-sector reforms as they pursue reasonable independence for their offices. The existence or threat of an economic crisis is also an argument to be used for better accountability and transparency, including better public-sector auditing. - Generally, SAIs feel that INTOSAI should play a proactive, advocacy role and should speak out at large for the INTOSAI community on the subject of independence. - INTOSAI and individual SAIs should establish and maintain contacts with advocacy organisations such as Transparency International and the Institute for Governance (see Appendix C). - Generally, SAIs feel that donor influence is very important and that donors should be encouraged to take steps to ensure the presence of adequate public-sector auditing in recipient countries. - The Task Force recommendations should be practical, realistic and of a long- term, sustainable nature. 2 APPENDIX D-1 INDEPENDENCE OF SAIs PROJECT Final Task Force Report Consultations with Selected Groups of SAIs Specific Comments SAI Mandate - For many SAIs, the most serious obstacles to the fulfilment of their audit mandates are the lack of adequate financial and human resources and the lack of autonomy. Constitutional Guarantees of Independence - De facto guarantees are often quite different from de jure guarantees. Legal texts are often not fully “operationalised” or are ignored in whole or in part in certain countries. - Heads of SAIs should have a minimum term of office of about 5 years to enable them to fully address and pursue important issues during their tenure. But life appointments are not necessarily beneficial to SAIs. A term of 10 to 15 years seems to be favoured. - Heads of SAIs should be appointed on the basis of the relevancy of their competence and experience. - Personal protection (in law) is necessary for Heads of SAIs, and objective criteria for removal from office should be embedded in law. - In a number of countries there is no functioning or effective legislature, so all powers reside with the Head of State. SAI Accounts and Performance Reviews - SAIs must do their utmost to build up their credibility in the eyes of their respective governments and of the public. - SAIs should establish a formal process to ensure that their accounts and performance are subjected to independent reviews comparable to those imposed on other public sector bodies 3 APPENDIX D-1 INDEPENDENCE OF SAIs PROJECT Final Task Force Report Consultations with Selected Groups of SAIs Freedom of Reporting - In many countries, only the annual report (basically an activity report) can be released by the SAI. Audit reports proper cannot be released without prior authorisation - Where it does not exist, there should be a law compelling the SAI to table its reports in the legislature. - In many countries, there is no formal and effective scrutiny or follow-up mechanism (such as a Public Accounts Committee) to ensure that the observations and recommendations contained in the SAI’s report are taken into account. Financial Autonomy - In many countries, despite constitutional guarantees and because of a lack of competent research staff, legislatures turn to the executive branch of government to carry out reviews of budgetary estimates of the SAI - A great number of SAIs have insufficient financial resources. Managerial/Administrative Autonomy - Autonomy in personnel management is extremely important. It is lacking in many SAIs - In many countries, decisions regarding the organisational structure of the SAI are tied to a budgetary process that is subject to executive review - Independence in this area is also severely jeopardised in many SAIs by insufficient human resources. 1 APPENDIX D-2 INDEPENDENCE OF SAIs PROJECT Final Task Force Report Meeting with International Agencies Meetings with national technical co-operation agencies and international donor agencies were held to inform them about the independence project and in turn become familiar with their policy objectives and their current programs and practices in the areas of public-sector accountability and transparency (see Section 8 of this report for additional details). The outcome of these meetings is presented hereafter in the form or key points made by staff present at the meetings. These were not cleared with the organisations concerned, and should not be construed as official statements. National Technical Co-operation Agencies 1. Agencies are currently promoting good governance and the establishment of democratic institutions (including SAIs). 2. Public finance management is a priority in fighting corruption and poverty. 3. Generally, assistance is given through national institutions in the form of national budget support and through sector programs. 4. Agencies are generally not happy about the quality of governance, including the degree of transparency and accountability, or about the quality of reporting by beneficiaries on aid projects. 5. Agencies are also trying to improve the quality of statistical data that recipient countries produce. The issue of proper records management is often neglected in the design of assistance projects. 6. Donors need to address governance issues as part of a co-ordinated and comprehensive approach. 7. Quality public-sector auditing is an important component of good governance. SAIs can play an important role in the pursuit of accountability and transparency as well as in the fight against corruption. 8. Some agencies support some SAIs directly and could make the issue of independence a key part of their dialogue with recipient countries (Note that, for example, incoming EU member nations are required to demonstrate that they have an independent national public-sector auditor). 9. There is a crucial need for scrutiny and follow-up mechanisms, to ensure that SAI reports are taken into account and that recommendations are followed 2 APPENDIX D-2 INDEPENDENCE OF SAIs PROJECT Final Task Force Report Meeting with International Agencies 10. The recommendations in the Task Force report should address all key issues of SAI effectiveness and institutional strengthening (proper mandate, proper resourcing, technical competence, adequate tools, etc.), in addition to the issue of independence. Issuing standards is not enough: measures to ensure compliance are needed. 11. The Task Force recommendations should be practical, so that donors can easily identify areas where they can support INTOSAI/SAI undertakings. 12. All agencies are very much interested in the independence project, and are looking forward to a copy of the report. They will support its recommendations to the extent possible. International Financial Institutions General comments 1. International Financial Institutions (IFIs) are very interested in and supportive of the independence project. 2. The independence issue must be clearly identified as a distinct element in the implementation of donor policy objectives. This project is a practical application of those objectives 3. Funding could be made available for this project and/or the implementation of its recommendations 4. Strong audit requires a strong legislature. IFIs are promoting the latter and SAI independence is a complementary element. Specific comments Asian Development Bank 1. The possibility of specifically including the SAI independence issue in an upcoming Executive Directors donor report (in a chapter on governance) will be considered seriously. 3 APPENDIX D-2 INDEPENDENCE OF SAIs PROJECT Final Task Force Report Meeting with International Agencies 2. The possibility of raising the issue of SAI independence at an upcoming APEC meeting on accounting initiatives (Economic Committee of APEC forum) will be considered seriously. The forum was established by Heads of State, and they are serious about bringing about change: reforms are taking place in Vanuatu, Fiji, Solomon, PNG and other countries. INTOSAI should contact the Canadian member of this group. 3. The adoption of eight principles of accountability including two specific references to the need for adequate public-sector audit (principles 2 and 7) by the Economic Ministers of the South Pacific is a step in the right direction (see bibliography in Appendix C). African Development Bank 1. The Bank has a policy on governance that clearly underlines the importance of an independent and well-resourced national public-sector auditing institution. 2. The Bank now has technical assistance funds for regional and bilateral projects that meet the objectives of that policy. 3. The Bank will encourage its regional directors to establish contacts with AFROSAI and SAIs of that region. Inter-American Development Bank 1. The Bank is supportive of INTOSAI’s project and is looking forward to receiving a copy of the Task Force report to determine how best to support its recommendations. World Bank 1. The Bank is currently promoting both private-sector and public-sector governance. In doing so, it has identified a number of elements needed to ensure a sound public-sector governance “architecture”. This architecture includes, among other things, the existence of proper financial management and controls, quality accounting and setting of auditing standards, compliance mechanisms and proper reporting, to ensure that public funds are used and managed properly. The Bank will use these elements as criteria for assessing the situation in beneficiary countries. 4 APPENDIX D-2 INDEPENDENCE OF SAIs PROJECT Final Task Force Report Meeting with International Agencies 2. Implementing such an architecture implies the existence of, among other things, an adequately professional, independent and resourced SAI. 3. The Bank is interested in discussing these and other related issues with INTOSAI in due time. United Nations Development Programme (South Pacific regional office) 1. The UNDP is very much involved in governance issues and will consider including the issue of SAI independence in upcoming conferences with ministers and parliamentarians of island states 2. The UNDP would consider co-funding related projects. APPENDIX E INDEPENDENCE OF SAIs PROJECT Final Task Force Report OUTCOME OF LISBON SEMINAR (1998) AND IVTH EUROSAI CONGRESS (1999) 1 APPENDIX E INDEPENDENCE OF SAIs PROJECT Final Task Force Report Outcome of the Lisbon Seminar (1998) and IVth EUROSAI Congress (1999) OUTCOME OF THE LISBON SEMINAR (1998) In June 1998, EUROSAI held a seminar in Lisbon, Portugal, on The Independence of SAIs in relation to the Legislative, Executive and Judicial Branches of Governments. The purpose of this seminar was to identify key independence issues to be addressed at the subsequent IVth EUROSAI congress, in Paris, in June 1999. The seminar was organised and hosted by the SAI of Portugal. In preparation for the Lisbon Seminar, a survey of European SAIs was conducted by the SAI of Portugal. Out of 39 SAIs surveyed, 32 responded - an 87 percent return rate. The survey was conducted by means of a questionnaire that addressed the following key points: - SAI Organisation - SAI Mandate - Constitutional/Statutory Guarantees of Independence - Functional/Operational Independence - Freedom of Reporting - Financial Autonomy - Managerial/Administrative Autonomy - Co-operation with Internal Control Bodies - Co-operation with the Legislative, Executive and Judicial Branches of Government. The detailed survey results were compiled in a document entitled Basic Report and in a volume entitled The Relations between the SAIs Members of EUROSAI and the Legislative, Executive and Judicial Powers. These two publications can be obtained from the Secretariat of EUROSAI. In summary, the survey indicated: 1. That the SAIs of EUROSAI have, as a rule, their legal basis laid out in the Constitution or in law. 2. That in 56 percent of the cases, the Heads of SAIs are appointed by the legislature. 2 APPENDIX E INDEPENDENCE OF SAIs PROJECT Final Task Force Report Outcome of the Lisbon Seminar (1998) and IVth EUROSAI Congress (1999) 3. That a large number of SAIs focus their work on the legality, regularity and value for money of the operations of audited organizations. 4. In most cases, SAIs develop and decide upon their own program of activities. 5. The main addressees of the reports of the SAIs are the legislatures. 6. In 88 percent of the cases, the budgets of the SAIs are approved by the legislature and, in most cases, SAI activities are not subject to financial resource constraints. 7. Co-operation with the Legislative Branch of government is significant. 8. A substantial number of SAIs co-operate with the Executive Branch of government through the issue of advice, recommendations and reports; consultancy in the field of public finance; and by carrying out “extraordinary” audits. 9. One of the main preoccupations of SAIs seems to be that of independence from political powers. 10. SAIs must assume the “control” (audit) of public finance as a priority issue in all societies. The seminar held following that survey led to the following “Lisbon Declaration”: 1. The capacity for independent action is an essential guarantee for the proper functioning of SAIs. This capacity should mean that, among other things, it should be impossible to remove SAI heads and members, irrespective of whether they have a mandate for life or a temporary mandate, and that self- regulation, including sufficient financial means, should, among other issues, be guaranteed in SAIs’ respective constitutions and laws and be observed by the Legislative Powers. 2. In relation to the Executive Powers, it is essential to ensure favourable conditions for self-regulation by SAIs in the management of both human and financial resources. In particular, this applies to the determination of activities to be developed (framework, schedule, methods), the decision as to the entities to be audited, the co-operation and relations with internal control bodies, the duty of audited entities to collaborate with SAIs, the recognition of auditees responsibilities, where appropriate, and the establishment of the principle of the “contradictory”, or similar, procedure. 3. In relation to the Judicial Power, it is considered desirable, where appropriate, that SAIs and the organs of Judicial Power be given a legal framework governing the co-ordination of their respective powers. 3 APPENDIX E INDEPENDENCE OF SAIs PROJECT Final Task Force Report Outcome of the Lisbon Seminar (1998) and IVth EUROSAI Congress (1999) OUTCOME OF THE EUROSAI IVth CONGRESS (1999) This congress was held in Paris, France, in June 1999. Its main theme was “The Independence of SAIs in Europe”. Key topics discussed during the congress included the following: 1. The independence of public organs 2. Relationships with legislative, executive and judicial branches of government 3. The means to attain independence 4. Relations with media 5. The accountability of SAIs 6. Independence and freedom The main conclusions reached at the end of the congress were as follows: In the INTOSAI Lima Declaration of Guidelines on Auditing Precepts (1977), the SAIs have asserted their attachment to independence, which is an indispensable condition of efficient audit of public funds management. Since then, social, technological and political evolutions have been numerous. In particular, the opening of central and eastern European countries to democracy has renewed the demand for independence and transparency. Decentralisation, privatisation and deregulation have changed public management. This is why EUROSAI members, after having convened in the Lisbon seminar (1998) and after their congress in Paris (1999), reaffirm that their independence today relies on the following principles: 1. SAIs ought to have the resources they need to be fully independent. The independence of SAIs should be based on constitutional or legislative provisions, which enshrine their institutional status within public authorities. Independence relies also on the guarantees extended to heads of SAIs, enabling them to carry out their duties in a sufficiently stable environment. Legal protection against pressure from outside and clearly defined investigative powers are needed in order to safeguard auditors’ independence. 4 APPENDIX E INDEPENDENCE OF SAIs PROJECT Final Task Force Report Outcome of the Lisbon Seminar (1998) and IVth EUROSAI Congress (1999) SAIs should have at their disposal sufficient resources to fulfil their tasks. Budgetary autonomy is another factor that can foster genuine independence. Finally, to be fully independent, SAIs must be free to plan and conduct audits as they see fit. 2. Independence goes hand in hand with accountability, which is provided for in a variety of ways, depending on a country’s institutional framework. SAIs ought to abide by the same rules they recommend others to enforce. Hence, they ought to establish internal audit procedures to ensure the effectiveness of their own work. Internal audits should be structured so that they have the means to provide SAI heads and senior officers with a clear picture of how their institution is performing. These internal audits should provide regular monitoring of operational indicators and conduct assessments of audit results. SAIs increasingly submit themselves to external audits. This procedure offers the public a guarantee that SAIs follow sound operational practices, but it should not challenge their independence. By publishing their budget performance reports and reports of their audit activities, and by submitting them to Parliament, SAIs should provide the highest degree of transparency for the way they use available resources and the results they have achieved. 3. Relations with the media are another indicator of the independence of SAIs. The freedom of SAIs to define their own communication policy toward the media and the public within existing legal and regulatory frameworks is an essential component of their independence and effectiveness. They should make sure that their communication gives a fair and unbiased account of their work and does not give rise to pointless controversy. Except in those cases where disclosure is compulsory pursuant to legal or constitutional provisions, this freedom includes the possibility of deciding whether to make a report publicly available. The same attitude can apply to the content, medium, format, date, periodicity and channels of disclosure. 5 APPENDIX E INDEPENDENCE OF SAIs PROJECT Final Task Force Report Outcome of the Lisbon Seminar (1998) and IVth EUROSAI Congress (1999) Transparency toward the audited body is of the essence. It has to be conveyed either through a process where facts are agreed upon with audited bodies, and/or through public access to audited bodies’ reactions, possibly by publishing them alongside SAI reports, so that the public gets full, fair and balanced information. The public must always have direct access, with copies available, to reports the SAI has decided to disclose. Reports should be made available in a variety of media, including Web sites.
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