Budget Execution, Public Expenditure and Financial Accountability

1
Budget Execution, Public Expenditure and
Financial Accountability

• Supreme Audit Institutions
• Johannes Stenbaek Madsen, FMS
• ECSPS
• Basic (empirical) characteristics of SAIs
• Main challenges for SAIs (mainly in ECA)
• Ideas as to how the Bank can assist the continued
  development of SAIs

2
Budget Execution, Public Expenditure and
Financial Accountability A. Basic (empirical)
characteristics of SAIs

• Public external oversight bodies - often with
  independent constitutional status
• Reporting to Parliament thus indirectly part of
  the legislature
• In some cases they also have own judicial powers
  (Courts of Account/Audit)
• Provides discharge on the state budget accounts
  providing independent external assurance to
  Parliament and citizen
• Generally responsible for ex-post financial
  control of legality of the transactions of the
  state a decreasing number of SAIs also do
  ex-ante financial control increasing focus on
  auditing performance aspects and financial
  statements (in accordance with IFACs
  International Accounting Standards or national
  equivalent)
• Formally apply the INTOSAI Auditing Standards for
  compliance, financial and performance audits -
  the most advanced apply IFACs International
  Standards on Auditing for its financial audits/
  audits of financial statements

3
Budget Execution, Public Expenditure and
Financial Accountability B. Main challenges
for SAIs in ECA and elsewhere

• Lack of operational independence, incl. lack of
  financial and law drafting capability (varies in
  ECA)
• Weak control environments (generally in ECA)
• Lack of appreciation of SAI role and function
  among the audited (universal problem)
• Inadequate audit remit/mandate/scope (varies in
  ECA)
• Overemphasis on formality and legality,
  disregarding materiality and the need to add
  value (varies in ECA)
• Weak follow-up mechanisms leading to low
  effectiveness of audits (generally in ECA)
• Lack of appropriately trained staff in
  particular with respect to newly introduced audit
  products, incl. audits of financial statements
  and performance audits (generally in ECA)

4
Budget Execution, Public Expenditure and
Financial Accountability C. Ideas as to how to
assist SAI development

• Make sure assessment framework (e.g. in CFAAs) is
  recognizable to and fully appreciated by the
  SAIs management (INTOSAI, IFAC and EU
  Guidelines) and addresses the concerns of the
  SAIs management
• Make sure to build on and support past or
  on-going assessments and reform work (e.g. SIGMA
  peer reviews and assessments or twinning project
  assessment and technical assistance work in EU
  candidate country SAIs, and bilateral SAI
  projects)
• Promote strategic development approach (e.g. via
  Strategic Development Plan) owned by SAIs
  management
• Collect, analyze and use all available data about
  SAIs in the relevant region for comparison (a lot
  of data exists, e.g. via SAI networks)
• Build on existing SAI networks, e.g. to promote
  (and monitor) application of international
  auditing and accounting standards (ex. EU
  candidate country 11 recommendations)
• Use World Bank reputation to push for dialog with
  Parliaments as well as governments concerning SAI
  role
• Promote, initiate and/or manage peer reviews of
  SAIs