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 The World Bank, April 8-9, 2003

Budget Execution, Public Expenditure and Financial Accountability: A 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 IFAC’s International Accounting Standards or national equivalent) Formally apply the INTOSAI Auditing Standards for compliance, financial and performance audits - the most advanced apply IFAC’s International Standards on Auditing for its financial audits/ audits of financial statements The World Bank, April 8-9, 2003

Weak control environments (generally in ECA) 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) The World Bank, April 8-9, 2003

Budget Execution, Public Expenditure and Financial Accountability: C 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 SAI’s management (INTOSAI, IFAC and EU Guidelines) and addresses the concerns of the SAI’s 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 SAI’s 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 The World Bank, April 8-9, 2003