1. 1 Audit & Legislative Oversight May 25,2005 - SEOUL  Developing Country Perspective  The System- “Westminster”  Holding Executive to Account  Changing Relationships  First Principles of Oversight  Recent Commonwealth Experience: Public Accounts Committees  Good Governance & Information  Way Forward

2. 2 Legislative Control History:  USA : Early 1800 – Appropriations ( GAO)  UK : 1861 – Gladstone – “Closing the loop” (C &AG)  France :1830s – Modern Expenditure Controls ( Court)  Annual Budgets & Supplementaries  Audit: Policing Function – RULES BASED Moving Forward:  From Annual to Medium Term Planning  Nature of control changing –from compliance with rules to results  Budget- from Outlays to Outcomes  From Budget Secrecy to Transparency  From Financial Compliance to Performance or VFM Auditing  From Administrative Control to Management Control  Audit: Standards based tool for Development: Much to offer to the private sector audit & oversight functions  Public & Corporate Governance are brothers not cousins

3. 3 “THE SYSTEM”

4. 4 SWARNAJAYANTI GRAM SWAROZGAR YOJANA (RURAL SELF EMPLOYMENT PROGRAMME – FOR POVERTY ALLEVIATION) Source: CAG Report 2001-02 38 % OF FUNDS WERE SPENT WITHOUT ANY IRREGULARITY ACCOUNTING FOR PUBLIC EXPENDITURE ACCOUNTING FOR PUBLIC EXPENDITURE

5. 5 Holding Executive to Account SIX KEY AREAS  Monies spent for purposes intended  Fair Presentation of Financial Statements  Monitoring and Evaluation  Risk Management  Cost Effective Service Delivery  Openness ( ATI )

6. 6 Changing Relationships  The Three Men in the Boat  Public and Corporate Governance –Expanding Role for Audit Committees  Public & Civil Society: Social Change  Competition: Ombudsmen, Social Audit, Media etc  Contract Appointments in Civil Service  Public and Private Sector Accounting Professions Converging- Common Standards

7. 7 Key Actors and their Relationships WATCHDOGS LEGISLATURE Executive Reports Examines Accountability Relationship

8. 8 External Auditor Examine Executive Board Accountability Reporting Mandate Report Conferred Responsibility Shareholder CORPORATE ACCOUNTABILITY Regulators Civil society

9. 9 Oversight: First Principles  Policy Neutrality  Main Focus: Bureaucracy  Inter-party Co-operation  Unanimity in decisions  Clout  Good Governance = Good Information

10. 10 Recent Experience…1  CPA STUDY: The Overseers –Many Common issues and Challenges –Developing Countries lagging in speed of evolution towards more Openness –Research Capacity Weak –Information Exchange limited –Independence of Auditors ? –Relevance to the Global Development Goals? –Small Countries – distinct challenges

11. 11 Recent Experience……2  Average size of PAC=11 MPs  2/3rds Chair from Opposition  Prime Focus: Public Accounts and Compliance Audit Reports  Reports Generally available to the Public  Gradually - PAC open to the Public/Media  Events discussed often dated -FIFO

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14. 14 Who is normally called as witness?

15. 15 WBI Survey: Success Factors for Oversight Committees  Broad Scope for Inquiry  Power to Select issues w/o Government Direction  Good Audit: Effective Analysis and Reporting on Matters of Public Significance  Solid Technical Support/Experts  Tenure  Open to Public  Effective Follow up

16. 16 What matters most ?  WBI Survey of PACs : Over 90% felt: –Formulate Recommendations and Publish Conclusions –Ability to Investigate all past and present public expenditure –Choose Topics without Government Intervention –Focus on Implementation rather than Policy

17. 17 Practices and Procedures most Important for Success ?  Over 75% felt: –Keeping the transcripts of the meetings –Preparation before Committee meetings –Effective Procedures for Follow up action taken by the Executive –Close working relations with members of all political parties

18. 18 Constraints and Challenges Cultural :  Partisan Climate  Executive Dislike for Legislators  Weak Civil Society/Media  Lack of Ethical Base  Belief: Audit Reporting is the end of the Responsibility  Unduly Adversarial approach to Politics  Ministers on the Oversight Committees Technical:  System design: Performance Indicators & Reporting ?  Dated and/or Immaterial Audit Findings  Audit Reports that focus on “accidents” rather than “road conditions”  Executive Non response  Capacity for Research and Follow Through  Communications Capacity at the SAI  By convention: Team Work discouraged by adversarial environment

19. 19 Some Suggestions  Have Small Committees ( 5-11 members)  Strengthen the Chair: Senior Parliamentarian – fair-minded, visionary and subscribes to Openness as an important value fair-minded, visionary and subscribes to Openness as an important value  Extend Tenure to the term of the Legislature  Give Suo Motu powers to investigate  Call AG too as a witness  Initiate Strategic thinking and planning  Table an Annual Performance Report  Encourage public and media coverage  Harmonize efforts with other Accountability Institutions

20. 20 Conclusions  INTEGRITY : The basic System of audit seems to have survived for 150 years – high degree of integrity.  OPENNESS : Closed Systems may perish in the digital world of Transparency and Contestability – OPEN UP THE SYSTEM  RELEVANCE: The greatest challenge is in maintaining Relevance in a period of rapid technological & social change and devolution – BECOME RELEVANT  BEST PRACTICE : Many developing countries need to catch up with the more advanced democracies – resource based management & accounting ? –MOVE FORWARD INLINE WITH GLOBAL BEST PRACTICE  RESULTS: Common issue: Need to broaden the System to include Performance Indicators, Reporting and Auditing – emphasis on service delivery –BECOME PERFORMANCE ORIENTED  WAY FORWARD : From Accounting for " Cash outlays” to “OUTCOMES” and from Reporting on “ACCIDENTS” to “QUALITY OF ROAD CONDITIONS”

21. 21 Recommendations 1. OVERSEERS: OPENNESS –OPEN LEGISLATIVE COMMITTEE HEARINGS TO THE PUBLIC –DEVELOP A MECHANISM FOR INFORMATION EXCHANGE 2. AUDITORS : CHANGE AGENTS –MOVE FROM RULES BASED AUDIT TO STANDARDS –BROADEN COMPLIANCE BASED AUDIT TO INCLUDE ETHICS & PERFORMANCE –INTERACT REGULARLY WITH CIVIL SOCIETY –AUDIT CONCURRENTLY –REPORT CONSTRUCTIVELY