1. Session 4, Group 2: Data completeness and reliability - the role of Supreme Audit Institutions (SAIs) in auditing the extractive industries and how to rely on their work Trygve Christiansen, Office of the Auditor General of Norway
28 November 2017

2. Supreme Audit Institutions
The highest Audit Institution of a country
Oversees the management of public finances, including government revenue from extractive industries
Independent and professional

3. The accountability chain

4. Three types of audit Financial audit Compliance audit
Performance audit

5. Audits along the value chain – some examples

6. Contracts and licenses
Tanzania, National Audit Office 2017
2017 performance audit on process of issuing licenses for natural gas exploration:
Findings:
Outdated legislation does not cover the process of issuing exploration blocks to oil and gas companies
No written procedures or guidelines

7. Production
Loss of revenue due to incorrect measurement A real risk! USA Audit Office (2008) India Audit Office (2004)
Failure to control production facilities and metering equipment
= 10,4 mill USD
(from one pipeline!)
Source: Office of the Auditor General India Audit Report 2004

8. Revenue collection
Example, Niger (2010): «- de faire les rapprochements périodiques entre les différents acteurs d’exécution des recettes minières et pétrolières » Failure to reconcile government revenue figures between the revenue authority and the Ministry of Mines and Energy

9. Revenue collection Revenue collection Zambia:
Mineral royalty tax calculation: production volume*copper price*royalty tax %
Risk: Under-reporting of production volumes results in less mineral royalty tax
Audit result (2016 audit report):
- Ministry of Mines does not receive production returns from all companies
- Mineral royalty tax calculated based on mining companies self-declaration
- Ministry of Mines does not share production volume reports with Zambia Revenue Authority
- Ministry of Mines does not carry out inspection on exit points

10. Revenue collection Kenya: IT Audit of the accounting system, IFMIS
Used to record government revenue, including extractive industries revenue

11. Revenue allocation Example: Ghana Audit Service
Ghana stabilization fund
Because of drop in oil prices
the fund is being emptied
Government’s projected revenue reduced by 64 %

12. Social and economic contribution
Example, Uganda (2015)
Audit of local content
Failure to use local suppliers
Lack of policy and plans to include Ugandans in managerial positions and as key staff

13. Lesson learned?
SAIs are in a unique position to audit the whole extractive industries value chain
Access to information
Independent
Cour de Comptes vs Inspection generale des finances

14. Learn more by visiting:
INTOSAI Working Group on Audit of Extractive Industries SAIs working together to increase transparency and accountability in the EI sector Many examples of audit reports on the value chain

16. International standards of Supreme Audit Institutions (ISSAIs)
Internationally recognized auditing standards for public auditing
Developed and maintained by the International Organisation for Supreme Audit Institutions (INTOSAI)
Applying the ISSAIs is the best way to ensure quality of audits

17. How to rely on the work of SAIs - measure how SAIs are complying with the international standards
Sources of verification:
Supreme Audit Institution Performance Measurement Framework (SAI PMF)
Public Expenditure and Financial Accountability (PEFA)
Indicators 30 and 31

18. SAI PMF assessment SAIs are assessed on a number of indicators
Quality of audit work is assessed and scored;
0-4
The framework also
includes cour de comptes
Domain A
SAI Reporting Score
SAI-1
Financial Audit Results 1
SAI-2
Compliance Audit Results
SAI-3
Performance Audit Results 2
SAI-4
Judgment Results 3
Applying the framework enables you to have an opinion on whether the independent assessor (the SAI) conforms with the requirements in 4.9 of the EITI standard

19. Challenges facing SAIs
Lack of independence:
27 July 2017
Former finance minister says: «Its a political decision. Chiri has been causing pain in government»

20. Challenges facing SAIs
Poor financial record management in government Lack of funding of SAIs

21. What is the situation in Francophone Africa
What is the situation in Francophone Africa? How can we rely on the work of SAIs in the EITI reconciliation process?