External Audit: Role of GAO and the Supreme Audit Institution Community

External Audit in Public Financial Management

Financial Management Sector Board of the World Bank

Helen Hsing

US General Accounting Office

March 2, 2004

185 member national audit offices dedicated to improving public sector

– Governance

– Public accountability

– Transparency

INTOSAIInternational Organization of Supreme Audit

Institutions

INTOSAI

CommitteesAccounting Internal Control

(USA) (Belgium)

Auditing Privatization

(Sweden) (UK)

IT Program Evaluation

(India) (France)

Environment Public Debt

(Canada) (Mexico)

• Governments and public expectations of governments are changing:– Increasing investor demand for transparency– Global interconnectivity – Transnational security threats– Rapidly evolving available technology– Readily available information– Aging populations– Rising health care costs and budget challenges– Public demand for performance results

The Evolving Role of the SAIs

Essentials for SAI Success

• Clear Mandates

• Independence

• Capacity

• Accountability and Integrity

• Knowledge Sharing

• Adherence to International Standards

Types of AuditsMandated and Performed

• Financial

• Compliance or legislative

• Performance

• Other

0

20

40

60

80

100

120

Mandated Performed

FinancialCompliancePerformanceOther

SAI: Obstacles to Independence

0

10

20

30

40

50

60

70

Legal Political Lack ofResources

Auditee

Very great

SomewhatLittle/no extent

Effective capacity building depends on

Communication

Cooperation

Partnerships

Continuity

Trust

GAO’s Mission• To support the Congress in meeting its

constitutional responsibilities• To help improve the performance and ensure the

accountability of the federal government for the benefit of the American people

According to the Budget and Accounting Act of 1921:

• “. . .to investigate, at the seat of government or elsewhere, all matters relating to the receipt, disbursement, and application of government funds.”

GAO’s Core Values• Accountability

Help the Congress oversee federal programs, policies, and operations to ensure accountability to the American people.

• Integrity Ensure that our work is professional, objective, fact-based, nonpartisan, nonideological, fair, and balanced.

• ReliabilityProvide high-quality, timely, accurate, useful, clear and candid information.

How Does GAO Carry Out Its Mission?

• Oversight Activities– Determining whether government entities are

• carrying out their assigned tasks, • spending funds for intended purposes, and • complying with laws and regulations

• Insight Activities– Determining which programs and policies work and which

don’t– Sharing best practices and benchmarking information

horizontally across government and vertically through different levels of government

How Does GAO Carry Out Its Mission?

• Foresight Activities– Identifying key trends and emerging challenges before

they reach crisis proportions

– Examples: • challenges of an aging population

• changing security threats

• demands of the information age

• complexities of globalization

• evolving governance structures

• long-range fiscal challenges.

How Does GAO Carry Out Its Mission?

• Audits of agency operations• Evaluations of government policies and programs• Investigations of alleged illegal and improper

activities• Issuance of legal decisions and opinions• Establishing Professional Standards

– Government Auditing Standards--the “yellow book”– Internal Control Standards– Accounting standards--participation in Federal Accounting

Standards Advisory Board

GAO’s Independence

• Headed by Comptroller General– Joint selection/appointment process of the

Congress and the President– 15 year term of office– Can only be removed by impeachment

• Reports to the Congress

• Budget determined by Congress– FY 2002 budget is $424.3 million

GAO’s Independence (cont.)

• Access to all government documents guaranteed by law

• Separate personnel system– Staff are career civil servants, not

political appointees

What Did GAO Accomplish in FY 2003?

• GAO testified before Congress 189 times• GAO’s work led to $35.4 billion in direct

financial benefits• In response to GAO’s work, agencies took over

1043 actions to improve government operations or services

• GAO made 2175 recommendations– 82 percent of recommendations made in 1999 were

implemented by 2003

GAO Initiatives to Build Capacity within SAI Community

• Auditor Fellowship Program

• Short-term in-country missions

G A OShort-term In-country Missions

• Ukraine Chamber of Accounts:

- agriculture audit program

• Indonesia Supreme Audit Board:

- banking regulation audits

• Guyana Office of the Auditor General:

- new audit legislation

GAO International Auditor Fellowship Program (IAFP)

Mission 

To strengthen SAIs’ ability to fulfill their missions and to enhance accountability and governance worldwide 

Program Objectives

•     Enhance institutional capacity and individual skills.

•      Foster continuous learning and knowledge sharing.

•      Strengthen institutional relationships and professional networks.

IAFP Components

• Classroom training

• OJT and mentoring

• Field placements

• Follow up assessment and support

• Professional/cultural networking

Selection of SAIs and Fellows

• Developing countries/transitional governments• Auditor General support and commitment• Broad regional representation• Mid-senior level officials• Mid-career

• Creating a critical mass

Invited Fellowship Program Candidates 2004AFROSAIBotswana

Burundi

Ethiopia

Kenya

Malawi

Sierra Leone

Tanzania

Zambia

EUROSAIAlbania

Cyprus

Hungary

Romania (2)

CAROSAIBarbados

Belize

Guyana

St. Vincent & the Grenadines

OLACEFSBrazil

Mexico

Venezuela

SPASAINone

ASOSAIBangladesh

Bhutan

Cambodia (2)

India

Indonesia (2)

Nepal

Sri Lanka

ARABOSAIOman

Yemen

Fellows Program At-a-Glance

• Program initiated in 1979

• 15-20 Fellows per year – 337 graduates from 94 countries

• 15+ graduates are now Ministers, Auditors General, Deputy Auditors General

IAFP: Enhancing Institutional

Capacity•Comprehensive learning program that includes

• classroom instruction

• practical applications

• intergovernmental field experience

• strategy paper and change implementation

• interface with auditees, legislators, media

IAFP Course CurriculaPerformance Auditing

•Approach and methodology selection

•Evidence documentation

•Interviewing skills

•Audit documentation

•Critical thinking

•Internal controls

•Statistical sampling

•Fraud awareness

IAPF Course CurriculaInformation Technology

• IT auditing methodology

• Data communications

Training Transfer and Knowledge Sharing

• Assessing, delivering and evaluating training

• Knowledge management

Strategies for managing change

• Introducing organizational change

Organizational structure and management

IAPF Areas of Focus

Strategy papers for on-the-job application:

• Zambia: Develop and introduce methods for documenting and referencing audit work

• Trinidad & Tobago: Introducing a design matrix for planning and conducting audits

Fellowship Program Strategy Paper Topics

• Internal Control & Auditing Standards• Audit Evidence & Analytical Procedures• Performance Auditing in Healthcare• Application of Statistical Techniques in Performance Audits• Preparing Training Manuals of Information Technology Auditing

Methodology• Parliament – SAI relations• Role and work of economists• Strengthen training capacity• Standardization of audit management process• Environmental auditing

Change

How will you• introduce change?

• deal with opposition?

• overcome obstacles?

• minimize negative influences?

• deal with political and cultural issues?

Opportunities

• Identify countries for strategic partnerships

• Fellowship advisory board

• Fellowship Curriculum Update

• Translation of course materials & manuals

• Fellowship Follow-up in country

• CFAAs

• Knowledge Sharing– Web-based communication tool?

IAFP: Measures of Success•Individual course evaluation

•Participant assessment of content and instruction

•IAFP overall evaluation

•Focus groups

•Evaluation instrument being revised by Applied

Research & Methodology team

•Post-IAFP assessment

•Auditor General and participant feedback

Opportunities & Challenges• Strategic partnerships with donors• Long term technical assistance to sustain capacity• Translation of course materials & manuals• Knowledge sharing

– Web-based communication tool?– Distance learning options?

• Coalition building– Within the SAI– Intergovernmental - within country

• Donor and SAI coordination