successes and challenges of the latvian state audit office, marita salgrave, council member, state...
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Presentation made by Marita Salgrave, Council Member, State Audit Office of Latvia, at the regional conference for Supreme Audit Institutions of European Neighbourhood South countries, co-organised by the Algerian Court of Accounts and SIGMA in Algiers, 16-17 December 2014.TRANSCRIPT
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REGIONAL CONFERENCE FOR
SUPREME AUDIT INSTITUTIONS OF EUROPEAN NEIGHBOURHOOD SOUTH COUNTRIES
Making a difference to the lives of citizens: a succesful transformation
process – the Latvian experience
Marita Salgrave, Council Member, State Audit Office, Republic of Latvia
Algiers 16-17 December 2014
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Contents
1) Supreme Audit Institution (SAI), Republic of Latvia – short introduction
2) Continuous change of a SAI to “make difference” and stay relevant: Phase 1: Transition from “inspection” to “audit” type of institution Phase 2: Further improvement and innovative implementation of ISSAI 12
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Who we are and where we are?
Republic of Latvia
Northern Europe, Eastern coast of the Baltic Sea
One of the three Baltic states
Member state of the European Union
Capital: Riga
Population: 2,013 million
Territory: 64 000 m2
Language: Latvian
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Supreme Audit Institution (State Audit Office, Republic of Latvia)
State Audit Office (SAO) is an independent, collegial,
supreme audit institution in the Republic of Latvia Auditor General and Members of Council are elected
by the Parliament for a definite period, they can be removed from the post only in case of court verdict
SAO mandate and proceedings: Law on the State Audit Office
Extract from the Constitution of the Republic of Latvia
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SAO audit scope Revenues, expenditure and property of State or local
government institutions (except Parliament)
Revenues, expenditure and property of public and private companies, where State and local governments own shares
Funds of European Union and other international organisations, which are included in State or local government budgets
Extract from the Law on the State Audit Office
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SAO mandate
SAO performs (1) financial audits, (2) compliance
audits and (3) performance audits
Annual financial audits – mandatory, while compliance and performance audits – based on risk assessment and depending on the resources available
Audits are performed in compliance with International Auditing Standards ISSAI and INTOSAI GOV
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Financial audits Annual opinions on accuracy of annual statements of
ministries and other central state institutions (by April 30)
Annual opinion on accuracy of the Consolidated Annual Statement on implementation of the State and municipal budgets, revenues, asset and debt management (by September 15)
28 financial audits were performed in 2013
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Compliance and performance audits SAO is independent in defining
• audit topic • audit scope • audit type and • audit period
Consequently - no influence from the side of
Parliament and Government 29 compliance / performance audit reports were issued
in 2013
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Supreme Audit Institutions – continuous change to “make a difference” and stay relevant
Phase 1: SAO - transition from “inspection” to “audit” type institution
Phase 2: SAO – further improvement and
innovative implementation of ISSAI 12
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Phase 1 Transition from “inspection” to “audit” type
institution 1992 – 2002: SAO as an “inspection” – type
institution, following just some international auditing concepts
2002 – 2004: (European Union pre-accession period): SAO starts to transform into IAS compliant institution
2005 - ~2010: transition process from “inspection” to “audit” institution fully finalized
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Phase 1 Transition from “inspection” to “audit” type
institution
Audit Control
Planning to get comprehensive
understanding of business and
identify risky areas
No planning to understand
business and risky areas
Audit work directed to cover areas
of high and medium risks
Audit work could be performed
within non-risky areas and is of an
incidental approach
Tends to create good
communication with all
management levels and staff
within audited body
Limited communication with
audited body
Comprehensive results of audit
(often - system audits)
Limited results of audit (often a
stand-alone transaction)
Time and resource consuming,
especially during first years
Less resource and time consuming
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Phase 1 Transition from “inspection” to “audit” type
institution
How to start?
Scrupulous planning & organization of the work
Continuous involvement and supervision by senior management
Creating favourable control environment (tone on the top)
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Phase 1 Transition from “inspection” to “audit” type
institution - approach
Planning: • SAO Strategic Development Plan • Annual plan • Individual objectives for staff members
Organization:
• Processes • Regulations • Following deadlines
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Phase 1 Transition from “inspection” to “audit” type
institution – choosing strategy
Strategic development plan determines: long-term strategic development objectives
and
results to achieve
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Phase 1 Transition from “inspection” to “audit” type
institution – specifying strategy The Latvian SAO defined three strategic development areas: Improvement of the audit work
Development of the SAO resources (competent
personnel, infrastructure, supporting tools, etc.)
Strengthening communication and cooperation activities
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Phase 1 Transition from “inspection” to “audit” type
institution – defining directions & results Example for defining results for one of strategic areas – “Improvement of the audit work” Audit methodology for financial, compliance,
performance audits complies with the IAS Switch to electronic working documents is
implemented Quality management system is developed and ensures
regular reassessment of processes Teammate software is used in audit work
(documentation of audit work, supervision of recommendations, resource planning, time recording)
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Phase 1 Transition from “inspection” to “audit” type
institution – defining directions & results Example for defining results for one of strategic areas – “Improvement of the audit work” (follow-up)
Data analysis software IDEA is used in audit work
(enabling 100% checks instead of sampling, where appropriate)
Audit topics are identified based on strategic risk assessment
Modifications to legal framework are initiated as a result of audits
Audited entities have implemented at least 75% of recommendations
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Phase 1 Transition from “inspection” to “audit” type
institution – defining Annual Action Plan SAO’s Strategic Development Plan as the basis for SAO’s
Annual Plan (AP)
AP includes annual audit plan and plan of support and development activities
For each activity AP determines: • responsible official • timeline • inputs in man-hours • budget
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Phase 1 Transition from “inspection” to “audit” type
institution – Audit Plan SAO’s Audit Plan as an integral part of the Annual Plan
Tax payers’ interests + strategic risk assessment -
Audit priorities -
Audit topics -
Annual Audit Plan
Annual Plan as the basis for individual objectives of
staff members
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Phase 1 Transition from “inspection” to “audit” type
institution – setting individual objectives for staff members
Annual Plan as the basis for individual objectives of
staff members
Annual objectives of the staff members include individual objectives and outputs for staff members, based on objectives of the particular structural unit
Individual objectives for staff members are: • well defined and achievable • measurable and imposing deadlines • substantial and result-oriented
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Phase 1 Transition from “inspection” to “audit” type
institution – scrutinizing the system
Quality Management system (QMS) as a core to ensure quality and added value
Why did we decide to “go for” QMS? QMS builds quality into the audit process QMS ensures continuous control of audit process from
senior management level to junior auditor, to avoid or minimize negative impact on quality and price of the final product
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Phase 1 Transition from “inspection” to “audit” type
institution – QMS The Latvian SAO decided to apply both: Audit process quality control
• audit process quality control during the audit process performed by audit unit internally (hot review 1)
• audit process quality control after the audit is completed performed by “external” reviewers (cold review)
Quality improvement measures • audit process quality control during the audit
process performed by “external” reviewers (hot review 2)
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Phase 1 Transition from “inspection” to “audit” type
institution – challenges with QMS Advantages and disadvantages of the reviews performed
by “externals” Advantages: adds value and quality straightforward and unlimited exchange of experience learning process for both – auditors from Audit Teams
& auditors - reviewers Disadvantages: very sensitive activity in a small office like ours time consuming – takes time from those who perform
checks as well as from those who are checked
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Phase 2: Supreme Audit Institution – further improvement and innovative implementation of
ISSAI 12
or how the ISSAI 12 principles: (1) strengthening accountability, transparency and
integrity
(2) demonstrating on-going relevance to citizens and
(3) SAI being a model organization
are to be applied by the Latvian SAO in 2014-2017
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Phase 2: Supreme Audit Institution – further improvement and innovative implementation of
ISSAI 12 SAO’s new strategy for 2014-2017 is based on: assessment of implementation of the SAO’s 2010-2013
strategy
results of strategic risk assessment of sectors of national economy
developments within EUROSAI and INTOSAI
the need to address weaknesses identified during PMF «self-assessment» exercise
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Phase 2: Supreme Audit Institution – further improvement and innovative implementation of
ISSAI 12: Strategy for 2014-2017 “Making difference in the lives of citizens” is translated into 2 strategic development directions of the SAO – support to the Parliament and the Government in
enhancement of good governance and
ensuring sustainable development, on-going relevance and increased added value of the SAO
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Phase 2: Supreme Audit Institution – further improvement and innovative implementation of
ISSAI 12: Strategy for 2014-2017
I Support to the Parliament and the Government in
enhancement of good governance – new initiatives
at least 30% of SAO’s resources allocated to performance
audits
financial audits result in 2 opinions – on (1) accuracy of financial statements and on (2) compliance of operations
at least 4 «ad-hoc» audits annually
each of 119 municipalities audited once per 3 years (compliance and/or performance audits)
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Phase 2: Supreme Audit Institution – further improvement and innovative implementation of
ISSAI 12: Strategy for 2014-2017
I Support to the Parliament and the Government in
enhancement of good governance – new initiatives
added value to good governance and financial impact as
audit priorities
Increased involvement of the Parliament in reviewing audit results and recommendations (informative report once a week)
Ministers are regularly met and «motivated»
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Phase 2: Supreme Audit Institution – further improvement and innovative implementation of
ISSAI 12: Strategy for 2014-2017
I Support to the Parliament and the Government in
enhancement of good governance – new initiatives
Cooperation with the Prosecutor’s General Office is
enhanced (public debate regarding the SAO as a Court)
Level of involvement of public in audit planning and execution is increased
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Phase 2: Supreme Audit Institution – further improvement and innovative implementation of
ISSAI 12: Strategy for 2014-2017
II Ensuring sustainable development, on-going
relevance and increased added value of the SAO
new initiatives
Financial impact from SAO’s recommendation
considerably exceeds investments into the SAO (1:5 euro)
Peer–review performed and recommendations implemented (peer-review team: Slovakia, Netherlands, Denmark, Poland, USA SAIs)
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Phase 2: Supreme Audit Institution – further improvement and innovative implementation of
ISSAI 12: Strategy for 2014-2017
II Ensuring sustainable development, on-going
relevance and increased added value of the SAO
new initiatives
Audit methodology updated, based on newly adopted
ISSAIs 100, 200, 300 and 400
SAO – the institution leading adoption and application of INTOSAI public sector standards in Latvia
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Phase 2: Supreme Audit Institution – further improvement and innovative implementation of
ISSAI 12: Strategy for 2014-2017
II Ensuring sustainable development, on-going
relevance and increased added value of the SAO
new initiatives
Involvement of all staff members in discussing strategic
issues
Renumeration policy ensures strict correlation between the salary and the „product“ provided by an individual staff member
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Phase 2: Supreme Audit Institution – further improvement and innovative implementation of
ISSAI 12: Strategy for 2014-2017
II Ensuring sustainable development, on-going
relevance and increased added value of the SAO
new initiatives
Simple, clear and regular SAO «messages» to the public;
more than 50% of society trusts the SAO (“stories”, videos, info graphics, etc.)
Regular visits to regions – meetings with citizens
Pro-active co-operation with media; journalist «round tables»
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Phase 2: Supreme Audit Institution – further improvement and innovative implementation of
ISSAI 12: Strategy for 2014-2017
II Ensuring sustainable development, on-going
relevance and increased added value of the SAO
new initiatives
Proactive use of Facebook, twitter, YouTube
Professional support to SAIs from «acceding» countries or
former SU countries
Providing expertise in capacity building projects financed by the EU
Hosting Contact Committee meeting in 2015
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Is this „a lot“ or
„almost nothing“ in 20 years?
Thank you for attention!
State Audit Office of the Republic of Latvia 50 Skanstes Street, Riga LV-1013
Telephone: +371 7017500 Fax: +371 7017673
E-mail: [email protected] Home page: http://www.lrvk.gov.lv