THE STATE AUDIT OFFICE OF VIETNAM (SAV)

ByPhan Truong Giang & Le Hoai Nam

State Audit Office of Viet Nam

8/2016

CONTENTS

1. State Audit Office of Vietnam – an Overview

2. Extractive Insductry and Auditing EI: an Overview

3. Policy and Legal Frameworks Approach: Experience and Practices in

Vietnam

Establised in 1994 (history of 22 years)

In 2005, the National Assembly passed the first the State Audit Law

In 2013, the legal status of SAV and the Auditor General was officially

constitutionalized in the Constitution

The SAV is structured in a centralised and unified organizational model which

comprises of central Head Office (8 specilazed Audit Depts) and regional offices

(13 R.Os)

State Audit Office of Vietnam – an Overview

Vision: “Being an accountable, trustworthy, professional andmodernized public financial audit institution that makes importantcontributions to the national industrialization and modernization inline with international practice and standards”.

Mission: “Strengthening the operational capacity, legaleffectiveness, performance quality and efficiency of SAV as auseful tool of the State for verifying and supervising themanagement and use of State budget, money and assets”.

Core Values: “Transparency, Quality, Efficiency, and ContinuouslyValue- added”; Core values of auditors: “Fairness-Integrity-Professionalism-Honesty”.

SAV’s Development Strategy

– Vision, Mission and Core Values

The SAV Development Strategy by 2020

The 2015 State Audit Law (take effect as from 1st January 2016)

SAV’s functions: to assess, certify,

determine and make

recommendations on the management

and use of public finance and public

assets

SAV’sTypes of Audit: financial

audit, compliance audit and

performance audit

The objects of SAV audits: the

management and use of public

finance and assets, and those

activities of audited entities in respect

to the management and use of public

finance and assets

Enhancing the international relations and cooperation on

Performance Audit, Extractive Industry Audit and Environmental Audit

Enhancing cooperation,exchange and shareprofessional experiences

Strengthening multilateraland bilateral cooperation

Mobilizes the support fromSAIs, international partnersand donors

SAV will be the Chair ofASOSAI for the term 2018-2021

Extractive Industry in Vietnam

There are several main areas of extractive Industry in Vietnam, such as:

• Natural Gas and Oil

• Coal

• Other Minerals: Gold, Iron, Aluminium Bauxite, Titan, Apatit....

Contributing for around 10-11% GDP and 25% total revenue of Vietnam

The SYSTEM OF LEGAL DOCUMENTS OF VIETNAM

National Assembly passes

Constitution

Code/Law

Resolution

National Assembly Standing Committee passesOrdinance

Resolution

President issuesOrder

Decision

Government promugates Decree

Prime Minister Decision

Procurator General of the Supreme People’s Procuracy,

Chief Justice of the Supreme People’s CourtCircular

Ministers, heads of ministerial-level agencies Circular

State Auditor General Decision

People’s Councils at all levels Resolution

People’s Committees at all levelsDecision (and Directive under the

2008 Law)

Local administrations in special

administrative-economic units

Legal documents (introduced for the

first time in the 2015 Law)

Policy and Regulations Related to Extractive Industry

in Vietnam

Mineral Law, 2010; Law on Environmental Protection; Oil and Gas Law

Decree No.15 of the Government detailing the Law on Minerals,

regulated:

Mineral activities must comply with

mineral strategies and master plans

and connected with the protection of

environment, natural landscape,

historical-cultural relics, scenic

places and other natural resources

while assuring national defense,

security and social order and safety.

Mineral activities may only be

carried out only after obtaining

permission from competent state

management agencies.

Mineral exploration must fully evaluate

the deposits and quality of all kinds of

minerals in an exploration area.

In mineral mining, socio-economic

effectiveness and environmental

protection must be considered basic

criteria for making investment decisions;

and advanced mining technologies

which are suitable to the size and

characteristics of each mine as well as

each kind of mineral shall be applied in

order to recover minerals to the

maximum.

Auditing Extractive Industry in SAV

Audit procedures: Audit Standards and Financial Audit

Procedures in general. There is no specific audit

procedure/guideline for an extractive industry audit

Type of audits: Compliance

Audit, Financial Audit and

Program Audit.

However, we were now

mainly focusing on financial

and compliance audit

Auditing Extractive Industry in SAV (Con’t)

The financial audit of entities which are responsible for

managing extractive industries

- Ministry of natural resources and Environment

- General Department of Geology and Minerals

- Department of Survey and Mapping;

- Vietnam Institute of Geosciences and Mineral Resources.

- ….

Auditing Extractive Industry in SAV(Con’t)

The financial audit of state-owned companies and groups

which are responsible for mining and extracting resources

- Vietnam National Coal and Mineral Industries Holding Group

(TKV)

- Vietnam National Oil and Gas Group (PVN)

- Other state-owned companies operating in this area

Auditing Extractive Industry in SAV(Con’t)

Other audits related to Extractive Industry

The audit of managing, extracting and

trading Mineral Resources of some state-

owned groups, corporation and

companies

The audit of issuing mining license and

governmental management of extractive

mineral resources in period from 2009-

2012.

Policy and Legal Frameworks Cycles in Vietnam

Developing Policy and

Regulations

Delivering Policy and

Regulations

Applying Policy and

Regulations

Reviewing Policy and

Regulations

1. Are there any relationship between Policy & Legal Frameworks Cycles andExtractive Industry Value Chain

2. Which steps of policy and regulations development Cycles should be audited?

Value chain Approach on Policy & Legal Frameworks

Audit in Viet Nam

Extractive

Industry

Value

chain

Policy and Legal framework

Exploration

Award of contracts and licenses

Monitoring of operations

Collection of revenue

Revenue management and allocation

Implementation of sustainable policies

Policy and Legal

Frameworks Cycles

- Reviewing Policy and Regulations

- Developing Policy and Regulations

- Delivering Policy and Regulations- Appling Policy and Regulations

NoPolicy and Legal

Framworks CyclesEI Value chain

Audit types Applied by Vietnam SAI

Note

1Developing Policy and

Regulations

Policy and Legal frameworkNot yet (only using

audit results)

As consultants and/or one of

Policy and Regulations Proponent

Issues arising from other value chain

2

3

Delivering Policy and Regulations

Applying Policy and Regulations

Exloration

1. Financial Audit2. Compliance Audit3. Performance Audit4. Combined Audit (and/or Specialized Audit)

Auditing

Award of contracts and licenses

Monitoring of operations

Collection of revenue

Revenue management and allocation

Implementation of sustainable policies

4Reviewing Policy and

Regulations

Policy and Legal frameworkNot yet (only using

audit results)

As consultants and/or one of

Policy and Regulations Proponent

Issues arising from other value chain

Audit Approach on EI Policy & Legal Frameworks

in Viet Nam

Financial Audit

Compliance Audit

Combined Audit

(Specialized Audit)Both Private and SOEs

Management of Mining

Exploration

Government Bodies

Local Governments

Both Private and SOEs

Financial Audit Government Bodies

Compliance Audit Local Governments

Finacial Audit Revenue Department

Compliance Audit Local Governments

The compliance of

regulations on mining

sectors in Local

Governments

Combined Audit Both Private and SOEs

Government Bodies

Local Governments

SOEs

Government Bodies

Local Governments

Both Private and SOEs

Financial Statements

Managing and using oil

revenues which allocate

to the Vietnam Oil

Corporation

Financial Statements

Exploration

Performance Audit

Compliance Audit

Licensing and authorising

for mining natural

resources and minerals

The rehabilitation of

abandoned mines in Thai

Nguyen Province

State-owned Enterprises (SOEs)

Implementation of

sustainable policies

Combined AuditRevenue management

and allocation

Collection of revenue

Monitoring of

operations

Award of contracts and

licensesCombined Audit

Sample of Audits that focus on Applying Extractive Industry Policy and

Regulations in each EI Value chain

Comply with current Regulations

Does not comply with current Regulations

Right things have been done

Good Policy and Regulations

Policy and Regulation issues

Right things have not been done

Policy and Regulation issues

Auditee Issues (applying policy and regulations

issue)

No Audit type Main ObjectivesHow are they related to Policy

and Legal Frameworks

1 Compliance Audit Obey Laws & Regulations Applying Policy and Regulations

2 Financial AuditTrue and Fair Views of Financial Statement

Applying Financial Regulations and Accounting Standards

3 Performance AuditAre the right things being

done in right ways?(The matrix below)

The issue is that: “The right thing have been done?” is auditor’s perspective, not Lawmaker’s perspective.

Audit Approach on EI Policy & Legal Frameworks in Viet Nam

Solutions for the diffidence between Auditor and Lawmaker Perspective

Audit Criteria

Transparency process

Get involved of Lawmakers

Reliable …..

Good “database”

Audit evidences

from different Audits,

auditee related to the Policy

and Regulation

issue

Combined audit

That may cover all

assessment of steps of Policy and

Regulations Cycle

Audit Opinion

Conclusion v.sRecommendation

v.s Optional Suggestions v.sProviding Audit

Evidence for Lawmakers (Parliament

Member)

Examples

Oil Revenue Allocation Rate between Government and Vietnam Oil & Gas Group:

Before 2013: 50% for reinvestment (for PVN) and 50% Government Revenue.

We always ask a question “Whether the rate is a good rate in term of Reinvestment and

Contribution for Development?” in every audits related to Oil and Gas to get broad

information and view from different Ministry Departments, Organizations and

Corporations.

We collect all information from financial audits, combined audits of Vietnam Oil and Gas

Group, Other Oil & Gas Corporation, Ministry of Natural Resource & Environment… in

several years (such as the effectiveness of reinvestment; the use of Government Revenue

from Oil; ROA, ROE information of Vietnam Oil & Gas comparing to Others…) , then

provide evidences, information for Parliament.

In 2013, Vietnam Parliament determined the rate to: 25% for reinvestment and 75% for

Government Revenue.

There are still challenges.

Thank you!

21