The Role of Parliament in the audit of public accounts

1
The Role of Parliament in the audit of public
accounts
2
Overview

• Audit and the chain of accountability
• Types of supreme audit institutions
• The Lima Declaration
• Types of audit
• Interaction between auditors and parliament
• The role of parliamentary committees
• Follow-up mechanisms

3
(No Transcript)
4
Types of supreme audit institutions

• A public organization, independent of government
  and responsible for auditing and reporting
  governments financial operations.
• Audit courts are independent of the legislative
  and executive branches and integral to the
  judiciary.
• Auditor generals are independent bodies that
  report directly to parliament and have no
  judicial function.
• The International Organisation of Supreme Audit
  Institutions (INTOSAI) has fundamental standards
  for national audit in the Lima Declaration of
  Guidelines on Auditing Precepts.

5
Lima Declaration The supreme audit institution
should

• Be independent from audited entity and protected
  against outside influence.
• Have functional and organizational independence,
  guaranteed by the constitution.
• Have the financial means to accomplish its tasks.
• Self-determine its audit program.

• Have members with prerequisite qualifications and
  moral integrity.
• Report annually and independently to Parliament.
• Produce reports that are objective, clear,
  limited to essentials, precise and easy to
  understand.
• Audit all public financial

6
(No Transcript)
7
Types of audit

• Financial audit is traditional focus of public
  sector auditing.
• Auditor general model, financial audit focuses on
  the accounts of government departments using
  sampling techniques.
• Audit court model, emphasis on the legality of
  spending to see whether government revenue and
  spending have been used for approved purposes and
  departments have conformed to laws.
• Perform value for money or performance audits.
• Three Es economy, efficiency and effectiveness.
  

8
(No Transcript)
9
An example of value for money considerations in
the health sector

• Hospital purchases inputs staff, equipment,
  medical supplies
• Transforms these inputs into outputs in services
  to community
• The outcomes are effects on patient health.
• Performance auditing checks for economy,
  efficiency and effectiveness in this process,
  asking, respectively
• Are supplies, equipment and staff purchased for
  cheapest price? (economy)
• Is adequate number of operations carried out with
  inputs? (efficiency)
• Do operations improve patient health?
  (effectiveness).
• It can be summarized that the Three Es require
  respectively spending less, spending well, and
  spending wisely.

10
Interaction with parliament

• Relationship varies between systems.
• Court model tradition, parliament uses audit
  information for a formal vote on the execution of
  a budget.
• Westminster tradition there is no formal vote on
  budget, parliamentary review generates
  recommendations for improving public spending.
• Supreme audit institutions have established
  parliamentary liaison offices and accompany
  related work of parliament on an ongoing basis.
• More recently, many supreme audit institutions
  have also developed a more ad hoc advisory
  function.

11
Role of parliamentary committees

• In Some Legislatures
• Audit findings are not considered in detail, but
  most parliaments use committees to do so.
• The same committee responsible for approving
  budget also must consider audit reports.
• A dedicated public accounts committee is used for
  the scrutiny of audit findings.
• Sectoral committees, such as those responsible
  for health, education or defense, scrutinize
  relevant audit findings.

12
Public accounts committees

• Hearings with accounting officers
• Increasing importance of value for money audit
• But evidence says this system does not work well
  in many developing countries
• Delayed reporting
• Poor quality of reports
• Government non-response

• First modern PAC in UK in 1861
• Strong link with Auditor General
• Policy-neutral focus on implementation
• Cross-partisan opposition chairperson in 67 of
  PACs in the Commonwealth

13
(No Transcript)
14
Follow-up mechanisms

• Parliaments recommendations and governments
  implementation
• Committee reports must be followed by a formal
  government response.
• A formal government response does not always
  ensure that the committees recommendations are
  acted upon.
• A formal tracking report produced regularly by
  the audit institution systematically considers
  the implementation of each recommendation.
• Instead of separate tracking report, some
  auditors include a chapter that reviews
  departmental action on previous recommendations
  in their annual audit report.

15
Concluding remarks

• External audit and parliamentary scrutiny are
  fundamental for holding government to account.
• Supreme audit institutions have evolved to
  different traditions - audit court and auditor
  general two main, but variations occur.
• Independence of supreme audit institutions is
  fundamental.
• Parliament engages with audit findings
  effectively through dedicated committee capacity.
• Follow-up mechanisms are important for ensuring
  that recommendations are actually implemented.