The Rise of the Activist Auditor
Vivek Ramkumar, Senior Director of Policy, International Budget Partnership— Aug 01, 2017
This post is from “That’s How the Light Gets In”: Making Change in Closing Political Environments – a collection of essays that examine evidence of how to pursue fiscal accountability in a tougher political environment. The collection is a companion to IBP’s 2016 Annual Report. Read more essays from the collection on the Open Budgets Blog here.
In 2016 the Brazilian president was impeached in a sensational case that received global media attention. At the time, much of this attention focused on widespread allegations that the impeachment was related to corruption cases involving politicians from both the ruling and opposition parties. There was little public discussion on the substantive issue upon which the impeachment proceeding was based, which had been detected and revealed by the country’s supreme audit institution (SAI). In its audit of the Brazilian government’s 2014 accounts, the SAI had found that the government had used accounting tricks to underreport the budget deficit by billions of dollars, potentially violating the country’s fiscal responsibility law. The Brazilian Congress used the audit finding as the basis for impeaching the president.
This is not the first time that an audit report has brought down a government. In Canada, a 2004 audit report on the government’s misuse of public funds for a public relations program is widely credited with contributing to the electoral loss suffered by the incumbent party. Similarly, an audit report issued by the Indian SAI in 2014, on a questionable coal procurement contract, reinforced the image of the incumbent administration as corrupt. This view fed demands for accountability that became a rallying cry for opposition political parties, which ultimately led to the administration’s defeat in the 2015 national elections.
Nearly every country in the world has a functional SAI that is mandated with checking whether public funds are being managed properly and in line with sound financial management practices. SAIs go by different names and are frequently called: office of the Auditor General (in Westminster systems), the Court of Accounts (in Napoleonic systems), or the Board or Commission of Audit (in parts of Asia and Latin America).
SAIs assess the proper use of public funds by conducting financial audits that examine the legality of financial transactions and performance audits that assess whether public funds have been used efficiently and effectively. Audit reports issued by SAIs contain recommendations on how government can improve financial management.
However, too often, governments are able to ignore audit findings with impunity, especially when they do not face pressure to institute remedial measures recommended in SAI reports. In most countries, SAIs cannot sanction the government or compel the executive to take action based on audit reports. Instead, the SAI submits its findings to the national legislature, which must then decide whether to take formal action in response. While legislatures may have the legal authority to demand corrective action, in practice they often fail to sanction their governments or require recommendations be implemented. Legislative inaction can be a result of both partisanship based on the party affiliations of legislators and executives and a lack of understanding of the content of technical audit reports.
The failure of legislatures to act on audit findings is frequently compounded by SAIs’ own organizational challenges. SAIs often struggle to communicate their work to external audiences or sustain the interest of the media after a sensational headline has faded from view. And many SAIs insulate themselves from contact with the broader society, some fearing that any association with civil society organizations (CSOs) will lead to charges from the government that audit findings are biased and politically motivated.
As a result of weaknesses in legislatures and SAIs, audit reports seldom receive the level of popular scrutiny that they deserve.
Fortunately, SAIs increasingly recognize the need to engage with citizens. SAIs in Argentina, India, the Philippines, South Korea, and Tanzania have established mechanisms for engaging with citizens in creative and meaningful ways. These include mechanisms through which citizens can report fraud, waste, and abuse via “hot lines,” suggest audit topics for review, and participate in joint audit assignments and social audits. Such forms of public engagement has the potential for transforming the way in which the public views the work of SAIs.
IBP believes that SAIs and civil society organizations are natural partners with overlapping missions to promote accountability in the use of public funds. Greater engagement between SAIs and CSOs can be mutually beneficial. CSOs are sometimes better placed than SAIs to implement communications strategies that can pressure governments to take remedial action on audit findings. In countries in which SAIs lack powers and resources, CSOs can champion the need for independent and empowered SAIs. CSOs can also use their expertise on social sector topics and their presence on the ground to share information on critical areas of government operations that merit audit scrutiny, and they can even collect evidence on problems in these operations.
In turn, audits conducted by SAIs can be useful for civil society. SAIs have a formal mandate to investigate government finances and their audit reports often cover government operations on social sectors. CSOs can use findings contained in audits of social sectors to demand corrective actions from governments on issues that they care about and that can yield impactful results on government service delivery on the ground.
The case for greater engagement between SAIs and civil society is also consistent with an emerging consensus among experts that improved accountability will require not only stronger state and nonstate oversight institutions but also systems that promote better linkages among these institutions. Such engagement is particularly relevant in light of the shrinking democratic spaces around the world and the need for checks against government excesses. Profiling audit findings and the lack of remedial actions by governments could be a promising and cost-effective way to highlight the failure of governments to implement public-financed projects and to deliver services effectively. Such work can also be used to overcome legislative inertia on audits, and to expose government callousness in addressing these problems even after that have been flagged by independent audits.
- Accountants with Opinions: How Can Government Audits Drive Accountability? by Vivek Ramkumar, IBP, November 2016
- Philippines’ Commission on Audit Key to Unearthing “Pork Barrel” Scandal (Case Study, October 2016)
- Is India’s Ministry of Coal Effective in Supporting Coal Production? The Comptroller and Auditor General’s Audit of the Coal Industry (Case Study, October 2016)
- Accountability for Safe Train Service in Argentina (Case Study, October 2016)
This collection of essays — a companion to IBP’s 2016 Annual Report — examines evidence of how to pursue fiscal accountability in tougher political environments.
The International Budget Partnership’s 2016 Annual Report documents our work over the past year, focusing on what we have achieved and what we have learned.