All Hands on Deck: Harnessing accountability through external public audits

Confronting the health effects and the economic upheaval of COVID-19 has required massive money flows as well as rushed and unprecedented decisions on government spending. Dozens of countries have created special crisis funds to mobilize donations for their emergency response. In some cases, these are managed through trusts or other arrangements that bypass parliamentary budget oversight and regular financial management controls. This poses a high risk of mismanagement or corruption. In short order, the response to the crisis needs strong oversight and accountability by independent institutions. At this time, there are enormous expectations that national audit systems will protect the public interest, and ensure governments are on track to maintain broader development and performance objectives.

Strong oversight of the public budget is a priority even in non-emergency times. Supreme audit institutions (SAIs) lead the charge, but it is increasingly clear that for their work to deliver impact, the support and collaboration of an “ecosystem” of interconnected actors, conditions and processes is needed. Integral components of effective oversight include:

  • An institutional framework or mandate that ensures public auditors have the independence and resources to do their job,
  • A high-quality audit report that covers essential programs and is accessible to the public,
  • Legislative oversight by a dedicated committee that deliberates on the audit report in a timely matter,
  • An executive response that demonstrates government’s attention to the audit findings and action on the recommendations in the audit report,
  • Independent follow-up, usually by the SAI or the legislature, on whether the actions deemed necessary by the audit were implemented, and
  • Opportunities for public participation – by civil society organizations, the media and citizens – to engage, influence and bolster the entire audit process.

In this report, we examine the strength of the audit and oversight systems across the world and provide guidance to various stakeholders on how to tackle identified weaknesses.[1] The assessment draws from the results of IBP’s most recent Open Budget Survey (OBS) and, specifically, from the survey questions which directly assess relevant aspects of audit and oversight. The OBS 2019 data were compiled before the onset of COVID-19 but give a good sense of practices in place prior to the crisis.

FINDINGS

On a global scale, the data indicate a weak performance on oversight. The average score for the 117 countries surveyed is only 37 out of 100.  Of course, this global average masks significant variation among countries and across the six essential components of oversight that we have identified. While generally INTOSAI regions with more advanced economies receive higher average scores than others, no region as a group is performing at the level of internationally accepted norms for audit and oversight. The weaknesses are most prevalent among countries in the Arab and Francophone African SAI-regions.

The strongest aspect of the ecosystem is institutional framework, and at a global average score of 76 out of 100, is the only component scoring above 60, the threshold for adequacy. Yet, while this component is seemingly strong overall, the average score conceals some worrying issues. A deeper analysis of country-level results shows that less than half (44%) of countries have in place all the elements of SAI independence examined in the Open Budget Survey. Further, recent experience has shown that, despite seemingly robust legal provisions, de facto independence may still be curtailed as powerful actors find ways to threaten and undermine the independence of SAIs.

Next in overall strength are the audit by SAI, scoring 47 points on average and legislative oversight at 44. The data also dive into certain sub-components and here that reveals weaknesses in quality of audit reports and the timeliness of the legislative response to audit reports. Low quality audit reports and legislative tardiness in engaging with the reports may well be linked.

The two weakest components of the oversight ecosystem are opportunities for public engagement in audits (16 out of 100) and executive responses to audit findings (13 out of 100). Despite the promise that more civil society involvement brings to the audit process, thus far the data – both on legislative oversight committees’ openness to public engagement and on SAIs’ openness and collaboration with the public – indicate very weak country performances overall. The low global average score signifies the lack of opportunities for the public to engage in and strengthen audit and oversight efforts. The countries that stand out for having participatory channels between the public and audit functions are Georgia, South Korea and the United Kingdom.

The dismal performance of countries on the executive’s response to audit findings applies to low-, middle- and high-income countries alike. This problem is further compounded by weaknesses in independent follow-up on the executive response (score of 28 out of 100). As a result, governments typically are not under the kind of pressure needed – internally or from formal oversight institutions, such as national legislatures, or from broader society – to prompt them to implement audit recommendations.

RECOMMENDATIONS

Ineffectiveness of the audit and oversight ecosystem as a whole is especially troubling now when SAIs have greater visibility than ever before. At a time when we need SAIs desperately, we are underinvesting in them and undermining their capacity. This report should be a wake-up call to all stakeholders to help rectify this situation by implementing the following measures:

  • Ensure SAIs are fully independent institutions that have access to official records, the mandate, and the resources to conduct and publish relevant, high quality audits, including of any extra budgetary funds.
  • Enhance public participation in all relevant aspects of the oversight system. SAIs should create meaningful and inclusive mechanisms for civic engagement, such as working with CSOs to improve audit targeting, expand coverage, and improve capacity. They should also make every effort to publish their audit findings in a timely and accessible manner. Legislatures should hold hearings, open to the media and the public, on audit findings and seek testimony from SAIs and relevant members of the public. CSOs and the media should promote the visibility of audit reports and recommendations, and track and advocate for executive follow-up.
  • Improve review and follow-up on audit reports so that audit recommendations lead to remedial measures being taken that improve the efficiency and effectiveness of public spending and the achievement of development outcomes.

We recognize that while we are in the throes of the COVID emergency, these recommendations may not all be achievable in the immediate timeframe and that some may take more time to implement. Nonetheless, ultimately, the success of these and other reforms relies on stakeholders appreciating that effective oversight is the product of a well-functioning ecosystem – a set of interconnected actors, conditions, and processes that need to be supported as a whole rather than as discrete components.

[1] The report is the joint work of the INTOSAI Development Initiative (IDI) and the International Budget Partnership (IBP). Special acknowledgement and thanks to Linnea Mills for her extensive work in drafting the report.