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6th Global Forum on Reinventing GovernmentTowards Participatory and Transparent Governance

AUDITING FOR SOCIAL AUDITING FOR SOCIAL CHANGE IN THE CONTEXT OF CHANGE IN THE CONTEXT OF THE MILLENNIUM THE MILLENNIUM DEVELOPMENT GOALS (refer to DEVELOPMENT GOALS (refer to background paper)background paper)Presentation by Esther Stern, Presentation by Esther Stern, Interregional Adviser Interregional Adviser Division for Public Division for Public Administration and Development Administration and Development Management, UNDESAManagement, UNDESA

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Context: Five year General Assembly Review of the implementation of the 2000 Millennium Development Goals (MDGs)

189 countries have committed to meeting the 189 countries have committed to meeting the MDGsMDGs by by 20152015According to the January 05 Millennium Development According to the January 05 Millennium Development Project (Sachs) Report and other UN reports, achieving Project (Sachs) Report and other UN reports, achieving the the MDGsMDGs requires a commitment to good governance requires a commitment to good governance and accountability structures and accountability structures The best designed policies are of little use if the State The best designed policies are of little use if the State does not have the institutional capacity to carry them does not have the institutional capacity to carry them outout

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Conceptual framework: The Millennium Development Declaration

In the 2000 UN Millennium Declaration, Member States have pledged: to work “for more inclusive political process, allowing genuine participation by all citizens”

“to ensure (…) the right of the public to have access to information” ……

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What are the MDGs?

The first seven Goals are “proThe first seven Goals are “pro--poor” related: poor” related: halve extreme poverty and hungerhalve extreme poverty and hungerachieve universal primary educationachieve universal primary educationempower women and promote equality between women and menempower women and promote equality between women and menreduce underreduce under--five mortality by twofive mortality by two--thirdsthirdsreduce maternal mortality by three quartersreduce maternal mortality by three quartersensure environmental sustainabilityensure environmental sustainabilityreverse the spread of diseases, especially HIV/AIDS, tuberculosireverse the spread of diseases, especially HIV/AIDS, tuberculosis s and malariaand malaria

The eighth goal The eighth goal –– “a global partnership for development” “a global partnership for development” ––comprises a set of commitments by developed comprises a set of commitments by developed countriescountries

createcreate a global partnership for development, with targets for aid, a global partnership for development, with targets for aid, trade and debt relieftrade and debt relief

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PROPOSAL FROM UN-DESA TO PUBLIC SECTOR AUDIT COMMUNITY

Include amongst audit priorities the furthering of human Include amongst audit priorities the furthering of human development and other sociodevelopment and other socio--economic and proeconomic and pro--poverty poverty goals encapsulated in the 2000 Millennium Development goals encapsulated in the 2000 Millennium Development GoalsGoals

They should be They should be ““ownedowned”” by each country rather than by UN and by each country rather than by UN and other partner international organizationsother partner international organizations

Likelihood of increased donor flows linked to a governmentLikelihood of increased donor flows linked to a government’’s s willingness to sign on to rigorous compliance regime including willingness to sign on to rigorous compliance regime including spot audits, evaluations and publication of performance indicatospot audits, evaluations and publication of performance indicatorsrs

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MDG PROGRAMME DELIVERY IS PART OF PUBLIC SERVICE DELIVERY BUT WITH MORE COMPLEX CHALLENGES (1)

Joint commitments by many stakeholders are at Joint commitments by many stakeholders are at the centre of the achievement of the centre of the achievement of MDGsMDGs; however ; however lack of assurance that actions by all parties are lack of assurance that actions by all parties are carefully monitored, outcomes evaluated, and carefully monitored, outcomes evaluated, and utilization of resources effectively auditedutilization of resources effectively auditedPublic Administration, in both developed and Public Administration, in both developed and developing countries, has been redeveloping countries, has been re--shaped by shaped by ““marketizationmarketization, outsourcing and , outsourcing and agentizationagentization””

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MDG PROGRAMME DELIVERY IS PART OF PUBLIC SERVICE DELIVERY BUT WITH MORE COMPLEX CHALLENGES (2)

The activity of public service delivery including The activity of public service delivery including MDGMDG--related has become significantly more related has become significantly more complex as a consequence of working in complex as a consequence of working in partnerships, relying on networks, decentralizing partnerships, relying on networks, decentralizing responsibilityresponsibility

The implications for decisionThe implications for decision--making, resource making, resource management and accountability are still being management and accountability are still being studiedstudied

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Does the negative image of Public Administration affect Audit Institutions(1)?

P.A. has had in recent decades to deal with its negative P.A. has had in recent decades to deal with its negative image, the difficulty to maintain its role under the image, the difficulty to maintain its role under the onslaught of onslaught of marketizationmarketization and the disenchantment of and the disenchantment of citizens with their government’s performance and citizens with their government’s performance and accountability (A broad consensus has emerged in recent accountability (A broad consensus has emerged in recent years of the fact that an approach to minimizing the role of years of the fact that an approach to minimizing the role of the State was problematic)the State was problematic)In that context, audit institutions have to “reIn that context, audit institutions have to “re--position” to position” to adequately respond to the evolving nature of the State’s adequately respond to the evolving nature of the State’s business scope, processes and reportingbusiness scope, processes and reporting

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Does the negative image of Public Administration affect Audit Institutions(2)?

The ability of audit institutions to effect change in The ability of audit institutions to effect change in this new environment are increasingly being this new environment are increasingly being questioned, and challenged by alternative questioned, and challenged by alternative watchdogs watchdogs

Impact of external and internal audit on Impact of external and internal audit on functioning, performance and transparency of functioning, performance and transparency of governments?governments?

Auditors traditionally work Auditors traditionally work ““in the trenchesin the trenches”” and and ““flog dead horsesflog dead horses””

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INCREASING EXPECTATIONS FROM AUDIT INSTITUTIONS - PUBLIC AND PRIVATE SECTOR

Growing pressure for audit institutions to prove their Growing pressure for audit institutions to prove their worth, valueworth, value--added and relevance added and relevance

public reporting on audit findings, public reporting on audit findings, results,quantifiedresults,quantified savingssavingsdemonstrate visible and measurable impactdemonstrate visible and measurable impactleading to greater public visibility and headlines…even for leading to greater public visibility and headlines…even for internal audit!internal audit!

At the same time pressure to “go back to basics” due At the same time pressure to “go back to basics” due to corporate audit failures (Sarbanesto corporate audit failures (Sarbanes--Oxley)Oxley)

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INDEPENDENCE AND RESPONSIVENESS OF SUPREME AUDIT INSTITUTION (SAI) IS KEY

Assist the legislature to carry out its constitutional Assist the legislature to carry out its constitutional responsibilities and legislative oversight; responsibilities and legislative oversight; Assist in improving the performance of Assist in improving the performance of government; andgovernment; andEnsure accountability and transparency of Ensure accountability and transparency of government for the benefit of the citizens.government for the benefit of the citizens.

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SOME SAIs USE AUDITS OF PAST PERFORMANCE AND ACTIVITIES TO DRAW LESSONS FOR TODAY AND TOMORROW

This implies that in addition to preventing and This implies that in addition to preventing and detecting fraud, waste, and abuse, and assisting the detecting fraud, waste, and abuse, and assisting the government to become more efficient and government to become more efficient and effective through “resultseffective through “results--based audit”, based audit”, SAIsSAIs may may examine the role of government, albeit within the examine the role of government, albeit within the boundaries of their mandate boundaries of their mandate Some established and newly created Some established and newly created SAIsSAIs have have already enshrined the latter focus in their already enshrined the latter focus in their legislation, e.g. specifying as one of their main legislation, e.g. specifying as one of their main objectives the evaluation of government policyobjectives the evaluation of government policy

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CAN THE AUDIT FUNCTION BECOME A TOOL TO EMPOWER CITIZENS TOWARDS “HOLDING THE STATE TO ACCOUNT”?

To achieve real impact for the benefit of the To achieve real impact for the benefit of the citizens would imply some degree of engagement citizens would imply some degree of engagement of the citizens and their perspectives in the audit of the citizens and their perspectives in the audit processes processes In the same way that most public administration In the same way that most public administration systems remain introverted and lack inclusiveness systems remain introverted and lack inclusiveness in decisionin decision--making processes, many audit offices making processes, many audit offices and their operations have remained a mystery and and their operations have remained a mystery and are shielded from the public eye and scrutiny are shielded from the public eye and scrutiny

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PROGRESSIVE AUDIT INSTITUTIONS HAVE ENGAGED IN INNOVATIONS (1) E.G.

The advent of performance audit has blurred the The advent of performance audit has blurred the boundaries between financial and compliance boundaries between financial and compliance audit as well as evaluationaudit as well as evaluationPerformance audit’s analysis of a policy, Performance audit’s analysis of a policy, programme or project implementation almost programme or project implementation almost always has an impact on policy issuesalways has an impact on policy issuesInvolve the stakeholders and beneficiaries of a Involve the stakeholders and beneficiaries of a programme, project, or policy in performance programme, project, or policy in performance auditsaudits

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PROGRESSIVE AUDIT INSTITUTIONS HAVE ENGAGED IN INNOVATIONS (2) E.G.

Audit has become a catalyst for change: a lot of effort has Audit has become a catalyst for change: a lot of effort has been put in the last decade into promoting “managing for been put in the last decade into promoting “managing for results” through “auditing for results” and “jointresults” through “auditing for results” and “joint--up,concurrent,coordinatedup,concurrent,coordinated audit”audit”

More research is needed for greater More research is needed for greater complimentaritycomplimentarity as as to how the functions of audit, evaluation and to how the functions of audit, evaluation and monitoring monitoring More research is needed to explore to what degree More research is needed to explore to what degree Audit Committees are currently being utilized to ensure Audit Committees are currently being utilized to ensure resultsresults--based auditbased audit

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GAPS IN AUDIT EXPECTATIONS

Providing blanket “assurance” (never enough Providing blanket “assurance” (never enough resources in quantity and expertise!)resources in quantity and expertise!)Risk audits sacrificed for “flavor of the day” Risk audits sacrificed for “flavor of the day” (Tsunami?)(Tsunami?)Lack of effective synergy between ext. and int. Lack of effective synergy between ext. and int. audit, audit, internat’linternat’l vs. national audit (single audit vs. national audit (single audit concept)concept)Highest international risks escape scrutiny because Highest international risks escape scrutiny because of transnational nature of transnational nature e.g.financiale.g.financial institutionsinstitutions

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GAPS FROM THE UN PERSPECTIVE

Audit of international agreements, including Audit of international agreements, including MDGsMDGsDonor funding not flowing through the national Donor funding not flowing through the national budget planning and expenditure system hence budget planning and expenditure system hence escaping national audit and scrutinyescaping national audit and scrutinyHowever intent is to serve the public good: should However intent is to serve the public good: should there be a role for national audit institutions there be a role for national audit institutions irrespective of existence of special audit irrespective of existence of special audit agreements/clauses with donors?agreements/clauses with donors?

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Little regional, country, or local level mobilization of the external and internal audit community around the MDG processes and results

A great effort has been launched by the UN and its A great effort has been launched by the UN and its international partners to international partners to

prepare monitoring tools for the established eight goals, 18 tarprepare monitoring tools for the established eight goals, 18 targets, gets, and 48 indicators and 48 indicators assist poorest countries in formulating poverty reduction strateassist poorest countries in formulating poverty reduction strategy gy papers (papers (PRSPsPRSPs))-- but they still need alignment with but they still need alignment with MDGsMDGsassist government statistical offices and international teams onassist government statistical offices and international teams on the the ground to improve the reliability and integrity of data collectiground to improve the reliability and integrity of data collection on and analysisand analysis

No national auditing with a view to tracking related No national auditing with a view to tracking related financial flows, assess utilization of resources, adequacy of financial flows, assess utilization of resources, adequacy of decisiondecision--making and implementation processes, or making and implementation processes, or ascertain results achieved on the ground ascertain results achieved on the ground

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National ownership of internat’l agreements including MDGs is lacking in government management and oversight

Citizens have the right to know what has, or has not, been Citizens have the right to know what has, or has not, been achieved as a result of international agreements and achieved as a result of international agreements and treaties and related expenditurestreaties and related expendituresExperts agree that international agreements are most often Experts agree that international agreements are most often not couched in clear enough language, therefore presenting not couched in clear enough language, therefore presenting difficulties in formulating objectives and clear results difficulties in formulating objectives and clear results expectations expectations Nonetheless setting performance expectations and Nonetheless setting performance expectations and measuring results with respect to international agreements measuring results with respect to international agreements should be a priority to find out whether a particular should be a priority to find out whether a particular approach works (what is not measured cannot be managed approach works (what is not measured cannot be managed effectively) effectively) –– like in any other govt programmelike in any other govt programme

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OPPORTUNITIES AND CHALLENGES OF AUDITING MDGS

The audit of The audit of MDGsMDGs provides enormous opportunity and provides enormous opportunity and scope to discuss innovative ways of making the auditors scope to discuss innovative ways of making the auditors partners for social change in putting the audit profession at partners for social change in putting the audit profession at the heart of citizens’ interests, especially in the effort to the heart of citizens’ interests, especially in the effort to overcome poverty, diseases, and other inequalities by 2015overcome poverty, diseases, and other inequalities by 2015Auditing could function in a more participatory and open Auditing could function in a more participatory and open manner, where a multimanner, where a multi--stakeholder participation, including stakeholder participation, including that of civil society and media can be envisaged. In that of civil society and media can be envisaged. In addition, legislative oversight will also need to be addition, legislative oversight will also need to be strengthened strengthened These are complex processThese are complex process--related issues that will related issues that will necessitate careful examination and capacity buildingnecessitate careful examination and capacity building

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CAPACITY BUILDING

As part of our programme to make the audit As part of our programme to make the audit function central to the MDG roadmap, we are function central to the MDG roadmap, we are engaging in technical cooperation ventures and engaging in technical cooperation ventures and partnerships with audit institutions interested in partnerships with audit institutions interested in exploring MDG related independent and resultsexploring MDG related independent and results--based auditing from a national, local, regional, or based auditing from a national, local, regional, or interregional perspectiveinterregional perspectiveOur paper suggests some innovative areas for Our paper suggests some innovative areas for making the audit process more results oriented and making the audit process more results oriented and participatoryparticipatory

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Conclusion

The audit community needs to carefully examineThe audit community needs to carefully examineHow the traditional boundaries of audit can be How the traditional boundaries of audit can be respected while the function adopts a more prorespected while the function adopts a more pro--active active stance in examining national commitments to stance in examining national commitments to international conventions and treaties including prointernational conventions and treaties including pro--poor and sociopoor and socio--economic programmes; economic programmes; in what manner some forms of empowerment of and in what manner some forms of empowerment of and participation by civil society in the audit of social participation by civil society in the audit of social expenditures could make a difference:expenditures could make a difference:

in increasing transparency, encouraging the increased in increasing transparency, encouraging the increased participation of constituencies, and strengthening peopleparticipation of constituencies, and strengthening people--centered governancecentered governance

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UNDESA/DPADM looks forward to collaborating with you

Thank youThank you