Presentation Bianca Breteche SIGMA Roundtable on Independence of Supreme Audit Institutions Sarajevo
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Presentation given by Bianca Brétéché, SIGMA, at the Roundtable on Independence of Supreme Audit Institutions held in Sarajevo on 8 September 2016 On the initiative of the Audit Office of the Institutions of Bosnia and Herzegovina (SAIBiH), the Network of Supreme Audit Institutions of Candidate and Potential Candidate Countries and European Court of Auditors.
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Presentation Bianca Breteche SIGMA Roundtable on Independence of Supreme Audit Institutions Sarajevo
- 1. © OECD AjointinitiativeoftheOECDandtheEuropeanUnion, principallyfinancedbytheEU Roundtable on Independence of Supreme Audit Institutions Network of SAIs of EU Candidate and Potential Candidate Countries and European Court of Auditors SIGMA discussion input Bianca Brétéché 8 September, 2016 Sarajevo, Bosnia and Herzegovina
- 2. AjointinitiativeoftheOECDandtheEuropeanUnion, principallyfinancedbytheEU Independence of SAIs = the necessary degree of autonomy and freedom to fulfil their mandates: • A fundamental right, not a privilege: SAIs need to demonstrate the necessity for this right • Cannot be absolute as SAIs are part of the state but has to enable them to fulfill their mandate 1
- 3. AjointinitiativeoftheOECDandtheEuropeanUnion, principallyfinancedbytheEU Statutory independence and the impact of other laws on the work of the SAI 2 • Do our legal frameworks pass the “stress test” ? Is the guarantee of independence only theoretical ? What kind of legal protection do SAIs of the Network have and how have those been exercised in practice? • What can SAIs do when the legal channels do not function?
- 4. AjointinitiativeoftheOECDandtheEuropeanUnion, principallyfinancedbytheEU Mandatory Audits and the audit of political parties 3 • Mandatory audits and discretion: can legal mandates affect SAIs independence ? • What can we do to reduce the burden of mandatory audits? • How does a successful delivery on the audit mandate look like?
- 5. AjointinitiativeoftheOECDandtheEuropeanUnion, principallyfinancedbytheEU Financial Independence 4 • The role of the Ministry of Finance: What is acceptable for budget allocation ? What is acceptable for the use of funds ? • How to react to inappropriate actions of the MoF ? • How to lead by example ?
Editor's Notes
- In preparation of the Roundtable and following the results of the survey, Alastair and I have written a discussion paper that tries to pick up the results of the survey for the three main issues that will be discussed today and we hope that at least some of you might have had the opportunity to read it. I’d like to emphasise that this paper wants to provoke some thoughts and discussions. We don’t expect everyone to agree with what we have written because otherwise it would not provoke any discussions However, in my short presentation now, I will only pick up some of the issues and thoughts that we have expressed in this paper. We have turned these issues and thoughts into questions that we might want to consider during the discussion sessions for the three main topics that we suggest to discuss today.
- I would like to start with some very brief reflections on the notion of independence of SAIs: Independence is central to securing the effectiveness of SAIs and delivering impact for citizens. The conditions most relevant to ensuring the independence of a SAI are enshrined in INTOSAI’s Mexico Declaration on independence. Those say that SAIs should have the necessary degree of independence to fulfil their mandates. As many things in life, the concept of Independence for SAIs has two sides: on the one hand it provides SAIs with autonomy and freedom to decide not only about their audit work but also about how to manage their own business. On the other hand it brings responsibilities, for example to lead by example and be accountable. Therefore we say that independence is a right and not a privilege. What we mean by that is that SAIs have to be able to demonstrate the necessity of this right by proving that they add value and effectively make a difference in the way public funds are managed in their country. SAIs of course cannot be absolutely independent as they are part of the state and laws but also generally secondary legislation apply to them. However, this should apply only to the degree to which they do not jeopardise the independent, objective and professional fulfillment of the SAIs mandate. I would argue that not every executive act that affects the autonomy of decision making of SAIs is automatically making it difficult for them to fulfill their mandate.
- The SAI of Bosnia and Herzegovina will explain the different ways by which the legislator and the administration have affected its independence through various legislative and administrative decisions and acts. The legal options of this SAI are very limited especially due to the fact that the necessary degree of independence of the Bosnian SAI is not anchored in the constitution. Consequently, there is no adequate legal protection by a supreme court against any interference with the SAIs independence as is required by the Lima declaration. It might be interesting in this session of our agenda today to exchange views and experiences on the effectiveness of the legal frameworks of the SAIs in each of the countries around the table today to see in how far the legal frameworks are really capable of protecting the SAI. Do they pass the stress test or is the legally and in most cases constitutionally guaranteed independence only theoretical? Some years ago the Constitutional court in Turkey decided that specific changes to the law on TCA were unconstitutional. So, in Turkey the legal framework worked in practice. It might be interesting to share what kind of legal protection do SAIs of the Network have an how have those been exercised in practice? And this of course would then lead to the question “what can SAIs do when the legal channels do not function?” How have SAIs here around the table acted and reacted to prevent or fight against legislative or administrative actions that would jeopardize their necessary independence? How have SAIs made the case that these actions affect their ability of doing their job? ISSAI 12 says that SAIs should report on any matters that may affect their ability to perform their work in accordance with their mandate and/or the legislative framework. It also says that SAIs should strive to promote, secure and maintain an appropriate and effective constitutional, statutory or legal framework.
- When it comes to mandatary audits, it is clear from the survey that SAIs of the Network have very different situations. The SAI of Montenegro will explain later its situation and experience on the example of the relatively new mandatory task of auditing the financing of political parties and election campaigns. One could ask the question if mandatory audits can affect the independence of SAIs. If it is the expressed will of the legislator that this is part of the SAIs mandate, it might be difficult to argue that this affects their ability to carry out their mandate. However, the risk is that if the mandatory requirements are very significant compared to the resources available this could effectively undermine the SAIs ability to deliver its overall mandate. The question is then: what can we do to reduce the burden of mandatory audits? How far can an effective risk based audit approach reduce the burden of mandatory audits? And finally: how does a successful delivery on the audit mandate actually look like?
- SAI Serbia will present the issue of financial independence. In all Network countries the legal frameworks are now quite clear on the independent establishment of the SAIs budgets through the relevant organ of the respective parliaments without interference from the executive. However, some SAIs have reported in the survey that in practice the MoF has interfered in setting their budgets. The MoF is the guardian of the overall budget and the budget discipline. It will therefore always have to play a role in budget process. The question is : what kind of role of the MoF is acceptable for the budget allocation? What is acceptable in the light of the required financial independence of the SAI and was is not? The same question is relevant for the independent use of the funds that are allocated to the SAIs. What is acceptable here and what is not? In case a SAI comes to the conclusion that the MoF has interfered in a way that undermines its financial independence, we might want to consider how SAIs can react appropriately to this inappropriate action? Are there examples of actions taken by SAIs that have proved to be effective? ISSAI 12 reminds us that SAIs should lead by example: what does that actually mean in practice when it comes to budgetary and financial management questions of the SAIs themselves?