Successes and challenges of the Latvian State Audit Office, Marita Salgrave, Council Member, State Audit Office, Latvia (long)

© OECD
AjointinitiativeoftheOECDandtheEuropeanUnion,
principallyfinancedbytheEU
REGIONAL CONFERENCE FOR
SUPREME AUDIT INSTITUTIONS OF EUROPEAN
NEIGHBOURHOOD SOUTH COUNTRIES
Making a difference to the lives of
citizens: a succesful transformation
process – the Latvian experience
Marita Salgrave, Council Member, State Audit Office,
Republic of Latvia
Algiers 16-17 December 2014

1
Contents
1) Supreme Audit Institution (SAI), Republic of Latvia –
short introduction
2) Continuous change of a SAI to “make difference” and
stay relevant:
Phase 1: Transition from “inspection” to “audit” type of
institution
Phase 2: Further improvement and innovative
implementation of ISSAI 12

2
Who we are and where we are?
Republic of Latvia
 Northern Europe, Eastern coast of the Baltic Sea
 One of the three Baltic states
 Member state of the European Union
 Capital: Riga
 Population: 2,013 million
 Territory: 64 000 m2
 Language: Latvian

3
Supreme Audit Institution
(State Audit Office, Republic of Latvia)
 State Audit Office (SAO) is an independent, collegial,
supreme audit institution in the Republic of Latvia
 Auditor General and Members of Council are elected
by the Parliament for a definite period, they can be
removed from the post only in case of court verdict
 SAO mandate and proceedings: Law on the State Audit
Office
Extract from the Constitution of the Republic of Latvia

4
SAO audit scope
 Revenues, expenditure and property of State or local
government institutions (except Parliament)
 Revenues, expenditure and property of public and
private companies, where State and local
governments own shares
 Funds of European Union and other international
organisations, which are included in State or local
government budgets
Extract from the Law on the State Audit Office

5
SAO mandate
 SAO performs (1) financial audits, (2) compliance
audits and (3) performance audits
 Annual financial audits – mandatory, while compliance
and performance audits – based on risk assessment
and depending on the resources available
 Audits are performed in compliance with International
Auditing Standards ISSAI and INTOSAI GOV

6
Financial audits
 Annual opinions on accuracy of annual statementsof
ministries and other central state institutions (by April
30)
 Annual opinion on accuracy of the Consolidated
Annual Statementon implementation of the State and
municipal budgets, revenues, asset and debt
management (by September 15)
28 financial audits were performed in 2013

7
Compliance and performance audits
 SAO is independent in defining
• audit topic
• audit scope
• audit type and
• audit period
 Consequently - no influence from the side of
Parliament and Government
29 compliance / performance audit reports were issued
in 2013

8
Supreme Audit Institutions – continuous change
to “make a difference” and stay relevant
Phase 1: SAO - transition from “inspection” to
“audit” type institution
Phase 2: SAO – further improvement and
innovative implementation of ISSAI 12

9
Phase 1
Transition from “inspection” to “audit” type
institution
 1992 – 2002: SAO as an “inspection” – type
institution, following just some international auditing
concepts
 2002 – 2004: (European Union pre-accession period):
SAO starts to transform into IAS compliant institution
 2005 - ~2010: transition process from “inspection” to
“audit” institution fully finalized

10
Phase 1
institution
Audit Control
Planning to get comprehensive
understanding of business and
identify risky areas
No planning to understand
business and risky areas
Audit work directed to cover areas
of high and medium risks
Audit work could be performed
within non-risky areas and is of an
incidental approach
Tends to create good
communication with all
management levels and staff
within audited body
Limited communication with
audited body
Comprehensive results of audit
(often - system audits)
Limited results of audit (often a
stand-alone transaction)
Time and resource consuming,
especially during first years
Less resource and time consuming

11
Phase 1
institution
How to start?
 Scrupulous planning & organization of the
work
 Continuous involvement and supervision by
senior management
 Creating favourable control environment
(tone on the top)

12
Phase 1
institution - approach
 Planning:
• SAO Strategic Development Plan
• Annual plan
• Individual objectives for staff members
 Organization:
• Processes
• Regulations
• Following deadlines

13
Phase 1
institution – choosing strategy
Strategic development plan determines:
 long-term strategic development objectives
and
 results to achieve

14
Phase 1
institution – specifying strategy
The Latvian SAO defined three strategic development
areas:
 Improvement of the audit work
 Development of the SAO resources (competent
personnel, infrastructure, supporting tools, etc.)
 Strengthening communicationand cooperation
activities

15
Phase 1
institution – defining directions & results
Example for defining results for one of strategic areas –
“Improvement of the audit work”
 Audit methodology for financial, compliance,
performance audits complies with the IAS
 Switch to electronic working documentsis
implemented
 Quality management system is developed and ensures
regular reassessment of processes
 Teammate software is used in audit work
(documentationof audit work, supervision of
recommendations,resource planning, time recording)

16
Phase 1
institution – defining directions & results
Example for defining results for one of strategic areas –
“Improvement of the audit work” (follow-up)
 Data analysis software IDEA is used in audit work
(enabling 100% checks instead of sampling, where
appropriate)
 Audit topics are identified based on strategic risk
assessment
 Modifications to legal framework are initiated as a
result of audits
 Audited entities have implemented at least 75% of
recommendations

17
Phase 1
institution – defining Annual Action Plan
 SAO’s Strategic Development Plan as the basis for SAO’s
Annual Plan (AP)
 AP includes annual audit plan and plan of support and
development activities
 For each activity AP determines:
• responsible official
• timeline
• inputs in man-hours
• budget

18
Phase 1
institution – Audit Plan
 SAO’s Audit Plan as an integral part of the Annual Plan
Tax payers’ interests + strategic risk assessment -
Audit priorities -
Audit topics -
Annual Audit Plan
 Annual Plan as the basis for individual objectives of
staff members

19
Phase 1
institution – setting individual objectives for staff
members
 Annual Plan as the basis for individual objectives of
staff members
 Annual objectives of the staff members include
individual objectives and outputs for staff members,
based on objectives of the particular structural unit
 Individual objectives for staff members are:
• well defined and achievable
• measurable and imposing deadlines
• substantial and result-oriented

20
Phase 1
institution – scrutinizing the system
Quality Management system (QMS) as a core to ensure
quality and added value
Why did we decide to “go for” QMS?
 QMS builds quality into the audit process
 QMS ensures continuous control of audit process from
senior management level to junior auditor, to avoid or
minimize negative impact on quality and price of the
final product

21
Phase 1
institution – QMS
The Latvian SAO decided to apply both:
 Audit process quality control
• audit process quality control during the audit
process performed by audit unit internally (hot
review 1)
• audit process quality control after the audit is
completed performed by “external” reviewers (cold
review)
 Quality improvement measures
• audit process quality control during the audit
process performed by “external” reviewers (hot
review 2)

22
Phase 1
institution – challenges with QMS
Advantages and disadvantages of the reviews performed
by “externals”
Advantages:
 adds value and quality
 straightforward and unlimited exchange of experience
 learning process for both – auditors from Audit Teams
& auditors - reviewers
Disadvantages:
 very sensitive activity in a small office like ours
 time consuming – takes time from those who perform
checks as well as from those who are checked

23
Phase 2: Supreme Audit Institution – further
improvement and innovative implementation of
ISSAI 12
or
how the ISSAI 12 principles:
(1) strengthening accountability, transparency and
integrity
(2) demonstrating on-going relevance to citizens and
(3) SAI being a model organization
are to be applied by the Latvian SAO in 2014-2017

24
ISSAI 12
SAO’s new strategy for 2014-2017 is based on:
 assessmentof implementation of the SAO’s 2010-2013
strategy
 results of strategic risk assessmentof sectors of
national economy
 developments within EUROSAI and INTOSAI
 the need to address weaknesses identified during PMF
«self-assessment»exercise

25
ISSAI 12: Strategy for 2014-2017
“Making difference in the lives of citizens” is translated
into 2 strategic development directions of the SAO –
 support to the Parliament and the Government in
enhancement of good governance and
 ensuring sustainable development, on-going relevance
and increased added value of the SAO

26
I Support to the Parliament and the Government in
enhancement of good governance – new initiatives
 at least 30% of SAO’s resources allocated to performance
audits
 financial audits result in 2 opinions – on (1) accuracy of
financial statementsand on (2) compliance of operations
 at least 4 «ad-hoc» audits annually
 each of 119 municipalities audited once per 3 years
(compliance and/or performance audits)

27
 added value to good governance and financial impact as
audit priorities
 Increased involvement of the Parliament in reviewing
audit results and recommendations (informative report
once a week)
 Ministers are regularly met and «motivated»

28
 Cooperation with the Prosecutor’s General Office is
enhanced (public debate regarding the SAO as a Court)
 Level of involvement of public in audit planning and
execution is increased

29
II Ensuring sustainable development, on-going
relevance and increased added value of the SAO
new initiatives
 Financial impact from SAO’s recommendation
considerably exceeds investments into the SAO (1:5 euro)
 Peer–review performed and recommendations
implemented (peer-review team: Slovakia, Netherlands,
Denmark, Poland, USA SAIs)

30
new initiatives
 Audit methodology updated, based on newly adopted
ISSAIs 100, 200, 300 and 400
 SAO – the institution leading adoption and application of
INTOSAI public sectorstandards in Latvia

31
new initiatives
 Involvement of all staff members in discussing strategic
issues
 Renumeration policy ensures strict correlation between
the salary and the „product“ provided by an individual
staff member

32
new initiatives
 Simple, clear and regular SAO «messages» to the public;
more than 50% of society trusts the SAO (“stories”,
videos, info graphics, etc.)
 Regular visits to regions – meetings with citizens
 Pro-active co-operation with media; journalist «round
tables»

33
new initiatives
 Proactive use of Facebook, twitter, YouTube
 Professional support to SAIs from «acceding» countries or
former SU countries
 Providing expertise in capacity building projects financed
by the EU
 Hosting Contact Committee meeting in 2015

34
Is this „a lot“
or
„almost nothing“
in 20 years?
Thank you for attention!
State Audit Office of the Republic of Latvia
50 SkanstesStreet, Riga LV-1013
Telephone:+371 7017500
Fax: +371 7017673
E-mail: Marita.Salgrave@lrvk.gov.lv
Home page: http://www.lrvk.gov.lv

Successes and challenges of the Latvian State Audit Office, Marita Salgrave, Council Member, State Audit Office, Latvia (long)

Recommended

Recommended

More Related Content

Similar to Successes and challenges of the Latvian State Audit Office, Marita Salgrave, Council Member, State Audit Office, Latvia (long)

Similar to Successes and challenges of the Latvian State Audit Office, Marita Salgrave, Council Member, State Audit Office, Latvia (long) (20)

More from Support for Improvement in Governance and Management SIGMA

More from Support for Improvement in Governance and Management SIGMA (20)

Recently uploaded

Recently uploaded (20)

Successes and challenges of the Latvian State Audit Office, Marita Salgrave, Council Member, State Audit Office, Latvia (long)