Zita Zarina, Relationships between Supreme Audit Institutions and Parliaments, Ankara, 8 November...

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Follow up on findings and recommendations together with

Parliament

Zita Zarina, State Audit Office, Latvia

Ankara, 8-9 November 2016

SAI Network ConferenceDeveloping Effective Working Relationships

between Supreme Audit Institutions and Parliaments

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EUFollow up on findings and recommendations

together with Parliament

SAO of Latvia: scope and types of audits

Parliament structure (incl.functions of

Standing Committees)

Public Expenditure and Audit Committee

Cooperation b/w SAO and Parliament: • Legal framework• Practical cooperation Conclusions

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SAO of Latvia: scope of audits

Revenues, expenditure and property of state

institutions (except

Parliament)

Revenues, expenditure and

property of municipalities

European Union and other Funds

Revenues, expenditure and property of state

and municipality-

owned enterprises

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SAO of Latvia – types of audits

• annual accounts of ministries and other central state institutions (by April 30)

• annual opinion on implementation of State and municipal budgets submitted by the Minister of Finance to the Parliament (by September 15)

Financial audits

• SAO is independent in defining theme and topic of audit and auditing period

Compliance audits

• SAO is independent in defining theme and topic of audit and auditing period

Performance audits

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Parliament structure

• 100 MPs• 6 Parliamentary Groups • Standing Committees - 16• Subcommittees - 14• Special Committees (Parliamentary

investigative committees)• Permanent delegations

12th Saeima (since Nov.2014)

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Parliament structure Parliamentary groups No. of MPs

Concord (Saskaņa) 24

Unity (Vienotība) 23

Union of Greens and Farmers (ZZS) 21

National Alliance "All For Latvia!" – "For Fatherland and Freedom/LNNK" (VL – TB/LNNK)

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Latvian Regional Alliance (LRA) 7

For Latvia from the Heart (NSL) 7

Unaffiliated members of parliament 1

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Parliament structure

Coalition Vienotība, ZZS,

VL-TB/LNNK (23+21+17=61)

Opposition Saskaņa, LRA,

NSL (24+7+7=38)

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EUParliament structure

Standing Committees

Regulated by the Saeima Rules of Procedure

Work in a specific field or carry out

specific tasks

Ensure parliamentary scrutiny

of topical issues of public interest and work of the government,

ministries, public institutions or local governments, providing

recommendations for improvements needed

Prepare matters to be considered at

Saeima plenary sittings, consider draft laws, proposals and

submissions

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Standing Committees

Meets on regular basis with ministers or

representatives of relevant institutions in

order to deal with issues that fall within

its competence

Has the right, without the Presidium's

mediation, to directly request information

and explanations from relevant ministers and

institutions, local governments

May use opinions of experts in the relevant field, social partners

and NGOs

Meetings are open to the public; however, may hold a closed

meeting

May convene joint meetings

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Standing CommitteesComposition of committees is proportionate to Parliamentary

Groups represented in the Saeima (with the exception for MESC and NSC, both having 1 representative from each PG)

An MP may be a member of no more than 2 Standing

Committees and 2 Subcommittees at a time

An MP may be the chairperson of only one Standing Committee at a time

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Standing CommitteesComposition of committees is proportionate to Parliamentary

Groups represented in the Saeima (with the exception for MESC and NSC, both having 1 representative from each PG)

An MP may be:•a member of no more than 2 Standing Committees and 2 Subcommittees at a time•the chairperson of only 1 Standing Committee at a time

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Parliament structure Standing CommitteesSaeima currently has 16 Standing Committees

Foreign Affairs Committee Social and Employment Matters Committee

Budget and Finance (Taxation) Committee

Mandate, Ethics and Submissions Committee

Legal Affairs Committee Parliamentary Inquiry Committee

Human Rights and Public Affairs Committee


Education, Culture and Science Committee National Security Committee

Defence, Internal Affairs and Corruption Prevention Committee

Citizenship, Migration and Social Cohesion Committee

Public Administration and Local Government Committee European Affairs Committee

Economic, Agricultural, Environmental and Regional Policy Committee Sustainable Development Committee

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EUPublic Expenditure and

Audit Committee

Dedicated committee to

review SAO reports

First establised during 5th Saeima (1993 – 1995) as

The Audit Committee

Transformed into PEAC during 8th Saeima (2002 –

2006)

17 members (9 coalition

8 opposition)

Chaired by Mr. Andris Bērziņš during 9th,

10th (2006 -2011), 12th (since 2014) Saeima

The Chairman of the Committee represents the

coalition

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Audit CommitteeDuring the lowest point of the economic recession in Latvia (2008–2011) as well as after the financial crisis, PEAC was in charge of parliamentary scrutiny of the financial and economic stabilization and recovery, including monitoring the implementation of the international loan programme.

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PEAC has two core functions

Parliamentary scrutiny of public expenditure Internal audit of Saeima

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Audit Committee

Parliamentary scrutiny of public expenditure:• review of the SAO findings resulting from compliance and

performance audits • setting timeframe for briefing PEAC on the

implementation of the SAO recommendations • assessing the measures taken by the auditees to

implement SAO recommendations • identifying problems regarding public expenditure and

proposing measures for public authorities to eliminate them

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Audit CommitteeInternal audit of the Saeima:• audit of bookkeeping records, review of

expenditure compliance and efficiency audits, reporting to the Presidium of the Saeima

• hiring an independent certified auditor for auditing the annual financial statements of the Saeima and submitting the relevant findings to the Presidium of the Saeima no later than 6 months after the end of each reporting period.

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Audit CommitteeIn 2015, PEAC met 68 times: • 47% of meetings focused on SAO findings, • 34% on parliamentary scrutiny of public

expenditure, • 10% on legislative proposals, • 9% on findings of parliamentary expenditure

audit.

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Example: PEAC work planSeptember - December, 2016

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PEAC work plan

Date Subject Participants

September 6 Accepting PEAC work schedule SAO

September 7 Cabinet of Ministers annual report - results of financial audit SAO, State Chancellery

September 14Performance audit "Does the protection policy of cultural monuments planned and implemented in Latvia ensure their preservation?" - presentation of audit findings

SAO, Ministry of Culture, State Inspection for Heritage Protection

September 21Performance audit “Information Systems in Health Care”- status of implementation of audit recommendations

SAO, Ministry of Health, National Health Service

September 27Performance audit "Municipal financial resources for culture, recreation and sport activities" - status of implementation of audit recommendations

SAO, municipalities of Cēsis, Bauska, Dr.oec.Inga Vilka

October 5Performance audit "Whether the Society Integration Foundation ensures traceability of the allocation of the State budget funds to associations and foundations, as well as control over the use thereof?" - audit results

SAO, Society Integration Foundation

October 12 International cooperation activities of SAO SAO, Ministry of Foreign Affairs

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PEAC work plan sept.-dec.2016Date Subject Participants

October 19

Performance audit "Has the process of selling the state-owned capital shares of Joint Stock Company “Citadele banka” seen such shat the state sould gain maximum possible amount of funds?" - audit results

SAO, Ministry of Economics, State Privatisation Agency

October 25SAO's role in the improvement of IT security, legitimate use of SW and IT management in municipalities

SAO, NGOs, Latvian Association of Local and Regional Governments

November 2Financial audit on 2015 Annual Report of the Republic of Latvia on State Budget Execution and Local Government Budgets - audit results

SAO, Ministry of Finance, Ministry of Justice, Ministry of Environmental Protection and Regional Development, Latvian Association of Local and Regional Governments, Lielvārde municipality, Latvian Association of Certified Auditors

November 8Implementation of SAO audit recommendations - summary and follow-up.

SAO, Ministry of Finance

November 16 Discussion paper by SAO on State owned enterprises

SAO, Ministry of Economics, Cross-Sectorial Coordination Center, Foreign Investors' Council of Latvia, Latvian Chamber of Commerce and Industry, Providus (Center for public policy), Delna (Transparency International), Baltic Institute of Corporate Governance

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PEAC work plan sept.-dec.2016Date Subject Participants

November 30The compliance of activities by municipal joint stock company "Daugavpils siltumtīkli" with the planning documentation and normative regulations

SAO, municipality of Daugavpils, "Daugavpils siltumtīkli"

December 7

Performance audit "Compliance of municipal waste management system with the intended objectives and regulatory enactments" - status of implementation of audit recommendations

SAO, Ministry of Environmental Protection and Regional Development

December 12Performance audit "Efficiency of limited liability company "Health care real estate" in managing state real estate used by the health care system"

SAO, State Joint Stock Company «State Real Estate», Ministry of Health

December 21Performance audit "Does state provide patients with the efficient ambulatory health care services?"

SAO, Ministry of Health

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Cooperation b/w SAO and Parliament

Legal framework

Practical cooperation

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Legal framework

State Audit Office Law

Appointing/ approving of SAO management

Reporting – SAO obligations

Rights to express opinion

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EULegal framework

Appointing/ approving of SAO management

• Saeima appoints the Auditor General for the term of 4 years in accordance with the procedures of the Saeima Rules of order

• The Auditor General recommends to Saeima for approval the candidate members of the Council of the State Audit Office for the term of 4 years

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EULegal framework

Reporting - SAO’s obligations

• to provide a qualified opinion to Saeima on the Annual Report by MoF concerning the implementation of the State budget and budgets of local governments

• to provide qualified opinions regarding the correctness of the preparation of Annual Reports by ministries and other central public institutions

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EULegal framework

Reporting - SAO’s obligationsTo submit reports to the Saeima and the Cabinet of

Ministers:

of those financial audits where SAO issues opinion with

annotations, a negative opinion, or refusal to issue an opinion

of all performance audits by SAO

containing especially important and

significant findings

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EULegal framework

Reporting - SAO’s obligations• The audit of the annual financial accounts of

SAO is performed by a sworn auditor selected by Saeima

• SAO submits the annual financial accounts together with the opinion of a sworn auditor to Saeima and State Treasury

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EULegal framework

Reporting - SAO’s obligationsAfter the Council of SAO has approved the annual audit plan, the Auditor General shall send to Saeima an explicit report regarding the planned audit directions (without naming the audited entities)

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EULegal framework

Reporting - SAO’s obligations

•There is no legal provision for Saeima to “order” specific audits•SAO is fully independent with respect to planning the audits •SAO does not consult Saeima on its annual work programme of audits•However, each year prior to preparation of its annual audit plan SAO invites Saeima to express their interest in general areas to be audited

Independence of SAO

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EULegal framework

Rights to express opinionSAO has the right to receive draft regulatory enactments examined by the Saeima and the Cabinet of Ministers and to provide opinion if: • the regulatory enactments may affect the revenues and

expenditures of the State and local governments• enactments provide for actions with the property of the

State and local governments• enactments concern resources allocated by the EU and

other international organisations or institutions included in the State budget or local government budgets

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Practical cooperation

Reporting to the Parliament

Practical examples

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EUPractical cooperation


SAI audit reports after completion are sent to the

respective line ministry, PEAC + other relevant Parliamentary

committees if necessary

PEAC calls for a committee meeting

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PEAC meetin

g

Auditee presents its opinion on the audit report,

conclusion, recommen

dations

SAO provides additional comment

s/ clarificatio

ns, if necessary

Other stakeholder

s (public bodies, NGO’s)

reflect on audit report

and auditee's reaction

MPs hold a discussion

PEAC sets a schedule for

auditee for the reporting on

implementation of

recommendations and for

SAO for providing their

opinion on progress

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Reporting to the ParliamentSAO regularly prepares and presents to PEAC

overview on the status of all audit recommendations with implementation deadline during the past year (once a year)

overview on the implementation of all audit recommendations within each audit field for a period of last three years

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There is no fixed formal Parliamentary procedure in place for reviewing SAO reports

It is a common practice for SAO to

meet with PEAC prior or between committee meetings to discuss

the latest audit findings, irregularities

detected, work in progress etc.

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SAO communicates with the auditees on quarterly basis

regarding implementation status of recommendations

Cases of non-compliance or significant delays are put forward

to the Parliament – either within or outside the scope of regular

progress reporting

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•27 financial audit reports •18 performance audit reports (covering also compliance issues)•24 other reports and documents •SAO annual activity report

During 2015 SAO

submitted to

Saeima

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Examples I. Audit on Prison Hospital and health care

provided to inmates (implementation of recommendations in progress, promising)

II. Audit (finding) regarding unified remuneration system in public sector (implementation of recommendations in progress, jeopardised)

III. Audit on IT management in municipalities (implementation of recommendations successfully completed)

IV. Survey of Members of Parliament

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Example I – Prison Hospital

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Examples (I)• Audit: Evaluation of operations of the Prison

Hospital of Latvia • Auditee: The Ministry of Justice and the Prison

Administration • Aim of the audit: to evaluate the operations of the

Prison Hospital in Olaine prison with the focus on efficient use of the Prison Hospital infrastructure to provide health care services to inmates

• Infrastructure investments - 9.3 MEUR of state budget funds

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Examples (I)Audit findings:• MoJ (responsible for penal policy) has not

ensured the assessment and promotion of the most appropriate health care model for the imprisoned and has not taken a decision regarding efficient use of Prison Hospital infrastructure and medical equipment

• PA has not created an efficient control system to monitoring operation of Prison Hospital

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Examples (I)Audit recommendations to MoJ and PA: • to develop a model for health care in prisons• to identify the actual needs and develop a

formal list of medical services available to inmates, and organize the operations of Prison Hospital accordingly

• to review the actual use of Prison Hospital infrastructure and medical equipment and ensure the investment is used most efficiently

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Examples (I)PEAC involvement: • 3 scheduled PEAC meetings with participation of SAO, MoJ, PA and

other stakeholders:1) 01/04/2014 - review of audit reports (“Provision and organization

of health care services for the imprisoned”; “Evaluation of operations of the Prison Hospital of Latvia”)

2) 03/03/2015 - discussion regarding Prison Hospital operations, result indicators and costs

3) 23/02/2016 - discussion on morbidity of inmates and review of MP suggestions for improving the operations of Prison Hospital

• several informal meetings b/w SAO and PEAC• several on-spot visits to prison and Prison Hospital by PEAC

members

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Example II - remuneration

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Examples (II)• Audit: On 2013 Annual Report of the Republic

of Latvia Regarding Execution of State Budget and Budgets of the Local Governments Auditee: Ministry of Finance

• Specific audit finding (since 2009): the remuneration system of state and municipal institutions is not unified and based on equivalent conditions and financial resources

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Examples (II)Audit recommendation to MoF and State Chancellery: to ensure equal conditions for implementation of unified and fair remuneration system till 15/01/2017. MoF initially accepted the recommendation and implementation deadline, however later asked for the recommendation to be closed.

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Examples (II)PEAC involvement

Scheduled meetings:- Oct.2014 – presentation and review of the audit report; PEAC instructs MoF to report on progress regularly- 29/03/2016 – review of the progress, discussion on necessary measures, PEAC instructs MoF to prepare official report with proposed solutions by Sept.2016.- 20/09/2016 – review of the progress, presentation of survey results (comparison of remuneration: civil service vs. private sector); postponing of submission or official report till end 2016. - 30/12/2016 – review of the progress and official report by MoF

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Example III - IT

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Examples (III)Audit: Software management assessment in local governments and local government educational institutionsAuditee: 14 local governments (incl.Riga)Aim of the audit: to verify the compliance and assess the effectiveness of software management in local governments and local government educational institutions

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Examples (III)Audit recommendations (169): - to comply with SW licensing terms, eliminate violations of intellectual property rights - to improve management of IT security and data protection, ensure compliance with the basic requirements of regulatory enactment, reduce the threat to the operation of IS of the institution, data protection and security- to improve organization of accounting and effectiveness of IT management with a long-term perspective

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Examples (III)PEAC involvement: - 3 scheduled PEAC meetings with participation of SAO and stakeholders:1) 9/10/2013 - presentation and review of audit report 2) 14/10/2014 follow-up on implementation of

recommendations3) 25/10/2016 discussion on impact of implemented

recommendations - written communication b/w SAO and PEAC on status of implementation of recommendations in between

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Example IV - questionnaire

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Examples (IV)General problem: short term approach to the state budget planning and execution

SAO repeatedly issued audit recommendations to the government to ensure that planning and implementation of the state budget is directly linked to the long term state policies and planning documents

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Examples (IV)Specific problem: SAO audit recommendations were repeatedly not taken into account Solution: to address Saeima for help - in the form of questionnaireMPs were asked to express their opinion - whether the state budget is prepared with the main priorities of the society in mind and is it based on the long term policy planning documents: Sustainable Development Strategy of Latvia 2030; National development plan 2020; Law on medium term budget framework 2015 – 2017

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Examples (IV)Q: What is overall satisfaction with the budget structure, planning process and the information availability for the achievement of goals?

A: 33% - satisfied with the process; 67% – not satisfied with the process

Q: Does the state budget offer sufficient and understandable information on the effective allocation and expenditure of the budget funds for the benefit of the society?

A: 83% - insufficient information; 17% - sufficient information

Q: Are political discussions regarding evaluation of the budget expenditure sufficient?

A: 69% - insufficient discussions; 31% - sufficient discussions

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Examples (IV)

Practical applicability of survey results: SAO could draw attention of the Ministry of Finance to the Parliaments’ low satisfaction level with the budget planning process

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ConclusionsMutual trust and respect

are essential

SAI should gain and retain the respect of MPs – by demonstrating high professional standards, independence and firm position

SAI should invest into making sure MPs understand SAI mission, functions, methods and reports («tailor-made»

presentations)

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Conclusions

Regularity of communication

(both formal and informal) does matter

Personalities (professional background,

previous experience of

MPs) do matter

Flexibility and adjusting to the

needs and interests of

different MPs is helpful

To work with both coalition

and opposition MPs is

important

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Thank you for your attention!

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Zita Zarina, Relationships between Supreme Audit Institutions and Parliaments, Ankara, 8 November...

Government & Nonprofit

Transcript of Zita Zarina, Relationships between Supreme Audit Institutions and Parliaments, Ankara, 8 November...