www.intosaijournal.org spring 2019 edition

The International Journal of Government Auditing is

published quarterly in Arabic, English, French, German

and Spanish on behalf of INTOSAI (International

Organization of Supreme Audit Institutions). The Journal,

which is an ofcial organ of INTOSAI, is dedicated to

the advancement of government auditing procedures

and techniques. Opinions and beliefs expressed are

those of individual contributors and do not necessarily

reect the views or policies of the organization.

The editors invite submissions of articles, special reports,

and news items, which should be sent to the editorial

ofces at:

U.S. Government Accountability Ofce

441 G Street, NW, Room 7814

Washington, D.C. 20548

U.S.A.

(Phone: 202-512-4707; Fax: 202-512-4021; E-mail:

intosaijournal@gao.gov).

Given the Journal’s use as a teaching tool, articles most

likely to be accepted are those that deal with pragmatic

aspects of public sector auditing. These include case

studies, ideas on new audit methodologies, or details

on audit training programs. Articles that deal primarily

with theory would not be appropriate. Submission

guidelines are located at http://intosaijournal.org/our-

submissions/.

The Journal is distributed electronically to INTOSAI

members and other interested parties at no cost. It is

also available electronically at www.intosaijournal.org

or www.intosai.org and by contacting the Journal at

intosaijournal@gao.gov.

Spring 2019

Vol. 46, No. 2

Board of Editors

Margit Kraker, President, Rechnungshof, Austria

Michael Ferguson, Auditor General, Canada

Nejib Gtari, Premier Président, Cour des Comptes, Tunisia

Gene L. Dodaro, Comptroller General, United States of America

Manuel E. Galindo Ballesteros, Comptroller General, Venezuela

President

James-Christian Blockwood (U.S.A.)

Vice President

Michael Hix (U.S.A.)

Editor

Heather Santos (U.S.A.)

Special Contributors

Arunas Dulkys (Lithuania)

Wilf Henderson (U.K.)

Administration and Operations

Peter Knopes (U.S.A.)

Associate Editors

AFROSAI Secretariat

ARABOSAI Secretariat

ASOSAI Secretariat

CAROSAI Secretariat

EUROSAI Secretariat

OLACEFS Secretariat

PASAI Secretariat

INTOSAI General Secretariat

Ofce of the Auditor General, Canada

Ofce of the Auditor General, Tunisia

Ofce of the Auditor General, Venezuela

U.S. Government Accountability Ofce

SSUE

Editorial

News in Brief

Feature Stories

Banking Oversight: Developing a Useful SAI Framework

Detect Fraud, Improve Internal Control Using Popular Strategy,

Performance Tool

Corruption and Money Laundering: The Nexus and the Way Forward

Eradicating Corruption: Measuring, Monitoring SDG16 Progress

Inside INTOSAI

Spotlight on Capacity Building

by James-Christian Blockwood, Managing Director of the

U.S. Government Accountability Ofce Strategic Planning and

External Liaison and President of the International Journal of

Government Auditing

In his 1996 speech as World Bank President, James David

Wolfensohn stressed the need to address accountability,

capacity and transparency to ensure sufcient and efcient

use of resources, particularly for those most in need.

In that same speech, he underscored the belief that we must

also deal with the “cancer of corruption.” It’s a compelling

message describing actions that rob a nation and its citizens,

undermine trust and weaken condence in governments.

Viewing corruption through this lens also made it clear—

the world must do more than merely treat this "disease."

We must work toward a cure and implement measures to

prevent its return.

Though we have made progress in addressing corruption,

given the global climate where uncertainties are inherent

in complex systems of governance—shifting demographics,

economic changes, new and evolving risks and technological

innovation—we still have work to do.

We must lead by example. We must communicate. We

must also translate our words into actions and forge

enduring partnerships with a true spirit of cooperation

ADDRESSING THE "CANCER OF CORRUPTION"

WITH COMMUNICATION, COLLABORATION

AND CAPACITY DEVELOPMENT

International Journal of Government Auditing—Spring 2019

EDITORIAL

"We must lead by example. We

must communicate. We must also

translate our words into actions

and forge enduring partnerships

with a true spirit of cooperation

and unmatched integrity."

and unmatched integrity. I am fortunate, and proud, to be

part of an organization and part of a global community

enhancing visibility, partnerships and capacity to address

these topics—topics that bear considerable importance to

us as individuals, organizations, nations and the world.

In recent years, technology and data have greatly impacted

anti-corruption and transparency initiatives, so it’s no surprise

these trends have risen to the forefront of our conversations.

At the same time, highlighting efforts

in communication, collaboration and

capacity development is crucial, as

these elements will remain at the

core of ghting corruption.

The U.S. Government Accountability

Ofce (GAO) has made great

strides in creating a climate rich

with the vital ingredients necessary

to help combat fraud, waste, abuse

and mismanagement and promote

good governance. Critical to its success in these areas

are GAO’s development and deployment of tools such

as Generally Accepted Government Auditing Standards,

Standards for Internal Control in the Federal Government,

and Framework for Managing Fraud Risks in Federal

Programs. Under the leadership of the U.S. Comptroller

General, Gene L. Dodaro, GAO has endeavored to impart

knowledge widely and partner to assist when and where

needed.

I aspire to employ the same approach as Managing Director

for GAO’s Strategic Planning and External Liaison (SPEL),

which oversees several programs with global reach—the

International Journal of Government Auditing (Journal),

International Auditor Fellowship Program (IAFP) and

Center for Audit Excellence (CAE)—that lend themselves to

communicating, connecting and cultivating capacity to foster

positive change in the global accountability community.

The Journal is the ofcial communication organ of the

International Organization of Supreme Audit Institutions

(INTOSAI), an umbrella organization that provides an

institutionalized framework for 194 member Supreme

Audit Institutions (SAIs) worldwide. An essential resource to

inform and educate, the Journal has been instrumental in

increasing our ability to share insight and best practices

across INTOSAI more pervasively and quickly through social

media (our Twitter audience has more than doubled over

the past two years) and more substantively by introducing

spotlight sections and developing thematic approaches, such

as this edition on anti-corruption and good governance.

The Journal’s ability to incorporate

and convey diverse perspectives

and experience spanning the

globe creates a force multiplier in

our efforts to connect more broadly

and expose approaches that can

help shape the accountability

community of the future.

As our community continues to

adapt and adjust, communicating

will become an increasingly important skill that, when

combined with collaboration and leadership, will transform

how we ght corruption and how we advance good

governance.

The IAFP weaves all of these concepts together by

emphasizing communicating and collaborating across

regions and cultures while also stressing the importance

of leadership. The program, designed to empower

future generations, has graduated more than 600 audit

professionals in its 40-year history and has created a

network of colleagues with a collective understanding about

the power of communicating, collaborating, and leading

and the power that comes with harnessing these skills to

effectuate change.

Change is not easy, especially when facing headwinds of

corruption and limited accountability. Through the CAE, we

leverage the knowledge and experience of former GAO

senior-level professionals and partner with world-renowned

organizations to provide training and technical support to

improve performance and transparency and ensure the

www.intosaijournal.org

EDITORIAL

"I am fortunate, and proud, to be part of an

organization and part of a global community

enhancing visibility, partnerships and capacity

to address these topics—topics that bear

considerable importance to us as individuals,

organizations, nations and the world."

International Journal of Government Auditing—Spring 2019

EDITORIAL

sound use of public funds. We recently signed an agreement

with the World Bank that strengthens our existing partnership

and expands capacity development support.

SPEL collaborative efforts include managing GAO

participation in INTOSAI, which has several working

groups—Fight Against Corruption and Money Laundering,

Value and Benets of SAIs, and Big Data—that promote

integrity, open data and transparency initiatives. GAO has

also partnered with the INTOSAI-Donor Cooperation (IDC),

a strategic global partnership between INTOSAI and 23

development partners. The IDC has led to augmented SAI

capacity support resulting in far-reaching achievements that

have positively affected SAIs around the globe, especially

in the African and Pacic regions.

In addition to existing partnerships, creating new ones

is also part of the agenda. Groups like the Organisation

for Economic Co-operation and Development (OECD)

Auditors Alliance provide unique global forums encouraging

cooperation and facilitating information exchange on topics

of global interest. In March, I attended the Auditors Alliance

meeting, which highlighted “Auditors and Technology” and

included enriching discussions on interesting digital trends

impacting audit work with a particular emphasis on how

audit institutions are taking steps to prevent corruption and

resource waste.

Technological advances in articial intelligence, automation

and data analytics provoked stimulating exchanges on

employing these tools to create efciencies and enhance

audits; however, modernization does not eliminate the need

for auditors. In some instances, modernization will involve more

human interaction and dialogue—leveraging communication

platforms to more broadly disseminate audit ndings to

increase transparency and providing human interpretation

into data results to help uncover root causes of corruption.

The goal is to integrate, not replace. Incorporating new

technologies and new approaches will force us to reexamine

our strategies, build data literacy and nd ways for more

collaborative work.

The digital evolution brings ample opportunities, as well

as sizable challenges. This evolution, along with the global

climate, will require substantial adaptation—individually,

organizationally, nationally and globally—which, in turn,

will require considerable strengths in communicating,

collaborating and capacity development if we are to build on

the progress we have made in addressing good governance

and successfully dealing with the “cancer of corruption.”

James-Christian Blockwood, GAO SPEL Managing Director, and

Ceyla Pazarbasioglu, World Bank Vice President, sign agreement

reafrming commitment to provide assistance to developing countries

www.intosaijournal.org

NEWS IN BRIEF

NEWS FROM SAIs

AROUND THE WORLD

News from Vietnam

SAV RELEASES 2019 AUDIT PLAN

The State Audit Ofce of Vietnam (SAV) issued its 2019

audit plan, which will include 190 audits in the coming year.

The plan, ofcially announced earlier this year by Vietnam’s

Auditor General (AG) was developed through feedback

received from the National Assembly Standing Committee,

Prime Minister, Central Inspection Committee and Central

Internal Affairs. The plan also incorporates comments from

the Government Inspectorate regarding the 2019 inspection

plan.

Key highlights in the SAV 2019 audit plan, include:

• Reduction in audited units and audit topics. This aims to

improve audit quality and efciency, particularly for

the State budget, where the SAV will conduct 59 audits

(14 ministries and branches, as well as 45 provinces and

municipalities). Twelve performance audits are scheduled,

which include auditing resource use and management in

four districts and cities and State-funded programs and

investment projects.

• Implementing 30 Thematic Audits. Audit themes include

import and export tax collection management; national

target program on sustainable poverty reduction for

2016-2020; nancial autonomy in public hospitals and

universities; and Build-Transfer (BT) investment projects.

Some audits are larger-scale to address comprehensive,

cross-sectoral management evaluations in using public

resources.

• Auditee/Audit Venue Pilot Rotation. For the rst time, the

SAV will conduct a pilot rotation of auditees and audit

venues among SAV audit units in an effort to improve audit

quality, transparency and accountability. Simultaneously,

the SAV will continue improving audit planning methods in

accordance with international practices.

SAV AG ISSUES NEW

AUDIT FRAMEWORK

Dr. Ho Duc Phoc, Vietnam's

AG, issued an audit framework

on nal settlements of public

enterprise state capital when

ofcially transformed into joint-

stock companies. The framework,

supported by sample forms that can

be applied to audit-related reports

and documents, calls for specialized audit

departments and regional state audit ofces to

focus on:

• Data truth and fairness in parent company

nancial statements;

• Equity expense settlements and money

obtained;

• Funding support for redundant workers;

• Corporate nancial values;

• Land management and use conversion;

• State budget obligations; and

• State capital determination.

The framework also highlights assessing

corporate compliance with laws and

regulations and evaluating corporate

methods used in choosing strategic

partners.

News from Japan

International Journal of Government Auditing—Spring 2019

NEWS IN BRIEF

News from Singapore

News from Myanmar

BOARD OF AUDIT WELCOMES KOBAYASHI AS NEW PRESIDENT,

OKAMURA AS COMMISSIONER

Dr. Mari Kobayashi assumed the Presidency of Japan’s Board of Audit (BOA) on December 7,

2018. She succeeds Mr. Teruhiko Kawato, who retired from ofce on October 22, 2018. Prior to

assuming her position as BOA President, Dr. Kobayashi served as BOA Commissioner (since 2013)

and as Acting President upon Mr. Kawato’s retirement. Her previous experience also includes a

professorship at the Graduate School of Political Science at Waseda Univiersity in Tokyo.

In a related move, Mr. Hajime Okamura was appointed as BOA Commissioner. He joined the Board

in 1983 and has held several important positions within the BOA General Executive Bureau, including Secretary General,

prior to his appointment as Commissioner. For additional information, contact the Board of Audit via email at liaison@jbaudit.

go.jp or visit www.jbaudit.go.jp/English/.

SINGAPORE WELCOMES NEW AUDITOR GENERAL

Ms. Goh Soon Poh was appointed Auditor General of Singapore on February 8, 2019, by the

President of Singapore. She succeeds Mr. Tan Yoke Meng Willie, who retired on the same date.

Prior to joining the Auditor General Ofce (AGO), Ms. Goh held senior management positions in

various public agencies, including the Ministries of Education, Finance, and Home Affairs, as well as

the Prime Minister’s Ofce. For additional information on the AGO, visit http://www.ago.gov.sg or

email the ofce at ago_email@ago.gov.sg.

MYANMAR, NORWAY COLLABORATE ON

ENVIRONMENTAL AUDIT WORKSHOP

The Supreme Audit Institutions (SAIs) of Myanmar and

Norway jointly held an Environmental Audit workshop in Nay

Pyi Taw, Myanmar, in February. The workshop, designed to

introduce environmental auditing in line with the International

Standards of Supreme Audit Institutions (ISSAIs), included

senior ofcials, ofcers and staff from SAI Myanmar (headquarters and regional ofces). Experts from SAI Norway dened

environmental auditing concepts, theories, frameworks and related standards and guidelines and discussed performance

auditing using an environmental perspective. Expert guidance also included establishing connections and relationships (to,

between, among) the Sustainable Development Goals (SDGs); risk assessments and analyses; and audit design.

The two-day event provided participants with a deeper understanding and increased capacity to conduct environmental

audits that comply with ISSAIs, select audit topics, and disclose audit ndings in reports.

News from Belarus

www.intosaijournal.org

NEWS IN BRIEF

SAI BELARUS LAUNCHES SELECTIVE INSPECTIONS SYSTEM USING RISK-BASED APPROACH

The Supreme Audit Institution (SAI) of Belarus introduced a new selective inspections system at the

beginning of the year. These audits, coordinated by the SAI and carried out by monitoring and oversight

bodies per national law, are based on risk assessment criteria established (and ranked) by evaluating

legal violation probabilities.

This risk-oriented approach, developed and employed by each control and oversight body, ensures

transparency, objectivity and validity and provides a mechanism to prioritize audit work. The approach

also provides exibility, as the SAI has dened standards that allow risk assessments and ranking to be

modied should certain benchmarks occur. For example, a risk assessment score can be lowered if an

absence of violations is found during an audit.

The monitoring and oversight bodies will determine which business entities to audit using this newly implemented

methodology every six months. The audits are summarized in the “Selective Inspections Plan” posted on the SAI Belarus'

website http://www.kgk.gov.by/ru.

NEW MECHANISM TO PROMOTE ACCOUNTABILITY, ADD VALUE TO LIVES OF CITIZENS

The Comptroller General’s Ofce of the Republic of Costa Rica, the nation’s

Supreme Audit Institution (SAI), has undertaken actions to strengthen compliance

follow-up activities—a task of great relevance aimed at improving processes

that contribute to making a difference in citizens’ lives (International Standards

of Supreme Audit Institutions (ISSAI) 12).

As part of these efforts, SAI Costa Rica created the “Dispositions and

Recommendations Compliance Institutional Index” (IDR), designed to systematically measure and present audited

organizations’ compliance rate based on three factors:

• Efcacy: compliance progress percentage;

• Efciency: rate at meeting stipulated deadlines; and

• Management: observing regulations and standards associated with the disposition follow-up process.

The rst IDR was completed in 2018, which measured compliance achievements for 173 institutions during the period

2016-2017. Results showed an average of 74 points, with more than half obtaining high marks in efcacy, efciency

and management. The numbers demonstrate audited entities’ concrete advancement in rectifying deciencies identied

during audits. The results also shed light on institutional behaviors, which can be used to establish future measures aimed

at continuity and improvement.

The IDR tool provides important input to establish best practices and activate accountability efforts, control mechanisms,

and process enhancing initiatives that generate a great deal of value to the public.

News from Costa Rica

News from Iran

International Journal of Government Auditing—Spring 2019

NEWS IN BRIEF

SAC SUBMITS ANNUAL REPORT

The Supreme Audit Court of the Islamic Republic of Iran

(SAC) submitted the Annual Audit Report for Fiscal Years

2017-2018 to Parliament. Dr. Adel Azar, SAC President,

presented the report's summary during the Ofcial General

Session of the Parliament in January, where he briefed

on several aspects, including revenues and expenditures;

performance-based budgeting; and recommendations to

improve the budget process.

SAC PRESIDENT ATTENDS INTERNATIONAL

PERFORMANCE-BASED BUDGETING EVENT

The 9th International Conference on Performance-Based

Budgeting (PBB) was held at the Al-Zahra University

Conference Center January 8-9, 2019. Dr. Adel Azar,

SAC President and Conference Chair, delivered remarks,

where he pointed to the PBB Maturity Model and the

Islamic Republic of Iran's Supreme Leader as instrumental in

reforming the country's current budgeting system. Dr. Azar

also emphasized the SAC has implemented the necessary

performance audit efforts nationwide.

SAC PROSECUTOR GENERAL PARTICIPATES IN

INTOSAI FORUM OF JURISDICTIONAL SAIS

Mr. Fayyaz Shojaey, SAC Prosecutor General, participated

in the 3rd International Organization of Supreme Audit

Institutions (INTOSAI) Forum of Jurisdictional Supreme Audit

Institutions (SAIs) held January 24-25, 2019 in Istanbul, Turkey.

Mr. Shojaey shared a presentation, "The Judicial System of

the Supreme Audit Court of I. R. Iran and Measures Taken to

Fight Fraud and Financial Corruption," and best practices with

forum members. During the meeting, Mr. Shojaey also met

with several SAI counterparts that highlighted the exchange

of experiences, bilateral cooperation and contributions.

SUPREME AUDIT INSTITUTIONS OF IRAN

AND INDONESIA HOLD JOINT SEMINAR

The SAC and the Board of Audit of the Republic of Indonesia

(BPK RI) conducted a joint seminar in Tehran last year to share

experience and best practices on several topics, including

auditing banking institutions and

public universities, government

e-procurement and improving

audit report quality. The BPK RI

delegation, who included Board

Member, Ms. Isma Yatun, as well

as Indonesian Ambassador to

the Islamic Republic of Iran, Mr.

Octavino Alimudin, also met with

Dr. Adel Azar, SAC President.

Azar noted that the cooperation

between the two SAIs can be

enhanced by expanding Action

Plan 2019, which was signed at

the seminar's conclusion.

SAC PARTICIPATES IN

ASOSAI ASSEMBLY

SAC President, Dr. Adel Azar,

joined the leaders of nearly 50

SAIs attending the 2018 Asian

Organization of Supreme Audit

Institutions General Assembly

(ASOSAI) in Hanoi, Vietnam. In

addition to the assembly, Dr.

Azar met with numerous high-

level SAI delegates to promote

bilateral cooperation and share

public audit knowledge and

experiences.

News from China

www.intosaijournal.org

NEWS IN BRIEF

Ms. Hu Zejun, Auditor General of the

National Audit Ofce of China (CNAO),

at the XIV Asian Organization of

Supreme Audit Institutions (ASOSAI)

Assembly in Hanoi, Vietnam, assumed

the ASOSAI General Secretariat role

and responsibilities. In the coming years,

Ms. Hu would like the CNAO and ASOSAI to

achieve certain milestones.

"As the CNAO Auditor General, I believe it is essential to

follow the national development strategy," she said.

She pointed to a focus on (1) high-quality development, (2)

adhering to structural reform, and (3) continuing to promote

the audit of public funds, state-owned assets and resources

in an effort to ensure full and strict audit coverage with clear

accountability.

By 2020, the CNAO will establish an audit oversight

mechanism to improve China’s audit system functionality.

"It will be a centralized, unied, authoritative and efcient

audit system with full coverage that ts the modern

national governance system and governance capacity,"

she explained.

Key goals include strengthening coordination, enhancing

guidance, promoting audit administration system reform,

optimizing audit resource allocation, and improving the

means for utilizing audit results.

Ms. Hu added that accelerating audit law revisions,

improving national audit standards, and increasing

cooperation with internal and private sector auditing

entities are also at the forefront of the CNAO agenda, as

are conducting real-time audits of major policy measures,

investment projects, special funds and emergencies.

Capacity building remains a priority. Enhancing audits

through technology—more fully integrating applications;

disseminating the digital audit mode of “overall analysis,

doubts identication, separate verication and systematic

investigation;" improving big data analytics capabilities—

can optimize resources and efciency.

Ms. Hu underscored, "We must be fully aware of our

mission as auditors, achieve our goals through innovative

and standard operations and establish our credibility

through self-improvement."

She added that, by developing sound training and

management mechanisms, the CNAO hopes to build a team

of "high-quality, results-oriented, professional auditors with

conviction, expertise and integrity."

Adhering to the principle of mutual respect and using the

win-win cooperative approach, promoting innovation and

development, improving governance, better serving all

members, and helping build a community with a shared

future are regional imperatives Ms. Hu nds essential.

A primary goal is to jointly build ASOSAI into a model

international organization, one that makes greater

contributions to developing the audit cause.

ASOSAI has recognized the urgency associated with

building capacity—a central task for all Supreme Audit

Institutions (SAIs)—individually and institutionally. Ms.

Hu champions expanding capacity and knowledge using

diverse methods with a particular emphasis on learning

and mastering new technologies.

Ms. Hu also noted SAIs should facilitate the sustainable

economic and social development of various countries,

especially with the adoption of the United Nations 2030

Agenda for Sustainable Development.

The International Organization of Supreme Audit Institutions,

along with auditors across the world, have attached great

importance to Agenda 2030 and have studied how SAIs

can contribute to national Sustainable Development Goal

achievement.

"We should continue focusing on sustainable development

and urge members to better serve sustainable development

initiatives within their country, as well as the entire Asian

region."

News from the United States

International Journal of Government Auditing—Spring 2019

NEWS IN BRIEF

GAO LAUNCHES CENTER FOR STRATEGIC

FORESIGHT INAUGURAL MEETING

“Supported by the leadership and vision of the U.S. Comptroller General,

Gene L. Dodaro, we are committed to strategic foresight as an important

management tool, as well as a mechanism to guide us as we plan our future

work,” noted James-Christian Blockwood, Managing Director of the U.S.

Government Accountability Ofce (GAO) Strategic Planning and External

Liaison (SPEL) ofce.

To achieve positive, long-term outcomes, Blockwood believes creatively

and critically thinking about emerging trends and future challenges and

collaborating with experts are necessary efforts—efforts facilitated through

the Center for Strategic Foresight (CSF).

The CSF, which Blockwood helped establish and will oversee, aims to enhance GAO's

ability to identify, monitor and analyze emerging issues and their implications to

agency operations and work performed for Congress.

“The CSF’s focus on strategic foresight reects the full scope of GAO’s oversight mission

across the federal enterprise, the agency's mission to support Congress and its core

values of independent, non-partisan analysis,” Blockwood said.

Consisting of strategic foresight experts (Fellows) from around the world, the CSF held its

rst meeting in January to discuss the evolving nature of identity and other trends with the

potential to signicantly impact the nation—as individuals, organizations and governments.

Long gone are the days where dates of birth, ngerprints or social security numbers are

the sole means to identify individuals. Today, our faces, our voices, even the way we drive

and browse the internet can be used to quickly identify us.

Dodaro, who opened the inaugural meeting, pointed out that cybersecurity has been on

GAO’s High Risk List since 1997 and stressed, “Protecting privacy and sensitive data is

one of the four major challenges GAO has identied related to cybersecurity.”

Dodaro also underscored the importance of GAO foresight activities, particularly in

planning efforts where CSF experts complement current GAO advisory entities and

organizational initiatives.

CSF Fellows noted several opportunities and challenges when it comes

to identity and its evolution. Worldwide, credible digital identity systems

help assure access to essential government services; however, potential

risks to privacy and civil liberties lurk, particularly in cases involving a

few large players with unprecedented access to data who operate in an

environment where government policy does not keep pace.

CENTER FOR

STRATEGIC FORESIGHT

U.S. GOVERNMENT ACCOUNTABILITY OFFICE

www.intosaijournal.org

NEWS IN BRIEF

CSF FELLOWS 2018-2020

ROSEMARIE FORSYTHE

Former Director, Exxon Mobil's International Political

Strategy; former Director, National Security Council

Russian, Ukrainian, and Eurasian Affairs

ANDY HINES

University of Houston Head of graduate studies and

Assistant Professor of Foresight; "Thinking About the

Future and Teaching About the Future" co-author

OCTAVIO HINOJOSA-MIER

Executive Director, National Hispanic Corporate

Council; former Vice President, Government Relations

and Strategic Partnerships at Cultural Strategies

BRIAN J. MASTERSON, MD

Senior UnitedHealth Group Behavioral Health

Medical Director; former Chief, U.S. Air Force Clinical

Medicine; founder of Federal Health Futures Group

CATARINA TULLY

Co-founder and Director, School of International

Futures; Director, FromOverHere and Director, NHJ

Strategic Consulting

KRISTEL VAN DER ELST

Co-Founder & CEO, The Global Foresight Group;

former Head of Strategic Foresight at the World

Economic Forum

JENS WANDEL

Special Adviser to the United Nations (UN) Secretary-

General; former UN Development Program Assistant

Administrator (Assistant Secretary-General)

AMY WEBB

Professor at NYU’s Stern School of Business and

Founder of the Future Today Institute; Author of

"The Signals Are Talking"

ANGELA WILKINSON

Senior Director of the World Energy Council; former

Head of Strategic Foresight at Organisation for

Economic Co-operation and Development (OECD)

What if the public sector was more involved?

Jens Wandel, CSF Fellow and Special Adviser to the

United Nations Secretary-General, believes, “If citizens

see the public sector regulating and using data for good

purposes, then citizens will be more likely to accept it, but

if they see data being abused or excessive risk exists,

then there will be problems.”

“Governments must use data correctly to enhance benets

and value. This is a global problem, not just a rst-world

problem,” he added.

CSF goals and activities are designed to be impactful

and inspirational.

“We are confronting deep global uncertainties across

a myriad of sectors, and there has never been a more

urgent need for strategic guidance at the highest levels

of government,” remarked Amy Webb, a futurist, author

and professor at New York University’s Stern School of

Business.

She added, “It is my civic duty, and my honor, to serve as

an inaugural Fellow in the Center for Strategic Foresight.”

A strictly nonpartisan organization, the CSF is uniquely

positioned to act as a central hub for research, data-driven

models and strategic assessment. The CSF's nine Fellows

represent a diverse set of global experience providing

expertise in foresight, planning and futures studies from

government, private sector, non-governmental, academia

and international organizations.

Stephen Sanford, CSF Director and GAO's Strategic

Planning and Innovation Manager, said the CSF Fellows

"count among the world’s top experts in strategic

foresight, and we are very pleased to have them support

an effort that is an important pillar to the broader

foresight ecosystem we’ve been building at GAO.”

The CSF was established in 2017, and the Fellows were

selected in 2018. They will serve a two-year, renewable

term.

News from Bulgaria

International Journal of Government Auditing—Spring 2019

NEWS IN BRIEF

BNAO AUDITS URBAN ARCHITECTURAL

HERITAGE PRESERVATION

The deprivation of Bulgaria's valuable architectural heritage

has become particularly noticeable in recent years, as

many architectural sites are in ruins and hundreds more

have been demolished and replaced with new buildings

that do not t into the surrounding environment. As a result,

old neighborhoods have lost the historic identities that once

attracted tourists.

The Bulgarian National Audit Ofce (BNAO) recently

completed an audit of the Ministry of Culture and the

National Institute for Immovable Cultural Heritage with a

focus on analyzing:

• Necessary conditions for architectural asset preservation

and maintenance;

• Activities associated with identifying, declaring and

granting cultural value status; and

• Monitoring and control activities.

The audit, which covers the period from January 1, 2015

to June 30, 2018, aimed to provide an independent,

objective assessment on preserving and maintaining historic

structures and raise awareness about the current state of

architectural treasures and issues related to keeping them

in good condition for future generations.

The BNAO audit resulted in several ndings, including:

• Conservation and maintenance efforts are neither

efcient nor effective and are not well-regulated or

monitored;

• An absence of strategic documents creates ambiguity on

the state policy’s vision, objectives and priorities;

• The national system is not fully established; the principle of

its decentralized management has not been implemented,

and coordination among relevant bodies is lacking;

• There are serious omissions in conservation management,

resulting in key outstanding issues that, if not addressed,

could lead to irreversible loss;

• Due to insufcient resources, some essential activities

have not been implemented, while others are carried out

in very limited volumes;

• More than 90% of the the immovable cultural values have

not been assessed, and no regimes for their protection

have been established; and

• The National Documentary Archive is in urgent need of

updating and digitization—it currently does not meet

regulatory requirements.

To learn more about the BNAO and its activities, visit www.

bulnao.government.bg.

News from Kuwait

www.intosaijournal.org

NEWS IN BRIEF

• Experts from the U. S. Government Accountability Ofce

Center for Audit Excellence delivered a training program

to State Audit Bureau (SAB) of Kuwait staff on planning

and conducting performance audits. The program, held

in SAB headquarters March 10-21, 2019, was based on

the project agreement signed between both parties late

last year.

• The SAB signed a cooperation agreement with the Turkish

Court of Accounts (TCA) during a TCA visit to SAB headquarters

in December 2018.

• The SAB visited the Court of Audit of Morocco and the State

Audit Institution of Oman recently. The ofcial trips also

included site visits to the International Renewable Energy

Agency's Photovoltaic Power Station “Noor” (NOORPV1)

and the Petroleum Development Oman Company's Miraah

Project for Solar Energy. As part of the SAB Strategic Plan

2016-2020 objectives, the visits focused on gathering

data on renewable energy as part of supporting and

developing institutional capacities.

• The SAB hosted the Premier President of Tunisia's Court

of Accounts (COA), as well as the Secretary General

of the Arab Organization of Supreme Audit Institutions

(ARABOSAI) in January to explore cooperation between

the SAB and the COA and discuss progress in supporting

ARABOSAI and other key stakeholders.

• SAB delegates participated in several meetings and

training events, including the third Forum of Supreme Audit

Institutions with Jurisdictional Functions hosted by the TCA;

2019 Integrity Seminar held in Hungary that highlighted

the most challenging integrity issues with a focus on

contracting and procurement practices; and the Financial

Audit and Accounting Subcommittee meeting in Abu Dhabi,

United Arab Emirates.

• As part of the SAB's cooperation with the National Audit

Ofce of Estonia, the SAB hosted a joint symposium on

“Waste (Medical and Hazardous) Management Issues”

and “Marine Pollution and its Effects on Fisheries Stock”

March 25-27, 2019, at the SAB headquarters.

• The SAB launched the 20th Annual Research Competition

across all SAB sectors. The 2019 competition includes ve

individual, ve joint and two group categories.

News from United Arab Emirates

International Journal of Government Auditing—Spring 2019

NEWS IN BRIEF

SAI UAE HOSTS ASOSAI MEETING ON

SDG IMPLEMENTATION EFFORTS

The United Arab Emirates (UAE) Supreme Audit Institution

(SAI) hosted the rst Asian Organization of Supreme Audit

Institutions (ASOSAI) meeting on using big data analysis in

reviewing national Sustainable Development Goal (SDG)

implementation. The event was held at SAI UAE headquarters

in Abu Dhabi and included delegates from 15 SAIs who met

to develop strategies and practices in reviewing national

performance in implementing the SDGs.

Dr. Harib Saeed Al Amimi, SAI UAE President and Chairman

of the International Organization of Supreme Audit Institutions

(INTOSAI), opened the meeting by emphasizing the SAI’s

signicant role in INTOSAI SDG initiatives. He also stressed a

desire to continue sharing knowledge and experiences with

SAIs in the region.

The two-day seminar included a presentation from the UAE

Federal Competitiveness and Statistics Authority, which

focused on organizational and national roles in coordinating

necessary work for SDG achievement. Workshops highlighting

SAI roles, audit methodologies and practices, strategic

planning, as well as public information management, allowed

participants to formulate proposals, recommendations and

best practices.

INTOSAI, UNODC DISCUSS SYNERGIES,

COOPERATION IN FIGHTING CORRUPTION

Dr. Margit Kraker, INTOSAI Secretary General and President

of the Austrian Court of Auditors, and Dr. Harib Saeed Al

Amimi, INTOSAI Chairman and SAI UAE President, met with

John Brandolino, Director of the United Nations Ofce on

Drugs and Crime (UNODC) Division for Treaty Affairs.

The meeting, which took place at UNODC headquarters

in Vienna, included a discussion on harnessing synergies

and enhancing cooperation, particularly in the ght in

against corruption. The two organizations envisage signing

a Memorandum of Understanding at the 72nd INTOSAI

Governing Board meeting in Moscow later this year.

SAI UAE PARTICIPATES IN CONFERENCE

ON COMBATING CORRUPTION,

STRENGTHENING INTEGRITY

SAI UAE participated in an international conference earlier

this year organized by the Kuwait Anti-Corruption Authority.

The conference, dedicated to “Integrity for Development,”

brought together global organizations to discuss best

practices, promote cooperation and exchange experiences

in establishing and cultivating transparency, integrity and

anti-corruption initiatives.

The conference included several sessions that highlighted

national anti-corruption strategies; successful public sector

practices in preventing corruption; the importance of

integrity in supporting economic reforms and improving

decision-making; transparency and its role in strengthening

trust; and monitoring integrity and corruption and the impact

these concepts have on achieving the SDGs.

News from Peru

www.intosaijournal.org

NEWS IN BRIEF

SAI PERU EMPLOYS INNOVATIVE MEASURE TO

PROMOTE INTEGRITY AND TRANSPARENCY

Last year, a law was enacted to strengthen Peru’s Supreme

Audit Institution (SAI) and National Control System (NCS),

marking a historic milestone in the ght against corruption

in the Peruvian State. Since then, SAI Peru has implemented

a series of measures to modernize and fortify supervisory

capacities in the use of public goods and resources and

combating functional misconduct and corruption.

To promote integrity and transparency, SAI Peru is employing

a new measure—Filing Sworn Statements to Manage

Conicts of Interest—aimed at preventing conditions that

may affect audit work independence and objectivity. While

the initial implementation has been rolled out to the more

than 7 thousand public ofcials and civil servants employed

by SAI Peru and the NCS, the goal is to extend this practice to

the entire public sector (a projected reach of 1.5-2 million).

The statements contain the declarant's personal and labor

data, educational level, information on nancial assets and

political afliations, among other aspects. As the sworn

statements contain condential information, SAI Peru will

ensure adherence to appropriate privacy rights protection.

As part of the recently enacted law, this new measure is based

on International Standards of Supreme Audit Institutions

(ISSAI) 21, which outlines the principles of transparency,

responsibility and good practices; ISSAI 30, Code of Ethics,

specifying SAI personnel are to be free from impediments

affecting independence and objectivity; and Peruvian law

covering Civil Service Code of Ethics requiring ofcials and

public servants to act with rectitude, trustworthiness and

honesty.

For more information about the law, contact the SAI Peru at

cooperacion@contraloria.gob.pe.

News from Poland

International Journal of Government Auditing—Spring 2019

NEWS IN BRIEF

SAI POLAND CELEBRATES 100 YEARS OF

PUBLIC SERVICE, PARTNERSHIPS

In 2019, the Supreme Audit Ofce of Poland (NIK) celebrates

the centenary of its establishment. As part of the celebratory

events, the NIK hosted an international conference on “The

Role and Challenges of the State Audit in the Modern World”

where members from the International Organization of

Supreme Audit Institutions (INTOSAI), European Organization

of Supreme Audit Institutions (EUROSAI) and the European

Court of Auditors (ECA) came together to share views on

public auditing goals—current and future.

NIK President, Krzysztof Kwiatkowski, opened the event by

sharing the NIK's rich history and expressing gratitude to

staff—dedicated experts who contribute to organizational

achievements through knowledge and expertise.

Throughout the conference, independence, transparency, and

reliability proved to be common themes, and participants

pointed to a need for strengthened cooperation among

Supreme Audit Institutions (SAIs) and improved stakeholder

relations in the face of modern world challenges.

“State auditing in the modern world is much more than

ensuring budget spending follows the rules. I think it is

equally important that tax money spent delivers value to the

citizens,” noted Klaus-Heiner Lehne, ECA President.

In addition to adding value, attendees cited the need to

enhance audit processes to remain relevant—by investing

in contemporary technologies and improving transparency.

Developments, such as articial intelligence, blockchain,

machine learning and quantum computing, are transforming

the world of audit, and Dr. Harib Saeed Al Amimi, INTOSAI

Chairman and President of the United Arab Emirates

State Audit Institution, concluded that “auditors should be

innovative and open to new tools and solutions.”

EUROSAI Chair and President of the Turkish Court of

Accounts (TCA), Seyit Ahmet Baş shared his perspective

improving audit work through SAI efforts in preparing and

publicizing consolidated monitoring reports on measures

taken by institutions in response to audit recommendations.

Kwiatkowski stressed the importance of continuously improving

internally to be able to competently advise other institutions

and remarked on the advantages SAI cooperation brings

through an exchange of experience and best practices. In

his closing remarks, Kwiatkowski remarked on the event's

inspirational value.

“I am convinced that we will recall the words, views and

opinions heard here, and that we will use them in our future

work.”

The Heads of European Union SAIs will celebrate the NIK’s

centenary during the Contact Committee meeting scheduled

for June in Warsaw.

News from Slovenia

www.intosaijournal.org

NEWS IN BRIEF

COURT OF AUDIT ISSUES RESULTS, SHARES

INITIATIVES TO ENHANCE SUSTAINABILITY

by Tomaž Vesel, President, Court of Audit, Slovenia

Supreme Audit Institution (SAI) independence can be compared

to the roots of a tree—the more deeply rooted, the stronger

the tree. Independence is a precondition enabling state bodies

to efciently exercise powers that provide value and benets

to the lives of citizens. In today’s rapidly changing environment,

Slovenia’s Court of Audit, the nation’s SAI, must be responsive

to key public nance challenges while following the principles

of good governance and sustainable development. Our audit

work, international relations and communications efforts are

essential mechanisms supporting this endeavor.

Last year, we issued 62 audit reports and two summary reports

that considered 102 auditees and 689 implemented corrective

measures (a considerable improvement from previous years).

Annual gures also show a decline in people anonymously

reporting issues to be audited, perhaps indicating increased

condence in the work we do and services we provide. While

168 written responses point to a need for public sector entities

to have better guidelines for work, we are eager to increase

our advisory services (a function often overlooked by public

institutions).

We published 26 post-audit reports in 2018 that included

assessments on 139 corrective measures—91 were found to

be adequate, 30 partially adequate and 18 inadequate.

Moving forward, we strive to focus on areas where corrective

measures were not (or will not be) fully adequate. We also

aim to monitor the planned corrective measures designed to

improve operations in the medium term.

Internationally, we continue strengthening relationships and cooperative efforts. We actively participate in the Organisation

for Economic Co-operation and Development (OECD) Auditors Alliance; continue an exchange of audit practices with other

SAIs, such as our auditor secondment agreement with SAI Malta; and, we work closely and collaboratively with regional

counterparts, committees and programs as part of the European Organization of Supreme Audit Institutions (EUROSAI).

We adjusted our communications to broaden our audience and capitalize on digital trends that continue to transform our

work and our society. Modern, fast, simplied—we revamped our website (http://www.rs-rs.si) to provide faster, up-to-date

information and functionalities. We began designing press releases with stakeholders in mind by providing audit report

summaries along with an infographic to easily convey complex and lengthy information. Social media engagement expanded

our reach, and we continue to share information and experiences with the global audit community through articles and news

appearing in the International Journal of Government Auditing and EUROSAI Magazine.

In watching over how our public resources are utilized, we are caring for our future, much like cultivating a tree. We planted a

tree, donated by SAI employees, in front of our building as a symbol of the roots we will establish (and grow) as we continue

to exercise good governance and promote sustainability.

News from Angola

International Journal of Government Auditing—Spring 2019

NEWS IN BRIEF

NEW JUDGES APPOINTED

TO COURT OF ACCOUNT

In accordance with constitutional powers and in keeping with

the proposal of the Judiciary Superior Council, the President

of the Republic, João Lourenço, appointed new COA judges

in an ofcial ceremony at the Presidential Palace in June

2018. Dr. Exalgina Renée Vicente Olavo Gambôa assumes

the role as COA President, and Domingas Alexandra Garcia

now holds the position of COA Vice President.

"We intend to establish close cooperation with all audit

institutions, so that all work can be transparent," stressed Dr.

Gambôa.

President Lourenço expressed condence in the capabilities

of the appointed judges and stated, "They are in a position

to face the challenges for the good of national justice and

democracy."

PUBLIC FINANCIAL MANAGEMENT

REPORTING FRAMEWORK WORKSHOP

WITH GIZ, AFROSAI-E SUPPORT

As part of a project conceived by the Deutsche Gesellschaft

für Internationale Zusammenarbeit (GIZ) and the African

Organization of English-Speaking Supreme Audit Institutions

(AFROSAI-E), a three-day workshop on the Public Financial

Management Reporting Framework (PFM RF) was held

at COA headquarters. The training, attended by staff

representing all COA levels, focused on the PFM RF tool's

fundamental principles, origin, utility and benets while

incorporating local, real-time data.

Dr. Exalgina Gambôa, COA President, offered opening

remarks, where she cited the PFM-RF as an extraordinary

support instrument in inspecting public nance and nancial

management.

COOOPERATION AGREEMENT SIGNED

WITH SÃO TOMÉ AND PRÍNCIPE

On February 15, 2019, Angola's Court of Accounts (COA)

signed a technical and scientic cooperation agreement with

the São Tomé and Príncipe COA.

Dr. Exalgina Gambôa, President, Angola's COA, said the

agreement "promotes action, emphasizes the importance of

partnerships and highlights the work of both Supreme Audit

Institutions (SAIs) within the region and globally as part of

the International Organization of Supreme Audit Institutions

(INTOSAI)."

The President of São Tomé and Príncipe's COA, Dr António

José Monte Cristo, afrmed that the cooperation agreement

between the two SAIs generates tremendous opportunities

for exchanging information and experiences, particularly in

technical training aspects.

SPECIAL THEME: ANTI-CORRUPTION, GOOD GOVERNANCE

SPECIAL CONTRIBUTION

"Good Governance: A Look Into the Free-riding Phenomenon"

—Dr. Arunas Dulkys, Auditor General, SAI Lithuania

FEATURE STORIES

• Banking Oversight: Developing a Useful SAI Framework

• Detect Fraud, Improve Internal Control Using Popular Strategy, Performance Tool

• Corruption and Money Laundering: The Nexus and the Way Forward

• Eradicating Corruption: Measuring, Monitoring SDG16 Progress

International Journal of Government Auditing—Spring 2019

SPECIAL CONTRIBUTION

GOOD GOVERNANCE:

A LOOK INTO THE FREE-

RIDING PHENOMENON

Once upon a time in the Bulgarian city of Gabrova, the

renowned capital of humor, each citizen agreed to bring

a bucket of good wine, pour it in one large barrel, and

present it as a gift at the city’s festival. When the rst ladle

of the festive wine was tasted, it was apparent…the barrel

held nothing but pure water.

Some citizens do not contribute to the common public

good. This global phenomenon, free-riding, is widespread,

often manifesting itself in several forms, such as not voting

in elections or evading taxes. States themselves may also

be guilty of free-riding (when not paying proportional

contributions to help solve international problems yet still

reaping the benets of positive outcomes).

Is free-riding really detrimental to anyone? Undoubtedly,

yes. And, the higher the level at which free-riding occurs,

the greater its destructive power. Mistrust forms a breeding

ground for free-riding, which makes maintaining the social

contract between citizens and the State next to impossible.

While deliberate free-riding is easy to pinpoint, less obvious

free-riding can occur when incomplete or partial information

exists. This information gap leads to uninformed decisions, thus

turning the information age into the age of disinformation.

For example, national budget decisions based solely on

revenue and expenditure cash ows (without analyzing net

asset values) can be problematic, as these gures do not

demonstrate true worth. This beckons the questions, “Are the

right decisions being made? Do we really know our State?”

Perceptions and attitudes toward the State differ—some see it

as a problem rather than a problem-solver. Others recognize

its potential positive economic role. Despite varying views, a

survey commissioned by the National Audit Ofce of Lithuania

(NAOL) and conducted by Vilmorus, a Lithuanian-based

market research company, indicated citizens believe there

is a clear need for the State (90% of respondents selected

“need” or “partial need” on the survey). Additionally, nearly

60% felt, to the extent possible, they personally contribute to

State-building.

Knowledge on how the State spends tax money also differs.

Approximately one-half of the survey respondents believed

the most signicant share of public funds were allocated to

security and defense, and a much less sizable portion was

used to administratively maintain the State. In reality, security

and defense received the smallest allocation. The largest sum

(roughly 70%) was set aside for public welfare, including

education and health care.

This lack of awareness demonstrates an information disparity

that shapes public perception and potentially discourages

willingness to contribute to the common public good. People

are more likely to support the common cause if they feel

by Arunas Dulkys, PhD, Auditor General,

National Audit Ofce of Lithuania

www.intosaijournal.org

SPECIAL CONTRIBUTION

the contribution is fair, honest, and equitable (everyone else

is doing the same). Therefore, examining several examples

from public audits about what is known, and, perhaps more

importantly, what is unknown, is essential to creating an

environment that encourages participation and discourages

free-riding.

Public Projects. Every year, hundreds of new projects are

launched without assessing how many have already begun,

and sometimes that same amount are brought to a standstill,

resulting in postponed implementation deadlines and frozen

funds (gures nearing €230 million in 2015). To date, about a

third of the projects have dragged on for over a decade, and

the approximate value of those launched but not completed

is approaching €10 billion.

State-Owned Real Estate. Records concerning State-owned

real estate are equally as controversial. While real estate

amounts to more than 10 million square meters, truly objective

gures are non-existent primarily due to varying formulas

used for calculation (sometimes real estate is divided by

total number of public sector staff; sometimes it is divided by

the number of civil servants—a gure eight times smaller).

The business world is surprised. The public is outraged. In

reality, nearly 80% of State-owned real estate bears no

direct relation to public sector working conditions, and most

of it is low-value structures.

Education. An NAOL audit on general education published

last year revealed a nationwide average of 34% of

families employing private tutoring services for school-

aged children. In larger cities, this practice is more frequent

(upwards of 40%). Why should people entrust their taxes

to the public education system if learning is outsourced to

parallel shadow schools?

Practical Training Centers. In recent years, 42 sectoral practical

training centers have opened. They are important, and no one

doubts their relevance. The centers, furnished with state-of-

the-art equipment, represent a €120 million investment, and,

so far, the extent of training in most centers has not reached

even half of the planned hours (one center has conducted no

training at all). Public auditors have questioned additional

proposals to allocate €50 million for further infrastructure

development of these seemingly underused resources.

Health Care. Life expectancy in Lithuania is the shortest of

all European Union (EU) countries (six years behind the EU

average). What does this suggest? That we don't provide

enough treatment? That the quality of treatment is poor? On

the contrary, we are ranked second in the EU when it comes

to hospital bed availability. We have more doctors than

the EU average, but we do not have standard procedures

to handle treatment for 80% of diseases. Moreover, we

do not record 60% of the adverse side-effects, making it

impossible to learn from mistakes. We buy tons of expensive

medical equipment, but 59% of it is not fully utilized, and

7% is not used at all. A majority believe the primary health

sector problems stem from long queues and waiting lists.

Telecommunications. Electronic communication networks in

Lithuania account for approximately 20,000 kilometers of

physical infrastructure. Over the last four years, some €40

million was spent on infrastructure development, while an

additional €30 million has been earmarked for maintenance.

No single organization is responsible for coordinating

national network development, which may account for the

duplication of an estimated 4,000 kilometers of physical

infrastructure. Until 2020, an additional €90 million has

been planned for infrastructure development.

Business Oversight Authorities. Very little is known. Today

there are 56 such authorities; however, not one government

report includes any activity analysis, extent to operational

efciency, or costs. Preliminary estimates show business

oversight annually receives an estimated €230 million

from the budget. The exact gures remain unknown. In this

context, it is not surprising to hear dissatised rumblings on

contributing tax money to funding such activities.

What if no one paid taxes anymore? Was it worth talking

about free-riding at all? When too little time and attention

is given to facts and the conceptual discussion of public

problems, the threat of mistakes in strategic decision-making

increases. These mistakes are followed by huge expenses.

Facts can be boring and often difcult to understand

and remember. Facts can be unattractive. Facts can be

threatening, as they summon the need to take responsibility.

Balancing the needs of "me" and "us" is crucial to improving

the quality of life, which requires uniting the public and

private sectors.

In asking how well we know our state and seeking answers

to that question, it's not just a quest for numbers. Its what we

do once we have that data. Far from merely showing how

Lithuanian funds or assets are managed, this article sheds light

on free-riding by illustrating instances where disinformation

impacts the ability to make informed decisions, which, in turn,

hinders our ability to exercise good governance and creates

a State that is not sustainable.

If the State nds itself lled with 100% free-riders, there

will be 0% State left.

International Journal of Government Auditing—Spring 2019

FEATURE STORIES

by Ghorban Eskandari, Senior Auditor, Supreme Audit Court

of Iran

Corruption and Fraud—The Issue

Corruption and nancial fraud are very challenging issues

within the banking system that can inict irreparable

harm to a nation’s development and growth. The potential

widespread and destructive effects can reduce social

capital and increase poverty, social injustice and class

divisions.

The banking system will continue to face these issues far

into the future until successful counteraction initiatives are

implemented.

Basic banking oversight concepts and principles have been

expressed in the Basel III framework, an internationally

agreed upon set of measures created in response to the

nancial crisis of 2007-2009 that aim to strengthen bank

regulation, supervision and risk management.

A multifaceted issue, oversight in the banking sector

requires the cooperation of various regulatory bodies,

each performing tasks according to individual organization

mechanisms and objectives.

While these regulatory agencies and various monitoring

structures are in place, the world economy remains exposed

to nancial abuse, and evidence points to inefcient banking

systems and weak regulatory procedures and guidance.

A Study to Determine a Successful Framework

This article discusses appropriate frameworks through a

study, “Surveillance Authority of Supreme Audit Institutions

(SAIs) in the Banking Sector,” that assessed the status quo

and identied potential mechanisms to achieve favorable

situations.

BANKING OVERSIGHT:

DEVELOPING A USEFUL SAI FRAMEWORK

Research Methodology. The study used a qualitative

approach to identify, analyze and report patterns within

the data. An open-ended interview of 21 local experts

(selected using the snowball sampling method) was the

primary tool to gather data. The research was conducted

using a four-phase process:

1. Identify goals and identify the status quo;

2. Formulate concepts governing regulatory framework

design;

3. Analyze pathology and problems in the banking eld;

and

4. Gather additional data through expert interviews and

reach a consensus on a nancial monitoring framework.

Study Findings. Every oversight system requires determining

specic objectives and identifying the responsibilities and

activities necessary to achieve them. Study results showed

that a key challenge for SAIs within the banking sector

tends to be unidentied goals, which means associated

tasks and responsibilities are also unclear.

Additionally, oversight activities should be updated as

changes occur in the environment, since these changes can

impact and inuence banking oversight on many levels—

economically, organizationally, socially, culturally and

politically.

The study also identied several factors resulting in,

hampering, or completely preventing successful banking

sector oversight, including:

• Auditors lacking a comprehensive understanding of bank

operations;

• The volume of regulatory bodies;

• Organizational expansion cost reduction measures

negatively impacted efciency and effectiveness; and

• Oversight authorities potentially limited by mandates,

available human resources and facilities, and participating

in investigations and/or audits having no real purpose

(simply justifying existence or creating false needs for

expansion).

Study ndings, combined with extensive research, resulted

in developing an oversight framework (see Figure 1 on

following page) that incorporates conditions, concepts,

activities and potential consequences attributable to, and

affecting, SAI audit work in the banking sector, such as:

• The pivotal phenomenon, or main theme, derived from the

study is targeted surveillance (monitoring).

• Causality conditions are events that create situations and

issues related to the phenomenon. These conditions, to an

extent, also explain how and why individuals and groups

engage in this phenomenon.

• To address underlying conditions (internal and external

characteristics considered primary challenges to the audit),

factors affecting targeted monitoring were identied.

• Mediator conditions are macro and general conditions

that inuence the effect of causal conditions on the

phenomenon under study.

• Strategies are the key activities auditors consider and

use.

• Finally, in the context of possible outcomes, expected

results, consequences, stemming from strategies and

actions were identied.

For more information about the study, research and

supervisory framework for SAIs in the banking sector, email

the author at ghorbaneskandari@yahoo.com.

www.intosaijournal.org

FEATURE STORIES

International Journal of Government Auditing—Spring 2019

FEATURE STORIES

CAUSALITY CONDITIONS

UNDERLYING CONDITIONS STRATEGIES & ACTIONS CONSEQUENCES

Level: SAI

• No clear goals

• Lack of human

resources

• Software weaknesses

• Hardware weaknesses

• Lack of operational

independence

• Information

condentiality

information

• Political tendencies

• Lacking culture of

responsiveness

Level: Banking System

• Information asymmetry

• Reputation

• Legal barriers

• Regulatory authority

fear

• Supervisory authority

distrust

• Lacking accountability

culture

Director Independence and

SAI Impartiality

Auditor's Personal

Characteristics

• Attitude, emotional

intelligence

• Experience, expertise, skills

and knowledge

• Inquirer's mind and

curiosity

• Honesty and integrity

Bank Characteristics

• Organizational culture

• Attitudes of bank managers

• Professional training

• Transaction complexity

• Information condentiality

• Inherent high risk of fraud

SAI Social Responsibility

• Reducing expectations gap

between society & SAI goals

General societal conditions

• Public interest; varied

stakeholders, users;

governmental economy

Societal Culture of

Accountability, Transparency

External Auditing Environment

• Budget pressure and level of

importance

• Professional audit supervision

Bank Characteristics

• Inherent high risk in bank

activities, fraud

• Managerial turnover

• Ownership nature and type

• Bank manager, government

ofcial reciprocity

• Managerial ability to

inuence auditors

• Bank's internal control status

• Staff wage dissatisfaction

MEDIATION TERMS

Level: Audit Work Assessing

Internal Control System

• Increased accuracy and

reliability

• Bank nancial stability

• Use professional hesitation

• Track contradictory

evidence and discover

contradiction causes

• Increase surveillance use

• Assign tasks to members;

engage them

• Increase professional on-

the-job training

• Employ guardians

Level: SAI

• Identify inherent risks

• Understand industry and

banking impact on budget

• Hire and train professional,

ethical staff

• Select appropriate audit

team members

• Rotate audit staff, groups

in banks

• Maintain bank nancial

stability

• Coordinate monthly audit

group member meetings

• Incorporate brainstorming

techniques in

• Apply appropriate

procedures (audit, non-

audit)

• Emphasize critical thinking

• Include work programs,

checklists

Level: Audit Work

Assessing Internal

Control System

• Further adherence to

audit standards

• Quality evidence

acquisition

• Detect material

misstatements

• Reduced risk of non-

detection

• Improving judgments

and conclusions

• Appropriate opinion

• Achieve work goals

• Maintaining banking

system nancial

stability

Level: SAI

• Preservation and

promotion of fame

• Reducing disciplinary

measures against

auditors

• Economical

• Increasing community

trust in Higher Audit

Institutions

• Hedging economy to

systemic risk

PIVOTAL PHENOMENON

(Targeted Surveillance)

FIGURE 1: SUPERVISORY FRAMEWORK FOR SAIS IN THE BANKING SECTOR

by Estrella Rivera, Supreme Audit Institution Ecuador

Research suggests a principal cause of fraud to be a weak,

limited internal control system. In Ecuador, the nation's Organic

Criminal Code (COIP) addresses fraud and crimes against

public administration, and the COIP considers embezzlement,

illicit enrichment, bribery, and inuence peddling among the

primary forms of corrupt activities. These crimes, generally

discovered through audit interventions and/or complaints,

demonstrate the need for a robust internal control system.

An internal control system aims to (1) comply with legal,

technical and administrative order; (2) promote an entity’s

efciency and effectiveness; (3) guarantee information

reliability and timeliness; and (4) take appropriate measures

to correct control deciencies.

In addition to strong internal controls, the auditor’s role in

detecting fraud is crucial, as the auditor evaluates internal

controls to prevent risk; promote efciency, effectiveness,

transparency and economy; protect assets and public

resources; and mitigate possible fraud.

Several organizations have tried to

standardize the internal control concept,

including the Committee of Sponsoring

Organizations (COSO) Tradway

Commission, whose report

stresses the need

for internal

control to be incorporated into organizational objectives and

strategies. For Ecuadorian public institutions, this approach

is envisioned in the national agenda (Agreement 39-CG-

2008), which cites the following as necessary internal control

components:

• Control Environment. An environment including principles

of integrity and ethical values governing the company.

• Risk Evaluation. Dening objectives; risk identication and

evaluation; determining risk management; probability of

fraud; and evaluating events or changes affecting the

internal control system.

• Control Activities. These activities refer to policies and

procedures established to reduce risks that may affect

achieving objectives.

• Information and Communication. The information necessary

for the entity to carry out internal control responsibilities

that support achieving outlined objectives.

• Supervision Activities. Self-control activities incorporated

into the supervisory and monitoring processes that are

designed to evaluate and improve operations.

Given the intricacies of the internal control system, this

article describes incorporating the "Balanced Scorecard"

(scorecard) method during the evaluation process to reduce

audit complexity and facilitate fraud detection.

The scorecard has traditionally been employed as a strategic

planning tool—measuring organizational performance and

evaluating corporate goal achievement. Based on both

nancial and non-nancial indicators, the scorecard

is a exible tool that lends itself to internal

control component integration.

The tool's exibility also

facilitates detecting

fraud because of its

ease of application

and evaluation.

www.intosaijournal.org

FEATURE STORIES

DETECT FRAUD, IMPROVE INTERNAL CONTROL

USING POPULAR STRATEGY, PERFORMANCE TOOL

International Journal of Government Auditing—Spring 2019

FEATURE STORIES

Combining the scorecard method with audit and documentary

forms, an internal control evaluation matrix was developed

that: (1) generates questions (by areas of application) for an

organization’s administrative and nancial management; (2)

establishes weight (importance) and level of occurrence; and

(3) denes key performance indicators along with respective

parameters, ranges, levels or thresholds from which alerts

are generated or triggered in the control panel (similar to a

trafc signal).

This tool facilitates recognizing risk situations that can lead to

fraud; helps detect (with greater precision) people involved,

controls that may have been violated and possible resources

affected or economic damage caused; and optimizes time

and ability to make audit work more effective.

To demonstrate the tool’s practical application, the below

example provides in-depth situational questions, indicators

and weights potentially suggesting fraud:

1. Are there pre-numbered or pre-printed forms to control

the income? No. Frequency: Daily; Weight: 10; Likely;

Indicator: Forms.

2. Is the deposit of securities in nancial institutions made

within 48 hours after collection? Yes. Frequency: Daily,

Weight: 10, Very Likely; Indicator: Bank Deposits.

3. Are collection reports made daily? No. Frequency: Daily;

Weight: 10; Very Likely; Indicator: Reports.

4. Are deposited values versus collected ones reconciled

daily? No. Frequency: Daily; Weight: 10; Very Likely;

Indicator: Conciliations.

5. Are there differences between the values collected and

deposited? Yes. Frequency: Daily; Weight: 10; Likely;

Indicator: Conciliations.

The negative responses to questions 1 and 4 and positive

response to question 5 may suggest the occurrence of a

malicious act (embezzlement). To conrm the assumption,

the auditor should gather necessary, pertinent and sufcient

evidence as a probative element of the determined ndings.

This tool also allows for information tabulation and

processing to develop reports by component, making it

possible to measure risk and condence levels. Subsequently,

components can be ranked to demonstrate the critical nature

of each component and interference with organizational

objectives. Identifying the most critical factors (based on

rank) provides the foundation for an improvement plan

where essential recommendations to correct observations

are formulated to strengthen the internal control system.

Conclusions

Fraud raises questions about audit work’s responsibility

and scope, as well as the auditor’s role in fraud detection.

Therefore, special attention must be paid to the entity’s

assessment methodology and the sufciency of the applied

audit procedures.

Accordingly, auditors can combine management tools with

internal control components to reduce audit complexity and

prevent fraud. To that effect, the balanced scorecard method

can help analyze nancial and non-nancial indicators.

These indicators, combined with evaluating internal control

components, assist in risk identication and fraud detection.

Applying an internal control tool based on the balanced

scorecard should be complemented by collecting sufcient,

relevant and competent evidence. Likewise, to ensure a

functional evaluation methodology, the matrix must be

adapted for each audited organization to consider legal

basis, legal nature and related regulations. Measurement

guidelines must also be clearly established.

Assessment results will provide reliable information

regarding internal control effectiveness and/or weaknesses,

allowing for adequate denition of recommendations and

corrective actions.

As preventive measures, an institution’s top management

must promote a high degree of integrity, honesty and

ethical behavior and design and disseminate appropriate

procedures and codes that consolidate transparency that

is reinforced by training actions, active and continuous

supervision, and the execution of effective internal controls.

Click each icon to view examples.

Balanced Scorecard

Weighting Scheme

www.intosaijournal.org

FEATURE STORIES

by Sammer Ahmad, Ofce of the Auditor General Pakistan,

Lahore Ofce

The Concepts Dened

Corruption and money laundering demoralize human

development, international security and national economies.

According to the World Bank and International Monetary

Fund (IMF), corruption is the greatest hurdle to lifting millions

of people from destitution. Money laundering invigorates

corruption, as it does all prot-driven delinquencies.

Corruption and money laundering are mutualistic—they

typically occur together. Yet, perhaps more signicantly, the

presence of one tends to produce, and reciprocally support,

the occurrence of the other.

The United Nations Convention against Corruption (UNCAC)

is more precise in dening corruption as “the active and

passive bribery of domestic and foreign public ofcials,

as well as ofcials from international organizations; the

embezzlement or diversion of public property by an ofcial;

trading in inuence or illicit enrichment by public ofcials;

and bribery and embezzlement in the private sector.”

While active bribery denotes the party making the

inducement, passive bribery represents the party receiving

it. This holds true even if advances are rejected and no give-

and-take occurs; it is the intent that matters.

Additionally, offering kickbacks through an intermediary

related to the target is also deemed to be a corrupt activity,

as are ofcials who steal public property (embezzlement) or

favor friends or family in discharging their duties (nepotism).

While corruption, generally comprises monetary stakes,

money is not a requirement.

Corporations can also be held criminally accountable for

corruption, though the criminal liability of parent companies

for criminal acts of subordinate rms is less clear. There

is growing consent that corruption can also materialize

between two private rms (in the past, labeling activities as

corrupt presumed the involvement of government ofcials).

Money laundering, the process of concealing illegal origins

of money derived from crime, occurs after a predicate

offense has brought the capital into the hands of criminals.

The practice has taken on an increasingly international

status with the growth of cross-border crime and progress of

legitimate international trade and nance. Though offenders

have faced a growing number of obstacles returning “dirty

money” to home countries, ample opportunities still exist by

leveraging globalized nancial sectors.

THE NEXUS AND THE WAY FORWARD

CORRUPTION AND MONEY LAUNDERING:

International Journal of Government Auditing—Spring 2019

FEATURE STORIES

Questions concerning the effectiveness of current Anti-Money

Laundering (AML) policies have also been raised. A study

in Britain, a nation possessing some of the world’s toughest

AML policies, indicated the cost to laundering money is, on

average, a mere15 percent of the principal amount.

The Relationship and Current Mitigating Mechanisms

For most countries, successfully dealing with corruption and

money laundering collectively is difcult to accomplish as

the close relationship between the two concepts tends to

be historically and bureaucratically skewed. Often, policy

groups and institutions are created to ght a multitude of

offenses without bearing related, yet distinct, missions.

AML Financial Intelligence Units (FIUs)

believe corruption is outside their area

of responsibility, and anti-corruption

bodies believe similarly when it comes

to money laundering.

Some international ofcials that

oversee technical assistance in both

AML and anti-corruption areas within

the same country express the norm is

for each body to have never heard of the other. Ofcials also

suggest money laundering and corruption are not domestic

priorities and believe that several developing countries are

establishing anti-corruption laws, regulations and institutions

simply to impress the global community rather than truly

addressing the topics.

To date, there are a number of international organizations

and projects that have been established to combat corruption

and money laundering, including: the Organization for

Economic Co-operation and Development (OECD) Convention

for Combating Bribery of Public Ofcials in International

Business Transactions; the joint United Nations Ofce on

Drugs and Crime/World Bank Stolen Assets Recovery

initiative; Asian Development Bank/OECD Anti-Corruption

Plan for Asia and the Pacic; Financial Action Task Force;

and Asia-Pacic Group on Money Laundering.

The Way Forward

Experts suggest the single most important tool in preventing

corruption is a register listing public ofcials’ (especially

members holding ranking positions and members of anti-

corruption bodies) assets and income. This register, which

would be updated and audited regularly, forces ofcials to

make a declaration of all assets and liabilities and creates

a benchmark that facilitates discovery of subsequent, large

sums. Declarations may also include assets derived from

spouses and immediate families, particularly those employed

in sensitive, senior positions.

Given FIU roles in collecting, analyzing and disseminating

nancial intelligence, the proper handling of condential

information is acutely relevant, as unauthorized release of such

data can have serious consequences. Past practices indicate

information policies should incorporate provisions to classify

sensitive information, and the “need to know” principle should

be applied to regulate restricted information access. FIUs

may also benet from adopting risk management principles

that call for additional data safeguard

integration, such as dual control and a

general presumption of cross-checking,

reviewing, and segregating duties and

functions.

Judicial corruption also represents a

severe threat to the proper functioning

of AML policies and the justice system

itself. Judges may be vulnerable to

inappropriate inuence, particularly

in environments where: (1) they are poorly compensated;

(2) appointments and promotion procedures tend to be

arbitrary or opaque; and (3) there is a general lack of anti-

corruption training.

Circumstances in which a resolution to impeach high-ranking

public ofcials for corruption lies with a minister or political

appointee also generates a serious conict of interest. In this

perspective, prosecutorial authority should be an autonomous

legal authority outside the government.

References

Baker, Capitalism’s Achilles Heel.

Asian Development Bank, Anticorruption Policy.

See the World Bank’s Literature Survey on Corruption 2000-2005,

the extensive online bibliographies maintained by the World Bank

Institute and Transparency International.

Levi and Gilmore, “Terrorist Finance, Money Laundering, and the Rise

and Rise of Mutual Evaluation”; Wechsler, “Follow the Money.”

Economist, May 25, 2006.

Sharman, ‘Power and Discourse in Policy Diffusion”; “The Bark is the

Bite.”

Reuter and Truman, Chasing Dirty Money, 184; Pieth and Aiol, A

Comparative Guide to Anti-Money Laundering, entitle their chapter on

the diffusion of these same rules “Spreading the Gospel,” 12.

Interviews conducted by David Chaikin and J. C. Sharman from

UNODC and World Bank.

"Experts suggest the single

most important tool in preventing

corruption is a register listing

public ofcials' assets and income."

www.intosaijournal.org

FEATURE STORIES

ERADICATING CORRUPTION:

MEASURING AND MONITORING

SDG PROGRESS

by Gunarwanto and Dedy Eryanto, Audit Board of the Republic of Indonesia

Introduction

In September 2015, nearly all United Nations (UN) member countries committed to the 17

Sustainable Development Goals (SDGs)—global goals created to steer policy making

and development funding until 2030. Each goal is comprised of targets, and each

target is further rened through one or two indicators designed to measure

progress. Though global targets and indicators have been established for each

goal, to what extent are they relevant and achievable?

This article highlights SDG16—promote peaceful and inclusive societies for

sustainable development, provide access to justice for all and build effective,

accountable and inclusive institutions at all levels—paying particular emphasis

to eradicating corruption and the ability to measure and monitor progress

using a rst-hand, real-world perspective.

Combating corruption, as outlined in SDG16, should be viewed as a keystone

element to all SDG agendas. In 2017, Transparency International estimated

more than 900 million people in the Asia-Pacic region alone paid bribes to

access basic services like health care and education. This statistic illustrates

additional complexities in achieving SDG3 (better health care) and SDG4

(better education) and demonstrates the pervasive threat corruption has on

the entire SDG program.

Measuring Progress

SDG 16 contains 12 targets, one of which, target 16.5, focuses on corruption

and bribery, calling upon nations to “substantially reduce corruption and

bribery in all forms.” Target 16.5 contains two indicators to gauge progress:

• 16.5.1: Proportion of persons who had at least one contact with a public ofcial and who paid a bribe to a public ofcial,

or were asked for a bribe by those public ofcials, during the previous 12 months.

• 16.5.2: Proportion of business that had at least one contact with a public ofcial and that paid a bribe to a public ofcial,

or were asked for a bribe by those public ofcials during the previous 12 months.

The target seems quite broad and ambitious in its attempt to minimize all types of corruption. Meanwhile, the assigned

indicators are, perhaps, too narrow, as (1) bribery is only one type of corruption; (2) current measurement criteria may

only capture a small portion of the population; and (3) cultural and personal context and denitions can result in signicant

dissimilarities. These factors make monitoring any real progress extremely difcult.

International Journal of Government Auditing—Spring 2019

FEATURE STORIES

Monitoring Progress

Data availability and objectivity represent two key aspects

that making monitoring SDG16 progress next to impossible.

Data is a crucial component to proving a program’s success.

Normally, a target contains specic criteria and indicators

acting as parameters to compare reality (real facts) to the

objective. Data meeting indicator requirements means the

program is successful (and vice versa). However, evaluating

progress is impossible when there is no data available.

Moreover, subjective data can be misleading.

The Institute for Economics and Peace believes this is the

case for SDG16, citing, as of 2017, "Currently, there is not

enough ofcial data or statistical capacity available at the

national level to properly measure SDG16 in a cross-country

comparable way."

By its very nature, corruption is a complex phenomenon with

many dimensions that takes on many forms and usually occurs

behind closed doors. Even when data is available, obtaining

objective data represents a signicant obstacle.

Some SDGs are also, inherently, multidimensional and cannot

be measured using one or two indicators. Target 16.5 seeks

a substantial reduction in corruption and bribery in all forms,

but the approved global indicators measure bribery only

between public ofcials and the public or businesses. There

are no indicators to measure corruption within or between

governments or other forms of non-governmental corruption.

The Indonesian Context

The Government of Indonesia (GOI) generally applies a

strong SDG commitment to national development priorities.

Yet, implemented regulations have not yet signicantly

reduced corrupt practices primarily because the current

political system gives rise to businesses and political actors

to practice corrupt behavior, such as candidates seeking

election for public ofce who require campaign funding

from third party sources.

Indonesia established a Corruption Eradication Commission

that has uncovered some bribery cases originating from

monetary support to campaigns. However, such detection

is limited, since ofcials successful in bids for public ofce

can simply provide kickbacks in the form of preferential

treatment, which is a difcult trail to unearth, follow and

source.

In terms of SDG Preparedness in Indonesian national policy

coherence and integrity, the Audit Board of the Republic of

Indonesia (BPK RI), the nation's Supreme Audit Institution,

noted two key ndings:

• GOI has difculty making clear, vertical integration

between central and local governments simultaneously

due to varying public election periods. This creates a risk

of intermittent policy and coherence at each governmental

layer; and

• Most government agencies still perform using a silo

mentality in budget execution, which causes coordination

and monitoring concerns and results in a lack of data

precision.

Indonesia's experience in combating corruption provides some

valuable lessons learned in improving SDG implementation.

As SDG implementation progresses, additional indicators

relating to corruption eradication should be considered,

particularly given the inadequacy of current measurements

to demonstrate progress in such a broad target.

References

Chadda, M. (2004). India: between majesty and modernity. In The

Struggle against Corruption: A Comparative Study (pp. 109-143):

Springer.

Huberts, L., Lasthuizen, K., & Peeters, C. (2006). Measuring corruption:

Exploring the iceberg. In Measuring corruption (pp. 265-293).

Institute for Economics and Peace. (2017). SDG16 Progress Report A

comprehensive global audit of progress on available SDG16 indicators.

Retrieved from http://visionofhumanity.org/app/uploads/2017/09/

SDG16-Progress-Report-2017.pdf

Lasthuizen, K., Huberts, L., & Heres, L. (2011). How to measure integrity

violations: towards a validated typology of unethical behavior. Public

Management Review, 13(3), 383-408.

Philp, M. (2016). Corruption Denition and Measurement. In Measuring

corruption (pp. 61-72): Routledge.

Pramono, A. J. (2018). Sharing Experience on Audit SDGs Preparedness

in Policy Coherence and Integration. New York: UN Web TV.

Transparency International. (2017). People and Corruption: Asia Pacic.

Retrieved from https://www.transparency.org/whatwedo/publication/

people_and_corruption_asia_pacic_global_corruption_barometer

Transparency International. (2018a). Summary of SDG16 Indicators

and Their Shortcomings.

Transparency International. (2018b). Using Governance Data To Fight

Corruption Across the SDGs Handbook for E-Learning Course.

"Much appreciated by his staff and respected by

parliamentarians and government ofcials alike, Mr.

Ferguson will be remembered by all those who had the

pleasure of knowing him as a humble, compassionate

and thoughtful man.

He cared deeply about conducting audits that brought

value to the public service, always for the greater

good of Canadians."

Ofce of the Auditor General of Canada

"His deep conviction was that an Auditor General plays

a unique role to encourage continuous improvement in

the public service, not for the sake of it, but because,

ultimately, all citizens—especially the most vulnerable

among us—are entitled to governance that maximizes

the public good.

He also believed that, as a leader, he had to foster

a vision of collaboration among all the stakeholders

who must work together to achieve results that truly

make a difference. Mr. Ferguson did all this with

professionalism, dignity and compassion. We will miss

him dearly."

Canadian Audit and Accountability Foundation

"The International Organization of Supreme Audit

Institutions (INTOSA) lost a personality who, over many

years, essentially shaped, inuenced and strengthened

government audit.

There is no doubt his work and expertise have inuenced

the international audit community and will continue to

leave an imprint on INTOSAI."

INTOSAI General Secretariat

International Journal of Government Auditing—Spring 2019

INSIDE INTOSAI

IN MEMORIAM

Michael Ferguson, Auditor General,

Ofce of the Auditor General of Canada

It is with great sadness that the Ofce of the Auditor General

of Canada announced the death of Michael Ferguson,

Auditor General, on February 2, 2019.

Mr. Ferguson was appointed Auditor General of Canada

on November 28, 2011. Prior to his appointment, he

served the public in a variety of positions, including Auditor

General, Comptroller and Deputy Minister of Finance in

New Brunswick until his move to Ottawa to take on the role

of federal Auditor General.

“

www.intosaijournal.org

INSIDE INTOSAI

“This meeting aims to help SAI experts create connections

within EUROSAI and develop ideas that expand activities

in these areas. I hope this is just the beginning of a broader

initiative, and that, in the following months and years to

come, we will continue exchanging experiences, identifying

challenges and inspiring positive change,” emphasized

Krzysztof Kwiatkowski, President of Poland's Supreme Audit

Institution (SAI).

Audit methodology experts from nearly 30 European

Organizations of Supreme Audit Institutions (EUROSAI) SAIs

gathered in Warsaw, Poland, late last year to attend the

region's inaugural Audit Methodology meeting. Some 60

delegates participated in the two-day event hosted by SAI

Poland to discuss issues related to Quality Assurance (QA),

stakeholder communication and audit planning—three areas

vitally important to SAI operations.

Kwiatkowski noted that the event also underlined analyzing

EUROSAI member needs in terms of institutional capacity

development.

Introductory thematic presentations sparked group dialogue

on the potential risks (challenges) and anticipated needs

(expectations)—each discussion resulting in a list outlining

current hurdles and future requirements.

EUROSAI AUDIT METHODOLOGY EXPERTS

UNITE TO DISCUSS COMMON CONCERNS

International Journal of Government Auditing—Spring 2019

INSIDE INTOSAI

Quality Assurance

• Oft-cited risks included insufcient distinction between QA

and Quality Control (QC) processes; extensive process

formalization that may reduce audit process exibility

and effectiveness; and staff difculty in accepting QA

process outcomes.

• Common expectations delegates noted included raising

awareness; resource provisioning; proper Information

Technology (IT) development and timely use to support,

enhance and monitor the QA process.

Stakeholder Communication

• Identied risks included the time gap between performing

an audit and publishing the report, which disrupts expected

communication impact; auditors lacking awareness of the

SAI’s communication obligations; and journalists (who may

not be well-versed in audit speak) publishing supercial

presentations that can negatively affect a SAI’s reputation.

• Developing communication strategies, practical training

on communicating audit ndings, and a need for

infographics templates for reporting were the primary

expectations reported by participants.

Audit Planning—Strategic and Operational

• Strategically, prominent risks included insufcient public-

sector knowledge and problems related to the length

of time from topic adoption in annual work plans to the

actual audit. Operational planning risks comprise limited

resources and planning issues.

• Delegates suggested clear explanations and criteria in

dening strategic planning; ensuring data reliability; and

establishing a connection between QA, strategic planning

and communication on the strategic level. Operationally,

providing a clear link between the organizational strategy

and planning was identied as a principal need as were

IT tool availability and a exible organizational structure.

Access the full story, photos and video interviews with key

participants at https://www.nik.gov.pl/en/news/the-rst-

meeting-of-the-european-audit-methodology-experts.

html.

www.intosaijournal.org

INSIDE INTOSAI

Air pollution knows no borders,

and recent statistics show that

more than 85% of the citizens

in European Union (EU) cities

breathe air containing harmful

chemicals.

This statistic prompted several

Supreme Audit Institutions (SAIs)

from the European Organization

of Supreme Audit Institutions

(EUROSAI) to join forces, and,

along with the European Court

of Auditors, perform a cooperative audit on air quality.

Participating SAIs, members of EUROSAI’s Working Group

on Environmental Auditing (WGEA), set out to evaluate

individual state activities designed to improve air quality.

Each SAI—Albania, Bulgaria, Estonia, Georgia, Hungary,

Israel, Kosovo, the Former Yugoslav Republic of Macedonia,

Moldova, Netherlands, Poland, Romania, Slovakia, Spain,

Switzerland—provided a national audit report. A joint audit

report, presented to the European Commission in Brussels

in mid-March, was also developed to provide consistent,

comprehensive conclusions and recommendations.

“Thanks to the audits carried out in each country, we can

simultaneously examine and evaluate activities of the

organizations responsible for protecting our air and

compare applied solutions,” noted Krzysztof Kwiatkowski,

President of SAI Poland, who, along with SAI Netherlands,

coordinated the cooperative audit.

The cooperative audit addressed the unquestionable

environmental consequences of air pollution while also

allowing participating members to treat the audit as an

important factor affecting individual national economies.

Access the joint audit report online:

• https://www.nik.gov.pl/plik/id,19001.pdf

• https://www.rekenkamer.nl/publicaties/

rapporten/2019/01/30/joint-report-on-air-quality

Additional links to news and reports available here:

• https://www.nik.gov.pl/en/news/international-audit-of-

air-quality-in-europe.html

• https://www.nik.gov.pl/en/news/joint-report-on-air-

quality-012019.html

REGIONAL COOPERATIVE AUDIT ON AIR

QUALITY YIELDS INSIGHTFUL REPORTS

International Journal of Government Auditing—Spring 2019

INSIDE INTOSAI

The International Organization of Supreme Audit Institutions (INTOSAI) Subcommittee

on Cooperative Audits has developed a self-instructive virtual course, "Guidelines

for the Execution of Cooperative Audits," earlier this year to address fundamental

aspects related to cooperative audits executed between two (or more) Supreme Audit

Institutions (SAIs). The course, designed to guide SAI staff in preparing, implementing

and monitoring cooperative audits, is based on International Standards of Supreme

Audit Institutions (ISSAI) 5800: Guide for the Execution of Cooperative Audits. The

Subcommittee on Cooperative Audits ofcially launched this course on April 1, 2019,

in the Organization of Latin American and Caribbean Supreme Audit Institutions

(OLACEFS) aimed at training one hundred SAI professionals within the region. The

month-long course helps answer questions, such as:

• What is a cooperative audit?

• What are the differences between the types of cooperative auditing?

• How do SAIs select the topic of a cooperative audit?

• Is there a subsequent evaluation?

For more information about the course, contact the subcommittee at cooperacion@

contraloria.gob.pe.

At the September 2018 International Organization of Supreme Audit Institutions (INTOSAI) Governing Board meeting in Moscow,

General Secretariats from the INTOSAI regions provided activity updates, and many regions expressed interest in conducting

cooperative audits on topics ranging from water protection and waste management to climate change. To better disseminate

valuable cooperative audit experiences that include themes relevant to the international community, the Subcommittee on

Cooperative Audits invites the INTOSAI community to share experiences and best practices using the Virtual Catalog on

Cooperative Audits at http://www.intosai-cooperativeaudits.org/.

The catalog, a useful reference source for Supreme Audit Institutions (SAIs) interested in conducting cooperative audits, also acts

as a worldwide repository of completed cooperative audits. The catalog includes various lters to rene search results based

on the user's needs. Currently, the catalog, available in English and Spanish, contains over a hundred audit reports resulting

from cooperative audits, and SAIs can publish cooperative audit reports directly to the site by creating a password-protected

account. To learn more about the virtual catalog and publishing reports directly to the catalog, contact the subcommittee at

cooperacion@contraloria.gob.pe.

COOPERATIVE AUDITS SUBCOMMITTEE

LAUNCHES VIRTUAL TRAINING

COOPERATIVE AUDITS SUBCOMMITTEE

PROMOTES VIRTUAL CATALOG

www.intosaijournal.org

INSIDE INTOSAI

NEWS FROM THE

OLACEFS REGION

SAI PERU ASSUMES OLACEFS PRESIDENCY

In an ofcial a ceremony in Mexico City, the Supreme Audit

Institution (SAI) of Mexico transferred the Organization of

Latin American and Caribbean Supreme Audit Institutions

(OLACEFS) presidency to the SAI of Peru. During the oath-

taking ceremony, Nelson Shack Yalta, Peru’s Comptroller

General, committed to implementing the region's current

activities and projects and expressed a willingness to

develop additional initiatives raised by OLACEFS members.

He also proposed the creation of working groups related

to disasters and cases of transnational corruption.

SAI EL SALVADOR TO LEAD OLACEFS CEDEIR

On January 1, 2019, El Salvador's SAI assumed the Presidency

of the Commission of Performance Evaluation and Indicators

(CEDEIR)—the technical arm of OLACEFS—following SAI

Peru's six-year term, which ended on December 31, 2018.

SAI Peru will remain an active member of the commission. As

outgoing president, SAI Peru performed the ofcial transfer of

chairmanship to SAI El Salvador on February 13, 2019. Both

SAIs intend to continue working together to share knowledge

on relevant topics within the region.

REGIONAL DELEGATES COMPLETE

ADVANCED SAI PMF TRAINING

SAI delegates from Belize, Bhutan, Bolivia, Chile, Costa Rica,

Cuba, Dominican Republic, El Salvador, Guatemala, Honduras,

Malawi, Nicaragua, Paraguay, Peru and Tunisia completed

the SAI Performance Measurement Framework Advanced

Course in February. As part of the CEDEIR annual operations

plan, the course, coordinated by SAI Peru and the INTOSAI

Development Initiative, provides more in-depth knowledge on

SAI PMF assessment methodology and application.

PROJECT LAUNCHED TO IMPROVE

INFORMATION ACCESS

The OLACEFS Technical Commission of Good Governance

(CTPBG) is currently conducting a project on “Improving

Access to Information and Use of Government Audit Products

in Latin America and the Caribbean” aimed to support SAIs

in improving the level of information availability within

appropriate and relevant standards. Based on constructive

dialogue, the project also promotes the use of auditing

products and how audit reports and other documents may

help to improve government services quality, increase

transparency and accountability in SAIs and audited entities.

To date, the SAIs of Argentina, Chile, Dominican Republic and

Peru participate in this project. In line with this, in January,

SAI Peru performed a readability and comprehension test

of developed products and responded to the project's

diagnosis and baseline. The other participating SAIs have

also conducted this process.

International Journal of Government Auditing—Spring 2019

SPOTLIGHT ON CAPACITY BUILDING

by Wilf Henderson, International Technical Cooperation Project

Manager (Retired), United Kingdom National Audit Ofce

Preventing fraud and corruption are major challenges facing

governments, particularly those of developing countries.

Government inability to establish effective internal audit

and nancial control systems and adequately establish or

resource organizations charged with identifying fraud and

corruption are just some causes of fraudulent and corrupt

behavior. While no system exists to entirely avert fraud and

corruption, there are measures that can be implemented to

reduce the potential of occurrence.

Supreme Audit Institutions (SAIs) provide assurance that

public monies have been properly accounted for and are

in keeping with established laws and regulations. While not

the SAI's responsibility to investigate and uncover evidence

of fraudulent and corrupt behavior, a general expectation

exists (stemming from society and the media) that SAIs have

a major responsibility in its prevention. SAIs in developing

countries often face considerable challenges and may lack

the capacity to undertake effective audits and seeking

support from development partners to enable technical

assistance is a crucial component to improving audit quality.

To thwart fraud and corruption, building and maintaining

relationships with government, its ministries, departments and

agencies; legislature; development partners; and support

contractors is crucial. SAIs should also cultivate connections,

where applicable, with the Public Accounts Committee

(PAC) anti-corruption bodies, and judiciary and prosecuting

authorities, as reporting and following up on cases of fraud

and corruption, when necessary, are important steps.

These relationships must be based on trust and mutual respect.

Each stakeholder must be clear on the roles and responsibilities

necessary to minimize fraud and corruption, and in my

experience in providing technical support to developing SAIs

in Sub Saharan Africa, there are key actions required.

Government

• Government should be fully supportive of an independent,

competent SAI. Encouraging knowledge and use of proper

accounting standards and techniques is essential while also

understanding management must implement systems and

procedures to detect and prevent fraud and corruption.

• Government must understand the value of SAIs. Effective

audit work promotes good governance and leads to

improvements in internal nancial control systems.

• Government should establish effective internal nancial

control systems, adequately fund bodies charged with

combating and prosecuting cases of fraud and corruption

and sufciently resource internal audit.

Legislature

• Legislature should ensure SAIs are resourced to deliver

effective, objective public audits.

• Legislature should champion a competent SAI to build

better relationships and processes with relevant prosecuting

authorities and the PAC. Strengthened relations creates

integrative, informing processes with each organization

fully understanding roles and responsibilities.

Development Partners

• Development Partners (DPs) bridge technical assistance

projects and government and are often substantial investors

having a major stake in ensuring investments are properly

scrutinized. This need should be recognized within national

strategies, and SAI development should be included in any

major public reform program.

• DPs are important to ensuring requested technical assistance

project support providers are competent, experienced

contractors with comprehensive knowledge of SAI work.

SAI Management

• Leadership is essential to a project's efcient functioning

and set the tone throughout the SAI and with support

providers. Employing a collaborative approach is key to

projects thriving in an inclusive and supportive environment.

• Work plans should not encourage auditors to seek out fraud

and corruption but to inform appropriate authorities if

suspicious activities are uncovered. SAI management should

ensure follow-up action on such cases has been taken.

• Leaders should ensure organizational buy-in, particularly

given the potential changes to a change-averse culture.

Establishing an inclusive learning environment incorporating

staff at all levels is one method to achieve consensus.

Contractors

• Successful contractors respect and work alongside SAI

management and staff collaboratively and recognize

potential challenges within the working environment with

an ability to empathize with staff facing change.

• Consultants should have experience with SAI work, thorough

knowledge of International Organization of Supreme Audit

Institutions (INTOSAI) standards and understand SAI roles

and responsibilities in combating fraud and corruption.

BUILDING PARTNERSHIPS TO COMBAT FRAUD AND

CORRUPTION VIA EFFECTIVE SAI TECHNICAL SUPPORT

PARTNERSHIPS

Supreme Audit Institutions (SAIs) provide assurance that public monies have been properly accounted for and are in keeping with

established regulations. To help combat fraud and corruption, building and maintaining relationships with government, its ministries

and departments; legislature; development partners; and support contractors is crucial.

GOVERNMENT should support SAI independence,

encourage SAI knowledge and use of proper

accounting standards, techniques, and understand

the value and benets SAIs provide.

LEGISLATURE impacts SAI resourcing, ability to

deliver effective services. They should champion

SAI competence and motivate SAIs to build better

relationships with relevant departments to create

integrative, informing processes.

DEVELOPMENT PARTNERS are the bridge between

a project and the government. They have a major

stake in ensuring investments properly scrutinized—

national strategies should reect this. They also help

ensure experienced contractor selection.

SAI MANAGEMENT is essential for projects' efcient

functioning. They set the tone throughout the SAI,

as well as with contractors. Employing an inclusive,

collaborative approach is vital. Leadership should

ensure buy-in due to change-averse work culture.

CONTRACTORS respect and work collaboratively

with SAI management, staff. Previous work with SAIs

and thorough knowledge of INTOSAI standards,

guidance vital to understanding nature of SAI work

and culture.

www.intosaijournal.org

SPOTLIGHT ON CAPACITY BUILDING

Best practices in building effective relationships to

combat fraud & corruption, provide technical support