The United States Government Accountability Office: Role and Functions -- Comparison with France and the UK's Cases

Posted by Tej Prakash.

 

The Acting Comptroller General of the USA (Gene L. Dodaro) in a recent meeting with parliamentarians from Georgia, Kosovo, Macedonia and Mongolia, talked about the role of the United States Government Accountability Office (GAO) -- click here for a copy of the presentation. This blog provides a brief summary of the main points. In the second part it also briefly reviews the roles and responsibilities of the National Audit office of the UK and of the French Court of Audit.

The US Federal Audit Practices are updated...

Posted by Abdul Khan

The United States Government Accountability Office (GAO) and the President’s Council on Integrity and Efficiency (PCIE) issued in July 2008 the latest version of its financial audit manual (FAM). The FAM sets out a methodology for financial statement audits. The latest version updates the FAM for significant changes that have occurred in auditing financial statements in the federal government since 2004, when it was previously updated. The FAM is in three volumes. Volume 1 sets out audit methodologies, volume 2 contains audit tools, and volume 3 provides check lists for accounting, reporting and disclosures.

Regulatory System for Financial Institutions are “High Risk”

The GAO announced on January 22, 2009 that the regulatory system governing U.S. financial institutions and markets is considered at “high risk” for waste, fraud, abuse, and mismanagement or in need of broad-based transformation. Depending on your inclination to view glasses as half full or half empty, you may find this announcement either comforting that the GAO has identified the problem and therefore something might be done about it, or disconcerting that so much taxpapers’ money is being thrown at such institutions.

The revisions to the FAM are primarily due to changes in professional auditing and accounting standards and laws. These include the effects on financial audits of Federal Accounting Standards Advisory Board (FASAB) accounting concepts and standards issued through May 31, 2007, e.g., on social insurance, heritage assets, and earmarked funds. Major changes include:

• consistent with OMB audit guidance, performance measures are excluded from internal control definitions;

• identification of treasury processes and reports that are being substantially revised as a result of the implementation of the government wide accounting (GWA) system and other changes;

• a new section provides guidance on auditing the Statement of Social Insurance.

Do you know AISCCUF?

Posted by Franck Bessette

AISCCUF, created in 1994, is an association of Supreme Audit Institutions (SAI) using French as their working language (Association des Institutions Superieures de controle ayant en commun l’usage du français). The Association has 43 members, most of them countries, but regional organizations like CEMAC [1] and UEMOA [2] are also members.

Canada and Quebec enjoy separate membership, as well as countries in which French is not the official language but maintain strong historical ties with the “francophonie”, like Vietnam, Sao Tome e Principe, Rumania, Mozambique, Moldova, Guinea Bissau, Cape Verde and Bulgaria. Switzerland and Belgium are also very active members. The French Cour des comptes holds the Secretariat of the association and the Cour des comptes of Belgium serves as Treasurer.

Internal Audit in the Pacific

By Suhas Joshi

Despite considerable work in the external audit area in the Pacific internal audit has largely been an orphan. In all the Pacific Island Countries (PICs) Internal Audit has been limited to the conduct of compliance audit and it’s ineffective implementation has led to misappropriation of funds, lack of compliance, incorrect payments and errors in financial reporting.

US Government Annual Financial Report

Posted by Eivind Tandberg

Comprehensive, transparent and reliable financial reporting is a cornerstone of good public financial management. The US Government financial report for fiscal year 2008 (October 2007 - September 2008) was released in December 2008. The report provides many examples of good international practices. However, the accompanying audit report from the US Comptroller General, which includes negative opinions for key government sectors, illustrates that it may be difficult to meet all requirements in this area, even for an advanced economy government with significant financial management resources.

Norway’s Government Pension Fund–Global

Posted by Thomas Ekeli

A recent post by Mauricio Villafuerte and Jon Shields described newly established guidelines for sovereign wealth funds (SWFs). One of the best known SWFs is the Norwegian Government Pension Fund–Global, formerly known as the Government Petroleum Fund. The Petroleum Fund was established in 1990 as a fiscal policy tool to support a long-term management of the petroleum revenues. Renaming the Fund the Government Pension Fund–Global in 2006 was part of a broader pension reform, highlighting also the Fund’s role in facilitating government savings necessary to meet the rapid rise in public pension expenditures in the coming years. However, the Fund is not earmarked for pension expenditures.

Extending Research on Corruption to Specific Features of PFM Systems

Posted by Francois Michel

If one wanted to summarize briefly how research on corruption has evolved in recent years, one could say that it has made progress in four different areas:

• The search for determinants of corruption and its transmission mechanism to growth and the exploration of linkages between corruption and other economic—GDP per capita, capital flows, aid, income distribution, inflation, etc.—or political variables. This is often achieved through panel data analyses;
• The improvement of transparency indexes—see Daniel Kaufmann and Aart Kraay’s recent article on "Governance Indicators: Where Are We, Where Should We Be Going?";
• Efforts to leverage insights from the corruption literature into sectoral, country-specific reform plans, and that have formed the core of the World Bank’s strategy in recent years. As the Bank’s recent flagship publication on corruption makes clear, public financial management reform are instrumental in tackling corruption;
• New microeconomic models explaining how corruption can originate in auctions of procurement contracts—e.g. on allowing ex-post collusion opportunities between the bureaucrat and one bidder.

Going hybrid! A practical approach to setting government accounting standards?

Posted by Holger van Eden

In the Netherlands, but also in a number of other OECD countries, the debate on the usefulness of accrual accounting standards, both for financial reporting and budgeting, has led to a hybrid set of accounting standards being used in government. This hybrid approach has been questioned by the Dutch Supreme Audit Office, and is generally not appreciated by accounting purists. However, the hybrid approach, in which part of government works under accrual standards, and part remains under cash, may be a practical way to reap some of the benefits of accrual reporting and budgeting, while not incurring the substantial costs of implementing accrual accounting standards government-wide. Accountability and transparency at the national level may also be better served by a straightforward cash-based approach.

Bill Dorotinsky on Public Financial Management Reform -- Trends and Challenges (Video 3)

Posted by Michel Lazare

You liked Bill Dorotinsky's post of June 27 "Public Financial Management Reform -- Trends and Challenges"?

Well, you'll then love the video of this presentation delivered at the ICGFM meeting. Here is the third part of this YouTube video; parts 1 and 2 appear in other posts published today.

Bill Dorotinsky on Public Financial Management Reform -- Trends and Challenges ( Video 2)

Posted by Michel Lazare

You liked Bill Dorotinsky's post of June 27 "Public Financial Management Reform -- Trends and Challenges"?

Well, you'll then love the video of this presentation delivered at the ICGFM meeting. Here is the second part of this YouTube video; parts 1 and 3 appear in other posts published today.

Bill Dorotinsky on Public Financial Management Reform -- Trends and Challenges (Video 1)

Posted by Michel Lazare

You liked Bill Dorotinsky's post of June 27 "Public Financial Management Reform -- Trends and Challenges"?

Well, you'll then love the video of this presentation delivered at the ICGFM meeting. Here is the first part of this YouTube video; parts 2 and 3 appear in other posts published today.

Public Financial Management Reform -- Trends and Challenges

Posted by Bill Dorotinsky

On June 18, 2008, I spoke on Public Financial Management Reform: Trends at the the International Consortium on Government Financial Management (ICGFM) monthly speaker series in Washington, D.C.

I took the opportunity to share my personal views on current trends and challenges in public financial management (PFM) reform, drawing on my experience across the globe and multiple institutions. (As I noted, these are not the views of the IMF, or any other institutions with which I have been associated.)

The presentation covered three broad areas:

1. Common PFM reform recommendations, seen across all donors, consultants, etc.
2. Information on what reforms countries have been implementing in recent years
3. Challenges ahead for improving PFM

The PowerPoint can be downloaded here Download public_financial_reform_trends_icgfm_June_2008.ppt

The ICGFM Blog also posted a summary and video of the presentation on their Blog (CLICK HERE).

Banking on Accountability?

Posted by Carlos Santiso, Sector Manager, Governance (AfDB)

"Banking on Accountability? Strengthening Budget Oversight and Public Sector Auditing in Emerging Economies," by Carlos Santiso in Public Budgeting and Finance, 26(2), pp.66-100, 2006.

In a relatively recent article (“Banking on Accountability? Strengthening Budget Oversight and Public Sector Auditing in Emerging Economies” Public Budgeting and Finance, 26(2), pp.66-100, 2006), Carlos Santiso reviews multilateral development banks’ support to parliaments and external audit agencies in Latin America. The analysis reveals a learning curve in multilateral assistance to budget oversight institutions, including in the choice of strategies and the combination of instruments. It underscores the importance of the underlying political economy context for strengthening checks and balances in the management of public finances.

MDBs have traditionally centered their attention on the modernization of financial management within the executive and the bureaucracy (finance ministries, central budget offices, central banks, and tax authorities). They nevertheless realize the limitations of an exclusive focus on the executive and the need to balance executive discretion with external accountability and, as a consequence, are increasingly supporting the infrastructure of accountability within the state - those institutions outside the executive branch of government and tasked with scrutinizing government and overseeing the budget.

Welcome to the new ICGFM Blog

Posted by Bill Dorotinsky

This week, the International Consortium on Government Financial Management holds their  22nd conference in Miami, Florida. (See our December 12, 2007, blog post on the ICGFM fall Washington, D.C. Conference on IFMIS.) The focus of this year's Miami Conference is on accountability, and is entitled “Joining Forces for Responsible Leadership to Enhance Good Governance:  Citizens, Public Officials, Private Sector and the Press”.

As part of this years event, ICGFM has introduced a blog spot, with daily coverage of presentations, including access to the presentation material and YouTube video's. Well worth a visit!

Improving Government Financial Management Systems -- Lessons from a U.S. GAO Report

Posted by Bill Dorotinsky

Countries around the world are working to improve their public financial management (PFM) systems, and the U.S. is no exception. While for many countries the U.S. example may seem remote --- too unique in the authority of the Congress or too economically developed --- the similarities and lessons are more relevant than might appear at first glance. A recent GAO report, Highlights of a Forum: Improving The Federal Government's Financial Management Systems (GAO-08-447SP, April 2008), provides some fascinating insights into the state of PFM in the U.S.

A Comparative Review of Financial Control in African Countries – an IMF Technical Guidance Note

Posted By Lubin Doe and Sailendra Pattanayak

Is effective control and stewardship exercised in the use of public funds? Are public resources being used for intended purposes and in compliance with respective laws and regulations? Can private sector suppliers of goods and services have reasonable confidence in transacting with the government?

These questions have always been of considerable concern to parliamentarians, government civil servants, the public at large and other stake holders (such as foreign aid providers) in countries with weak public financial management systems. There is a close relationship between the quality of financial control during budget execution and budgetary outcome. Weak financial control in many African countries have led to unbudgeted expenditure, emergence of expenditure arrears, concealment of excess spending, non-compliance with financial regulations, and recourse to exceptional spending procedures. However, the financial control architecture varies across the countries in Africa reflecting the traditions of their former colonial powers and changes introduced over the years.

Sri Lanka: Improving Transparency and Accountability in Budget Processes

Posted by Justin Tyson

A TV report posted on YouTube in September 2007 provides a short, but interesting, introduction to debates about improving the transparency and accountability of budget-making in Sri Lanka. Topics covered by the video include: the move away from incremental annual budgets towards Activity-Based Budgeting; the need to have more in depth review of expenditure purposes and outcomes; and, the role of parliament in scrutinizing the budget process.

Is Providing Budget Support to Developing Countries Effective? -- Evaluation of DFID's Direct Budget Support by UK's National Audit Office

Posted by Michel Lazare

One of the main changes in development aid policy over the last decade was the decision made by the international community to move away from project aid in favor of direct budget support. This meant shifting away from aid financing specific projects and disbursed outside of the beneficiary country's public financial management (PFM) system (e.g., money deposited on projects' accounts in the commercial banks) to favor generally unearmarked aid funds directly disbursed using the beneficiary country's  PFM system (e.g., direct budget support deposited on the treasury's account at the central bank).

Evaluation of the efficiency and effectiveness of this new aid policy is a key issue for the international community. Just a few weeks before the upcoming Fourth High Level Forum on Aid Effectivemess to be held in Accra (Ghana), the UK's National Audit Office (NAO) has published, on February 8, 2008, a report evaluating DFID's (the UK's development agency) performance in providing budget support. This report titled: "Department for International Development -- Providing Support to Developing Countries", concludes in a nuanced way:

"Evidence on whether budget support has yielded better value for money than other forms of aid is not conclusive. While budget support has some advantages compared to other forms of aid, it also carries significant risks which need to be better managed."

A Primer on Accrual and Cash Deficits--Understanding Similarities and Differences--the US Case (GAO Report)

Posted by Michel Lazare

In December 2006, the United States Government Accountability Office published a report on "Understanding Similarities and Differences between Accrual and Cash Deficits": Download gao07117sp_accrual_and_cash_deficits.pdf.

This report constitutes a good introduction to the differences about these two notions of fiscal balance. In addition, it explains in a clear way how some of the categories of expenditures are accounted for in cash and in accrual terms. It is also candid about the weaknesses in some of the data reported in accrual terms and the need for a "plug" (i.e., unaccounted for differnces) to fully reconcile the two deficit numbers.

David Walker (GAO): Long-Term Fiscal outlook--Action is Needed to Avoid the Possibility of a Serious Economic Disruption in the Future

Posted by Michel Lazare

Further to our January 29, 2008 post on "David Walker (GAO head): The USA is Living beyond its Means -- Difference between Accrual and Cash," here is below the summary of David Walker's testimony before the Committee on the Budget of the U.S. Senate: "Long-Term Fiscal Outlook--Action is Needed to Avoid the Possibility of a Serious Economic Disruption in the Future."

(link to the full text of David Walker's testimony: Download gao08411t_longterm_fiscal_outlook.pdf )."

David Walker (GAO head): The USA is Living beyond its Means -- Difference between Accrual and Cash

Posted by Michel Lazare

The YouTube video below is a presentation on long-term fiscal issues in the US made by David M. Walker, the US Comptroller General and head of the U.S. Government Accountability Office (GAO). 

France improving its medium-term budget framework

Posted by Ian Lienert

Many developed and developing countries are struggling to implement or improve their medium term expenditure frameworks (MTEFs) to elaborate on a government’s sectoral spending objectives. In April 2007, l’Inspection Générale des Finances (IGF), a high-level government body under the Ministers of Economy/Finance and of Budget/Accounts, published a report (in French) analyzing France’s a medium-term budget framework (MTBF), making recommendations for strengthening the framework.

Eyes wide shut? Understanding the politics of government auditing

He who lives outside the budget lives in error.
            Carlos Fuentes, La Silla del Águila, 2003.

Posted by Carlos Santiso (AfDB)

In the second generation PFM reform, strengthening transparency and accountability in public finances is a defining challenge for emerging economies seeking to foster fiscal responsibility and curb corruption. There is thus renewed interest in those oversight agencies tasked with scrutinizing public spending and enforcing horizontal accountability within the state.

Recent research by Carlos Santiso, titled Eyes Wide Shut? The Politics of Autonomous Audit Agencies in Emerging Economies, explores the external oversight of public finances. It models and measures the effectiveness of autonomous audit agencies, developing an index to evaluate their performance, and assesses their reform over time. It examines the institutional trajectory of the AAAs of Argentina, Brazil and Chile, which illustrate the three models for organizing the external audit function in modern states and three distinct trajectories of reform (or lack thereof).

A Principal-Agent Theory Approach to Public Expenditure Management Systems in Developing Countries - IMF Working Paper

Posted by Luc Leruth

A well-functioning public expenditure management (PEM) system is considered a critical pillar of government efficiency by most practitioners, who place it at par with a low-distortion tax system and an efficient tax administration. It is therefore unfortunate that economic research has shown so little interest in the design of PEM systems, especially on the theoretical side. A recent IMF Working Paper entitled "A Principal-Agent Theory Approach to Public Expenditure Management Systems in Developing Countries" by Elisabeth Paul and myself discusses Public Expenditure Management (PEM) systems in developing countries using an analytical framework based on principal-agent theory.

Ongoing Developments in Performance and Accountability - seminar with the Auditor-General of Australia

Australian A-G meets with Bank and Fund staff

Posted by Jim Brumby, World Bank

The Auditor-General of Australia, Mr. Ian McPhee, discussed wide ranging issues related to public sector performance and accountability at a joint Bank-Fund seminar held at the World Bank on December 11, 2007. Mr. McPhee drew attention to the importance of openness and transparency, not only in the work of the executive but also in the execution of the work of the Australian National Audit Office (ANAO).

France's National Audit Office ("Cour des Comptes"): 200 years and counting!

Posted by Michel Lazare and Dominique Bouley

On November 5, 2007, the French National Audit Office (La Cour des Comptes) celebrates its 200th anniversary with a re-enactment of its 1807 inaugural session. The current Cour des Comptes was created by Emperor Napoleon I (in a September 16, 1807 law).

Its historical roots are even much older: a royal ordinance in 1256 prescribed that mayors in Normandy had to report their financial accounts to a royal commission once a year; and an institution called chambre des comptes was created in 1303.