Supreme audit institutions essential in securing government accountability during covid19

FELICITY HAWKSLEY, journalist

In January 2021, the International Monetary Fund reported that the global fiscal response by governments to the coronavirus pandemic was US$14 trillion, and counting. Many countries have spent more than they take in taxes to try and get the pandemic under control.

And though both the financial crisis and covid19 warranted speedy spending, coronavirus spending has been spread across many more sectors and channels than the bank bailouts and quantitative easing during the credit crunch.

Clearly there are risks associated with such spending. "The main risks are fairly obvious," said Pamela Monroe Ellis FCCA, auditor general of Jamaica and secretary general of the Caribbean Organisation of Supreme Audit Institutions (CAROSAI). "The spending is generally taking place in an environment that is not conducive to checks and balances, and this has meant – in some cases – that there has been improper spending, corruption and irregularities.

"More likely than any of these is deprivation – the money is not going where it’s needed most and has been redirected to persons of low priority. We have certainly seen that in some places with the vaccine rollout."

But Monroe Ellis agreed with enabling speedy spending. "Clearly a relaxing of controls is warranted," she said, "but we have to remember that once it has been spent, it can’t be recovered."

Two solutions

In some countries two solutions are emerging to manage some of the risk involved in colossal and quick government spending. The first is on-time or real-time audit conducted by a country’s supreme audit institution. The second, encouraged by the International Organisation of Supreme Audit Institutions (INTOSAI) is a transparency, accountability and inclusiveness (TAI) audit.

Monroe Ellis has first-hand experience of the former, since Jamaica’s supreme audit institution conducted an on-time audit of its covid19 spending. "We know that one of the big risks is that supreme audit institutions are not equipped with either the financial or the human resources to respond with the speed in which the spend is taking place."

But Jamaica’s supreme audit institution, which had already spent some years developing its technology environment and digitising processes, was able to transition to home-working without introducing high levels of risk. "My experience is that not many audit institutions can do this," Monroe Ellis said. "Among the 23 audit institutions in CAROSAI, only eight were able to work from home effectively, and of those eight, only one was able to conduct an on-time or real-time audit – and that was us."

Jamaica’s on-time audit was conducted at the same time its government was developing the system for paying out funds to citizens and organisations. "We had high-level support from the finance minister," Monroe Ellis said, "and we had access to all the information we needed. The release of funds was conditional on the outcome of the audit, so there was a real incentive for the government to do their homework."

It wasn’t easy, though. "We worked a lot of long hours, and cooperation with other entities was essential." But, she says, the outcome was extremely valuable, and reassured the public that the government had been held accountable over the structure and means of its spending. "We publicised the level of scrutiny, and we made clear what we found, and what remedial action had been taken," she added.

Although the real-time audit focused on accountability, she said that "inclusiveness is a nascent issue". She hoped that governments will begin to take a holistic approach to inclusiveness in spending but is clear about the proper limits on the supreme audit institution’s mandate.

"As a supreme audit institution, we can examine the budget and budget development, but we can’t influence the policy side of things," she said, adding, "but we can absolutely examine how the policies to provide for the vulnerable are implemented."

Archana Shirsat, deputy director general of the INTOSAI Development Initiative (IDI), said that transparency, accountability and inclusiveness audits are an important part of the toolkit to prevent governments bypassing accountability and transparency in emergency spending.

"There’s a risk the massive resources that have been mobilised end up being misdirected or diverted," she said. "Last year we launched TAI, which is a compliance audit of TAI issues in covid19 spending, and took up conversations with around 57 supreme audit institutions across the region."

But INTOSAI soon found that not every supreme audit institution had the mandate to undertake such an audit, and many that had the mandate did not have the capabilities. Where TAI audits have been carried out, many are limited and focus more on accountability and transparency. "We’ve seen almost nothing on inclusiveness," Shirsat said.

But she added that supreme audit institutions can take steps to ensure fairer spending even if they don’t have the capacity to launch a full, real-time TAI. "We have plenty of resources to help countries that want to do this, including a handbook, a bank of audit questions, and local and regional advisers." And, she said, supreme audit institutions can start small and work their way up.

"Making the audit doable is the most important step – limit the scope and make it manageable," she advised. "Ask yourself, do you have enough sources of evidence to gather what you need? Is the risk manageable? If you can’t audit individual transactions, audit the framework for spending – there is always somewhere to start."

Source: ACCA Accounting and Business magazine.