1. The eighth meeting was hosted in Budapest by Dr Arpád Kovács, President of the State Audit Office of Hungary. Sir John Bourn, Comptroller and Auditor General of the United Kingdom, Chairman of the Working Group, said that the growth in the membership of the Group (now 31 SAIs plus observer SAIs), and the fact that 9 of the 24 SAIs represented at the meeting were led by the heads of their SAIs, underlined the continuing and increasing interest in privatisation and its offshoots across the membership of INTOSAI and in all regional groupings.
2. In November 1998 XVI INCOSAI asked the Group to monitor the effectiveness of the guidelines on best practice for the audit of privatisations, to facilitate the further exchange of information between SAIs about privatisations and their audit, and to develop audit guidance in two areas of particular importance for public services: economic regulation and the increasingly widespread use of public/private finance and concessions.
3. The Group have examined case studies showing how SAIs are drawing on the privatisation guidelines in planning, carrying out and reporting on their examinations of particular sales. These studies show that SAIs have found the guidelines to be helpful in their application to audit work.
4. In pursuit of their 1998 remit, the Group have developed further guidelines, on the audit of economic regulation and of public/private finance and concessions. These too have been informed by case studies, drawing on the audit experience of many SAIs. And the draft guidelines received a favourable response when they were circulated to the full INTOSAI membership for comment in October 2000. The Group agreed a number of amendments to the draft guidelines in the light of these comments and approved the final drafts for submission to XVII INCOSAI for adoption.
5. The Group are conscious that the involvement of the private sector in financing and delivery of public services continues to grow in a variety of ways. As well as outright sales, there is outsourcing, joint ventures and commercial exploitation of state-owned assets. In these arrangements, the state often finds itself the junior partner in a range of partnerships, including having minority shareholdings in private businesses.
6. These partnerships pose challenges for the public sector partner as regards developing understandings with the private sector and new forms of accountability. SAIs are increasingly seen in their countries as having a relevant contribution to make to this debate. Developments in electronic government alone mean that the issue of the seamless delivery of public services has become a demand, not an option. This in turn means that SAIs have to become more proactive in promoting a framework which clarifies who is accountable for what in delivering public services, without seeking to supplant the policy discretion of governments, and without undermining SAI independence.
7. The Group believe therefore that there would be value in supplementing existing guidelines to provide further advice, for the assistance of audited bodies as well as SAIs on these issues. As an initial contribution to this work, members of the Group have completed a questionnaire on the role of the state as a minority shareholder in private businesses. The report on this survey identifies issues which could be covered by audit guidance to be developed by the Group.
8. A number of countries have now largely completed their sales programmes and are simultaneously developing new forms of joint working with private sector businesses. Other countries are in the middle of the privatisation process. Yet more are considering whether to privatise, and if so how. In this rapidly changing scene, the Group think it important to help SAIs access information about the latest developments and sources of good practice. The Group have therefore continued to put all their working documents, case studies and draft guidelines on their website (www.nao.gov.uk/INTOSAI/wgap/home.htm) together with contact details (email addresses) of members. The Group also intend to develop more links to relevant websites, including INTOSAI websites.
9. In response to their 1998 remit, the Group recommend two sets of guidelines to XVII INCOSAI for approval and adoption. The guidelines on best practice for the audit of economic regulation recognise that economic regulation is being used increasingly as a means of checking the power of monopolistic and dominant suppliers of vital utilities, and that regulators face a difficult task in pursuit of their remits, which can include in particular balancing the interests of the consumer against those of the supplier.
10. The guidelines on best practice for the audit of public/private finance and concessions underline both similarities and differences between the privatisation approach and the private finance or concession approach. Under both, the state ceases to perform activities which may traditionally have been seen as exclusively the responsibility of the state. But, in contrast to an outright sale, under the private finance or concession model the state continues to have a measure of responsibility for the service provided. The guidelines set out the issues that need to be addressed if these arrangements are to provide value for all parties.
11. Both sets of guidelines have been translated into the INTOSAI official languages and placed on the Group’s website. Printed versions will be provided for delegates at XVII INCOSAI.
12. The Group have now produced three sets of guidelines addressing three major aspects of privatisation: the sales process itself, the regulation of suppliers, and the negotiation and management of contracts with the private sector for the supply of public services. The usefulness of these guidelines needs to be monitored, and if necessary supplemented by further guidance, which might, for example, be needed in relation to audit issues arising where the state is a minority shareholder, alternatives to regulation, and further developments in the field of partnerships.
13. In view of this, the Group propose to focus their efforts in the period leading up to XVIII INCOSAI in Budapest in 2004 on monitoring the effectiveness of the guidelines adopted by INTOSAI, developing future audit guidance as necessary to supplement these guidelines, and continuing to facilitate the exchange of information between SAIs.
Budapest
12 June 2001