INTOSAI Working Group on the Audit of Privatisation

Overview Note by the Chairman

1 This note introduces the draft agenda for the seventh meeting, and the various papers attached for discussion at that meeting which were contributed by members of the Working Group or prepared by the secretariat in the light of comments received from members by 12 July 2000.

2 The Working Group was set up in 1993 with the following terms of reference:

• to identify and examine problems confronting SAIs in the audit of privatisation;
• to exchange information on the range of experience within the Working Group's membership in resolving these problems, having regard to relevant work in INTOSAI regions; and
• to facilitate the provision of information on this subject to INTOSAI members.

3 At XVI INCOSAI it was agreed that, in the period leading up to XVII INCOSAI in 2001 and acting within the ambit of their terms of reference, the Working Group should:

• monitor the effectiveness of the guidelines on best practice for the audit of privatisations adopted by XVI INCOSAI;
• continue to facilitate the exchange of information between SAIs on completed audits in the privatisation field; and
• develop guidance on the audit of public/private partnerships, and concessions, and on economic regulation.

4 The report summarised the work on which the Group are engaged, including exchanges of information and experiences on the use of the privatisation audit guidelines, and issues relating to the role of the state as minority shareholder in private business. It noted that, subject to the agreement of the Buenos Aires meeting, the draft audit guidelines on economic regulation and public/private finance and concessions would be circulated to the full INTOSAI membership for comment, with a view to submitting final revised texts to the eighth meeting in Hungary in June 2001, for agreement that they should be submitted for adoption to XVII INCOSAI meeting in November 2001.

5 The attached papers set out progress on these matters and issues for consideration by the Group. In particular:

• the next stage of privatisation

Mr Mustafa Kerçuku, Chairman of the Supreme Audit Institution of Albania, and Mr Sali Agaj have prepared a paper on the further liberalisation of the Albanian economy which gives an account of the current challenges facing Albania, including the Supreme Audit Institution, between the first series of privatisations and those which have yet to take place.

• using the privatisation audit guidelines

The paper by Dr Árpád Kovács, President of the Hungarian State Audit Office, and Mr Emil Kemény, sets out how the guidelines are being used in Hungary, not only by the State Audit Office but also by the Supervisory Board of the State Privatisation and Holding Company (APV Rt). The report focuses on how particular guidelines have been used for supervisory as well as audit purposes.

• draft guidelines on best practice for the audit of economic regulation

the draft guidelines, circulated for members' comment on 15 March 2000, have been amended and updated in response to these comments (deletions are indicated, and changes are shown in italics). If the Group are content, the next step would be to expose the draft to the full INTOSAI membership (paragraph 4 above).

• The Supreme Chamber of Control of Poland (the NIK) have provided two papers on economic regulation and its audit. The first paper - on guidelines referring to economic regulators - summarises key findings from the NIK's recent audit of the Energy Regulatory Authority, the first regulator in Poland not to be part of a Government Ministry. The second paper - on issues related to the audit - examines the result of the audit in more depth and draws conclusions about the scope of the audit required and key aspects which the auditor needs to address in planning such audits.

• using the Group's website

This paper summarises the patterns of use of the website and outlines recent changes to it, underlining the value of the facility both to members of the Group and other users.

• the role of the state as minority shareholder in privatised businesses

The paper by the Office of the Auditor General of Norway summarises the guidelines followed in corporate control audit in Norway as regards limited companies wholly or partly owned by the state, including companies in which the state is a minority shareholder. In their covering letter noting the many papers and widespread discussion in this subject at the Group's sixth meeting in Warsaw (October 1999), Ms Kirsten Astrup, Director General, and Mr Per Egil Astad, Deputy Director General, suggest that, as a step towards possibly developing audit guidelines, the Group might wish to invite members to complete a questionnaire.

• draft guidelines on best practice for the audit of public/private finance and concessions

The draft guidelines, circulated for comment to members on 15 March 2000, have been amended and updated in the light of these comments (deletions are indicated, and changes are shown in italics). If the Group are content, the next step would be to expose the draft to the full INTOSAI membership (paragraph 4 above).

• presentations

A highlight of the meeting will be presentations by two Argentinian regulators - Ing Héctor Formica (ENARGAS) and Ing Juan Antonio Legisa (ENRE).

• future meetings

As previously announced, the eighth meeting of the Group will be hosted by Dr Árpád Kovács, President of the Hungarian State Audit Office, in Budapest, on 12 and 13 June 2001;

Mr Bjarne Mørk-Eidem, Auditor General of Norway, has kindly offered to host the Group's ninth meeting, in Oslo, in 2002, on dates to be announced; and

Dr Lubomir Volenik, President of the Supreme Audit Office of the Czech Republic, has kindly offered to host the tenth meeting of the Group, in Prague, in 2003, on dates to be announced.