INTOSAI Working Group on the Audit of Privatisation

Conclusions

1    The seventh meeting of the Working Group was hosted in Buenos Aires by Dr Rodolpho Barra, President of the Auditoria General de la Nacion of Argentina. It was attended by representatives of 17 of the 30 Supreme Audit Institutions who are members of the Working Group, and observers. Sir John Bourn, Comptroller and Auditor General of the United Kingdom, Chairman of the Working Group, noted that the high level of attendance and the range of matters discussed at the meeting emphasised the significance of privatisation in all its forms to the modernisation of public services worldwide and how important it is for SAIs to examine and report on these developments which directly affect all citizens.

2    The Group has been charged by INTOSAI to monitor the effectiveness of the comprehensive guidelines on best practice for the audit of privatisations adopted by XVI INCOSAI in 1998, 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 the development of public services: economic regulation and the increasingly wide spread use of public/private partnerships and concessions.

3    An increasing number of SAIs are using the guidelines as a checklist in planning their audits, adding their own experience and knowledge having regard to the particular circumstances in their countries, for example contract conditions, and use by privatisation agencies. The guidelines are proving to be very helpful, enabling SAIs to focus more directly, specifically and quickly on key issues. Privatisation continues to take an increasing variety of forms and SAIs need to be active in the defence of public interests, using imagination in the interpretation of their audit remits, alerting Parliaments and governments (local as well as national) to the risks as well as the opportunities arising out of privatisation, drawing out general lessons as well as reporting on specific sales. The meeting identified a number of developments which might call for supplementary guidance and agreed to give further consideration to these at future meetings. In doing so, there might be advantage in highlighting guidelines likely to be of particular value depending where a country was in the privatisation process - some countries are already well advanced, others are just beginning, and others are still deciding what to do.

4    The Group continued the exchange of views begun at their previous meeting on their experiences in addressing the particular problems faced by the state where it is a minority shareholder in private businesses. SAIs who have carried out examinations explained the aim of their audits. The Group agreed that both the government bodies responsible for the state's minority shareholding and SAIs examining the discharge of these responsibilities needed access to market specific knowledge and expertise in defending the state's interests, and that the issues raised merited further examination. In order to have a clearer understanding of the key issues, members of the Group agreed to complete a questionnaire on the role of the state, and of the SAI, and to examine the outcome of that questionnaire at their eighth meeting.

6    A highlight of the meeting consisted of presentations by two leading Argentinian regulators - Ing Hector Formica of ENARGAS and Ing Juan Legisa of ENRE. They set out the challenges which their regulatory bodies currently face in encouraging the development of energy supply in Argentina and how these challenges are being addressed.

7    In pursuit of their remit from XVI INCOSAI, the Working Group reached agreement on the text of guidelines on best practice for the audit of economic regulation. The guidelines highlight a series of key issues that SAIs are likely to need to address when examining the efficiency and effectiveness with which regulators of suppliers of public services have set about their tasks having regard also to globalisation in increasingly unified markets. The guidelines are divided into five sections: the skills required by the SAI, the business of regulation, the supply of service, the price of service, and developing competition. The Group noted that the draft guidelines were already proving to be of considerable help to SAIs in carrying out audits of economic regulation and that they were capable of being applied in studies of other forms of regulation too.

8    The Group also reached agreement on guidelines on best practice for the audit of public/private finance and concessions. These contracts, a significant offshoot of privatisation, typically involve public sector bodies specifying services which they wish to purchase and, through competition, selecting private sector suppliers to provide them. Alternatively, they can involve the award of a concession to a private sector supplier who then charges the general public for access to the services. The purpose of the guidelines is to provide a logical framework for SAIs intending to examine these agreements to establish whether the public sector partner has got the best possible deal for the taxpayer/citizen. The guidelines are grouped in six sections: the general approach of the SAI, scoping the project, project management, contractual issues, value for money evaluation and managing the contract.

9    The Group asked for further explanation of the relevance of the guidelines to different types of activities, to countries at different stages of development and with different constitutions to be inserted in the introduction to the guidelines. Subject to this, they commended both sets of draft guidelines to the INTOSAI membership and invite their comments on them. Having regard to comments received from INTOSAI members, the Group aim to recommend the guidelines for adoption by XVII INCOSAI (Seoul, November 2001).

10    The Group agreed that a particular focus of their discussions at their eighth meeting (12 and 13 June 2001), to be hosted in Budapest by the President of the State Audit Office of Hungary, should be the challenges faced by developing and transitional countries in the privatisation process. They also agreed that their ninth meeting should be held on 10 and 11 June 2002 in Oslo, to be hosted by the Auditor General of Norway, and that their tenth meeting should be held in 2003 in Prague, to be hosted by the President of the Supreme Audit Office of the Czech Republic.