INTOSAI Working Group on the Audit of Privatisation

Papers for the Ninth Meeting
Oslo, 10 and 11 June 2001

Overview note by the Chairman

• The Working Group's remit
• Purpose of this note
• Existing guidelines and experiences of privatisation
• Risks where the state enters into partnership with the private sector
• Alternatives to state-imposed regulation
• Date of future meeting

1. 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.

2. At XVII INCOSAI it was agreed that, in the period leading up to XVIII INCOSAI in Budapest in 2004, the Working Group should focus its efforts on:

• monitoring the effectiveness of the guidelines adopted by INTOSAI; and
  
• developing future audit guidance as necessary, for example on audit issues arising in the field of partnerships and where the state is a minority shareholder, and on alternatives to regulation.

3. This note introduces the draft agenda for the ninth meeting, and the various papers attached for discussion at the meeting which were contributed by members of the Working Group. The note follows the order of items in the agenda.
   
4. The meeting will cover three general themes:

• the use of the Working Group’s existing guidelines, and sharing of experiences of auditing the ongoing process of privatisation in many countries;
  
• the development of audit guidance on the risks faced by governments and SAIs where the state enters into partnership with the private sector; and
  
• alternatives to state-imposed regulation.

Existing guidelines and experiences of privatisation

- The experience of privatisation (Mr Tormod Hermansen, Chief Executive Officer, Telenor)

5. The meeting will open with a presentation from Mr Tormod Hermansen, Chief Executive Officer, Telenor, the Norwegian telecommunications company. This presentation will set out the experience of privatisation from the perspective of a privatised company.

- Using the guidelines (Note by the Chairman)

6. This paper examines the use that SAIs are making of the Working Group’s existing guidelines. It considers whether the guidelines are assisting SAIs in planning and carrying out audits (based on papers presented by Members of the Working Group in the past) and explores how the guidelines can be shared with audited bodies to help the audited body to improve performance and accountability.

- Bus company privatisation (Denmark)

7. This presentation will set out the experience of auditing a state-owned bus company, which was de-merged from the Danish State Railway in 1995.

- Auditing the successors to the Treuhandanstalt (Germany)

8. This presentation will consider the experience of privatisation in Germany, from the point of view of the unit of the Bundesrechnungshof which audits the organisations which succeeded the Treuhandanstalt – the holding company for the nationalised industries of the former German Democratic Republic.

- The Norwegian experience on the audit of privatisation (Norway)

9. This presentation will explain how the Office of the Auditor General carries out its audits of privatisation in Norway, including planning the audit, addressing the audit issues arising under different forms of privatisation, and reporting the results of audit work to Parliament.

- Privatisation of state activities – The role of the SAI (Zambia)

10. This paper will use the Working Group’s guidelines (on privatisation, economic regulation, and public/private finance and concessions) to summarise the role the SAI can play in the privatisation of state activities.

11. One feature of the ongoing process of privatisation has been an increasing emphasis on partnerships between public and private sectors. While these partnerships offer many benefits in terms of risk sharing and greater effectiveness in delivering public policies, they also entail new risks. The draft guidelines seek to explore the risks facing both governments and SAIs where the state enters into partnership with the private sector, and sets out how these risks can be managed.

- Managing the state’s interests in partly privatised companies (Poland)

12. This presentation will explore in more detail one of the areas covered by the draft guidelines: where the state has an interest in partly privatised companies as a result of the process of privatising state assets.

- The role of Partnerships UK (Mr Derek Higgs, Chairman, Partnerships UK)

13. This presentation comes from the Chairman of Partnerships UK, a new body established in the UK to help improve the way the public sector defines, negotiates and manages the partnerships it enters into with the private sector.

14. In many countries, privatisation has been accompanied by an increase in the regulation by the state of newly privatised (and often monopolistic) companies. Regulation is an important function of government, and typically involves a relationship between public and private sectors in which the state specifies the services and standards that the private sector should deliver. This presentation will explore the alternative ways the state can undertake the function of regulation, and what the possible consequences are for SAIs.

Date of future Meeting

15. As previously announced, 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. The meeting will be held on Monday 9 and Tuesday 10 June 2003.

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