INTOSAI Working Group on the Audit of Privatisation

XIX INCOSAI: MEXICO CITY, NOVEMBER 2007

REPORT TO XIX INCOSAI

Developments in the Working Group
  1. At XVIII INCOSAI in 2004 the Working Group was given a remit in the period leading up to XIX INCOSAI to develop and submit to the Governing Board sets of case studies which cater for the differences between SAIs and to continue to adjust guidelines in light of experience; to carry out more training through IDI; and to do joint studies with two or more SAIs doing joint reports on selected features of each others programmes.
  2. During the intervening period the Working Group has expanded to include 42 members and has held a further three annual meetings in Brasilia (2005), London (2006) and most recently in Marrakech (2007). Additionally a number of SAIs have attended meetings in an observer capacity and several have since been encouraged to join the Group as full members. One useful development at the two most recent meetings has been the introduction of interactive technology. This technology has allowed presenters to engage with members and obtain their perspectives through the use of an interactive voting system. It has also proved useful in allowing members to prioritise future workstreams for the Group in order to meet its remit.
  3. The Working Group has also begun to engage more widely with related organisations with an interest in our work. Notably, the Organisation for Economic Co-operation and Development (OECD) has now sent a representative to two annual meetings and has reported to the Group about its Guidelines on Corporate Governance of State Owned Enterprises. Joint working and interaction on this topic proved useful to the National Audit Office who in 2007 published a report on the Shareholder Executive, the UK organisation responsible for improving the Government’s ability to act as an effective shareholder.
  4. At the 2006 meeting in London, members agreed that it would be sensible to change the title of the Working Group to reflect its expanded remit. Much has changed since the inaugural meeting of the group in 1993 with a significant broadening of the privatisation audit field. Members now audit not just the sale of state assets, but also the economic regulation of privatised services. SAIs have also begun to look at audit issues associated with Public Private Partnerships (PPP) where the public and private sectors work together to deliver public services. Following consultation with the Secretary General of INTOSAI, I would like to request formal permission from the Governing Board to change the title of the Working Group to “The INTOSAI Working Group on the Audit of Privatisation, Economic Regulation and Public Private Partnerships” to reflect our work in areas related to privatisation.

    Developing Technical Case Examples and Updating Audit Guidelines
  5. Since 2004, the Working Group has successfully developed a series of technical case examples across the subjects of privatisation, economic regulation and Public Private Partnerships. These case examples provide a detailed analysis of key audit issues with a focus on developing lessons for auditors. The subject areas covered by the case examples were generated through consultation with Group members in order that they could add value to the work of SAIs. Members of the Group have reported back that they have found the case examples useful as they provide tangible guidance on key aspects of their work.
  6. The technical case examples are published electronically as they are intended as live documents which can be adjusted by SAIs to take account of recent developments or new experiences. The 10 case examples developed by the Working Group to date in pursuit of the 2004 remit are:
  7. The Working Group has also re-considered the four sets of audit guidelines produced between 1993 and 2004 and in the light of experience has updated the Guidelines on Best Practice for the Audit of Public/Private Finance and Concessions (July 2001). The revised 2007 version takes account of new developments, in particular the evolving focus on deals in operation, as increasing numbers of projects reach financial close. The draft guidelines were circulated to Working Group SAIs for comment and an approved final version has been submitted to XIX INCOSAI for adoption.

    Training and Skills Development
  8. Following XVIII INCOSAI the INTOSAI Development Initiative (IDI) undertook a survey of the needs of SAIs in order to prioritise and focus its training programmes. They concluded that the audit of privatisation was not a priority and that IT audit shows increasing precedence within IDI. The Working Group, however, remains committed to facilitating the development of skills and therefore continue to liaise with the IDI about developments and possible future training needs in this field.
  9. Members of the Working Group continue to attach priority to strengthening skills in the audit of privatisation, economic regulation and Public-Private Partnerships. A network of experts is being developed to meet this need. Members of the group will identify themselves as “experts” on particular topics and SAIs will be able to make contact with the experts to get help with specific issues.

    Joint working and reports
  10. In pursuit of this area of the Group’s remit, the UK NAO has jointly developed with the SAI of the Russian Federation a dictionary of privatisation terms and concepts. The UK initially provided assistance and guidance to the SAI of the Russian Federation which was developing a tailored privatisation dictionary aimed at a Russian audience. Given the usefulness of such a product, the two SAIs developed a more generic version for the wider Group. The dictionary is published electronically and is hyperlinked so that readers can browse easily between concepts and definitions and where desirable link to other online sources.
  11. Members of the Working Group in the Nordic alliance countries have worked collaboratively on a joint audit of the Nordic power market. These SAIs have produced separate national audit reports and a joint memorandum of their findings and conclusions.
  12. The Working Group has also begun to utilise the new INTOSAI collaboration tool developed as a means of working towards Goal 3 of the INTOSAI Strategic Plan. Goal 3 focuses on Knowledge Sharing and Knowledge Services and encourages SAI collaboration, co-operation and continuous improvement through knowledge sharing, including providing benchmarks, conducting best practice studies and performing research on issues of mutual interest and concern. The collaboration tool is now the key communication channel for members of the Group and we plan to help meet the objectives of Goal 3 through its use.

    Future Work Programme
  13. Given the volume of technical case studies produced by the Group to date it seems sensible that members should aim to keep these as “live” documents adding to them in the light of experience and to reflect new audit developments. It would also be beneficial to the Group if we could strengthen the case studies with more and varied SAI specific examples. The Working Group Secretariat is also developing its use of the INTOSAI collaboration tool as a forum for providing online training and for sharing expertise. The Working Group is also strengthening its relations with other organisations, such as the OECD, so that it can continue to benefit from related experience in areas of mutual interest.
  14. In the period leading up to XX INCOSAI in 2010, the Working Group therefore proposes to continue to adjust guidelines where necessary in the light of experience, for example to reflect experience of secondary share sales; to strengthen and develop the existing series of technical case studies and to develop the INTOSAI collaboration tool as a forum for members to share advice and expertise and to facilitate joint working.

    November 2007

    Sir John Bourn

    Comptroller and Auditor General of the UK National Audit Office
    Chairman of the Working Group for the Audit of Privatisation