INTOSAI Working Group on the Audit of Privatisation

XVIII INCOSAI: BUDAPEST, OCTOBER 2004

Report to XVIII INCOSAI

Ten Years of the Working Group

  1. In 2001, XVII INCOSAI set the Working Group its remit to monitor the effectiveness of the guidelines adopted by INTOSAI and to develop future audit guidance as necessary, for example on audit of issues arising in the partnerships’ field and where the state is a minority shareholder, and on alternatives to regulation. The Working Group would also continue to facilitate the exchange of information between Supreme Audit Institutions (SAIs).
  2. The eleventh meeting of the Working Group was held in Sofia in June 2004 and hosted by Dr. Nikolov, President of the National Audit Office of the Republic of Bulgaria. The meeting was attended by representatives from 25 countries, with membership of the Group currently numbering 40 SAIs. The Working Group was pleased to observe that since the inaugural meeting in 1993, members of the Working Group had seen significant developments in the audit of privatisation and had benefited from the sharing of their experiences. The Working Group had reacted successfully to the changing world and globalisation of the economy by adapting its work to new circumstances.
  3. In recognition that the Working Group has now been in existence for just over ten years and has become one of the largest of INTOSAI’s committees and groups, the Working Group has produced an additional paper for XVIII INCOSAI entitled "Privatisation: ten years on". This outlines the achievements and lessons from the first ten years of the Working Group and looks at the changes and developments that have taken place in the privatisation field since 1993. Achievements in the first ten years include development of four sets of guidelines:
    4.

    Using and Developing Audit Guidelines
  4. At annual meetings of the Working Group, Members have reported in their presentations that the guidelines have had a tangible and useful impact on their audits of privatisation and economic regulation. As with all guidelines, they have to be applied in different circumstances – different SAIs have different powers, and privatisation, regulation and Public/Private Partnerships develop in different ways in different countries.
  5. In pursuit of the 2001 remit, the Working Group has developed a further set of guidelines on Best Practice for the Audit of Risk in Public/Private Partnerships (PPPs). These guidelines draw strongly on examples and survey responses provided by Member SAIs from their auditing experiences. The draft guidelines were fully circulated to Working Group SAIs for comment and amended in the light of comments from Members. An approved final version has been submitted to XVIII INCOSAI for adoption.
    6.

    Exchanging Information
  6. In addition to the use of the guidelines, SAIs benefit from exchanges of information about privatisation, post-privatisation and economic regulation audit issues, best practice and lessons learned. Dissemination of this information has largely taken place at annual meetings through the presentations given by Members and through the reports circulated to the Group. The Working Group also uses a website to facilitate the exchange of information and this is currently being redesigned to enhance both its content and user friendliness.
  7. A more recent development is the partnership established between the Working Group and the INTOSAI Development Initiative (IDI). The Group has helped the IDI in developing a training course in the audit of privatisation and has provided Subject Matter Experts and material to assist during these courses. The IDI is now surveying developing SAIs to establish the future demand for training in privatisation, economic regulation and PPPs, and the Working Group will continue to work in partnership with the IDI to help meet this demand.

RECOMMENDATIONS TO XVIII INCOSAI

Guidelines
  1. In addressing their 2001 remit, the Working Group recommends a set of guidelines on Best Practice for the Audit of Risk in Public/Private Partnerships (PPPs) to XVIII INCOSAI for approval and adoption. Many states now work increasingly with the private sector to deliver public services and SAIs have started to examine the associated price and service quality issues. The guidelines identify the key risks facing both the state and the SAI, and how they can best be managed, and are intended to assist SAIs in auditing Public/Private Partnerships. The guidelines have been translated into the official INTOSAI languages and placed on the Group’s website. Printed versions will be available for delegates at XVIII INCOSAI.

Future Work Programme

  1. Given that the Group has produced four sets of guidelines across privatisation, economic regulation and Public/Private Partnerships the continuing usefulness of these will need to be monitored. Furthermore, in recognising the value of comparisons with other countries in applying the guidelines, the Working Group believes that Members may benefit in future from case studies. The Working Group Secretariat is therefore working on designing the framework for a series of case studies that illustrate key technical issues in privatisation, economic regulation and Public/Private Partnerships, and which draw directly on the experiences of member SAIs.
  2. In the period leading up to XIX INCOSAI in 2007, the Working Group therefore proposes to develop and submit to the Governing Board sets of case studies which cater for these differences 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.

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Sir John Bourn                                                                                                                                September 2004

Comptroller and Auditor General of the United Kingdom
Chairman of the INTOSAI Working Group on the Audit of Privatisation