Presentation by Phil Duncombe, UK, on standards and their relevance to Jordan (COSO, INTOSAI, Jordanian laws and regulations), Amman 4-5 November 2014.

1. © OECD
A joint initiative of the OECD and the European Union, principally financed by the EU
PUBLIC FINANCE MANAGEMENT AND AUDIT IN JORDAN
THE INTERNATIONAL CONTEXT
PHILIP DUNCOMBE
AMMAN, JORDAN
4-5 NOVEMBER 2014

2. A joint initiative of the OECD and the European Union, principally financed by the EU
THE ‘PARTNERSHIP’
•Parliament and its committees
•External audit (supreme audit institutions)
•Ministry of Finance and Internal audit
•Publicly-funded institutions
•Accountable officers and line management
“The Expectation Gap”
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3. A joint initiative of the OECD and the European Union, principally financed by the EU
RESPONSIBILITIES AND ACCOUNTABILITY
•Management is responsible for maintaining effective systems of control
•Internal audit provides assurance to management that systems of control operate effectively
•Supreme audit institutions provide independent assurance to Parliament and civil society of the reliability of national, financial statements
•Parliament maintains oversight of the effective operations of the control systems
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4. A joint initiative of the OECD and the European Union, principally financed by the EU
INTERNATIONAL STANDARDS
•COSO Standards: ‘Management Control – Integrated Framework’ – 2013*
Definitions of:
•Management Control
•Management Control Objectives: Operations, Reporting. Compliance
•Components: Control environment, risk assessment, control activities, information and communication, monitoring activities
Standards also define 17 Principles
Committee of Sponsoring Organisations of the Treadway Committee
refer to ‘Internal Control’ (www.coso.org/IC)
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5. A joint initiative of the OECD and the European Union, principally financed by the EU
CONTROL FRAMEWORKS IN PUBLIC INSTITUTIONS
•Frameworks be designed to ensure:
The economic, efficient and effective achievement of objectives
Adherence to laws and to internal and external rules and regulations
The safeguarding of assets and information
Prevention and detection of fraud and error
High quality of accounting records
Timely production of reliable financial and management information
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6. A joint initiative of the OECD and the European Union, principally financed by the EU
INTERNAL AUDIT
•Established in 1948
•Currently 170,000 members in 165 countries (~ 1,000 members in UK)
•All members work to the same international standards and a code of ethics
•Established in both public and private sector organisations
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7. A joint initiative of the OECD and the European Union, principally financed by the EU
INTERNAL AUDIT
•Independent and objective*
•Add value and improve an organisation’s operations
•Apply a systematic and disciplined approach
•Evaluate the effectiveness of management, control and governance processes
* International Institute of Internal Auditing – Global Standards (www.theiia.org)
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8. A joint initiative of the OECD and the European Union, principally financed by the EU
EXTERNAL AUDIT – SUPREME AUDIT INSTITUTIONS
•INTOSAI* – Lima Declaration (Auditing Precepts) (1998)
General
Independence
Relationship to Parliament, government and the administration
Powers of Supreme Audit Institutions
Audit Methods, audit staff, international exchange
Reporting
Audit Powers of Supreme Audit Institutions
*www.intosai.org
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9. A joint initiative of the OECD and the European Union, principally financed by the EU
EXTERNAL AUDIT – SUPREME AUDIT INSTITUTIONS
•INTOSAI – Mexico Declaration on SAI Independence (2007)
Core Principles:
•Legal framework
•Independence
•Broad mandate and full discretion
•Unrestricted access to information
•Right to report
•Freedom to decide content and timing of reports and publication
•Effective follow-up mechanisms
•Financial, managerial and administrative autonomy and available human, material and monetary resources
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10. A joint initiative of the OECD and the European Union, principally financed by the EU
‘MAKING A DIFFERENCE’
•ISSAI 12 – ‘The Value and Benefits of SAIs – making a difference to the lives of citizens’
SAIs should:
• Strengthen the accountability, transparency and integrity of government and public sector entities
•Demonstrate ongoing relevance to citizens, Parliament and other stakeholders
•Be a model organisation through leading by example
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11. A joint initiative of the OECD and the European Union, principally financed by the EU
SUPREME AUDIT INSTITUTIONS ‘MAKING A DIFFERENCE’
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Accountability, transparency, integrity
Model Organisation, leading by example
Relevance
to citizens, Parliament and others
SAIs making a difference to the lives of citizens

12. A joint initiative of the OECD and the European Union, principally financed by the EU
NATIONAL AUDIT OFFICE -UK
•Key facts (2013-14)*
822 staff
£84.6m expenditure, £20.3m revenue
Audit £1 trillion combined revenue and expenditure
427 accounts certified
66 value for money reports Audit
60 PAC hearings supported
21 other Committees supported
£1.1 billion savings to the public purse
£16 of financial impacts for every £1 the NAO spends
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13. A joint initiative of the OECD and the European Union, principally financed by the EU
PARLIAMENT - AN INTERNATIONAL EXAMPLE
•Oversight by Parliament*
Typical core tasks of parliamentary committees:
•To examine and comment on the policy of public institutions
•To examine the expenditure of public institutions
•To examine the administration of public institutions
•To assist the Parliament in debate and decision
* Ref: Parliament of UK: Select Committees - Core Tasks (January 2013)
( www.parliament.uk/briefingpapers/SNO3161)
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14. A joint initiative of the OECD and the European Union, principally financed by the EU
PARLIAMENT - AN INTERNATIONAL EXAMPLE
•Standing Order 148 - The Committee of Public Accounts*:
“For the examination of the accounts showing the appropriation of the sums granted by Parliament to meet the public expenditure, and of such other accounts laid before Parliament as the committee may think fit, to consist of not more than sixteen members.”
“The committee shall have power to send for persons, papers and records, to sit notwithstanding any adjournment of the House, to report from time to time, to appoint specialist advisers either to supply information which is not readily available or to elucidate matters of complexity within the committee’s order of reference, and to adjourn from place to place.”
*Ref: www.parliament.uk
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15. A joint initiative of the OECD and the European Union, principally financed by the EU
PARLIAMENT - AN INTERNATIONAL EXAMPLE
•Recent Reports by PAC, Session 2014-15*
Child Maintenance 2012 Scheme (17th Report, October 2014)
Early Contracts for Renewable Electricity (16th Report, September 2014)
Local Government Funding – Assurance to Parliament (13th Report, September 2014)
Army 2020 (11th Report, September 2014)
Major Projects Authority (10th Report, August 2014)
* All Reports are available on www.parliament.uk
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16. A joint initiative of the OECD and the European Union, principally financed by the EU
THE ACCOUNTABILITY CYCLE
Government requests and Parliament grants funds
Auditor General audits accounts, examines spending and reports to Parliament
PAC holds enquiry session and produces a Report
Government responds to the Report
NAO monitors Government actions and follows up
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17. A joint initiative of the OECD and the European Union, principally financed by the EU
WITHDRAWAL FROM PRE-AUDIT
•Current situation:
Blurs responsibilities between Ministry staff and management, internal control units and the Audit Bureau
Weakens systems of control within Ministries
Leads to unnecessary duplication of work
AND
Impacts adversely on Audit Bureau resources
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18. A joint initiative of the OECD and the European Union, principally financed by the EU
WITHDRAWAL FROM PRE-AUDIT
•Key reforms:
Reinforce management responsibility for implementing proper controls
Provide mechanisms to deter ‘undue influence’ over staff
Strengthen internal control units to perform full internal audit functions
Convince Audit Bureau and Parliament that ‘withdrawal’ is essential for good governance
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19. A joint initiative of the OECD and the European Union, principally financed by the EU
POSSIBLE ISSUES FOR WORKSHOPS
•What needs to be changed to strengthen internal control units?
•What is needed to ensure that the Audit Bureau is able to withdraw from pre-audit?
•What can Parliament do to strengthen the public accountability cycle?
•How can the risks of fraud and corruption in the public sector be minimised?
•What are the obstacles to reform and how can they be resolved?
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20. A joint initiative of the OECD and the European Union, principally financed by the EU
VIEWPOINT OF THE NATIONAL AUDIT OFFICE UK
“A strong public audit framework contributes towards stronger financial management, good governance and accountability, and has a deterrent effect on fraud and corruption”*
* Annual Report and Accounts, June 2014. Page 24
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21. A joint initiative of the OECD and the European Union, principally financed by the EU
Thank you for your attention
Any questions?
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