Audit Report

At the end of each fiscal year, a country’s Supreme Audit Institution (SAI) performs an annual audit of the final accounts. The Audit Report is a document produced by the SAI as a result of its audit activities, and evaluates the completeness and accuracy of the information included in final accounts, and the adherence of the government’s financial management and accounting to existing laws and procedures. The SAI plays a vital role in holding the executive accountable to the legislature and the public. In its oversight role of the executive's stewardship of public funds, the SAI in many countries performs financial, compliance, and/or performance audits.

The Lima Declaration of Guidelines on Auditing Precepts (Chapter VI, Section 16 (1)) makes it clear that the auditor’s annual report should be published and made available to the public. According to OECD best practices, the SAI should complete these audits within six months of the end of the budget year for administrative units (that is, ministries, departments, or agencies).

Assessing the public availability of the AR
Publicly available budget documents are defined as those documents that are published on the website of the public authority issuing the document within the time frame specified in the OBS methodology and that all citizens are able to obtain free of charge. (See the Open Budget Survey Guidelines on Public Availability of Budget Documents.) This is a change from previous rounds of the Open Budget Survey: now at minimum documents must be made available on the Internet and free of charge to be considered publicly available.

The OBS methodology requires that for an AR to be considered publicly available, it must be made available to the public no later than 18 months after the end of the fiscal year to which it corresponds. If the AR is not released to the public at least 18 months after the end of the fiscal year to which it corresponds, option “d” applies. Option “d” should also be chosen for documents that are produced for internal purposes only (that is, produced but never released to the public) or are not produced at all. Some governments may publish budget documents further in advance than the latest possible dates outlined above. In these instances, researchers should choose options “a” or “b,” depending on the date of publication identified for the AR. See Question AR-2 for more information.

Questions on the AR in the OBS

 * Questions on the AR in the OBS

1) The case of Chile in OBS 2019
In Chile in the OBS 2017, we accepted the the Cuenta Publica 2015 as the Audit Report. This came after a discussion between the researcher and the Supreme Audit Institution in Chile, the Contraloría General, in which the Contraloría said that what we accepted before, in OBS 2015, was not really an audit report. That report previously accepted was called “Informe de Gestion Financiera del Estado 2013”.

In OBS 2019, the researcher said there was actually no Audit Report in the country (he did not think we should we use either the Cuenta Publica 2017 or the Informe de Gestion Financiera del Estado 2017. This led to the question: Should we use one of these reports, or should we consider the AR “not produced”?

According to the OECD’s review of budgeting processes in Chile (see here and here), the Informe de Gestion Financiera del Estado is not an Audit Report but rather a consolidated annual report on the government’s fiscal operations. Meanwhile, the Cuenta Publica is not an AR, but an annual report that the Contraloría prepares about its activities/work. It contains details of how many audits were carried out, but does not summarize the findings from those audits, unlike the case of the Swedish SAI’s annual report, which is considered an AR (see below).

Finally, the OECD SAI review states that the Contraloría focuses mostly on compliance audits, but carries out many individual ones, rather than a comprehensive one for the annual accounts. It also says that the Contraloría does not do performance audits, although "elements of value-for-money are woven into the majority of its work" (quoting from yet another OECD document). All of this seems to imply that there's no consolidated AR, but many different reports for compliance audits that are carried out on specific units or projects of government.

Because of these factors, and as what we require for section 1 is a financial audit report, we decided that in OBS 2019 we would not consider Chile’s AR as publicly available. In the comment section, we carefully explained the change in answers related to the AR, and ensured that we gave them some points for what they actually do, like carrying out compliance audits (which in fact the Chile Contraloría produces and publishes).

2) The case of Sweden in OBS 2019
Since 2010, we have accepted Sweden’s “Riksrevisorernas Arliga Rapport” as the Audit Report for the country. This is a summary of the audits performed by Sweden’s National Audit Office over the past year. They perform diverse financial reports which are then compiled in the Audit Report (see here). As described on the NAO’s website: “Every year, we compile the most important observations within the annual financial audit and the performance audit into what we call the Annual Report of the Auditors General, which we submit to the Riksdag.”

Since this document summarizes the findings from Sweden’s audits, it can be considered a starting point and the AR can be considered as publicly available. However, a full answer to the AR questions should explain that many different financial and performance audit reports are published by the Swedish NAO, and provide some examples of each.

3) The case of Sri Lanka in OBS 2019
The audit report of the financial statements in Sri Lanka is not released as a separate audit report. Instead, by law, the SAI releases an annual report that includes the summary of the findings from the financial audits of all the central government ministries to Parliament, which is then what is discussed. However, even though an overall report of the findings from all the financial audits of government accounts is not produced, because the individual audits of at least 190 government units (out of 204 possible ministry heads - see reports here). Because, in the past, the OBS has given credit to the UK for “Whole of Government Accounts,” which includes separate individual reports both national and subnational accounts, as well as the Annual Report of Sweden because it summarizes all of the financial audits done by the SAI. Therefore, even though it is a change in assessment from previous rounds, Sri Lanka’s audit reports were assessed as publicly available in OBS 2019.

4) What if COVID prevented the publication of the a key budget document?
Even if the COVID crisis prevented the publication of a key budget document, we are not considering it to be an exceptional circumstance because of which we could look back to assess the document from a previous fiscal year. Many governments worked hard to ensure publication of budget documents, even during the pandemic, though these documents were at times less comprehensive and timely than usual. We would not want to give credit to a country that did not publish a document during the pandemic while penalizing a country that did publish a document, just one that is less comprehensive. In addition, it is difficult to pinpoint when COVID prevented a document's publication. Finally, COVID impacted all countries in the survey, unlike the usual exceptions allowed in the survey (a one-time election in a country, for example).

Note: One country that is still under discussion is Canada. The Government of Canada was set to present their budget for 2020/21 budget in late March 2020, before it was postponed in mid-March because of the pandemic. It was pushed back a few times, before finally being postponed indefinitely in early May. This continued for the rest of 2020. Between 12 March 2020 and 30 December 2020 the Parliament passed 12 spending or tax bills. A number of these (if not a majority) are the legislation that we are considering Canada’s emergency fiscal policy package in the COVID Module. While there was no budget proposal for 2020/21, the Government did publish a Fall Economic Statement 2020 in November – this is the document that we will consider as the MYR for 2020/21 and the PBS for 2021/22. Canada also presented an “Economic and Fiscal Snapshot 2020” in July, which was a new document that focused on the Government’s fiscal response to COVID (and we use heavily in the COVID Module).

Because Canada's lack of publication of these budget documents was not a transparency issue but rather a calculated response to the pandemic - particularly in the case of the budget proposal - it is still under team discussion.