International Journal of Government Auditing – January 2012
by Averil James-Bonnette, Secretary General of CAROSAI, and Alaistair Swarbrick, Auditor General of the Cayman Islands and Chair of the CAROSAI Institutional Strengthening Committee
The 21 members of the Caribbean Organization of Supreme Audit Institutions (CAROSAI) carry out their mandates against the background of rapidly changing environments and emerging accountability issues. Many face tremendous challenges in the areas of legislation and mandates, operations, budgets, methodologies, inactive Public Accounts Committees (PAC), and the failure to be recognized as fully independent organizations within the governance modality. Additional challenges arise in the CAROSAI region from the small size of the countries and their limited human and institutional capacities.
A brief look at the Cayman Islands, one of the CAROSAI members, will illustrate the broader issues facing governments and SAIs in the region. A British overseas territory with an area of only 151 square kilometers and a population of 55,700 in 2009, the Cayman Islands is one of the wealthier countries in the Caribbean. It has the world’s largest offshore banking sector and reported real GDP per capita of $42,605 in 2010.
However, the Cayman Islands’ government operations—and related governance, transparency, and accountability issues—have not kept pace with its wealth, GDP per capita, and status as a developed nation. The Office of the Auditor General (OAG) of the Cayman Islands experiences the same challenges as its counterparts in the less developed nations of the Caribbean. These challenges include the following.
- Operational and financial independence: While the Auditor General of the Cayman Islands has constitutional independence, in reality the government controls the financial resources and the appointment of staff. The Ministry of Finance sets the OAG’s budget. The Auditor General must seek approval for contract renewals, pay rates, and any new staff from the head of the civil service. Thus, the OAG is technically part of core government.
- Publication of reports: Although the Cayman Islands (unlike most territories in the region) now has a functioning PAC, there have been and continue to be efforts to restrict when the Auditor General’s reports become public documents. For example, some important stakeholders believe the PAC’s role is to challenge the veracity of the Auditor General’s findings rather than consider whether there are things that government should do more efficiently, effectively, and economically. As a result, they would like to see the publication of Auditor General reports delayed until after the PAC considers them and issues its own reports. This could lead to a situation similar to the one that occurred not so long ago when the PAC had to review all reports before they were issued—and because the PAC was inactive at that time, reports were not published for years.
- Technical Capacity: While the OAG has fortunately had a high level of qualified staff, its biggest challenges are keeping up to date on developments in auditing and accounting standards, updating the audit methodology, obtaining appropriate technical advice on difficult technical issues, and meeting the quality control requirements of auditing standards. This is exacerbated by the small size of the OAG staff (only 19 members) and the challenges of dedicating resources to such important areas.
Other fundamental issues related to institutional capacities plague almost all SAIs in the region. The INTOSAI Development Initiative (IDI), one of the major supporters of CAROSAI capacity-development initiatives, sponsored the Quality Assurance Review (QAR) program in 2010 and the Risk-Based Approach to Financial Auditing (RBAFA) program in November 2011 to help strengthen regional institutional capacity in those areas. The RBAFA and QAR programs were valuable initiatives, but the ability of individual SAIs to effectively implement these methodologies may be limited. Regional SAIs are in different phases of development and have varying audit approaches. Capacity, capability, and ultimately institutional strength are key issues that may impede implementation.
Another issue is the need for effective technical support for standards for financial auditing and accounting (as well as for performance and information technology auditing). In the CAROSAI region, it is difficult to get effective technical support and advice for small audit offices. The auditing and accounting standards have changed tremendously in recent years, and maintaining and acquiring knowledge on them is a challenge.
Development of a Regional Strategic Plan
To address some of these issues that have been plaguing the region for some time, CAROSAI developed a regional strategic plan.
CAROSAI’s strategic plan for 2008–2011 has four goal areas.
Goal 1: Raise the profile of SAIs.
Goal 2: Assist member SAIs in strengthening their institutional capacity.
Goal 3: Help member SAIs develop their professional capacity.
Goal 4: Establish an effective information-sharing process.
Given the many challenges facing SAIs in the region, goal 1 of the strategic plan seeks to
- encourage the adoption of legislation that establishes strong independent SAIs,
- promote improvements in the relationship between SAIs and PACs in order to increase the utilization and impact of audit findings, and
- strengthen relationships with key regional bodies.
To promote the achievement of this goal, CAROSAI received an institutional development grant from the World Bank in 2009 to strengthen fiduciary oversight in the Caribbean. The United Kingdom’s National Audit Office (NAO) was given the contract in 2010 to be the consultant for this project. The NAO delivered an initial report in June 2011 that outlined the delivery and approach for the project. The following are the main components of the project:
- helping to build members’ institutional capacity,
- strengthening the legislative framework of CAROSAI members,
- strengthening Parliamentary/SAI relationships,
- preparing an institutional needs assessment, and
- designing a peer review mechanism and mentoring CAROSAI members in its use.
CAROSAI is currently implementing the grant at the regional level with a view toward applying the knowledge gained at the national level. It is also seeking to update its strategic plan for 2012–2015 to further strengthen the capacity of SAIs to promote and enhance public sector accountability in the region by creating a well resourced Secretariat.