Zita Zarina, Relationships between Supreme Audit Institutions and Parliaments, Ankara, 8 November 2016

© OECD
AjointinitiativeoftheOECDandtheEuropeanUnion,
principallyfinancedbytheEU
Follow up on findings and
recommendations together with
Parliament
Zita Zarina, State Audit Office, Latvia
Ankara, 8-9 November 2016
SAI Network Conference
Developing Effective Working Relationships
between Supreme Audit Institutions and
Parliaments

Follow up on findings and recommendations
together with Parliament
SAO of Latvia: scope
and types of audits
Parliament structure
(incl.functions of
Standing Committees)
Public Expenditure
and Audit Committee
Cooperation b/w SAO and
Parliament:
• Legal framework
• Practical cooperation Conclusions
1

SAO of Latvia: scope of audits
Revenues,
expenditure and
property of state
institutions
(except
Parliament)
Revenues,
expenditure and
property of
municipalities
European Union
and other Funds
Revenues,
expenditure and
property of state
and municipality-
owned
enterprises
2

SAO of Latvia – types of audits
• annual accounts of ministries and other central
state institutions (by April 30)
• annual opinion on implementation of State and
municipal budgets submitted by the Minister of
Finance to the Parliament (by September 15)
Financial
audits
• SAO is independent in defining theme and
topic of audit and auditing period
Compliance
audits
• SAO is independent in defining theme and
topic of audit and auditing period
Performance
audits
3

• 100 MPs
• 6 Parliamentary Groups
• Standing Committees - 16
• Subcommittees - 14
• Special Committees (Parliamentary
investigative committees)
• Permanent delegations
12th Saeima (since Nov.2014)
4

Parliamentary groups No. of MPs
Concord (Saskaņa) 24
Unity (Vienotība) 23
Union of Greens and Farmers (ZZS) 21
National Alliance "All For Latvia!" – "For Fatherland and
Freedom/LNNK" (VL – TB/LNNK)
17
Latvian Regional Alliance (LRA) 7
For Latvia from the Heart (NSL) 7
Unaffiliated members of parliament 1
5

Coalition
Vienotība, ZZS,
VL-TB/LNNK
(23+21+17=61)
Opposition
Saskaņa, LRA,
NSL
(24+7+7=38)
6

principallyfinancedbytheEU Parliament structure
Standing Committees
Regulated
by the Saeima Rules of Procedure
Work
in a specific field or carry out
specific tasks
Ensure
parliamentary scrutiny
of topical issues of public interest
and work of the government,
ministries, public institutions or
local governments, providing
recommendations for
improvements needed
Prepare
matters to be considered at
Saeima plenary sittings, consider
draft laws, proposals and
submissions
7

Standing Committees
Meets on regular
basis with ministers or
representatives of
relevant institutions in
order to deal with
issues that fall within
its competence
Has the right, without
the Presidium's
mediation, to directly
request information
and explanations from
relevant ministers and
institutions, local
governments
May use opinions of
experts in the relevant
field, social partners
and NGOs
Meetings are open to
the public; however,
may hold a closed
meeting
May convene joint
meetings
8

Standing Committees
Composition of committees is
proportionate to Parliamentary
Groups represented in the
Saeima (with the exception for
MESC and NSC, both having 1
representative from each PG)
An MP may be a member of no
more than 2 Standing
Committees and 2
Subcommittees at a time
An MP may be the chairperson
of only one Standing
Committee at a time
9

Standing Committees
Composition of committees is
proportionate to
Parliamentary Groups
represented in the Saeima
(with the exception for MESC
and NSC, both having 1
representative from each PG)
An MP may be:
• a member of no more than 2
Standing Committees and 2
Subcommittees at a time
• the chairperson of only 1 Standing
Committee at a time
10

Parliament structure Standing Committees
Saeima currently has 16 Standing Committees
Foreign Affairs Committee
Social and Employment Matters
Committee
Budget and Finance (Taxation)
Committee
Mandate, Ethics and Submissions
Committee
Legal Affairs Committee Parliamentary Inquiry Committee
Human Rights and Public Affairs
Committee
Public Expenditure and
Audit Committee
Education, Culture and Science
Committee
National Security Committee
Defence, Internal Affairs and Corruption
Prevention Committee
Citizenship, Migration and Social
Cohesion Committee
Public Administration and Local
Government Committee
European Affairs Committee
Economic, Agricultural, Environmental
and Regional Policy Committee
Sustainable Development Committee
11

Audit Committee
Dedicated committee
to review SAO
reports
First establised
during 5th Saeima
(1993 – 1995) as
The Audit Committee
Transformed into
PEAC during 8th
Saeima (2002 –
2006)
17 members
(9 coalition
8 opposition)
Chaired by Mr.
Andris Bērziņš
during 9th, 10th
(2006 -2011), 12th
(since 2014) Saeima
The Chairman of the
Committee
represents the
coalition
12

Audit Committee
During the lowest point of the economic
recession in Latvia (2008–2011) as well as
after the financial crisis, PEAC was in charge
of parliamentary scrutiny of the financial and
economic stabilization and recovery, including
monitoring the implementation of the
international loan programme.
13

Audit Committee
PEAC has two
core functions
Parliamentary
scrutiny of public
expenditure
Internal audit of
Saeima
14

Audit Committee
Parliamentary scrutiny of public expenditure:
• review of the SAO findings resulting from
compliance and performance audits
• setting timeframe for briefing PEAC on the
implementation of the SAO recommendations
• assessing the measures taken by the auditees to
implement SAO recommendations
• identifying problems regarding public expenditure
and proposing measures for public authorities to
eliminate them

Audit Committee
Internal audit of the Saeima:
• audit of bookkeeping records, review of
expenditure compliance and efficiency audits,
reporting to the Presidium of the Saeima
• hiring an independent certified auditor for
auditing the annual financial statements of the
Saeima and submitting the relevant findings to
the Presidium of the Saeima no later than 6
months after the end of each reporting period.
16

Audit Committee
In 2015, PEAC met 68 times:
• 47% of meetings focused on SAO findings,
• 34% on parliamentary scrutiny of public
expenditure,
• 10% on legislative proposals,
• 9% on findings of parliamentary expenditure
audit.
17

Example: PEAC work plan
September - December, 2016
18

PEAC work plan
Date Subject Participants
September 6 Accepting PEAC work schedule SAO
September 7
Cabinet of Ministers annual report - results of financial
audit
SAO, State Chancellery
September 14
Performance audit "Does the protection policy of
cultural monuments planned and implemented in
Latvia ensure their preservation?" - presentation of
audit findings
SAO, Ministry of Culture, State
Inspection for Heritage Protection
September 21
Performance audit “Information Systems in Health
Care”- status of implementation of audit
recommendations
SAO, Ministry of Health, National
Health Service
September 27
Performance audit "Municipal financial resources for
culture, recreation and sport activities" - status of
implementation of audit recommendations
SAO, municipalities of Cēsis,
Bauska, Dr.oec.Inga Vilka
October 5
Performance audit "Whether the Society Integration
Foundation ensures traceability of the allocation of the
State budget funds to associations and foundations, as
well as control over the use thereof?" - audit results
SAO, Society Integration
Foundation
October 12 International cooperation activities of SAO SAO, Ministry of Foreign Affairs
19

PEAC work plan sept.-dec.2016
October 19
Performance audit "Has the process of
selling the state-owned capital shares
of Joint Stock Company “Citadele
banka” seen such shat the state sould
gain maximum possible amount of
funds?" - audit results
SAO, Ministry of Economics, State Privatisation
Agency
October 25
SAO's role in the improvement of IT
security, legitimate use of SW and IT
management in municipalities
SAO, NGOs, Latvian Association of Local and
Regional Governments
November 2
Financial audit on 2015 Annual Report
of the Republic of Latvia on State
Budget Execution and Local
Government Budgets - audit results
SAO, Ministry of Finance, Ministry of Justice,
Ministry of Environmental Protection and Regional
Development, Latvian Association of Local and
Regional Governments, Lielvārde municipality,
Latvian Association of Certified Auditors
November 8
Implementation of SAO audit
recommendations - summary and
follow-up.
SAO, Ministry of Finance
November 16
Discussion paper by SAO on State
owned enterprises
SAO, Ministry of Economics, Cross-Sectorial
Coordination Center, Foreign Investors' Council of
Latvia, Latvian Chamber of Commerce and Industry,
Providus (Center for public policy), Delna
(Transparency International), Baltic Institute of
Corporate Governance
20

PEAC work plan sept.-dec.2016
November 30
The compliance of activities by municipal
joint stock company "Daugavpils
siltumtīkli" with the planning
documentation and normative regulations
SAO, municipality of Daugavpils, "Daugavpils
siltumtīkli"
December 7
Performance audit "Compliance of
municipal waste management system with
the intended objectives and regulatory
enactments" - status of implementation of
audit recommendations
SAO, Ministry of Environmental Protection
and Regional Development
December 12
Performance audit "Efficiency of limited
liability company "Health care real estate"
in managing state real estate used by the
health care system"
SAO, State Joint Stock Company «State Real
Estate», Ministry of Health
December 21
Performance audit "Does state provide
patients with the efficient ambulatory
health care services?"
SAO, Ministry of Health
21

Cooperation b/w SAO and
Parliament
Legal
framework
Practical
cooperation
22

Legal framework
State Audit Office
Law
Appointing/
approving of SAO
management
Reporting – SAO
obligations
Rights to express
opinion
23

Legal framework
Appointing/ approving of SAO
management
• Saeima appoints the Auditor General for the
term of 4 years in accordance with the
procedures of the Saeima Rules of order
• The Auditor General recommends to Saeima
for approval the candidate members of the
Council of the State Audit Office for the term
of 4 years
24

principallyfinancedbytheEU Legal framework
Reporting - SAO’s obligations
• to provide a qualified opinion to Saeima on the
Annual Report by MoF concerning the
implementation of the State budget and
budgets of local governments
• to provide qualified opinions regarding the
correctness of the preparation of Annual
Reports by ministries and other central public
institutions
25

To submit reports to the
Saeima and the Cabinet of
Ministers:
of those financial audits
where SAO issues opinion
with annotations, a
negative opinion, or
refusal to issue an opinion
of all performance audits
by SAO
containing especially
important and significant
findings
26

• The audit of the annual financial accounts of
SAO is performed by a sworn auditor selected
by Saeima
• SAO submits the annual financial accounts
together with the opinion of a sworn auditor
to Saeima and State Treasury
27

After the Council of SAO has approved the
annual audit plan, the Auditor General shall send
to Saeima an explicit report regarding the
planned audit directions (without naming the
audited entities)
28

• There is no legal provision for
Saeima to “order” specific audits
• SAO is fully independent with respect
to planning the audits
• SAO does not consult Saeima on its
annual work programme of audits
• However, each year prior to
preparation of its annual audit plan
SAO invites Saeima to express their
interest in general areas to be
audited
Independence
of SAO
29

Rights to express opinion
SAO has the right to receive draft regulatory
enactments examined by the Saeima and the
Cabinet of Ministers and to provide opinion if:
• the regulatory enactments may affect the
revenues and expenditures of the State and local
governments
• enactments provide for actions with the property
of the State and local governments
• enactments concern resources allocated by the
EU and other international organisations or
institutions included in the State budget or local
government budgets
30

Practical cooperation
Reporting
to the
Parliament
Practical
examples
31

principallyfinancedbytheEU Practical cooperation
Reporting to the Parliament
SAI audit reports after
completion are sent to the
respective line ministry, PEAC
+ other relevant Parliamentary
committees if necessary
PEAC calls for a committee
meeting
32

PEAC
meeting
Auditee presents
its opinion on the
audit report,
conclusion,
recommendations
SAO provides
additional
comments/
clarifications, if
necessary
Other
stakeholders
(public bodies,
NGO’s) reflect on
audit report and
auditee's reaction
MPs hold a
discussion
PEAC sets a
schedule for
auditee for the
reporting on
implementation of
recommendations
and for SAO for
providing their
opinion on
progress
33

SAO regularly prepares
and presents to PEAC
overview on the status of
all audit recommendations
with implementation
deadline during the past
year (once a year)
overview on the
implementation of all audit
recommendations within
each audit field for a
period of last three years
34

There is no fixed
formal
Parliamentary
procedure in place
for reviewing SAO
reports
It is a common
practice for SAO to
meet with PEAC
prior or between
committee
meetings to discuss
the latest audit
findings,
irregularities
detected, work in
progress etc.
35

SAO communicates with
the auditees on quarterly
basis regarding
implementation status of
recommendations
Cases of non-compliance
or significant delays are
put forward to the
Parliament – either within
or outside the scope of
regular progress reporting
36

37
• 27 financial audit reports
• 18 performance audit
reports (covering also
compliance issues)
• 24 other reports and
documents
• SAO annual activity report
During
2015
SAO
submitted
to
Saeima

Examples
I. Audit on Prison Hospital and health care
provided to inmates (implementation of
recommendations in progress, promising)
II. Audit (finding) regarding unified
remuneration system in public sector
(implementation of recommendations in progress,
jeopardised)
III. Audit on IT management in municipalities
(implementation of recommendations successfully
completed)
IV. Survey of Members of Parliament
38

Example I – Prison Hospital
39

Examples (I)
• Audit: Evaluation of operations of the Prison
Hospital of Latvia
• Auditee: The Ministry of Justice and the Prison
Administration
• Aim of the audit: to evaluate the operations of the
Prison Hospital in Olaine prison with the focus on
efficient use of the Prison Hospital infrastructure
to provide health care services to inmates
• Infrastructure investments - 9.3 MEUR of state
budget funds
40

Examples (I)
Audit findings:
• MoJ (responsible for penal policy) has not
ensured the assessment and promotion of the
most appropriate health care model for the
imprisoned and has not taken a decision
regarding efficient use of Prison Hospital
infrastructure and medical equipment
• PA has not created an efficient control system
to monitoring operation of Prison Hospital
41

Examples (I)
Audit recommendations to MoJ and PA:
• to develop a model for health care in prisons
• to identify the actual needs and develop a
formal list of medical services available to
inmates, and organize the operations of Prison
Hospital accordingly
• to review the actual use of Prison Hospital
infrastructure and medical equipment and
ensure the investment is used most efficiently
42

Examples (I)
PEAC involvement:
• 3 scheduled PEAC meetings with participation of SAO, MoJ,
PA and other stakeholders:
1) 01/04/2014 - review of audit reports (“Provision and
organization of health care services for the imprisoned”;
“Evaluation of operations of the Prison Hospital of Latvia”)
2) 03/03/2015 - discussion regarding Prison Hospital
operations, result indicators and costs
3) 23/02/2016 - discussion on morbidity of inmates and
review of MP suggestions for improving the operations of
Prison Hospital
• several informal meetings b/w SAO and PEAC
• several on-spot visits to prison and Prison Hospital by PEAC
members
43

Example II - remuneration
44

Examples (II)
• Audit: On 2013 Annual Report of the Republic
of Latvia Regarding Execution of State Budget
and Budgets of the Local Governments
Auditee: Ministry of Finance
• Specific audit finding (since 2009): the
remuneration system of state and municipal
institutions is not unified and based on
equivalent conditions and financial resources
45

Examples (II)
Audit recommendation to MoF and State
Chancellery:
to ensure equal conditions for implementation of
unified and fair remuneration system till
15/01/2017. MoF initially accepted the
recommendation and implementation deadline,
however later asked for the recommendation to
be closed.
46

Examples (II)
PEAC involvement
Scheduled meetings:
- Oct.2014 – presentation and review of the audit report; PEAC
instructs MoF to report on progress regularly
- 29/03/2016 – review of the progress, discussion on necessary
measures, PEAC instructs MoF to prepare official report with
proposed solutions by Sept.2016.
- 20/09/2016 – review of the progress, presentation of survey
results (comparison of remuneration: civil service vs. private
sector); postponing of submission or official report till end
2016.
- 30/12/2016 – review of the progress and official report by
MoF
47

Example III - IT
48

Examples (III)
Audit: Software management assessment in local
governments and local government educational
institutions
Auditee: 14 local governments (incl.Riga)
Aim of the audit: to verify the compliance and
assess the effectiveness of software
management in local governments and local
government educational institutions
49

Examples (III)
Audit recommendations (169):
- to comply with SW licensing terms, eliminate
violations of intellectual property rights
- to improve management of IT security and data
protection, ensure compliance with the basic
requirements of regulatory enactment, reduce the
threat to the operation of IS of the institution, data
protection and security
- to improve organization of accounting and
effectiveness of IT management with a long-term
perspective
50

Examples (III)
PEAC involvement:
- 3 scheduled PEAC meetings with participation of SAO
and stakeholders:
1) 9/10/2013 - presentation and review of audit report
2) 14/10/2014 follow-up on implementation of
recommendations
3) 25/10/2016 discussion on impact of implemented
recommendations
- written communication b/w SAO and PEAC on status
of implementation of recommendations in between
51

Example IV - questionnaire
52

Examples (IV)
General problem: short term approach to the
state budget planning and execution
SAO repeatedly issued audit recommendations
to the government to ensure that planning and
implementation of the state budget is directly
linked to the long term state policies and
planning documents
53

Examples (IV)
Specific problem: SAO audit recommendations were
repeatedly not taken into account
Solution: to address Saeima for help - in the form of
questionnaire
MPs were asked to express their opinion - whether
the state budget is prepared with the main priorities
of the society in mind and is it based on the long term
policy planning documents: Sustainable
Development Strategy of Latvia 2030; National
development plan 2020; Law on medium term budget
framework 2015 – 2017
54;

Examples (IV)
Q: What is overall satisfaction with the budget structure, planning process and the
information availability for the achievement of goals?
A: 33% - satisfied with the process; 67% – not satisfied with the process
Q: Does the state budget offer sufficient and understandable information on the effective
allocation and expenditure of the budget funds for the benefit of the society?
A: 83% - insufficient information; 17% - sufficient information
Q: Are political discussions regarding evaluation of the budget expenditure sufficient?
A: 69% - insufficient discussions; 31% - sufficient discussions
55

Examples (IV)
Practical applicability of survey results:
SAO could draw attention of the Ministry
of Finance to the Parliaments’ low
satisfaction level with the budget
planning process
56

Conclusions
Mutual trust and respect
are essential
SAI should gain and retain
the respect of MPs – by
demonstrating high
professional standards,
independence and firm
position
SAI should invest into
making sure MPs understand
SAI mission, functions,
methods and reports («tailor-
made» presentations)
57

Conclusions
Regularity of
communication
(both formal
and informal)
does matter
Personalities
(professional
background,
previous
experience of
MPs) do matter
Flexibility and
adjusting to the
needs and
interests of
different MPs is
helpful
To work with
both coalition
and opposition
MPs is
important
58

Thank you for your attention!
59

Zita Zarina, Relationships between Supreme Audit Institutions and Parliaments, Ankara, 8 November 2016

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Editor's Notes