Mapping EU SAIs: the who, the what and the how of international cooperation
International cooperation revolves around various topics and actors. Zooming in on public auditing, who are the key players amongst the EU supreme audit institutions (SAIs) In which field and how do they collaborate with each other? Rosa Kotoaro and Gaston Moonen dived into responsibilities, numbers and cooperation platforms to give an overview on the who, the what, and the how.
By Rosa Kotoaro, Private Office of Hannu Takkula, ECA Member, and Gaston Moonen, Directorate of the Presidency
As the EU’s external auditor, the ECA’s task is to check that EU policies and programmes meet their objectives and deliver value for money, that EU funds are raised and spent in accordance with the relevant rules and regulations, and that EU funds are accounted for correctly. The annual EU budget is about 140 billion euros. To put things in perspective: this is less than 2% of the overall yearly public expenditure in the 28 Member States, which amounts, according to Eurostat, to over 6 900 billion euros in 2016 . And it is the supreme audit institutions (SAIs) in the Member States which audit all — or at least a substantial part — of this expenditure. But who are these EU SAIs, what do they do and how do they collaborate with each other and the ECA?
Comparative analysis mostly based on publicly available data
We did some research into these questions, using information mainly available on the websites of EU Member States’ SAIs and data on issues such as staff and budgets, provided by various audit institutions. Regarding cooperation activities we used the information provided on the websites of the three main international and European cooperation platforms:
- INTOSAI — the International Organisation of Supreme Audit Institutions;
- its European sub-organisation EUROSAI — the European Organisation of Supreme Audit Institutions;
- the Contact Committee of the heads of SAIs of the EU and its Member States, dealing mainly with EU related issues.
Highest level of public sector external audit
SAIs are countries’ utmost external audit institutions, generally assigned with the task of overseeing the management of government expenditure. In the EU, there are 29 SAIs in total: those of the individual Member States and the ECA. By evaluating the consistency, efficiency, compliance, and reliability of public entities’ policies and financial statements and assessing policy effectiveness, SAIs promote transparent and accountable governance. They therefore play a fundamental role in our democratic societies.
Typically, SAIs carry out three different types of audit: financial, compliance, and performance audit. In financial audit, SAIs examine whether their respective governments’ financial statements are complete and reliable. In other words, financial audit seeks to ensure that states’ budgets are presented accurately and in accordance with the applicable financial reporting rules. Compliance audit, in turn, focuses on the adherence to legal and regulatory standards. That is, when auditing governments’ budgetary compliance, SAIs aim to find out if governments are following the relevant laws and rules correctly. Finally, performance audit revolves around added value. Accordingly, when investigating governments’ performance, SAIs aim to find out whether public policies and programmes achieve their objectives, and ensure that government funds are used in efficient ways that provide real value for money.
When talking about the role of SAIs in public audit a crucial aspect is the principle of independence. In order to perform their duties as an objective auditor of public finances, SAIs must remain impartial. In the European Union all SAIs must be bodies that are independent from the legislature, executive, and judiciary branches of government. This is generally enshrined in their countries’ constitutions.
Typically, the most notable tool at SAIs’ disposal, in Europe like elsewhere, is their ‘power of the pen’. That is, SAIs can publish their audit findings, they can make recommendations, but they cannot impose any actions upon the auditee. This remains the task of the executive or legislative branches of the government. In this context, however, it is important to note that some SAIs do possess a special status as jurisdictional courts. In the EU, this pertains to the SAIs of Belgium, France, Greece, Italy, Portugal, and Spain. The jurisdictional mandate allows these SAIs to initiate legal proceedings against public fund managers and accountants suspected of being involved in irregularities regarding public assets and expenditure. This jurisdictional function gives SAIs a tool to publically scrutinize and sanction individuals guilty of misconduct in government service.
When it comes to staff and the size of their own operational budget, there are considerable differences between SAIs, not the least due to their countries different size, economic situation and administrative structure. For instance, the Italian SAI has a budget of 310 million euros and employs 2 658 people, while the Luxembourgish SAI has a budget of 4.5 million euros and employs 34 people in its service. See for more details Figure 1, for which the ECA collected the information in close cooperation with the SAIs covered.
In total, the 28 national audit institutions and the ECA have over 17 000 staff members. The SAIs of the five biggest Member States — Germany, France, UK, Italy and Spain, representing close to 330 million people — employ around 7 700 auditors. Almost 9 300 auditors are employed by the other 23 Member States, with a total population of over 180 million people.
For the EU as a whole there is one SAI auditor per 20 000 citizens. East European SAIs tend to have a higher proportion of female staff and a lower average age than the larger Western European SAIs. From a budget perspective, in almost all Member States an SAI’s budget accounts for less than 0,1% of the overall government budget.
In addition to differences in the EU’s SAIs’ budget and staff sizes, deviations in activities exist, too. While financial, compliance, and performance audit form the corner stones of most of the EU Member States’ SAIs’ operations, each of the Union’s national audit institutions is free to structure its activities according to national priorities and administrative resources. For example, some SAIs invest more in financial and compliance audit, while being less active in the field of performance audit. Many SAIs also perform additional activities that support their mission of overseeing the sound management of public expenditure. For instance, some EU Member States’ SAIs carry out fiscal policy audit and evaluation, while others perform assessments of election campaigns and political party funding.
International cooperation on multiple levels
The scope of SAIs’ activities has implications for not only their internal operations, but also for their cooperative efforts. Indeed, while SAIs operate independently, they do not act in isolation. This is particularly true of the SAIs of the EU and its Member States (see Box 1).
Box 1: legal provisions on cooperation in the Treaty
In the EU, cooperation is explicitly addressed in Article 4(3) of the Treaty on the Functioning for the EU: ‘Pursuant to the principle of sincere cooperation, the Union and the Member States shall, in full mutual respect, assist each other in carrying out tasks which flow from the Treaties.’ For SAIs, the issue of cooperation is elaborated further in Article 287(3) of the same Treaty, where it is stated that the ECA and the national audit authorities ‘shall cooperate in a spirit of trust while maintaining their independence.’
Also beyond the EU’s legal framework, SAIs sustain close relations and engage in active dialogue with each other in various cooperation fora. Typically, such cooperation materialises around the exchange of knowledge and information of specific audited fields, as well as practical and logistical support.
INTOSAI
At a global level, the most important collaboration platform for SAIs is the International Organization of Supreme Audit Institutions (INTOSAI). Founded in 1953, INTOSAI provides the world’s audit community with an institutionalised framework that encourages development of expertise and exchange of knowledge. By allowing public auditors from across the world to work on issues of mutual interest while staying informed of novel developments in the field of external audit, the organisation strives to foster enhanced audit practices and to increase the influence of its member SAIs. INTOSAI’s mission as a facilitator of knowledge sharing is captured in its motto, which affirms that ‘Mutual experience benefits all.’
In its triannual conferences, INTOSAI brings together all of its 195 member SAIs, including the SAIs of EU Member States and the ECA, as well as representatives of various international organisations, such as the United Nations and the World Bank. Through the processes of open dialogue, and exchange of ideas and expertise, INTOSAI also aims to pass resolutions and recommendations that improve governments’ financial management and accountability worldwide, thereby delivering value to citizens.
Among the most notable products of INTOSAI are its ‘International Standards for SAIs’ — ISSAIs, which set out government audit principles and guidelines. For many SAIs, this common frame of reference for public sector auditing forms a key building block for their operations, and as such constitutes a public audit equivalent of the International Federation of Accountants’ (IFAC) International Standards on Auditing.
For more information on INTOSAI, see page 45.
EUROSAI
While INTOSAI facilitates the EU’s SAIs’ cooperation with international organisations and SAIs across the globe, the forum also fosters regional cooperation through its seven geographically specific sub-organisations. The regional group dedicated to promoting the goals of INTOSAI at European level is known as the European Organisation of Supreme Audit Institutions (EUROSAI).
EUROSAI’s membership currently stands at 50 SAIs, consisting of those of 49 European states and the ECA. Together, the European SAIs pursue initiatives in line with EUROSAI’s mission of ensuring better public sector auditing and sound financial management across the continent.
More information on EUROSAI can be found on page 62.
EU Contact Committee
Over the years, increasing European integration has been accompanied by deeper, more organised, and institutionalised collaboration between the EU Member States’ SAIs and the ECA. A manifestation of this ever-increasing European interconnectedness in the realm of public audit is the ‘Contact Committee of the heads of SAIs of the EU and its Member States`.
The Contact Committee is — or at least has the potential to be — the primary collaboration forum between the 29 SAIs of the EU. There are several reasons for this: first, a considerable share of public policies in the Member States is framed by regulations which have been adopted at EU level, by the European Parliament and the Council. Also, the economic cycle between EU Member States is becoming more and more aligned. Therefore, Member States increasingly and simultaneously face similar issues relating to the delivery of public policies. Second, up to 80% of the EU’s budget is spent by national and regional authorities in the Member States. One could even argue that without close collaboration between the Member States’ SAIs and the ECA it would be difficult to ensure an effective external audit and accountability in the EU.
For more information on the EU Contact Committee, see page 23.
Other cooperation platforms
In addition to the global and regional cooperation fora, there are various sub-regional collaboration platforms for SAIs operating within the EU and beyond. For example, the so-called NBP (Nordic, Baltic, Poland) forum provides a framework for collaboration between the national audit offices of the Nordic countries, Baltic states, and Poland. There is also the ‘Association des institutions supérieures de contrôle’ which gathers INTOSAI members across the world using the French language in their work, or the Organisation of Supreme Audit Institutions of the Portuguese Speaking Countries Community, which serves a smilar purpose for those using the Portuguese language.
Most popular topics for cooperation
While SAIs can organise themselves geographically and linguistically, cooperation can also take place on the basis of specific topics and objectives. In all the major cooperation fora discussed in this article — INTOSAI, EUROSAI, and the EU Contact Committee — SAIs have the opportunity to work with each other on specific topics of interest. The platforms for the advancement of particular objectives and discussion of specific issue areas are known as committees, working groups, task forces, and expert networks. The topics covered by these collaboration groups vary from environmental issues and ethics to technological questions and big data.
To get an impression of the topics covered by these cooperation platforms, and of the EU SAIs’ involvement in them, we have gathered information from the websites of the three cooperation platforms to ‘map’ this information and identify possible focus areas, trends and patterns. In doing so we drew on information that is available on these websites and we did not assess the actual cooperation activities SAIs have undertaken in these areas. In our analysis, we did not allocate greater weight to SAIs serving as chair or rapporteur in a committee or working group. We realise that such a task might affect the SAIs capacity for membership of other activities. It is also important to bear in mind that simply being a member of a committee or a working group does not necessarily mean taking action on and responsibility for a given topic. Despite these provisions the data gathered show some interesting outcomes.
The graph above illustrates the number of EU SAIs participating in cooperation groups focusing on various topics (see Figure 2). When doing this analysis we grouped committees and working groups covering the same topic under a topic label reflecting the core activities. The figure — overall reflecting 15 different topics — shows that some of the largest subjects are dealt with on more than one collaboration platform, attracting substantial participation by the EU SAIs. The most significant topics are: ‘Environment audit,’ ‘IT and Technology,’ and ‘Fiscal Policy.’
In addition, we see that the topics ‘Value-added tax’ and ‘Audit and Ethics,’ although each covered by one cooperation platform only, also attract considerable interest, the latter topic even more so if we also add the SAIs participating in ‘Corruption, Fraud, and Money Laundering.’ In contrast, relatively few SAIs are participating in INTOSAI’s subcommittees on financial, compliance, and performance audit.
Which SAIs on what topics
Our analysis also shows that certain subjects are significantly more popular among the EU’s SAIs than others. The graph below shows that every EU SAI, with the exception of the Italian SAI, is participating in at least one cooperation group dealing with the environment (see Figure 3). Out of these 29 SAIs, 25 are participating in groups on ‘IT and Technology’ and 20 in groups on ‘Fiscal Policy.’
In fact, many SAIs take part in their main topics of interest on more than one cooperation platform. A case in point is the Lithuanian SAI, which is a member of groups focusing on environmental, technological, fiscal policy, and public policy matters on two different platforms at once. Meanwhile, other topics have attracted very limited interest from the EU’s SAIs. For instance, based on the publically available information on websites, only three EU SAIs are involved in international cooperation in the field of public procurement.
Furthermore, our analysis illustrates that the size of a SAI does not necessarily correlate with the number of topics the SAI is involved in through the cooperation platforms. For example, besides the French, German and Romanian SAIs, as well as the ECA, the considerably smaller Finnish, Hungarian and Lithuanian SAIs are involved in at least 10 topics and sometimes on a number of platforms. For example, the SAI of Hungary is member of 13 working groups on 12 different topics. The Lithuanian SAI is involved in four different topics in which it works on more than one cooperation platform. In contrast, the Spanish SAI collaborates internationally in only a few areas. There are also considerable differences in interest between SAIs of countries of comparable size, such as the SAIs of Luxembourg and Malta. The latter is a member of eight working groups on seven different topics, while the Luxembourg SAIs is a member of two.
Without further analysis it is clearly not possible to assess why there are these differences in the SAIs’ participation, other than to say that this may reflect their national priorities or those of their own organisation and management.
Active on which platform?
Finally, it is interesting to consider which cooperation platforms are the most frequent ones for the EU’s SAIs: INTOSAI, EUROSAI, or the Contact Committee. This is reflected in the graph below (see Figure 4).
Our analysis clearly shows that interest in regional cooperation takes precedence over global cooperation. For all EU SAIs, with the exception of the SAIs of the UK and Austria (which hosts the INTOSAI secretariat), cooperation mostly takes place at European level, despite INTOSAI being the largest one of the three collaboration fora. Indeed, some of the EU’s SAIs — those of Croatia, Ireland and Luxembourg — have no presence in any of the cooperation groups of INTOSAI dealing with the topics represented in Figures 2 and 3. Meanwhile, every EU SAI cooperates in both EUROSAI and the Contact Committee.
Again, it is difficult to say anything conclusive about the reasons behind these findings. However, it seems plausible to suggest that perhaps the EU SAIs prefer working with like-minded European SAIs. After all, despite their diversity, it is likely that the EU’s SAIs have more in common with each other than they do with, say, the SAIs of East Asia or Africa. Furthermore, the EU countries’ geographical as well as political proximity means that many issues, such as those related to environment and technology, are experienced in a more or less similar way in the entire region. It therefore makes sense for the EU’s SAIs to share knowledge and expertise with each other in order to find solutions that can benefit the entire Union and the region. In addition, there is the logistical perspective: cooperative efforts through conferences and meetings may simply be easier to arrange with SAIs located in the same region.
From a legal responsibility into a practical necessity
INTOSAI, EUROSAI, and the EU Contact Committee are constantly evolving. As the world changes, out-dated committees and working groups are combed out and new ones are established to address pressing matters.
Indeed, over the years, the EU’s SAIs have been impacted greatly by the constantly evolving global and European context. Issues from trade and financial instability to climate change and political volatility are posing unprecedented challenges for governments across the world, spurring national authorities to deeper collaboration than ever before. In the increasingly interconnected societies of Europe, fewer and fewer issues can be described as strictly ‘national’ and, correspondingly, an increasing number of them span and go beyond countries’ borders. Examples of such cross-border questions include migration, security, technology, and the environment — all topical matters in current political discussions. Recently, it has become clear to policy-makers that such subjects of mutual interest to various countries and regions cannot be dealt with in isolation. In other words, cooperation between the national SAIs, their respective governments, the EU, and the rest of the world, has evolved from a legal responsibility into a practical necessity.
In order to remain relevant in a continuously changing global environment, SAIs must adjust their ways of working according to the evolving context. To do this, increasing flexibility will be required from the international and regional cooperation fora, including INTOSAI, EUROSAI, and the EU Contact Committee. If the variety of their committees, working groups, etc. reflect the interest of the EU’s SAIs in the current ‘hot’ topics from an audit perspective, then clearly the environment, technology, and fiscal policy stand out as topics of interest — and on which cooperation is desired. And, for the EU SAIs, most often with sister organisations in the region. Figure 3 displaying which SAIs are interested in which topic, shows some common and perhaps ‘expected’ threads but also some surprises, with some smaller SAIs punching ‘above their weight,’ or at least showing the intention to do so. Although the data we have collected are subject to a number of provisos and, consequently, limitations to what we can conclude, it might be interesting to do such a ‘mapping’ exercise beyond the 29 SAIs we have selected here.
While the 21st century has seen an array of new challenges for SAIs and their cooperation, it has also brought about significant opportunities. In particular, the availability of internet and social media together with technological innovations, and improved availability of and access to information and data, have the potential to open new doors for more effective collaboration between SAIs. At a time when international cooperation is being challenged from left and right, it is more critical than ever that SAIs do not suffer paralysis amidst the challenges they are confronted with, but instead embrace the opportunities they face.
This article was first published on the November-December 2018 issue of the ECA Journal. The contents of the interviews and the articles are the sole responsibility of the interviewees and authors and do not necessarily reflect the opinion of the European Court of Auditors.
