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Principle EIGHT –

Financial and management autonomy and availability of resources

A SAI should have sufficient financial and administrative resources to fulfil its mandate. It is expected that:

1.     A SAI should have available the necessary reasonable human, material and monetary resources;
2.     A SAI’s budget should be set independently of the Executive;
3.    A SAI should manage their own budget and allocate it as appropriate;
4.    A SAI should be free to appoint its staff independently of the Executive;
5.    The SAI head should have autonomy about how the SAI office is organised and structured; and
6.   A SAI should have authority to develop its own human resources policy and practices separate from the Executive or other similar administrative body.

1. Legislative examples of financial and management autonomy and availability of resources


Estimates
21(1) The auditor-general must prepare, for each financial year, estimates of proposed receipts and expenditure relating to the audit office.
(2)       The auditor-general must give the estimates to the Treasurer.
(3)       The Treasurer must consult with the parliamentary committee in developing the proposed budget of the audit office for each financial year (Auditor-General Act 2009 Queensland)
 

Audit priorities, budgets and expenditure
7D(1)  In performing or exercising his or her functions or powers, the Auditor-General must confer with, and have regard to any audit priorities determined by, the Parliamentary Committee.
(2)       The Auditor-General’s budget for each financial year is to be determined in consultation with the Parliamentary Committee concurrently with the annual plan under section 7A (Audit Act 1994 Victoria)
 

Staff subject only to direction of auditor-general
27(1) The staff of the audit office are not subject to direction by any person, other than the auditor-general, the deputy auditor-general or a person authorised by the auditor-general, about—
(a)  the way in which the auditor-general’s powers in relation to audit are to be exercised; or
(b)  the priority to be given to audit matters (Auditor-General Act 2009 Queensland)
 

Staff not subject to direction from others
9DA(1) The auditor-general’s staff are not subject to direction from anyone other than the following people in relation to the exercise of the auditor-general’s functions:
(a)       the auditor-general;
(b)     another member of the auditor-general’s staff authorised by the auditor-general to give Directions (Auditor General Act 1996 Australian Capital Territory)
 

Employees of the Auditor General
8(1) The Auditor General may employ such persons as are necessary for the performance of the Auditor General's functions, duties and powers under such terms and conditions of employment that the Auditor General may determine. (Public Audit Act 2007 Tonga)
 

Establishment of the Audit Office
11(3) The Controller has sole power to employ, which includes power to structure, appoint, manage, and fix remuneration and salaries of the Assistant Auditor, officers, employees and other persons of the Audit Office on terms that the Controller thinks fit.
(4)      The power under subsection (3) to appoint includes the power to transfer (within the Audit Office), promote, suspend, discipline or dismiss officers and employees, and to vary, suspend or terminate contracts for consultants or contractors (Audit Act 2013 Samoa)
 

Functions of Auditor-General
152(6) The Auditor-General shall have the authority to appoint, remove and discipline all staff (including administrative staff) in the office of the Auditor-General.
152(7)The Auditor-General has the authority to determine all matters pertaining to the employment of all staff in the office of the Auditor-General, including—
(a)       the terms and conditions of employment;
(b)       the qualification requirements for appointment and the process to be followed for appointment, which must be an open, transparent and competitive selection process based on merit;
(c)       the salaries, benefits and allowances payable, in accordance with its budget as approved by Parliament; and
(d)       the total establishment or the total number of staff that are required to be appointed, in accordance with the budget as approved by Parliament
(8)       The salaries, benefits and allowances payable to any person employed in the office of the Auditor-General are a charge on the Consolidated Fund.
(9)  Parliament shall ensure that adequate funding and resources are made available to the Auditor-General, to enable him or her to independently and effectively exercise his or her powers and perform his or her functions and duties
(10) The Auditor-General shall have control of the budget and finances of the office of the Auditor-General, as approved by Parliament(Constitution of the Republic of Fiji)
 

Employees of Auditor-General
Schedule 3 - 8(1) The Auditor-General may employ such persons as are necessary for the performance of the Auditor-General's functions, duties, and powers.
(2) Except as otherwise stated in this Act, the terms and conditions of employment of any employee are as agreed by the Auditor-General with the employee (Public Audit Act 2001 New Zealand)

 

Staff of Audit Office
33B(1) The Auditor-General may appoint, as members of staff of the Audit Office, such persons as may be necessary to enable the Auditor-General to exercise the Auditor-General’s functions.
(2)       Those persons are taken to be employed by the Government of New South Wales in the service of the Crown, except as provided by section 33E.
(3)       Each person who is appointed as a member of staff of the Audit Office continues, subject to the provisions of this Division and the terms of the person’s appointment, to be employed in the Audit Office at the discretion of the Auditor-General.
(4)       Chapter 2 of the Public Sector Employment and Management Act 2002 does not apply to the appointment or employment of a person as a member of staff of the Audit Office.

33C Auditor-General may determine employment conditions
(1) The Auditor-General may from time to time make determinations fixing the conditions and benefits of employment of the members of staff of the Audit Office and their salary, wages and other remuneration. Such a determination can provide for redundancy and severance payments and for remuneration packaging (Public Finance and Audit Act 1983 New South Wales)


2. Notes

There are three aspects of a SAI’s independence under this principle: 

  • Adequacy of resources; 
  • Financial independence, especially from interference by the Executive; and 
  • Operational autonomy. 

Adequacy of resources

It is important for a SAI to have sufficient financial resources to fulfil its mandate. Inadequate resourcing can result in a SAI: 

  • Lacking the capacity to perform audits across its mandate; 
  • Being unable to produce quality audits, in a timely manner; 
  • Being unable to follow-up its audit recommendations effectively, or to provide support to the Legislature and its committees, often because of a lack of time or capacity; 
  • Being unable to attract and retain staff because of inadequate levels of remuneration; and 
  • Falling behind in its use of technology and being unable to keep up-to-date with technical accounting and auditing developments. 

SAIs can adopt a range of strategies to address resourcing issues, including: 

  • Advocating with the Government or the legislature to emphasise the important role of the SAI, highlighting the challenges faced and seeking additional resources; 
  • Creating financial incentives to attract and retain staff, where possible; 
  • Enhancing the skills of staff, for example through regional training programs, or enrolling staff in colleges to improve their technical skills; and 
  • Outsourcing audits where permitted or practicable. 

Financial independence

The SAI budget setting process is an important independence matter. Ideally, the setting of a SAI’s budget should be free from Executive control and the Legislature should play a significant role in reviewing a SAI’s budget proposal and determining the amount of the SAI’s budget, before the budget is finalised and presented. The best practice approach is that the SAI’s budget should be determined by the country’s Legislature with reference to the SAI’s independently determined work plan intentions. 

There are good reasons why a SAI should consult with the Legislature in this way: 

  • It provides the legislature with an opportunity to inform the SAI of what the Legislature considers to be important for the SAI to examine (subject to the SAI having the final say as to the content of its work plan); 
  • It provides the SAI with an opportunity to discuss its business with the Legislature, which could also include budgetary matters, staffing, audit timeframes and backlogs, and audit recommendations; and 
  • It enables ongoing development of the relationship between the SAI and the Legislature (e.g. the Public Accounts Committee) to generate an understanding of the respective roles of the Legislature and the SAI in relation to holding the executive government to account. 

Accordingly, where a SAI is reviewing its legislation it should also consider its budget setting process. The best practice approach is set out above but, at a practical level, this may not be possible for a SAI to attain. However, there are a range of “half-way” houses that, although may fall short of the best practice approach, may provide the SAI with some financial independence. For example, having the Legislature, or a committee of Parliament, having input into the SAI’s budget process. This could include: 

  • A committee of Parliament considering draft SAI budgets and then making a recommendation to the Legislature and/or the Executive; or 
  • Requiring the Executive to obtain the views of the a committee of Parliament before the Executive determines the SAI’s budget. 

Operational autonomy

It is also important that SAI heads have appropriate organisational and operational autonomy to: 

  • Protect the SAI from undue influence in performing its mandate; and 
  • Allow the SAI to operate efficiently and effectively. 

Pacific SAIs generally have a significant level of practical independence in the way they operate and are free to use resources as they see fit. 

One exception is procurement where Pacific SAIs are often subject to the same procurement rules and processes as the wider civil service. There are arguments for and against SAIs being subject to the formal government procurement rules. However, SAIs often oversee and monitor a government’s procurement rules and making them subject to them may undermine this function. Also, it may require a SAI to audit itself in respect of its procurement practices. 

Should a SAI be exempted from the government’s procurement rules, it should still be required to follow equivalent principles and standards of the government system. 

A SAI head should have independence in all employment matters. However, this is uncommon in the Pacific with most SAIs regarded as part of the civil service and staffing and employment matters generally being the responsibility of a public service commission, or similar organisation. 

Having a public service commission, or similar organisation, overseeing the SAI’s recruitment activities may create the potential for interference in SAI staffing matters. Other potential problems may include: 

  • Delays in recruiting staff; and 
  • Civil service pay bands and job sizing meaning SAIs must offer less money to potential staff than other government organisations for similar positions. 

The lack of autonomy in employment matters is a significant and widespread matter in the Pacific and is not easily solved as, often, the public service commission involvement is by virtue of a statutory authority. However, where a SAI’s legislation is being reviewed it should seek to ensure 

that those responsible understand the importance of the SAI head having the authority to determine all matters pertaining to the employment of SAI staff. 

Alternatively, if it isn’t possible to have employment autonomy enshrined in law, the SAI could look to have a greater involvement in employment matters within the existing constitutional or legal framework. For example, it could enter a “Memorandum of Understanding” (or equivalent agreement) with the public service commission ensuring that the SAI can be represented on interview panels for the appointment of new staff, that the SAI head will be consulted before any staff are re-assigned elsewhere in the public service, and that pay rates the SAI can offer are commensurate with the skills and competencies required of auditors and/or are no less than for equivalent positions in other Ministries. 

It is also noted that SAIs are often permitted to use contracted professional services to undertake financial, or other, audits.