Financial and managerial/administrative autonomy and the availability of appropriate human, material, and monetary resources.

Principle 8 has three dimensions:

• To be able to act independently, SAIs need sufficient resources to implement their mandate.
• The SAI should have financial independence from the Executive.
• Heads of SAI should have sufficient autonomy to deploy the allocated resources as they see fit.

As noted under Principle 1, these elements all relate to the SAI as an institution. In return for its independence, the SAI should be prepared to be accountable for its use of the resources entrusted to it. The following discussion explores this in greater detail.

Financial independence

As noted under Principle 1, the legal framework should make clear how the SAI is to be funded. This is a complex question, which requires careful consideration and explanation.

As a minimum, the SAI should be responsible for preparing its own annual budget proposal. It makes sense for the proposal to be based on the SAI’s annual work programme that it has also developed, in accordance with its mandate. The advantage of preparing the budget in tandem with the work programme is that it enables the programme to be costed and then reflected in the budget proposal. This lends strength to the budgeting process, even if the approval of the budget may remain subject to some form of control or oversight by the Executive.

However, the process for approving the budget should also, as far as possible, remove the risk that funding is controlled by the Executive, including Ministers or Ministry of Finance officials (who have a natural incentive to limit the freedom of the SAI to carry out an adequate level of audit and scrutiny). Instead, it is best practice for the Legislature, or another body independent of the Executive, to either determine the budget (subject to fiscal parameters set by the Ministry of Finance) or be able to make a recommendation to the Executive following discussion with the SAI.

This should happen before the Executive presents its national budget (including the SAI’s budget) to the Legislature for scrutiny and enactment.

Models which see these processes implemented by a non-partisan committee of the Legislature, or a politically neutral commission, can enhance the independence of the SAI both as an institution and in its freedom to carry out audits as it sees fit.

Other forms of revenue

A SAI’s financial independence can be enhanced by having the power to charge audit fees. Practice on charging fees varies internationally. It is more common for the audits of state-owned enterprises or other entities which the SAI can contract out to external auditors.

Moving to a fee-based approach can be a point of difficulty in those countries where the SAI has traditionally been funded solely from the national budget (and often without the power to employ its own staff). Also, in many countries SAIs are asked, or may wish, to take on additional audits – for example, an international audit or an audit of donor funded projects. In such cases, it is desirable for the audit to be funded by the project in question. The SAI should also seek the ability to retain the additional earned income (and employ additional staff). This should come, of course, with the normal expectation of being expected to report annually on its use of such income.

Operational autonomy

Operational autonomy includes the power to allocate the resources given to the SAI through its budget. This has links with Principle 3, and the power to decide on the content and direction of the SAI’s auditing operations. It should also extend to powers of procurement, including the development of information and communications technology capability, the acquisition and use of computer-assisted auditing techniques, and the development and control of a website.

Autonomy in human resources is a critical capability. In many countries, the SAI is dependent on the Executive or a powerful body such as a public service commission which controls all aspects of staffing in the public sector. Such bodies are not always attuned to the specialist skills needed to carry out professional audits according to international standards. There may not be appropriate grading categories to allow a SAI to retain some professionals needed to deliver high quality audits. Equally there may not be systems in place allowing the SAI to promote staff on merit or remove underperforming staff. This can mean that it is difficult to recruit staff with the right skills, offer 46 competitive salaries to recruit and retain professionally qualified staff, promote staff on the basis of ability and dismiss staff who are under-performing.

Principle 8 anticipates these matters should be under the direct control of the Head of SAI. Autonomy can help the SAI to be flexible, responsive and able to produce high quality work. However, it is also important to use these powers in conformity with broad government guidelines, a structured approach to recruitment, performance management, and remuneration, and good employment practices. These matters require careful consideration and discussion with the relevant authorities.

Accountability

In return for financial independence and operational autonomy comes accountability. INTOSAI-P 12, the SAI PMF, and other documents encourage SAIs to demonstrate that it is practising the highest levels of internal control and judicious use of public resources.

A willingness to be accountable can be a powerful counterpoint to government concerns about extending the SAI’s financial or operational independence. A new law may therefore establish arrangements for the SAI to report annually on its performance. Where the country system allows it, this should include the production of separate and audited financial statements (with the external auditor being appointed by a transparent process to ensure objectivity). Independence can be enhanced by providing that the SAI must make its report to the Legislature, especially if the Legislature also has the power to approve the SAI’s budget.

Again, this can require extensive discussion and, in some instances, acceptance that the SAI needs to be treated differently from other public sector agencies.