PERFORMANCE AUDITING „new perspectives“

The Role of Performance Audit in the Efficiency and Effectiveness of Management of Public Finance in the Federation of Bosnia and Herzegovina (FBiH)
Dr.sc.Ibrahim Okanović, Auditor General Audit Office for the Instittions of FBiH
The author’s views expressed in this presentation do not necessarily reflect the views of the United States Agency for International Development or the United States Government

AIM AND PURPOSE OF PERFORMANCE AUDITING COMPARED WITH TRADITIONAL FINANCIAL AUDITING IN BIH • Make auditing public • Deal with difficult questions • „Challenge“ bad practice • Initiate change • Promote responsibility • Assist in prevention of fraud and corruption • Serve a democracy and an open society

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MODERN SOCIETY REQUIRES MORE THAN TRADITIONAL FORMS OF CONTROL AND AUDITING
Complex structures multi-layer reforms
Conditions and requirements that change rapidly and

Weak inherent incentive to change

Public finance vs requirements of citizens

Continuous improvement and education

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PERFORMANCE AUDITING AS A MECHANISM TO MEAUSRE THE SUCCESS OF PUBLIC SECTOR • • • • IMPLEMENTATION of development projects; IMPLEMENTTION of economic development strategy; ECONOMY of budget funds investments LACK of efficient mechanism for monitoring of results of the work of the Government. • EVALUATION OF EFFICIENCY of implementation of Government regulations( rules, decisions, conclusions) • INCONSISTENT implementation of the prescribed procedures for public procurement in BiH

Financial auditing (FA)
Coordination

Performance auditing (PA)

Economy Financial management Outcome report Implementation

Internal control

Efficiency of programs and management
Effectiveness of agency programs

Accounts

Influence of government policies and program Transactions

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PUBLIC SECTOR PERFORMANCE AUDITING (BEST VALUE FOR MONEY)  Market mechanism and company profit (private sector)  Replacement for market mechanism (public sector)  Performance auditing - investigative, almost scientific approach to methodology (extensive investigations).  Performance auditing-serves for creation of the better than what is available.

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STARTING POINTS OF PERFORMANCE AUDITING
Has public management selected appropriate way of utilization of public resources?

Has public management set clear goals?

Has public management selected appropriate priorities?

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THE FOLLOWING AUDITS HAVE BEEN CONDUCTED IN THE FEDERATION OF BiH
1. High education planning in FBiH 2. Efficiency of responsible institutions in the process of incentives to primary agricultural production 3. Time management in the process of expropriation of real estate during the construction of a highway 4. Concessions management in FBIH 5. Management of primary medical care in FBiH 6. Youth Employment Program management 7. Flood prevention in FBiH 8. Support to the development of SMEs in FBiH
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SELECTION OF AUDITS WAS MADE AFTER INDICATIONS FROM THE ENVIRONMENT AND POOR RESULTS BY THE GOVERNMENT

 Issues of economy, efficiency and effectiveness of government programs or public services,  Issues that have negative impact on society,  Issues as a consequence of government activities.
Poverty is a social problem. Auditing monitors the government activities such as poverty reduction programs. They can be more or less economic, efficient, and effective.
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Our experiences in BiH, Federation of BiH.....

• Conclusions • Recommendations • Results

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“HIGH EDUCATION PLANNING IN FBIH”
Audit conclusions: • Enrolment of students is made per usual practice, with no enrolment policy • There is no practice of coordination between cantons and universities on the required number of students.. • Information on high education planning and market requirements are not adjusted. Audit recommendations: • Develop the system of planning of student enrolment based on anticipated requirements for cadre with high education in relation to labor market.. • Improve the quality of information and access to information, and equalize the Bologna process. • Encourage cooperation among all direct and indirect participants in high education at all levels.

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EFFICIENCY OF RESPONSIBLE INSTITUTIONS IN THE PROCESS OF INCENTIVES TO THE PRIMARY AGRICULTURAL PRODUCTION
Audit conclusions: The system of award of incentives is inefficient and is frequently changing. The system of planning and execution of budget is not timely and does not function efficiently. The existing system of control and audit is not in the function of efficiency nor in the function of incentive process. Audit recommendations: Improve the flow and distribution of information on changes in regulations. Establish a system of a more efficient control and inspections based on risk estimate. Simplify application forms.

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TIME MANAGEMENT IN THE PROCESS OF EXPROPRIATION OF REAL ESTATE DURING CONSTRUCTION OF A HIGHWAY
• • • Audit conclusions: Expropriation procedures are neither timely nor efficient. Unsolved ownership issues (no possibility for agreements on transfer of ownership). Lack of transparency and supervision (system development not possible). Audit recommendations: That the user of expropriation follows the information on current prices in the real estate market To ensure fair and realistic offers to land owners when making an agreement on transfer of ownership. That the stakeholders improve mutual exchange of information. That the responsible Ministry ensures that the user of expropriation may solve complex cases, including the issue of ownership. Tat the user of expropriation submits disputed cases to the court.


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CONCESSIONS MANAGEMENT IN FBIH
• • • • • Audit conclusions: The concessions system is not managed efficiently and the system does not function. Award of concessions is not timely. No transparency. Administrative and other obstacles impede the realization of contracts. Audit recommendations. Make an analysis of obstacles that lead to weak efficiency and apply the procedures of award of concessions that are likely to be subject to long processing. Consider a possibility of establishment of a working body that would propose measures for improvement of the system of concessions management. Change legal framework and organizational procedures.

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MANAGEMENT OF PRIMARY HEALTH CARE IN FBIH
• • • • • • Audit conclusions: Management of primary health care in FBIH is not efficient. Policlinics do not provide equally accessible services of primary health care. Ministry of health of FBiH has not developed continuous monitoring and evaluation. Audit recommendations: That health insurance units establish the system of planning and distribution of funds on the basis of monitoring of performance of policlinics in order to ensure equal access to primary health care. That Cantonal Ministries develop the function of strategic and long-term planning to ensure equal access to primary health care. That the Federation Ministry of Health develops continuous monitoring and evaluation system to make the primary health care efficient and with equal access for all citizens of FBiH.

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YOUTH EMPLOYMENT PROGRAM MANAGEMENT
• • • Audit conclusions: The program did not help the most vulnerable categories of young unemployed people. The goal is not clearly defined. Too wide criteria resulted in the program not oriented toward the most critical categories of youth. Supervision system was neither established nor implemented in order to make corrections and improve the system of program management. Audit recommendations: The program should have been preceded with a systematic and detailed planning process based on labor market data and on the analysis of previous experiences in the implementation of similar programs. It is necessary that all institutions participating in the implementation of the program have a common vision and apply equal procedures (cantons, companies, institutes).


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FLOOD PREVENTION IN FBIH
• • • • • • • Audit conclusions: Damages from flood were 100 Million KM in 2010. Not well defined legal framework, insufficient supervision, lack of networking in inspection (incomplete and unclearly distributed responsibilities). No analysis of distribution of funds; insufficient funds. Audit recommendations: Establish clear responsibilities at the Federation level and adjust all activities per priorities and timelines. Water agencies should set goals and performance indicators to quantify effects of measures taken. Cantonal Ministries should pay more attention to flood prevention and ensure the flood protection measures in accordance with policies and documents at the Federation level.

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SUPPORT TO THE DEVELOPMENT OF SMEs IN FBIH
• • • • • • • Audit conclusions: The measures taken have not contributed to the significant improvement of conditions for the development of SMEs. The existing supervision does not ensure adequate basis for evaluation of the effect of incentives. Award of the incentive funds could be more efficient. Audit recommendations: Government of FBiH must analyze the support it provided so far and reconsider the possibilities of more significant support to the development of SME sector in the future. In creation and implementation of SME support programs, give priority to general measures directed toward creation of better conditions for opening of new and development of existing SMEs.

Determine criteria for award of incentives and appropriate evaluations to enable that the funds are directed to the projects that stimulate the development of SMEs, and insure transparent award of incentives at all stages.

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IMPACT OF PERFORMANCE AUDITS
• Audits had impact on the changes to the laws in various fields. • 50% of recommendations have on average been implemented. • Non-implementation of recommendations is caused by various factors (slow process of taking of measures, lack of legal framework adjustment, political environment etc.). • Public reactions to performance audits in FBiH are very positive • Supreme audit institution in FBiH is faced with the need for the development of performance auditing but lack of resources (financial and human) affect the number of audits.

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CHALLENGES OF IMPLEMENTATION OF PERFORMANCE AUDITS IN FBIH
Evaluates impact on community

Evaluates impact on beneficiaries

Reports on results (3E)

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CONCLUSION:
Who has the right, the information, and the capability to oppose bureaucracy, inefficiency, ineffectiveness, and dysfunctional regulations? AUDITORS CAN MAKE CHANGE “
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Thank you for your attention! Questions?

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