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Developing performance auditing in Supreme Audit Institutions

Case study ‘Vehicle Management’

Joop Vrolijk, Netherlands

Beirut, 29 June 2016

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List of Content

1. Why Vehicle Management?2. Pre-study phase3. Work plan4. Audit Execution phase5. Reporting phase6. Assistance Twinners7. Impact and lessons learned

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1. Why Vehicle Management?

Number of vehicles: 344 vehicles in 2011 on central state level Number of users: at least 23.000 Financial materiality:

o RSD 84.9 m (1.165 m LP) on mechanical repairs and replacement tyres, o RSD 159.5 m (2.190 m LP) on petrol costs

Not investigated in any other type of audit; No other authorities deal with the issue in terms of examining the

performance achieved through the expenditure of particular funds. No accurate data as to how many official vehicles are in use; No authority is in possession of accurate numbers of official vehicles at its

disposal or the expenditures associated with managing them. Significance of issue is not confined to particular groups but of interest to the

broader public, the media, non- governmental organisations

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2.1 PRE-STUDY PHASE

The pre-study phase entailed the following activities:• Work plan was developed• Requests for information were sent to

direct budget beneficiaries• Data captured through questionnaires

were processed and analysed

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3. Work plan

• Objective of audit• Potential risks• Audit questions• Scope of audit• Methodology• Time schedule

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Objective of the audit

Question:

What could be the objective of this PA?

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3.1 Objective of the audit

The purpose of this audit was to gain insight into • the financial materiality of the use of official vehicles by direct budget beneficiaries • the management of those vehicles • to provide recommendations to improve management of official vehicles.

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3.2 Assessing Potential Risks

• Review of the stages of vehicle management process:o procurement planning o usage planning o actual use o oversight mechanisms available to responsible officers o vehicle disposal.

•Risks were then considered and assessed for each stage of the vehicle management process.

Question: What could be risks for vehicle management?

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3.3 Audit questions1. Are there uniform rules governing the management of official vehicles at the national level?2. Do current vehicle management records provide comprehensive information about the number and use of official vehicles, as well as the associated expenditures and outflows?3. Do record-keeping, monitoring, and oversight arrangements with regard to vehicle management pose risks of abuse?4. Are official vehicles procured and disposed of based on ex-ante analyses?5. Do direct budget beneficiaries have appropriate information gathering systems with regard to vehicle management that can inform decision-making to allow economical and efficient use?

Question:Do above questions give information for achieving objective

of the audit? 9

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3.4 Scope of the Audit

Limited to: 1. Management of official vehicles available to direct budget beneficiaries32. Management of general-purpose official vehicles (no special-purpose vehicles3. Focus on

o identifying how direct budget beneficiaries plan their needs for official vehicles;

o their regulations governing vehicle use; o established vehicle use practices; o monitoring and oversight of vehicle use.

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3.5 Working methodology1. Requests for general information regarding official vehicles and associated

expenditures were sent to direct budget beneficiaries 2. Analysis of:

a. vehicle numbers; b. models; c. purchase date; d. purchase and current value; e. mileage from purchase date to 31 December 2012; f. mileage in 2012; g. title holder; h. statutory basis for use; i. average fuel consumption; j. fuel costs; k. maintenance costs; l. spare part costs;m. registration, insurance, and parking costs.

3. Result of analysis was input for defining scope and plan of the audit

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Problems faced during data collection

Question:

what kind of problems the auditors might have faced?

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EU3.6 Problems faced during data

collection• Time constraint: most beneficiaries were late in providing

information;• Incomplete, unreliable and contradictory information: request

for correct and re-submitting of information;• In 2012, some vehicles were used by ;• In 2012, beneficiaries used vehicles owned by other

beneficiaries whilst at the same time providing their own vehicles for use elsewhere;

• No records of fuel consumption and other expenditures relating to official vehicles available;

• Structures of several Ministries and other authorities had been changed (audit was carried out in post-election period);

• Internal: audit team not complete yet: 4 staff with no experience in PA 13

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Which Time Schedule?

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Audit Planning

? 4

Audit Stage

? 6

Decision-Making and Reporting

? 6

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3.7 Time Schedule

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Audit Planning

Mar-July 13 4

Audit Stage July 13-Mar 14 6

Decision-Making

and Reporting

Mar-Jun 2014 6

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4. Audit Execution

1.Selection of beneficiaries for detailed analysis

2.Introductory meetings with beneficiaries3.Collection of evidence: documents and

interviews4.Define key message and audit conclusions

5. Preparing audit report

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4.1 Selection of beneficiairies

15 of the total of 126 beneficiaries for detailed analysis• Selection criteria (based on extremes: best/worst performances)• Materiality (number of vehicles and amount of total and individual

expenditures);• Regulations in place at the beneficiary to govern the use of official vehicles;• Vehicle use (mileage);• Reliability of data provided (assumption testing);• Need for additional clarification by beneficiary management;• Good practices; • Share of vehicles owned in total number of vehicles used by each budget

beneficiary.

20/80 rule used: coverage of 88% of total number of vehicles and 84% of vehicle expenditures.

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4.2 Key message

1. Management of official vehicles not governed by law; existing regulations are not consistent

2. Records do not contain up-to-date and comprehensive information about Number of Official vehicles Their utilisation Expenditures

3. Inadequate systems for recording, monitoring and controlling systems are in place and poses a risk for abuse

4. No ex-ante analysis for acquisition and disposal of official vehicles

Conclusion: Risk that management of official vehicles of central level budget

beneficiaries is uneconomically and inefficiently 18

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5. Reporting phase

• Draft report to SAI management• Quality Control review• Draft report to auditees and former responsible officers for comments

(34 in total)• Audited entities and former responsible officers may comment on the

Draft Report;• SAI may respond to such comments;• Meeting is held to discuss any outstanding issues;• Draft Final Report is provided to audited entities and former

responsible officers (40 in total);• Audited entities and former responsible officers may comment on

Draft Final Report;• SAI Council adopts conclusions • Final Report is adopted

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6. Assistance TwinnersNo. Period Area Output

  1

14.-18.01.2013

Concept and significance of performance audit; aim of first performance audit; identification of possible problems; selection criteria for audited entities

Issue to be audited under first performance audit identified as ‘ Management of official vehicles by direct budget beneficiaries’

 2

11.-14.03.2013

Audit planning (audit questions; sources of information; scope and methodology, constraints; expected outcomes)

Work plan

  3

13.-16.08.2013

Assistance in selecting case studies – development of check list; communication with audited entity; announcement of audit; presentation of results)

Selection of 15 direct budget beneficiaries for case studies

 4

11.-15.11.2013

In-depth studies; evaluation of results; reporting

Drafting of findings, conclusions, main message, and recommendations

5 27.-31.01.2014

Development of draft structure of audit report

Outline draft report

 6

12.-16.05.2014

Knowledge gained from first pilot audit; recommendations for improvement; guidance and initiation of second pilot audit

Evaluation of first pilot audit

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7. Impact and lessons learned

• High impact with Parliament and the media with requests for more studies.

• The study on second PA (property management) proved to be undeliverable in original form and was scaled back to become a series of case studies.

• Introduction of doing full preliminary studies before committing to projects.

• Heavy training input on performance audit has impact on absorption ability of the PA unit

• Learning from other SAIs in transition on the Balkans is considered

• The SAI law requirements on the skills of auditors is too restrictive (limited to accountants and lawyers

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THANK YOU!

QUESTIONS?

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