Institutional Strengthening of the National Audit Office

Institutional Strengthening of the National Audit Office

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TECHNICAL ASSISTANCE COMPLETION REPORT Division : SEGF TA No., Country and Name Amount Approved: $700,000 TA3771-LAO: Institutional Strengthening of the National Audit Revised Amount: $700,000 Office Executing Agency Source of Funding Amount Undisbursed: Amount Utilized: State Audit Organization of the Lao $113,884.55 $586,115.45 People’s Democratic Republic (Lao PDR) ADB TASF TA Approval TA Signing Date: Fielding of First TA Completion Date Date: Consultants: Original: 31 Dec 2005 Actual: 31 Dec 2006 Account Closing Date Original: 31 Dec 2005 Actual: 30 August 200714 November 18 February 2002 May 2003 2001 Description Technical Assistance (TA) 3771 is the second TA grant from ADB to support the National Audit Office (NAO), the supreme audit authority of the Lao PDR. This assistance followed through ADB’s prior assistance in TA2987-LAO: Establishing the National Audit Office. TA2987 assisted in the establishment of the NAO under Prime Minister’s Decree no. 174 in 1998 which made the NAO an agency of the Prime Minister’s office. The NAO was later renamed the State Audit Organization (SAO). The TA is included in ADB’s program of assistance for the country. Expected Impact, Outcome and Outputs The goal of the TA is better public outcomes through improved efficiency of public expenditure. The TA specifically aims to assist in upgrading SAO’s capacity i.e., (i) to improve SAO’s regulatory and institutional framework; and (ii) to effectively ...

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TECHNICAL ASSISTANCE COMPLETION REPORT
Division :
SEGF
TA No., Country and Name
Amount Approved:
$700,000
TA3771-LAO: Institutional Strengthening of the National Audit
Office
Revised Amount:
$700,000
Executing Agency
State Audit Organization of the Lao
People’s Democratic Republic (Lao PDR)
Source of Funding
ADB TASF
Amount Undisbursed:
$113,884.55
Amount Utilized:
$586,115.45
TA Approval
Date:
TA Signing
Date:
Fielding of First
Consultants:
TA Completion Date
Original: 31 Dec 2005
Actual: 31 Dec 2006
14 November
2001
18 February 2002
May 2003
Account Closing Date
Original: 31 Dec 2005
Actual: 30 August 2007
Description
Technical Assistance (TA) 3771 is the second TA grant from ADB to support the National Audit Office
(NAO), the supreme audit authority of the Lao PDR. This assistance followed through ADB’s prior assistance in
TA2987-LAO: Establishing the National Audit Office.
TA2987 assisted in the establishment of the NAO under Prime
Minister’s Decree no. 174 in 1998 which made the NAO an agency of the Prime Minister’s office. The NAO was later
renamed the State Audit Organization (SAO). The TA is included in ADB’s program of assistance for the country.
Expected Impact, Outcome and Outputs
The goal of the TA is better public outcomes through improved efficiency
of public expenditure. The TA specifically aims to assist in upgrading SAO’s capacity i.e., (i) to improve SAO’s
regulatory and institutional framework; and (ii) to effectively conduct audits on the basis of international good practice
standards of audit methodologies, systems, and procedures. Expected outputs were:
(i) revised regulatory and
institutional framework for SAO (submitted to the Government by September 2002);
(ii) long-term institutional master
plan (by December 2002); (iii) audit manuals for the Agriculture Promotion Bank (by September 2002);
and (iv)
training programs.
Delivery of Inputs and Conduct of Activities
Prior to commencement of TA,
t
he scope and terms of reference
(TOR) of the TA were expanded considerably to include (a) 5 sets of audit manuals covering (i) the financial audit
process; (ii) foreign-aided loan projects; (iii) state-owned enterprises; (iv) state-owned banks; (v) government
financial statements, and (b) a diagnostic assessment of current practices of the accounting and auditing. Two
international consultants engaged on an individual basis carried out their TORs with strong technical substance and
professionalism. Consultancy inputs were expanded from 10 person-months of the international team leader’s inputs
to 10.4 person-months, and from 18 person-months of the international audit training specialist to 22.5 person-
months. Average cost per person-month input of the team leader and international audit training specialist were
$17,850 and $8,000 respectively.
A total of 22 international trips were made at an average cost of $1,640 per trip.
The delivery of consultants’ inputs was made with due consideration to cost efficiency. Adequate twice a year review
missions were fielded by ADB, including two courtesy visits by Director, MKGF and Country Director Lao Resident
Mission in 2004-2005 to elevate issues of concern to the Auditor General over the slow progress of the TA. Although
the Government agreed to provide part-time counterpart staff at start of TA, the Government later rationalized that
the demands on SAO staff time did not make this possible over the duration of the TA. There was also a change in
project director at around 6 months into implementation. On request by the Government, the TA completion date was
extended by one year (to 31 December 2006) to provide support to the SAO in the drafting of the Audit Law.
Evaluation of Outputs and Achievement of Outcome
(a)
Efficiency in Production of Outputs (Cost and Process).
The TA was efficient in producing the outputs.
A draft audit law was provided to the SAO. This draft was used as basis for an Audit Law submitted by the
SAO to the National Assembly in June 2007 and passed in July 2007. A 5-year Strategic Plan for fiscal years 2005-
2009 was prepared by the TA and approved for implementation by the SAO in January 2005;
Five sets of audit manuals were produced and approved in August 2005. Training was conducted on their
use. A diagnostic assessment of current practices of accounting and auditing of Lao PDR was prepared;
Five audit awareness workshops were conducted nationwide. Three 3-day seminars were provided on
concepts of performance audits and use of software. Classroom training were conducted. Training of trainors was
held. Five staff attended computer maintenance and networking courses. Beginner, pre-intermediate, and advanced
English courses totaling 120, 80, and 60 hours of instructions respectively, were provided.
The following study tours were supported: (i) the Auditor General’s visit to the Philippine’s Commission on
Audit and attendance at the 9
th
Asian Organization of Supreme Audit Institutions
(
ASOSAI) Congress in 2003; (ii) the
2003 visit to the supreme audit institution of People’s Republic of China (PRC); (iii) attendance to the 10
th
ASOSAI
congress in PRC in 2006; and (iv) two senior SAO staff participation in an exchange program in Vietnam on
performance audits.
The TA helped support the SAO when it hosted PRC’s supreme audit institution visit to Lao
PDR in 2006.
Equipment procured and transferred to the SAO included 21 computers (9 desktops and 12 laptops), 8
printers (4 laserjet and 4 portable printers), 2 photocopiers, 2 fax machines, a scanner, an all-in-one
printer/fax/scanner/copier, an LCD projector/screen, a sound system, and 47 reference materials.
(b)
Effectiveness (Achievement of Outcome).
Achievement of the intended outcome from training of SAO staff
could have been more effective if the SAO senior management would have demonstrated more consistent support to
the TA. For example, for the years 2004-2005, SAO staff were seldom available for training.
A one-off on-the-job
training for audit of an ADB-funded project was conducted. However, the SAO did not allow the consultants to carry
out further on-the-job training. The staff unavailability and limited on-the-job training has hampered the effectiveness
of the training component of the TA.
(c)
Quality of outputs.
The quality of outputs is highly satisfactory. The draft audit law took into consideration the
context of Lao’s transition and political economy. The set of audit manuals were based on international good practice
standards of audits and are being used as constant references by the SAO auditors in the course of their field work.
(d)
Client Satisfaction with Outputs and Outcome.
At completion of TA, the then newly appointed Auditor
General (appointed June 2006) expressed strong satisfaction with the TA’s outputs.
He also indicated that the TA’s
resources could have been further maximized to increasing the capacity of SAO staff over the period 2004-2005.
The Auditor General expressed his strong appreciation of ADB’s support during the Director SEGF’s country
consultation mission in October 2006.
(e)
Timeliness of Delivery of Outputs.
The timeliness of delivery of outputs was unsatisfactory.
There were delays from the start of TA implementation. The TA was formulated under a previous Auditor General
(who led the NAO in TA2987). However, there was a period in 2002-2003 where no Government staff was named to
the Auditor General position. With appointment of a new Auditor General in 2003, the consultants were fielded.
Through 2003-2005, difficulties experienced have considerably slowed the TA delivery of outputs. SAO responses to
outputs of the consultants, if any, came late. The TA training activities picked up considerably during the last six
months of TA (June-December 2006) with the new Auditor General.
Overall Assessment and Rating
Overall, the TA is rated partly successful.
The training and technical knowledge
building of SAO could have been more effective. This notwithstanding, it was through the assistance of TA3771 that
the SAO was able to draft the Lao PDR’s first Audit Law. Even as the TA was concluded in December 2006, SAO
had further pursued the issue of its independence from the executive branch of Government in 2007 as was
embodied in the draft Audit Law.
With the passing of the Audit Law in July 2007, the SAO was thereby made an
independent body with a mandate to report its annual audit findings to the President of Lao PDR, the National
Assembly, and the Prime Minister. The SAO will play a significant role in ensuring that the incremental revenue flows
from the Nam Theun 2 HydroElectric Project (to commence in 2009) are indeed being allocated to eligible poverty
reduction priority programs.
The SAO is also to undergo an INTOSAI (International Association of Supreme Audit
Institution) audit peer review in late 2007 and every two years thereafter to enable an assessment of its capacity. In
this regard, TA3771 has better prepared SAO for its elevated role and future audit peer review processes.
Major Lessons
(1) A critical success factor for TA outcomes is Government ownership of the technical assistance.
Even as the TA paper/inception plan was approved by the Government, differing views and degrees of support by
senior management of SAO has caused considerable delays in TA implementation as well as less than satisfactory
outputs/outcomes in as far as training and capacity building.
Albeit late in the TA implementation, the change in
leadership during the last 6 months of the TA has resulted in considerable satisfactory cooperation and prompt
responses by the SAO. (2) Successful implementation of TA’s training activities require that workplans of the TA as
is indicated in the inception plan approved by the executing agency (EA) is an integral part of the larger workplans of
the EA. Unavailability of staff to attend training – either due to poor staff workprogram planning and/or simply
constrained staffing at the SAO – have limited the achievement of training outcomes. Sensitivities on sharing of
confidential information on audits of state-owned enterprises had prevented a more comprehensive on-the-job
training of SAO staff. (3) ADB should take caution to set realistic timelines for delivery of outputs and outcomes. The
timelines as indicated in the design and monitoring framework were optimistic and relied on the assumption that the
senior leadership in SAO at TA formulation will remain in office through TA implementation.
Recommendations and Follow-Up Actions
TA4954-LAO: Improved Public Financial Management Systems was approved in July 2007 and included a
component of assistance to SAO (around $250,000) to help in capacity development in drafting the implementing
decrees to the Audit Law and technical support to SAO as it undergoes the INTOSAI peer review process.
The
public financial management reform agenda is now one of the core focus of the Lao PDR and is supported by many
external funding agencies.
Strong coordination with the external funding agencies (such as the World Bank and the
European Union) will need to continue in ADB’s program of assistance for the Lao PDR.
Prepared by:
Vicky C.L. Tan
Designation: Financial Management Specialist, SEGF