Lao People's Democratic Republic: Strengthening the Capacity of the State Audit Organization

Transcription

1 Completion Report Project Number: Technical Assistance Number: 7857 April 016 Lao People's Democratic Republic: Strengthening the Capacity of the State Audit Organization This document is being disclosed to the public in accordance with ADB s Public Communications Policy 011.

2 In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.

3 TA Number, Country, and Name: TA 7857-LAO: Strengthening the Capacity of the State Audit Organization Executing Agency: State Audit Source of Funding: TASF Organization (SAO), Lao PDR TA Approval TA Signing Date: 0 Sep Date: 10 Oct Fielding of First Consultants: May 013 Amount Approved: $750,000 Revised Amount: NA Amount Undisbursed: Amount Utilized: $108, $ 641, TA Completion Date Original: 31 Oct 013 Actual: 31 Oct 014 Account Closing Date 31 Oct 013 Actual: 4 Aug 015 Description: The technical assistance (TA) aimed to strengthen audit professionalism and improve skills in the area of procurement audit, building on earlier TA efforts. Under a previous TA, 1 a procurement guide was prepared, and this is an area of considerable interest to the State Audit Organization (SAO), the supreme audit institution (SAI) of Lao People s Democratic Republic (PDR). The TA specially assisted the SAO staff to better understand and carry out audit of procurement. Specifically, the TA was intended to increase knowledge and skills of audit staff regarding procurement best practices; help auditors to identify risks relating to procurement processes and activities; assist auditors in achieving a high level of quality and consistency when auditing procurement; provide a basis for measuring audit performance; and allow others outside the SAO to gain a better perspective and understanding of the SAO audit practices. The capacity building activities was undertaken in accordance with international standards of SAI (ISSAI) focusing on pre-procurement procedures. These include preparation of bid requirements, transparency in the bidding process, checks and balances in the bidding process, and post-procurement practices relating to audit and documentation. The TA has strengthened the interface between the Department of the National Assembly s Economic Planning and Finance Committee (EPFC) and the SAO. This was in line with the 010 Country Assistance Program Evaluation (CAPE) Lao findings point for the need to strengthen the EPFC as a part of the National Assembly s capacities to make informed decisions. The TA has: (i) defined EPFC role and responsibilities for parliamentary oversight of financial management (FM) legislation and implementation; (ii) prepared a draft mandate for EPFC; (iii) held workshops for the Finance and Economic Standing Committee (FESC) members on their role and functions; governance, accounting, and auditing issues; and (iv) developed procedures for communicating with SAO, Ministry of Finance (MOF) and other relevant agencies. SAO is the executing agency (EA) and the implementing agencies (IAs) are (i) the SAO Audit Department for activities related to SAO and (ii) EPFC the activities related to the National Assembly. Expected Impact, Outcome, and Outputs: The TA impact was improved accountability in the management of public resources. The TA outcome was the improvements in the audit of public sector procurement practice. The TA key outputs were: (i) strengthened SAO audit capability of public sector procurement practices; and (ii) legislative oversight of the SAO audit reports. These have: (i) contributed to increased professionalism of SAO through training of SAO auditors in the auditing of public procurement transactions; (ii) enabled the government to draw the economic benefits of a sound and well-performing public procurement system; and (iii) enhanced legislative scrutiny of audit reports and the parliamentary stage of the audit cycle. Delivery of Inputs and Conduct of Activities: The TA was implemented in about 37 months, from September 011 to October 014, with about one year extension. It engaged one international consultant for 1 person-months and one national consultant for 4 person-months. The consultants were recruited by ADB as individual consultants in accordance with the Guidelines on the Use of Consultants (010, as amended from time to time). From $750,000 budget allocation from ADB, 14% was undisbursed mainly due to (i) lower than expected cost of consulting services, (ii) unspent allocation for contingencies. The government also provided counterpart fund of about $75,000, in kind. Computer and other IT supports were procured to support TA activities. Inception workshop and five training programs were conducted, each attended by about 30 staff. They covered the following areas: overview of current audit practices, Procurement Law and Regulation in Lao PDR, ADB and WB Procurement Guidelines; and Procurement Audit Principles, Procedures and Methodology. It also implemented step by step training program in procurement audit; two pilot procurement audits; and 3 model procurement audits. EPFC and SAO staff also participated in study tour to SAIs in Malaysia and Australia to enhance their knowledge in audit practices. Overall performance of ADB, the EA and the IAs in implementing the TA is satisfactory. 1 TA 4954-LAO: Improved public financial management (PFM) System, approved in 6 Jul 007, and was completed on 31 Jan 011.

4 Evaluation of Outputs and Achievement of Outcome: The TA achieved the targets set for the two outputs: (i) The SAO audit capacity of public sector procurement practices strengthened as (a) the SAO audit team deployed on procurement has been trained; and (b) Audit reports prepared by SAO have been consistent with The International Organization of Supreme Audit Institutions (INTOSAI) best practices as incorporated in SAO Audit Guidelines and relevant manuals; and (ii) Strengthened legislative oversight of the SAO audit reports, since the number of SAO audit reports scrutinized by the EPFC of the National Assembly has been improved. Overall Assessment and Rating: The TA efforts have enabled the Government to draw the economic benefits of a sound and better performing public procurement system; and enhance legislative scrutiny of audit reports and the parliamentary stage of the audit cycle. The TA achieved its intended performance targets set in the TA design and monitoring framework for its outcome and output. It also contributed in achieving its targeted impact. For output level, it improved accountability of public resources and strengthened legislative oversights. Specifically, it has strengthened the audit professionalism of trained SAO staff in auditing public procurement transactions. Simultaneously, it helped EPFC staff complete a number of training and conduct regularly the detailed examination of SAO s audit reports. Issuing a resolution on strengthening coordination between EPFC and SAO in audit function (in January 014) was the major achievement under the TA. The Resolution includes examination of audit report and hearing on the audit report was for the first time in Lao PDR. Overall, the TA is rated as successful. Major Lessons: (i) the well-designed training program has contributed significantly to the increase in the number of the SAO trained audit staff who has the necessary capacity for undertaking the procurement audit as a priority area. This has also progressively increase the spread of audit of public procurements both from the national and sources from development partners and provide greater assurance to stakeholders; (ii) the TA has two components managed by two different IAs, not in parallel positions. EPFC, as part of the National Assembly was seemly inappropriate to be an IA under the SAO as the EA. This contributed to some difficulties on scheduling the completion of TA activities on time; (iii) The Procurement Audit Guidelines have not been well prepared when the auditors conducted the model for procurement audit. This made SAO s management encounter difficulties to properly review and upgrade the model audit into the complete manual; and (iv) some delays in transferring advances into the bank account of the TA has created some difficulties in implementing project activities on time, since the IAs did not have other sources of financing to support the activities in advance. Recommendations and Follow-Up Actions: The following are some proposed recommendations and follow-up actions: (i) SAO will require establishing a system of proper data collection and updating on procurement budgets and procurement contracts above the pre-determined threshold; and analyze data on procurement budget and contracts funded by national and donor budgets; (ii) the future investments should be separately designed for more independent EAs and/or IAs; (iii) SAO proposed, for future similar investments, draft manual should be processed earlier, so that the auditors could properly use in conducting pilot tests on model audit; (iv) ensure timely availability of TA fund in the project areas to avoid potential delays in the implementation of TA activities; (v) for training related supports, it is recommended to share the training materials and presentations that have been translated into Lao language, and are made available for review by participants, at least one week before conducting the training, so that the trainees could have sufficient time to study the documents before attending the training programs; (vi) monitor the translation of three standards (on Financial Audit, Compliance Audit, and Performance Audit) of ISSAI into Lao language; apply the lessons learned and the recommendations from this TA to improve and explore how the ongoing regional capacity building technical assistance (R-CDTA) 884: Enhancing Roles of Supreme Audit Institutions in Selected Association Southeast Asia Nations (ASEAN) Countries will complement the efforts; (vii) monitor the existence of the proposed procurement audit as the mainstream and priority area in SAO to enhance the public governance system in Lao PDR; and review any progress of the SAO s procurement audit plan made in 01; and (viii) explore necessary follow up actions to further improve the performance of SAO as the lead institution to audit public funds. ADB = Asian Development Bank, CAPE = Country Assistance Program Evaluation, EA = executing agency, EPFC = Economic Planning and Finance Committee, IA = implementing agency, MOF = Ministry of Finance, R-CDTA = regional capacity building technical assistance, SAI = supreme audit institution, SAO = State Audit Organization. Prepared by: Agustina Musa Designation and Division: Senior Financial Management Specialist, SEPF $800,000 from ADB, funded by the Japan Fund for Poverty Reduction (JFPR), approved in December 014, targeted to be closed in January 017. SAO in Lao PDR is one of the participating SAIs. Its intended outcome is the quality of financial audit guidelines of SAIs improved to ISSAI level.

5 Criterion TA 7857-LAO: Strengthening the Capacity of the State Audit Organization (SAO) Assessment of Overall TA Performance Weight (%) Assessment 1. Relevance 0% Highly relevant in increasing knowledge and skills of audit staff regarding procurement best practices; helping auditors to identify risks relating to procurement processes and activities; assisting auditors in achieving a high level of quality and consistency when auditing procurement; providing a basis for measuring audit performance; and allow others outside the State Audit Organization (SAO) to gain a better perspective and understanding of the SAO audit practices. The TA has also strengthened the interface between the Department of the National Assembly s Economic Planning and Finance Committee (EPFC) and the SAO in monitoring the external audit function in Lao PDR.. Effectiveness 30% The TA was effective since with the actual expenses were less than the budget, it achieved most performance indicators/ targets set for its outcome and outputs. The TA efforts have enabled the Government to draw the economic benefits of a sound and better performing public procurement system; and enhance legislative scrutiny of audit reports and the parliamentary stage of the audit cycle. 3. Efficiency 30% The TA was efficiently implemented. Overall performance of ADB, the executing agency, the implementing agencies and the consultants in implementing the TA is satisfactory. 4. Sustainability 0% Overall, the TA investment will be likely sustainable, especially for well-designed training that has significantly increase in the number of the SAO staff who has capacity for undertaking the procurement audit as a priority area. It also helped EPFC staff conduct regularly the detailed examination of SAO s audit reports. Issuing a resolution on strengthening coordination between EPFC and SAO in audit function (in January 014) was the major achievement under the TA. Overall Assessment Notes: Rating Description and Value High 3 Weighted Rating Successful. Rating Value Legend for the four criteria: 3=High, =, 1=partly successful Overall Assessment Weighted Average Legend: 1.6.6= Successful 0.4