CAG Comments

Auditor-Auditee relationship for developing a transparent and accountable environment in the governance is vitally important. Under the authority of the constitutional provisions and other sources of laws, CAG carries out compliance or regularity audit, issue-based audit, performance or value for money audit, management audit, pre-emptive audit, comprehensive audit, financial audit and certification audit. The cost-effectiveness of public expenditures and efficiency of the revenue management, are, thereby, measured through the above audits.

CAG’s audit has the following dimensions:

· As an aid to the Governance, it detects financial irregularities, system flaws, public money mismanagement and recommends ways for improvement through prevention

· As legislative audit, CAG’s audit provides audit reports to the Parliament that are dispensed with by the Public Accounts Committee (PAC) of the Parliament

· As an audit of the Republic, CAG’s audit offers meaningful information to all stakeholders - the tax payers, the parliamentarians, the bureaucracy, the press and other information media, the academicians and researchers.

The auditees e.g; all involved with the governance in the Public Sector have essentially the following functions:

· As implementers of the laws made by the parliament, they have to ensure the enforcement of the same

· As the executors of government policies and decisions, they have to ensure that the people received the services targeted in the budget as well as the progress envisaged in the Annual Development Programme (ADP)

The purpose of both auditor and auditee, therefore, converges on the same platform of enforcing transparency and accountability of the governance. This requires both to acquire and sustain the following requisites :

· Professional acumen and expertise

· Re-oriented mindset to face the new realities and challenges

· Commitment

· Reciprocity with each other's functions

· Ethical standards pursuance

Both auditor and auditee have to address the following for enhancing respective capabilities :

· Human resource development

· Career planning

· Structural and operational reforms

Auditor and Auditee may form partnership on the following :

· Training for professional development offering each other’s training facilities

· Mutual co-operation for enhancing the common cause of good governance

A well planned and co-ordinated approach on the lines suggested above may pave the way for both the auditor and auditee to make constructive and realistic contribution towards enhancing transparency and accountability in the public sector. My office is working relentlessly towards that end.

30 June, 2004

Asif Ali

Comptroller and Auditor General of Bangladesh

Editorial

On the 1^st anniversary of the REVIEW, the quarterly journal of the office of the CAG, we celebrate a publication that has received encouraging appreciation from its readers. The spontaneous responses that we received from different SAIs and professional bodies within the country are really heartening for us.

The publication focuses on the reviews of various audit related important publications made by the member countries of the International Organization of Supreme Audit Institutions (INTOSAI). These reviews made by our officers include summarized version of different SAI audit reports which are very pertinent to the objectives and activities of this office.

The office of the CAG is committed to promoting accountability and transparency for achieving good governance by conducting independent audit and evaluation of public sector operations. It aims at attracting desired standards through exchange of ideas. The REVIEW should not be treated as a critique, rather it is an analysis and explication of the reports.

The present issue heavily draws from reviews made on various reports of the National Audit Office (NAO), UK and covers various interesting topics. The comments made are solely of the reviewers and do not necessarily reflect that of the Office of CAG.

The Editorial Board acknowledges with deep regards the constant inspiration and guidance of the CAG, whose role as the Adviser of REVIEW has made this issue a useful document for ready reference and a tool for sharing knowledge and experience.

We promise of our continued efforts to make the REVIEW very useful to all the readers. Comments for further improvement of the publication shall be highly appreciated.

30 June, 2004

Niaz Rahman

Editor

Table of Contents

·	Introducing Issue Based and Value for Money Audit in the Missions Mohammed Moslem Uddin	1-4
·	Some Highlights on NAO, UK Report on ‘Network Rail – Making a Fresh Start’ Abul Foyez Md. Abid	5-8
·	A brief review of – “Local Authorities Working Together” by Controller and Auditor-General of New Zealand Dilip Kumer Podder	9-11
·	Summary of NAO UK Audit Report on ‘The Management of Suspensions of Clinical Staff in NHS Hospital and Ambulance Trusts in England’ Ismat Jahan	12-14
·	Public Private Partnership – A Brief Analysis Ayesha Khanam	15-17
·	Summary of NAO, UK Audit Report on ‘Strategic Rail Authority: Improving Passenger Rail Services through New Trains’ Kazi Golam Towsif	18-20
·	Visit to Auditor Generals’ Offices of the Kingdoms of Nepal and Bhutan Ahsan Abdullah and Sarooj Kanti Deb	21-22
·	Summary of Report on ‘Purchasing and Managing Software Licences’ Md. Golam Rabbani	23-24
·	Summary of Audit Report on Māori Land Administration: Client Service Performance of the Māori Land Court Unit and the Māori Trustee A.B.M. Forhad Hossain	25-33
·	Summary of Report on ‘Making a difference : Performance of maintained Secondary schools in England’ Md. Nazrul Islam	34-37
·	United Nations Peace Keeping Missions in Liberia Farid Ahmad Khan	38
·	Summary of NAO, UK Audit Report on ‘Tackling Cancer in England: Saving more lives’ Shaheda Khanam	39-43
·	Messages	44-48

Introducing Issue Based and Value for Money Audit in the Missions

Mohammed Moslem Uddin*

Introduction

Mission Audit Directorate is one of the ten Audit Directorates under the office of the Comptroller and Auditor General of Bangladesh. This Directorate has been entrusted with the responsibility of auditing the accounts of Bangladesh Missions abroad, overseas stations of Biman Bangladesh Airlines and branches of nationalised commercial banks located outside Bangladesh. Presently, the Directorate audits the accounts of 58 Diplomatic Missions, 27 Bank offices and 22 Biman stations.

Main focus of present Audit

· The main focus of existing audit is regularity or compliance in nature. Under this audit, the accounts are examined to see whether the entity has complied with specific applicable laws, rules, regulations, procedures in the management of expenditure and receipts.

· At present some Local Audit Reports (LAR) make references about the performance of the Economic and Commercial Wing and the internal control system of the mission.

· Special audits are also being carried out. Recently, a special audit was conducted on the Hajj Mission at Jeddah on the request of the Ministry of Religious Affairs. Special audit was also conducted on the newly built Chancery Building in New Delhi on the request of Prime Minister's Office. Similarly special audit was conducted on the consular income of Malaysia Mission on the directive of the CAG office.

Issue Based Audit and Value for Money Audit

To overcome the limitations of Compliance and Regularity Audit and to give audit a macro dimension, Issue based Audit and Value for Money Audit will be gradually necessary in the missions along with traditional compliance audit practices.

Importance of Issue Based Audit

The need to introduce issue based audit can be explained in terms of the following factors:

· Vouching Audit cannot satisfy the expectation of the clientele groups

· To satisfy the Members of the Public Accounts Committee (PAC)

· It addresses the limitations of compliance or regularity audit

· It is analytical

· It is possible to concentrate on important specific issue

Some important issues for conducting Issue based Audit in the Missions

Issue based audit can be conducted in the missions on the following important issues:

· Management and utilization of land received from the host country for constructing Chancery and residential building

· Consular Income

· Hajj Management

· Management of Wage Earners Welfare fund

· Commercial target fulfillment

· Flow of remittances to Bangladesh

· Manpower export management

· Immigrants management

Rationale for selecting land management and utilization as a topic

· Valuable land has remained unutilized in many missions abroad

· Lack of initiative to construct building

· It is possible to save money by constructing own building

· Loss is being incurred for maintaining the land. In this regard, Government has to pay, rent, rates etc to the host authorities for maintenance of land

· Host country has been requesting the missions to undertake construction. It creates image problem

Micro aspects in conducting issue based audit on management and utilization of land received from the host country

· Reasons for not utilizing land

· Initiative taken by the mission

· Amount paid for rents, tax etc

· Money that could be saved from construction

· Additional cost to be borne for delay in construction

Rationale for selecting consular income as a topic

· Traditionally emphasis is given on expenditure. Thus, audit of receipts had been ignored

· About 14 Missions do not require allocation from government. In these missions, income is sufficient to meet the expenditure. Such income should be subject to audit

· Anomalies have been observed in respect of consular income in some missions

Micro aspects that need to be looked into while conducting issue based audit on consular income

· No. of passport form issued (ordinary/urgent)

· No. of passports issued (ordinary/urgent)

· Income from issuance of passport

· No. of passport renewed

· No. of visas issued

· Income from renewal, attestation of passports and issuance of visa

· Reconciliation of consular income with bank deposit register

· Verification of passport issue register

· Verification of passport stock register (comparison between stock of diplomatic section and consular section)

· Verification of clients’ receipt and counterfoil of receipt book

· No. of receipt books received from the Ministry of Foreign Affairs

· No. of receipt books used

· Verification of stock register of receipt book

· Transfer of consular income to welfare fund

· Consular income remaining idle in the Mission

· Correct reflection of consular income in the cashbook

· Effectiveness of internal control system in respect of consular income

Rationale for selecting Hajj management as a topic

· Hajj management is an issue of national importance

· Government is expected to provide better service to pilgrims who perform Hajj under government management

· Parliamentary committee's demand to know about Hajj management

· Irregularities were observed in the previous audit reports regarding Hajj management

Micro aspects in conducting issue based audit on Hajj Management : Jeddah Hajj Mission

Audit should concentrate mainly on the following five funds : Hajj management fund, Advance house rent fund, Service charge fund, Destitute Hajji Welfare fund and Sick Hajji welfare fund. In auditing these funds, audit should give emphasis accordingly on the following points-

Hajj management fund

· Determination of amount sent as special remittance from Bangladesh

· Observance of financial rules in incurring expenditure from this fund

Advance house rent fund

· Whether money collected from Hajjis for hiring accommodation has been properly spent

· Maintenance of accounts correctly

Service charge fund

· Proper collection of money in Mecca and Medina Hajj offices

· Depositing money with government account

· Maintenance of accounts correctly

Destitute Hajji Welfare fund and Sick Hajji Welfare fund

· Maintenance of accounts correctly against fund received from different sources

· Issuance of money receipts

· Observing formalities in incurring expenditure from this fund

· Achieving the objectives of the fund

Management of Wage Earners’ Welfare Fund

· Rationale for selecting Wage Earners’ Welfare Fund as a topic for issue based audit

q SAI, Bangladesh has to conduct audit relating to the accounts of the fund

q Wage Earners’ Welfare Fund is being maintained in 23 Missions

q Proper utilization of fund will boost up home bound remittance

q Irregularities have been noticed in the previous audit reports regarding maintenance of fund

· Micro aspects in conducting issue based audit on Management of Wage Earners’ Welfare Fund

q Proper collection of income should be ensured

q Maintenance of accounts relating to income

q Timely deposit of income into fund account

q Maintenance of cashbook

q Observance of formalities in incurring expenditure

q Expenditure on items not specified in the circular

q Realization of the objectives of the fund

q Idle money remaining in the fund account

q Purchase of miscellaneous items for Missions from Welfare Fund

q Irregular donation made out of fund account

Value for Money Audit in the Missions

Value for Money Audit is not conducted generally upon the whole organization. It is conducted upon an activity or particular aspects of an organization. So the areas of Value for Money Audit in the Missions can be Performance of Commercial Wing and Performance of Economic Wing.

· Micro aspects in conducting Value for Money (VFM) audit on Performance of Commercial wing and Economic wing

q Analyzing Economic and Commercial activities of the Missions to assess performance

q Examining the target of Economic and Commercial Wing

q Rationale behind the target

q Assessing actual achievement against performance target

q Reasons for not achieving the target

q Reasons for changing the target

q Evaluation of action taken by the Economic and Commercial Wing to explore and expand the market in the host country/adjacent region for Bangladeshi products.

q Evaluation of the performance of the Economic Wing by looking into the number and quality of negotiation, meeting, seminar and presentation organized

q Remedial suggestions and audit comments

Conclusion

Issue based Audit and Value for Money Audit in the context of mission audit are areas whose potential have not hitherto been properly explored. It is expected that by introducing Issue based Audit and Value for Money Audit with its macro dimension, Mission Audit Directorate will be able to produce quality audit reports.

Some Highlights on NAO, UK Report on

‘Network Rail – Making a Fresh Start’

REPORT BY THE COMPTROLLER AND AUDITOR GENERAL

HC 532 SESSION 2003-2004: 14 MAY 2004