SAIs Have a Critical Part in Extractives Revenue Oversight

By Dana Wilkins, Natural Resource Governance Institute

Supreme audit institutions are the unsung heroes of natural resource governance—or they have the potential to be, at least.

SAIs are the first, and in some cases only, independent check on the accuracy of government accounts. They measure the degree to which officials comply with legislation and budgets, and the effectiveness and efficiency of government programs. When things go wrong in public resource management or officials abuse their power to line their own pockets, SAIs are there to identify and expose the problem.

Though such a check holds universal value, the potential of SAIs as watchdogs is particularly relevant for resource-rich countries. Despite their natural wealth, many of these countries top the world’s worst development, governance, and fragility indices. Their citizens seem to miss out entirely on the funds that should be used to improve things like healthcare, education, and infrastructure.

The huge and in some cases very sudden rents that natural resources can bring are difficult to manage and oversee even in the most sophisticated public financial management systems. And the highly-complex decision chain and financial flows of the oil, gas, and mining sectors are particularly susceptible to corruption. It is critical that SAIs of resource-rich countries are able to operate effectively and hold governments accountable.

Research

There is a large and ever-growing body of literature on natural resource governance and SAIs are becoming a topic of choice for academics writing on accountability and corruption. However, despite obvious overlap of the research areas and the potential for game-changing policy implications, few if any scholars have yet conducted a joined-up analysis. My research seeks to help fill this gap, examining the legal and administrative determinants of SAI functional effectiveness in resource revenue oversight. In this instance, I focus on Sub-Saharan Africa.

For the purpose of this research, I limited my scope to the ‘functional’ effectiveness of SAIs only. This means their ability to access information and publish credible reports, rather than overall effectiveness in fighting corruption or mismanagement. I also focused on legal and administrative variables, rather than external relationships and the wider political economy; and on revenue collection and management oversight, rather than contract allocation or public spending outcomes.

Overall Findings

Though the existing literature typically emphasizes de jure factors such as constitutional grounding, sanctioning powers, and appointment and budget control as the key determinants, my analysis suggests that de facto conditions such as quality of leadership and presentation of reports may be equally—if not more—significant. Technical sector expertise and technology are also central in the ability of a SAI to deal with the complexity of natural resource revenue oversight and to take advantage of the increasing amount of open data available. These conclusions demand further study and have important implications for the way in which domestic and externally-sponsored efforts to improve natural resource governance engage with SAIs.

A Few Highlights

Leadership

The degree to which SAI leaders are willing to challenge executive authority varies significantly. However, such efforts can be necessary to secure access to sensitive documents and the freedom to publish uncensored reports. In Liberia, for example, the former Auditor General was a vocal critic of government opacity and mismanagement. For a few years, this allowed his office to produce high-quality and widely-lauded reports on mining and other sectors, despite a particularly sensitive post-conflict context. In Uganda, the Auditor General’s willingness to speak out on limited access to information and gaps in accounts has led to the exposure of significant corruption cases. Importantly, his leadership on extractive industry auditing has better prepared Uganda’s government for petroleum production and helped build a global network of SAI partners. Even the most technically capable institution might fall short if its leader is not willing to actively manage political, bureaucratic, and other blockages.

Report Presentation

Given the sensitive nature of resource governance in some countries (and allegations of corruption abound), publishing findings in a timely manner can be a significant challenge. SAIs’ inability to simply present reports can undermine all preceding efforts. The act of report presentation relies on the parliamentary calendar (and in some cases, sign-off by the executive) and those in power are not always keen to see mismanagement or corruption brought to light. In South Sudan, for example, the most recent annual audit report is from 2008. Even prior to the current conflict, repeated requests from the Auditor General to present his reports faced years of delays and pushback. This was despite the oil sector bringing in almost all government revenues, and previous audit reports (and many individuals in and outside of the government) citing specific and repeated concerns over how the sector was being managed.

I was also recently told that in pre-revolution Tunisia, the Cour des Comptes produced consistently good reports detailing the diversion of public funds. However, it was only allowed to publish a short (and unsurprisingly unproductive) newspaper blurb once a year. Happily, it seems the preceding efforts were not in vain: the courts are now using those reports in corruption cases against former officials.

More

There are many critical factors affecting SAIs’ ability to access information and publish credible reports on resource revenue management. Though it is of course necessary to have a strong constitutional mandate, committed resources, and technical expertise, the gap between de jure and de facto abilities deserves more in-depth scrutiny. We may learn that personalities and parliamentary maneuvering have a much larger effect than previously thought.

This article is a synopsis of research I will be presenting at the 3rd Annual INTOSAI WGEI Meeting later this month in Mombasa. For those of you unable to attend, my presentation will be shared on the WGEI site and I am always very happy to discuss this work.

Recommended Reading

Bauer A and Quiroz JC, ‘Resource Governance’ in Goldthau A (ed), The handbook of Global Energy Policy (Wiley-Blackwell 2013)

Collier P, The Plundered Planet: Why We Must—and How We Can—Manage Nature for Global Prosperity (OUP 2010)

Dye KM and Stapenhurst R, ‘Pillars of Integrity: The Importance of Supreme Audit Institutions in Curbing Corruption’ (1998) World Bank

Harlow C, ‘Accountability and Constitutional Law’ in Bovens M, Goodin RE, and Schillemans T (eds), The Oxford Handbook of Public Accountability (OUP 2014)

Humphreys M, Sachs JD, and Stiglitz JE, Escaping the Resource Curse (Columbia UP 2007)

Noussi K, ‘Supreme Audit Institutions as Accountability Arrangements – Why Independent External Public Auditing Thrives in Some Countries and Fails in Others’ in GIZ and INTOSAI (eds), Supreme Audit Institutions: Accountability for Development (Nomos 2013)

Ross ML, The Oil Curse: How Petroleum Wealth Shapes the Development of Nations (Princeton UP 2012)

Santiso C, ‘Improving Fiscal Governance and Curbing Corruption: How Relevant Are Autonomous Audit Agencies?’ (2006) 7 International Public Management Review 97

Wang V and Rakner L, ‘The Accountability Function of Supreme Audit Institutions in Malawi, Uganda and Tanzania’ (2005) Chr. Michelsen Institute CMI Report 4

Comments are closed.