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Background information
about the Supreme Audit Institute (SAI) of Bhutan
The Kingdom of Bhutan,
a landlocked country is peacefully cradled in the heart of great
Himalayas. Bhutan has an area of 46,500 sq. km with a north-south
distance of 170 Km and east to west with 300 Km. It is mountainous with
vast rugged mountain ranges on all sides, separating it from its
neighbors- the hill districts of the Indian State of Sikkim, West
Bengal, Arunachal Pradesh, Assam borders on the south, east and west of
the country and on its north lies the Tibetan autonomous region of
China.
With
the launching of the First Five-Year Plan in 1961, Bhutan decided to
come out of the isolation and decided to open its door to the outside
world.
Bhutan at a glance:
Country: Bhutan
Capital:
Thimphu
Religion:
Mahayana Buddhism
Language: Dzongkha
Currency:
Ngultrum
Economy:
Agrarian
Evolution of the audit
system in Bhutan
Bhutan
consciously adopted an efficient and effective financial management
system to support and enhance its development plans from the very
inception of the development plans. The financial management system
stressed on the accountability of resources, effective evaluation and
reporting for appropriate decision-making.
The audit organization was reposed with the responsibility of
evaluating and reporting on the economic and efficient management of
scarce resources of the Royal Government.
As
early as 1961, the 16th National Assembly proposed the establishment of
an audit system. In response to the need for establishing
accountability, the Royal Government issued the first edition of the
"Financial Manual" in 1963.
The manual provided for the organization of the Development Wing
of the Government.
The Audit and Accounts organization maintained the books of
accounts, conducted budgetary controls of revenues and expenditures and
undertook periodic audit and inspections of accounts and records.
The
31st Session of the National Assembly voted in October 1969
for the appointment of Royal Auditors to conduct the audit of accounts
and records of the Royal Government.
Consequently, four Royal Auditors were appointed on 16th
April 1970 under a Royal Kasho (decree).
The Kasho defined and authorized the jurisdiction of the then
Royal Audit Department as primarily responsible for the audit of
accounts of the Ministry of Finance, all other Ministries, the Royal
Bhutan Army, the Royal Bhutan Police and the His Majesty’s
Secretariat.
In
1974, the financial management system was restructured. The
Financial Manual 1974, acclaimed under the 29th Resolution of the 34th Assembly
placed the Royal Audit Department under the Ministry of Finance. In
1985, the audit service was restructured as an autonomous entity as the
Royal Audit Authority (RAA).
The Financial Manual 1988 further strengthened the financial
management system. Subsequently, in 1989, the General Auditing Rules and
Regulations (GARR) which defines the roles and responsibilities of the
RAA. The latest Kasho
(decree) of March 2, 1999 corresponding to the Bhutanese 15th day of
first month of the Earth Rabbit year, further reiterates the
independence of the RAA.
Scope
and Jurisdiction
The GARR mandate the
RAA to carry out any type of audit, as it may deem proper. Presently the
RAA conducts financial and compliance audits of about 400 agencies
including externally funded projects, Government and joint sector
corporations, financial institutions and non-government organizations.
In
addition special investigations and special subject reviews are also
carried out for selected agencies as required from time to time.
The
main office is in the capital, Thimphu. The
three regional offices are located in Samdrup
Jongkhar, Bumthang and Tsirang head by an Asstt. Auditor General.
The
canons of auditing are contained in the six Royal Commands issued by His
late Majesty, the King. The GARR 1989 stipulates that the RAA in
executing audit functions shall conduct:
1.Comprehensive
audits;
2.Financial
and compliance audits;
3.Performance
audits; and/or
4.Any
other form of audit as it may deem proper.
Audit
reports as per GARR shall recommend measures to improve economy,
efficiency and effectiveness in government operations.
Chapter 5, Para 5.6.5 (c) of the Financial Manual 1988 also stipulate
that as a part of the budget accountability phase the RAA has
responsibilities to report whether the agencies are ensuring economy,
efficiency and effectiveness in the operations of the government.
The
Roles and Responsibilities of the RAA
The Royal Decree 1970, the
General Auditing Rules, Regulations 1989, and the Financial Manual 1988
delineate the roles and responsibilities of the RAA. As indicated in the
GARR, audit shall be primarily directed towards enhancing government
accountability. In pursuance thereof, the RAA’s function are to:
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Conduct audit in
accordance with laws, rules and regulations of;
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All account,
records and operations pertaining to the revenue and receipts of and
expenditures or uses of funds and property owned or held in trust by
or pertaining to the Government or any of its instrumentality’s,
Government owned and controlled corporations and their subsidiaries;
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Non-government
entities subsidized by the Government, funded by the donations or
grants through the government, those for which the government has
put up a counterpart fund or those partly funded by the government,
those required to pay levy, and those whose loans are approved and
or guaranteed by the government;
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Foreign assisted
and special projects of the Government;
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Any other
organization upon commands of His Majesty the King;
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Ascertain and
evaluate whether the Government resources are handled properly and
in compliance with laws, rules and regulations;
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Assess whether the
government agencies achieve the purposes for which they were
established and for which the government resources are made
available to them;
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Provide information
to decision makers in the government and creates awareness of agency
heads and administrators in obtaining value for money in government
expenditures, in utilizing resources and in ensuring that all
government revenues due are collected;
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Prepare and
transmit audit reports containing audit findings and recommendations
of measures to improve economy, efficiency and effectiveness of
government operations;
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Issue supplementary
rules and regulations, or manuals to facilitate the exercise of its
audit functions to enhance the information value of government
accounts and to ensure compliance with the applicable laws, rules
and regulations;
-
Issue records of
outstanding audit observations to accountable officers or any other
government officer/employee, upon recommendation of the proper
administrative head or authority and settlement of deficiencies and
un-cleared accounts for purposes of promotion in rank or salary,
foreign travel, etc. as may be required or necessary; and
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Submit reports to
appropriate authorities covering the financial condition and results
of operations of the Government, its subdivisions and
instrumentalities, including government corporations, and such other
reports as may be required.
The latest Financial
Rules and Regulations of July 2001 of the Ministry of Finance state
that the responsibility of RAA in respect of finance and
accounting include:
a. The
examination audit and settling, in accordance with laws, rules and
regulations, all accounts pertaining to:
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The revenue and
receipts, and expenditure or use of funds and property owned by the
government or its instrumentalities;
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The corporation
including their subsidiaries in which the government has an
ownership interest;
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Entities subsidized
by the government or are funded by donations, grants or loan
arranged through the government.
b. Ascertaining that
Agency heads and officials at different levels discharge their
responsibility properly and effectively;
c. Promulgation of
auditing rules and regulations, including those that facilitate the
keeping and enhancing the information value of government
accounts, and for the prevention of irregular, unnecessary,
excessive or extravagant expenditure or use of funds or
properties;
d. Certifying the
consolidated Annual Financial Statements of the government prepared by
the MOF;
e. Issuing an annual
Audit report covering the financial position and operations of the
government agencies and other organizations and recommending measure to
improve their efficiency and effectiveness.
Besides, the Royal
Audit Authority is also responsible for the following non-audit
functions:
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Appoint the
officials and employees of the Royal Audit Authority subject to the
rules and regulations of the Royal Civil Service Commission, and
make their assignments or reassignments in accordance with existing
policies on reassignments or whatever the exigencies of the service
so require;
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Promulgate auditing
rules and regulations;
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Institute control
measures through the promulgation of rules and regulations or
issuance of guidelines governing receipts, disbursements and uses of
funds and property, consistent with the total social and economic
development efforts of the Government; and
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Bring to the
attention of the proper Ministry, Administrative head or authority
including the Royal Civil Service Commission, cases of
irregularities, and other violations of laws or regulations
discovered in audit committed by or involving government
officers/employees or even private persons so that administrative,
disciplinary or other appropriate action may be instituted against
them, as circumstances may warrant.
Reporting
System
One
of the major functions of audit is to provide report by consolidating
the facts and figures observed during audit along with comments and
recommendations. Generally, audit findings are reported in the following
phases.
Preliminary
Report/Memos
The preliminary
reports/memos is made available to the audited entity after concluding
the audit work. The report contains detailed descriptions of audit
observations and actions to be taken on the observations. These
observations are discussed in the Audit Exit Conference normally
presided over by the Division
Chiefs. Where there are serious and significant issues, the Auditor
General attends such exit conferences. Observations are dropped and
treated as settled where satisfactory explanations and evidences are
provided during these conferences. The management of the audited entity
is given a period of three months to respond to the unresolved
observations during the audit exit conference.
Final
Report
The final report is
prepared after discussions are held between the Auditor General/Division
Chiefs with the management of the audited entity. The report
incorporates the replies and justifications provided by the management
of the audited entity and further recommendations of the RAA. Generally,
the final report is addressed to the head of the audited entity but
where there are issues of serious nature like misappropriation, the
copies of the report are submitted to the Royal Civil Service
Commission, Ministry of Finance, Cabinet Secretariat, High Court, Department
of Legal Affairs and the His Majesty’s Secretariat. The Royal Civil
Service Commission and the Department of Legal Affairs prosecute the
defaulters in the court of law. RAA
may act as observers in such prosecutions.
IT in
the RAA
Local
Area Network
RAA has installed a
local area network (LAN) within the Authority itself.
38 computers and 13 printers are currently linked using a
10BaseTP backbone, 4 hubs and an Ethernet switch.
Two servers have been installed for reliability and load sharing.
The servers are running Windows NT® and the client computers are
operating with Windows 97®.
Audit
Information
Management
System (AIMS)
AIMS was written using
Microsoft Access® and is a comprehensive system for maintaining and
administrating audit reports. The
functions of AIMS are:
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To
collect and maintain information about each audit, including the
agency involved, associated dates and milestones, the audit
participant and their findings.
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To
manage the sums that individuals are accountable to the Government
and to account for any payments or settlements.
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To
produce management information that assists in the planning of
future audits and the evaluations of those performed.
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To
facilitate the “clearance” of individuals by allowing the RAA to
quickly retrieve observations and settlements related to them.
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To
produce statistical information that will assist the Government to
determine areas for improvement by identifying the common problems
found during audits.
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To
centralise audit information so as to assist in its timely and
systematic collection.
The
system was written in Microsoft Access® and operates on the local area
network. It is
entirely “multi-user” which allows for many people to access and
enter data at the same time. It
contains numerous report outputs and a mechanism to
“query-by-example” to retrieve data that matches the user’s
criteria.
The
system maintains three main types of data:
Audit
Data
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Information regarding each audit that is to be, or has been, performed
by the RAA. The basic
data includes the dates the audit reviewed, the type of audit, the
agency in which the agency was performed, the names of the audit team
and a chronology of events (including their estimated and actual dates)
that occurred.
Observation
Data
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In
addition to the “basic” audit data above, information is also
maintained on each observation (or “Para”) that was made during the
audit. For each
observation, data is maintained on whom was accountable, the
individuals’ immediate supervisor, both the accountable and
non-accountable loss realised, and a categorised identification of the
observation. The
observation identification will allow the RAA to be able to create
statistical information on the frequent problems found within the
Government. This has
forced the RAA to undertake an exercise to identify and organise common
problems found in audits and to devise a scheme for categorising them
Recovery
Data
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After
an observation has been made against an individual and unaccountable
loss has been realised, the information system assists in the management
of the recovery
of that loss. Whenever
a settlement is made, the details of the settlement are recorded and the
balance against the individual is adjusted.
The ability to quickly ascertain a person’s balance will
substantially decrease the time required for the RAA to provide the
“audit clearance” as required by the Royal Civil Service Commission.
Future Efforts
Various activities have been initiated to enhance the quality of work of
the Auditor General and improve performance of the employees of the RAA.
Performance
Auditing
The
RAA had since now carried out only regularity/propriety audits. Attempts
are being made to enhance the practice of such audits in recent years by
creating a division to look after the Value for Money and Environmental
Audit wing.
Besides,
the RAA is also publishing various Manuals to guide the Auditors such as
Manual on audit of Contracting Process, Manual on Audit Planning
etc.
Auditing
Standards of Bhutan
The RAA has initiated
and drafted the Auditing Standards of Bhutan. The Standard is expected
to guide the auditors and make the audit reports uniform and
professional. The standard incorporates most of the INTOSAI guidelines
so that it is in accordance with the International Auditing Standards.
International
Relations
The
RAA is a member of the International Organization of Supreme Audit
Institutions (INTOSAI) and Asian Organization of Supreme Audit
Institutions (ASOSAI). It participates in training workshops and
conferences organized by these organizations to make best use of
knowledge and skill imparted through exchange of views and ideas etc.
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