ATC130415: Report of Standing Committee on the Auditor–General on the study tour to Austria, dated 19 March 2013
of the Committee on the AuditorGeneral on the study tour to
Committee on the AuditorGeneral, having conducted a study tour to
Committee on the AuditorGeneral (the Committee) undertook a study tour
from the above, one of the committees interest was to find out the process
that Austria is following in appointing of the Auditor-General, which could be
an important lesson or experience to the committee since it is expected to play
a pivotal role in the appointment of the next Auditor-General of South Africa
whose contract is due to expire by the end of 2013.
order to fulfill its planned objectives, as highlighted in the above, the
met and interacted with
the following individuals and institutions: South African Ambassador to
/Bank Austria; International
Anti-Corruption Academy (IACA) of Austria; Austrian Parliament Committee on
Auditor-General; Austrian Parliamentary Investigation Committee on Corruption;
Austrian Auditor-General; International Chamber of Commerce; Provincial Court
of Audit of Province of Lower Austria and Provincial Court of Audit of Province
of Upper Austria.
line with the above explanation, thus, this report considers and summarizes the
critical issues/points emanating from the meetings held with the afore-said
individuals and institutions.
this report has grouped into one heading all the similar issues emanating from
its interaction with the above-mentioned individuals and organizations and
deals precisely with exceptional issues.
Committee delegation consisted of: Adv T M
Chairperson and leader of delegation; Mr.
(ANC); Prof LBG
(ANC); Ms S
-Sithole (ANC); Mr. N Singh (IFP);
Mr. J H
(DA) and Mr. N Koornhof (COPE).
delegation was accompanied by the following parliamentary officials: Mr J
(Committee Secretary) and Ms Y
(Assistant to the Chairperson).
3. Political and Economic profile of
is worth noting that this section is derived from the briefing made by the
South African Ambassador in Austria to the committee and meetings held with the
officials of the
/Bank Austria on the day
1(8 October 2012); and Austrian Parliamentary Committee on the Court of Audit
(Auditor-General) and the Investigation Committee on Corruption on the 8
of October 2012 and 10
of October 2012 respectively. As transpired
from these briefings and meetings, the following key political and economic
issues are considered and unpacked accordingly.
According to the
National Council and the complementary
are peers. As a practical matter,
the National Council is decidedly more powerful, though it is frequently
described as the lower house.
The National Council is where
The 183 members of the National Council are
elected by nation-wide popular vote for a term of five years; each Austrian
sixteen years or older on the day the election takes place is entitled to one
vote. National Council elections are
The voting system aims at
partially open lists
and are relatively straightforward.
In addition to voting for a party list, voters may express preference for
one individual candidate. A candidate receiving sufficiently many personal
votes can rise in rank on his or her district party list; voters thus have a
certain degree of influence as to which particular individual wins which
particular seat. It is not possible, however, to simultaneously vote for party
X but exert influence on the candidate rankings on the party list of party Y.
Austrian constitutional theory and Austrian political practice is that the
constitution defines the President of the National Council to be Austria's
second highest public official, junior only to the president of the executive.
As a practical matter, the President of the National Council is a
representative of rather moderate significance:
wielding less power than the head of cabinet or even most federal
ministers. The President of the National Council thus serves mostly as a more
moderator of parliamentary
The ability of a legislature to serve an effective
oversight role depends not only on its internal structure, but also on powers
enabling it to compel the production of information or testimony necessary to
the complexity of the issues facing government has increased, so too has the
importance of committees to the parliaments work. After a bill reaches the
, it is assigned to a committee
and frequently also to a subcommittee. Legislators typically spent twice as
much time in committee hearings as in plenary sessions. The subcommittees hold
even more hours of hearings than the full committees. Because of the unwieldy
nature of plenary sessions, 80 percent of changes to government legislation
occur in committees.
amended its procedures to give
the opposition and smaller parties a greater role in the legislative process.
Under the 1975 amendments, one third of the legislators can request the
At the time of
the committee visit, it was reported that
several years of solid foreign demand for Austrian exports and record
employment growth, the financial crisis and global economic downturn in 2008 led
to a sharp decrease in economy and employment. Subsequently, Austrian economy
contracted to 3.9% in 2009 but recorded a growth rate of about 2% in 2010.
However, Unemployment has not risen as steeply in
international financial crises caused difficulties for
Even after the
global economic outlook improves,
Government of Austria has been working towards a closer collaboration among
European states in the debt crisis, and has on many occasions warned of the
far-reaching implications it would have on the lives of Austrians and Europeans
if the Euro-zone is allowed to disintegrate. The Austrian parliament in
September 2011 approved the Euro rescue deal, which includes the expansion of
the European financial stability facility.
Parties to the
far right of the political spectrum, have openly ridiculed the government for
continuing to pay the debts of foreign countries with state resources.
Economic and Trade relations
bilateral relations between
The EU, of
4. Meeting with
officials of the
4.1 Summary of Findings
/Bank Austria better known as Bank
When the Senior
were learned from the
panicked and started withdrawing funds and deposited money in German banks
5. Meeting with
5.1 Summary of Findings
offence like corruption, which is often linked to organised crime, cannot be
effectively addressed with traditional methods alone. The International
Anti-Corruption Academy (IACA), the first of its kind, aims to overcome the
current shortcomings of knowledge and practice in the field of anti-corruption.
The Academys mission is to deliver and facilitate anti-corruption education
and training for practitioners from all sections of society and provide
technical support and assistance to a wide variety of stakeholders.
originally initiated by the United Nations Office on Drugs and Crime (UNODC),
Corruption (UNCAC) forms
the global legal framework for governments in their fight against corruption.
The education and training offered by the Academy will largely be based on this
UNCAC objective and other comprehensive international instruments. To this end,
IACA also envisages to assist States Parties in translating the provisions of
the UNCAC into reality. Consequently, IACA urged
6. Meeting with
the Austrian Parliamentary Committee on the Court
(Auditor-General) and the
Investigation Committee on Corruption.
6.1 Committee on Court of Audit
6.1.1 Summary of Findings
Austrian Committee on the Court of Audit (Auditor-General) was established in
accordance with the Rules of Procedure of the National Council. Rule vi section
National Council shall elect
the Main Committee from among its Members in accordance with the principles of
and it states further in
section 32e (1)
of Audit Committee shall elect a Standing Sub-Committee, in which each party
represented in the Main Committee shall have at least one member.
is however that the current Chairperson of the Court of Audit Committee is a
member of the opposition.
Court of Audit reports are discussed in the Court of Audit Committee, which can
call witnesses and interrogate them in a public hearing. In addition, the Court
of Audit submits the annual Federal Financial Accounts, which present federal
revenue and expenditures during the previous fiscal year and allow an assessment
of whether, and in how far, the actual management of the budget tallies with
the budget proposals.
6.1.2 Investigation Committee on
33 (1) of the Rules of Procedure further states that: On the basis of a
procedural motion the National Council may decide to set up an investigating
committee. Such a motion shall be submitted to the President in writing and
shall state the subject of investigation, its objective and the completion of
the investigation. Each of the parties represented on the main committee of the
National Council shall have at least one member on the committee.
committee is empowered to request the courts and all other public authorities
to take evidence, and the latter have to produce their files as per such
request. Witnesses before an investigating committee are under obligation to
testify truthfully. If a witness refuses to testify and the committee feels
that such refusal is not justified, it may request a court to impose a coercive
witness fails to comply with summons, the committee may have him/her arraigned
by police. While civil servants cannot plead being bound by official secrecy,
such a plea can only be made by said civil servants administrative authority.
The deliberations of an investigating committee are confidential. Hearings of
witnesses and experts are; however, open to media representatives unless the
committee decides to hear them in camera.
the activities of an investigating committee are terminated once it submits its
report to the National Council or at the end of the legislative period.
6.2. Meeting with the Austrian Court of
6.2.1 Summary of Findings
The Auditor-Generals Office, better known as the Austrian
Court of Audit (ACA), is a monitoring instrument of the Austrian Parliament. It
is independent of the Federal Government and the
(Provincial) Governments and subject only to the provisions of the law. It is
not bound by any instructions when it takes action in response to a request or
demand. Its official goal is to attain the most effective use of public funds,
that is, the reduction of costs and /or the increase in benefits when spending
public monies. The audits focus primarily on financial compliance. The federal
constitution states that the president of the ACA is elected by the National
Council for a term of twelve years, re-election is not possible. The long term tenure
is intended to allow the president and the office in general to maximum
independence from parliament as well as government. He can only be removed via
a procedure independent of government and authorities.
In the case of incapacity, the President is represented by
the highest ranking official of ACA. The President ranks equal to the members
of the Federal Government (Cabinet).
The federal constitution stipulates that the ACA has the
right to audit the accounts and financial management of the state: federal
governments, and municipalities
with over 10,000 inhabitants, legal entities, funds, foundations, institutions,
enterprises with over 50% public stake or predominant position and statutory
professional representative bodies.
Auditors are entitled to be granted unrestricted access to
information. This principle is realized in the Federal Act on the Austrian
Court of Audit. All audited entities have to cooperate with the Court of Audit
and provide it with any information requested for the purpose of the particular
audit: books, records of account, business documents, contracts, pieces of
The federal constitution further stipulates that ACA should
report at least once a year on the audit outcomes but also has the right to
produce reports more often and report its observations at any time to the
National Council and must simultaneously inform the Federal Government of every
report. Reports shall be published after submission. Furthermore, ACA also
evaluates if recommendations of the previous year have been implemented and
assesses their effect, a principle stated in the Strategic Plan of the Austrian
Court of Audit.
The federal constitution also states that the president of
the ACA has a right to attend, and to take the floor in the National Council
plenary and its competent committees and sub-committees during deliberations on
Court of Audit reports, including discussions on the subdivisions of the
Federal Finance Bill relating to the ACA. His reports are debated in the
Councils regular sessions. The cabinet has the right to respond to the
offices critique but cannot influence the reports. This also holds for
deliberations concerning instructions to investigate certain matters and for
discussions of the Court of Audit budget. Members of the National Council may
also address written questions to the president of the Court of Audit; all
personnel matters of the ACA shall be managed on independent basis; the president
of the ACA can appoint officials and auxiliary personnel.
Over and above, tasks of the Court of Audit also include the
presentations of reports concerning the development of incomes in the public
area. Moreover, the President of the Court of Audit obtains the list of
donations received in excess of stipulated amount
from the political parties and, if requested
by the party concerned, informs the general public whether said donations have
been duly declared.
In accordance with the provisions of the Incompatibility Act s/he receives every year from all Members of the federal and provincial governments declarations, concerning their financial circumstances and reports to the President of the National Council or, as the case may be, of the Provincial Diet any extraordinary increases in the assets held by the individual in question.
It is worth noting to highlight the fact that the committee
delegation was also informed that most members of the EU are moving towards
refers to an
examination of a program, function, operation or the management systems and
procedures of a governmental or
to assess whether the entity is achieving economy, efficiency and effectiveness
in the employment of available resources. The examination is objective and
systematic, generally using structured and professionally adopted
The scope of performance audits may
include the detection of fraud, waste and abuse, although often these are not
included in the scope. Prior to engaging in a performance audit, the auditor
must have a defined scope and plan which will be used to guide the audit
Performance auditing differs from
performance measurement, the latter being the responsibility of management of
the entity. In addition, performance measurement may include a broad variety of
activities that do not meet the rigour of an independent external assessment.
7. Attend Parliamentary panel discussion
on: Change and Challenges for Development Cooperation.
Summary of Findings
The delegation attended a panel discussion
at the Austrian Parliament where the topic was Change and Challenges for
Development Cooperation. The speakers included the President of the Austrian
National Council, the Secretary of State, Austrian Federal Ministry for
European and International Affairs, Deputy Minister of Foreign Affairs for
Economically and politically, the emerging
countries are redefining global development cooperation. Their investment
policy challenges traditional development cooperation and has initiated new
ways of collaboration.
Some of the questions the panel tried to
find answers are
: What will be the impact
of this new development architecture? What is the
response? What drives the emerging powers to engage in South-South cooperation?
What development partners do developing countries choose? What role do national
parliaments in both donor and recipient countries play in shaping development
processes in this new context?
Meeting with the International Chamber of Commerce: Prevention of
Commercial Crime and Corruption Division.
Summary of Findings
The International Chamber of
Commerce (ICC) has been a pioneer in the business fight against corruption,
issued its first version of the Rules of Conduct to combat Extortion and
Bribery in 1977.
About the commission
ICC is on the forefront in the
development of ethics, anti-corruption and corporate responsibility advocacy
codes and guidelines, providing a lead voice for the business community in this
rapidly changing field.
The Commission on Corporate
Responsibility and Anti-Corruption works closely with other ICC Commission to
combine expertise on a number of current issues, including:
and counter terrorist financing (Banking Law and Practice)
public procurement and
anti-corruption clauses in model contracts (Commercial Law and Policy)
The Commission on Corporate
Responsibility and Anti-Corruption meets twice per year, but carries out work
constantly throughout the year, including through issues to specific task
Hence the corruption occurs in many
different forms, such as bribery, bribe solicitation or extortion, the ICC
maintains the following:
ICC has long argued that fighting
corruption requires action against extortion as much as against bribery.
Without effective action to address the "demand side" of corruption,
the fight against corruption cannot be won.
Commission on Anti-Corruption, in cooperation with
Commercial Crime Services
is currently exploring
ways to establish a facility where companies can voluntarily and anonymously
report attempts of bribe solicitation by public officials.
Private-to-private bribery refers to
corrupt practices within and between enterprises.
It occurs, for example, when an
employee accepts the advantage granted to him by a person from outside of the
company, without informing the corporate bodies or persons.
As a consequence, the corrupted
executive's or manager's freedom of judgment is abdicated in return for money
(or other considerations).
There is a significant risk that
purchases will be made at overstated prices (in order to recover the bribes)
and under unfavourable conditions, and that the product sold will not be of the
optimal or even required quality.
9. Meeting with Provincial Courts of Audit
Summary of Findings
Within the scope of the Austrian Federal
States relative constitutional autonomy, the Austrian federated states (
have the authority to set up
independent regional courts of audit for their area and vest them with auditing
The Austrian (Federal) Court of Audit has a
long tradition and history. The regional courts of audit are new compared to
the Austrian (Federal) Court of Audits in comparison. The first was established
in 1982, with the rest following in the years after. This wave of setting up
such courts reflects a positive political climate with regard to control
activities and was the start of a dynamic development in public sector auditing
Legal position of the regional courts of
In the main, the regional courts of audit
of the individual federated states meet the international standards of the Lima
Declaration. They are set up as organs of the legislature and are protected
institutionally by the respective constitutions of the
task is to support the regiona
in their control duties.
The position of the regional courts of
audit as an organ of the legislature is underlined by the constitutional
clarification that they are independent from the regional governments
) and are subject only to legal
provisions. This is aimed at preventing those being audited or government
policy from influencing the audit process. For the most part, the essential
organisational and financial principles and the regulatory framework of the
regional courts of audit have constitutional status and thus enjoy increased
preservation of the status quo.
Remit of the regional courts of audit
The remit of the regional courts of audit
is, without exception, laid down in the regional constitutions, the specific
provisions of which vary from state to state, to audit the financial management
of the respective federated state, its administration, the foundations, funds
and institutions as well as companies in which the
as shareholder or over which it can exercise influence. Other tasks which are
similarly laid down in all Austrian court of audit acts include examining the
proper use of grants and subsidies awarded by the federated states.
Furthermore, most Austrian courts of audit are also involved in auditing funds
received from the European Union, under Community Law.
The Austrian legal system tends to follow
the basic principle of comprehensive management auditing when establishing the
competencies of the regional courts. According to this principle, there should
be no audit free areas in which the public sector is financially active but
not controlled. In principle, all federal and regional administrative
activities, irrespective of the legal form in which they take place and
irrespective of whether they are performed by government bodies themselves or
have been outsourced, are thus subject to court audit control.
An essential principle and a manifestation
of the independence of the regional courts of audit is the right to audit on
their own initiative, thus independently of external auditing mandates. This
principle is put into practice universally in all federated states and is
supplemented by the use of analysis methods which aim at ensuring that audits
are selected in an impact-and-risk-oriented manner.
In addition, the regional parliaments are
entitled to request the regional courts of audit to carry out an audit. Audits
can be requested both through a resolution of the parliament and the
parliamentary committee entrusted with management auditing and-effectively as a
parliamentary minority right- as the request of a smaller number of members of
parliament. Furthermore, most of the regional governments are entitled to
request an audit. In some
, individual political fractions
represented in the regional parliament, which otherwise would not be able to do
so due to the low number of their members in parliament, are also entitled to
request an audit to a limited extent.
The courts of audit have legally defined
powers that are aimed at ensuring that they are able to examine all
documentation and obtain all information relevant to the audit. They
communicate directly with all the bodies that come under their auditing
They have the authority, among other
obtain all information that appears to be required from all audited bodies at
any time in writing or in a convenient form,
request the forwarding of files, accounts books, receipts, other records and
have their auditors inspect accounts, invoices and other materials
including electronic data processing systems related to financial management
and to carry out local investigations themselves.
However, the regional courts of audit are
not entitled to exert influence directly, that is by virtue of unilateral orders
) on the administration and organisations
audited. The regional courts of audit are certainly required to make
suggestions for improvements and propose measures for making savings or
increasing income, but the implementation of these is the responsibility of the
competent bodies of the audited entities which, in turn, come under legal and
In almost all federated states, the
Constitutional Court of the
Audits performed by the regional courts of
audit must regularly look at the accuracy of figures and compliance with
current regulations (legality), and ensure that financial management is carried
out economically, efficiently and effectively in accordance with constitutional
provisions and the regulations of the various acts governing regional courts of
audit, which are by and large identical.
Court of audit controls are now focussing
more on performance audits, with the effectiveness and efficiency of government
operations increasingly coming under the spotlight as a benchmark for action
The determining elements for evaluating
performance and assessing efficiency are the predetermined objectives, the
resources employed and the result achieved. Courts of audit increasingly seek
to examine whether the objectives specified, and thus the interest of taxpayers
have been met with the public money used. In addition, they are pushing for the
reduction of bureaucracy and the modernisation of administration accordance
with the principles of new public management and good governance.
The Austrian regional courts of audit are
. The heads of these courts are
elected by the regional parliaments for a specific period of time. They
represent the regional court of audit externally, and are senior and authorised
to issue instructions to all other staff. The heads of the courts of audit are
on a level with the members of the respective government in terms of their
responsibility (responsibility under constitutional law). In most federated
states they have complete control over staff in matters of personnel management
and performance of duties.
The legal position of the heads of regional
courts of audit is specifically regulated. There are, for example, strict
conditions relating to incompatibility that stipulate that they may not belong
to a parliament or local council and that they had not been a member of a
federal or regional government in the last few years prior to their election.
In addition, no member of a regional court of audit may be involved in the
management and administration of commercial undertakings or undertakings
subject to audit by the regional court of audit.
The regional courts of audit are financed
exclusively by the federal state for which they have responsibility. The head
of the respective court of audit informs the regional parliament of his/her
financial, personnel and material requirements. After examination and
consultation the parliament recommends the regional government to consider
those requirements recommendations in their budget.
Despite the creation of the regional courts
of audit, the auditing competence of the Austrian Court of Audit in the
federated states has not been restricted or amended. It is all the more
important to coordinate auditing activities in order to avoid potential
duplication of work. Coordination of meetings therefore regularly takes place,
providing opportunities for mutual exchange of information and implementation
This co-existence not only calls for a
coordination input, but also offers benefits as each audit institution can play
out its individual strengths. So, for example, only the Austrian Federal Court
of Audit is able to undertake extensive cross-audits of several federated
states and make comparisons across states.
The regional courts of audit, on the other
hand, are closer to the action and as a rule have a better insight into the
structures of the audited bodies. They can thus detect any irregularities more
quickly than would have been possible by the Austrian Court of Audit in
Key findings/ observations
Flowing from the above summary of findings,
the following points are of importance to be noted, and they are as follows:
existence of International Anti-corrupt Academy which acts as a centre of
excellence to provide a new, holistic approach to
anti-corruption education and research, attempts to bring the new ways of
overcoming the current shortcomings of knowledge and practice in the field of
anti-corruption. Importantly, it provides some new and advanced methods of
dealing with the complex offence such as corruption as opposed to the
predominantly use of traditional methods.
is moving towards the direction of performance audit which is critical to
assess whether the audited institution or entity has employed its available
resources economically, efficiency and effectively when implementing its
programs or producing its outputs. The implementation of performance audit
impacted positively in the reduction of costs while increasing benefits when
spending public funds.
Austrian Federal states have the authority to set up independent regional
courts of audits into their areas of jurisdiction. Although the functions of
these regional court of Audit differ from region to region depending on their
constitution, their standard tasks that they perform include, auditing the financial
management of the respective federated state, its administration, the
foundations, funds and institutions as well as companies in which regional
) participates as shareholder;
and the examination of the proper use of grants and subsidies awarded by the
existence of Commercial Crime and Corruption division of the International
Chamber of Commerce which is a specialised division which renders commercial
crime services is currently exploring ways to establish a facility where
companies can voluntarily and anonymously report attempts of bribe solicitation
by public officials. It is worth noting that in
federal constitution states that the president of the Austrian Court of Audit
(ACA) is elected by the National Council for a term of twelve years,
re-election is not possible. The long term tenure is intended to allow the
president and the office in general to maximise independence from parliament as
well as government. The president can only be removed via a procedure
independent of government and authorities; and in the case of incapacity, a
highest ranking official from the ACA should temporary take the reins until the
new president is elected.
In spite of the
above, the system of appointing the Auditor General is distinct from the South
African one. In Austria, the Auditor- General is elected and as such it is
politically driven, while in South Africa, it is more administrative, whereby a
woman or a man of South African citizen with specialised knowledge of, or
experience in, auditing, state finances and public administration is appointed
following a stringent processes of recruitment.
The Committee recommends the following:
office of the Auditor-General should consider affiliating to the Austrian based
International Anti-corruption Academy (IACA). The motive behind that is for
is a need for the introduction of corruption as a subject in South African
Higher Education curricula, notably, Further Education and
South African AGs office should intensify the use of performance auditing when
the government institutions are audited. The proper use of performance audit
can enhance the efficiency of the state, due to efficiency gains derived from
the efficiency of the state, a greater and better satisfaction can be ensured
and felt by ordinary South Africans. In the main, the value for money principle
will be achieved and from little that the country has, the country can do more
to better the lives of its citizens.
opposed to the Austrian Auditor-General structure,
Report to be considered.
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