Auditing organization operating on state budget expenditure performed by the State Audit Office

the functions, tasks and expected audit objectives. 8 Fourthly, ensuring the quality of the audit stage. 2.3. Operational audit criteria of state budget expenditures performed by the State Audit Office 2.3.1. Concept of operational audit criteria According to the operational audit’s training documents of State Audit Office, "Auditing criteria are feasible and appropriate standards that are used as metrics to evaluate audit content:" [24, p.88] . In the view of the Postgraduate, the operational audit criteria associated with state budget expenditure can be understood as follows: “Operational audit criteria are appropriate, acceptable qualitative and quantitative measures that are based on the measure to evaluate the economy, efficiency and effectiveness of state budget expenditure activities of organizations, agencies and units ”. 2.3.2. Operational audit criteria of state budget expenditures (1). Economic operational audit criteria: Economy is often referred to as the minimum principle and otherwise known as thrifty. Economy mainly focuses on considering the reduction in input resources. Level of spending’s saving from State Budget = The total cost of the unit used x 100% (1) Toal budget assigned due to project (2). Operational audit criteria for efficiency: Efficiency refers to the maximum output with defined resource usage. (i) As for regular expenditure: The effectiveness of the use of state budget expenditure can be measured by generating a larger output or results while still using a specified amount of defined input funding. Efficiency of state budget expenditure = Funds assigned to perform the tasks / actual funding for the tasks * 100% (2) Or Efficiency of state budget expenditure = Results of implementing tasks / tasks implemented according to assigned plans * 100% (3) (ii) For development investment expenditures: To determine the effectiveness of state budget spending for a project, there are often many quantifiable methods, for example: + Net present value (NPV): (4) 9 + Internal rate of return (IRR): Accordingly, any project with a larger NPV or IRR will be appreciated. + ICOR coefficient: ICOR = [Kt-K(t-1)]/[Yt-Y(t-1)] (6) In which: K is capital; Y is the output; t is the reporting period; t-1 is the previous period In addition to evaluating and determining efficiency through a number of quantitative indicators, for development investment spending, auditors need to combine the assessment with some other qualitative indicators such as effectiveness for Socioeconomic. (3). Validity of operational audit criteria: Validity is understood as the results, achieved goals of the entity. The validity of state budget expenditure activities is understood as the performance results or the level of achievement of objectives and tasks when the state budget funds have been allocated and used. 2.3.3. Source of building audit criteria of state budget expenditure activities In general, there are many approaches to build auditing criteria. However, depending on the characteristics of each operational audit, the auditor may collect different sources of documentation to appropriately establish the auditing criteria. It usually relies on the following sources: Firstly, the source is legal. Secondly, other sources. For the auditing stage of state budget expenditure activities: Sources of documents that the auditor considers and analyzes to establish the auditing criteria can be: the State Budget Law; public investment law, system of standards and norms; medium and long term plans on the state budget; plan on socio-economic development in the period; medium-term public investment plans; resolutions of the National Assembly, reports of the Government on state budget estimates ... (5) 10 2.4. Personnel organization of operational audit for state budget expenditures Operational auditing organization of state budget expenditure activities is also done through an audit incorporating all three types (financial audit, compliance audit and performance audit), in which mainly financial audits are performed and compliance audit, while operational audit only implemented in some contents. According to the postgraduate, the organization of human resources for the operational audit of state budget expenditure is carried out with two models as follows: The first model of the online audit team The organizational model of online audit teams is suitable for audits operating independently of state budget spending. The second model of the division of audit teams The hierarchical audit team model is suitable for auditing state budget expenditure activities integrated with financial audit and compliance audit in an audit stage when the audit scale and scope are large and also suitable for Vietnam's state budget characteristic, that is typically intergovernmental integration. 2.5. Organizing the operational auditing process for state budget expenditures It can be understood that the operational audit process is the provisions on the order and procedures to carry out the operations of the operational audit. Like other auditing processes, operational audit processes are performed in the following four steps: Diagram 2.4 Operational audit process Source: Operational audit process of State Audit Office(2018) 2.5.1. Audit preparation The content of this step is that: the auditor surveyed, collected information and documents related to the operation, management and use of the state budget of the unit; internal control system; management and operation processes; organizational structure; internal regulations ... On that basis, the auditor assesses the risks, determines materiality and notes other issues affecting the control of state budget expenditure of the unit. The purpose of this step is to help the auditor establish the auditing criteria in developing and completing the general auditing plan, detailed auditing plan, and setting auditing program for the auditing stage. Audit preparation Audit implementation Monitoring, checking the implementation of audit conclusions and recommendations Audit reports’ preparation and submission 11 2.5.2. Audit implementation This is the stage when the auditor uses auditing techniques and procedures to collect auditing evidences. Operational audit is the process of making open judgments, and therefore, the auditor should be careful in analyzing auditing evidences as well as the quality (value) of them. 2.5.3. Preparing and submitting auditing reports The auditing report is the final product of the auditing. On the basis of audit findings on the management and use of the state budget, the operational audit report will evaluate, conclude and recommend on audit objectives and contents of the state budget expenditure audit that were identified in the auditing plan. 2.5.4. Monitoring and checking the implementation of audit conclusions and recommendations This is the last step of the auditing process; an activity requires the implementation of audit conclusions and recommendations of the audited entity, but also is the activity of examining the entity's corrective actions related to the indicated audit recommendations. 2.6. Experience in operational audit of a number of countries in the world and lessons for the State Audit Offices in Vietnam 2.6.1. Experience in building operational audit criteria (1) The view of the supreme audit agency in the world According to the general guidelines on building operational audit criteria of INTOSAI as well as some other supreme auditing agencies, it is not possible to build an available sample operational audit criteria system to apply to all operational audits for which the operational audit criteria will be established and developed by the auditors themselves, and should be considered in many respects accordingly. (2) Experiences of Indonesia and Tartastan auditing agencies in terms of operational audit criteria The operational audit criteria of the Tartastan and Indonesia auditing agencies are specifically developed for each auditing stage and the audit criteria are based on auditing standards and auditing practice experience, good practices are drawn from the same operations. Requirements when building audit criteria: Focusing on selecting auditors with general knowledge of the auditing field and experience from similar activities to participate in the criteria development. On the other hand, when setting up the 12 criteria, there is a need to coordinate with experts; The agreed criteria used in the audit stage must have the consent of the audited entity. Criteria for evaluating the economy, efficiency and effectiveness: Both supreme auditing agencies choose one to two out of three criteria (economic, efficient, and effective) to perform the audit stage, often do not select all three criteria in an audit stage because of the difficult feasibility. 2.6.2. Experience of some countries on audit organization and implementation of operational audit process (1) Canadian State Audit Office (2) Malaysia State Audit Office (3) Australia National Audit Office (ANAO) (4) US Government Accountability Office (GAO) (5) New Zealand State Audit Office 2.6.3. Lessons learned for the State Audit Office of Vietnam Researching experiences from the above 5 auditing agencies about the audit process and audit organization methods; on that basis, lessons learned are: (1). The lesson of building operational audit criteria: it must attach the importance and pay attention to the construction of audit criteria and risk assessment which is suitable for each audit stage; auditing criteria must be based on reality and set in the specific context and conditions of the entity and should be exchanged and discussed with management of the entity; operational audit criteria should be designed from general criteria to detailed criteria; it needs to increase the use and consultation of external experts when setting audit criteria. (2). Lessons about the organization of human resource of operational audit Firstly, the size of the audit organization is about 5 to 7 auditors doing from the planning stage to the end to prepare the audit report, at the same time attaching importance to the structure, capacity and expertise. Secondly, it is necessary to often organize the operational audit independently with the long lasting audit, even up to 12 months. (3). Lessons on performing operational audit processes Firstly, the supreme auditing bodies all develop auditing standards and auditing guidelines that operate under INTOSAI. Second, the supreme audit agencies attach great importance to the medium and long-term planning work to determine selected areas and topics for operational audit. 13 Thirdly, choosing the audit topic, which concerns the period (usually between 3 years and 5 years) and focuses on the most risky areas .... Fourthly, usually spending a lot of time on planning the audit (eg: Malaysia State Audit Office spends up to 70% of the time of the audit stage on the audit planning stage). Fifthly, a number of supreme auditing agencies attach great importance to the inspection of the implementation of audit conclusions and recommendations. CHAPTER 3 CURRENT SITUATION OF OPERATIONAL AUDIT ORGANIZATION OF STATE BUDGETS EXPENDITURE PERFORMED BY STATE AUDIT OFFICE 3.1. Overview of the operational audit organization of the State Audit Office 3.1.1. Overview of State Audit Office State Audit Office was established under Decree No. 70 / CP dated 11/7/1994 of the Government. The birth of State Audit Office is indispensable in accordance with required and international practice. State Audit Office has the main function and task of assessing, confirming, making conclusions and recommendations for the management and use of public finance, public assets ... The organizational structure of the State Audit Office consists of 32 units divided into 04 blocks. 3.1.2. The development of operational audit of the State Audit Office The period before 2010: Operational audit was not respected, auditing activities of the State Audit Office mainly performed financial audit and compliance audit. The period from 2010 to 2013: The State Audit Office has not conducted independent audits but the number of large thematic audits has increased. From 2014 up to now, especially the implementation of the 2015 Law on State Audit, the State Audit Office has paid more attention and focused on the development of operational audit. Accordingly, the State Audit Office strengthens the organizational structure of the State Audit Office; developed the audit standards system of the State Audit Office, and at the same time oriented the pilot organization of a number of operational audits in the annual audit plan of the State Audit Office. According to the aggregated data, in the period from 2015 to 2019, the proportion of operating audits in the annual audit plan is about 4%. It can be seen that the development of operational audit of State Audit Office is only really clear from 2015 until now, after having accumulated some 14 experience from thematic audits as well as the necessary foundation preparation required for implementing this type of operational audit. 3.1.3. The results of operational audit of State budget expenditure (1). Expenditure for development investment: Audit results revealed many limitations and shortcomings in capital allocation; approval of investment guidelines, projects; acceptance and payment work; progress and capital use .... (2). Regular expenditures: Restrictions on spending that are not in accordance with regimes, standards, norms, or with improper sources ...; spending is still large ... 3.2. Actual status of operational audit organization of state budget spending performed by the State Audit Office 3.2.1. The state of building operational audit criteria of state budget spending performed by the State Audit Office Auditing criteria is the most differentiated and distinctive point to distinguish the types of audit (operational audit with financial audit and compliance audit). Auditing criteria are often developed in the audit planning stage based on the determination of the expected audit objectives and contents. Through the practical survey and the results (90%) of the questionnaires, it shows that the State Audit Office has not built the criteria as well as guidance on operational audit criteria on state budget spending to apply and refer to when evaluating the management and use of state budget expenditures by audited units. In fact, the audit criteria of some audits were fuzzy and not yet established, the structure was clear and mainly expressed through some audit contents or statistical indicators in the final report. State budget calculation of units. A few assessments of the economy, efficiency and effectiveness are auditors mainly based on the norm of state budget allocation, the actual implementation and results of the implementation of the state budget estimates of the units. audited, but in practice, the financial mechanism and the norms of state budget allocation are not synchronous, limited and inconsistent with the actual operation of the state budget using units. 3.2.2. Current situation of human resources organization of operational audit of state budget expenditures The human resources organization of operational audit of state budget expenditures is designed in two forms, that is auditing the state budget balance of ministries, central agencies and localities (integrating audit objectives and contents) and auditing independently operational audits according to selected topics: (1). Human resources organization of operational audit of state budget expenditure according to an integrated model 15 Organizational model of audit team according to classification (Model of audit team with audit teams), specifically: - The organization of audit personnel in auditing plans at ministries and central agencies is usually about 3-4 audit teams or 7-9 audit teams when the state budget is larger and each audit team has 3 or 4 auditors .. - Human resources organization of auditing budget statements in localities for all three areas (state budget revenue, regular expenditure and capital construction investment). Except for localities with large scale state budget (Hanoi and Ho Chi Minh City), the personnel organization structure for audit teams is usually arranged from 5-8 audit teams, each audit team has from 3 to 5 auditors. (2). Human resources organization of operational audit of state budget spending according to an independent model: Due to the audit objectives by subject and audit scope is not large in principle of organization size of auditing personnel under the online but practical model is still organized according to the linear model, popularizing the organizational structure of auditing personnel including from 2 to 4 audit teams with about 8 to 16 auditors. Through the study of the above two audit organization models, it shows that there is a difference in the size of the audit team as well as the selection and arrangement of audit staff in the audit team. Specifically, the organization human resources of the integrated audit organization model requires more number of auditors due to the broader audit scope and objectives, but often does not impose high requirements on auditing personnel; while the size of the organization and personnel of the independent audit organization model is often less but requires high quality. 3.2.3. The situation of the organization of the operational audit process for state budget expenditures (1). Audit preparation period - The thesis has researched the status of an auditing plan from the preparation and approval of the survey outline to the general audit planning stage. Along with that, the auditing plan is illustrated in an integrated model and an independent model associated with two areas of expenditure (regular expenditure and development investment expenditure). On the basis of the research results, the thesis clearly shows the difficulties, limitations and identifies that most of the auditing plans are made for different subjects, but are the same in the way and content of risk assessment. ; Since then, the determination of audit objectives, contents, methods and audit criteria are still universal, estimated and has not come into reality to refer to the audit implementation process. 16 (2). Audit implementation stage Inheriting the results from the study of auditing plans due to the audit preparation models (above), the thesis has synthesized audit findings through illustrative boxes associated with the independent and integrated audit model. (3). Making and submitting audit reports stage The thesis has synthesized and analyzed the current state of the process of making audit reports at the State Audit Office, especially the procedures for preparing and submitting audit reports. (4). Examination stage of the implementation of audit conclusions and recommendations The thesis has analyzed the 3-step implementation process, which clearly shows the high rate of implementation results of audit conclusions and recommendations on basic financial settlement, but recommendations on reorganization of management, supplementation, the revision of mechanisms and policies is still slow and the rate is low. 3.3. A general assessment of operational audit organization of state budget expenditure performed by the State Audit Office 3.3.1. Results in setting criteria and organizing operational audit of state budget expenditures 3.3.1.1. Results in building audit criteria (i) Forming a foundation for developing operational audit. (ii) Auditing criteria of state budget expenditure, although not independently, detailed and fully developed for the audits, it has been integrated in terms of economy, efficiency and effectiveness embedded in the content of the audit, accounting of the thematic audits, the state budget settlement of the ministries, central agencies and localities. 3.3.1.2. Results in operational audit organization of state budget expenditures (i) Results of the personnel organization of the operational audit of state budget expenditures. (ii) Results of the implementation of the process of operational audit of State budget expenditures. 3.3.2. Limitations and the causes of the restriction 3.3.2.1. Limitations in building audit criteria - For the operational audits of state budget expenditure are integrated: Auditing criteria of state budget expenditure have not been focused on methodically, 17 fully and clearly developed, but mainly designed in the form of General auditing content or some aspects ... - For operational audits of state budget expenditure conducted under an independent model: Operational audit criteria have been concerned, but only to a certain extent, that is the design of general audit criteria, has not yet developed these general audit criteria into detailed audit criteria associated with the specific conditions and context of State budget expenditure activities at the audited entity; has not had the consultation of experts or exchanged opinions with the audited unit; ambitious to comprehensively evaluate the economy, efficiency and effectiveness of the management and use of resources of a budget level with the scope of a budget year, so audit criteria are still heavy qualitative, spread and difficult to implement. 3.3.2.2. Limitations in the organization of auditing personnel organization The arrangement of auditing personnel in audit teams still had many limitations and was not consistent with the nature and characteristics of each audit. 3.3.2.3. Limitations in the audit process of state budget expenditure activities First, the audit preparation stage The organization, access to information collection, research and analysis and selection of audit topics on state budget expenditure activities are not appropriate, lack of methodical and passive causes difficulties for the implementation process, both about the auditing process as well as the organization and personnel of the audit team. Seconly, the audit implementation phase Auditing methods focus on the audit of compliance rather than economics, efficiency and effectiveness. The independent operational audits still lack the specific auditing methods of operational audit such as consultation and use of experts; quality accreditation or Thirdly, the stage of preparing and submitting audit reports Audit reports of the integrated operational audits were not structured and synthesized according to each audit content and criteria. For audits operating independently: The audit report has synthesized audit findings according to audit content and criteria, but there is no standardization and consensus on audit criteria. Operational audit reports have not yet reflected the effects as well as the need for remedial solutions. Fourthly, monitoring and inspecting the implementation of audit conclusions and recommendations. There is no difference in the nature of the jobs in this step between types of audit, especially the impact of operational audit recommendations has not been assessed, has 18 not organized monitoring, updating and summarizing the implementation of audit conclusions and recommendations into a complete database system. 3.3.2.4. Causes of limitations There are many reasons leading to the limitations of the operational audit results of state budget expenditures of the State Audit Office in recent years, but the main reasons are: (1) Professional qualification and audit skills (2) Lack of timely and inadequate implementation instructions (3) There is no consensus in awareness about operational audit CHAPTER 4 COMPLETING SOLUTIONS FOR THE OPERATIONAL AUDIT ORGANIZATION OF STATE BUDGETS EXPENDITURE PERFORMED BY STATE AUDIT OFFICE 4.1. Orientation of developing operational audit of state budget expenditures Firstly, the State Audit development strategy to 2030 and a vision to 2035, the State Audit Office needs to clearly define a roadmap associated with quantitative targets and specific objectives for developing the type of operational audit ... Secondly, the State Audit Office develops and completes guidelines for operational audit in partic