Korea’s Experiences of Participatory Auditing Board of Audit and Inspection Seongjun Kim Public...

Korea’s Experiences of Participatory Auditing

Board of Audit and Inspection

Seongjun Kim

Public Participation in the Audit Phase of the Budget: Opportunities and ChallengesJoint GIF-IBP-World Bank Seminar

April 30, 2015

The Board of Audit and Inspection of Korea

http://www.google.co.kr/url?url=http://internationalbudget.org/&rct=j&frm=1&q=&esrc=s&sa=U&ei=kZpBVY-RF8W7ggTT34Bg&ved=0CDsQ9QEwEw&usg=AFQjCNHEfuTTtyr_4QITg34pW-HWHzXO_g


Presentation Outline

1. Introduction to the BAI

2. Background for Citizen Engagement at BAI

3. BAI’s Participatory Audit System

4. Values & Benefits of Citizen Engagement

5. Risks & Control Mechanisms

6. Lessons Learned and Challenges

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SAI of Korea

Constitutional AgencyBAI’s functions, status and orga-nization stipulated in Articles 97 to 100.

Agency under the PresidentEstablished under the direct juris-diction of the President.

Independence in Performing Du-ties

Independence guaranteed with regard to its duties pursuant to BAI Act

A Council (Collective) System for Decision-Making

Council of Commissioners make final audit decisions:Quasi-judicial functions.


The Board of Audit and Inspection of Korea 5


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BAI’s Duties and Functions

• Verifying Final Accounts of the State - Government Performance Report Review (GPRR) as a part of

verification process

• Auditing (Financial Audit, Performance Audit) - Central & local governments, Legislative and Judiciary, Public in-

stitutions, Bank of Korea, Armed forces

• Inspecting Performance of Government Employees - Excluding National Assembly, courts of law and Constitutional

Court

- BAI may request the head of responsible authority to take a dis-ciplinary action on public sector employees



BAI’s Duties and Functions•Rendering Legal Decisions on

- Accounting Officers’ Violation of Financial Regulations

- Protests and Complaints Against Agency Actions

• Making Legal Opinions on Accounting and Audit Laws and Regulations

• Supervising/Assessing the Performance of the In-ternal Audit Units in the Public Sector

•Ombudsman

- 6 Regional Citizen Complaints Centers



Contributing characteristics of the BAI that led to successful development of citizen engagement

• Operational independence

• Comprehensive audit mandates

• Good working relationship with Internal Audit

• High expectations and trust from citizens








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Korea has a long tradition of hearing people’s voice • Sinmungo (big drum) during Chosun dynasty (15th

century) Citizen engagement has evolved ever since BAI’s es-

tablishment in1963 • Civil Petition & Complaints Reception Center (1971) • Fraud hot line (#188)• Open audit system (1990s)• Business Complaints Reception Center (2004)



Now BAI has full spectrum of citizen engagement except the direct participation in audit process (i.e., citizen auditors)• Gathering audit information (complaints, etc)• More focused or targeted information collection

(open audit system)• Advisory service from citizen/experts group• Formal audit request


2. Background for Citizen Engagement at BAI Rapid democratization and citizen empowerment

since late 1980s Decentralization process resumed in 1988 with re-

vision of Local Autonomy Act, Local Finance Act

Against this backdrop, BAI introduced Audit Re-quest for Public Interests (ARPI) in 1996

Anti-Corruption Act of 2002 introduced Citizen Au-dit Request (CAR), which strengthened legal foun-dation of citizen engagement in audit








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Planned Audit Requested Audit

Initiation BAI Requesters

Audit scope Broad/complicated Specific / narrow / less complicated

Audit team size Over 10 auditors 1-2 auditors

Duration of field works

Over 2 weeks 2-5 days


Planned Audit vs. Requested Audit



Citizen Audit Request (CAR)

Audit Request for Public Interests (ARPI)

Eligibility of au-dit

• over 300 citizens • over 300 citizens/CSOs/ head of public entities / lo-cal councils

Audit matters(subjects)

• illegal acts or corruption • illegal acts or corruption• budget abuse• mismanagement• improvement

Matters excluded from being au-

dited

• under investigation or trial• private matters• under the jurisdiction of lo-

cal governments

• matters under investigation or trial

• private matters

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Who can request an audit on what?



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What are the selection criteria?

• Does it pursue public interests?

BAI defines public interest as “welfare or good of

the public and the whole society, not confined to

certain group or person”



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Handling Process of Audit Request• Submit an audit request (over 300 people)• Allocate an auditor to preview the audit request (eligibility/

audit ability)• Refer it to the Review Committee (monthly meeting)• Notify acceptance/rejection to the requester• Conduct field work• Finalized at the BAI Commissioners’ Meeting• Notify the audit results to requesters/related public entities• Publicize the audit result through BAI website



Submission of audit request

Eligibility Pre-view

Committee Review (ARRC)

BAI investiga-tion

Closing of the case

Notifying audit results

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How long does it take to receive the audit result? • 2-6 months (if not accepted, in 40 days)

How many auditors are involved? • Audit Request Investigation Bureau has 100

auditors (72 BAI staff, 28 seconded staff)• 20 auditors in charge of requested audits• Other 80 in charge of civil petitions/complaints

(over 14 thousand cases in 2014)


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Responding to citizen needs and grievances• Principal-agent theory

Facilitating more active citizen participation, which , in turn, contributes to enhancing government ac-countability and building participatory democracy

Improvement in public services• Most frequently requested areas are also high-risk

areas: permit/licensing (20%), budget abuse (17%), construction (15%), transportation/envi-ronment (9%)

4. Values and Benefits of Participatory Audit

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Reducing blind spots and dark corners• Bottom-up approach through the eyes and ears

of citizens Affecting the behavior of government workers

• Reducing “opportunity” element in Cressey’s fraud triangle


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Risks Politically-motivated purposes of audit requests

• Attempts to make an issue of their demands by utilizing BAI’s high visibility Number of requests by local councils jumps

in election years: average 5 requests → 13 (2009), 11 (2013)

• Online CSOs become more and more active Number of registered CSOs : 3,236 (2001)

→ 10,086 (2011)

5. Risks and Control Mechanisms

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Auditors are exposed to highly conflicting issues

Limited audit resources can be used in less priori-

tized issues


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Control Mechanisms How to control the risks while ensuring the bene-

fits (SR) and promoting citizen participation (LR)? Design audit request system with explicit consid-

eration of risks• Qualification of requesters• Scope of requests• Screening system (eligibility preview, ARRC)


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Control Mechanisms

Refrain fieldworks for politically sensitive requests

during preview stage

Placement of experienced and motivated auditors


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3. BAI’s Participatory Audit




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Success Factors• Legal foundation should be in place to ensure continued operation and resource inflows

• Top management’s support is necessary to pro-vide motivation to auditors

• Offering various but related activities increases citizen satisfaction (synergy effects exist)

• Enhanced access through various online and off-line media encourages more active participation

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Success Factors• Risks should be considered proactively before launching

• Higher standards on ethics are required for audit staff in order to deal with those who have direct interests

• Good cooperation with service delivery agencies through their internal audit units expedites the process

• Well-staffed and functioning CSOs seeking pub-lic interests

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Challenges

• Promote citizen engagement in public auditing

• Expand dimensions of citizen engagement in

audit process

• Measure and promote the values and benefits

of participatory audit

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There are great benefits, both explicit and implicit, from the citizen engagement

Risks can be controlled within reasonable cost• Priorities in audit resource allocation may vary

among SAIs BAI’s participatory audit model shows a great po-

tential, but it may or may not work in other cir-cumstances

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Thank you

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