APPROVED

By the Auditor General‘s

Order No V-63 of

22 February 2011

Public Audit Strategy 2011-2015 of the National Audit Office of Lithuania

Foreword

Strategy Map

Introduction

Environmental analysis

External factors

Internal factors

Vision, mission, values

Strategic goals

Monitoring of the implementation of the Strategy

Implementing measures of the Strategy

Foreword

The mission of the National Audit Office of Lithuania as the Supreme Audit Institution is to promote an efficient management of State property. Financial power of the State diminished due to economic downturn makes us not only use the resources in a more economic way, but also look for new nonstandard means to receive the maximum benefit from the State-managed property. Growing expectations of the public for transparency of public sector activities, efficient management of State property, as well as economic use of State Budget funds - these are the areas, in which the role of the National Audit Office of Lithuania (hereinafter NAOL) is especially important in the meantime.

The main objective of the NAOL in the 2011-2015 period is to enhance the public audit impact. We will contribute to Parliamentary scrutiny exercised by the Seimas (the Parliament of the Republic of Lithuania): we will seek to make public audit recommendations and their implementation the basis for the increase in public sector accountability, as well as efficient use of funds and management of property.

Performance efficiency and professional competence of the staff are the fundamental factors determining the quality of public audit results. Development of professional competence of the NAOL staff will help us to become a knowledge centre, institution open for cooperation, opinion and work of which will form the basis for important decisions in the State. Our more efficient use of the available resources will lead by example, which will be followed by other public sector institutions.

I believe that the National Audit Office of Lithuania and its competent staff members are able to achieve ambitious objectives envisaged in the Strategy, implementation of which will directly contribute to the efficient management of State property and results-oriented public sector.

 Auditor General                                                                                                       Giedrė Švedienė

Strategy Map

Introduction

The constitutional duty of the NAOL is to supervise the lawfulness of the management and use of State property and the execution of the State Budget. This provision is enforced in independent public audit.

Public audit, which complies with international standards on auditing is a fairly new phenomenon in Lithuania, however, the recognition of the National Audit Office of Lithuania as the supreme audit institution shows a sufficiently high level of public audit. This may be recognized as the result of implementation of Public Audit Strategy 2006-2010.

The Public Audit Strategy of the previous period mostly focused on strengthening of public auditing processes, development of audit methodologies, as well as development of audit quality control system. Public audit planning system ensuring the independence of the supreme audit institution in planning and selecting audited bodies and audit subjects was developed and introduced.

In order to enhance public audit impact on the management and control system of State finance, the focus of attention was placed on building an image of public auditor as assistant and advisor, as well as on cooperation with other public sector institutions. Significant results were achieved in cooperation with the strategic partner in the Seimas: Committee on Audit.

Achievements of the previous years not only engage us to maintain a high quality of public audit, but also encourage to enhance public audit impact, develop professional competence, as well as to conduct efficient results-oriented activities. Audit maturity enables us to assess weaknesses in organization of activities of audited bodies, as well as identify the development directions of the supreme audit institution and public audit process.

The changing environment encourages us to continuously develop, therefore with a view to a new five-year perspective it is necessary to improve the existing and plan new ways to implement the mission of the institution, to efficiently use the available limited financial, material and human resources. This Public Audit Strategy will be the basis for drawing up of more detailed plans of the NAOL and developing of institutional activities.

The Public Audit Strategy was drafted on the basis of the concept of balanced scorecard and management by objectives, as well as results of process analysis applying LEAN methodology. Objectives of the Public Audit Strategy are closely related both to trends in external environment and the related possibilities and threats, and to internal environment of the National Audit Office of Lithuania: its strengths and weaknesses.

Environmental analysis

As the implementation of the previous Strategy showed, public audit impact depends not only on audit quality. It is highly influenced by uniform understanding of public audit results and an appropriate implementation of public audit recommendations. Increasing the confidence of the Government, the Seimas and audited bodies in public audit results we may achieve essential changes in public sector activities. Despite the fact that the NAOL is ranked as a mature supreme audit  institution, however, only a continuous development and increasing professional competence enables us to increase the confidence in public audit results.

It becomes a striving and a duty. A duty to adapt to quickly changing environment and to have a professional team which helps to look for ways to conduct more efficient audits and develop activities, which leads by example other public sector institutions.

External factors

Having conducted an external environmental analysis we found out that main opportunities and threats to public audit are directly linked to economic and political development of the country, changes in external regulation, growing expectations of the public, public sector reforms and their impact. All of these factors determine trends of public audit development. It is difficult to forecast directions and intensity of these factors in a dynamic environment, therefore changes in external environment not only pose threats, but also shape the development opportunities for the National Audit Office and public audit. Topics of public audits partly depend on external environment. Economic situation of the country, performed reforms and other external factors have an inevitable impact on public audit directions and scope.

Objective and independent public audits are performed only by an independent supreme audit institution, which is protected from external impact. However, in certain political circumstances independence of the NAOL may be insufficient. In order to hedge against such cases, it is important to include concepts of independence of the Auditor General, Deputy Auditors General, as well as public auditors into the Constitution.

Financing of the National Audit Office, which is based on the principle of annual financing has a significant impact on independence of public audits. Financing of the NAOL may change along with the changing economic and political situation in the country, which could have a direct impact on the implementation of Public Audit Strategy and annual public audit programme. In general, a complex financial and economic situation requires a larger scope of public audits, however, due to potentially unstable financing, a high risk to the achievement of the expected results may arise.

A threat of insufficient financing reduces possibilities of  retaining the staff, their competence, as well as ensuring a proper quality of the conducted audits and public confidence in the National Audit Office. On the other hand, economic changes and changes in the management of the State often open up new possibilities and encourage us to take new initiatives, to seek and apply performance optimization methods.

Since 1 January 2010, public sector entities manage their accounting and draft their sets of financial statements following the standards for public sector accounting and financial reporting. Starting with 2012, the National Audit Office will submit an opinion on the national set of statements. With regard to that, the NAOL should be prepared for new developments in public sector accounting and significantly increased audit scope.

Growing expectations of the public is one more factor, which has an impact on the scope of public audits and their performance. Transparency of public sector activities, efficient management of State property, economic use of the State Budget funds are the areas, wherein the public expects a solid public audit impact, therefore the National Audit Office should keep on monitoring and properly react in a timely manner.

It is of utmost importance that the public and audited entities should recognize the mission of the supreme audit institution: it would create a wider possibilities for the development of public audit, as well as contribute to the progress of public sector. The increased reliance on the institution would enable to enhance the role of the NAOL as “competence and knowledge centre“.

The National Audit Office maintains and develops international relations with supreme audit institutions of other countries, international organizations; it is a member of the International Organization of Supreme Audit Institutions (INTOSAI) and its regional working group – European Organization of Supreme Audit Institutions (EUROSAI). Participation in international activities allows the NAOL to obtain an experience of other supreme audit institutions, as well as disseminate its own experience via exchange of official and working visits, taking part in joint events, conferences, trainings and seminars, conducting joint audits and exchanging professional information.

Lithuania‘s membership in the European Union (EU), as well as the membership of the NAOL in international audit organizations enables it to use the experience of other countries and disseminate its own experience. In 2013, Lithuania will face probably the biggest challenge since joining the EU: the Presidency of the European Union. In the Presidency period, the Member State is constantly visible in foreign media; it organizes international events attracting the highest level officials of foreign countries. The NAOL should be properly prepared for the many events, monitoring of the preparations for the EU Presidency, as well as for exploitation of advantages of this period.

Internal factors

The National Audit Office is a modern and innovative supreme audit institution, where best international practice is applied and public audits are conducted following the progressive methodologies consistent with international standards on auditing. Public auditors are increasingly treated as advisors, not as controllers. In the opinion of audited bodies, the expertise and capabilities of public auditors to perform quality audits are significantly growing.

In order to ensure public audit quality, assessments of public audit results and impact are performed on a regular basis using both internal and external resources. It allows to identify public audit directions, which need improvement. Currently, planning is the public audit stage demanding most focus. Strengthening of planning of audit subjects, examination scopes, as well as resources needed for audits is one of the key factors of audit success. It is necessary to ensure that most relevant topics are selected for audits, as well as appropriate audit scopes are chosen.  

Improvement of processes supporting public audit is one more possibility to seek a more efficient performance of public audit and better results. We believe that the strengthening of planning of resources and time, as well as monitoring of performance processes, improvement of staff management, integration of information systems are the areas, which along with the development of public audit methodology will enable to raise an efficiency of the NAOL and public audit impact.

Vision, mission, values

Vision – We are a competent and independent supreme audit institution, which is trusted.

Mission –  To promote an efficient management of State property.

Values – We value an independent, professional and honest teamwork.  Our relationship with audited bodies is based on respect and confidence.

Strategic goals

The main objective of the National Audit Office for the period 2011-2015 is to enhance public audit impact. Recognizing the mission of the National Audit Office as supreme audit institution and having evaluated external and internal factors, in 2011-2015 we will seek to directly contribute to the promotion of public sector accountability and results-oriented management. We believe that an adequate and purposeful dissemination of public audit results both in the institution and outside it will allow to achieve a better audit impact, while broader directions of cooperation will enable to enhance the expertise and reliance put on audit and its results.

We will seek to expand cooperation directions in the national and international level, since international recognition is particularly important for the supreme audit institution. It provides the possibility to receive a competent assistance from other supreme audit institutions and international organizations in a timely manner.

In order to lead by example other public sector institutions, we will continue initiatives increasing the efficiency of performance. In our activities we are ready to follow the LEAN philosophy. We consider that based on best practice examples of the private sector, the public sector should properly analyze its activities and find areas, which need structural, funding and management changes, which will determine the efficiency of performance. In 2011-2015, we plan to implement the following strategic objectives:

§  to enhance public audit impact;

§  to more efficiently use the available resources;

§  to develop professional expertise of our staff via promotion of teamwork principles.

1. We will enhance public audit impact

Implementing this objective we will seek to turn public audit into the basis for the rise of public sector accountability and efficient use of State property and funds, while providing the opinion of the National Audit Office, which is referred to when making decisions important to the State. The following are key measures, implementing which we will aim to enhance public audit impact:

§  Improvement of public audit process. In order to ensure the focus of public audit, it is necessary to strengthen the process of drafting public audit programme, to find ways to provide answers to the public on the management of State‘s resources, as well as to shape suggestions to resolve issues identified during audits in high quality and in a quick manner.

§  Dissemination of public audit results. It is very important to disseminate best practice identified during public audits to public sector entities, as well as to point out systemic errors in order to prevent their recurrence. Raising the confidence in the NAOL and in public audit results, it is necessary to inform the public and audited bodies about the role of the supreme audit institution, the applied techniques, public audit impact and added-value as widely as possible.

§  Development of communication and cooperation. It is important to further strengthen and develop mutual cooperation with the Seimas, the Government, law enforcement and other public sector institutions via monitoring of the implementation of management decisions taken on the basis of public audits and sharing of the accumulated information.

2. We will use the available resources more efficiently

Public expectations for the public sector, as well as for the NAOL are growing; however, the available resources remain the same or even subside. Therefore it is important to become change drivers and an example for other public sector institutions in the area of efficient use of the available limited resources. The following are key measures for promoting performance efficiency:

§  Quality improvement of public audits. Apart from general changes in institution‘s activities, significant professional changes are also needed. One of the main directions for improvement in this field is qualitative evaluation of public audit results with the help of experts in the area, audited bodies, as well as direct beneficiaries of public services. We believe that the improvement of individual stages of public audit process will allow to perform public audits with more quality, in a quicker and more efficient manner, as well as to provide a quality information for important management decisions of the State.

§   Optimization of activity processes of the National Audit Office. Achievement of the planned results primarily requires to clearly understand stages of the conducted processes, the time spent on them and the allocated resources. Collection of this information requires to introduce measures enabling to assess activities of the institution based on uniform criteria, to ensure that each stage of the process goes smoothly and does not hinder the progress of the whole process. Risk management, LEAN, project management principles – these are but a few progressive measures for the development of institution‘s activities.

3.    We will develop professional expertise of our staff via promotion of teamwork principles

The key to a successful implementation of the objectives of the Strategy are the staff of the NAOL. Professional expertise is one of the essential values of an auditor and audit institution. Only public audits conducted following the professional teamwork principles may achieve the expected outcome. Striving of the teamwork is not restricted only to the change of internal processes, it covers the following areas:

§  Enhancement of professional expertise. We will pay a particular attention to professional training of the NAOL staff and development of their expertise. Maintaining of the existing level of public audit professionalism requires public auditors‘ motivation to act more widely, in a better way and to achieve more results. Development of the staff motivation system, introduction of certification system are but a few measures, which will be used to raise the level of professional expertise and teamwork.

§  Development of international cooperation. A simple monitoring of a public audit progress in international level is not any more a sufficient means for the National Audit Office as progressive public audit institution to participate in activities of international audit community. We have accumulated sufficient knowledge and experience, which may be shared with other supreme audit institutions, we may monitor the outcome and changes in  their performance, as well as submit proposals for the improvement of audit methodology.

Monitoring of the implementation of the Strategy

In order to properly and effectively implement the Public Audit Strategy, it is not enough to just choose a strategic direction; it requires a clearly defined monitoring of implementation of the Strategy. The monitoring of objectives of the Public Audit Strategy will cover:

§  Annual plan for implementing measures of the Strategy;

§  Quarterly revision of the status and key indicators of the measures envisaged in the plan;

§  Annual report on implementation of the Strategy.

Taking into consideration external and internal changes and monitoring results of the implementation of the Public Audit Strategy, objectives, measures and indicators forecasted in the Strategy will be considered and annually revised as required.

Implementing measures of the Strategy