The State Comptroller Presents an Outline of “The Constructive Audit Reform"

At the Israel Law Conference, State Comptroller and Ombudsman Matanyahu Englman presented an outline of the “Constructive Audit Reform” that will be implemented in reports scheduled for publication in the next few months

Photograph: Knesset Channel, News

Yesterday (Tuesday, September 3, 2019), State Comptroller and Ombudsman Matanyahu Englman presented an outline of the “Constructive Audit Reform” being formulated by his Office. The State Comptroller spoke at the 8th Annual Law Conference of Israel.

In his words, “In the two months since assuming office, I have devoted myself to deep study of and getting acquainted with all the professional and dedicated teams in the Office of the State Comptroller. Similarly, we have examined what is going on in the world in state comptroller offices in prominent countries such as the US, England and others. Together, we surveyed the various challenges facing comptrollers and we are formulating our “Constructive Audit Reform”, which is based on advanced methods of action taken in recent years by the Office of State Comptroller as well as on up-to-date models of international audit, together with reinforcing the social aspect of audit work and integrating innovative audit tools.”

The Comptroller explained his vision: “The positioning of state audit as constructive, relevant and effective audit, looking to the future, congruent with national objectives, having a broad national perspective that expresses the added value of state audit, involved in the core areas of state audit, examining public affairs and focusing on essential risks that impact those being audited. The audit will be performed professionally, objectively and thoroughly in a respectful and dignified way.”

 “In keeping with my instructions, we will begin implementing the new format in the reports due to be published in the coming months. This implementation, even if imposes a slight delay in the planned publishing dates, is necessary given that it is my duty as incoming comptroller to review all the reports and study all the matters in depth before I can approve them.”

The comptroller finished his remarks on a personal note: “I arrived at my present position after many years as an accountant in public administration, with two decades’ work as the chairman of the audit committee of JOINT Israel and general director of a local authority, in the Technion and in the Council for Higher Education. In all the positions I filled, I worked to advance initiatives and excellence alongside demonstrating social sensitivity, with the aim of improving public service. This is my way and, on basis of it, I was chosen by the Israeli Knesset. This way is expressed in my vision of State Comptroller and we will act to implement it accordingly.”

Some fundamental principles of the “Constructive Audit Reform”

  1. A broad, statewide perspective and the adoption of a “from the specific to the general” approach

  2. Strengthening of the component of state audit as social audit – Focusing on audit topics with social aspects

  3. Combining surprise audits (e.g., at service centers and public reception points)

  4. Wide use of complementary audit tools beyond reviewing primary sources and interviewing officeholders, and in general: questionnaires for the public, polls, sampling and observations – Making the ombudsman accessible to populations deserving advancement

  5. Bringing the audit model into line with the most advanced models in the world, among which are the offices of the state comptroller of the US, England and others

  6. Changing the report abstract by putting the emphasis on the TOP 5 – The five main findings of the audit report alongside the top five recommendations

  7. Promoting innovativeness and creativity in the audit – Increased use of computerized audit tools, datamining of information systems and financial data analysis

  8. Diversifying the types of audit to increase audit effectiveness and efficiency

  9. Adjusting the human resources skill mix (hiring experts from the fields of computer science and data system analysis) and performing follow-up audits to ascertain whether the audited bodies are dealing with the recommendations included in the reports

Some remarks made by the comptroller:

Focusing on being congruent with national objectives:

The Office of the State Comptroller will, every year, study the areas designated as national objectives and examine the various steps taken by the government to meet these objectives. In this framework, central, national issues that affect many citizens will be scrutinized. Among these are: housing issues – the prolongation of construction procedures, strengthening the periphery, reducing regulation / bureaucracy etc.

Broad, nationwide perspective:

The Office of the State Comptroller will examine how audited bodies handle cross-cutting issues that have implications for all citizens, such as examining the handling of security issues by the army and civilian authorities in parallel. The broad perspective and the added value of the Office of the State Comptroller will be also be expressed through examination of the interfaces between the central and local governments and execution of comparative audits between various government ministries and government authorities. In this context, the Office of the State Comptroller, led by me, will adopt the “from the specific to the general” approach – analysis of findings related to specifics and formulation of broad recommendations on the basis of the findings to boost the performance of audited bodies.

Strengthening the side of state audit as social audit:

As State Comptroller and Ombudsman, I see great importance in strengthening the social side and its role in the audit such that it can function as the voice of weak groups in society. My role as ombudsman includes handling around 15,000 complaints filed by residents annually and I believe that it is essential to improve the processing of these complaints and to expand the accessibility of the Office of the State Ombudsman’s activities to all levels of society – including minorities.

In the audit area too, we will focus on issues having a social nature such as the government’s treatment of populations deserving advancement – whether relating to public housing or increasing personal security in the Arab sector. We will work to integrate issues stemming from social aspects in our audits of different bodies such as examining the system of reductions for the needy in the public authority being audited and we will take care to look at this with “public eyes” – which will include auditing the service given to the public. To this end, we will act to widen the use of the public participation process and complementary audit tools (beyond review of primary sources and interviewing officeholders). We will conduct surprise audits of resident service centers (e.g., public business centers), we will examine the services given to the citizen on internet sites and we will conduct surveys and observations. In addition, when necessary, we will consult with experts from academia and conduct international comparisons to determine the relationship between what is practice in Israel and what is customary in other parts of the world, in terms of audit issues.

Aligning our audit model with advanced audit models used around the world:

I see great importance in updating the audit model and aligning it to advanced international models used in state comptroller offices in the US, England and elsewhere. Accordingly, and as practiced around the world, the new format of the audit report will include a TOP 5 abstract that will focus on the five main findings at the heart of the report and, alongside them, the central recommendations as well as presentation of Key Facts (the numbers tell the story) that will summarize the audit findings using numbers and key data. The report will include references to the recommendations’ utility, including, in certain cases, estimates of the ratio between the investment required to rectify deficiencies and the financial renumeration accruing from this.

Promoting innovation and creativity in audits:

We will intensify the use of computerized audit tools, datamining of information systems and analysis of financial data. We will work to establish a research unit and strengthen the internal QA mechanism of the Office of the State Comptroller.

Diversifying the types of audit:

To date, generally, one type of audit was used (the external audit). Under the leadership of Comptroller Englman, the types of audit to be used will be diversified and will include various areas:

Strategic audits – These audits will test the process of strategy formulation in the audited body and the different relevant alternatives for its development.

Financial audits – These audits deal with financial data, their reliability and different risks.

Procedural audits – Audits that evaluate the efficiency of procedures in the audited body.

Compliance audits – Audits that evaluate the adherence to good governance and legal and judicial guidelines.

Audits – IT audits focused on the computerized systems of the audited bodies.

Updating the human resources skill mix and performance of follow-up audits to ascertain whether the audited bodies are dealing with the recommendations included in the reports:

In this way – together with evaluating compliance and maintaining of good governance, we will audit and increase the efficiency and utility. Diversifying the types of audit will be integrated in an organized process of preparing a three-year audit program that will include, alongside topics chosen in advance in an orderly manner – performance of follow-up audits to increase effectiveness and handling by the audited bodies of the recommendations included in the reports. The aforementioned diversity will require updating of the human resources skill mix in the Office of the State Comptroller and broadening of the skill mix among teams. In addition to lawyers, accountants and economists – we will look to recruit computer and information system experts as well as professionals in the fields of education, welfare and health in order to prepare audits in the core focus areas of the audited bodies.

Improvement in the interface with the audited bodies:

I will work to continue conducting state audit in a respectful and dignified manner, while enabling audited bodies to voice their responses. Attention will also be paid to encouraging excellence and initiative among audited bodies while combining commensurate positive reinforcement of improvements and especially constructive activities – as mentioned in paragraph 15 (b) of the State Comptroller Law.