Environmental Performance Auditing in the Public Sector

Enabling Sustainable Development

Awadhesh Prasad

• Publisher: Routledge
• Year: 2018
• Print ISBN: 9780367856045
• eBook ISBN: 9781351273466
• Edition: 1
• Topic: Commerce
• Subtopic: Comptabilité

Environment and sustainable development challenges are a matter of global concern. Trillions of dollars of mostly public money are invested every year in domestic and international policies and programs to address these challenges. The effectiveness of these policies and programs is critical to environmental sustainability. Performance audits that examine the effectiveness of governmental policies and programs heavily influence their implementation. Despite this, performance auditing in the environment field has received very little academic attention.

This book takes a closer look at performance auditing of public sector environmental policies and programs. It examines trends in global environmental performance auditing; and how it is currently practiced drawing on a global survey and case studies from Canada, India and Australia. In doing so, it identifies issues and challenges faced by Supreme Audit Institutions in undertaking these performance audits.

This book will be of interest to students, scholars and practitioners of sustainable development, environmental auditing and public sector auditing as well as to donor organisations engaged in these areas.

1Introduction

Background

Due to drivers such as population growth, industrialization, globalization and the digital revolution, the world is changing very rapidly, both in its natural and socio-political domains. Impending exceedance of some critical thresholds in the natural domain will likely adversely affect life-support functions of the earth, with significant adverse implications for human well-being (UNEP 2012: 6). One such consequence, climate change induced by global warming, is already being felt. The three recent consecutive years – 2015, 2016 and 2017 – have all been in ‘the top three years in terms of temperature records’ (Taalas, 2017). Governments across the world have been endeavouring to combat such environmental challenges through both domestic and international actions. Such environmental policy initiatives have been taken at least since the 1960s (Keene and Pullin, 2011), when visible environmental degradation and consequent public pressure for environmental protection (Chertow and Esty, 1997; Durant et al., 2004; Fiorino, 2001) prompted policy interventions by governments the world over – both nationally and internationally. More than 300 multilateral environmental agreements (MEAs) are currently operating to address global environmental challenges (e.g. loss of biodiversity, climate change). ‘Environmental protection and sustainable development are among the most topical issues that face governments in the new millennium’ (INCOSAI, 2010). Globally, trillions of dollars of mostly public money are invested every year in domestic and international programmes to maintain and enhance environmental quality. The effectiveness of these programmes is critical to environmental sustainability. The effectiveness of governments’ programmes is examined through evaluations undertaken mostly by the private sector and through performance audits undertaken by independent Auditors General, also known as Supreme Audit Institutions (SAIs.)¹ Evaluation and performance auditing are similar in aims, approaches, analytical methodologies and techniques (Barrett, 2001; Pollitt and Summa, 1996). However, compared with the former, the latter has scarcely been studied in the environmental field. This is the focus of this book.

Environmental audits undertaken by SAIs can and do play a crucial role in the implementation of environmental initiatives, including those in MEAs (UNEP, 2010: iii) aimed at environmental protection and sustainable development. These audits, particularly environmental performance audits, that SAIs have been undertaking for over two decades, have resulted in governments’ actions both domestically and internationally to improve environmental sustainability (WGEA, 2012).

Sustainable development and the role of SAIs

The concept of ‘development that meets the needs of the present generation without compromising the ability for future generations to meet their own needs’ (WCED, 1987) was put forward in the late 1980s. Over the years, the concept has become so comprehensive and complex that it is assumed to encompass all that is good and desirable (Holden et al., 2014). A large literature on sustainable development has developed (see Holden et.al., 2014 for a concise review), with sometimes divergent views – a review of which is beyond the scope of this book. Suffice it to say that gradually the concept has gained acceptance and currency in both the public and private sectors. It is now a major consideration in government planning and policy making (WGEA, 2007a: 15). About one-quarter of SAIs reported in the fifth survey (WGEA, 2007a: 15) that they were conducting audits of sustainable development programmes.

Building upon the earlier initiatives toward sustainable development – such as Agenda 21, reached at the Rio Earth Summit, 1992; the UN Millennium Development Goals (MDGs), 2000; World Summit on Sustainable Development (WSSD), 2002; and the Rio+20 Summit in 2012 – world leaders unanimously adopted new sustainable development goals (SDGs) in September 2015. This was immediately followed up by another landmark agreement on climate change at the Paris climate conference in December 2015. Together with the Paris Climate Agreement, the SDGs (17 goals, 169 targets) set the agenda for governmental efforts across the world for sustainable development for decades to come: to end poverty, fight inequality and injustice, and tackle climate change by 2030 (UNDP, 2016). SDGs are a complex web of integrated and interdependent global priorities that need effective governance systems, institutions, partnerships and intellectual and financial resources for their effective, efficient and coherent implementation (ICSU, 2017). The UN Division for Sustainable Development (UN-DSD, 2017) through the High-level Political Forum and Sustainable Development Knowledge Platform, among other means, provides leadership to the implementation of SDGs.

Good governance within each country and at the international level is essential for sustainable development (UN-WSSD, 2002). Topfer (2004) observes that ‘sustainable development cannot be achieved without good governance, and good governance, in turn, is greatly furthered by the valuable work of SAIs. Therefore, SAIs can play a vital role in informing and supporting efforts to achieve sustainable development.’ Due to their independence, SAIs are in a unique position ‘to legitimately and credibly evaluate the efficiency and effectiveness of government policy and obligations’ (Topfer, 2004). SAIs are critical to protecting the use of public finances for sustainable development. By providing crucial information on the use and management of public resources, they contribute to transparency and accountability of the public administration for these resources (UN/INTOSAI, 2015). By holding governments accountable, SAIs play an important role in ensuring that issues of environment sustainability are at the centre of development initiatives (Nombembe, 2007, quoted in WGEA 2007b: 55). Sustainable development worldwide is only possible if the use of public resources is made more transparent and accountable (Moser, 2015) by the work of SAIs.

Due to their position within the national administrative system, generally with a mandate over wide areas of government endeavour and their active involvement in regional and global organizations, SAIs can make significant contributions towards the successful achievement of SDGs (Dutra, 2016). They can take a long-term perspective of the issues (Oviir, 2012) and can better integrate social, economic and environmental issues across different sectors and form non-partisan views – a basic requirement for auditing sustainable development programmes. Due to their ability to understand local circumstances, SAIs are honest brokers of assessments of government policies at the national level. As such, their performance audits are a great tool to support monitoring and evaluation of the SDGs (Lapointe, 2015). UN Resolution A/66/209 of December 2011 recognized ‘the important role SAIs play in promoting the efficiency, accountability and transparency of public administration’ and called for their strengthening to promote good governance. Subsequently, UN Resolution A/C.2/69/L.25/Rev1 of November 2014 acknowledged the role of SAIs in fostering governmental accountability for the use of resources and their performance in achieving development goals, including internationally agreed development goals. SAIs are at the core of effective, accountable and transparent institutions (Hongbo, 2015). SAIs-related target 16.6 of the SDGs perhaps reflects learning from the implementation of MDGs that had inadequate monitoring and evaluation framework (Lapointe, 2015). These UN resolutions anchor the important role of SAIs in the post-2015 development agenda (Sattler, 2015). Further, the UN Secretary General has expressly stressed the need for strengthening SAIs as the national oversight mechanism in the Synthesis Report on Post-2015 Agenda (UN, 2014: paragraphs 92, 145–150).

Limited literature on environmental performance auditing

On one hand, SAIs and their performance auditing are considered critical to achieving environmental sustainability and SDGs; on the other, compared with thousands of papers on environmental evaluation (Prasad, 2016: 7), there has been very little academic work (about a dozen papers) on environment-related performance auditing. Some lead papers are noted herein. Rubenstein (2001) observes that performance auditing is a vital link between stewards of the environment and those to whom they are accountable. He describes the audits undertaken by the Canadian Commissioner of Environment and the role it can play in empowering the public. Rose (2001) explored the practice and possibilities of auditing the performance of the Australian government’s environmental commitments. He also commented on the then debate for establishing a national Commissioner for the Environment for this purpose. Van Leeuwen (2004a) describes the results of the first three International Organization of Supreme Audit Institutions (INTOSAI) Working Group on Environmental Auditing (WGEA) surveys on environmental auditing by SAIs. Van Leeuwen (2004b) discusses the procedural aspects of international cooperation in environmental auditing through the WGEA. She notes the need for future research into the contribution of the environmental audit work of SAIs to the improvement of environmental governance and policy performance, and the advantages of international cooperation between SAIs on audits of international environmental agreements. Rika (2009) investigates environmental auditing by the SAI of Fiji and notes that it is strongly motivated by the UN system, including INTOSAI. Martinov-Bennie and Hecimovic (2010) describe the assurance-related challenges involved in auditing the performance of regional public sector natural resource management (NRM) bodies, e.g. catchment management agencies by the Natural Resource Commission (NRC) of the Australian State of New South Wales. This study is not about an SAI in that the NRC is both a judge and advocate of NRM. However, Martinov-Bennie and Hecimovic’s suggestion for research into the issues of independence of audit and audit methodology is relevant here. Lima and Magrini (2010) describe the Brazilian Audit Tribunal’s role in external auditing of environmental management in Brazil. Yusoff (2013) explores the understanding of the public sector auditors about the environmental audit. Wang et al. (2011) and Liu and Xu (2014) discuss environmental performance auditing in China and suggest some measures for improvement. Rika (2014) examines environmental performance auditing at the SAI of Australia and concludes that environmental performance auditing is essentially used as a tool to manage reputational risk in the public sector.

Other than descriptive individual audit reports and guidelines, there is very limited investigative work available on environmental performance auditing in professional (non-academic) literature. For example: RPC (2010) discusses environmental performance auditing in China and suggests a few ideas for overcoming some related challenges; INTOSAI (2012) describes the current and future challenges of environmental auditing; and Reed and Cing-Mars (2014) discuss ways of increasing the impact of environmental performance audits.

Reasons, purpose and scope of this book

Overall, the few academic studies noted above that have investigated some aspects of environmental performance auditing point to the need for further investigation. Further, most of the work on performance auditing generally is related to developed countries (e.g. Lonsdale et al., 2011; Pollitt et al., 1999). There is no previous work that has investigated environmental performance auditing undertaken by SAIs taking a global perspective. This book endeavours to fill this knowledge gap. The three main objectives of this book are: (1) to understand what has been the trend in environmental performance auditing; (2) to understand how environmental performance auditing is currently practised; and (3) to understand issues and challenges in environmental performance auditing.

This book is focused on environmental performance audits undertaken only by SAIs. It is a strategic volume aimed at practitioners, such as performance audit managers and auditors general, academics, and decision makers in government, donor agencies and other international organizations (e.g. UN bodies such as UNEP) who are interested in broader issues related to environmental performance auditing, such as relevant trends and capacity development. The book is not intended to be a comprehensive text on performance auditing. Not being about technical auditing, it is not aimed at theoretically inclined readers who want to see more use of models and statistical analysis.

Structure of the book

Chapter 1 (this chapter) establishes the need, purpose and scope and provides an outline of the book.

For the benefit of readers who are not necessarily experts in auditing, Chapter 2 starts with the conceptual and institutional framework of performance auditing. As performance auditing continues to be a work in progress, its identity and nature continue to be debated. The contemporary debate over the nature of performance auditing, such as the effectiveness of process or effectiveness of outcome, is briefly noted, followed by a description of how performance auditing is undertaken. Having established this context, the chapter differentiates the concept of environmental auditing in the public sector from that in the private sector. It further clarifies the difference between environmental performance auditing and the n...

Table of contents

• Cover
• Half Title
• Series Information
• Title Page
• Copyright Page
• Contents
• List of figures
• List of tables
• Acknowledgements
• Abbreviations
• 1 Introduction
• 2 Environmental performance auditing
• 3 Global trends in environmental performance auditing
• 4 Current practices in environmental performance auditing
• 5 Environmental performance auditing in three countries
• 6 Challenges and barriers
• 7 Perspectives and prospects
• Appendix: methods for evidence collection
• Index