Audits can be a very useful integrity protection mechanism. They are used as both part of the routine oversight and supervision of the electoral process by the Official Oversight agency, as well as an investigative tool when malfeasance or corruption is suspected. Audits can help ensure that election managers and political parties receiving public funds comply with the law and are held accountable for their actions. Audits increase transparency by opening records and making audit reports public.
The underlying principles for an audit363 are that the persons and institutions entrusted with the handling of public resources are responsible for applying those resources efficiently, economically and effectively to achieve the purposes for which the funds were given. They must also comply with the applicable laws and regulations that come with public funding.
Public officials, and others managing and spending public resources, are responsible for establishing and maintaining effective controls to ensure that the appropriate goals and objectives are met; that resources are safeguarded; laws and regulations are followed; and that reliable data is obtained, maintained and fairly disclosed. These persons are also accountable to the public, and to other levels and branches of government, for the use of the public resources, and, as part of this accountability, must provide appropriate reports on a timely basis.
The type of audit to be conducted depends on the objectives of the audit. It can be a performance audit to assess the performance of election authorities or it can be a financial audit to look at the accounting books to see how the funds were utilized. It can be a combination of the two, or it can have a specific purpose such as looking at internal control mechanisms.
Performance audits independently assess the performance of election managers in order to improve public accountability and facilitate decision-making by those with the responsibility to oversee or initiate corrective action. Audits can help provide credibility to the management, systems and reporting of election managers as they objectively verify and evaluate manager reporting and performance. Audits of candidate and political party campaign finance reports can verify that the funds were used according to the requirements of campaign finance laws and were not spent for other purposes.
Unless legal restrictions or ethical considerations prevent it, audit reports are usually made public. This helps increase the transparency of election management and its oversight. It also increases accountability through the wide dissemination of information so that the citizens, their elected representatives and the electoral managers can assess the integrity, performance and stewardship of the publically funded election activities.
Performance audits
A performance audit is an objective and systematic examination of evidence for the purpose of providing an independent assessment of the performance of the election management or policy bodies, the agency that regulates campaign finance or other beneficiary of public financing, such as candidates and political parties.
Performance audits provide information on how the process is working, identifies weaknesses or areas of noncompliance, and makes recommendations on how to improve the process. The facts uncovered by an audit, and the audits' evaluation and recommendations on integrity issues, can help direct election managers to correct their problems and to make the process more effective.
Performance audits can include economy and efficiency, and program audits which determine whether the election management body, or other related agencies, are acquiring, protecting and using their resources (such as personnel, property and space) economically and efficiently. This is an important mechanism in combating corruption and mismanagement.
Performance audits look at:
- the cause of inefficiencies or uneconomical practices;
- whether the organization has complied with laws and regulations on matters of economy and efficiency;
- procurement practices and whether they are sound;
- the type, quality, amount and cost of resources being acquired and whether they are appropriate;
- the protection and maintenance of resources and if they are adequate;
- duplication of efforts by employees, idleness, overstaffing and work that serves little or no purpose;
- the use of efficient operating procedures;
- whether an optimum amount of resources (staff, equipment and facilities) are used to produce or deliver the appropriate quantity and quality of goods or services in a timely manner;
- compliance with legal and regulatory requirements on the acquisition, protection and use of the entity's resources;
- the adequacy of the management control system for measuring, reporting and monitoring a program's economy and efficiency; and
- if the reported measures of economy and efficiency are valid and reliable.364
Program audits can include:
- determining if the desired results, or benefits established by the legislature or other authorizing entity, are being achieved;
- assessing the adequacy of the management control systems for measuring, reporting and monitoring program effectiveness;
- measuring compliance with the significant laws, and regulations applicable to the program and the elections;
- assessing whether the objectives of a new, or ongoing program are proper, suitable or relevant;
- determining the extent to which a program achieves a desired level of program results, and identifying factors inhibiting satisfactory performance;
- determining whether management has considered alternatives to carry out the program that might provide the expected results more efficiently or at a lower cost;
- determining whether the program complements, duplicates or conflicts with other related programs; and
- identifying ways of making the program work better.
Financial audits
Economic corruption can be a major integrity problem for an election management body. It usually has a large dispersed staff, hires thousands of temporary workers and procures millions of dollars worth of electoral equipment and materials. Pay may be low and workers unhappy. Lucrative contracts can attract offers of kickbacks or opportunities for embezzlement. Financial audits, especially those done on a regular basis, can detect and deter economic corruption and financial malfeasance.
Financial audits determine whether the financial reporting done by the institution or candidate accurately presents its financial position, and that the accounting is done in conformity with generally accepted accounting principles.
Financial audits can also determine whether:
- the organization has adhered to specific financial compliance requirements or its own internal control structure over financial reporting; and
- the safeguard system to protect assets is suitably designed and implemented to achieve the control objectives.
To make these determinations, financial audits usually look at:
- financial statements, financial records and banking information;
- internal controls to ensure compliance with the legal and regulatory requirements for procurement, bidding, accounting and reporting on grants and contracts; and
- internal controls for financial reporting and safeguarding assets.
Accurate, written audit reports
To serve its purpose as an integrity mechanism, audits should be done objectively, and without interference by other agencies or persons. (For more on this, see Integrity Issues in Oversight.) Audit reports must also be accurate and fairly present the significant findings for each audit objective. Including sufficient, competent and relevant information in the report can help the organization being audited, oversight agencies and policy makers understand the situation and determine the corrective action to be taken.
Audits are carefully documented and a written report is made which is usually made public. These reports usually describe the objectives and scope of the audit and the methodology used. They also include significant findings and recommendations. Supporting documentation, which substantiates the report and its findings, is usually attached and is also made available for public inspection.
Complete transparency of the audit's purpose and findings can help increase public understanding of the problems uncovered, or, on the other hand, help increase the credibility of the process if nothing significant is found. Complete transparency can also help limit the extent of misperceptions that can arise if a politician or candidate uses audit findings selectively or out of context as a campaign or political issue.
Effective audit reports include recommendations on how to correct problem areas and improve operations. They can also include recommendations on how to improve compliance and management controls.
In addition, audit reports usually:
- certify that the audit was made in accordance with generally accepted auditing standards. If this was not the case, the audit report explains why they were not used, and what standards were used;
- report all significant instances of noncompliance witnessed and all significant instances of abuse found during, or in connection with, the audit. In some circumstances, auditors report illegal acts directly to parties external to the audited entity. Auditors usually do not determine illegality- that is for a court. But auditors assess the prevalence and consequences of noncompliance, relate this to the number of cases examined and quantify it in term of monetary value if appropriate;
- report on scope of their work on management controls and any significant weakness found during the audit;
- report on the views of the responsible officials of the audited program concerning their findings, conclusions and correction plans;
- report on noteworthy accomplishments, particularly where management improvements in one area might be applicable elsewhere;
- are complete, accurate, objective, convincing and as clear and concise as possible. This includes providing appropriate background information, perspective, presenting evidence and portraying findings correctly. The presentation of the entire report is balanced in content and tone;
- are distributed in a timely manner to officials interested in the findings, including those designated by law or regulation, those responsible for acting on the findings and recommendations, and those at other levels of government who have provided assistance to the program; and
- the findings that are unrelated to audit objectives are communicated in writing to the management of the audited organization.
Whether auditors reports are used as evidence in a criminal case depends on the system. For example, in Israel, auditors reports cannot be used in legal proceeding but are admissible as evidence in a disciplinary proceeding.365 Other systems allow the prosecution to use of audit reports in a court proceeding.
