Meeting Overview

Following the working group’s special session on COVID-19 in May, on July 29, 2020, the U.S. GAO hosted the first of three planned virtual meetings to replace the in-person annual INTOSAI Working Group on Financial Modernization and Regulatory Reform meeting. Sixteen SAI members joined the meeting. The SAIs provided updates on audits related to the COVID-19 pandemic and ongoing working group efforts, learned about the INTOSAI COVID-19 Initiative, and discussed goals and ideas for the 2021-2023 work plan.

Meeting Attendees

The following SAIs attended the meeting: China, Canada, Estonia, European Court of Auditors. Finland, Germany, Indonesia, Italy, Korea, Mexico, Pakistan, Poland, Qatar, Russia, Sweden, and United States.

COVID-19 Work and Impact on Operations

Many of the SAIs are currently conducting or plan to conduct audits related to the COVID-19 pandemic. Examples of existing or planned audits related to COVID-19 include economic recovery efforts such as governmental support of businesses, liquidity support, and income support programs; risk management of loan guarantees; economic impact of the crisis; reserve requirements for commercial banks; and fiscal/budgetary impact. Additionally, many SAIs are examining issues related to pandemic preparedness and disaster management, such as procurement of personal protection equipment. A few SAIs said that auditing in real time has presented challenges such as attempting to audit programs as they are being designed by the government, information being classified, and tight deadlines.

Operationally, many of the SAIs said that they are operating under a work-from-home posture, some through the end of the calendar year. A few SAIs are returning to the office. In a digital working environment, a few SAIs said that they encountered challenges such as slowness in obtaining information from audited agencies and obtaining paper documentation.

Ongoing Working Group Efforts

The group discussed ongoing working group efforts, including a newly-developed website and audit authority survey results.

Website

GAO presented the capabilities of the working group’s internal website. Participants will need to create an INTOSAI website user account, which can be completed here. The website allows members to create and post on forums to exchange information. During the meeting, members expressed interest in using the website to share information.

For access and other questions related to the website, please email [email protected] and [email protected].

Audit Authority Survey Results

The China National Audit Office (CNAO) presented the results of the 2019-2020 audit authority survey, which describes mandates or authorities that SAIs have or have performed in oversight of various audit areas. Of the 22 SAIs that responded to the survey, generally about half have audit authority in each of the audit areas the survey asked about. For each of the audit areas, some SAIs with audit authority have also performed audits. However, SAIs have generally not performed worked in the following areas: hedge funds or other social funds; financial technology; credit rating agencies; and security or insurance fraud. The summary results will be posted to the internal working group website.

INTOSAI COVID-19 Initiative

The program manager for the GAO International Auditor Fellowship Program and the INTOSAI COVID-19 Initiative, Mark Keenan of GAO’s Office of Strategic Planning and External Liaison, introduced the Initiative and talked about projects in development. The Initiative falls under the auspices of the Policy, Finance, and Administration Committee (PFAC) and is led by U.S. GAO, in consultation with the General Auditing Bureau of Saudi Arabia and all members of the PFAC. The group has supported SAIs in  maintaining continuity of operations; sharing practical, technical, and audit-related information across INTOSAI members; and developing a high-level lessons learned document for external stakeholders such as the United Nation as and the World Health Organization that will focus on preventing or minimizing similar situations in the future. Projects underway include a proposal to provide up to 700,000 EURO of surplus INTOSAI funds to SAIs that would assist with their continuity of operations during the pandemic. The Initiative welcomes submissions to its website and lessons-learned document from the working group. GAO will conclude this short-term initiative at the end of September 2020 and transition it to a longer-term INTOSAI COVID-19 effort under the auspices of the Supervisory Committee on Emerging Issues.

Working Group Discussion on Work Plan and Future Goals

The group summarized accomplishments from the 2018-2020 Work Plan and discussed ideas for the 2021-2023 Work Plan.

2018-2020 Work Plan

Group accomplishments from the 2018-2020 work plan included the following.

Goal 1: Tools and knowledge-sharing opportunities

Identified contacts for international organizations including the International Monetary Fund (IMF), Financial Stability Board (FSB), and Basel Committee on Banking Supervision and obtained speakers for working group meetings.
Surveyed SAIs on their audit authority, with the intent of providing this information to the IMF as part of efforts to collaborate on future financial sector stability assessments.

Goal 2:  Mechanisms for sharing information between SAIs and international organizations

Held three working group annual meetings to discuss and share information on financial modernization and regulatory reforms and emerging risks.
Created internal and external websites for the working group and are currently populating the internal website with discussion board topics and background documents.

Goal 3: Track and synthesize information on the nature, scope, and status of financial modernization and regulatory reforms and identify gaps in working group focus.

Identified nonbank financial institutions as a potential topic for a parallel audit and began researching best practices and models for conducting parallel audits.
Obtained survey responses on SAI audit authority from members and SAIs in other significant economies
Developed three annual reports that summarized SAI work on topics relevant to group.

2021-2023 Work Plan Ideas

The group discussed potential areas of focus for the 2021-2023 Work Plan.

COVID-19
SAI Canada, SAI France, SAI Finland, GAO, SAI Sweden, and the European Court of Auditors believe that work related to COVID-19 will be a focus for the foreseeable future. Such work might include government loan guarantees and impact on bank balance sheets.

Climate Finance and Sustainable Development Goals (SDG)
SAI Finland and SAI Canada expressed interest in climate finance and social sustainability, including the relationship between sustainability and COVID-19 recovery plans.

Finland suggested linkage between COVID-19 recovery to climate change, such as asking “what kind of new financing mechanisms and regulations are needed to support the economic and ecological sustainability in recovering from and preparing for a global crisis?” and “How do the recovery plans take into account the issues related to carbon neutrality, and other aspects of sustainability?” SAI Canada agreed with this approach.
SAI Russia said it leads the INTOSAI Working Group on SDGs and Key National Indicators and thought it would be good to communicate with other groups on this subject. Several SAIs agreed that the working group could partner with the Working Group on Environmental Audit for speakers.

Financial technology, shadow banking, and cybersecurity
SAI France, and SAI Indonesia, and SAI Sweden expressed interest in financial technology, such as digital currencies, other payment system innovations, and shadow banking.

SAI Indonesia and SAI Sweden expressed interest in learning about audit methodologies from SAIs that have performed audits of financial technology.

GAO said that plans are still in place for a speaker on cybersecurity for a future meeting.

Central Bank interventions and macroprudential supervision
CNAO and SAI France expressed interest in central bank intervention instruments, such as asset repurchases and swap lines and monetary policy effectiveness.

SAI Canada, SAI France, SAI Sweden, and SAI Italy expressed interest in macroprudential work. While SAI Italy is interested in audit competencies in this area, the Italian central bank has high degree of independence from the government and the SAI Italy does not audit the monetary policy of the central bank.

Financing for Small Medium Enterprises
CNAO expressed interest in this area.

Big Data analysis
CNAO expressed interest in this area.

IMF loan program
SAI Indonesia expressed interest in learning about audits of loan programs, in particular as it pertains to the use of loans obtained through the IMF.

Connection with International Organizations
CNAO said that one of the group’s main goals is to connect with international organizations such as the Basel Committee. CNAO has regular relationships with Basel and Basel representatives have expressed interest with providing regular information to the group. CNAO suggested modifying the new work plan to include better internal sharing between SIAs, which can include contact information for relevant external entities.
SAI Sweden agreed that it is important to interact with international organizations to obtain their perspective and to reach out to IMF about establishing audit authority as FSAP criteria.

Other comments
SAI Sweden said that a parallel audit is of less interest while early-warning system on emerging risks are of interest.

Next steps for Work Plan
GAO will produce a provisional work plan based on member input.