The auditor’s handbook

The auditor’s handbook

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From tracking the distribution of cross-country aid to the flow of black money, use of geospatial technology is fast gaining ground in the audit world. Lack of awareness and the tendency to be secretive about public finances are the only hurdles

On December 26, 2004 an earthquake measuring 9.1 on the richer scale in the Indian Ocean set off a series of devastating tsunamis along the coasts, killing over 230,000 people in 14 countries. Indonesia was the hardest hit, followed by Sri Lanka, India, and Thailand.

As more than 100 international agencies joined hands for a $4.5-billion rebuilding effort, a group of supreme audit institutions from the affected countries and from those involved in relief work formed a taskforce to build an audit trail. The results found several gaps in the way funds were being routed, and also pointed to inconsistencies in rebuilding and rehabilitation.

This was the first systematic joint venture between various national audit organisations under the umbrella of the International Organization of Supreme Audit Institutions (INTOSAI) where geospatial information and technologies were systematically and extensively used. Google Maps and location coordinates were combined with real-time satellite pictures as layers of GIS were created to pinpoint exact location of damages and track the relief and rehabilitation efforts. The disaster was unprecedented in many ways, including the loss of life and damages, involving the largest number of donors and implementing agencies, and highest amount of aid per affected person. The complexities within the humanitarian aid sector, combined with those of the disaster, led to huge challenges for accountability and transparency of the aid flows.

In addition to making sure that the rehabilitation work happened as planned, it was also important to ensure contributors that the aid indeed went to the right people, says Saskia J. Stuiveling, President, Court of Audit, The Netherlands, who was also the chair of the INTOSAI Tsunami Task Force.

The power of geo
INTOSAI was quick to acknowledge the fact that one of the main lessons from this was the added value of geospatial data for planning, coordination, monitoring, accountability and audit of disaster-related aid. It concluded that “in order to ensure long-term accountability and transparency, geospatial data should be immediately included in the information structure of agencies involved”.

INTOSAI is now urging nations and agencies to use geoinformation and GIS, and in its XXI INCOSAI (its triennial Congress) in October endorsed a set of International Standards for Supreme Audit Institutions (ISSAI) with regard to the use of geospatial information in auditing disaster management and disaster-related aid.

Geospatial information, provided the images are most recent and their resolution is adequate, can provide valuable and cost-effective information for auditors, especially for selecting projects/areas to be audited on the spot,” says Aidas Palubinskas, Press Officer, European Court of Audit.

Agrees Simon Thompson, Director, Global Commercial Solutions, ESRI: “Understanding where the money flows and how people are connected, and geographical/spatial analysis of all this is the ultimate connector.” Esri has been pioneering the use of geoinformation in audit space and in addition to providing solutions, has tied up with various audit institutions and independent organisations to forward the cause of transparency in public finances and welfare programmes.

Examples of effective use of geospatial technology to audit aid programmes abound, including the United Nations World Food Programme, which uses satellite images and GIS to locate refugees and plan food distribution. The International Criminal Court uses satellite images to locate refugee camps and gather evidence on human rights violations. The European Commission’s Directorate-General for Agriculture has successfully used GIS for monitoring agriculture through remote sensing.

Location is the key element in a lot of government policies. “So if we could combine public finance policy with geotechnology, it could not only help in implementing a better policy but also help us know more about the spendings,” underlines Stuiveling.

“It is critical for governments, development partners, and civil society to have a clear picture of who is doing what and where,” says Josh Powell, Innovation Team Manager, AidData, a partnership between Development Gateway, College of William and Mary, and Brigham Young University, that delivers information solutions to people on the frontlines of international development work. Powell adds that funding information becomes tremendously valuable when made open to the public and mapping the information to make it interpretable adds to this value. This information can then help to highlight gaps in service delivery, overlaps in donor activities that could be better coordinated, and location-specific activity information which can be used by citizens to hold government and donors accountable.

While national audit institutions have used location-specific information and GIS for some time now, these have by far been limited to auditing of natural resources like forestry or river water etc. Initiatives in the area of public finance and welfare have largely been isolated, uncoordinated and sporadic to say the least. The encouraging aspect, however, is the importance some audit institutions have begun to attach to geospatial technology.

ECA or the European Court of Audit, which audits the EU budget, is a regular user of geospatial information. Except for certain military areas, ECA has unrestricted access to all geospatial information available with the Member States. Giving an example to illustrate the importance of geoinformation, Palubinskas explains that EU legislation requires the Member States to make use of GIS techniques like satellite or aerial orthoimagery to carry out land-use cross-checks to qualify for the EU agriculture aid. The ECA’s mandate is also to check if the Member States are indeed using these techniques.

Among the others, the Indonesian Supreme Audit Institute (BPK) and the Netherlands Court of Audit (NC A) were quick learners from IN TOSAI’s tsunami aid tracking project. Today, BPK uses geospatial technology in all phases of its workflow, and has focus on audit of natural disasters aids, natural resources and environment & forests in particular. It has even created a guidance paper on using geospatial information in auditing forestry inventory. “We collaborate with several departments dealing with geoinformation such as the National Institute of Aeronautics & Space and the Ministry of Forestr y for geospatial data/information,” says Dr Ali Masykur Musa, Member, Audit Board, Republic of Indonesia. In addition to being the source of geospatial data/information, BPK also cooperates with these entities for training.

BPK’s Dutch counterpart set up a knowledge centre in 2007 to explore how GIS and geospatial data could be used in auditing. Today, geospatial is at the core of NCA’s functions, as it uses GIS and satellite imagery in projects like tracking the flow of Dutch funds for international programmes to combat money laundering and terrorist financing. The technology is also used to track social programmes. “By providing a visual representation, NCA can account for where money has gone and measure the success of each project. Things become more explanator y when you have a map,” reiterates Stuiveling.

In fact, INTOSAI’s international standard with regard to the use of geospatial information in auditing disaster management and disaster-related aid was developed by NCA as vice chair of the working group.

Stuiveling, however, is not new to the use of geoinformation in audit work. About 20 years ago, as INTOSAI’s Chair of the Global Working Group on Environmental Auditing, she oversaw what could perhaps be termed as the first use of geospatial data and technology in cross-country audits. There was large-scale deforestation in the rainforest between Peru and Brazil, and the two governments accused each other. The audit offices of the two countries joined forces to get the real picture. They used maps, aerial imagery and field observations to find that the forest was logged in such a way from both sides of the border that a road cut right through it. The results of this audit could not have been obtained and visualised so clearly without geospatial information, she says.

Examples galore
A number of national audit institutions have been using geospatial technology in projects from time to time though they have not made it a part and parcel of their workflow completely. From conducting audits on the accessibility of health services for US military veterans to auditing housing assistance programmes, the United States Government Accountability Office (GAO) is a regular user of this technology and even has a dedicated unit for this purpose. Thanks largely to GAO’s active encouragement, audit offices of several states, cities and counties in the US have also taken to using geoinformation. Some like the Marion County Auditor Office have set up a full-fledged GIS website for public use.

In an interesting case, the City of Portland in Oregon used GIS to identify housing units receiving subsidies from multiple city programmes and mapped their geographic distribution, drawing together information that had not been available previously because city subsidy programmes had never been combined in a single audit. The city has also conducted an interesting audit on various tax measures. The data on the recipients of the tax measures was geocoded with their zip codes. The analysis showed that although individual tax measures were in compliance with the rules and regulations, the accumulation of tax measures by various individuals was not. The audit therefore saved the city valuable public funds.

The Delaware County Auditor’s GIS office, established in 1994, has received numerous awards for exemplary and innovative use of GIS technology in property taxation as well as other applications. The Auditor’s GIS office is the source of the majority of spatial data specific to the county, including parcels, roads, municipal boundaries, township boundaries, flood plains, census data, topography etc, which can be downloaded for free from its website.

Although there is some good work happening in the US in the use of accurate location and mapping for auditing, a lot of this work is not coordinated and there is not enough tracking of government programmes and citizen welfare, says Nancy K. Di Paolo, Chief, Congressional & Intergovernmental Affairs. While some attribute it to the general lack of awareness about the specifics and potential of this niche technology, some insiders also feel there is an inherent reluctance among auditors in sharing information, thus making these organisations work in silos.

For instance, the National Audiit Office (NAO) and the Audit Commission in the UK, which audit spendings of the national and local governments, respectively, are also known to be heavy users of GIS and geoinformation. NAO even has a special unit that supports the use of geospatial information, but the exact level of technology adaptation is not clear because there is very little information available on this. Similarly, the Comptroller and Auditor General (CAG) in India is known to be using geoinformation and several geospatial techniques — satellite imagery from NRSC to self-developed GIS — for auditing natural resources or even welfare projects, but it is not open to talking about its application in these projects.

Australia is another example with initiatives such as audit of health services to natural resources & forestry. An interesting project was by the Department of Community and Social Inclusion involving housing for Indigenous Australians living in remote communities in South Australia. The staff had to audit the condition of each of the housing programme’s 1,200 homes — some located thousands of kilometres from the unit’s main office in Adelaide. DCSI turned to GIS to transform the auditing process — from information capture and storage, to publication and reporting. Significant efficiency improvements have been achieved, with the time taken for asset audit process reduced to 10 minutes per dwelling from one hour previously.

A number of smaller countries have also joined the fray. For instance, NCA is assisting the Control Chamber of Armenia in making use of IT resources and GIS. The audit office in Hungary has received EU subsidy for developing a project aimed at raising ethical standards in its public sector. The specific aim of the project is to produce a GIS-based online ‘integrity risk map’ of the public sector in Hungary. As part of a EU twinning project, NCA is also assisting the Office of the Auditor General in Kosovo to design a system of efficiency audits. It has also been helping the Tunisian Court of Auditors and the Aruban audit office since 2007.

Open spending & transparency
With government spending increasingly coming under the lens and effective governance taking centrestage, authorities are moving towards opening funding data and making it freely available on the Web. While this means more transparency, this also means greater audited work involving maps and visualisation. “It is an illusion to think that with one audit office you can picture the truth about reality on all government money streams and policies. But open spending enables the people for whom the money is meant to see how much money is coming their way, what is the meaning of that money and if that really makes a difference,” underlines Stuiveling. Plotting this data in real-time on a map brings transparency to the whole process.

“Open data funding allows citizens to see what is being done with their tax money; it also helps prevent fraud, waste and abuse of this money,” points out Di Paolo. Also, such a system provides complete data to oversight officials, enabling them to prioritise work and have more complete audits. “Consistent and accurate open data eases access to spending information at the federal, state and local levels,” she adds.

The recovery.gov or the Recovery Accountability & Transparency Board (RATB) created by the American Recovery & Reinvestment Act of 2009 (ARRA) is an excellent initiative in this regard. In keeping with its primary mandate, the website is full of interactive visuals and maps to provide taxpayers with user-friendly tools to track how and where recovery funds are spent, and also an easy way to submit allegations of fraud, waste or abuse of ARRA funds.

Though there is no active collaboration yet with any national agencies for geospatial data, RATB’s accountability division works with the Federal Inspectors General and the Department of Justice to map fraud indicators and such, says Di Paolo. However, while RATB’s mandate has expanded to provide oversight of other types of Federal spending, there is no coordination with welfare agencies in the US or abroad.

“Many of the countries where we work have placed a significant emphasis on transparency and accountability,” points out Powell, whose organisation collaborates with agencies responsible for collecting, reporting, and coordinating aid activities in respective countries. For example, Development Gateway worked with the International Economic Cooperation and Coordination Division (IECCD) in the Nepal Ministry of Finance to collect over 21,500 project locations for approximately 600 projects from roughly 30 donors. This dataset covers approximately $6 billion in aid commitments and $3 billion in disbursements, and is publicly available through the ministry’s new Aid Management Platform portal. It also worked with various agencies to add context to the project location information referenced above.

The Uganda Bureau of Statistics is an excellent example of a national agency working closely with the AidData team to contribute valuable geospatial data on poverty rates, literacy, water access, and various other important indicators to the location coding work. The Ugandan government is also evolving a system where its national audit office performs the bulk of the accounting work for the aid provided, thereby reducing the pressure on the government. Similarly, Malawi uses a dynamic mapping tool to track and report on the country’s external funding. Some of the leaders in this effort include Timor-Leste, which is working to map all development finance activities; Kosovo, which was one of the first countries in the world to share aid information via a public portal; and Honduras. adds Powell. “The legitimacy of what the governments are doing will rise if people think they are taken seriously. It is very important for a democracy to share the data now that the technique is available,” stresses Stuiveling

What lies ahead?
In a globalised world of closer international cooperations, the problems faced by national audit bodies are similar in nature. Public resources are being spent increasingly across national borders such as on transport projects or conservation, development projects or international disaster aids, making it imperative that national audit institutions join hands to track the whereabouts of funds.

Government audit institutions, Parliaments, and national governments have a common interest to ensure efficient and effective financial management at national or supranational level, according to Dr Josef Moser, former INTOSAI Secretary General. While international cooperation among national audit institutions is expected to create added value for governments, it is also needed in project implementation to avoid gaps in audit coverage. And the common link to all this is location information. So how geared up is the geospatial industry in taking on this challenge?

While lack of awareness among users remains a big issue, the attitude of the geospatial industry itself, which has little to offer in this space, is also a big hurdle, leaving audit organisations to develop their own maps and analyses with help from various sources. Thompson, however, blames the system of information security and chain of custody within government authorities for this. “They want 20th century workflows with 21st century technology and early 20th century rules for data stewardship. That doesn’t work!”

Palubinskas too believes that the geospatial industry is geared up to meet the needs of the audit industry, but resolution and update regularity are big issues.

However, with information moving to cloud, this tendency of data secrecy is likely go away with time. “Think how easy compiling reports for auditing will become — mine the data, collate using geo, connect disconnected items/incidents/ ideas using location as a steel thread…” adds Thompson.

Stuiveling feels auditors are also not looking outside their normal processes to check new methods. Further, she believes the practice of using geoinformation should not be for infrastructure projects only where geospatial is more or less naturally present. “The government and the geospatial world should work together in other domains like social welfare, deprived areas, neighbourhood projects, environment,” she adds.

Agrees Dr Musa, who also feels that the main focus of geospatial technology should not be in audit but on overseeing public welfare works and projects. While its use in audit work will follow the capacity and maturity of the technology, there is a clear need for auditors to learn more about the geospatial world to optimise its use, he adds. For that, while auditors have to learn from GIS experts, there is also a clear need for exchange of experiences and knowledge among national audit bodies too.

So where is the future headed?
“It is not a structural place in the technique of the auditors to use geospatial techniques, but we must encourage its use so that it becomes a normal tool for them,” stresses Stuiveling. Relentless advocacy by NCA — within and outside the Netherlands — is just a case in point. In addition to its innovative use in areas like auditing of facility management of educational institutions, real estate management by ministries and public agencies, access to healthcare services, and open geospending for urban areas, NCA is also actively helping several national audit bodies to adapt this technology.

Powell points to the pioneering work that his organisation has accomplished. While Development Gateway is partnering with Esri and has developed a sophisticated GIS server technology to partner country governments at reduced costs, it has been an active developer of geospatial software and tools. “We are also working closely with the Brigham Young University and the University of Texas at Austin, as part of a five-year agreement with the USAID to continue developing new geospatial tools, data and methodologies to enhance the way the development industry uses GIS in resource tracking, monitoring and evaluation, auditing, and citizen engagement,” he explains.

The next step is using these data to understand the results of aid and government spending sub-nationally. For example, education indicators at different time periods can be compared with intervening financing activities. These data can also help auditors to “follow the money” through its various stages of implementation, often through multiple disbursements between donors, government, and NGOs/implementing agencies, to assess whether funding is reaching its intended beneficiaries.

The strength of geospatial technology lies in it as a source of information and collaboration. “The goal should be making people more aware and accountable as we shrink the time from information collection to sharing and analysis. How we can democratise the capture and distribution of data across many people and provide a more complete version of the truth — one that is more singular, timely and holistic?” says Thompson.

And to do that, one has to shift the thinking away from traditional view of GIS/geospatial as software technology — from it being something based on a computer to an enabler, which is available on demand on any device.

Auditors of course are yet to try tools like social media and crowdsourcing. In addition to ease of use and apps, media in all its forms — social, video, photo etc — is expected to be a really big part of the change as geo-social analysis becomes an immensely powerful thing. As Thompson says: “Think of an implication like the Arab Spring.”