Business: the neglected stakeholder

Feb 11, 2016

Much has been made in recent years of the need for Supreme Audit Institutions (SAIs) to engage with our key stakeholders. We need to reach outside our organisations to make sure that we learn: what the concerns of citizens are; where government services are under-performing; and where public funds are at risk. We also need to reach out to these key stakeholders to make sure that our messages and recommendations get widely disseminated, are understood and implemented.

When most SAIs think of stakeholders this is usually taken to mean civil society organisations, parliaments, auditees, or the media and very rarely business. Yet the existence of effective, and independent SAIs should matter to business; SAIs and business should be natural allies.

When companies invest in an economy they want to know that the public finances are well managed and the taxes they pay will be fair, efficiently collected and properly used. The routine financial audits conducted by SAIs can provide a degree of assurance that a government is managing public finances well and if it is not that prompt action is being taken to deal with weaknesses.

Businesses interact with the state at many different points – for example when registering new businesses, paying taxes, complying with regulations and when selling goods and services to the state. They often complain of the costs of such interaction – claiming that it takes too long to deal with government, that the regulations are excessive, or that goods are pilfered during transit through customs at ports. Some of this at times may be special pleading, a way of trying to reduce costs and not pay a fair and reasonable amount into the public coffers. But equally many of these complaints are justified and too often states interact with business in ways which are a drain on the economy and reduce the overall rate of growth.

Well chosen performance audits or value for money studies can help highlight areas where government interactions with business can be improved and costs reduced. For example, when the UK National Audit Office examined whether government was paying business promptly for goods and services, we found that:

UK businesses welcomed the government’s commitment to pay invoices early. However, there had been a disappointing lack of effort by government to check whether the implementation of the policy was actually helping small to medium size enterprises. We were also seriously concerned about the prompt payment performance figures publicly reported by departments. These were overstated by the four departments we looked at. Paying government suppliers on time HC 906 January 2015

Paying businesses late can be very costly for small businesses and in some cases force them to close down. Efforts by SAIs to improve government performance in this area can have serious long-term economic benefits. This is one example but there are multiple other studies which SAIs could undertake and which would have beneficial impact on business. For example, examining whether procurement rules are operating in a transparent and effective way, and whether tax repayments are made promptly.

Of course some individual businesses may not want reforms to occur believing that ineffective or corrupt government systems mean they can bribe their way to success but business associations and leaders usually take a more enlightened view. They are often keen to engage more closely with SAIs and this engagement can take many forms including:

  • Talking at annual conferences of business associations so that members better understand the work of SAIs and the potential benefits to business;
  • Encouraging business associations to bring to the SAI’s attention areas of risk, waste, inefficiency;
  • Communicating the results of key audits to business through articles in business journals or on their websites – encouraging them to monitor implementation of recommendations;
  • Ensuring that in the SAI’s annual plan of performance audit there are always a few which can be seen to have a direct relevance to business; and
  • Demonstrating to business that SAIs are open, transparent, well governed institutions which practice what they preach and can be beacons for both the public and private sectors.

INTOSAI is currently developing a new strategic plan and is looking at how it engages better with all its key stakeholders. Developing links with business will grow in importance and it will be useful to share more widely examples of how our work has helped businesses in their interaction with the state.

David Goldsworthy

Head of International Relations and Technical Cooperation, National Audit Office - ‎United Kingdom

3 Comments

  1. Very interesting new perspective of how SAIs could increase their benefits to the various components of the society. Thank you David for sharing this. Abdessadeq from SAI of Morocco

    • My pleasure Abdessadeq. I strongly believe that positioning SAI’s in this space will make a real economic impact as well as enhancing our reputations.
      David

  2. Thanks David.This is very interesting as such issue is also occurring in Kiribati. Grateful if I can obtain copy of your PA mentioned in this Journal
    Toromon SAI Kiribati