Phan Truong Giang & Le Hoai Nam By State Audit Office of Viet - - PowerPoint PPT Presentation

THE STATE AUDIT OFFICE OF VIETNAM (SAV)

By Phan Truong Giang & Le Hoai Nam State Audit Office of Viet Nam 8/2016

CONTENTS

• 1. State Audit Office of Vietnam – an Overview
• 2. Extractive Insductry and Auditing EI: an Overview
• 3. Policy and Legal Frameworks Approach: Experience and Practices in

Vietnam

 Establised in 1994 (history of 22 years)  In 2005, the National Assembly passed the first the State Audit Law  In 2013, the legal status of SAV and the Auditor General was officially

constitutionalized in the Constitution

 The SAV is structured in a centralised and unified organizational model which

comprises of central Head Office (8 specilazed Audit Depts) and regional offices (13 R.Os)

State Audit Office of Vietnam – an Overview

Vision: “Being an accountable, trustworthy, professional and modernized public financial audit institution that makes important contributions to the national industrialization and modernization in line with international practice and standards”. Mission: “Strengthening the

• perational

capacity, legal effectiveness, performance quality and efficiency of SAV as a useful tool of the State for verifying and supervising the management and use of State budget, money and assets”. Core Values: “Transparency, Quality, Efficiency, and Continuously Value- added”; Core values of auditors: “Fairness-Integrity- Professionalism-Honesty”.

SAV’s Development Strategy – Vision, Mission and Core Values

The SAV Development Strategy by 2020

The 2015 State Audit Law (take effect as from 1st January 2016)

 SAV’s functions: to assess, certify,

determine and make recommendations on the management and use of public finance and public assets

 SAV’sTypes

• f

Audit: financial audit, compliance audit and performance audit

 The objects of SAV audits: the

management and use

• f

public finance and assets, and those activities of audited entities in respect to the management and use of public finance and assets

Enhancing the international relations and cooperation on Performance Audit, Extractive Industry Audit and Environmental Audit

 Enhancing

cooperation, exchange and share professional experiences

 Strengthening

multilateral and bilateral cooperation

 Mobilizes the support from

SAIs, international partners and donors

 SAV will be the Chair of

ASOSAI for the term 2018- 2021

Extractive Industry in Vietnam

There are several main areas of extractive Industry in Vietnam, such as:

• Natural Gas and Oil
• Coal
• Other Minerals: Gold, Iron, Aluminium Bauxite, Titan, Apatit....

Contributing for around 10-11% GDP and 25% total revenue of Vietnam

The SYSTEM OF LEGAL DOCUMENTS OF VIETNAM

National Assembly passes Constitution Code/Law Resolution National Assembly Standing Committee passes Ordinance Resolution President issues Order Decision Government promugates Decree Prime Minister Decision Procurator General of the Supreme People’s Procuracy, Chief Justice of the Supreme People’s Court Circular Ministers, heads of ministerial-level agencies Circular State Auditor General Decision People’s Councils at all levels Resolution People’s Committees at all levels Decision (and Directive under the 2008 Law) Local administrations in special administrative-economic units Legal documents (introduced for the first time in the 2015 Law)

Policy and Regulations Related to Extractive Industry in Vietnam

Mineral Law, 2010; Law on Environmental Protection; Oil and Gas Law Decree No.15 of the Government detailing the Law on Minerals, regulated:



Mineral activities must comply with mineral strategies and master plans and connected with the protection of environment, natural landscape, historical-cultural relics, scenic places and other natural resources while assuring national defense, security and social order and safety.



Mineral activities may

• nly

be carried

• ut
• nly

after

• btaining

permission from competent state management agencies.



Mineral exploration must fully evaluate the deposits and quality of all kinds of minerals in an exploration area.



In mineral mining, socio-economic effectiveness and environmental protection must be considered basic criteria for making investment decisions; and advanced mining technologies which are suitable to the size and characteristics of each mine as well as each kind of mineral shall be applied in

• rder

to recover minerals to the maximum.

Auditing Extractive Industry in SAV  Audit procedures: Audit Standards and Financial Audit

Procedures in general. There is no specific audit procedure/guideline for an extractive industry audit

 Type of audits: Compliance

Audit, Financial Audit and Program Audit. However, we were now mainly focusing on financial and compliance audit

Auditing Extractive Industry in SAV (Con’t)

 The financial audit of entities which are responsible for

managing extractive industries

• Ministry of natural resources and Environment
• General Department of Geology and Minerals
• Department of Survey and Mapping;
• Vietnam Institute of Geosciences and Mineral Resources.
• ….

Auditing Extractive Industry in SAV(Con’t)

 The financial audit of state-owned companies and groups

which are responsible for mining and extracting resources

• Vietnam National Coal and Mineral Industries Holding Group

(TKV)

• Vietnam National Oil and Gas Group (PVN)
• Other state-owned companies operating in this area

Auditing Extractive Industry in SAV(Con’t) Other audits related to Extractive Industry

 The audit of managing, extracting and

trading Mineral Resources of some state-

• wned groups, corporation and

companies

 The audit of issuing mining license and

governmental management of extractive mineral resources in period from 2009- 2012.

Policy and Legal Frameworks Cycles in Vietnam

Developing Policy and Regulations Delivering Policy and Regulations Applying Policy and Regulations Reviewing Policy and Regulations 1. Are there any relationship between Policy & Legal Frameworks Cycles and Extractive Industry Value Chain

• 2. Which steps of policy and regulations development Cycles should be audited?

Value chain Approach on Policy & Legal Frameworks Audit in Viet Nam

Extractive Industry Value chain

Policy and Legal framework Exploration Award of contracts and licenses Monitoring of

• perations

Collection of revenue Revenue management and allocation Implementation of sustainable policies

Policy and Legal Frameworks Cycles

• Reviewing Policy and Regulations
• Developing Policy and Regulations
• Delivering Policy and Regulations
• Appling Policy and Regulations

No Policy and Legal Framworks Cycles EI Value chain Audit types Applied by Vietnam SAI Note 1 Developing Policy and Regulations Policy and Legal framework Not yet (only using audit results) As consultants and/or one of Policy and Regulations Proponent Issues arising from other value chain 2 3 Delivering Policy and Regulations Applying Policy and Regulations Exloration

• 1. Financial Audit
• 2. Compliance Audit
• 3. Performance Audit
• 4. Combined Audit

(and/or Specialized Audit) Auditing Award of contracts and licenses Monitoring of operations Collection of revenue Revenue management and allocation Implementation of sustainable policies 4 Reviewing Policy and Regulations Policy and Legal framework Not yet (only using audit results) As consultants and/or one of Policy and Regulations Proponent Issues arising from other value chain

Audit Approach on EI Policy & Legal Frameworks in Viet Nam

Financial Audit Compliance Audit Combined Audit (Specialized Audit) Both Private and SOEs Management of Mining Exploration Government Bodies Local Governments Both Private and SOEs Financial Audit Government Bodies Compliance Audit Local Governments Finacial Audit Revenue Department Compliance Audit Local Governments The compliance of regulations on mining sectors in Local Governments Combined Audit Both Private and SOEs Government Bodies Local Governments SOEs Government Bodies Local Governments Both Private and SOEs Financial Statements Managing and using oil revenues which allocate to the Vietnam Oil Corporation Financial Statements Exploration Performance Audit Compliance Audit Licensing and authorising for mining natural resources and minerals The rehabilitation of abandoned mines in Thai Nguyen Province State-owned Enterprises (SOEs) Implementation of sustainable policies Combined Audit Revenue management and allocation

Collection of revenue

Monitoring of

• perations

Award of contracts and licenses Combined Audit

Sample of Audits that focus on Applying Extractive Industry Policy and Regulations in each EI Value chain

Comply with current Regulations Does not comply with current Regulations Right things have been done Good Policy and Regulations Policy and Regulation issues Right things have not been done Policy and Regulation issues Auditee Issues (applying policy and regulations issue) No Audit type Main Objectives How are they related to Policy and Legal Frameworks 1 Compliance Audit Obey Laws & Regulations Applying Policy and Regulations 2 Financial Audit True and Fair Views of Financial Statement Applying Financial Regulations and Accounting Standards 3 Performance Audit Are the right things being done in right ways? (The matrix below)

The issue is that: “The right thing have been done?” is auditor’s perspective, not Lawmaker’s perspective.

Audit Approach on EI Policy & Legal Frameworks in Viet Nam

Solutions for the diffidence between Auditor and Lawmaker Perspective Audit Criteria

Transparency process Get involved

• f Lawmakers

Reliable …..

Good “database”

Audit evidences from different Audits, auditee related to the Policy and Regulation issue

Combined audit

That may cover all assessment

• f steps of

Policy and Regulations Cycle

Audit Opinion

Conclusion v.s Recommendation v.s Optional Suggestions v.s Providing Audit Evidence for Lawmakers (Parliament Member)

Examples

 Oil Revenue Allocation Rate between Government and Vietnam Oil & Gas Group:

Before 2013: 50% for reinvestment (for PVN) and 50% Government Revenue.



We always ask a question “Whether the rate is a good rate in term of Reinvestment and Contribution for Development?” in every audits related to Oil and Gas to get broad information and view from different Ministry Departments, Organizations and Corporations.



We collect all information from financial audits, combined audits of Vietnam Oil and Gas Group, Other Oil & Gas Corporation, Ministry of Natural Resource & Environment… in several years (such as the effectiveness of reinvestment; the use of Government Revenue from Oil; ROA, ROE information of Vietnam Oil & Gas comparing to Others…) , then provide evidences, information for Parliament.



In 2013, Vietnam Parliament determined the rate to: 25% for reinvestment and 75% for Government Revenue.



There are still challenges.

Thank you!

21