95079 Public Participation in the Budget and Audit Process (PPBA) Learning Note No. 1 SIDE BY SIDE WITH PEOPLE: Korea’s Experiences on Participatory Auditing Seongjun Kim BAI www.bai.go.kr Dr. Seongjun Kim is currently Director-General for research at the Audit and Inspection Research Institute (AIRI), a research arm of the Board of Audit & Inspection of Korea. His areas of expertise are public audit systems, audit policies, audit methodologies, and capacity building of audit institutions. He has also served as an expert member of the OECD Audit Committee from 2013 to 2015. Dr. Kim has engaged in a number of international cooperation and training activities. He carried out BAI’s ASOSAI Secretariat Affairs, BAI’s chairmanship of the UN-INTOSAI Platform on Public Accountability, BAI’s vice chairmanship of the INTOSAI Tsunami Initiative Task Force and BAI’s advisory board membership for the Audit Board of the Republic of Indonesia (BPK). Dr. Kim received his Ph.D. in Economics from New York University and has a Master of Arts degree in Economics from Seoul National University, Korea, All photos courtesy of the BAI Public Affairs Department. The PPBA team would like to thank the peer reviewers: Ms. Elia Yi Armstrong, Chief, Development Management Branch, Division for Public Administration and Development Management (DPADM), United Nations Department of Economic and Social Affairs (UNDESA) and Bonnie Sirois, Senior Financial Management Specialist and Financial Management Hub Lead for the Philippines, The World Bank, for their time and valuable contributions to the paper. The findings, interpretations and conclusions expressed in this work, do not necessarily reflect the views of the World Bank, its Board of Executive Directors or the governments that they represent. ©2015 International Bank for Reconstruction and Development / The World Bank Contents Introduction to the BAI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Historical Perspective . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Establishment of Civil Petition & Complaint Reception Center . . . . . . . . . . . . . . . . . . . . 3 Introduction of Audit Request for Public Interests (ARPI) . . . . . . . . . . . . . . . . . . . . . . . . 4 Institutionalization of Citizen Audit Request (CAR) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 BAI’s Participatory Audit System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Who is qualified to request an audit? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 What are the selection criteria? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Who handles the audit requests at the BAI? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Values and Benefits of Participatory Auditing . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Active citizen participation in auditing and enhanced participatory democracy . . . . . . . . 11 Meeting citizens’ needs and redressing their grievances . . . . . . . . . . . . . . . . . . . . . . . 12 Improvement of public sector administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Risks and Control Mechanisms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Distorted purpose of audit requests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Politically motivated audit requests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Inefficient use of audit resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Lessons Learned and Future Challenges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 iv  /  Side by Side with People: Korea’s Experiences on Participatory Auditing Side by Side with People: Korea’s Experiences on Participatory Auditing The Board of Audit and Inspection of Korea (hereinafter referred to as BAI) has gradually 1 expanded the dimensions of its cooperative relationship with the citizenry since its establishment. The BAI has gone through the information and consultation stages and has now reached the stage of partnership for decision-making with citizens.1 The BAI takes advice on its audit direction and formally receives audit requests from the citizens. In addition it takes tips on fraud, waste, or mismanagement of public funds along with civil petitions and complaints from the citizens. The BAI also makes all audit reports available to the citizenry through its website. The fact that the BAI annually receives over ten thousand petitions or complaints from the citizenry and the business community well reflects the significance of this cooperative relationship. The BAI also receives about 200 audit requests per year from Korea’s citizens. This paper addresses three key issues associated with the Supreme Audit Institution (SAI)’s engagement with citizens based on the BAI’s varied cooperation experiences with citizens: i) the values and benefits of SAI’s engagement with citizens; ii) the potential risks; and iii) practical approaches to ensure the identified values and benefits while controlling the risks. 1  UNDESA (2013) categorizes the types of interaction between SAIs and citizens as follows: (1) a one-way SAI-citizen relationship where SAIs inform citizens; (2) a two-way relationship where SAIs consult citizens; and (3) a partnership for decision-making between SAIs and citizens. Introduction to the BAI  /  1 1 Introduction to the BAI “ The BAI, established in 1963, is a highly respected public institution in Korea for its high Acting as standards for work ethics and professionalism. It plays a unique role in the national accountability and control processes in terms of operational independence, audit the eyes and capacity, and audit remit.2 The BAI has several characteristics that may have contributed to the successful development of citizen engagements in public auditing in Korea. ears of the They are operational independence, comprehensive audit mandates, good working relationships with internal audit units, and high expectations and trust in the BAI’s work from citizens. Unlike most of SAIs, the BAI, is mandated to inspect the performance of citizens, BAI public institutions and their employees, in addition to auditing government accounts. It is thereby responsible for establishing discipline in the public sector. ensures a clean Operational independence governmnet Though the BAI belongs to the executive branch directly under the President, the BAI enjoys its complete independence in function by deciding what to audit as well and a fair as how to audit with its own authority. As its functions, status, and organization are society. ” 2  The BAI’ duties and functions are to verify the final accounts of the state; to carry out financial and perfor- mance audits; to inspect the performance of public sector employees (excluding those of National Assembly, Courts of Law and Constitutional Court); to render legal decisions on accounting officers’ violations of financial regulations and protests and complaints against the actions of government agencies (adjudication); and to assess and supervise the performance of public sector internal audit units. 2  /  Side by Side with People: Korea’s Experiences on Participatory Auditing explicitly stipulated by the Constitution, the independence works of internal audit units in the public sector, which and political neutrality of the BAI have a strong foundation. contributes to building a good working relationship Its independence in operations is also spelled out in its between the BAI auditors and the public sector internal organic law, the Board of Audit and Inspection Act of 1963. auditors. This working relationship has been strengthened by the recent enactment of the Public Sector Internal Audit Comprehensive audit mandates Act of 2010. The BAI’s role, for instance, has been elaborated The BAI’s audit mandate is well stipulated by the BAI Act as a supervisor, a promoter, and a partner of IAUs. 2 and the BAI may follow public money wherever it goes. The BAI Act defines those entities subject to the mandatory The BAI works in cooperation with IAUs to conduct audits, audit: central government, provincial and local government, or commission them, instead, to perform certain audits. The local autonomous bodies, and the Bank of Korea. The Act BAI is working to strengthen the bilateral relationship with stipulates that those entities that have received—directly IAUs, by giving them the authority to examine complaints or indirectly—grants or financial assistance from any of and grievances filed by citizens and to report the results the mandatory audit entities are also subject to the BAI’s to the BAI. The BAI has been able to better handle citizens’ discretionary audit. As of December 2013, over 60 thousand complaints and grievances as well as audit requests raised entities are subject to the BAI audits. by citizens because BAI’s cooperative relationship with IAUs contributes to expediting its investigation process. The BAI is also responsible for inspecting the performance of the public institutions and their employees. This inspection High expectations and trust from citizens function aims at improving the operation and the quality Incidents of corruption and mismanagement in the public of public services. Its comprehensive access rights to sector, though occasional, have a profound impact on documents, property, and people support the BAI’s audit and the public confidence and trust in government. Public inspection mandates. These comprehensive audit mandates trust is indeed a scarce social capital in most developing and supporting access rights enable the BAI to respond to countries. Fortunately, citizens have vast confidence in and the citizens’ demands in a direct and timely manner, since expectation of the BAI as the last resort to get things right. it does not need to go through a very complex and time- Coupled with a weak internal audit function due to its lack taking process of citizens redress mechanisms. of independence and professionalism as well as deep- rooted paternalism in the public sector, citizens opt to place Good working relationship with Internal complaints or make audit requests to the BAI rather than Audit Units (IAUs) to the government itself, even if the government auditors The BAI, as the Supreme Audit Institution (SAI) of Korea, may better handle the audit requests or complaints than has been responsible for supervising and overseeing the the BAI. Historical Perspective  /  3 2 Historical Perspective The Korean society has a long tradition of hearing people’s voice as a way of protecting people’s basic rights and preventing public officials’ corruptive acts. For instance, Sinmungo—a big drum—was hung outside of the royal palace in early 15th century during the Chosun Dynasty in an effort to resolve people’s complaints directly and help stabilize their lives. By beating the drum, people suffering from injustice could voice their complaints. For a long time, Sinmungo had served as a channel for the government to listen to the people’s complaints and solve them.3 Its tradition has been kept in many aspects of public administration. Establishment of Civil Petition & Complaint Reception Center The BAI has developed close ties with the citizenry since its establishment in 1963. Citizens’ involvement in the beginning, however, was confined to gathering information on fraud, misconduct, or abuse of power through citizens’ complaints and petition. As the number of citizens’ complaints increased rapidly, the BAI decided to set up the Civil Petition & Complaint Reception Center in 1971 in order to handle them 3  Anti-Corruption and Civil Rights Commission of Korea. ACRC Korea Annual Report 2010, p. 29. The Korean government follows this tradition and ACRC Korea operates online Sinmungo or e-People (www.epeople.go.kr/) as a communication channel between the government and the citizens. 4  /  Side by Side with People: Korea’s Experiences on Participatory Auditing and the poor, and safeguarding long-term values such as environmental protection, particularly when democracy was not mature and development was given a higher priority. The CSOs are still considered one of the most trustworthy public entities in Korea according to the recent polls. With active participation and support from the academic and research community, some leading CSOs in Korea are well equipped with professional experts in various areas. During the same timeframe, the 1988 reform of the Local Autonomy Act and the Local Finance Act triggered a tidal wave of decentralization, shifting responsibilities towards the local governments from the central government, efficiently. During the 1990s, the BAI started soliciting more which was followed by direct election of local councils in specific information from the target group, relying more on 1991 and the popular election of governors and mayors citizens or stakeholders to collect information on specific in 1995. Other government reform measures gave more audit mission or government agencies to be audited. This managerial freedom and discretion to public service open audit system proved to be very effective in collecting delivery organizations. However, coupled with weak more relevant information. internal audit function in the public sector, these changes toward decentralization raised serious concerns over In 1993, a fraud hotline (#188) was established which was mismanagement and abuse of newly acquired authorities intended to provide citizens with more convenient means in the public entities in charge of service delivery. to report information concerning abuse of public funds or complaints on administrative actions. The 188 hotline Against this backdrop, the BAI introduced the Audit served as a model for similar operations throughout Request for Public Interests in 1996. The BAI laid down a the government in Korea. As the internet became such legal foundation through its internal regulations, under a popular communications medium in Korea, the BAI which CSOs whose membership exceeds 300 or a group expanded the 188 hotline to an internet-based fraud of citizens over three hundred can make a request to the net. In February 2004, the BAI open itself to receiving BAI to conduct an audit on specific issues for the sake of complaints from the business sector on the administration’s the public interest. This audit request system is aimed at inappropriate delays or refusals in handling permit and promoting public confidence in the government through licensing applications. peoples’ participation in the BAI’s audit work. Introduction of Audit Request for Public The BAI’s own initiative to further develop cooperation with Interests (ARPI) the citizens by allowing them to make an audit request Since the late 1980s the Korean society has undergone a was also helped by the facts that the CSOs have played rapid democratization along with citizen empowerment. an important role in Korea as a watchdog to government Citizens have become more active and involved with state operations. decisions that would affect their daily lives and raised voices on state affairs. Citizens’ demand for a more transparent and Institutionalization of Citizen Audit Request accountable government has been steadily increased. (CAR) In 2002, six years after the BAI had introduced the Audit The civil society organizations (CSOs) have acquired public Request for Public Interests with its own initiative based trust by challenging the authorities, siding with the weak on the BAI internal regulation, the Anti-Corruption Act Historical Perspective  /  5 Comparison of CAR and ARPI Citizen Audit Request (CAR) Audit Request for Public Interests (ARPI) Eligibility of audit • Group of citizens over 300 • Group of citizens over 300 requesters • CSO with 300 or more membership • Heads of public entities • Local councils Requested audit scope • Illegal acts/corruption • Illegal acts/corruption • Budget abuse • Mismanagement • Other matters of public interests Matters excluded for audit • Matters under investigation or trial • Matters under investigation or trial requests • Matters of private interest • Matters of private interest • Matters under the local government jurisdiction 6  /  Side by Side with People: Korea’s Experiences on Participatory Auditing was enacted for the first time in which another citizen of audit requests from the citizens because ARPI is much engagement channel with the title of Citizen Audit Request broader than CAR in terms of eligibility of requesters, audit was introduced. The BAI decided to maintain both channels scope, and time limit for reporting audit results.4 3 4  The BAI is currently working with the National Assembly and other related agencies to integrate ARPI and CAR in order to avoid any confusion to the citizens. BAI’s Participatory Audit System  /  7 3 BAI’s Participatory Audit System In order to support increasing demand for audit requests, the BAI gradually expanded its investigative capacity. In 1980, the BAI established, for the first time, an audit unit designated to investigate those petitions and complaints that were submitted to the BAI Reception Center. In 2006, the Audit Requests Investigation Group was established with two audit divisions, one for petitions and complaints and the other for audit requests, which later expanded into the Audit Requests Investigation Bureau with three divisions,5 one regional office, and five regional centers in 2009. The BAI plans and conducts over 150 audits on the BAI’s own initiative every year. In addition to these planned audits, the BAI carries out 20 to 30 audits out of 150 to 180 audit requests submitted by the citizens, CSOs, local councils or the heads of public entities that are subject to the BAI audit. The National Assembly, upon the approval at its plenary session, may also ask the BAI to conduct an audit on specific issues under the BAI’s audit mandates. The BAI reports 5 to 13 mandated audits to the National Assembly annually. The BAI opened three regional Civil Petition & Complaint Centers in Busan, Daejeon, and Gwangju in 2009 and two more centers in Daegu and Suwon in 2013, to make services more accessible to everyone. 5  As audit requests increased steadily, the audit requests investigation unit was expanded to two divisions by setting up an audit division in charge of investigating construction related audit requests. 8  /  Side by Side with People: Korea’s Experiences on Participatory Auditing Comparison of BAI’s Planned Audit and Requested Audit Planned Audit Requested Audit Initiated by BAI Requesters Audit Scope Broad/complicated Specific/narrow/less complicated Size of audit team More than 10 auditors 1–2 auditors Duration of field works 2 weeks or more 2–5 days Compared with planned audits, participatory or requested The citizen audit request system is geared more toward audits are more narrowly focused in scope and less the public interest rather than private interest, aiming to complicated in contents. For a typical participatory audit, audit illegal and unlawful behaviors of public officials, as an audit team consists of two to five auditors who will well as to monitor budget waste. The minimum number complete the fieldwork in less than a week. A planned of audit requesters is set at 300 individuals, or a CSO audit, on the other hand, involves far more audit resources: composed of over 300 members, to effectively preclude as many as 10 auditors are teamed up and the fieldwork abusive audit requests. This eligibility requirement also usually takes longer than two weeks. takes into consideration the limited audit resources available, as it would not be possible to audit all cases At the BAI, the citizen participation in the audit process requested, and also to reduce the burden faced by is generally limited to the preliminary or planning public entities of being excessively audited. Whether the stage of auditing. In principle it is BAI’s policy not to minimum requirement of 300 citizens is too restrictive or allow citizens’ direct participation in the fieldwork or not is still an open question. examination process, though the BAI relies on outside experts indirectly through consultations.6 Following The heads of public entities shall request an audit in any up on the government responses to the BAI’s audit case when it is considered difficult or inappropriate for its recommendations could be another prospective area of internal audit unit to handle the case or when there is no citizen participation, though the BAI has not developed a internal audit unit within the public entity. cooperative follow-up system yet. What are the selection criteria? Who is qualified to request an audit? The first and foremost selection criterion is whether the Unlike civil petition or complaints, the BAI restricts audit request pursues the public interest or not. The BAI the qualifications of audit requesters. There are four refines the concept of public interests as “welfare or good qualifications: a group of three hundred citizens aged of the general public and the whole society, not confined over 19; CSOs; local councils; and heads of public entities to certain groups or persons.” For instance, audit subjects which are subject to the BAI audit. As the number of may include cases of budget abuse in implementing CSOs increases rapidly and their pursuing interests get public policies and projects; cases of moral hazard that diversified, it is stipulated that a CSO as a requester should delay implementation of policies or projects; cases of be a non-profit and non-partisan organization that has performance improvement; and violation of law or more than 300 members. corruptive behavior of public servants which hampers the 6  The Seoul Metropolitan Government of Korea, for instance, appoints outside experts in respective areas as citizen auditors and allows them to participate in the fieldwork. BAI’s Participatory Audit System  /  9 Handling process of audit request Submission of Eligibility Deciding (Accept) Conduct an Finalize an Notify audit a request Preview whether to audit audit results accept the requests (Citizens BAI (Audit Requests (ARRC) (Audit Requests (Council of (BAI Citizens) Reception Center) Investigative Investigation Commissioners) Bureau) Bureau) public interest. Local councils as a requester may request an decision. The requesters shall be notified of the audit results audit on the matters strictly under its jurisdiction. within 10 days of the completion of the audit. When an audit request is submitted to the BAI, the request Once the request for audit has been accepted by the BAI is forwarded to the Audit Requests Investigation Bureau. and the audit is conducted, the audit results are released to In case an in-person visit to the BAI is not possible, citizens the public via the BAI website. In order to make the audit can request an audit by mailing in an audit application request process more transparent and accountable, starting with the supporting documents. As the system requires in December 2014 the BAI is going to disclose the whole the signature of over 300 individuals, this service cannot be process via the BAI website. made available online yet. Who handles the audit requests at the BAI? The Bureau carefully examines the eligibility of the request The BAI set up the Audit Requests Investigation Bureau to and reports its preview result to the Audit Request Review exclusively handle audit requests and civil petitions and Committee (ARRC) which decides whether to proceed complaints. A Director-General who is supported by nine with the requested audit or not. Audit requests that are directors and about 120 staff members leads the Bureau. politically motivated or pursue certain groups’ own benefits The Bureau receives about 150 to 200 audit requests and are not allowed. Any unsupported requests that do not over ten thousand petitions and complaints annually. have proper evidence to support alleged misadministration Experienced staff carefully examine each and every audit or corruption are also dismissed in order to prevent limited request to determine its auditability and eligibility. Out audit resources from being wasted. of 120 staff members at the Bureau, 36 members are Requesters shall be notified of the Committee’s final decision on the acceptance of audit request the within 30 days of submission. In general, an audit case shall be assigned to one of the three divisions responsible for conducting examination within the Audit Requests Investigation Bureau. When a requested audit requires more expertise and resources due to its high complexity and broad scope, it may be assigned to other audit bureaus. The BAI shall complete the investigation within 180 days of the decision made by the Committee. As for the Citizen Audit Request based on the Anti-Corruption Act, the audit results shall be completed within 60 days of the Committee 10  /  Side by Side with People: Korea’s Experiences on Participatory Auditing 4 seconded from the central ministries, local governments, or of the Committee. External experts are non-partisans who public institutions. come from various backgrounds and fields of specialty: lawyers, professors, journalists and civil activists from NGOs. The Audit Request Review Committee is composed of The BAI Chairman commissions all the external members. seven members: three BAI officials and four external experts The committee meets once a month, and reviews eligibility including a Committee chair. In order to ensure impartiality of audit requests and decides on the acceptance by and objectivity, the external members have the majority majority. Values and Benefits of Participatory Auditing  /  11 4 Values and Benefits of Participatory Auditing7 Active citizen participation in auditing and enhanced participatory democracy The graph below shows a rapidly increasing trend of audit requests over the 1996–2013 period.8 From the introduction of the Audit Request for Public Interests (ARPI) in 1996, the average number of annual audit requests remained around 20 until 2001, but it has increased eight-fold since then, and for the last three years, it jumped to about 180 cases per year, which can be explained by the long-awaited enactment of Anti-Corruption Act of 2002. The CSOs and citizen activists had put great effort into the enactment, such as conducting a campaign to collect a million signatures. Thus, the enactment itself brought great attention to the citizen engagement in public auditing, though it was not a critical element of the Anti-Corruption Act. The increase in the number of audit requests reflects that the citizens and the CSOs consider the participatory audit as an important vehicle to improve the transparency and accountability in the public sector, which in turn contributes to maturing participatory democracy. 7  For summary list of the potential benefits of SAI engagement with CSOs, see Cornejo, Guillan and Lavin (2013, p.4). 8  The figures discussed in this section are based on the audit requests channeled through the Audit Request for Public Interests (ARPI). 12  /  Side by Side with People: Korea’s Experiences on Participatory Auditing Figure 1: Overview of Audit Request Reception (1996–2013) 160 200 180 184 140 180 169 148 160 120 138 140 126 118 100 110 120 104 108 80 100 79 60 80 60 40 40 40 25 22 21 20 15 13 10 20 0 0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Local Council Public Entities CSO Citizens Total Source: BAI. Figure 1 shows that the citizens are the most active mismanagement, but they are more likely to redress their requesters, accounting for 59.5 percent of total audit grievances on private interests. The CSOs account for 32.3 requests. Since there have been a number of mega-size percent of total audit requests, second to the citizens. The redevelopment projects going on in the town areas acceptance rate for the CSOs is 40 percent, at least twelve throughout the country, those who consider themselves percentage points higher than that of the citizens. The to be treated unfairly in the process, grouped together CSOs are playing an important role as a shepherd of citizens and brought their cases to the BAI. Hence, citizens also and a watchdog of the government. Local councils, which recorded the lowest in acceptance rate, 28 percent, among have less power and narrower mandates than the National the four categories of requesters, that is, local councils, Assembly, have often requested audits to the BAI with a public entities, CSOs and citizens. This implies that citizens view to checking and overseeing the performance of the have become more active in raising their voices against heads of local authorities. Meeting citizens’ needs and redressing their grievances As shown in Figure 2, those areas to which citizens’ livelihood are closely linked—permits and licensing, construction (mostly redevelopment projects), transportation, and environment—account for as much as 43 percent of total audit requests, which confirms the belief that most requests come from those areas directly affecting private interests. This also means that, through the participatory auditing process, the BAI serves as a troubleshooter of citizens’ complaints and grievances. The most frequently seen categories are permits, licensing, and construction, which might be considered as matters of private interest. Values and Benefits of Participatory Auditing  /  13 Figure 2: Audit request by subject area (1996–2013) Permit and Licensing 289 Others 653 (18%) (41%) Construction 283 (18%) Transportation and Environment 116 (7%) Management 53 (3%) Budget waste 217 (13%) Source: BAI. On the other hand, those categories under transportation oversight function substantially contributes to enhancing and environments, management, budget waste, and others transparency and impartiality of public institutions. (inspection, public contract, and education) might be more closely related with public interests. Citizen engagement in public auditing employs a bottom- up approach. In other words, citizens assist auditors by Improvement of public sector administration exposing such problems that are in dark corners and Citizen engagement does not stop at meeting citizens’ avoid the watchful eyes of auditors. Frequently requested needs and redressing their grievances. Citizen engagement areas such as permits and licensing, construction, and also helps the BAI perform its oversight role better and environment are also high-risk areas themselves. With the improve the performance and accountability of the help of active participation from the citizens, government government. About 64 percent of the audit requests officers have come to recognize that there is much higher the BAI accepted as meeting the criteria to conduct an chance of being checked by the BAI if they have done audit have resulted in material outcomes, justifying the anything wrong. These restraining effects of overseeing the requests. This indicates that the participatory auditing public sector through the eyes of citizens may outweigh system underpinned by citizen participation and the associated costs. Box 1: A case of redressing citizen grievances Telephone users requested an audit against a telephone company when they found that they had been subscribed to expensive phone plans without their consent. The BAI found that there were more than 2 million cases of the same unauthorized subscriptions and Korea Communications Commission (KCC), the supervisory body, failed to take appropriate actions over telephone users’ repeated complaints against the illegal practices of the telephone company. The BAI notified the head of KCC of its negligent supervision and recommended to take corrective actions. The telephone company was fined and the telephone users including the requesters were fully refunded as a result of the audit. 14  /  Side by Side with People: Korea’s Experiences on Participatory Auditing Box 2: Cases of improving public sector administration The Eum-seong County authority decided to allow a debt guarantee to the developers of large-scale industrial complex in the region. Concerned about the high financial risk that the County should bear in case the development project went bankrupt, the County residents requested the BAI to examine whether or not the County’s decision to 5 provide debt guarantee of 42 billion won was in compliance with relevant laws and regulations. The BAI found that the provision of debt guarantee to the private developers was illegal and ordered the Country authority to revoke its decision. Risks and Control Mechanisms  /  15 5 Risks and Control Mechanisms Many SAIs are still hesitant about expanding their collaboration with citizens to the stage of partnership for decision-making, citing potential risks associated with the practices of participatory auditing, such as hampering independence and/or political neutrality and use of limited audit resources in private interest areas. The question is whether there exist any effective control mechanisms so that these risks can be managed within a reasonable cost. Distorted purpose of audit requests Although participatory auditing is gaining momentum as more citizens are eager to express their interests in government affairs, some of audit requests are tilted toward pursing private interests, which may divert the very purpose of participatory auditing, protecting the public interest of citizens. In order to preclude distorted audit requests, the BAI has established various control measures such as strengthening qualifications of requesters, defining ‘public interest’ in a rigorous way, and setting up an audit request review committee to screen the requests, etc. First, to become an eligible requester, citizens as a group should be composed of over 300 people. Second, since it is one of the key selection criteria, the BAI has also refined the concept of public interest as “welfare of the general public and the whole society, not confined to certain groups or persons.” The CSOs as a requester 16  /  Side by Side with People: Korea’s Experiences on Participatory Auditing 2009 and 11 in 2013 respectively from the average number of five requests during the non-election years. Audit requests on national security or educational policy in which there exist sharp differences in opinions among different parties may be triggered by partisan reasons—using the audit request system to promote their views and gain support from the people. 6 In order to keep political neutrality and to meet the needs of local council, the heads of local government, as well as CSOs and citizens who have different political interests from each other, the BAI may accept the request partially after a thorough review of an audit request item. From this perspective, the Audit Request Review Committee should be also composed of at least 300 members and chaired by an external expert is the key mechanism to should not pursue, based on their founding charter, any provide an assurance to the requesters that the final particular interests in politics or their own benefits. decision on whether or not to accept the audit request is independently made of the BAI. As the internet becomes more and more popular and people are more than willing to reveal their own opinions Inefficient use of audit resources on any issues of their interests, it becomes much easier Since all the audit requests have to go through a thorough to form an online CSO or collect a group of cyber citizens examination by BAI’s experienced staff, it is important to over three hundred to raise their voices on specific issues. have viable requests and maintain a high acceptance rate. In fact, in Korea the number of registered CSOs soared As noted before, with the emergence of online activists, the from 3,236 in 2001 to 10,086 in 2011. The BAI, therefore, risk of wasting limited audit resources on matters of little or strengthened its efforts to preview the eligibility of the no public good has increased. The BAI, therefore, considers requests by setting up the Audit Requests Investigation awarding various incentives including some cash prize Bureau in 2009. Experienced staff of the BAI carefully to the requesters when their requests result in material examined each and every audit request to determine outcomes. auditability, as well as eligibility. The Audit Request Review Committee composed of internal officials and external Another related issue is that the citizens’ audit request, experts decides whether or not to accept the received once established, will be extremely hard to pull back, even audit requests based on the eligibility preview report. The if there is a fundamental change in the audit environment, eligibility review process, therefore, plays a pivotal role in since audit request can be considered as one of the basic reducing the risks associated with participatory auditing. rights of the citizens. It would be the last thing for the top management of an SAI to face with such criticism that they Politically motivated audit requests do not have enough interests to protect citizens’ rights. The local councils and the heads of local governments This situation may result in inflexible resource allocation may also request the BAI to conduct an audit on specific within an SAI, which in turn may cause inefficiency in the issues with the aim of attaining their own political goals utilization of audit resources. Priorities in audit resource or agenda. Due to high visibility of BAI audits, the audit allocation, of course, may vary from one SAI to another by results might be used to attack or humiliate their political its respective mission, audit strategy and approach, as well opponents. Therefore the audit requests made by local as audit environment surrounding the SAI. Therefore, SAIs council tend to increase in the year prior to local election. need to approach this issue more carefully and gradually For instance, the number of audit requests jumped to 13 in than other resource allocation decisions. Lessons Learned and Future Challenges  /  17 6 Lessons Learned and Future Challenges The experiences of the BAI’s participatory auditing show that the risks associated with the participatory auditing are manageable within a reasonable cost, though it does not necessarily imply that the BAI model works in all circumstances. The BAI was able to seize substantial benefits from the participatory auditing thanks to several factors as follows: ❱❱ Legal framework should be in place to ensure continued operation and resource inflows and to draw more attention from citizens; ❱❱ Continuous attention and support from the top management is necessary in order to help their auditors get motivated; ❱❱ Synergy effects or economies of scope can be obtained by offering various but related participatory activities. This integrated “one-stop” system can increase citizens’ satisfaction by helping an SAI better respond to the citizens’ demands; ❱❱ Enhanced access to the redress system through various online and off-line media, such as an internet based fraud net, toll-free hot line, and civil petitions and complaints reception center may encourage more active participation from the citizens; 18  /  Side by Side with People: Korea’s Experiences on Participatory Auditing ❱❱ Potential risks associated with citizen engagement Despite several positive developments, the participatory should be proactively dealt with before being auditing of the BAI is still evolving and the BAI needs to launched; respond to the following challenges: ❱❱ Higher standards for ethics requirement for auditors ❱❱ To promote citizen participation in public auditing are necessary, as they may have to deal with those while effectively precluding any attempts to pursue who have direct interests on the requested issues, and certain groups’ own interests from being realized; not public officials. When equipped with the highest of ethical standards, auditors can effectively avoid any ❱❱ To develop a participatory follow-up on audit attempt from requesters to seize private interests in lieu results system in which the BAI cooperates with of public interests; the citizen to monitor the implementation of audit recommendations; ❱❱ Keeping good cooperative relations with local authorities and other service delivery organizations ❱❱ To integrate the legal basis for different types of through their internal audit units could help expedite participatory auditing initiatives; and the whole processes; and ❱❱ Last but not least, to measure the values and benefits ❱❱ Well-staffed CSOs seeking public interests is a of participatory auditing in a reliable and rigorous way prerequisite for well-functioning of participatory and to promote the values and benefits of participatory auditing. auditing. References / 19 References Cornejo, Carolina, Aranzazu Guillan and Renzo Lavin. 2013. “When Supreme Audit Institutions engage with civil society: Exploring lessons from the Latin American Transparency Participation and Accountability Initiative.” U4 Practice Insight No 5. U4 Anti-Corruption Resource Center. Available at http://www.U4.no. Krafchik, Warren. 2007. “The Role of Civil Society Organizations in Auditing and Public Finance Management.” In UNDESA. 2007. Auditing for Social Change: A Strategy for Citizen Engagement in Public Sector Accountability, New York: United Nations. pp. 21–52. Available at http://unpan1.un.org/intradoc/groups/public/ documents /UN/ UNPAN021950.pdf. Nino, Ezequiel. 2010. “Access to Public Information and Citizen Participation in Supreme Audit Institutions: Guide to Good Practices.” Governance Working Paper Series. World Bank Institute. Pyun, Ho-Bum. 2005. “Audit and Citizen Empowerment: Experience of Korea.” Paper presented at the 6th Global Forum on Reinventing Government towards Participatory and Transparent Governance, 24–27 May 2005, Seoul, Korea. Ramkumar, Vivek. 2007. “Expanding Collaboration between Public Audit Institutions and Civil Society.” International Budget Project. Available at http://internationalbudget.org. The Board of Audit and Inspection. 2013. White Paper on Citizens’ Audit Requests and Public Grievances, Seoul: Board of Audit and Inspection. (in Korean) The Board of Audit and Inspection. 2008. White Paper on Civil Petitions and Public Grievances: 2001–2007, Seoul: Board of Audit and Inspection. (in Korean) UNDESA. 2013. Citizen Engagement Practices by Supreme Audit Institutions, New York: United Nations. The World Bank Group’s Open and Collaborative Governance (OCG) Practice within the Governance Global Practice (GGP) works to make governments more effective, inclusive, and trustworthy by opening up national and local governance processes and systems to demand-side actors such as media, parliaments, and civil society organizations (CSOs) and citizens. The OAG’s program on Public Participation in the Budget and Audit Process (PPBA) supports Supreme Audit Institutions (SAIs) and Ministries of Finance (MoF) to effectively engage with CSOs, media, and relevant parliamentary committees in order to enhance public oversight across the budget and audit cycles. The program does that by facilitating space for multi- stakeholder dialogue, raising awareness on the challenges, opportunities, and entry points for collaboration, and by supporting effective implementation of agreed-upon actions with capacity building and technical assistance. Public Participation in the Budget and Audit Process responds to the global trend of increasing collaboration between SAIs and CSOs which, if done well, promises to strengthen the quality, reliability and credibility of audit processes through public outreach and citizen engagement. The program also builds on long experience in expanding citizen engagement across the budget cycle. Critical to sustaining momentum on this agenda is the systematic capture of good practices, and lessons learned about what works or does not work with respect to citizen engagement in budget and audit processes. This paper on the experience of the Korea Board of Audit and Inspection (BAI) is the first in a new series of PPBA learning notes that codifies good practice examples from around the world to share it among Bank’s client countries, Policy Research Organizations, Academia, Civil Society Organizations and donors. For additional information, please contact Carolina Vaira, PPBA Program at cvaira@worldbank.org.