Key Function 4: Exercise of internal control and risk management

2 – SUPREME AUDIT INSTITUTIONS’ INPUT INTO POLICY FORMULATION – 57

However, the ten SAIs involved in this report all looked at the processes for the development of regulations and regulatory policy. In France, Korea, Portugal and South Africa, these activities are covered periodically in either sectoral audits (Portugal) or in other audits of relevant bodies (France).

10/10

Of peer SAIs looked at:

Processes for the development of regulations and regulatory

policy, including: the clarity of objectives of regulatory policy frameworks; the incorporation of risk management; the openness and consultation of the process; the alignment of regulatory policy with international principles.

Examples of SAI work in this area include:  Brazil’s Programme for the Strengthening of the Institutional Capacity for Regulatory Management (Pro-Reg) was established by presidential decree 6062 in 2007 to reinforce the government-wide regulatory system. Measures included: formulating capacity-building and public policy analysis in regulated sectors; improving co-ordination and strategic alignment between sectorial policies and the regulatory process; strengthening the autonomy and performance of regulatory agencies; developing mechanisms of accountability and transparency in the regulatory process. Through Pro-Reg, impact analysis has been integrated into 10 federal regulatory agencies. The TCU audits Pro-Reg related activities and provides recommendations based on international good practices of regulatory agencies. Consultation with centre of government officials in Brazil suggests that the TCU’s periodic reviews have been useful in improving CoG’s capacity to implement, monitor and evaluate regulatory processes. Of particular use have been: the recommendations in the annual report, the TCU Basic Governance Reference Guide, meetings and exchanges between senior officials of the TCU and the CoG, and findings from audit activities related to particular sectors (TCU, 2013; 2008).

OECD reviews, surveys and roundtables on regulatory reform confirm that countries are still in the process of developing the tools that can support the identification of the trade-offs, costs and benefits of alternative regulatory reforms (OECD, 2014c). Persistent challenges to measuring the performance of regulation, and to better regulation practices, stem from: 1) a lack of clarity as to what countries should aim to measure in regulatory governance; 2) confounding factors that impact the outcomes in society that regulations aim to improve; and 3) a lack of information as to whether regulatory practices are being undertaken correctly, or even implemented and enforced (OECD, 2014d). Challenges in implementation and enforcement are discussed further in Chapter 3.

In view of these challenges, regulatory tools (ex ante assessment and ex post evaluation) should be integrated into the design phase to ensure that there are reasoned and measurable criteria on which to evaluate the impact and effectiveness of regulation as a policy tool. The main functions of regulatory oversight actors include: systematic improvement of regulatory policy, co-ordinating regulatory tools, and providing guidance and training. Actors’ main inputs therefore come at the formulation stage of the policy cycle. The role of oversight bodies in providing quality control and identifying areas for improved efficiency of regulations is discussed in Chapter 4.

SUPREME AUDIT INSTITUTIONS AND GOOD GOVERNANCE: OVERSIGHT, INSIGHT AND FORESIGHT © OECD 2016