Key Function 8: Exercise of internal control and risk management

3 – SUPREME AUDIT INSTITUTIONS’ INPUT INTO POLICY IMPLEMENTATION – 97

 Korea’s BAI has been active in going beyond the traditional verification of accounts to support good budgetary implementation. Through financial statement audits, the SAI has been examining the verification and reliability of performance reports of all central government agencies since fiscal year 2009, as well as reviewing the appropriateness of budget execution. Through special audits, BAI conducts comprehensive analysis and evaluation of important social and economic issues. The number of special audits as a percentage of total audits at BAI increased to 63% in 2014, which is the highest rate among four audit types. Through performance audits, BAI provides a systematic diagnosis and analysis of effectiveness, efficiency and economy and detection of waste, to promote good budgetary execution. However, the rate of performance audit as a percentage of the total number of audits was 1% in 2014 (BAI, 2014, 2013, 2012).

Key Function 7: Implementing and enforcing regulatory policy

The ability of governments to achieve broad objectives depends on how well the government can uphold the regulatory framework designed to guide their achievement. Enforcement and compliance with rules and regulations is an important factor in creating a well-functioning society and trust in government (regulation enforcement). The challenge for governments is to develop and apply enforcement strategies that facilitate the best possible outcomes with high levels of compliance, while minimising burden and cost. Inadequate compliance and enforcement can threaten improvements aimed for by the reforms and new approaches set out in the design phase. Trends in administrative regulation and supervision include the integration of riskbased approaches that have (where implemented) been driven by the potential to maintain effective supervision while reaping savings in regulatory costs (OECD, 2015d). Riskbased management and oversight are still unexplored in some countries, where an increased emphasis on regulatory design rather than implementation has come, to a certain degree, at the expense of a maturity that allows for risk or proportionality assessments.

Table 3.3. Key elements of implementing and enforcing regulatory policy

Stage of the policy cycle

Policy implementation Key functions of a strategic and open state

Co-ordinating and communicating Implementing the budget Implementing and enforcing regulatory policy

A. There is transparency and engagement in regulatory processes, which includes accessible and searchable online government regulatory databases and plain language communication on rights to parties affected by regulations. B. Application of risk management in regulatory processes to increase the likelihood of compliance goals and to protect the public and environment. C. There is regulatory coherence across levels of government, including co-ordination to adopt good practices and tools to diagnose cross-cutting regulatory issues. D. There are mechanisms for evidence and risk-based regulatory enforcement and inspections. E. An explicit regulatory policy is established with a consistent policy on the role and functions of regulatory agencies.

Establishing processes for risk management and internal control

Sources: Adapted from OECD (2014c), Regulatory Enforcement and Inspections, OECD Best Practice Principles for Regulatory Policy, OECD Publishing, Paris, http://dx.doi.org/10.1787/9789264208117-en. OECD (2012), Recommendation of the Council on Regulatory Policy and Governance, C(2012)37, 22 March 2012, OECD, Paris, www.oecd.org/gov/regulatory-policy/49990817.pdf.

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