What is environmental auditing?

Environmental auditing started developing at the beginning of 70s of the past century in the United States of America and in the Western Europe. In that period the developed countries were adopting the environmental legislation in order to reduce the harmful consequences of the companies' actions that had affected the environment. At the beginning the environmental auditing involved reviews of independent experts assessing whether companies operated in line with the demands of the environmental legislation. Presently the companies decide to undertake environmental audits in order to obtain an independent external assessment whether the management has created efficient environmental policy and provided for acceptable environmental attitude. The most important results of the environmental audits are recommendations how a company can reduce the damaging impacts on the environment in an efficient and cost-benefit manner, and how it can in a long-term save funds by using environment friendly technology. The implementation of the environmental audits is not obligatory for the companies never the less it shows high awareness of the companies on their social responsibilities and an overall attitude towards the environment. Greater awareness and understanding of environmental issues have led the supreme audit institutions (SAI) to recognise the key role of the state in defining appropriate measures for reducing the damaging consequences for the environment; for the efficient and effective solutions of environmental problems. The increasing concern has influenced the SAIs to introduce the environmental auditing in the public sector. Environmental auditing in the public sector encompasses independent and objective assessments whether:

the governments implement the international agreements on environmental protection, there is a complete and appropriate institutional framework for the efficient protection and preservation of the environment, there is an efficient control over the implementation of the national legislation in order to realise the set strategic objectives of protection and preservation of the environment, there is provided for the appropriate use of public funds for the assessment and for solving of the environmental problems.

Why is environmental auditing important?

Most of the SAIs around the world have recognised the importance of the environmental auditing and have started implementing them as a part of their regular work. In some countries the implementation of the environmental audits is mandatory, namely the national legislation defining the state auditing determines those audits as obligatory. In order to harmonise the methods of implementing the environmental audits and to exchange the experience in auditing this new area the Working Group on Environmental Auditing has been established within the INTOSAI. The INTOSAI Working Group on Environmental Auditing has developed a strategy for co-operation with the regional organizations of supreme audit institutions. Working Groups on Environmental Auditing operate within six regional organisations of the supreme audit institutions, i.e. AFROSAI (SAIs of African countries), ARABOSAI (SAIs of Arab countries), ASOSAI (SAIs of Asian countries), EUROSAI (SAIs of European countries), OLACEFS (SAIs of Latin-America and Caribbean countries), and ACAG/SPASAI (SAIs of South Pacific countries, Australia and New Zealand). The tasks of the working group are the development of the environmental auditing guidelines, launching initiatives to promote environmental auditing and the assistance in defining environmental auditing methodology. It is of high importance to include the environmental audits in the working programmes of the SAIs, since they can in line with their mandate, by issuing recommendations and remedial measures, contribute to:

the implementation of the adopted international responsibilities and conventions on the environment protection, the defining of the unambiguous and harmonised environmental legislation, the creation of the efficient and effective control mechanisms over the implementation of the national environmental legislation and environmental policy, the implementation of the national environmental programmes and to the allocation of public funds for the redressing the consequences of environmental problems, the efficient and economic use of public funds for the implementation of the central-government and local environmental programmes and for reducing the damaging consequences.

How do SAIs implement environmental audits?

At the XVth INTOSAI the agreement was reached that environmental auditing, in principle, is no different from other audit approaches practised by SAIs, and it could encompass all types of audit; i.e. audits of financial statements, regularity audits and performance audits. The performance audits are considered most important since they involve the assessment of the environmental circumstances, the compliance with national and international legislation and conventions, the economy, efficiency and effectiveness of the use of public funds when implementing environmental policy; and auditing of the efficiency of the environmental management systems EMS . The SAIs plan, implement and report on the environmental audits in line with the INTOSAI auditing standards. In order to improve the efficiency of the audit implementation, the INTOSAI Working Group on Environmental Auditing adopted the following guidelineswhich stress the specifics of the environmental audits:
1

Environmental Audit and Regularity Auditing (2004), Sustainable Development: The Role of Supreme Audit Institutions (2004), Guidance on Conducting Audits of Activities with an Environmental Perspective (2001), The Audit of International Environmental Accords (2001) and How SAIs May Co-operate on the Audit of International Environmental Accords (1998).

The SAIs implement the environmental audits mainly on the following areas:

waste management, preservation of quality of water, soil, air and climate changes, preservation and protection of biotic diversity, managing the adverse health effect and sustainable development.

The INTOSAI Working Group on Environmental Auditing carried out several surveys at the SAIs (i.e. in 1993, 1996, 2000, 2003 and 2006) on the audit subject, types and methods of environmental audit implementation. Between 2000 and 2003 the most common audits implemented by SAIs were audits of environmental management in public sector, water management (i.e. drinking water supply, implementing measures for preservation of appropriate water quality of rivers, lakes and seas) and waste management. Among the implemented environmental audits the audits that prevailed were a combination of the regularity and performance audit. Most of the environmental performance audits referred to the assessment of the efficiency of the governmental control over the environmental legislation, the assessment of the efficiency and effectiveness of the implementation of the governmental environmental programmes and the assessment of the efficiency and effectiveness of the environmental management systems (EMS). Considering the fact that the environmental issues encompass the territory beyond the national borders, the SAIs have recognized the importance of the international co-operation when implementing environmental audits. Undertaking audits of a certain environmental issue in several countries at the same time provides the SAIs to benchmark the efficiency and effectiveness of the operations of the audited bodies.

1: Systems of environmental management is defined by ISO standard 14001 and EMAS (Eco-Management and Audit Scheme)

How does the Court of Audit implement the environmental audits?

With the Slovenian accession to the European Union, with the implementation of the international agreements on the environmental area, by inclusion of the key development objectives, i.e. principles of environmental balances and sustainability in the Development Strategy of the Republic of Slovenia from 2006 to 2013 and in other strategic documents, the awareness and understanding of environmental issues in Slovenia increased. Further more, the importance of the environmental auditing gained value and was introduced in the working programme of the Court of Audit. It was planned that these audits should be a common element of the Court's activities. The Court of Audit carries out the environmental audits on the basis of the Court of Audit Act, the Rules of Procedure of the Court of Audit, the INTOSAI auditing standards, the European guidelines for the implementation of the INTOSAI auditing standards and the environmental auditing guidelines adopted by the INTOSAI Working Group on Environmental Auditing. The Court of Audit is an active member of the INTOSAI and EUROSAI Working Group on Environmental Auditing. Among the audited bodies there are Ministry of Environment and Spatial Planning and Ministry of Agriculture, Forestry and Food that carry the responsibility of preparation and monitoring of the environmental policy and commercial and non-commercial public service providers that represent the key entities carrying out the mechanisms of the environmental policy and governmental environment programmes. Up to now there have been four environmental audits carried out. They were performance and regularity audits of the audited bodies that implemented environmental policy and legislation, the audits reviewed waste management, implementation of the environmental policy on the area of water quality and preservation and protection of biotic diversity. Two audits, i.e. performance and regularity, of the implementation of the traffic infrastructure also involved the environmental aspect of the two investments. The Court of Audit implemented two international environmental audits after 2005. It closely co-operated with the SAIs of Austria, Hungary and Croatia. Previously, the Court of Audit co-operated in the implementation of the parallel audit of the implementation of the Convention on co-operation and permanent use of the Danube River and two other audits of environmental aspects of the investments in the traffic infrastructure. Some important environmental audits carried out by the Court of Audit:

the regularity and performance audit of establishing the regional parks Snenik and Koevsko - Kolpa and of the implementation of the projects for preservation of wild animals and forests, the regularity and performance audit of the establishing the Zasavje Centre for Wast e Management in Unino, Hrastnik since October 2000 to the end of 2005, the audit of the appropriateness of the decision made by martno pri Litiji Municipality on waste disposal Ostri vrh near Logatec, the regularity and performance audit of the business operation of the Ministry of Environment and Spatial Planning in implementing environmental policy since 2000 to 2004.

What has the Court of Audit found out and what are the impacts of the environmental audits?
The most important audit findings of the environmental audits are:

the responsible audited entities did not create the institutional framework for the protection and preservation of the environment in the due time, the responsible audited entities did not prepare planned strategic documents for the environmental policy. There were no strategic documents which would identify objectives, actions, responsible people for their implementation and expected results and impacts for each area of environment protection, the responsible audited entities did not prepare and implement harmonised measures for the achievement of the planned objectives, instead the measures were in several cases contradictory and did not provide for the achievement of the objectives, the responsible audited entities did not provide for the co-ordination between the institutions that were also involved in the implementation of the environmental measures. Further more they did not co-ordinate nor monitor the implementation of measures, some of the national and governmental programmes of nature protection were not entirely implemented or not all of the objectives were reached, due to inconsistent implementation of the measures, the responsible audited entities did not provide the conditions for the implementation of the sustainable development on the areas where the environmental protection and co-ordinated development is very important.

The most important impact of the environmental audits as well as all other audits is the implementation of the remedial measures due to the found irregularities and inefficiencies. On the basis of the findings of the environmental audits the Court of Audit demanded form the audited bodies to prepare and adopt the strategic documents, to study the efficiency of the implementation of the environmental measures and to prepare a proposal for their co-ordinated implementation, to prepare guidelines for managing the protected areas. The implementation of the remedial measures is the most important mechanism that is used by the Court of Audit in order to provide for more efficient implementation of the environmental policy and the achievement of the objectives.

How does the Court of Audit plan to implement the environmental audits in the future?
Good understanding of the environmental problems, environmental legislation, responsibilities and organisation of institutions authorised for the implementation of the environmental policy is of key importance for the preparation of the proposals of the future environmental audits. The objective of the Court of Audit is to continue with the implementation of the environmental audits that shall present and study the key environmental issues in Slovenia and that shall provide for the solution and elimination of the environmental problems. On the basis of the risk analysis referred to each area of the environment protection the Court of Audit shall define a strategy of implementing the environmental audits. In this way it shall provide for the continuous auditing of the key audit issues. A special focus will be placed on the assessment whether Slovenia achieves the set objectives of the international environmental agreements, assessment of important local environment issues and assessment whether the users of public funds are environment friendly in their operation. An important challenge is the audit of the achievements of the sustainable development of Slovenia; this audit shall include almost all working areas of the State. The Court of Audit shall also in the future co-operate with other SAIs when implementing environmental audits. The purpose of such co-operation is to exchange audit experience in order to improve the audit implementation as well as to obtain understanding of the aspects, issues and solutions of the environmental problems in other countries and to define the principles of best practice on the area.

About the Audit Process

In accordance with the guidelines and standards adopted by INTOSAI the Court of Audit of the Republic of Slovenia carries out audits of regularity and audits of efficiency of the operations of direct and indirect users of public funds. In addition to the regular audits which the Court of Audit has a statutory obligation to perform, its annual work programme also includes other audits selected by the Court of Audit itself. The audit begins with the framework planning of the audit. A proposal for the introduction of an audit may be submitted as:

a proposal for a pre-audit, or as a proposal for an audit. In a pre-audit the auditor obtains, in particular, the information required for an assessment of the risks in the operations of the auditee or obtains other information required in order to decide whether to include the audit in the annual work programme of the Court of Audit. If the proposal is approved a plan for the implementation of a pre-audit is drawn up. When a report on the pre-audit has been compiled a proposal is issued on whether or not to commence an audit The audit begins with the formulation of a detailed plan. After it is approved a resolution is issued for carrying out an audit which is included in the work programme of the Court of Audit. This is followed by the performance of the audit at the auditee, a draft audit report is issued, disputed audit findings are cleared up with the auditee in a clarification meeting, a proposed audit report is compiled, the auditee has the opportunity to object to the findings of the audit, and the senate performs its work. The audit is concluded with the issuing of an audit report. The follow up is introduced if any important irregularities or inefficiencies by the user of public funds are found and it is not stated in the audit report that appropriate measures were taken during the audit to remove the irregularities or inefficiencies discovered. In that case the auditee must submit a response report to the Court of Audit. The response report must present the steps and actions undertaken to eliminate the irregularities and inefficiencies. The Court of Audit tests the credibility of the response report. If the Court assesses that remedial actions were not satisfactory and that the public fund user violated the obligation of operational efficiency, a request for action to be taken is issued and delivered to the authorised entity, which can take measures against the auditee. The body entity must decide on the measures necessary and report its decision to the Court of Audit within 30 days. If the user of public funds commits a severe violation of the obligation of operational efficiency, the President notifies the National Assembly. The relevant committee of the National Assembly reviews any severe violations in the presence of the auditee and adopts a decree on measures to be taken in such cases. In cases of severe violations of the obligation of operational efficiency, or if the auditee prevents or hinders the execution of the audit, the Court of Audit can issue a proposal for the dismissal of the responsible person and inform the media. If there is a suspicion of an offence having been committed the Court of Audit proposes a legal procedure or informs the relevant authorities.