Executive summary
Continuous supervision has developed over decades as a way for auditors to enhance their oversight of public funds. Approaches to continuous supervision vary, but, in general, it involves assessing risks and controls to help management determine the need for and nature of corrective actions or further inquiry. Continuous supervision complements traditional auditing by providing an early warning system to catch problems before they compound. It relies on reliable data and information technology systems to facilitate data collection and analysis.
In Spain, the contemporary origins for continuous supervision stem from nearly a decade of reforms to improve the efficiency of the public administration, increase its accountability and transparency and enhance public service delivery. In 2012, the Spanish national government established the Commission for the Reform of the Public Administration (CORA). At the time, the CORA 2013 reform package was one of the most substantial, evidenced-based and wide-ranging public governance reform plans among OECD member countries. The CORA recognised the strategic potential of information technology and digital tools to help achieve the proposed policy reforms, building on previous efforts at both the domestic and European levels.
One of the desired outcomes of the CORA reform package was an improved institutional architecture for the public sector. To achieve this, the CORA proposed regular monitoring and evaluation of the “rationality” of public sector entities in Spain with the goal of identifying those that could be dissolved or merged with others performing similar functions. The Public Administration Legal Regulation Act of 2015 (Ley 40/2015 de 1 de octubre de Régimen Jurídico del Sector Público) codified some of the CORA reform proposals to improve administrative efficiency, reduce duplication and simplify procedures across the public sector.
This Act also established the legal framework for a continuous supervision system for public sector entities (sistema de supervisión continua, SSC), spearheaded by the General Comptroller of the State Administration (Intervención General de la Administración del Estado, IGAE) and the National Audit Office (Oficina Nacional de Auditoría, ONA), the financial control and internal audit body within IGAE. In 2019, IGAE implemented its first iteration of the methodology for the SSC — an approach to independent evaluation of public policies with a focus on the entities that implement them. Over 400 government entities are subject to the SSC.
Building on this effort, with the support of the OECD and financing from the European Union, IGAE is advancing its strategy to improve the SSC. This report presents the IGAE’s methodology for the end-to-end process of continuous supervision of public sector entities at the central government level. It also provides examples of good practices from other oversight bodies that have a similar supervisory mandate. The report proposes actions primarily for the IGAE and the ONA to consider in order to improve the effectiveness and impact of the SSC. Proposals for action fall into three related areas: strengthening risk assessments for continuous supervision, enhancing strategies and capacity for data-driven monitoring, and improving transparency, communication and co-ordination.
Chapter 1 introduces the IGAE’s continuous supervision mandate, with a focus on the ONA and its responsibilities to deliver the SSC. The chapter provides an overview of “rationality” risk and how the ONA operationalises this concept in its risk assessments and reviews, which focus on 3 entity-level risk factors: 1) compliance with laws and regulations, 2) financial sustainability, and 3) the relevance of the entity in the context of a particular public policy, including whether it duplicates efforts with others. Chapter 1 offers several recommendations for the ONA to strengthen its risk assessments, including the following:
Formalise the criteria for its automated reviews and clarify how indicators link to the strategy for continuous supervision.
Leverage the SSC for a broader assessment of sustainability, going beyond current financial indicators.
Standardise and document processes related to selecting entities for and using the results of control reviews.
Enhance entity-level assessments of duplication, including consideration of fragmentation and overlap as distinct issues.
Chapter 2 shifts the focus to challenges the ONA faces in terms of its shaping its strategy and building capacity for delivering the SSC in the future. It draws from a broad range of relevant experiences by other audit and control bodies to help shape recommendations to improve the methodology and processes for implementing the SSC. These recommendations focus on various technical aspects, and they include:
Institutionalise feedback loops to ensure continuous improvement to the SSC and consider further automation as well as the use of dashboards.
Take additional steps to assess data quality with respect to the SSC.
Improve the tracking of conclusions and recommendations from continuous supervision activities.
Invest in the ONA’s capacity and specialised data skills for enhancing th SSC.
Chapter 2 also takes into account issues related to transparency, communication and co-ordination. These areas can have an impact on the effectiveness and relevance of the SSC in Spain, as well as the legitimacy of the ONA’s efforts as the SSC matures. Drawing inspiration from the Institute of Internal Auditors as well as supreme audit institutions, the chapter offers the following additional recommendation for the ONA:
Improve the transparency of the SSC, including publishing the annual report and establishing audit committees.
Enhance co-ordination with key oversight institutions to ensure the effectiveness of the SSC and avoid duplication.
Develop a communication strategy to demonstrate the value of the SSC to government entities and oversight bodies.
The issues and recommendations presented in the report, while not exhaustive, target many of the ONA’s most urgent challenges to delivery its new mandate for continuous supervision. During the course of the project with the OECD, the ONA had already started to take concrete steps to advance the next iteration of the SSC, demonstrating a commitment to ongoing improvement. This commitment is a critical driver for the effectiveness of the SSC to promote accountability and transparency in the Spanish government in the coming years.