Armenia
The Swedish National Audit Office (Swedish NAO) has had previous cooperation with the SAI of Armenia, the Audit Chamber of the Republic of Armenia, and embarked on a new cooperation in 2021. The current cooperation agreement was entered into in June 2021 and runs until December 2023.
The overall objective of the cooperation is for the Swedish NAO to promote the SAI’s capability and opportunity to contribute to accountability and to improvements in public administration, as well as to improve citizens’ transparency. This, in turn, contributes to the democratic development of Armenia and to building greater trust in the public administration. As the cooperation is new, there are still no results in line with the objectives that can be linked to the cooperation project.
Project Description
The main focus of the cooperation between the Swedish NAO and the SAI of Armenia covers:
- capacity building
- performance audit
- internal and external communication
- relations to stakeholders and the Parliament.
Previous Cooperation
The Swedish NAO cooperation with the SAI of Armenia began in 2021. The Swedish NAO has not previously had any cooperation with the SAI of Armenia.
SAI Conditions
By law, the SAI of Armenia is an independent central government agency that has a mandate to audit government agencies and institutions at the state and local level that are funded by public funds. According to its mandate, the SAI shall carry out financial, performance and compliance audits. The SAI points out in its strategic development plan that the mandatory audits of quarterly financial statements take up a significant part of the budget, which limits other activities. They are working to remove this requirement and instead report to parliament annually.
The organisation is led by a board (the Public Audit Chamber) consisting of seven members, including the Auditor General. The Auditor General is elected by Parliament on the basis of a recommendation from the President.
In order to be able to work in line with international standards for public sector audit, there are some issues in the legislation addressed by the SAI in its strategic plan for the period 2020–2023. Among other things, financial independence is limited as the government has to approve the budget and access to information is unclear due to legislation interpreted in conflicting ways. There are also restrictions on recruitment of personnel and a rotation system that affects the ability to allocate staff on the basis of competence.
On the scale for SAI PMF, Armenia is at a level ranging from 1 to 2. The scale is between 0–4, where 0 means that the audit functions are not defined and 4 implies full compliance with the international standards.
The SAI’s Degree of Independence
The World Bank’s SAI Independence Index is an index of SAIs’ independence. The index is designed using a ten-point scale where 0 is low and 10 is high. Armenia’s 2021 index was in the range 8.0–8.5, placing the SAI in the category of “substantial independence”.
Project Results
As the cooperation is new, there are still no results in line with the objectives that can be linked to the cooperation project.
However, digital performance audit training was carried out in autumn 2021. In the subsequent evaluation, the majority stated that the training has improved their knowledge of the subject and that they will use the knowledge in their work in the future.
The main component of the project is to develop performance audit within the SAI of Armenia. It is a relatively new audit type and only a few audits have been carried out and published. The goal is for more auditors to be able to carry out qualitative audits and to become a more integrated part of the organisation’s work. According to previous estimates, the SAI of Armenia has a basic understanding of what performance audit is and an ambition to carry out the audits in line with international standards. The authority also wishes to increase knowledge of performance audit within the SAI. This was clear in the self-assessment carried out already in 2016 in accordance with SAI-PMF and supported by IDI. The report shows that there is great potential for improvement both in the audit operations and the organisation’s internal processes. Many of these problems remain even after the entry into force of the new legislation in 2018.
The Swedish NAO’s support to the SAI of Armenia involves training for both auditors and managers and coaching during the audit process. In addition, the SAI of Armenia has the ambition to produce a performance audit manual, and we will support them in that process. There is no other donor directly involved in performance audit.
The SAI needs to strengthen its internal and external communication. The OECD/SIGMA leads this work, but they would like the Swedish NAO to be involved in the preparation of a communication plan for the SAI. New communication channels for internal communication and exchange of information are to be established to improve the exchange of knowledge between employees. In addition, the SAI of Armenia wants to improve external visibility to strengthen citizens’ confidence in and understanding of the work of the SAI. An important part of this is to write user-friendly and relevant reports.
A key area for a SAI is to ensure that relations with parliament and other stakeholders are constructive and that they understand the SAI’s remit and mandate. The Swedish NAO is to support the SAI of Armenia in developing relations with parliament and strengthening their understanding of auditing, in particular to increase the understanding of performance audit so that they are able to deal with the reports. Support also includes strengthening communication with auditees so that they are aware of the purpose of the audits and are willing to share the necessary information. Other stakeholders that may be relevant are the media, parts of the judiciary and NGOs.
Costs
Costs of the Swedish NAO's cooperation that are charged to international development cooperation.
Source: Swedish National Audit Office Annual Reports for 2019, 2020 and 2021 and budget for 2022.
Brief Facts about Armenia
Armenia declared independence in 1990 after the collapse of the Soviet Union. In 2018, the so-called Velvet Revolution took place, based on protests against corruption and abuse of power within the Republican Party that had long been in power. In January 2019, opposition leader Nikol Pashinyan was appointed prime minister after his alliance won the election with 70 per cent of the vote.
Since the 2019 elections, several reforms have been initiated to reduce corruption and change the political system. An anti-corruption commission was set up by the prime minister and a three-year anti-corruption plan was launched for the period 2019–2022. According to the Transparency International 2021 Corruption Index, Armenia ranks 58 out of 180 countries.
Armenia’s relations with neighbouring Azerbaijan and Türkiye are tense. The conflict with Azerbaijan over the Nagorno-Karabakh region has been going on for a long time and has flared up on several occasions since the fall of the Soviet Union. The last time was in autumn 2020.
The agricultural sector is large and employs about half of the population. Growth has been relatively good in recent years, but a large part of the population is still living in poverty, especially in rural areas. Wages are low, especially for women. Thanks to the reforms carried out and economic developments in recent years, Armenia has become a country where international companies have chosen to invest.
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