Supreme Audit Institutions and Sustainability of Public Finance. Links and Evidence along the Economic Cycles

Abstract

Against the backdrop of concerns for diminishing the vulnerabilities of the economies of the Member States, the EU has adopted measures to strengthen budgetary discipline and control of the public deficit. In this context, the responsibility of government institutions has increased, not only in ensuring the sustainability of public finances but also in direct or indirect cooperation for good economic governance. From this perspective, this study aims to assess the impact of macroeconomic variables and those associated with supreme audit institutions on the sustainability of public finances measured by the size and dynamics of government deficit and gross public debt. Additionally, the impact of the same variables on governmental effectiveness and control of corruption has also been assessed. The data collected from secondary sources and panel data models were used to conduct an empirical study of the EU Member States which covered the 2002–2019 period and the sub-periods, divided as follows: pre-crisis, crisis, and post-crisis. The results of the study show that supreme audit institutions, through their organizational structure, the nature of their activities, and professionalism, may contribute to the reduction of public deficit and gross public debt and, implicitly, to higher efficiency and control of corruption. The results of analyses for the sub-periods show that ISAs played a more important role in reducing government deficit during crisis and post-crisis periods. By confirming or rejecting the results of the few studies that have been conducted so far, this study provides additional evidence that fills the gaps in the literature.

Audit of public finances: methodological issues and the case of Ukraine

“…Current research in different countries confirm the relationship between the performance of the SAIs and the maintenance of good governance (Meiss et al, 2017;Milojević et al, 2018;Nevidomyi & Kanonishena-Kovalenko, 2019;Lentner et al, 2020;Bardash & Osadcha, 2020;Çeku, 2021;Bostan et al, 2021).…”

“…In addition, as noted by Bostan et al (2021), in recent years, against the background of the aggravation of the economic and financial crisis in many countries, the quality of public finances has come to the fore, which involves not only changing the way public resources are allocated, but also their efficient use. Under these circumstances, the Supreme Audit Institutions have a strong capacity to help governments stabilize the economy, respond quickly to economic shocks, and ensure the proper functioning of markets for goods, services, and labor.…”

Improving the Public Sector Development Programme Allocations in the Clientelistic Environment of Balochistan: A Political Economy Analysis

“…For example, we can hardly witness any productive debates being conducted for budget allocations (Head, 2007). The majority of budget meetings are rushed, and their sessions are not long enough to ensure that the process is as inclusive and successful as it should be (Bostan, et al 2021;Jobaid & Khan, 2018;Jackobsen, et al 2016). Finally, a budget document is presented to the assembly for approval without any discussion by the members.…”

Special Issue “Audit and Financial Control Tools Aimed at Ensuring the Sustainable Performance of Organizations”

“…That is why works have been included that treat as closely as possible the correlation between the activity supreme audit institutions (SAI) and sustainability of public finance [11] or comparing internal audit with internal control in the marketing environment [12]. The results of analyses (regarding the activity of the SAI) for the sub-periods show that these institutions played a more important role in reducing government deficit during crisis and post-crisis periods.…”