strengthen external auditing and reform the CGR. In 2002, the CGR articulated a modernization program, which nevertheless focused on improving its internal functioning (CGR 2002).
The challenge for Chilean authorities is to redefine the role of the CGR in the oversight of government finances, as part of a broader structural reform of financial governance. As Waissbluth (2001) argues, what is required is ‘an entirely renovated institution, with greater constitutional powers and streamlined competences, and with different approaches to the external control of public sector management.’ Clearly, as an evaluation of fiscal governance in Chile highlights, ‘some of the current functions of the CGR are incompatible with its ultimate responsibility as external auditor of the system,’ in particular the supervision of the government accounting system (World Bank 2004:2; OECD 2004).
Any reform of the control functions of the CGR would involve systemic changes in the overall system of financial governance and fiscal control. Six interrelated reforms would be required. First, were the CGR to abandon its ex-ante compliance control functions, government would have to substantially upgrade its internal control system and the General Council of Internal Government Auditing (CAIGG). Second, were the CGR to abandon its supervision of government accounting, these functions should be assumed by an executive agency, possibly through the creation of a general accounting office within the finance ministry. Third, as government accounting responsibilities are transferred to the executive, the CGR should develop its ex-post auditing functions and audit government financial statements, including annual public accounts. Enforcing ex-post controls would, in turn, require the agency to be endowed with greater sanctioning powers.
Four, the greater focus on ex-post performance auditing that the abandonment of ex-ante compliance control would allow would require substantial changes in the CGR’s corporate culture and a widening of the panoply of ex-post audit instruments. Five, the auditing of government financial statements by the CGR, including annual government accounts, would also require strengthening the role of the legislature in the oversight of government finances and an improvement in the functional relations between the legislature and the CGR. A major challenge for the CGR is ‘how to develop more effective mechanisms to ensure that the legislature duly considers its findings and recommendations and uses them in an appropriate and apolitical manner to scrutinize the activities of government’ (World Bank 2004:48). Six, the CGR also should develop its linkages with the wider society through a more pro-active approach to the publicity of its audits.
In recent years, the political momentum for reform has quickened, as corruption scandals have affected the public trust in the system of fiscal control. Upon assuming office in 2006, Concertación President Michelle Bachelet launched a series of initiatives to restore confidence and increase transparency in the public sector. She commissioned a report from a group of independent experts, which submitted its conclusions in November 2006. In December, President Bachelet outlined her reform plan based on the commission’s recommendations, including a radical reform of the CGR through the adoption of a new organic law.
The proposed reforms seek to modernize external auditing and recast of the CGR by increasing the focus on ex-post compliance control and financial auditing, limiting ex-ante control functions further, disclosing audit reports, and broadening the scope of the CGR. The commission also advised that the CGR abandons its quasi-judicial functions as a tribunal of accounts and the creation of a specialized court of accounts. In terms of government accounting, it suggested separating government accounting and external auditing functions, thus paving the way for the CGR to audit government accounts. It proposed establishing an autonomous accounting agency.
The commission also recommended creating an autonomous agency to evaluate the performance of public agencies and programs. This agency should be linked to the legislature and would be