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Speech at the conference marking the launch of a co-operation project between the Netherlands Court of Audit and the Armenian Control Chamber

Chairman Zakharyan, Mr. Ambassador, dear colleagues, ladies and gentlemen,

It is for me and my staff a great pleasure that I can address you here in Armenia. Today we mark the beginning of a promising project jointly undertaken by our two sister institutions. Last July the Netherlands Court of Audit and the Armenian Control Chamber signed a letter of intention in which we expressed our willingness to co-operate. Today, some 9 months later, we meet as the proud parents of a common project. I am confident that our baby will have a bright future.

I would like to present three themes during this presentation:

  • the historic ties between Armenia and the Netherlands;
  • how we intend to approach the project;
  • the challenges we expect to encounter.

The Armenians and the Dutch - a history of co-operation

When Armenia already was part of the ‘civilized’ world and a powerful nation, the Netherlands more or less was a swamp where the Batavians, our ‘barbarian’ ancestors, quarreled with the Romans along the river Rhine. The first attempts to introduce Christianity in the Netherlands date from around 700 AD, when Armenia had already been a Christian nation for 400 years. The latter fact was to play an important role in the relations between the Armenians and the Dutch.

History can play strange tricks in the development of nations. In the late Middle Ages the Dutch began constructing the dykes and the windmills that protected their cities and pastures from the vagaries of nature. There is a saying according to which “God created the world, but the Dutch created Holland”. That may be a little presumptious, but the Dutch certainly made the most of Holland’s geographical location, honing their skills as shipbuilders and merchants. Amsterdam became a prominent financial market centre. Immigrants from the Southern Netherlands (currently Belgium) contributed greatly to Holland’s cultural development. By the time the Seven United Provinces of the Netherlands secured their independence from Habsburg Spain at the Peace of Westphalia in 1648 Holland had become of Europe’s most powerful nations.

Trade became the linking pin between the Armenians and the Dutch. In the 17th century the Dutch trading empire stretched far and wide. The red-white-blue flag was raised, inter alia, in a trading post in the Persan capital Isphahan. There the Dutch encountered a large colony of Armenians in the suburb of Julfa. They were pleasantly surprised to find that the Armenian merchants were Christians as well as reliable partners who offered access to all sort of profitable merchandise from the Far East. For their part the Armenians obtained access to Dutch markets. The first Armenians arrived in Amsterdam around 1627. From 1650 onwards their numbers grew. The first printed Bible in Armenian was printed in Amsterdam in 1666. The Armenian church in Amsterdam, built in 1714, is still operating.

Armenians settled not only in Amsterdam, but eventually also in the Dutch East Indies, the current Indonesia. As Christians the Armenians were considered equals to the Dutch. Armenian churches were built in Batavia (today’s Jakarta) and Surabaya, on the island of Java. Although the Armenians were careful to preserve their religion and traditions, they successfully integrated into Dutch society. Prosperous Armenians had their portraits painted by famous Dutch artists such as Rembrandt, and Armenians sometimes lent large amounts of money to the Dutch Government Relations were characterized by mutual trust and respect.

The fourth Anglo-Dutch War (1780-1784) proved an economic disaster for the Dutch, and particularly for the Dutch East India Company, which folded in 1800. In 1795 a French army invaded the Dutch republic. Faced with economic and political instability most Armenians subsequently left Amsterdam in search of better opportunities. However, the thread of history that runs between Armenia and the Netherlands proved strong. With time the number of Armenians in Holland increased once again, and today several thousand Armenians call the Netherlands their home.

A future inspired by the past

As this short overview indicates, the Armenians and the Dutch have many things in common, including a history of mutual respect and cooperation. Appreciation for each other’s traditions and identity is part of our common heritage. I trust the cooperation on which our two institutions will embark today will draw inspiration from the past. Respect for each other and acknowledgement of differences proves to be a critical success factor in projects of this nature. Our co-operation will be organized according to the so called ‘twinning’ concept. This concept of twinning between administrations has been successfully applied to link up current and future member states of the European Union. This practice, which the European Commission has played a leading role in developing, is also being applied by the Netherlands Court of Audit.

The Netherlands Court of Audit is selective in partnerships of this nature. We are not a consultancy firm and only engage in twinning if we believe there is added value to be obtained and provided. The project we are about to launch is being supported by the World Bank. We pledged our cooperation having ascertained that:

  • the Control Chamber is committed to international good auditing practices in order to improve the quality of public financial management in Armenia;
  • staff at the CoC is committed to raising professional standards in order to develop the efficiency and effectiveness of the institution;
  • the President of the Control Chamber is personally committed to the success of the project.

We prefer working with moderately-sized partners. Working with medium-sized partners tends to facilitate communication and enables us to involve most relevant staff members. At a certain moment we know everyone and everyone knows us. We like to use several ways of knowledge sharing and encourage direct communication between colleagues. Of course projects of this nature do require some formalities and formal paperwork. But the focus has to be on substance and on sharing of knowledge and experiences between fellow-auditors. It is important for this learning process to be genuinely interactive and mutual. Solutions that work in the Netherlands do not necessarily work here, so we will have to learn from each other. As both of our institutions must spend their limited resources wisely, we need to agree on how best to proceed. I would suggest that we examine at an early stage any constraints or challenges that we might face, and adapt our approach accordingly. I would like therefore to invite our Armenian colleagues to meet with my staff in The Hague at their earliest convenience. We look forward to an open, results-oriented, genuine partnership.

Challenges

Citizens everywhere require governments to spend public finances prudently, effectively, and in accordance with the law. Trust in government depends, inter alia, on how public institutions manage taxpayers’ money. Allegations of corruption and financial mismanagement undermine trust in government. Citizens resent politicians or civil servants wasting or mismanaging taxpayer’s money. It is widely recognized that corruption is a major impediment to good government. It also blocks economic development. Corruption amounts to stealing from the poor. We must fight it tooth and nail.

Transparency International’s global corruption table currently ranks Armenia in 120th position, between Togo and Eritrea. That is not good enough. Armenians deserve better. There is work to do. I know that Chairman Zakharyan and his staff are firmly committed to having the Chamber of Control play a leading role in improving accountability in Armenia. They can count on the full support of the Netherlands Court of Audit.

The COC’s audit agenda already contains a natural focus on detection of corruption, poor management of state finances, and improper implementation of the budget. These are classic duties of a Supreme Audit Institution. However, the promotion of good financial management cannot and should not be the task of audit institutions alone. This is why the efforts of various Armenian public institutions to improve the state of financial governance are much to be applauded. In this connection I would like to salute the support and encouragement provided by the European Commission and the World Bank. With the help of the Commission and the World Bank’s Public Sector Modernization program several mechanisms for internal control and internal audit in the public sector are under development. I am confident that Armenia’s Chamber of Control will succeed in building on these developments, and modernize its audit practices where relevant and appropriate.For a country to modernize its system of financial accountability takes time. In my own country, for example, where levels of corruption have traditionally been modest, only 20 years ago central government accounts were in a state of disarray. The financial statements of most ministries in the Netherlands were five years overdue, many items of expenditure were irregular or doubtful, and financial management at the ministries was poor. In 1983 the regularity of only 13 per cent of state expenditure could be ascertained by the Netherlands Court of Audit.

With the support of Parliament, in 1986 the Minister of Finance introduced a five-year plan under the name Operation Accounting Reform to improve financial management. This operation’s objectives were to:

  • improve internal control at the ministries;
  • prepare manuals on administrative procedures and control;
  • establish internal Ministry Audit Departments at all 13 ministries;
  • have the Ministry Audit Departments issue unqualified audit opinions on the ministries’ financial statements.

A whole-of-government effort proved necessary to meet these objectives. The original time-table was unrealistic: the five year plan took ten years to implement. In fact, it took until 1995 before the Netherlands Court of Audit was able to issue a ‘reasonable assurance’ opinion on the regularity of 99% of state finances. Today, Dutch citizens can be confident that the central government’s books are in order. The experience has taught us some lessons which we will be happy to share with our colleagues in Armenia.

The “Vault”

In the course of the past few months I have been privileged to get to know the Chairman of Armenia’s Control Chamber and his colleagues. Before concluding my presentation I would like to express my admiration for the tireless efforts undertaken by Mr Ishkhan Zakharian and his staff to contribute to good governance in Armenia. As a token of my appreciation I would like to present you, Mr Chairman, with a small gift. It is both a practical tool that should be of use to your daily work and an instrument of international communication. I like to think of it, therefore, as a symbol of our co-operation.

Information technology is no doubt one of the most powerful tools in auditing. Of course IT cannot replace professional judgment by the auditor, but it greatly facilitates audit work and enables audits that would be impossible to execute manually. Our present is a state-of-the-art carrier of such technology. We have equipped it with two sets of tools. Included you will find, first, a collection of manuals and other guidance papers used by my own institution, as well as a number of audit reports that might be of interest to you and your staff.

All files are in English. Furthermore, we have equipped our present with a fully licensed piece of so-called ‘audit’ software, called IDEA (Interactive Data Extraction and Analysis). This software allows you load up computer data of your auditees and to run all sorts of compliance tests, to extract samples and carry out many more types of analysis. Experts assure me this electronic vault is powerful enough to contain all relevant audit information with respect to Armenia’s government finances. One of the intended activities in our project is to share our experience in using this software with your staff, for instance in revenue or payroll audits. We will also provide adequate training and guidance.

We trust this store of knowledge will be of use to you in your efforts to improve financial accountability in Armenia. Of course, as auditors we don’t like taking risks, so we thought we should provide a back-up facility as well. It comes in the shape of a powerful, portable, shock-proof hard disk, with the same capacity as the instrument itself - around 640 Gigabyte. In presenting you with this gift, Mr. Chairman, let me once again express our gratitude for the warmth and friendship that you and your colleagues have been providing these past few days and for which Armenia is justly famous. We look forward to deepening our friendship and to continue working with you.


 

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