Independent audit of central government finances not strengthened by minister’s decision for postponement
Netherland Court of Audit distances itself from Minister of Finance’s decision
The Netherlands Minister of Finance decided on 4 April 2025 against a permanent solution to strengthen the independent audit of central government finances. The Netherlands Court of Audit distances itself from his decision. Audit work will be duplicated at all ministries and more auditors will be needed.
The Court of Audit calls on the House of Representatives and Senate to opt for a fundamental solution to strengthen the independent audit of central government finances. The variant proposed by the minister following the cabinet meeting of 4 April will result in the engagement of more auditors and thus to a heavier audit burden on the ministries and the inefficient use of tax money.
Many years’ work to improve the system
Several variants have been explored in recent years to raise financial audit in central government to international standards and make it more efficient. In January 2021, the Court of Audit sent the findings of a peer review, a thorough examination of the Court by the Supreme Audit Institutions of Sweden, the United Kingdom and Canada to the House of Representatives. The main recommendation was to strengthen independent audit. In its capacity as external auditor, the Court’s audit of central government accounts relies too heavily on the work of the internal auditor, the Central Government Audit Service (ADR). The ADR is part of the Ministry of Finance.
Several variants to strengthen financial audit were studied 4 years later, with mixed results. A variant worked out by former House member Evert Jan Slootweg at the request of the Minister of Finance would result in permanent and practicable improvement. The minister, however, has not opted for this variant. He considers the associated reorganisation of the internal audit service together with an increase in the Court’s size to be too drastic.
Clearer segregation of duties and greater audit independence
The variant worked out in the Slootweg report would resolve many issues: it would define the ADR’s internal audit function more clearly, expedite the entire audit system, making it more efficient, and strengthen the Court’s audit independence. In this variant, the ADR would lose the audit function it currently fulfils as certifying internal auditor. It would retain and enhance its advisory role regarding, amongst other things, the ministries’ financial management. In this variant, 75 of the ADR’s staff could be released and deployed at the ministries to strengthen financial management. The Court’s audits have shown over many years that there is a manifest need for better financial management at many ministries.
The Slootweg report recommended transferring the audit certification task from the internal auditor to a single body: the external auditor, i.e. the Court of Audit. The external auditor’s independence from central government would strengthen the audit and reduce ambiguity in the system. This is in line not only with the organisation in other EU countries but also with the demands the Minister of Finance makes on auditors of large businesses. In the private sector, audit and consultancy services cannot be provided by one and the same organisation. The Court of Audit favours the Slootweg variant. It would transfer 225 auditors from the ADR to the Court to carry out fieldwork on site at the ministries. Furthermore, it would save 56 audit positions in central government. The minister’s decision, however, will require the appointment of more auditors and will therefore be more expensive. The Court is an adherent of efficiency and the labour market for auditors is already very tight.
More efficient audit, faster results
The Court of Audit expresses independent opinions on central government revenues and expenditures, as funded by taxpayers, and on the government’s accountability for them. The Slootweg variant would achieve several of parliament’s preferences. Financial audit of central government would be more efficient – with fewer auditors – and would be completed more quickly. Submitting the ministers’ annual reports and the Court’s opinions to the House of Representatives and the Senate earlier in the year would have significant benefits. The House would receive audit opinions on the government accounts for the past year in April instead of on the third Wednesday in May. Lessons learned from the previous year’s accounts could then be applied in the debate of the government’s Spring Memorandum concerning the current and future budgets. As a High Council of State with a constitutional task to audit central government accounts, the Court of Audit wants to contribute to this strengthening of the democratic rule of law.
Other variants do not produce a future-proof audit system
The Minister of Finance’s decision leads to further postponement, not to a future-proof audit system. Along with experts in the audit world and constitutional law, the Court thinks this decision to change the system will strengthen neither independent audit nor the democratic rule of law. The minister’s preferred variant with ‘drawing rights’ will increase the Court’s reliance on the ADR. In The State of Central Government Accounts the Court wrote on 15 May 2024 that the variant would not fully address the problem concerning international standards and that increasing the external auditor’s reliance on the ADR was not a solution. It is not future-proof, is more expensive, creates more audit overlap and thus increases the burden on ministries.
The letter is available only in Dutch.