Why did the Local Autonomy Act establish an external audit system?
The term "external audit system" may not be very familiar to many people.
However, in fact, it is a formal system based on the Local Autonomy Act, and comprehensive external audits are already mandatory for prefectures, government-designated cities, and core cities.
So, why did the Local Autonomy Act establish an external audit system?
Behind it lies the very realistic idea that "there are limits to internal audits alone."
The external audit system is a system under the Local Autonomy Act
The Local Autonomy Act stipulates
comprehensive external audits
individual external audits
as systems.
A comprehensive external audit is a system in which external experts conduct audits based on themes set each fiscal year.
An individual external audit is a system conducted as needed, triggered by
resident audit requests,
assembly requests,
or head of local government demands.
The audits are performed by
lawyers,
certified public accountants,
tax accountants,
or other external experts.
In other words, it is an audit system by a "third party" rather than "within the local government".
Why was it institutionalized?
The background to the Local Autonomy Act establishing an external audit system includes:
the increasing complexity of administrative affairs
the expansion of fiscal scale
the increase in specialized fields
.
In particular,
contracts
subsidies
designated management
information systems
public facility management
and the like are fields that require advanced specialized knowledge.
There was a concern that the conventional audit commissioner system alone had limitations in terms of expertise and independence.
Based on that awareness of the issue, an external audit system was introduced through an amendment to the Local Autonomy Act.
"Internal control" and "external audit" are separate matters
What is important here is that
"external audit is unnecessary because there is internal control"
is not the relationship.
I think this is easy to understand if you consider private companies.
Even in private companies,
strengthening internal controls
internal audits
external audits
normally coexist.
Moreover, their fundamental purposes are different.
Internal audits are mainly conducted for management improvement and internal control.
In other words, they are audits for the management team and the internal organization.
On the other hand, external audits have the role of guaranteeing "objectivity as a third party" to stakeholders such as shareholders, financial institutions, and business partners.
In short,
"External audits are unnecessary because internal controls are being strengthened"
is not the original relationship between them.
Rather,internal controls, internal audits, and external audits each play different roles while coexisting, thereby enhancing the overall reliability of the organization.
The same applies to local governments.
There is no need to deny the audit committee system or internal controls.
However, apart from that, there is the issue of whether or not to have third-party verifiability for citizens as a system.
Why is it mandatory for core cities and above?
Under the Local Autonomy Act,
prefectures
designated cities
Core cities
are required to have a comprehensive external audit system.
This is because
the volume of administrative work
financial scale
authority
and expertise
are significant.
In other words, the national government itself
designed the system on the premise that "it should not be completed internally alone, and audits by third parties are also necessary"
is what this means.
On the other hand, it is not mandatory for general municipalities.
However, the system is designed so that it can be introduced by ordinance.
In short,
the position of the Local Autonomy Act is not that "it is unnecessary for small-scale local governments," but rather
that "it is designed to be introduced as needed"
.
A theme that has been repeatedly discussed in Kodaira City as well
The external audit system is not a topic that appeared suddenly.
In fact, the General Affairs Committee of the Kodaira City Council has previously taken up the comprehensive external audit system as a research theme and even conducted site visits to advanced municipalities.
Furthermore, the former mayor included a "time-limited comprehensive external audit system" in his election pledges.
In other words, the mayor himself, who was elected with the trust of the citizens, mentioned the necessity of an external audit system.
Also, several council members have previously mentioned the necessity of
third-party verification
external perspectives
strengthening administrative oversight functions
in the assembly.
In short, the external audit system in Kodaira City was not something that only a specific council member suddenly brought up.
It is something that has been repeatedly discussed by the assembly as a theme in municipal management.
"For trust," not "for suspicion"
When people hear "external audit system,"
"distrust of administration"
"pursuit of misconduct"
some may have such images.
However, that is not the original intent.
Rather, it is the idea that
"if there are no problems, having that confirmed by a third-party audit itself leads to increased trust from citizens"
.
Internal control is important.
Self-purification is also necessary.
However, neither humans nor organizations are so perfect that one can say that alone is sufficient.
That is precisely why external audits exist in the private sector as well.
And I believe that the Local Autonomy Act also provides for an external audit system as a formal mechanism.
Next time
On the final day of the March regular session, a petition requesting the "consideration of introducing an external audit system" was submitted, and yesterday (May 7), the General Affairs Committee held a meeting during the recess to review it.
Next time, I will summarize the content of the review at the General Affairs Committee.