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🇧🇷 Brazil /Economy & Trade

Senate Must Block 'Rider' in New Public Governance Law

From Folha de S.Paulo · () Portuguese

Translated from Portuguese, summarized and contextualized by DistantNews.

At a glance

Opinion Named sources Context piece
  • A proposed public governance law (PL 3.995/2024) in Brazil faces criticism for a provision allowing public audits to be outsourced.
  • Critics argue that allowing public entities to hire their own auditors creates conflicts of interest and undermines independence.
  • The article urges the Senate to remove the controversial article to preserve the integrity of public control mechanisms.

Brazil's Senate is poised to vote on a new public governance law, PL 3.995/2024, which, despite containing progressive elements, includes a controversial provision that critics argue compromises the independence of public audits.

The bill, originally proposed in 2017, aims to consolidate various practices related to public governance into a single law, focusing on control, prevention, social participation, risk management, and transparency. However, an amendment introduced in the Chamber of Deputies allows public entities to contract their own independent auditors.

This change has drawn sharp criticism. Laura Mendes Amando Barros, a prosecutor and professor at Insper, stated, "The control of public action is incompatible with market logic. The client is the one who hires and pays, and this opens room for conflicts of interest." The Brazilian Association of Jurists for Democracy (ABJD) denounced the provision as a "deeply problematic structural inflection," warning that outsourcing audits could lead to more bureaucracy, higher costs, and reduced effectiveness, while also raising the question: "Who will control the private controllers?"

The control of public action is incompatible with market logic. The client is the one who hires and pays, and this opens room for conflicts of interest.

— Laura Mendes Amando BarrosA prosecutor and professor at Insper, explaining the issue with outsourcing audits.

The article also points to the recent history of major auditing firms, noting their involvement in financial scandals such as those at Lojas Americanas and Banco Master, where firms had previously validated financial statements later found to be fraudulent. The article expresses concern that the bill could allow individuals, not just firms, to act as public auditors, potentially enabling any registered accountant to audit government ministries.

While acknowledging the positive aspects of PL 3.995/2024 and its potential to advance public governance, the author stresses the critical need for the Senate to remove Article 16. This action, the article argues, is essential to safeguard the integrity and effectiveness of Brazil's public control system.

The outsourcing of the audit creates an additional problem: who will control the private controllers? The probable result will be more bureaucracy, more costs, and less effectiveness.

— ABJD (Associação Brasileira dos Juristas pela Democracia)Denouncing the provision in a note.
DistantNews Editorial

Originally published by Folha de S.Paulo in Portuguese. Translated, summarized, and contextualized by our editorial team with added local perspective. Read our editorial standards.

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