From audit to prosecution: institutional collaboration as a solution to closing the expectations gap in decentralized governance

Michael Barzelay and Sérgio N. Seabra

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: A long-standing topic of concern in the literature on governmental auditing is whether the aims of Supreme Audit Institutions (SAIs) or other central audit institutions should include detecting fraudulent use of public money. The balance of opinion has been against this proposition, largely for reasons of infeasibility. This article takes up the same topic, but in policy contexts appropriate to this special issue, namely, where federally financed health, education, and infrastructure programs are implemented through program spending and delivery by local governments. Such policy contexts heighten the need for a capability to prevent and prosecute cases involving the fraudulent use of public money. This need, recognized within Brazil's federal executive since the early 2000s, has been addressed by its Office of the Comptroller General (Controladoria-Geral da União - CGU) through systematic field audits of municipal implementation coupled with strategic collaboration with Federal Police. This article examines CGU's integrated audit investigation approach and its policy and institutional contexts. By explaining how these strategies have functioned in attaining operational capacity and support, the article provides evidence on possibilities of how audit institution strategies aiming to detect fraudulent use of public money can be feasible within decentralized governance systems that call for innovative vertical coordination mechanisms.

Keywords: auditing; corruption; fraud detection; decentralization; public management; expectations gap; vertical accountability (search for similar items in EconPapers)
JEL-codes: F3 G3 J50 (search for similar items in EconPapers)
Date: 2026-06-18
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Published in Financial Accountability and Management, 18, June, 2026. ISSN: 0267-4424

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