Contingent Liabilities: Issues and Practice; Aliona Cebotari; imf working Paper 08/245; October 1, 2008

While SAIs do not play a role in setting policies for the mitigation, management or 
disclosure of contingent liabilities, they have an important role to play in their 
improvement, by focusing policy-makers’ attention on weaknesses and vulnerabilities in the 
existing practices. The public debt committee of Intosai recommended that: (i) countries 
should consider the merits of extending the mandate of the SAI to undertake financial and 
33
In Brazil, the PPP law limits the total financial commitments that can be undertaken in PPP contracts to a 
maximum of 1 percent of annual net revenue for all levels of government. When subnational governments 
exceed this limit, the federal government is authorized to withhold voluntary transfers. 
34
See Intosai, 2005. Countries surveyed include Argentina, Brazil, Bulgaria, Canada, Fiji, Finland, Lithuania, 
Mexico, Norway, Portugal, Russia, Republic of Korea, Sweden, United Kingdom and the United States.

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performance audits on contingent debt; (ii) this audit work should reflect SAI’s and 
parliament’s assessment of the relative importance of this subject while making an 
appropriate contribution to parliamentary accountability; (iii) the SAI could add value 
through the examination of how the government identifies and classifies its liabilities, 
including contingent debts; (iv) when examining the expected cost of contingent debts, the 
SAI should consider whether all liabilities that can be quantified have been properly 
quantified, whether appropriate descriptive information is produced about nonquantifiable 
debts, and whether proper attention has been paid to implicit liabilities and their 
quantification; (v) when considering the adequacy of arrangements for reporting contingent 
debts to parliament, the SAI should assess them against the criteria of completeness, 
understandability, accuracy, regularity, and consistency; (vi) the SAI should also consider 
whether the amounts budgeted for contingent debts are adequate to cover the likely costs; and 
(vii) when examining the risk management processes around contingent debt, the SAI should 
consider whether the arrangements in place are appropriate for the country’s specific 
circumstances and whether there are practical improvements that should be made.