Challenges to
Establishing an Effective
Organisational
Framework for Effective
Internal Auditing
By Ato Ghartey
OUTLINE
1. What is a framework?
2. Why does it exist/objectives?
3. The Framework: Illustration from Ghana
•What does it look like?
•Who should
What
does itdesign
look it?
like?
Who
should
it?
•Where
shoulddesign
it be located?
Where should it be located?
•Challenges
Challenges
•Evaluation criteria
and
methodology
Evaluation
criteria
and
methodology
•Success criteria:
and and
Impacts
Success
criteria:Outcomes
Outcomes
Impacts
Teasing
questions
•Teasing questions
4. Conclusion
OBJECTIVES
OF THE
INTERNAL AUDIT
Organisational
framework
Why Does It Exist / Objectives?
Control environment with integrity,
accountability and transparency.
Clear definition of
powers
Facilitating
Strong culture of internal
coherent system
control, risk management,
and responsibilities
Transparency, public
confidence for rational
allocation of resources.
Priority setting, planning
and decision making
internal and external auditing
Add value and improve
operations
Accurate,reliable and
timely reporting
THE FRAMEWORK
Operational
Framework
Legal
Framework
Background
and
Objectives
Existing
location,
Structure
and
Functions
Sector
Ministry
Restructuring
and
Relocation
Manual / Legislative
Instrument , IIA
Framework ,
Professionals ethics, etc.
Attorney
General office
Staffing and
Capacity
Building
Requirements
Cabinet
Parliament
Resource and
Operational
Requirements
Transition
Plan
Background
•Public Financial Management Reform
Programme (PUFMARP).
•Transfer of budgetary authority and
expenditure control to MDAs and MMDAs.
•Formal legal recognition of internal audit
THE EXISTING LOCATION (CAGD),
STRUCTURE AND FUNCTIONS
Controller & Accountant-General
Head of Audit & Investigations
Division (Director)
Audit
Public Accounts
MDAs
Investigations
Payroll Audit
Task Force
Pension
Note: Questionable mandate, lack of control overide, duplication of functions.
Redesign and Relocation
Understanding and
appreciation of
How the whole internal audit
system works.
How to identify the component
parts, e.g., MDAs, MMDAs
How each of the components
works
How the parts fit together as a
whole
Using this
approach
Functions and processes are brought
together
System implementation is done in a
coherent manner
Each party within the organisation
gets to know his/her role and how the
role links to or affects other parts of
the organisation.
Decentralized
National
Government Government
Levels
Key
Institutions
Centralized
Government
Levels
PROPOSED STRUCTURE OF THE CENTRAL INTERNAL AUDIT AGENCY (CIAA)
OFFICE OF THE PRESIDENT OR
MINISTRY OF FINANCE
CENTRAL INTERNAL AUDIT
BOARD
DIRECTOR GENERAL
DEPUTY DIRECTOR GENERAL (DDG)
DEPUTY DIRECTOR GENERAL (DDG)
DEPUTY DIRECTOR GENERAL (DDG)
Technical , Field Operations & Research - MDAs
Technical , Field Operations & Research - MMDAs
Administration & Human Resource
MDA*
MDA
MDA
ABBREVIATIONS
DDG
Deputy Director General
MDA*
Ministries, Department and Agency
MMDA
Metropolitan, Municipal and District Assembly
RIAU
Regional Internal Audit Unit
* Also included in the MDA category are the Armed Forces, Commission on Human Right
and Administrative Justice, National Media Commission, Serious Fraud Office, electoral
commission and other similar institutions.
MMDA
RIAU
RAIU
MMDA
RAIU
MMDA
MMDA
Staffing and capacity
building requirements
Skills
mix
Transition Plan
•Implementation committee
•Legal backing
•What to do with existing staff, etc.
Resource and Operational
Requirements
Costing of operational and
logistical inputs
LEGAL FRAMEWORK
Central Internal Audit Bill 2002
•Legislative Instrument
Operational
•Manual,
e.g. Eastern and Southern Africa
Framework
•IIA Etc. see illustration
Operational
Framework
an
Illustration
The Framework
Professional Practices Framework
PerformanceStandards
Normal change
management expectations
Specific
challenges
Environmental
challenges
Normal change
management expectations
Note
Change implies the unknown, uncertainty, risk and stress. The status quo
represents stability, consistency and security. People resist change for good
reasons which include:
•Communication: Not convinced about the need for change. Lack of
awareness, consensus building and participation.
•Security: loss of current job status and known work and expertise.
•Uncertain benefits.
•Fear of failure.
•Low tolerance for change.
Specific Challenges
Location:
Ownership
Office of
of internal
President
audit staff
v MOF
Timing and funding, e.g.,
estimated start, November
2001. Implementation of
priority issues, i.e.,
implementation
committee, enactment of
law, appointment of D-G
and other key staff July
2002.
Rationale of the framework
and related issues
Scope and
targeting of
policy
implementation
activities
Environmental
Challenges
Legitimacy of
framework
Issues and
constraints related to
implementation
(See below)
Implementation issues include:
•Policy rationale – need for the framework and assurance services
•Policy implementation and building capacity – including reporting, HR, strategy, and
internal audit
committees
•Ignorance, Compliance, Enforcement
•Professionalism and ethics
•Governance and poverty reduction dimensions
•Information Technology Issues in Internal Auditing
•Values and Accountability
•Mobilizing Support and Structuring Credibility for Public Sector Internal
Auditing/Building Confidence and Trust
•Building Partnerships and Coalitions for Effective Financial Accountability (includes
outsourcing)
•Staff recruitment and retention
•Appropriate classification and salary levels
Evaluation Issues
A.Evaluation Methodology
B.Outcome, Impact and Success Criteria
C.Teasing Questions
Evaluation
Methodology
•
•
•
•
•
•
Feedback
Interviews
Survey
Case studies
Gap analysis
Review of relevant
documents
• Benchmarking
Outcome, Impact and Success
Criteria
a) Results of the new IA policy activities
b) improved programme delivery, alternatives,
and unintended effects
c) improved awareness, compliance and
enforcement
d) improved governance
Teasing Questions
i.
To what extent have departmental heads and accounting
officers bought into the revised IA policy and assurance
services?
ii. Is there an active IA committee in each department and
agency providing input to departmental priorities,
planning, and decision-making?
iii. Are management corrective action plans followed-up and
implemented?
iv. Has a monitoring system been set up and implemented?
v. Is there a continuing need for change in the IA function?
Teasing Questions contd.
vi. To what extent have departments and agencies
established an effective assurance capability?
vii. To what extent will the revised IA policy contribute
to:
a.
more effective audit reporting?
b.
supporting the management in setting priorities, planning and
decision- making?
c.
fostering a continuous management improvement system?
d.
improving confidence in the IA function?
e.
providing greater transparency in program delivery?
f.
ensuring accountability of departments and government to
Parliament and to the citizenry?
Teasing Questions contd.
viii.To what extent have your capacity building initiatives
been successful in:
a) providing advice to the political leadership, departmental
heads, the general public, and IA practitioners?
b) developing the necessary technical capacity and expertise
for the country?
c) Improving awareness, compliance and enforcement?
Teasing Questions contd.
viii.How effective will the IA policy be in contributing to
improved program delivery of departments?
ix. How effective will the IA policy be in improved
governance (including anti corruption) and poverty
reduction?
x. Are there better ways of delivering the IA function
within the federal, state and local governments?
xi. What, if any unintended effects (positive or negative)
will result in the new IA policy and framework
xii. Is there an effective monitoring system in place for the
IA function?
Conclusion
“We wont solve new problems with
old ways of doing things.”
Albert Einstein
Keep abreast with new and emerging ways trends and ways of doing things.
That way we will be well equipped to solve new problems with corresponding
new approaches.
Change of attitude, skills set and mindset.
Change views on internal audit and look for more innovative and effective ways
of using the resources associated with it before the full benefits associated with
it can be realized.
The
End