Public Sector Governance: Internal Audit Perspective

Annual National Convention Association of Government Internal Auditors October 9-11, 2013 Boracay Island, Malay, Aklan Rufo R. Mendoza, Ph.D., C.P.A.

Governance

• • •

means

by which goals are established and accomplished

processes

account by which an organization is directed, controlled, and held to

manner

by which an organization makes and implements decisions

•

activities

that ensure a public sector entity’s credibility, establish equitable provision of services, and assure appropriate behavior of government officials — reducing the risk of public corruption.

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Governance

• • • • • • • Arrangements that are put in place to ensure that the intended outcomes for stakeholders are defined and achieved Political Economic Social Environmental Administrative Legal Others

IFAC and CIPFA

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The function of good governance in the public sector is to ensure that entities act in the public interest at all times

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Characteristics of the Public Sector

1. must satisfy a complex range of political, economic, social, and environmental objectives –

deal with a different set of external and internal constraints and incentives different from those in the private sector

2. main objective is to achieve outcomes by way of enhancing and maintaining the well-being of citizens, rather than generating profits 3. principal source of revenue for governments is generally taxation 4. services may be provided in a non-competitive environment because alternative providers often do not exist 24/04/2020 Public Sector Governance 4

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Principles of Governance

Setting Directions Instilling Ethics Overseeing Results Accountability Reporting Correcting Course

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Expectations

whether the planned outputs have been delivered and outcomes achieved whether there has been an efficient, economic, effective, and equitable manner maintain the government entity’s capacity highly transparent and provide high quality information and all aspects of performance

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Principal-Agent Relationship

Principal Resource Authority Accounting of Accomplishments Agent Auditor Independent Objective

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What should auditors be doing?

• • • •

Provide unbiased, objective assessments of whether public resources are managed responsibly and effectively to achieve intended results Should have the competency to evaluate financial and program compliance, effectiveness, economy, and efficiency Use tools such as financial audits, performance audits, investigations, and advisory services to fulfill roles Help the public sector agencies in achieving accountability and integrity, improve operations, and instil confidence among citizens and stakeholders

• • •

Oversight Insight Foresight

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Key Elements Effective Public Sector Audit

1. Organizational Independence 2. Formal Mandate 3. Unrestricted Access 4. Sufficient Funding 5. Competent Leadership 6. Objective Staff 7. Competent Staff 8. Stakeholder Support 9. Professional Audit standards Public Sector Governance 10

Internal Audit is part of the organization that helps achieve organizational goals.

ORGANIZATION Internal Audit Organizations have goals which they aim to achieve.

RISKS INTERNAL CONTROLS What is an internal control?

The achievement of organizational goals is hindered by risks.

What is a business risk?

Internal control is a process which addresses the risk.

A risk is a set of circumstances that hinder the achievement of goals or objectives.

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Good Governance

Teaching Internal Audit 11