Internal Audit Finding Its Place in Public Finance Management

Internal Audit Finding Its Place in Public Finance Management Cecilia Nordin Van Gansberghe For centuries, internal audit was a simple administrative procedure of checking documents, counting assets, and reporting on past events to various types of management. Several forces in our times have led to a quiet revolution in internal audit. Democracy requires government to be accountable in its use of public money and in providing effective, efficient, and economical service delivery. Ever larger and more complex systems require greater competencies, thus internal audit has had to become ever more professional. Sheer size also brings with it the need to assess risk, deploying scarce resources in the most logical manner to address those risks. Technological advances have made it possible to track and analyse more data much faster. An informed world that keeps turning ever faster, makes it essential for governments to be well informed by internal audit about the risks and improvements in public finance management and service delivery. World Bank Institute Copyright © 2005 The International Bank for Reconstruction and Development/The World Bank 1818 H Street, N.W. Washington, D.C. 20433, U.S.A. The World Bank enjoys copyright under protocol 2 of the Universal Copyright Convention. This material may nonetheless be copied for research, educational, or scholarly purposes only in the member countries of The World Bank. Material in this series is subject to revision. The findings, interpretations, and conclusions expressed in this document are entirely those of the author(s) and should not be attributed in any manner to the World Bank, to its affiliated organizations, or the members of its Board of Executive Directors or the countries they represent. Internal Audit: Finding its Place in Public Finance Management Cecilia Nordin Van Gansberghe 2005. 24 pages. Stock No. 37246 Contents Foreword v Acronyms vii Internal Audit Process 1 Internal Audit – a Little History Modern Internal Audit 4 2 Challenging Circumstances and Reform 5 The Situation Today – One Example of Stock-Taking in Africa References 16 Useful Websites 17 9 iii Foreword As part of its Public Sector Governance program, the Poverty Reduction and Economic Reform Division of the World Bank Institute (WBIPR) is engaged in strengthening responsive (matching public services with citizens’ preferences), responsible ( efficiency and equity in service provision without undue fiscal and social risk) and accountable (to citizens for all actions) public governance in developing countries. The Division is active on a broad front, including division and exercise of fiscal powers (taxing, spending and regulatory responsibilities) by various levels of government, intergovernmental finance and policy coordination, budgeting and budgetary institutions, debt management, public financial management, e-government, public management/administration (civil service reform) and service delivery mechanisms and institutions, as well as legislative (various parliamentary committees, etc.), executive, judicial, legal framework, media, and other civil society institutions. It also includes mechanisms for public financial accountability and integrity, rules and codes for fiscal transparency, citizens’ charter, citizens’ score cards on government performance and private-public sector nexus. As part of its program for Public Expenditure and Financial Accountability for Africa, financed by Sweden, WBIPR joined forces with the World Bank’s Financial Management division and external partners, such as the the Institute of Internal Auditors, to organize learning events in Africa on designing and implementing integrated public expenditure and financial accountability reforms for key stakeholders - including ministries of finance, line ministries, local governments, supreme audit institutions, parliament, the media, and civil society organizations. One such event was a consultative forum on Internal Audit for stakeholders from Kenya, Uganda, Malawi and Ethiopia. During four days in 2004, lively discussion and planning took place on demand and supply impediments to increasing the role, image and effectiveness of internal audit in Africa. This paper examines the questions raised during these seminars, particularly the Consultative Forum, by the participating countries and looks at the role of internal audit and its future in Africa. The author wishes to thank Dominique Vincenti, Institute of Internal Audit, and Gert van der Linde, World Bank for their valuable input to this document. Furthermore, the paper draws heavily on the abovementioned activities: discussions, presentations, etc. (available on the internet ) which have been an very valuable source. Roumeen Islam Manager Poverty Reduction and Economic Management Division World Bank Institute