Reform Internal Auditing In The Public Sector For Improved Governance And Accountability
There have been calls from many Civil Society Organizations and governance experts on the need to reform internal auditing in the Public Service to protect the public purse. The Auditor-General, Mr. Daniel Dormelevo recently said Internal Auditors (IA) need autonomy to end corruption in the public sector.
He emphasized that IA were the custodians of accountability, yet were weakened by “employer dominance and political interference”. IA are to serve as watchmen by safeguarding government revenue and ensuring proper disbursement of public funds.
The Association of Certified Fraud Examiners (ACFE), 2018 Report to the Nations on fraud and corruption cited that IA detected 15% of fraud and external auditors detected only 4%. So where were the IA in the 85% of corruption cases that were not detected?
The Annual Report of the Auditor-General on the Public Accounts of Ghana, Ministries, Departments and Other Agencies (MDAs) for the year ended 31 December, 2018 reported financial irregularities amounting to GH¢5,196,081,899.94. Surprising, IA exist in these MDAs, so how come these irregularities went on undetected?
Admittedly, there have been a lot of reforms put in place over the last two decades to ensure accountability in the public sector. One of such reforms is the Public Financial Management Reform Programme (PUFMARP). Legislations were passed as part of efforts to help achieve the objectives of the Reform. One of such reforms is the enactments of the Internal Audit Agency Act of 2003 (Act 658) and the Financial Administration Act (FAA), 2003 (Act 654) and Financial Administration Regulation (FAR), 2004 (L.I 1802). The FAA and FAR were currently replaced with Public Financial Management Act, 2016 (Act 921) and Public Financial Management Regulation, 2019 (L.I 2378) respectively. However, the Internal Audit Agency Act which was promulgated within the same period has not been amended since passed in 2003 to conform to current happenings in the public sector, especially with the introduction of the Ghana Integrated Financial Management Information Systems (GIFMIS).
Previously internal auditing in the public sector was largely focused on pre-audit rather than on systems reviews. Pre-auditing needs to be practiced because it validates expenditure in ensuring prudent public spending. With the introduction of the GIFMIS pre-auditing by the IA have totally been eliminated. Pre-auditing is a proactive approach that should not be entirely eroded from Public Financial Management, no matter the strong defense for augments against it. For example, in Germany IA primarily performs a “pre-audit” role.
In spite of promising results, major challenges still remain with the Introduction of GIFMIS. Therefore, IA should be given access on the GIFMIS platform to certify expenditure on the system to mitigate against those challenges.
To ensure proper financial management there have to be reforms in the Public Sector Internal Auditing. First of all, the legal framework within which the Internal Audit operates needs to be amended. the Internal Audit Agency (IAA) Act should be amended to become Internal Audit Service Act. The amendment should come with autonomy where the IA in the public sector can be independent. Independent from appointments, promotions, transfer/postings and approval of the Internal Audit Units Assignments.
Furthermore, I will encourage the Government of Ghana to adopt is own approach to the IA which is unique to our system of governance since there are several approaches worldwide. Ideally, IA in Ghana should report directly to the Internal Audit Agency because it ensures independence of the Internal Auditor. However, in Ghana, IA report administratively to Heads of the Ministries or Government Agencies and functionally to the Audit Committee. Whiles the IAA serves as a regulatory body with less authority per the Act establishing the Agency to perform their supervisory roles.
Internal audit work programs are done in consultation with the Heads of the Public Sector Institutions because funding of internal audit work programs are from the agencies budget. It will be appropriate if approvals of Internal audit work programs are approved by Audit Committees by taking into consideration the budget allocated to the Internal Audit Unit. The idea is to eliminate the interference of the head of Public Sector Institutions in coming up with work programs for the IA units.
The extent of recognition of Internal Audit reports should be an aspect that the Internal audit reforms in the public sector must focus on. The Internal Audit Reports should be collated at the end of every financial year and presented to the President of the Republic of Ghana for onward submission to the Public Account Committee of Parliament for actions to be taken. An alternative is mandating the Director-General of the IAA to present Internal Audit Reports of the various Public Sector Institutions to the Auditor-General’s Department to be included in the Auditor-General’s reports to parliament. For example, in Germany Internal Audit is view as a component of external audit. Therefore, IA reports are given all the necessary attention and seriousness it deserves. The idea is to ensure that there is sufficient collaboration between Internal and External audit function in the Public Sector.
The quality assurance department from the IAA must be strengthen to perform independent external review of IA practices in the various Public Sector Institutions. The IAA should identify and correct substandard practices, check whether IA are fulfilling their mandated responsibility and whether they are observing professional standards and recommend possible ways of improving Internal Audit Practices in Ghana.
Finally, IA should be motivated to enable the IAA retain and employ high qualified staffs to help maintain good governance and accountability in the Public Sector. If the Internal Audit Units in the public sector were to be well structured and equipped with the right resources, it would minimize financial irregularities reported by the Auditor-General and reduce public sector corruption.
Source: Divine Alifo, firstname.lastname@example.org (modernghana.com)
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