Audit of the Public Sector and Key Audit Matters

Transcription

1 Audit of the Public Sector and Key Audit Matters (Lessons from the Findings of the Office of the Auditor-General) FCPA Edward R.O. Ouko, CBS Auditor-General Enhancing Accountability 1

2 Outline 1. OAG Mandate 2. Pillar of Accountability 3. Social Accountability 4. OAG Strategy 5. Transformative Journey 6. Audit Process 7. OAG Report 8. Key Audit Matters 9. Lesson Learned 10. Conclusion Enhancing Accountability 2

3 Mandate OAG Art. 229 (financial) Article 229 of the Constitution gives the Auditor-General the mandate to audit the accounts of: a. The National and County Governments; b. All Funds and Authorities of the NG and CG; c. All Courts d. Every Commission and Independent Office e. National Assembly, Senate and County Assemblies f. Political Parties funded from public funds g. The Public Debt; and h. Any other entity that legislation requires the Auditor- General to audit. 3

4 Expanded Mandate (Lawfulness and Effectiveness) Article 229(6)of the Constitution further tasks the Auditor- General to confirm whether or not public money has been applied lawfully and in an effective way. This introduces a new concept of auditing, requiring the Auditor-General not only to look at the fiscal and managerial accountability aspects, but also to confirm whether or not the programmes implemented lead to results and outcomes that positively transform the lives of our people. Enhancing Accountability 4

5 OAG Pillars of Accountability Enhancing Accountability 5

6 Social Accountability Audit The Constitution clearly states that all sovereign power is vested to the people of Kenya Citizen participation is one of the National Values and is also one of the Principles of Public Service as articulated in Article 10 (2,a) and Article 232 (1) COK - places citizens at the centre of governance as a key factor to enhance its successful implementation and good governance Process through which members of the community seek to evaluate how well public resources are being used and how to improve Enhancing Accountability performance 6

7 Social Accountability Audit Background: Idea initiated in 2016 Partnership: OAG, World Bank & Civil Society (CSOs) The project involves - : - Development of Citizen Engagement (CE) Framework - Development of a social accountability audit tool - Development of social audits operational manual - Identification of potential CSOs and other partners - Definition of roles and responsibilities for each party - Development of social accountability strategy - Agreement on work plans and relevant budgets - Non-partisan execution of Audits 7

8 Target Partners Development partners Civil society organizations County governments National government Non-Governmental organizations Parliament and County assemblies Private sector entities Professional bodies Individual citizens Other SAIs 8

9 OAG Audit Strategy Client Ranking at the Global level 1190 Audit Entities Custom Measures Budget Materiality Revenue Past Experience Audit Opinions Service Delivery Address the Sustainable Development Goals (SDGs) Ranking into Two Tiers Tier One Tier Two 9

10 OAG Transformative Journey The office has managed to ensure that all over 1000 audit staff have a working laptop fitted with the Audit Management System (Teammate) This is a move from 70 Laptops in 2011; Audit Management System (Teammate) fully rolled-out on all modules. A first one in Africa. Audit Vault procured and in use. Real time access to exception reports Staff trained on Teammate Data Analytics thus ensuring smarter Audits 10

11 What does the Transformation Mean??? Quality of audits enhanced Smarter Audit through Teammate Analytics Faster processing of audit reports Data Analytics in audit thus covering evolving change in technology Increased Integrity levels Enhanced Quality Control Embedded and instant Review process Suppression of audit findings drastically reduced Enhancing Accountability 11

12 Audit process Submission: Public Audit Act 34 of 2015 Section 47 within three months after the end of the fiscal year to which the accounts relate. (Basically 30 September) Audit: Public Audit Act 34 of 2015 Section 48. Within six months after the end of each financial year, Auditor-General to audit and report. Entry Conference before commencement of audit (Sec. 31(1)(b) of PAA, 2015) chaired by Accounting Officer. Exit Conference before commencement of audit (Sec. 31(1)(b) of PAA, 2015) chaired by Accounting Officer. Management letters (Section 31 of the PAA 2015, Management to respond within 14 days (Section 31 of the PAA 2015; and Report within 6 Months 12

13 OAG Report Report on Financial Statements addresses Article 229 (4) of the Constitution Report on Compliance with Laws and Effectiveness of utilization of Public Resources addresses Article 229 (6) of the Constitution Report on Effectiveness of internal controls addresses Section 7 (1) (a) of the Public Audit Act, 2015 Sections 68(2)(c and e) and Sections 149(2)(c and e) of the Public Finance Management Act

14 New Audit Report Format. Title Report on the financial statements Opinion Basis for opinion Emphasis of matter Key audit matters Other matter Report on compliance issues Conclusion of effectiveness and lawfulness of use of public monies Basis for conclusion Report on Internal Controls, Governance and Risk Management Conclusion Basis for conclusion Report on other legal and regulatory requirements (where applicable) Management responsibilities Auditor-General s responsibility Auditor General s Signature 14

15 Considerations for Key audit matters (KAM) Considerations in determining the relative significance of a matter include: Importance of the matter to intended users understanding of the financial statements as a whole, in particular its materiality to the financial statements Nature of the underlying accounting policy or complexity or subjectivity in management s selection of an appropriate accounting policy Nature and materiality of corrected and uncorrected misstatements related to the matter Nature and extent of audit effort needed to address the matter Nature and severity of difficulties in applying audit procedures or obtaining relevant and reliable audit evidence Severity of any control deficiencies related to the matter Enhancing Accountability 15

16 Examples of Key Audit Matters in Public Sector Pending Bills Legal requirement for spending as per budget Requirements for commitment of funds Requirements for procurement to be within the procurement plan Effect of the pending bills on subsequent accounting period transactions Enhancing Accountability 16

17 Lessons Learned - OAG still struggling on Systems o Audit of IFMIS o Audit of other Systems - Staff Capacity is still an issue - Inadequate Resource allocation - PAC action comes a little bit too Late o PAC actioning on the 2014/2015 audit reports o Auditor General has already submitted reports for 2016/2017 which should be point of discussion at PAC - Change Constitution/legislation and PAC procedures to make PAC enforce Auditor s recommendations and not interrogate clients afresh Enhancing Accountability 17

18 Conclusion Need to assure accountability to Wanjiku Confirming lawfulness and effectiveness in public resource utilization Internal capacity to approach audit from a strategic viewpoint Need to leverage on IT and Data Analytics going forward Producing more timely & quality audits in an environment of limited resources Enhancing Accountability 18

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