AFIIA CONFERENCE 2014 APRIL 9-11, 2014 KAMPALA, UGANDA
Learning from the Ghana Model of Public Sector Internal Auditing Regulation, Legislation and Positioning Richard Ntim Chief Internal Auditor, Ghana Grid Company Vice-President, IIA-Ghana Vice-President, AFIIA (West-Africa)
Outline of Presentation Introduction Internal Audit Practice before the Act Legal Framework & Institutional Structures Challenges Internal Audit Practice after the Act Internal Audit Agency Act Internal Audit Regulation Audit Report Implementation Committees Significant Achievements Conclusion
Introduction In Ghana, the internal audit function in the public sector has evolved over the years. With the exception of public institutions whose enabling acts required the establishment of internal audit departments, there were no guidelines on internal audit practice in the public institutions until the Internal Audit Agency Act was passed in year 2003.
Regulatory Framework The regulatory framework for corporate governance in Ghana, the Companies Code 1963 (Act 179) is also silent on internal auditing : Provisions on auditors report, appointment and remuneration of auditors, removal of auditors, duties, powers and qualification of auditors all relate to external auditors
Regulatory Framework The Corporate Governance Guidelines on best practice issued by the Securities and Exchange Commission states that every corporate body at whom these Guidelines are directed should establish an audit committee Audit Committee functions include : Review the adequacy of systems of internal controls and compliance with policies Provide a direct channel of communication between the board and the external and internal auditors
Legal Framework for Auditing Since Independence, responsibility for auditing of the public service of Ghana has been the mandate of the Auditor General per the Ghanaian Constitution: eg: Section 187 (1992 Constitution)
Legal Framework for Auditing Several bodies established as statutory corporations have in their respective enactments, provision on appointment of internal auditors for the organizations The enactment setting up some other public institutions permitted them to set up structures that would enable them achieve their objectives
Legal Framework for Auditing Public institutions which had internal audit departments included : State Owned Enterprises (SOEs), Tax Institutions (CEPS, IRS, CEPS) now Ghana Revenue Authority Social Security & National Insurance Trust, Volta River Authority Bank of Ghana etc.
Legal Framework for Auditing Under the Financial Administration Decree, 1979, SMCD 221, the Auditor-General had the legal mandate to carry out audits in the Ministries, Departments and Agencies (MDAs) and Metropolitan, Municipal and District Assemblies (MMDAs)
Legal Framework for Auditing Section 187 (2) of 1992 Constitution and Audit Service Act 2000 (Act 584) Section 11 (1) state that The public accounts of Ghana and of all public offices, including the courts, the central and local government administrations, of the Universities and public institutions of like nature, of any public corporation or other body or organization established by an Act of Parliament shall be audited and reported on by the Auditor-General
Legal Framework for Auditing Financial Administration Decree, 1979, SMCD 221 S. 48 (1) - The Auditor-General may appoint any person to carry out audit S. 48 (3) - The Auditor General may make arrangements for the carrying out of internal audit functions in all the offices audited by him
Institutional Structure The Auditor General s Department established Internal Audit Division to perform internal audit functions in the MDAs and MMDAs. Internal auditors were stationed in the various MDAs and MMDAs and submitted their reports to the Auditor General.
Institutional Structure The functions performed were; pre-examination of payment vouchers Inspection of equipment and other assets Selected investigations Review of internal controls
Institutional Structure Following the challenges associated with the reporting relationship, in 1989, the Auditor General, in pursuance of section 48(3) of SMCD 221, appointed the Controller and Accountant-General to carry out internal audit in the MDAs and the MMDAs.
Institutional Structure In the 1990 s the internal auditors in the Controller and Accountant General s Department performed the following functions: Pre Examination of payment vouchers Review of internal controls Investigations Watchdog over the Controller s staff (accounting officers).
Challenges prior to the Act Scope was limited to financial accounting & reporting : checking that assets are safeguarded. Unsatisfactory reporting relationship : Internal audit reported functionally to the Controller & Accountant General and administratively to MDAs. Inadequate staff : some MMDA s had no internal auditors. Regional Internal Auditors visited MMDAs periodically.
Challenges prior to the Act Inability to recruit and retain professional staff due to low salary levels in the public service Quality assurance on the work of the internal auditors was non existent Non/Ineffective Implementation of recommendations in internal audit reports Absence of practice framework to guide internal auditors
Public Financial Mgt. Reform Program As part of reforms under the Public Financial Management Reform Programme, a scoping study for the establishment of internal audit functions in MDAs and MMDAs was carried out in 2001 The reforms led to the enactment of : Financial Administration Act 2003, Act 654 Public Procurement Act 2003, Act 663 Internal Audit Agency Act 2003, Act 658
Public Financial Mgt. Reform Programme Financial Administration Act 2003 : S.44(1) The public accounts shall be audited in accordance with the Audit Service Act S.44(2) the internal audit of public institutions etc. shall be conducted in accordance with any enactment for the time being regulating internal auditing of departments, statutory corporations and public institutions
Public Financial Mgt. Reform Programme Financial Administration Regulation 2004 : S. 196. (3) Internal audit functions of a department shall be regulated by the provisions of the Internal Audit Agency Act, 2003 (Act 658), and any other enactments for the time being in force.
Internal Audit Agency Act Establishment The Internal Audit Agency 2003, Act 658 was establish as a central agency to co-ordinate, facilitate, monitor and supervise internal audit activities within MDAs and MMDAs in order to secure quality assurance of internal audit within these institutions of state.
Internal Audit Agency Act Membership of the Governing Board Chairperson Minister for Finance or representative Minister for Local Gov t. or representative Chairperson for Public Service Commission or rep. The Director-General of the Agency Two persons from the private sector Two professional accountants
Internal Audit Agency Act Establishment of Internal Audit Units : Section 16 (1) of the Internal Audit Agency Act states that there shall be established in each MDA and MMDA, an internal audit unit which shall constitute a part of the MDA or MMDA This policy accords with section 120 of the Local Government Act, 1993 (Act 462) which requires MMDAs to have Internal Audit Units.
Internal Audit Agency Act Reporting : An Internal Audit Unit shall submit reports to : Director-General of the Internal Audit Agency and Management of the MDA
Reporting : Internal Audit Agency Act The Board shall not later than three months after the end of each financial year submit to the President a report of the activities of the Agency in respect of the preceding financial year and shall in the report (a) state its findings on activities of the internal audit units of the MDAs and MMDAs. The President shall cause the report with such comments as the President determines, to be laid before Parliament.
Internal Audit Regulations Internal Audit Regulations 2011, L.I 1994 Mandate and role of the Agency Standards and guidelines Responsibilities of the Agency in supervision and monitoring Evaluation of internal audit units Responsibilities of the Agency in reporting and follow up on recommendations Risk management activities within Ministries and Assemblies Maintenance of quality assurance by the Agency
Internal Audit Regulations Governance and conduct of internal audit Responsibilities of the head of a Ministry or an Assembly regarding internal audit Performance standards of the internal auditor Sanctions for breach of discipline Guidance for establishment of the Internal audit unit Reporting relationships of head of internal audit unit Function of internal audit unit
Internal Audit Regulations Planning internal audit unit activity & risk assessment Role on internal controls & governance processes Assistance in specialized audit work Duties of the head of internal audit unit Maintenance of quality assurance at internal audit unit Staff strength and qualifications required for internal audit unit. Implementation of recommendations in internal audit report
Internal Audit Regulations Internal audit records and reports Internal audit working papers : Content, Ownership, Storage, life span, Updating, access internal audit report : Communicating, Types, Quality, Register, Recipient, Time of submission and response to Internal Audit Report, Action to be taken
Internal Audit Regulations Protection of internal audit and grievance procedure Indemnity, The right to petition, Disciplinary procedures, Formation of the disciplinary committee, The right to apply for review Application for review of disciplinary action, Condition for review
Audit Report Implementation Committee The Audit Service Act states that an institution which is subject to auditing by the Auditor-General shall establish an Audit Report Implementation Committee. S. 196. (4) of Financial Administration Regulation, 2004 states that every department shall as part of its accounting and auditing functions establish an Audit Report Implementation Committee in accordance with Section 30 of the Audit Service Act 2000 (Act 584).
Audit Report Implementation Committee The equivalent of an audit committee in the Public Service of Ghana is the Audit Report Implementation Committee (ARIC) By MOU between the Auditor-General and the Director-General of the Internal Audit Agency, the Agency ensures the operation of the ARICs while the Auditor-General reviews the performance of the ARICs
Audit Report Implementation Committee S.22(1) of Internal Audit Regulation states that the head of institution is primarily responsible for the implementation of the recommendations contained in the internal audit report. S.22 (2) states that the Internal Audit Agency and the Institute of Internal Auditors of Ghana shall provide representatives to serve on the Audit Report Implementation Committees.
Audit Report Implementation Committee Membership: Chairperson (Board Member or Minister) Chief Executive One Director (excluding Directors Finance & Audit) Rep. of IIA-Ghana Rep. of Internal Audit Agency
10 Significant Achievements 1 Internal Audit Units established 375 2 3 Number of Internal Auditors (250 in 2001) Audit Report Implementation Committees established 149 in MDAs and 202 in MMDAs. 1,550 351 4 Institutions with signed Audit Charters 286 5 Annual Internal Auditors Forum 8
10 Significant Achievements 6 Developed Internal Audit manuals Provided Training and on-site support for 7 Internal Auditors Increased scope to include review of Risk 8 Management and Governance processes Professional staff are recruited as Internal 9 Auditors Growth of IIA membership ( from 73 in 2007 to 10 691 March 2014)
Impact on IIA-Ghana 180 160 140 120 100 80 60 40 20 0 MEMBERS ACCEPTED
Conclusion The enactment of the Internal Audit Agency Act 2003, Act 658 has contributed significantly to internal audit practice in the public sector of Ghana. This has impacted positively on both the public and private sector organizations in Ghana. The collaboration among the Internal Audit Agency, the Auditor-General and the IIA- Ghana has facilitated effective implementation of the Act.
THANK YOU Richard Ntim rntim@yahoo.com