Evolution and Challenges of Internal Audit in International Development

1. Internal Audit and International Development Address by Nicole Mendenhall, CIDA 20th ICGFM International Conference Miami, Florida May 8, 2006

2. Evolution of Internal Audit in Canada • 1962 – Glassco Commission – recommended internal financial audit in departments • Late 1970s - MBO adopted in the Government • 1979 – Lambert Commission – need to expand internal audit beyond finance

3. Evolution of Internal Audit in Canada • Early 1990s - Results Based Management introduced in Government • 1994 - Review Policy – integration of audit and evaluation • 2004 – Sponsorship & the Gomery Commission • 2006 – Internal Audit Policy

4. Evolution of Audit Focus in CIDA • Late 1990s - CIDA starts its change from a project to a program focus • 2003 to now – country program audits • Introduction of the management accountability framework as the basis for audits • Internal audit now taking an outward or international view

5. Country Program Audits • An integrated holistic approach • Assessing systems and processes in place to support aid effectiveness • Governance, accountability, stewardship, risks • Policy dialogue – plans, systems, etc • Local ownership & capacity building

6. The Provision of Assurance • Chief Audit Executive provides assurance on individual audits; management of risks; and the functioning of fundamental controls • The Chief Financial Officer provides assurance that the financial controls are working • The Auditor General provides assurance on the Financial Statements of the department / ministry

7. The Challenge of Assurance in International Development • Donor internal audit work in a multi-donor environment • Each donor is not solely accountable for the delivery of its aid dollars – joint or shared accountability is the norm

8. Assurance in a Multi-donor Environment – a question How can internal audit give assurance that funds are well managed and controlled, that they are being used for the purposes intended, that the progress towards results and the use of funds are properly linked when each donor has no direct control, the funds are pooled, and accountability is shared?

9. The Challenge for Donor / Recipient Internal Audit • Paris Declaration reinforced the need for program based approaches with the recipient in the “driver’s seat”. • National and multilateral donors fund long term programs developed by the recipient • Acceptance of recipient systems • Common reporting and audit rules • Mutual accountability

10. The Gaps in Assurance Although aid is harmonizing – gaps in assurance remain • Definition of mutual accountability – to whom? – by whom? • Management accountability frameworks are not commonly understood and accepted • Risk management – need for commonly accepted risks & risk mitigation strategies

11. The Gaps in Assurance • Donor internal audit cannot and should not unilaterally audit a multi-donor program • Currently, audits planned are financial mostly done by the recipient’s “supreme auditor”

12. Meeting the Challenge • Is there a will in the donor/recipient community to perform internal audits of program based approaches? • Is there a will for donors/recipient countries to strengthen the function of internal audit? • Is there a will to share the results of internal audits?

13. The Question • How can Internal Audit ensure that donor/partners meet fiduciary obligations vis-à-vis their respective population?