Public Sector Governance: Internal Audit Perspective

1. Public Sector Governance: Internal Audit Perspective Annual National Convention Association of Government Internal Auditors October 9-11, 2013 Boracay Island, Malay, Aklan Rufo R. Mendoza, Ph.D., C.P.A.

2. Governance • means by which goals are established and accomplished • processes by which an organization is directed, controlled, and held to account • mannerby which an organization makes and implements decisions • activities that ensure a public sector entity’s credibility, establish equitable provision of services, and assure appropriate behavior of government officials — reducing the risk of public corruption. Public Sector Governance

3. Governance Arrangements that are put in place to ensure that the intended outcomes for stakeholders are defined and achieved • Political • Economic • Social • Environmental • Administrative • Legal • Others IFAC and CIPFA The function of good governance in the public sector is to ensure that entities act in the public interest at all times Public Sector Governance

4. Characteristics of the Public Sector • must satisfy a complex range of political, economic, social, and environmental objectives • deal with a different set of external and internal constraints and incentives different from those in the private sector • main objective is to achieve outcomes by way of enhancing and maintaining the well-being of citizens, rather than generating profits • principal source of revenue for governments is generally taxation • services may be provided in a non-competitive environment because alternative providers often do not exist Public Sector Governance

5. Principles of Governance Public Sector Governance

6. Public Sector Governance

7. Expectations Public Sector Governance

8. Principal-Agent Relationship Principal Agent Resource Authority Accounting of Accomplishments Verify or Validate Report Auditor Independent Objective Public Sector Governance

9. What should auditors be doing? • Provide unbiased, objective assessments of whether public resources are managed responsibly and effectively to achieve intended results • Should have the competency to evaluate financial and program compliance, effectiveness, economy, and efficiency • Use tools such as financial audits, performance audits, investigations, and advisory services to fulfill roles • Help the public sector agencies in achieving accountability and integrity, improve operations, and instil confidence among citizens and stakeholders • Oversight • Insight • Foresight Public Sector Governance

10. Key ElementsEffective Public Sector Audit • Organizational Independence • Formal Mandate • Unrestricted Access • Sufficient Funding • Competent Leadership • Objective Staff • Competent Staff • Stakeholder Support • Professional Audit standards Public Sector Governance

11. Internal Audit is part of the organization that helps achieve organizational goals. ORGANIZATION RISKS Internal Audit The achievement of organizational goals is hindered by risks. INTERNAL CONTROLS Organizations have goals which they aim to achieve. What is an internal control? Internal control is a process which addresses the risk. What is a business risk? A risk is a set of circumstances that hinder the achievement of goals or objectives. Good Governance Teaching Internal Audit