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Internal Audit and EU Requirements

System based audits required under Article 10.1(A) of Commission Regulation (EC) 438/2001, as determined by the National EU Audit Plan are undertaken as required, by the Audit Department.  The purpose of these audits is to verify the effectiveness of the management and control systems in place and that EU regulations are fully adhered to.

The National EU Audit Plan is based on risk analysis and the Audit Unit can be involved in assessing and scoring risks under the different measures. The Internal Audit Department is party to the cascade of audits carried out on EU funded schemes.  In addition it reviews  5% of EU funded expenditure in the Kildare Authorities.

Internal Audit and the Department of the Environment, Heritage and Local Government Audit Service

The Local Government (financial provisions) Act 1997 enhanced the role of the Local Government Audit Service in relation to VFM by

  • Establishing the VFM unit in the Department to undertake national studies on Local Authorities
  • Empowering the Local Government Audit Service to carry out VFM studies in local authorities by examining systems, procedures and practices in order to evaluate the effectiveness of their operations.  Also to examine the extent to which recommendations in national reports have been implemented.

The Value for Money Unit in the Department of the Environment, Heritage and Local Government has issued 29 Value for Money reports to date as follows:

1. Purchasing (General)
2. Advertising
3. Insurance
4. Parking Charges
5. Photocopying Costs
6. The Machinery Yard
7. Energy Efficiency in Local Authority Buildings
8. Differential Rent
9. Property Management
10. Public Lighting
11. Stores
12. Water Production and Distribution
13. Housing Maintenance
14. Debt Collection
15. Waste Collection
16. Treasury Management
17. A Review of Performance Indicators
18. Comparative Data on Local Authority Revenue Collection Accounts
19. The Machinery Yard
20. Internal Audit
21. Internal Audit Handbook (not on Internet site)
22. Delivery of Motor Tax Service
23. Follow up report on the Development of Internal Audit in Local Authorities
24. Financial Management Reporting in Local Authorities
25. Value for Money and Policy Review of the Arts Council
26. Development Contributions
27. Management and Maintenance of Vacant Dwellings in Local Authorities
28. Management of Sickness Absence in Local Authorities
29. The oversight role of local authorities in the provision of social housing by Approved Housing Bodies

The reports concerning Internal Audit in Local Authorities (20,21,23) have been very helpful and beneficial in developing the Internal Audit function.

Reports 11 to 23 (excluding 21) have been made available for viewing on the Department of Environment and Local Government Website. 

Fraud Alert / Prevention

The Kildare Local Authorities are committed to the prevention and detection of fraud so as to minimise any potential losses attributable to fraud thereby promoting authorities that are committed to operating under the highest standards of integrity.

The Fraud Policy statement was launched in July 2005 and can be viewed on the Internal Audit Section of the Intranet.   

The main points covered in the statement are:

Introduction and Definitions

Risk Areas

  • Internal Controls
  • Roles and Responsibilities
  • Fraud Contingency Plan
  • Action to be taken when Fraud and Corruption is uncovered

Whistleblowing

The purpose of whistleblowing is to facilitate staff to bring to attention reasonable concerns regarding any ‘wrong doing’ which might not come to light otherwise.  Reports can be made in respect of events currently happening or in respect of events which have already taken place.

Confidential reporting can be made through Internal Audit in order to protect the person reporting from retribution.  The raising of unfounded malicious allegations will also be taken seriously and will lead to the matter being dealt with through disciplinary procedures.

Checking

While most attention is paid to the Internal Audit role, the Checking function remains very important.  Checking is concerned with the acceptance, receipting and lodgement of monies.  Good Checking will ensure that discrepancies are detected immediately and rectified as soon as possible.  The areas covered by Checking range from Cash Offices in the Kildare Local Authorities to Motor Tax, to recreation facilities and burial ground caretakers.  It also includes car parking, superloos and civic amenity centres receipts.

As Internal Audit deals with the general position of policies, procedures and compliance, its effects and benefits are more applicable to the long-term situation while receipts checking is important for individual day-to-day transactions.

Conclusion

Having an Internal Audit and Checking Department is essential for all large bodies.  As activity gets more complex it becomes increasingly difficult for a large organisation’s management to be certain that the internal controls and accounting for assets and activities are being adhered to.  The prime purpose of Internal Audit is to give assurance to management on the adequacy of the internal controls as a contribution to the proper, economic and effective use of resources by the organisation.  Internal Audit will support management in achieving its objectives and discharging their responsibilities.  Internal Audit will have a value for money focus in its activities.  The one constant in today’s environment is change and while everyone aspires to do the right thing there is always a temptation to do the easy thing.

Because of its unique position Internal Audit must ensure that it complies with the Standards for the Professional Practice of Internal Audit, the practice advisories and the Code of Ethics.  The Code of Ethics has been included in the Internal Audit Strategy.

The Role of the Internal Audit and Checking Department

Introduction

One of the changes introduced in the modernisation of Local Government with Better Local Government (B.L.G.) was the establishment of an Internal Audit and Checking Department in each county.  Formerly in Kildare there had been a checking function but this was now expanded to include the Internal Audit function.

The primary role of Internal Audit is to be part of the overall governance and control environment in the Kildare Local Authorities and provide independent assurance to the Manager that all significant operating risks are identified, managed, and controlled effectively at reasonable cost. 

In establishing the Internal Audit Department a number of documents were produced.  Following extensive consultations, an Internal Audit Charter, Strategic Plan and Annual Audit Plan were agreed and adopted.  The latter two plans were recently reviewed and the amended versions adopted.

For those seeking an understanding of what Internal Audit is about, these three documents are an excellent starting point and provide an expanded clarification of the Institute of Internal Audit’s definition of Internal Audit, which reads as follows:

Internal auditing is an independent, objective assurance and consulting activity designed to add value and improve an organisation’s operations.  It helps an organisation accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control and governance processes.”

The Internal Audit operating strategy is based on the principles set out in the Internal Audit Charter. After the incoming Council has adopted the Corporate Plan, the Strategic Audit Plan is prepared, and aims to coordinate Internal Audit activity to the best effect and assist in the development of annual Internal Audit Plans for the period the Council is in office.  The annual Audit Plan sets out the programme of audits for the year and can also include audit related work such as liasing with other Departments on concerns that arise.

The Internal Audit Charter, Strategic Plans and Annual Audit Plans can all be viewed on the Internal Audit Section of the Intranet.

Role and Responsibilities of Internal Audit Department

Internal Audit is an independent appraisal function established by management for the review of the internal control system, as a service to the organisation, and to the overall benefit of the community. It objectively examines, evaluates and reports on the adequacy of internal controls to ensure the economic, efficient and effective use of resources. The Internal Audit Department performs its duties by:

  • Reviewing and appraising the adequacy, efficiency and effectiveness of all activities and systems of internal control on an independent basis.
  • Reviewing and reporting on compliance with policies, plans, procedures, laws and regulations. Verifying the existence of assets and reviewing the means of safeguarding assets and their value.
  • Promoting effective control at reasonable cost and recommending operating improvements where appropriate with regard to Value for Money (VFM), best value and similar audits.
  • Reporting on EU audits and compliance with grant regulations and procedures.
  • Liaising with External Audit to ensure that internal and external work is complementary and to avoid unnecessary duplication.

To ensure the independence and objectivity of the Internal Audit function, the Department has no direct responsibility or authority for activities of operations that may be audited or reviewed. Internal Audit staff shall adhere to the standards and guidelines for the professional practice of internal auditing as issued by the Institute of Internal Auditors. Its staff shall operate to the highest standards of integrity and maintain confidentiality over information obtained in the course of their work.

The Internal Audit Department is granted full and complete access to all of the Kildare Local Authorities manual and computerised records, physical properties and personnel relevant to carrying out its role and responsibilities.