Five Reasons to Have Internal Audit in Your Government

In government entities, internal audit plays a pivotal role in ensuring effectiveness and accountability. From optimizing resources to enhancing compliance, internal audits empower government leadership with surveillance on the strength of accountability and compliance activities. BRONNER identified five compelling reasons why integrating robust internal audit mechanisms is not only advantageous, but also imperative for government entities’ operational integrity.

What is Internal Audit?

Internal audit assesses risk and evaluates the effectiveness of controls in place to mitigate risk by examining and assessing company records, workflows, systems, and processes. An internal audit function acts as a line of defense in rooting out activities that are not compliant with policy, procedure, rules, and regulations by conducting independent assessments of operations, such as technology, finance, procurement, inventory, and human resources. These assessments provide management with valuable insights and recommendations for improvements to operational effectiveness and integrity.

Establishing an internal audit function is vital for government entities committed to maintaining a robust framework of internal controls and improving the standard quality of work. In addition, internal audits offer impartial analysis free from conflicts of interest and promote transparency by shedding light on governmental operations typically shielded from management’s view.

Top Five Reasons for an Internal Audit Function

1.??????? EVALUATE RISK AND THREATS

A well-designed internal audit begins with an assessment of risks to the control environment such as new regulations, new systems, or new staff. Internal audit will evaluate these risks and their threats to operational objectives in a systemic manner to inform management. Routine internal audit of activities involving high risk, such as IT operations, complex accounting systems, or contracts with outside parties, is a best practice.

2.??????? PROPER FUNCTION OF INTERNAL CONTROLS

Internal auditors act as an additional level of assurance by assessing the overall control environment. Through this, they support management in monitoring the design and proper function of policies and procedures. When procedures fail or policies are not followed, instances of fraud, waste, and abuse can more easily occur.

3.??????? ENSURES COMPLIANCE OF PROCEDURES

Internal audit reveals whether a program is running not only in accordance with current policy and procedures, but also efficiently and effectively. These performance audits serve to maximize operational performance and demonstrate good stewardship of public funds. Internal audit functions serve a dual purpose beyond mere compliance; they provide valuable insights to management.?

4.??????? IDENTIFICATION OF CURRENT AND FUTURE RISK

The optimal internal audit function performs annual risk assessments. Risks include any changes to the operating environment that can have either a positive or negative impact on operations, such as developing demographic trends, fluctuating economic conditions, changing political landscape, or evolving security threats. The risk assessment informs management of potential impacts to the control environment and achievement of the entity’s strategic goals and objectives.

5.??????? CLARIFIES EMPLOYEE ROLES AND DEPARTMENT FUNCTIONS

Government operations involve numerous decision-makers, and the hierarchy can change with the election or appointment of new officials. Internal audit helps to clarify for employees their role in compliance, as well as their relationship to the entity’s goals and objectives. Management can use internal audit recommendations to identify functional gaps in the control environment, and employees can gain understanding of their importance in supporting accountability and compliance through implementation of policy and procedure.

Internal Audit Operations Can Provide a Solution Before a Problem Arises

Internal audit operations are vital for monitoring internal controls in government entities, enhancing the control environment, and providing valuable insights on risk to entity goals and objectives. Through independent assessments, feedback, and recommendations, internal audits enhance transparency by identifying gaps, fostering continuous improvement, and reducing the potential for fraud, waste, and abuse. Click here to learn how BRONNER has assisted numerous state and local government agencies integrate internal audit operations to improve efficacy and accountability.

- Paula R. McCabe, MPA, BRONNER Director of Consulting Services