Internal Audit Plan and Its Alignment to Risk Strategy

Makhosandile Kwaza

Are Internal Auditors Watchdogs?

If you do not plan any way is the correct way

What is Internal Audit Plan

Legislative framework

• Section 165 (2) (a) of the MFMA requires that the Internal Audit of a municipality or municipal entity to prepare a risk-based audit plan and an internal audit program for each financial year.

• On the other hand, section 45 (a) of requires that the results of performance management in term of section 41 (1) (c) be audited as part of the municipality’s internal auditing processes.

International Standards for Professional Practice of Internal Auditing (ISPPIA)

• Standard 2010 requires that the chief audit executive to establish risk-based plans to determine the priorities of the internal audit activity, consistent with the organization’s goals.

• Standard 2010.A1 – The internal audit activity’s plan of engagements must be based on a documented risk assessment, undertaken at least annually. The input of senior management and the board must be considered in this process.

Risk Management

• A result of the risk assessment

• Strategic level – municipal wide risks

• Departmental level – departmental risks

• IA plan takes into account strategic risks; departmental risk and other factors like AG findings

Time allocation

Linking your plan to strategic risk

No. Objective Risk name Context / Root cause

2012/2013

1

To provide quality and sustainable drinking water in an integrated manner, to all consumers in the district

Climate change, drought and floods (Sustainability)

1. Restricted water availability (worst drought in 130 years

2. Climate change and associated disasters3. Lack of integrated water reporting

2

To increase internal and external project spending to 80% of projected expenditure by 2015

Poor project management

1. Co-ordination of activities2. Lack of monitoring and evaluation3. Roll over's 4. Procurement deviation of SCM policy5. Project Management Capacity (Skills &

Personnel)

IDP/Budget processSupply Chain Management Processes

Linking your plan to strategic risk

No. Objective Risk name Context / Root cause

2012/2013

3Provision of adequate, portable and sustainable water services infrastructure by 2014

Poor asset management

1. Outdated infrastructure (Inherited old infrastructure)

2. Increased maintenance costs3. Loss of revenue opportunity on water and

sanitation services 4. Underutilisation of resources 5. Poor fleet management 6. Poor implementation of asset disposal policy 7. Lack of asset management planning

Infrastructure asset management reviewAsset management reviewFleet management review Asset disposal review

4To ensure that the district remains financially viable

Inadequate funding and revenue management

1. Insufficient funds to meet mandate (MTEF)2. Inefficient utilisation of existing funds (poor

cost itemisation)3. Poor systems – revenue collection4. Customer care5. Leakages – water

2/3 (two thirds) of district dominated by indigentdependent on grant funding

Revenue management review Water leakages review

Operational plan