The Experience of International Organizations with Audit Committees

Transcription

1 The Experience of International Organizations with Audit Committees Esther Stern Director, Office of Internal Oversight Organization for Security and Co-operation in Europe 1

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3 I will cover. Introduction to the OSCE Challenges in the internal audit function in International Organizations (IOs) Position statement by IOs on Audit Committees (ACs) Practices to follow and to avoid Benchmarking data 3

4 South Eastern Europe Eastern Europe Caucasus Central Asia 21 Field Operations & Special Representatives in four regions 3 Institutions & Secretariat 56 participating States & 12 Partners for Co-operation 4

5 The OSCE: A forum for dialogue 5

6 On the ground Over 2,500 staff, with the majority in the field ( 500 employed by the Secretariat and the specialized institutions) Some 900 international staff, mostly seconded 6 610

7 Our mission To work for stability, prosperity and democracy in 56 participating States through political dialogue about shared values and through practical work that makes a lasting difference. 7

8 The Chairperson of the OSCE Permanent Council, Ambassador Kairat Abdrakhmanov, and United Nations Secretary-General Ban Ki-Moon discuss at a meeting of the OSCE Permanent Council. Vienna, 8 April OSCE Chairperson in Office

9 Audit Committees: A new process for International Organizations (IOs) A professional and independent internal audit (IA) function evolved starting in the mid-nineties IIA standards were adopted However subsidiary committees (finance, administration, budget ) of ultimate Governing Body were perceived as fulfilling the Audit Committee role First Audit Committees appeared a decade ago UN system:

10 Challenges faced by the Audit Function in IOs (1) Significant progress achieved in enhancing the audit function in the past 10 years in response to public pressure for better scrutiny, transparency and accountability Internal Auditing Many organizations need to improve independence, capabilities, resources and processes Political context Other issues: Follow-up/ implementation of recommendations Communicating audit results 10

11 Challenges faced by the Audit Function in IOs (2) External Auditing Usually a Supreme Audit Institution of a member/participating State Selection/rotation process not clearly regulated in some IOs Quality assessment review of external auditors lacking Other issues: Potential overlap with IA function/audit engagement Potential conflict of interest Single audit principle/request for third party verifications 11

12 ACs in IOs are evolving into Oversight Committees Many IA offices are now part of a larger Oversight department/service combining audit, evaluation and investigation functions Oversight Committee membership has to reflect such expertise However, some IOs have yet to establish an AC have an AC exclusively composed of internal membership i.e. staff members 12

13 OSCE Reporting Relationships Secretary General (CAO) Audit Committee Permanent Council (Governing Body) Internal Oversight External Auditors 13

14 How does your Audit Committee behave? 14

15 Challenges to effective ACs in IOs (1) Political context, e.g. appointments Composition (internal / external, expertise, remuneration...) Terms of reference/mandate/responsibilities including selection of CAE/external auditor Professional assessment of AC performance AC Reporting lines and independence 15

16 Challenges to effective ACs in IOs (2) Number of members Mix of expertise Interaction of members (within AC and with Organization) Level of activity from too detached to interfering Understanding of role Understanding of business 16

17 Sleeping 17

18 The Big Four Banner 4 18

19 The Diplomat 19

20 Some good practices observed Respect for existing oversight functions and assurance providers Decline issues referred to it (unless within mandate) Choose one or two issues and make a difference Review Terms of Reference and modus operandi Selection/reappointment of CAE and External Auditor Combined certification/experience in audit/accounting/oversight Independent AC secretariat (reporting to AC) 20

21 Some practices to avoid Terms of reference confusion e.g. almost exclusive focus on IA function; interference in operations Poor induction resulting in briefings overload Lack of follow-up on previous annual reports and recommendations Unclear roadmap resulting in poor scheduling of meetings No standardized format for meeting records resulting in unclear outputs, action items or recommendations Too many or too few field visits (cost!) 21

22 Communicating with Governing Bodies through Audit Committees Few components of oversight are as critical to effective and successful audit committee oversight of internal auditing as its two-way communication with the internal audit activity (IIA paper on audit committees) 22

23 Good communication from the AC point of view The AC should Agree on the IA charter with the Chief Audit Executive Periodically ensure that the IA activity has the appropriate financial and human resources Review the scope and determine the appropriateness of the audit plan Be informed of risks that could hinder the achievement of the objectives Be informed of any fraud risks Be assured of the reliability of the operational information Be assured of appropriate disclosure mechanisms 23

24 IOs issued a Position Statement in 2008 RIAS (Representatives of Internal Audit Services of the UN and Multilateral Institutions) formed in 1969 by a handful of UN IA offices to discuss issues of common interests annual meetings and working groups Over four decades participation has extended to the International Financial Institutions (IFIs) and other international organizations AC related issues have been a long standing agenda item In 2008 RIAS promulgated a Position Statement providing a description of generally accepted AC principles and some identified good practices 24

25 RIAS 2008 Position Statement RIAS consulted The IIA in preparing the Position Statement Recommends the establishment of effective and independent audit committees for United Nations entities and other similar multilateral institutions with written charters approved by their governing bodies; and composed of independent, objective, experienced and competent members 25

26 RIAS Position Statement: Principles Purpose Authority Composition 26

27 RIAS Position Statement: Responsibilities Risks and Control Financial statements Internal audit External audit Values and Ethics 27

28 RIAS Position Statement: Operation Status Annual plan Meetings Resources Conditions of service 28

29 IIA GAIN Benchmarking Report 2009 on ACs Contributions by 286 organizations in total ( universe ) Data provided concerns the fiscal year ends 12/ /2009 Heterogeneous group of organizations; e.g. size, expenses, assets, industries 29

30 IIA GAIN Benchmarking Report 2009 (continued) Close to 100% of organizations have an AC in place Average number of AC members: five On average the AC meets five times a year Ninety percent of ACs are chaired either by someone from outside the organization or independent of the organization 30

31 IIA GAIN Benchmarking Report 2009 (continued) HoIA Fourteen Heads of Internal Audit in International Organizations in Europe Four out of five organizations have an AC in place Average number of AC members: nine On average the AC meets three times a year Two out of three ACs are chaired by an external member ACs have generally a less strong role than at the universe level 31

32 IIA GAIN Benchmarking Report 2009 (continued) 32

33 IIA GAIN Benchmarking Report 2009 (continued) 33

34 IIA GAIN Benchmarking Report 2009 (continued) Responsibilities 34

35 IIA GAIN Benchmarking Report 2009 (continued) Information shared with the Audit Committee 35

36 The Future Evolution of Audit Committees in IOs From heavy-handedness to a balanced role Potential of sub-committees for larger Audit Committees Better networking of IO Audit Committees De-politicizing the appointment of members 36

37 Thank you for your attention! 37