Speech by Mrs Josephine Teo, Minister of State For Finance And Transport, At The Institute of Internal Auditors (IIA) Singapore Public Sector Internal Audit Conference 2013 "Enhancing Internal Audit Effectiveness For The Public Sector"

Mr Eric Lim, President, IIA Singapore
Mr Michael Lim, Chairman, Singapore Accountancy Commission
Distinguished guests
Ladies and gentlemen

1. Good morning. Thank you for inviting me to IIA Singapore’s inaugural Public Sector Internal Audit Conference.

2. This conference is a timely initiative, reflecting the continued emphasis on good governance and accountability in the public sector. As stewards of public funds, all of us serving in the public sector must strive to maintain the highest standard of integrity, and uphold the trust that Singaporeans place on us. We have built up this trust painstakingly, not least by putting in place robust systems such as in internal audit, and we must strive to ensure these systems remain relevant.

3. Internal audit helps to give the leadership a clear view of internal processes, through its objective and independent perspective. Unlike external audit, internal audit is less adversarial and more able to position themselves as partners to the business units.

4. Internal audit also enables the sharing of best practices and helps drive greater efficiencies across departments. More than just a corporate governance requirement, internal audit is increasingly seen as an enabler whose functions help bring about an efficient, effective and trusted organisation.

5. In a survey commissioned by Ernst & Young in 2010, nearly all respondents indicated that their Internal Audit function had an important role to play in their overall risk management efforts. However, fewer than half believed that Internal Audit was helping their organization achieve its business objectives. This gap between the desired and actual level of contributions presents an opportunity to internal auditors.

6. Similarly in the public sector, we would like to see more agencies make better use of internal audit to strengthen their governance and as an enabler for better decision-making and strategies.

7. An example is the tracking of expiry dates for procurement contracts. This tracking used to be done manually in one particular Ministry. Although rare, there were still occasions where the contracts had lapsed and without a formal contract, the Government’s interest could be compromised should the service-provider fail to deliver the required services or if there was a dispute. The Ministry’s Internal Audit Unit have uncovered these occasions and suggested the implementation of an e-tracking system for all procurement contracts. Users are now alerted of contract expiry dates automatically. This not only reduced the risk of lapses, but also enabled greater efficiency.

8. The work of Government has increased in complexity. As policies evolve to be more responsive to the needs of our people, internal systems and processes need to change. Gaps could open up when established procedures are modified. As internal auditors, you have the duty of helping your organisations stay vigilant. You must ensure that internal controls evolve in tandem, remain robust and yet at the same time, avoid becoming unnecessarily onerous.

9. I will outline some brief points on what is being done. I hope that in your interactions later today and tomorrow, you will consider and exchange ideas on how public sector agencies can improve the effectiveness of the Internal Audit function, taking reference from overseas and private sector good practices, which will be a rich source of learning points.

Strengthening the Internal Audit Function within the Public Service

Strong Mandate and Support from the Leadership

10. First, our Public Service leadership recognises and appreciates the partnership role played by internal audit, and are committed towards ensuring that you have a strong mandate and support to carry out your responsibilities to a high degree of professionalism.

11. As an independent body within the organisation, internal audit offers an objective inside view of the effectiveness of our management and governance processes. It is in the interest of all top management to pay close attention to internal audit, leverage on your work to gain a clearer picture of the organisation’s overall health, and make rectifications before problems arise.

Sharing of Good Practices

12. Second, we encourage our internal auditors to come together and share good practices. Each of you brings along your individual experiences and insights, and pooling them together provides a rich source for collective learning. Some efforts have already taken off, and I will take this opportunity to share a few examples.

13. For instance, the Accountant General’s Department (AGD) organises half-yearly Internal Audit Roundtable for Public Service internal auditors. I understand that a range of topics are discussed at this forum, which provides a platform for exchange of knowledge and experiences. Started in 2010 for Ministries’ internal auditors, the roundtable has been extended to Statutory Boards since last year.

14. Another example is AGD’s educational efforts through periodic newsletters which are distributed to all our public agencies. This facilitates the sharing of learning points on how to get the best value in managing programmes and projects. On a broader scale, it also helps to promote value-for-money mindset within the public sector, and level up staff’s understanding of the spirit and intent behind our policies and processes.

Having Internal Audit Functions that Suit Our Needs

15. Third, government agencies have tailored the internal audit functions to their individual contexts.

16. An example is the Ministry of National Development (MND), which has a central pool of internal auditors who cover both MND-HQ and its smaller Statutory Boards. This helps to achieve economies of scale with the pooling of resources, and at the same time, develop internal audit competency within the Ministry-group and enhance career progression for its internal auditors.

17. In other instances, some of our Statutory Boards have sourced the services of private sector audit firms, to tap on their scale and expertise.

Conclusion

18. On the part of internal auditors, one of the challenges faced is that you are sometimes unfairly vilified as the organisation’s “fault-finders”. Your fellow colleagues who are audited may become wary of your presence.

19. However, the support of your colleagues is critical to your effectiveness. This is why I would like to encourage you as internal auditors, to position yourselves more strongly as business partners.

20. It will be beneficial to the organisation if internal audit is carried out in support of the work of the other departments, for example, by promoting improvement in their processes, rather than be seen as fault-finders who impede their work.

21. Where possible, internal auditors should seek to value-add by providing solutions to augment the organisation’s business strategy, and not just point out deficiencies. In order to improve your effectiveness, I encourage you to stay abreast of current developments, both in terms of your organisation’s evolving operating context as well as the latest developments in the audit field.

22. In summary, internal auditors need t o continue to polish your skills, build your networks, and always find a way to offer customised value-add. Today’s conference offers you a useful platform to do just that. I am confident you will make good use of your time here and I wish you a fruitful session.

23. Thank you.