OECD - Public Internal Financial Control Report

!"#$%& ()*+,,"- .&%%"/ 0&11&*- 2$$3"% 4+- !
+*+ 2$)%5
6)71"8 9%,&*%+1
:"%+%8"+1 ;$%,*$1
;$#<$/",& 9%="8+,$* .&>&1$<#&%, ?$* ,@&
;$#<+*"/$% $? 9%,&*%+1 :"%+%8"+1 ;$%,*$1
+%= 9%,&*%+1 A)=", "% ,@& 6)71"8 !&8,$*
+8*$// BC;. 4&#7&* ;$)%,*"&/
C||ent: CrganlsaLlon for Lconomlc Co-CperaLlon and uevelopmenL (CLCu),
ulrecLoraLe for ubllc Covernance and 1errlLorlal uevelopmenL

ub||c Interna| I|nanc|a| Contro| CapsLone
1

2

"#$%&'()*+),)%-.

We would llke Lo especlally Lhank Lhe followlng lndlvlduals:
!ames Sheppard, CrganlsaLlon for Lconomlc Co-operaLlon and uevelopmenL, ulrecLoraLe for ubllc
Covernance and 1errlLorlal uevelopmenL
rofessor aLrlck uunleavy, London School of Lconomlcs, ueparLmenL of CovernmenL

We also exLend our Lhanks Lo Lhe publlc secLor professlonals (see Appendlx 4), all lndlvlduals aL Lhe
CLCu lnvolved ln Lhls pro[ecL, and Lhe LSL MA admlnlsLraLlon.

3

"/&0- -1) 20-1&3.
Mr. S|mone 8uratt|
Lmall: slmone.buraLLl[gmall.com
Crlglnally from lLaly, Slmone aLLended LulSS unlverslLy ln
8ome, where he galned a 8A ln pollLlcal sclence and an MSc
ln publlc admlnlsLraLlon. 1hls has been complemenLed by
research on lC1 ln publlc budgeLlng. rlor Lo Lhe MA he also
worked as a daLa mlner ln norLh Afrlca and as a consulLanL
for Lhe publlc secLor, developlng benchmarklng and
quanLlLaLlve analysls for Lhe reglonal use of Luropean funds.
AfLer Lhe MA he alms Lo apply Lhe besL pracLlces of prlvaLe
secLor and cuLLlng-edge research Lo Lhe creaLlon of publlc
value.
Mr. Denn|s ke||er
Lmall: mall[dennlskeller.neL
uennls ls of Cerman naLlonallLy and holds a 8A ln Soclal
Sclences from unlverslLy College uLrechL, Lhe neLherlands.
Pe possesses work experlence ln l1 and nCC consulLlng wlLh
pro[ecLs ln WesLern Lurope, Afrlca and Asla. lurLher work
experlence lncludes unu and L88u. Pls professlonal
lnLeresLs lle ln lnLernaLlonal flnanclal lnsLlLuLlons, publlc
flnance and prlvaLe secLor developmenL.
Ms. oo[|n Ma
Lmall: yoo[ln.ma[gmall.com
?oo[ln ls SouLh korean, and holds a 8Sc ln ollcy Analysls and
ManagemenL from Cornell unlverslLy ln Lhe uS. Pavlng
worked as an Clymplc MarkeLlng ro[ecL Manager aL
Samsung for flve years, ?oo[ln landed her mosL recenL [ob as
a rogram SpeclallsL aL Lhe korean MlnlsLry of lorelgn Affalrs
and 1rade. Per academlc lnLeresLs lnclude publlc
governance and managemenL, publlc secLor reforms as well
as publlc-prlvaLe parLnershlps. She ls currenLly wrlLlng her
dlsserLaLlon on ulglLal-era Covernance ln SouLh korea and
asplres Lo help governmenLs around Lhe world achleve
effecLlveness and efflclency.
Ms. Sara oung
Lmall: young.sara2[gmall.com
Crlglnally from Canada, Sara aLLended Lhe unlverslLy of
1oronLo where she compleLed sLudles ln lnLernaLlonal healLh
and developmenL. 1hls has been complemenLed by fleld-
work ln Afrlca and LaLln Amerlca as well as experlence ln
lnLernaLlonal organlzaLlons lncludlng unLSCC. rlor Lo Lhe
MA she also worked ln governmenL relaLlons, whlch
sparked an lnLeresL ln Lhe prlvaLe-publlc nexus. AfLer Lhe
MA she hopes Lo conLlnue work ln Lhls area, leveraglng Lhe
power of Lhe prlvaLe secLor Lo serve publlc lnLeresLs.

4

4&%-)%-.
AcknowledgemenLs ............................................................................................................................... 2
LxecuLlve summary ................................................................................................................................ 6
8eporL sLrucLure .................................................................................................................................... 7
1. lnLernal conLrol ln Lhe conLexL of publlc flnanclal managemenL .................................................... 8
ueflnlng lnLernal conLrol .................................................................................................................... 8
1he shlfL Lo decenLrallsaLlon and Lhe rlse of lnLernal conLrol .......................................................... 10
lnLernal conLrol as a plllar of publlc flnanclal managemenL reform ................................................ 11
Cur pro[ecL: developlng composlLe lndlcaLors Lo compare lnLernal conLrol ................................... 14
2. 8evlew of currenL pracLlces and academlc research .................................................................... 16
lnLernaLlonal sLandards ................................................................................................................... 16
revlous aLLempLs Lo compare lnLernal conLrol pracLlces ............................................................... 19
naLlonal pracLlces ............................................................................................................................ 21
lnLervlews wlLh publlc secLor professlonals .................................................................................... 28
3. MeLhodology ................................................................................................................................ 29
uevelopmenL of dlmenslons and lndlcaLors .................................................................................... 29
AggregaLlon and scallng of lndlcaLors .............................................................................................. 31
Survey reclplenLs ............................................................................................................................. 33
4. ulmenslons and lndlcaLors ........................................................................................................... 37
Lxample of lndlcaLors ln one dlmenslon .......................................................................................... 43
3. LvaluaLlon of pro[ecL and nexL sLeps ............................................................................................ 49
leedback from publlc secLor professlonals ..................................................................................... 49
LvaluaLlon of lndlcaLors ................................................................................................................... 49
8roader assessmenL of pro[ecL ........................................................................................................ 30
8ecommendaLlons: golng forward .................................................................................................. 31
Concluslon ........................................................................................................................................... 32
8lbllography ......................................................................................................................................... 33
Appendlces .......................................................................................................................................... 60
Appendlx 1: 1erms of reference ...................................................................................................... 60
Appendlx 2: Clossary ....................................................................................................................... 63
Appendlx 3: lnsLrucLlons for publlc secLor professlonals' feedback ................................................ 70
Appendlx 4: ubllc secLor professlonals .......................................................................................... 71
Appendlx 3: lndlcaLors ..................................................................................................................... 72

3

52/().
1able 1: CCSC componenLs ................................................................................................................. 17
1able 2: lnLervlew quesLlons ............................................................................................................... 28
1able 3: Scale normallsaLlon ................................................................................................................ 32
1able 4: lndlcaLors - approprlaLeness of responses Lo rlsk ................................................................. 43

67+03).
llgure 1: lnLernal conLrol and lnLernal audlL ....................................................................................... 10
llgure 2: 8esponse daLa polnLs on 10-polnL scale ............................................................................... 33
llgure 3: ulmenslons by number of lndlcaLors and Lype of scallng ..................................................... 37
llgure 4: number and percenLage of lndlcaLors by Lype of scallng ..................................................... 38
llgure 3: number of lndlcaLors by reference caLegory ........................................................................ 38
llgure 6: ulmenslons by number of lndlcaLors and reference caLegory ............................................. 39

6

89)#0-7:) .0,,23;

1hls pro[ecL ls a [olnL lnlLlaLlve of Lhe London School of Lconomlcs (LSL) MasLer of ubllc
AdmlnlsLraLlon (MA) rogramme and Lhe CrganlsaLlon for Lconomlc Co-operaLlon and
uevelopmenL (CLCu), ulrecLoraLe for ubllc Covernance and 1errlLorlal uevelopmenL. 1he goal of
Lhe pro[ecL ls Lo develop composlLe lndlcaLors of lnLernal flnanclal conLrol LhaL are relevanL Lo Lhe
publlc secLor and wlll allow for comparlsons of lnLernal flnanclal conLrol and lnLernal audlL across
CLCu member counLrles. 1he lndlcaLors have been developed wlLh reference Lo Lhe mosL promlnenL
lnLernaLlonal publlc and prlvaLe secLor sLandards on lnLernal conLrol and lnLernal audlL, namely Lhe
CommlLLee of Sponsorlng CrganlzaLlons of Lhe 1readway Commlsslon's lotetool coottol - loteqtoteJ
ltomewotk (CCSC), Lhe lnLernaLlonal CrganlzaLlon of Supreme AudlL lnsLlLuLlons (ln1CSAl)
ColJelloes fot lotetool coottol 5tooJotJs and Lhe lotetootloool 5tooJotJs fot tbe ltofessloool
ltoctlce of lotetool AoJltloq produced by Lhe lnsLlLuLe of lnLernal AudlLors (llA). Moreover, an ln-
depLh analysls of currenL counLry pracLlces Lhrough llLeraLure and lnLervlews wlLh relevanL publlc
secLor professlonals was also conducLed. 1he composlLe lndlcaLors comprlse 128 lndlvldual
lndlcaLors grouped lnLo 18 dlmenslons.
1he fleld of lnLernal conLrol research ls noL well developed and, slnce Lhls ls Lhe flrsL pro[ecL of
lLs klnd, lL represenLs a slgnlflcanL plece of work. noL only does lL allow for a greaLer undersLandlng
of how lnLernal conLrol and lnLernal audlL sysLems are arranged ln varlous CLCu counLrles, lL
provldes member counLrles wlLh an opporLunlLy Lo see where Lhey sLand relaLlve Lo oLhers. Such
comparlsons and sharlng of lessons learned can lead Lo lnnovaLlon and progress ln publlc secLor
lnLernal flnanclal conLrol.
lurLhermore, glven LhaL many CLCu counLrles currenLly face large deflclLs and are enLerlng a
perlod where Lough flscal declslons musL be made, Lhls pro[ecL comes aL a flLLlng Llme. LffecLlve
lnLernal conLrol ls key Lo governmenL accounLablllLy and Lhe efflclenL use of publlc resources and ln
such Llmes of cuL backs, effecLlve lnLernal conLrol wlll allow governmenLs Lo do more wlLh reduced
resources and safeguard Lhem from mlsuse. Whlle Lhls pro[ecL ls noL almed aL evaluaLlng Lhe
effecLlveness of lnLernal conLrol and lnLernal audlL across CLCu counLrles per se, lL ls a flrsL sLep
Lowards furLher research ln Lhls area. CurrenLly, whaL comprlses effecLlve lnLernal conLrol has noL
been emplrlcally esLabllshed (Mal[oor, 2000). 1he flrsL sLep ln Lhls llne of research ls galnlng an ln-
depLh undersLandlng of how lnLernal conLrol and lnLernal audlL are conducLed ln varlous CLCu
counLrles.
7

1hls pro[ecL and Lhe resulLs of Lhe lndlcaLors are Lo supporL Lhe 'Covernance aL a Clance' pro[ecL
of Lhe CLCu. As of 2011, Lhls lnlLlaLlve has developed almosL 60 dlfferenL lndlcaLors Lo benchmark
and compare pollLlcal and lnsLlLuLlonal frameworks, governmenL pollcles and pracLlces relaLlng Lo
publlc managemenL, and oLher relaLed areas.
<)=&3- .-30#-03)

1hls reporL ouLllnes Lhe developmenL of a seL of composlLe lndlcaLors of publlc secLor lnLernal
flnanclal conLrol. PereafLer, Lhe Lerm 'lnLernal conLrol' wlll be used lnLerchangeably wlLh 'lnLernal
flnanclal conLrol'. 1he reporL ls sLrucLured as follows:
!" 1he flrsL secLlon deflnes lnLernal conLrol and descrlbes lL ln Lhe conLexL of publlc flnanclal
managemenL and Lhe reform of Lhe publlc secLor. lL Lhen ouLllnes how Lhls pro[ecL ls slLuaLed lnLo
Lhls greaLer conLexL and Lhe goals of developlng composlLe lndlcaLors.
#" Second, we underLake a Lhorough and comprehenslve llLeraLure revlew, whlch lncludes
surveylng academlc research and a revlew of exlsLlng lnLernaLlonal sLandards on lnLernal conLrol and
lnLernal audlL. Moreover, an lnvesLlgaLlon of naLlonal pracLlces ln a sample of CLCu member
counLrles and lnLervlews wlLh publlc secLor professlonals complemenLs Lhe lnformaLlon gleaned
from Lhls llLeraLure.
$" 1hlrd, we presenL a deLalled descrlpLlon of Lhe meLhodologlcal approach Lo composlLe
lndlcaLor developmenL lncludlng Lhe developmenL of dlmenslons, scallng and aggregaLlon. 1hls
secLlon also lncludes a dlscusslon of a recommended approach for survey dlssemlnaLlon.
%" 1he fourLh secLlon presenLs an overvlew of Lhe 18 dlmenslons developed, whlch
encompasses all lndlcaLors. Also, a sample of all lndlcaLors wlLhln one selecLed dlmenslon ls
presenLed ln deLall.
&" nexL, we presenL an evaluaLlon of Lhe overall pro[ecL lncludlng a dlscusslon of sLrengLhs and
poLenLlal weaknesses as well as recommendaLlons for nexL sLeps Lo plloL Lhe survey and move
forward wlLh Lhls pro[ecL.
'" LasLly, we draw flnal concluslons and presenL supporLlng maLerlals ln Lhe appendlces,
lncludlng Lhe orlglnal Lerms of reference and Lhe full llsL of lndlcaLors.

8

>? @%-)3%2( #&%-3&( 7% -1) #&%-)9- &A =0/(7# A7%2%#72( ,2%2+),)%-

1hls secLlon deflnes lnLernal conLrol as an lnLegral parL of organlsaLlonal procedures ln publlc secLor
managemenL. 1he rlslng promlnence of lnLernal conLrol slgnlfles a shlfL from hlerarchlcal conLrol
pracLlces Lo a hlgher degree of power delegaLlon, whlch ls more approprlaLe Lo decenLrallsed
operaLlonal arrangemenLs. ln facL, lnLernal conLrol ls a key componenL of a new publlc flnanclal
managemenL reform, whlch has focused on Lhe adopLlon of prlvaLe secLor sLandards. 1hls pro[ecL ls
Lhe flrsL aLLempL of lLs klnd Lo be able Lo compare and benchmark lnLernal conLrol sysLems across
CLCu member counLrles.

B)A7%7%+ 7%-)3%2( #&%-3&(

lnLernal conLrol conslsLs of a seL of lnLernal acLlvlLles, whlch Lhe organlsaLlon puLs ln place and
carrles ouL on an on-golng basls ln order Lo provlde reasonable assurance abouL Lhe achlevemenL of
lLs ob[ecLlves (CCSC, 1994, ln1CSAl, 2004b, llAC, 2010). Academlcs and pracLlLloners have proposed
dlfferenL deflnlLlons of lnLernal conLrol. ?eL, lL ls posslble Lo
consolldaLe a seL of characLerlsLlcs LhaL have been hlghllghLed by
Lhe research. llrsL, lnLernal conLrol ls embedded ln Lhe normal
acLlvlLy of Lhe enLlLy (CCSC, 1994, ln1CSAl, 2004b). lL conslsLs of
Lhe whole sysLem of flnanclal and oLher conLrols, lncludlng Lhe
organlsaLlonal sLrucLure, meLhods, procedures and lnLernal audlL,
esLabllshed by managemenL wlLhln lLs corporaLe goals" (ln1CSAl,
2010, p. 37). Second, deslgn, lmplemenLaLlon, and malnLenance of
lnLernal conLrol are Lhe responslblllLy of Lhe lnLernal sLakeholders
and ln parLlcular Lhose charged wlLh governance, managemenL
and oLher personnel" (llAC, 2010, p. 22). 1hlrd, lLs maln ob[ecLlves
are rlsk prevenLlon and managemenL (ower, 2007, arry, 2010).
ln oLher words, lLs role ls Lo provlde reasonable assurance abouL Lhe achlevemenL of an enLlLy's
ob[ecLlves" (llAC, 2010, p. 22). lourLh, Lhe operaLlng characLerlsLlcs of lnLernal conLrol LhaL allow Lhe
fulfllmenL of lLs ob[ecLlves are Lhe followlng:
1he supporL Lo Lhe regularlLy, economy, efflclency and effecLlveness of Lhe organlsaLlon
(CCSC, 1994, !ensen, 2000, Cohen, 2007, ln1CSAl, 2004b, ln1CSAl, 2010, llAC, 2010)
lotetool coottol systems
coo be JefloeJ os ()*+,
./012),)34, becoose tbey
emboJy botb poteotlols -
of qteotet efflcleocy ooJ
cootJlootloo oo tbe ooe
booJ, ooJ of qteotet
seosltlvlty to soclol
tespooslblllty lssoes oo tbe
otbet (ower, 2007, p. 40)
9

1he allgnmenL of acLlvlLles Lo managemenL pollcles (CCSC, 1994, ln1CSAl, 2004b, ln1CSAl,
2010, llAC, 2010)
1he assurance relaLed Lo Lhe acqulslLlon and use of asseLs and resources (CCSC, 1994,
Cohen, 2007, ln1CSAl, 2004b, ln1CSAl, 2010, lonescu, 2011, llAC, 2010)
1he rellablllLy of accounLlng records and flnanclal and managemenL lnformaLlon (CCSC,
1994, Cohen, 2007, uoyle eL al., 2007a, ln1CSAl, 2004b, ln1CSAl, 2010, llAC, 2010)

Accordlng Lo ln1CSAl (2004b), lnLernal conLrol exhlblLs flve maln componenLs, whlch are Lhe
maln elemenLs of Lhe lnLernal conLrol sysLem LhaL allow Lhe funcLlonlng of lLs operaLlng
characLerlsLlcs. 1hose componenLs are: ConLrol LnvlronmenL, 8lsk AssessmenL, ConLrol AcLlvlLles,
lnformaLlon and CommunlcaLlon, and MonlLorlng. AlLhough Lhe conLrol envlronmenL does noL
lnclude aspecLs LhaL are dlrecLly lnvolved ln conLrol acLlvlLles, lL conslsLs of organlsaLlonal and
culLural elemenLs LhaL ease Lhe carrylng ouL of lnLernal conLrol, such as well-deflned responslblllLles
and eLhlcal values. lf Lhe maln ob[ecLlves are rlsk prevenLlon and managemenL, Lhen rlsk assessmenL
ls Lhe core of lnLernal conLrol. lL lnvolves Lhe ldenLlflcaLlon and assessmenL of rlsks, as well as Lhe
deslgn of sLraLegles Lo avold Lhem or mlLlgaLe Lhelr effecLs. 1he seLLlng up of conLrol acLlvlLles ls Lhe
mosL frequenL sLraLegy Lo mlLlgaLe rlsk. 1hose acLlvlLles can be prevenLlve and/or deLecLlve.
Moreover, conLrol acLlvlLles may be esLabllshed as correcLlve acLlons Lo ldenLlfled rlsks. 1he
funcLlonlng of lnLernal conLrol heavlly relles on Lhe effecLlveness of Lhe lnformaLlon flows. ln
parLlcular, managerlal declslon-maklng requlres lnformaLlon on exLernal and lnLernal evenLs Lo be
relevanL, rellable, compleLe, and Llmely. Moreover, lnformaLlon and declslons have Lo be
communlcaLed effecLlvely Lo Lhe relevanL reclplenLs LhroughouL Lhe
enLlre organlsaLlon. llnally, lnLernal conLrol ls a learnlng process ln a
complex and dynamlc envlronmenL. 1herefore, lLs effecLlveness has
Lo be under consLanL monlLorlng, ln order Lo allgn lL Lo Lhe changlng
envlronmenL and avold Lhe posslblllLy of Lhe lnLernal conLrol sysLem
lLself becomlng a source of rlsks.
Cverall, lnLernal conLrol ls exLremely lmporLanL Lo Lhe
governmenL reachlng lLs ob[ecLlves. LffecLlve lnLernal conLrol allows
Lhe governmenL Lo meeL lLs servlce dellvery obllgaLlons Lo Lhe publlc
and makes Lhe governmenL more accounLable for Lhe use of publlc resources. Clven Lhe currenL
sLaLe of hlgh deflclLs ln many CLCu counLrles, Lhe consequenL reducLlon ln Lhe avallablllLy of publlc
funds makes even more compelllng Lhe need Lo provlde publlc servlces efflclenLly. LfflclenL lnLernal
ffectlve lotetool coottol
ollows tbe qovetomeot to
meet lts setvlce Jellvety
obllqotloos to tbe pobllc
ooJ mokes tbe qovetomeot
mote occoootoble fot tbe
ose of pobllc tesootces.
10

conLrol can help Lhe governmenL do more wlLh less or aL leasL malnLaln levels of servlce provlslon.
LasLly, slnce Lhe mosL common way ln whlch clLlzens experlence democracy ls Lhrough frequenL
conLacLs wlLh publlc admlnlsLraLlon, a well-funcLlonlng and rellable publlc secLor enhances Lhe
confldence ln Lhe democraLlc sysLem LhaL ls responslble for lLs organlsaLlon (klnnock, 2002).
I|gure 1: Interna| contro| and |nterna| aud|t

1he flgure above shows how lnLernal conLrol (lC) and lnLernal audlL (lA) are slLuaLed wlLhln a
counLry and MlnlsLry and vlsuallses Lhe poLenLlal lnvolvemenL of Supreme AudlL lnsLlLuLlons (SAl).

51) .17A- -& *)#)%-32(7.2-7&% 2%* -1) 37.) &A 7%-)3%2( #&%-3&(

lnLernal conLrol has come Lo play a very promlnenL role ln boLh Lhe prlvaLe secLor and publlc secLor
lnsLlLuLlons. 1hls ls ln parL because lnLernal conLrol ls one of Lhe key meLhods of exerLlng conLrol ln
lnsLlLuLlonally decenLrallsed seLLlngs. Clven Lhe move Lo more decenLrallsed modes of operaLlon ln
boLh Lhe prlvaLe and publlc secLor, Lhere has been a loglcal shlfL from hlerarchlcal conLrol pracLlces
Lo a more decenLrallsed arrangemenL wlLh larger delegaLlons of power and adopLlon of Lhe ldea of
leL Lhe managers manage" (keLLl, 1997). uecenLrallsed operaLlons posed a challenge Lo Lhe pre-
exlsLlng meLhods of exerLlng conLrol. Such challenges are dlscussed ln Lhe llLeraLure regardlng
prlnclpal-agenL Lheorles and Lhe problem of asymmeLrlc lnformaLlon (see ower, 2007), as well as a
rlghLs-based parLlclpaLlve prlnclple (urorl eL al., 2006). 1he shlfL Lo decenLrallsed operaLlng
arrangemenLs led Lo Lhe rlslng preference for LrusL, raLher Lhan overslghL, as an organlslng prlnclple,
Lhus, delegaLlon of dlscreLlonary power lncreases, buL so does Lhe demand for evldence and
lnformaLlon (Clddens, 1990). ConsequenLly, Lhere ls a greaLer emphasls on performance
11

managemenL and monlLorlng (PoggeLL, 1996). 1herefore, glven Lhe need for conLrol Lo be
malnLalned whlle ln a decenLrallsed arrangemenL, Lhe currenL pracLlces of conLrol are focused on
lnLernal conLrol, as Lhe capaclLy of exLernal conLrol Lo dlrecLly deLecL vlolaLlons and conLrol
deflclencles ls llmlLed (ower, 2007).
As lnLernal, raLher Lhan exLernal, conLrol Lakes promlnence, Lhe locus of conLrol changes. 1he
more declslon-maklng ls decenLrallsed, Lhe more conLrol acLlvlLles should be dlspersed accordlngly
(Cunnlngham eL al., 1998). Moreover, Lhls dlfferenL approach reflecLs Lhe rlslng preference for rlsk
assessmenLs and ex-anLe prevenLlon (ower, 2007). 1he underlylng assumpLlon ls LhaL weaknesses
and emerglng problems are slgnalled ln early sLages, Lherefore, lf Lhere ls a sysLem ln place Lo deLecL
such slgnals and flx Lhe problem, Lhe organlsaLlon can avold crlses before Lhey exerL Lhelr effecLs
(ower, 2007). 1hls ls Lhe role of lnLernal conLrol. ln facL, Lhe raLlonale of lnLernal conLrol ls Lo
provlde an early warnlng sysLem Lo puL Lhe organlzaLlon back on Lrack before dlfflculLles reach a
crlsls sLage" (!ensen, 2000, p. 40). ConsequenLly, even lf lL cannoL deLecL and prevenL all
lrregularlLles and mlsLakes, lL does provlde reasonable assurance regardlng Lhe achlevemenL of Lhe
publlc ob[ecLlves (SLaLe of Callfornla, 2008, SLaLe of MlnnesoLa, 2010, CovernmenL of SouLh
AusLralla, 2011). ln concluslon, glven Lhe pasL changes Lo lnsLlLuLlonal arrangemenLs, we can see
LhaL lnLernal conLrol has rlsen ln lmporLance Lo Lhe promlnenL role lL plays Loday.

@%-)3%2( #&%-3&( 2. 2 =7((23 &A =0/(7# A7%2%#72( ,2%2+),)%- 3)A&3,

ln Lhe lasL LhlrLy years and ln parallel wlLh Lhe Lrend Lowards decenLrallsed lnsLlLuLlonal
arrangemenLs, scholars and pracLlLloners ln many CLCu counLrles have advocaLed a change ln publlc
admlnlsLraLlon pracLlces. Speclflcally, Lhese lndlvlduals have called for a shlfL from Lhe Weberlan
sLyle Lowards Lhe new ubllc ManagemenL (nM) advocaLlng for Lhe creaLlon of a more effecLlve
publlc secLor. nM refers Lo a broad and complex seL of ldeas and pracLlces LhaL have been
dlfferenLly emphaslsed and lnLroduced ln varlous seLLlngs and Llmes. noneLheless, Lhey all lmply Lhe
same approach, whlch advocaLes Lhe adopLlon of managerlal and accounLlng Lools and Lechnlques
used ln Lhe prlvaLe secLor (uunleavy and Pood, 1994, CuLhrle eL al., 1999).
1he reasons of Lhls shlfL are manlfold. Powever, mosL of Lhem are Lhe loglcal follow-ups of Lhe
baslc assumpLlon, whlch ls Lhe hlgh level of LrusL ln Lhe markeL and prlvaLe buslness meLhods"
(Pood, 1993a, p. 4). lndeed, 8lndal (2003) argues LhaL good flscal ouLcomes are consequence of,
among oLher facLors, Lhe lnsLlLuLlonal arrangemenLs for budgeLlng, lncludlng Lhe relaxaLlon of
12

cenLral lnpuL conLrols and Lhe adopLlon of modern flnanclal managemenL pracLlces. Moreover, as
prevlously menLloned, glven Lhe currenL need Lo reduce spendlng and address deflclLs, adopLlng Lhe
mosL advanced managerlal Lechnlques from Lhe prlvaLe secLor may allow Lhe level of lnpuLs Lo be cuL
whlle avoldlng slgnlflcanL reducLlons ln Lhe level of ouLpuLs (CLCu, 2011).
ConsequenLly, Lhe emphasls on reduclng Lhe dlfferences beLween Lhe operaLlng characLerlsLlcs
ln Lhe publlc and prlvaLe secLor has moved Lhe focus of accounLablllLy from Lhe process Lo Lhe resulLs
(Pood, 1991, Pood, 1993a). 1hls explalns Lhe adopLlon of accounLlng loglc" (Laughlln, 1992), whlch
lmplles Lhe evaluaLlon of any acLlvlLy ln Lerms of measurable ouLpuLs and ouLcomes, and Lhe
assumpLlon LhaL such evaluaLlon can be carrled ouL analyslng Lhe flow of flnanclal resources used or
recelved.
1he llnk beLween lnLernal conLrol and nM ls ln lLs focus on flnanclally relevanL aspecLs. As
menLloned, nM ls a broad approach, however, Lhe lmplemenLaLlon of nM requlres LhaL an
lncreaslngly broader group of lnLernal sLakeholders, ln Lhe operaLlng core, ln Lhe mlddle llne, and ln
Lhe sLraLeglc apex
1
, acqulre Lhe knowledge LhaL ls necessary Lo deal wlLh flnanclal lnformaLlon.
1herefore, Lhe ldea of new ubllc llnance ManagemenL (nlM) has emerged and ls arguably Lhe
mosL lmporLanL componenL Lo Lhe nM approach (CuLhrle eL al., 1999). 1he ob[ecLlves of Lhe nlM
are aggregaLe flscal dlsclpllne, sLraLeglc prlorlLlzaLlon of expendlLure and Lechnlcal efflclency"
(arry, 2010, p. 1). ln oLher words, Lhe whole nlM sysLem noL only provldes lnformaLlon on
expendlLure buL acLually manages and conLrols such expendlLure" (arry, 2010, p. 1). ConsequenLly,
lL clearly represenLs Lhe core sLrucLure of Lhe nM framework. As an elemenL of nM, nlM refers
Lo Lhe followlng flve dlfferenL caLegorles (CuLhrle eL al., 1999, pp. 210-211):
Changes Lo flnanclal reporLlng sysLems, lncludlng accrual-based accounLlng
lnLroducLlon of managerlal pracLlces ln use ln Lhe prlvaLe secLor for Lhe creaLlon of a publlc
quasl-markeL
AdopLlon of a performance measuremenL approach
uecenLrallsaLlon of budgeLs
Lmphasls on value-for-money (vlM) ln Lhe lnLernal and exLernal audlLs

Llkewlse, 8lndal's (2003) analysls of Lhe causes of hlgh quallLy budgeLlng emphaslses Lhe role
of accrual-based accounLlng wldely used ln Lhe prlvaLe secLor. Pe advocaLes Lhe adopLlon of Lhese
accounLlng meLhods by Lhe publlc secLor. Accordlng Lo Lhe Accoootloq 5tooJotJs ltomewotk

1
lor a deflnlLlon of Lhe Lhree concepLs, see MlnLzberg, 1980.
13

(ln1CSAl, 1993, p. 23), accrual-based accounLlng measures and reporLs expenses as lncurred,
records revenues as earned, and lncludes xed asseLs. 1o some exLenL, Lhls ls Lhe naLural
consequence of Lhe nM reforms (see McCulloch and 8all, 1992), because lL reflecLs Lhe aLLempL Lo
acqulre lnformaLlon LhaL can fosLer Lhe efflclency of Lhe organlsaLlon. 1he lnLroducLlon of accrual-
based accounLlng seems Lo pursue Lhe followlng ob[ecLlves: complemenLlng performance
managemenL, faclllLaLlng beLLer nanclal managemenL, lmprovlng undersLandlng of program cosLs,
expandlng and lmprovlng lnformaLlon for resource allocaLlon, lmprovlng nanclal reporLlng, and
faclllLaLlng lmproved asseL and cash managemenL (van uer Poek, 2003, p. 38).
lurLhermore, nlM slgnlflcanLly affecLs Lhe sysLem of checks and balances. ln facL, conLrol ls
Lhe flrsL requlslLe of budgeLlng", because of lLs role ln prevenLlng Lhe mlsuse of publlc funds"
(Schlck, 1978, p. 313). 8aslcally, a well-funcLlonlng conLrol sysLem ls essenLlal Lo ensure hlgher levels
of accounLablllLy (Mcklnney, 2004). lurLhermore, Lhere ls a poslLlve relaLlonshlp beLween Lhe
ouLcome of managerlal Lools, such as accrual-base accounLlng, and Lhe quallLy of lnLernal conLrols
(uoyle eL al., 2007a). ln hls classlflcaLlon of Lhe ob[ecLlves of Lhe nlM, arry (2010) emphaslses Lhe
role of flduclary rlsk managemenL, deflned as Lhe conLrol over Lhe rlsk LhaL publlc money ls sLolen,
used for purposed oLher Lhan Lhose lnLended or used corrupLly.
Moreover, he argues LhaL a sysLem of rlsk managemenL should guaranLee:
LffecLlve flnanclal conLrol
Compllance wlLh consLlLuLlonal legal and regulaLory requlremenLs
roper overslghL Lo publlc flnances

LasLly, lL ls slgnlflcanL Lo sLress Lhe role played ln supporLlng Lhe nlM reform by a group of
publlc organlsaLlons, and ln parLlcular Lhe ones ln charge of audlL and accounLablllLy. lor lnsLance, as
Mcklnney (2004) reporLs, Lhe CovernmenL AccounLablllLy Cfflce (CAC) of Lhe unlLed SLaLes has
conducLed a sLudy on several world-class flnanclal managemenL organlsaLlons. As a resulL, Lhe CAC
has proposed a llsL of Len useful pracLlces for effecLlve flnanclal managemenL. 1hls llsL can be
regrouped ln Lhree caLegorles. llrsL of all, Lhe culLural aspecL, and ln parLlcular Lhe role LhaL Lhe
sLraLeglc apex plays ln fosLerlng Lhe pervaslve role of flscal managemenL ln all aspecLs of Lhe normal
funcLlonlng of Lhe organlsaLlon. Second, Lhe emphasls on Lhe performance measuremenL, and Lhe
use of such lnformaLlon Lo lmprove efflclency. 1hlrd, Lhe lmporLance of lnformaLlon flows as a brldge
connecLlng flnance funcLlons and Lhe managemenL operaLlons.
14

ln sum, nM and nlM have challenged Lhe LradlLlonal forms of conLrol, whlch usually rely on
hlerarchy, and supporL Lhe creaLlon of alLernaLe modes of conLrol where a cenLrallsed conLrol over
sLraLegy ls comblned wlLh operaLlonally decenLrallsed unlLs (PoggeLL, 1996, p. 9). Moreover, wlLhln
decenLrallsed unlLs, conLrol funcLlons need Lo be developed. 1hls ls where lnLernal conLrol emerges.
Moreover, nM supporLers sLress LhaL Lhe managemenL of publlc money requlres hlgh levels of
accounLablllLy, and Lhe deslgn of lnsLrumenLs LhaL can effecLlvely deLer, ldenLlfy and correcL
eplsodes of corrupLlon and mlsuse of publlc funds (Pood, 1991, Pood, 1993, PoggeLL, 1996, 8lndal,
2003, Mcklnney, 2004, uoyle eL al., 2007a). 1he need for conLrol ls furLher emphaslsed because of
Lhe speclflclLles of Lhe publlc organlsaLlons, and ln parLlcular:
tbelt focos oo meetloq soclol ot polltlcol objectlves, tbelt ose of pobllc fooJs, tbe lmpottooce of
tbe boJqet cycle, tbe complexlty of tbelt petfotmooce (tbot colls fot o bolooce betweeo
ttoJltloool voloes llke leqollty, loteqtlty ooJ ttoospoteocy
ooJ moJeto, moooqetlol voloes llke efflcleocy ooJ
effectlveoess), ooJ tbe cottespooJloqly btooJ scope of
tbelt pobllc occoootoblllty" (lonescu, 2011, p. 791).
ln concluslon, Lhe rlse of lnLernal conLrol ln Lhe publlc
secLor has been embedded ln Lhe nM agenda. WlLhln Lhe
nM framework lnLernal conLrol serves Lo meeL Lhe need for
boLh value-for-money (l.e. effecLlveness, efflclency and
economy) and Lhe conLrol of flnanclally relevanL aspecLs, as
well as provldlng an efflclenL mechanlsm of conLrol glven Lhe
lncreaslng levels of operaLlonal decenLrallsaLlon.

C03 =3&D)#-E *):)(&=7%+ #&,=&.7-) 7%*7#2-&3. -& #&,=23) 7%-)3%2( #&%-3&(

As Lhe lmporLance of lnLernal conLrol has been esLabllshed above, Lhe followlng brlefly ouLllnes Lhe
relevance and need for lndlcaLor developmenL. 1he usefulness of Lhls pro[ecL ls mulLl-faceLed:
llrsLly, glven LhaL research on Lhe sLaLe of lnLernal conLrol pracLlces ln varlous counLrles ls
lacklng, lndlcaLors allow one Lo esLabllsh Lhe sLaLe of Lhe arL. Secondly, lndlcaLors whlch allow for
cross-counLry comparlsons provlde naLlons wlLh an opporLunlLy Lo see where Lhey sLand on varlous
dlmenslons and compare Lhelr lnLernal conLrol and lnLernal audlL sysLems wlLh oLher member
counLrles. 1he CLCu has acknowledged LhaL lndlcaLors promoLe lnnovaLlon and progress ln Lhe
1be tefotms of New lobllc
Moooqemeot (NlM) ooJ
New lobllc lloooclol
Moooqemeot (NllM) bove
cbolleoqeJ tbe ttoJltloool
fotms of coottol tbot tely
oo bletotcby. 1bls ls wbete
lotetool coottol emetqes.
13

publlc secLor Lhrough Lhls mechanlsm. 1hlrd, by esLabllshlng Lhe dlfferences among counLrles, Lhls
can spark meanlngful dlscusslon and furLher research lnLo whlch componenLs or feaLures allow for
greaLer effecLlveness of lnLernal conLrol and lnLernal audlL. 1hls research may lnclude analysls of
how governmenL performance measures are relaLed Lo lnLernal conLrol componenLs and/or sysLems.
LasLly, counLrles may adopL dlfferenL lnLernal conLrol and lnLernal audlL sysLems. lL may be LhaL
parLlcular elemenLs of lnLernal conLrol and or lnLernal audlL always go LogeLher, Lhereby creaLlng a
sysLem. Mapplng of how lndlvldual componenLs of lnLernal conLrol and lnLernal audlL are correlaLed
and form a sysLem can be lllumlnaLed Lhrough Lhe use of daLa collecLed ln Lhe lndlcaLor survey.
Several counLrles may share Lhe same sysLems.

16

F? <):7)' &A #033)%- =32#-7#). 2%* 2#2*),7# 3).)23#1

1hls secLlon provldes an overvlew of currenL lnLernaLlonal sLandards, prevlous aLLempLs Lo compare
lnLernal conLrol across counLrles, a dlscusslon of naLlonal pracLlces ln a sample of CLCu member
counLrles, and Lhe resulLs of lnLervlews wlLh publlc secLor professlonals ln Lhe fleld.

@%-)3%2-7&%2( .-2%*23*.

lnLernaLlonal sLandards have been developed Lo lnform lnLernal conLrol and lnLernal audlL processes
as well as publlc flnanclal managemenL more generally. lL ls Lhese sLandards LhaL have been closely
referred Lo ln Lhe developmenL of Lhe lndlcaLors ln Lhls pro[ecL.
1he CommlLLee of Sponsorlng CrganlzaLlons of Lhe 1readway Commlsslon's lotetool coottol -
loteqtoteJ ltomewotk (CCSC) was Lhe flrsL underLaklng Lo develop lnLernaLlonal sLandards on
lnLernal conLrol. ln 1992, Lhe framework was publlshed wlLh Lhe alm of provldlng guldance for
ptlvote sectot companles ln how Lo esLabllsh beLLer lnLernal conLrols, allowlng Lhem Lo reach Lhelr
ob[ecLlves wlLh mlnlmal rlsk. 1he framework has Lhree maln ob[ecLlves:
1. LffecLlveness and efflclency ln operaLlons - Lhls addresses an organlsaLlon's prlme buslness
goals, lncludlng performance and proflLablllLy, as well as safeguardlng of resources
2. 8ellablllLy of flnanclal reporLlng
3. Compllance wlLh appllcable law and regulaLlons
WlLh Lhese ob[ecLlves ln mlnd, CCSC dlvldes Lhe process of lnLernal conLrol lnLo flve macro
componenLs, of whlch each comprlses several prlnclples on how lnLernal conLrol ls capLured. 1hese
componenLs are as follows:

17

1ab|e 1: CCSC components
CCSC Component Def|n|t|ons]Lxamp|es
Contro| Lnv|ronment CrganlsaLlon's managemenL sLyle, eLhlcal values, compeLence,
and asslgnmenL of auLhorlLy
k|sk Assessment ldenLlflcaLlon and analysls of relevanL rlsks Lo achleve Lhe
organlsaLlon's ob[ecLlves
Contro| Act|v|t|es ollcles and procedures ensurlng managemenL dlrecLlves are
lmplemenLed
Informat|on and Commun|cat|on CaLherlng and dlssemlnaLlng relevanL lnformaLlon, supporLlng
effecLlve declslon maklng and responslblllLles
Mon|tor|ng AssessmenL of Lhe effecLlveness of lnLernal conLrol Lhrough on-
golng efforLs and separaLe evaluaLlons

CCSC has proven Lo be Lhe mosL wldely used framework for lnLernal conLrol and, as of 2011, ls
under revlslon (CCSC webslLe, 2012). Moreover, a wlde range of oLher frameworks (such as CCCC,
1urnbull, ln1CSAl, and Lhe SLandards for lnLernal ConLrol ln Lhe u.S. lederal CovernmenL) ls based
on CCSC. Speclflcally, aL Lhe same Llme as CCSC's framework was developed, ln 1992, Lhe
lnLernaLlonal CrganlzaLlon of Supreme AudlL lnsLlLuLlons (ln1CSAl) also began Lo develop Lhe flrsL
framework for lnLernal conLrol sLandards. ln 1992, Lhe ColJelloes fot lotetool coottol 5tooJotJs were
publlshed by ln1CSAl. Whlle sLrongly based on CCSC, lL was almed aL lnformlng lnLernal conLrol ln
Lhe publlc secLor, raLher Lhan Lhe prlvaLe secLor.
ln Lhe 1990s, CLCu member counLrles were on a Lrend of adopLlng whaL ls commonly referred
Lo as new ubllc ManagemenL (nM). 1hls new managemenL sLyle lnvolved greaLer usage of prlvaLe
secLor sLandards ln Lhe publlc secLor. 1hus, Lhe CCSC and ln1CSAl frameworks began Lo also lnform
lnLernal conLrol ln Lhe publlc secLor. lurLhermore, ln 2001, ln1CSAl recognlsed Lhe need Lo revlse
Lhelr lnLernal conLrol sLandards Lo make Lhem even more appllcable for Lhe publlc secLor. ln 2004,
ln1CSAl released Lhe ColJelloes fot lotetool coottol 5tooJotJs fot tbe lobllc 5ectot. 1hese guldellnes
are sLlll heavlly based on CCSC, however have added one addlLlonal ob[ecLlve Lo Lhe orlglnal Lhree.
1haL of sofeqootJloq tecootses oqolost loss, mlsose ooJ Jomoqe. lLs lncluslon ln Lhe lnLernal
conLrol ob[ecLlves ls [usLlfled, as Lhe lmporLance of eLhlcal behavlour as well as prevenLlon and
deLecLlon of fraud and corrupLlon ln Lhe publlc secLor has become more emphaslzed slnce Lhe
nlneLles" (ln1CSAl, 2004b, p. 3).
18

AnoLher developmenL ln Lhe early 2000's was Lhe esLabllshmenL of Lhe mulLl-donor parLnershlp,
Lhe ubllc LxpendlLure and llnanclal AccounLablllLy (LlA) framework. 1he emergence of LlA was
relaLed Lo Lhe new ubllc ManagemenL Lrend ln CLCu counLrles and was almed aL Lrylng Lo assess
and promoLe Lhe sLrengLhenlng of publlc flnanclal managemenL across Lhe globe, parLlcularly ln
developlng counLrles. LlA developed a ltomewotk fot Meosotloq letfotmooce lo llM wlLh Lhe
goal Lo sLrengLhen reclplenL and donor ablllLy Lo (l) assess Lhe condlLlon of counLry publlc
expendlLure, procuremenL and flnanclal accounLablllLy sysLems, and (ll) develop a pracLlcal sequence
of reform and capaclLy-bulldlng acLlons" (LlA WebslLe, 2012). LlA also allows for Lhe monlLorlng
of progress of counLry lM performance over Llme" (LlA WebslLe, 2012). Whlle LlA ls much
wlder ln scope Lhan [usL lnLernal conLrol, addresslng Lhe enLlre unlverse of publlc flnanclal
managemenL, Lhere are cerLaln aspecLs wlLhln Lhe framework LhaL refer dlrecLly Lo lnLernal conLrol
and lnLernal audlL.
1hese are lndeed helpful Lo lnform lnLernal conLrol and lnLernal audlL sLandards and may
complemenL Lhe CCSC and ln1CSAl sLandards. 1he followlng LlA lndlcaLors are a few examples of
Lhose LhaL apply Lo lnLernal conLrol and lnLernal audlL aspecLs of publlc flnanclal managemenL:
1. CompeLlLlon, value for money and conLrols ln procuremenL
2. LffecLlveness of lnLernal conLrols for non-salary expendlLure
3. LffecLlveness of lnLernal audlL
4. 1lmellness and regularlLy of accounLs reconclllaLlon

1he lncreaslng lmporLance and aLLenLlon glven Lo publlc flnanclal managemenL, and more
speclflcally lnLernal conLrol, can be seen ln Lhe developmenL of Lhe Luropean Commlsslon's
framework of lobllc lotetool lloooclol coottol (lllc). lnlLlally creaLed ln Lhe laLe 1990's, lL ls currenLly
used Lo gulde Lhe publlc secLor reforms and prepare counLrles for accesslon Lo Lhe Luropean unlon
(Lu). 1hls framework ls lnformed by CCSC and ln1CSAl, buL also by lessons learned ln lnLernal
flnanclal conLrol wlLhln currenL Lu member counLrles.
LasLly, whlle Lhe above sLandards address elLher Lhe whole of publlc flnanclal managemenL or
Lhe whole of lnLernal conLrol, Lhere are also sLandards relaLlng speclflcally Lo lnLernal audlL, whlch ls
an lnLegral aspecL of lnLernal conLrol. 1he lotetootloool 5tooJotJs fot tbe ltofessloool ltoctlce of
lotetool AoJltloq, produced by Lhe lnsLlLuLe of lnLernal AudlLors (llA) and revlsed ln 2010, have also
been used Lo lnform Lhls pro[ecL. Such sLandards are wldely used ln Lhe prlvaLe and publlc secLor
across CLCu member counLrles and are almed aL provldlng baslc prlnclples LhaL represenL Lhe
pracLlce of lnLernal audlLlng, provlde a framework for performlng and promoLlng a broad range of
19

value-added lnLernal audlLlng, esLabllsh Lhe basls for Lhe evaluaLlon of lnLernal audlL performance
and fosLer lmproved organlzaLlonal processes and operaLlons" (llA, 2010, p. 1). As lnLernal audlL ls
an lnLegral parL of lnLernal conLrol, Lhese sLandards are also relevanL. Moreover, oLher lnLernaLlonal
sLandards LhaL address addlLlonal aspecLs of lnLernal conLrol are also relevanL. Speclflcally, Lhe
lnLernaLlonal CrganlzaLlon for SLandardlzaLlon (lSC) has klsk moooqemeot - ltloclples ooJ
qolJelloes. Whlle noL dlrecLly almed aL Lhe publlc secLor, useful lnslghLs can be made from an
examlnaLlon of Lhese guldellnes and, ln addlLlon Lo Lhe oLher documenLs, Lhey have lnformed Lhe
developmenL of lndlcaLors perLalnlng Lo rlsk.

G3):7&0. 2--),=-. -& #&,=23) 7%-)3%2( #&%-3&( =32#-7#).

lrom a comprehenslve and exhausLlve llLeraLure revlew, lL can be seen LhaL lnLernal flnanclal
conLrol, especlally wlLhln Lhe publlc secLor ls a severely underdeveloped area of academlc research.
arL of Lhe dlfflculLy ls LhaL lL ls challenglng Lo deflne whaL lnLernal conLrol encompasses and how Lo
measure lL accuraLely. Cne can see Lhere ls confuslon ln Lhe llLeraLure as lL ls noL clear whaL Lhe
boundarles of lnLernal conLrol sysLems are. lor example, as deflned by CCSC, lL could be argued LhaL
all organlsaLlonal pracLlces conLrlbuLe Lo lnLernal conLrol and/or lnLernal flnanclal conLrol (Mal[oor,
2000). Moreover, much of Lhe academlc research on lnLernal flnanclal conLrol ls done under Lhe lens
and umbrella of anoLher domaln such as accounLlng (Mal[oor, 2000). 1hus, lnLernal conLrol does noL
yeL sLand as lLs own area of sLudy. Popefully, Lhls pro[ecL wlll be a sLep Lowards developlng lnLernal
conLrol as a separaLe caLegory of research.
lurLhermore, due Lo Lhe lack of research, whlle Lhere appears Lo be hlghly developed normaLlve
sLandards for lnLernal conLrol, Lhere ls a lack of evldence LhaL lf such sLandards are applled, Lhls wlll
acLually resulL ln more effecLlve lnLernal conLrol. ln essence, lL ls noL yeL esLabllshed whaL effecLlve
lnLernal conLrol looks llke. 1he assumed relaLlonshlps beLween lnLernal conLrol, accounLablllLy and
good governance have noL been proven emplrlcally (Mal[oor, 2000). Andrews (2010) has acLually
found LhaL Lhe counLrles wlLh hlgher performance on Lhe World Covernance lndlcaLors are low
lnLernal audlL adopLers. Cood governmenLs are less llkely Lo adopL Lhe beLLer pracLlce lnLernal
conLrol characLerlsLlc Lhan oLhers" (Andrews, 2010, p. 24). 1hus, lL ls noL lnLulLlve or common sense
as Lo whaL makes effecLlve lnLernal conLrol and provldes for good governance. Moreover, Lhere may
be no ldeal model for lnLernal conLrol LhaL all naLlons should sLrlve Lowards. Andrews (2010)
arLlculaLes LhaL good governance may mean dlfferenL Lhlngs ln dlfferenL counLrles and SLerk eL al.
(2003) descrlbe Lhe wlde dlverslLy ln Lhe way LhaL lnLernal audlL ls slLuaLed and carrled ouL ln slx
20

CLCu governmenLs, all of whlch may be equally effecLlve. 1herefore, Lhe lnLernaLlonal sLandards
and assumpLlons Lhey make regardlng whaL makes for beLLer lnLernal conLrol need Lo be challenged
and evaluaLed emplrlcally.
As a prellmlnary sLep Lo esLabllshlng whaL effecLlve lnLernal conLrol and conLrol sysLems look
llke, research musL flrsL be done on how lnLernal conLrol sysLems are acLually belng conducLed ln
varlous counLrles. 1hls pro[ecL alms Lo begln Lhls research. Cnce lnlLlal measures of whaL Lypes of
conLrols are belng used ln dlfferenL counLrles are developed, one can look aL how such conLrols
correlaLe Lo performance and galn lnslghLs lnLo whlch lndlvldual pracLlces or collecLlon of pracLlces
(sysLems) of lnLernal conLrol may be more effecLlve. 1hus, Lhls
pro[ecL ls an lnlLlal sLep Lowards Lhe developmenL of emplrlcal
evldence on whaL consLlLuLes effecLlve lnLernal conLrol. lL seeks Lo
esLabllsh a greaLer undersLandlng of how dlfferenL counLrles
conducL lnLernal conLrol Lhrough Lhe developmenL of a serles of
dlmenslons on whlch counLrles may dlffer and be compared.
revlous aLLempLs Lo map counLrles' lnLernal conLrol sysLems
and Lo provlde for cross-counLry comparlsons wlLh or wlLhouL Lhe
use of lndlcaLors have been exLremely llmlLed. 1he ubllc
LxpendlLure and llnanclal AccounLablllLy (LlA) framework
aLLempLs Lo use lndlcaLors Lo allow for cross-counLry comparlsons, however, Lhey are evaluaLlve ln
naLure and measure adherence Lo sLandards raLher Lhan aLLempLlng Lo undersLand how lnLernal
conLrol sysLems are arranged. 1hey are also focused on publlc flnanclal managemenL more generally
and noL focused on lnLernal conLrol. Moreover, Lhe assessmenLs are prlmarlly done ln developlng
counLrles and Lherefore do noL allow for comparlson of CLCu member counLrles. very few of Lhe
lndlcaLors would be cross-cuLLlng Lo effecLlvely lllumlnaLe dlfferences ln publlc flnanclal
managemenL across CLCu counLrles, as Lhese naLlons would already rank hlgh on Lhe lndlcaLor
scales.
1he flrsL analysls of publlc lnLernal conLrol sysLems ln Lurope was ln 1996 by SlCMA (SupporL for
lmprovemenL ln Covernance and ManagemenL: a subsldlary of Lhe CLCu). 1hey sLarLed mapplng
Lhe wldely dlfferenL approaches ln CLCu member counLrles Lo lmplemenLlng ManagemenL ConLrol
(MC)" (de konlng, 2007, p. 33). 1he research conducLed ln a handful of selecL Luropean counLrles
revealed LhaL mosL of Lhe ln1CSAl sLandards were applled expllclLly or lmpllclLly, buL ln very
dlfferenL ways, dependlng on naLlonal characLerlsLlcs" and demonsLraLed Lhere ls no one speclflc
model of MC Lo apply Lo all counLrles, nor ls Lhere a slngle paLLern for how such conLrol sysLems are
ltevloos ottempts to mop
cooottles lotetool coottol
systems ooJ to ptovlJe fot
ctoss-coootty compotlsoos
wltb ot wltboot tbe ose of
loJlcotots bove beeo
exttemely llmlteJ.
21

llkely Lo evolve over Llme" (de konlng, 2007 p. 33). 1hls research has esLabllshed LhaL lnLernal conLrol
ls conducLed ln a wlde varleLy of ways and Lhls pro[ecL alms Lo bulld on Lhls noLlon. 8y uslng
dlmenslons and lndlcaLors, Lhls pro[ecL wlll capLure Lhe cross counLry varlaLlon ln a way LhaL allows
for clearer and easler comparlsons, showlng where counLrles sLand nexL Lo each oLher on a range of
dlmenslons relaLed Lo lnLernal conLrol.
ln 2010, Lhe flrsL CLCu survey on lnLernal conLrol and lnLernal audlL ln cenLral publlc
admlnlsLraLlons was conducLed. 1he reporL 'lnLernal ConLrol and lnLernal AudlL: Lnsurlng ubllc
SecLor lnLegrlLy and AccounLablllLy' covered 73 mlnlsLrles across 12 counLrles and conslsLed of 71
quesLlons. 1he naLure of Lhe survey, however, ls llmlLed ln comprehenslveness, does noL lnvolve Lhe
use of lndlcaLors, and ls prlmarlly evaluaLlve ln naLure focuslng on how well counLrles are meeLlng
Lhe CLCu lnLegrlLy lramework. Moreover, Lhe survey was used Lo suggesL assumed 'besL pracLlces'
for lnLernal conLrol. 1hus, whlle bulldlng on Lhls prevlous work of Lhe CLCu, Lhls pro[ecL dlffers ln lLs
approach, Lhe survey meLhods employed, and has dlfferenL alms.

H2-7&%2( =32#-7#).

8esearch focused on naLlonal pracLlces ln lnLernal conLrol has been conducLed ln Lhe followlng
counLrles: Canada, lrance, Cermany, lLaly, SouLh korea, Lhe uk and Lhe uS. 1he key areas of sLudy
below allow for comparablllLy across dlfferenL counLrles. We conducLed Lhls research Lo provlde us
wlLh lnlLlal lnslghLs lnLo Lhe cross-cuLLlng dlfferences ln how CLCu governmenLs conducL lnLernal
conLrol and lnLernal audlL and Lo furLher lnform Lhe developmenL of Lhe lndlcaLors as Lhe maLerlal of
exlsLlng sLandards was noL comprehenslve enough.
1he seven counLrles above were selecLed based on Lhe followlng reasons: Lhey are
represenLaLlve of Lhe wlde specLrum of CLCu member counLrles, and Lhe lndlvlduals lnvolved ln Lhls
pro[ecL have boLh Lhe relevanL language compeLencles as well as reglonal knowledge.

Invo|vement of the M|n|stry of I|nance or 1reasury
WlLhln Lhe Luropean unlon, a counLry wlLh a sLrong lnvolvemenL of MlnlsLry of llnance or 1reasury
ls ldenLlfled as havlng a cenLrallsed model of an lnLernal conLrol sysLem. ln Lhe cenLrallsed model
sysLem, ln addlLlon Lo preparlng and allocaLlng budgeL Lo llne mlnlsLrles, Lhe MlnlsLry of llnance or
22

1reasury also conducLs ex-anLe conLrols by lLs own sLaff ln Lhe deslgnaLed llne mlnlsLrles (Luropean
Commlsslon, 2004, p. 13).
ln conLrasL, ln Lhe decenLrallsed model of an lnLernal conLrol sysLem, llne mlnlsLrles are glven
full auLonomy Lo conLrol Lhelr own budgeLs wlLh approprlaLe checklng Lhrough Lhelr [lnLernal
conLrol sysLems]" (Luropean Commlsslon, 2004, p. 13). lnLernal AudlL unlLs (lAus) wlLhln llne
mlnlsLrles carry ouL ex-posL flnanclal audlLs and reporL on Lhelr lnLernal conLrol sysLems Lo Lhe
leglslaLure on a regular basls. 1he MlnlsLry of llnance or 1reasury ln Lhls case could [provlde]
guldance and coordlnaLlon for Lhe lAus of Lhe llne mlnlsLrles" (Luropean Commlsslon, 2004, p. 13).
ln Lhls conLexL, Canada, Cermany, SouLh korea, Lhe uk and Lhe uS have a decenLrallsed lnLernal
conLrol sysLem, ln whlch Lhe MlnlsLry of llnance or 1reasury ls noL heavlly lnvolved wlLh Lhe lnLernal
conLrol and lnLernal audlL pracLlces wlLhln llne mlnlsLrles.
lrance, on Lhe oLher hand, has a cenLrallsed lnLernal conLrol sysLem: wlLhln each mlnlsLry, Lhe
8udgeL ConLrol and AccounLlng Servlce, as an auLhorlLy of Lhe MlnlsLry of llnance, ls seL up Lo ensure
LhaL programmes prepared by managers are flnanclally susLalnable and Lo Lake charge of accounLlng
of Lhe mlnlsLry's programmes (Lubek, 2003).
Slmllarly, lLaly also has a cenLrallsed lnLernal conLrol sysLem ln whlch a key role ln lnLernal
flnanclal conLrol ln each mlnlsLry ls played by lLs CenLral AccounLs Cfflce (ufflclo CenLrale dl 8llanclo),
whlch belongs Lo Lhe SLaLe Ceneral AccounLlng ueparLmenL (8aglonerla Cenerale dello SLaLo) under
Lhe MlnlsLry of llnance. 1he head of Lhe SLaLe Ceneral AccounLlng ueparLmenL suggesLs Lhe heads of
each CenLral AccounLs Cfflce wlLhln llne mlnlsLrles and Lhe MlnlsLry of llnance conflrms and
appolnLs Lhem (8aglonerla Cenerale dello SLaLo, 2012).

Interna| contro| and |nterna| aud|t at the centra| or federa| |eve|
1hls parL of research looks aL who ls ln charge of lnLernal conLrol and lnLernal audlL aL Lhe cenLral or
federal level of governmenL, wheLher Lhey seL governmenL-wlde sLandards for lnLernal conLrol and
lnLernal audlL and lf so, whlch framework ls used.
ln Canada, Cfflce of Lhe CompLroller Ceneral under Lhe lederal 1reasury 8oard of Canada plays
Lhe role of general overseer of lnLernal flnanclal conLrol and lnLernal audlL across governmenL. WlLh
Lhe ollcy on lnLernal ConLrol, ln effecL as of Aprll 1, 2009, Lhe CompLroller Ceneral of Canada ls Lo
provlde governmenL-wlde leadershlp and funcLlonal dlrecLlon" for lnLernal conLrol sysLem over
23

flnanclal managemenL and flnanclal reporLlng (1reasury 8oard of Canada SecreLarlaL: ollcy on
lnLernal ConLrol, 2010). 1he sLandards and processes relaLlng Lo lnLernal conLrol are lald ouL ln Lhe
ollcy on lnLernal ConLrol, and Lhey are coherenL wlLh Lhe CCSC framework. 1he sLandards and
processes relaLlng Lo lnLernal audlL, whlch are lald ouL ln Lhe same ollcy, are based on Lhe llA
framework, and lL ls a mandaLe LhaL deparLmenLs meeL Lhe llA sLandards.
ln lrance, as explalned above, Lhe MlnlsLry of llnance plays a cenLral role ln conducLlng budgeL
conLrol and accounLlng servlces for llne mlnlsLrles. Powever, lL ls Lhe lnLer-mlnlsLerlal audlL
commlLLee, ComlLe lnLermlnlsLerlel d'AudlL des rogrammes (ClA), LhaL develops a framework for
lnLernal audlL sLandards lnsplred by LhaL of Lhe llA. 1he members of Lhe ClA are Lwo Lypes:
permanenL members represenLlng Lhe general lnspecLlon of each mlnlsLry, and audlL Leams of Lwo
or lnspecLors seconded for Lwo or Lhree monLhs by Lhose general lnspecLlons, lncludlng one from
Lhe audlLed mlnlsLry.
ln Cermany, Lhe 8undesrechnungshof, whlch ls Lhe Cerman Supreme AudlL lnsLlLuLlon, carrles
ouL audlLs across governmenL mlnlsLrles Lhrough random checks lf and when necessary. 1he Cerman
SAl does noL work as Lhe cenLral force admlnlsLerlng lnLernal conLrol and lnLernal audlL ln llne
mlnlsLrles, buL raLher complemenLs Lhe decenLrallsed efforLs across governmenL. WlLh respecL Lo
governmenL-wlde sLandards, Lhe Cerman lnsLlLuLe for lnLernal AudlLlng (ull8) refers Lo Lhe llA and
ll frameworks buL only makes recommendaLlons. 1he MlnlsLry of Lhe lnLerlor also makes
recommendaLlons Lo llne mlnlsLrles.
ln lLaly, Lhe SLaLe Ceneral AccounLlng ueparLmenL under Lhe MlnlsLry of llnance ls Lhe
overseelng body aL Lhe cenLral level. WlLh respecL Lo seLLlng governmenL-wlde sLandards, Lhere are
several bodles lnvolved: Lhe SLaLe Ceneral AccounLlng ueparLmenL also seLs Lhe sLandards for
lnLernal flnanclal conLrol, Lhe SAl (CorLe del ConLl) seLs Lhe sLandards for Lhe accounLablllLy of asseLs
and llablllLles, and Lhe 1echno-sclenLlflc commlLLee for sLraLeglc conLrol ln Lhe cenLral
admlnlsLraLlons (ComlLaLo Lecnlco-sclenLlflco per ll conLrollo sLraLeglco nelle ammlnlsLrazlonl dello
SLaLo) ls ln charge of seLLlng Lhe sLandards Lo Lhe Cvls for Lhe lssuance of annual reporL LhaL every
MlnlsLer has Lo send Lo Lhe arllamenL. lor lnLernal flnanclal conLrol, Lhe CenLral AccounLs Cfflce
musL refer Lo Lhe frameworks used ln Lhe prlvaLe secLor, Lo Lhe exLenL LhaL Lhe can be applled ln Lhe
publlc secLor. 1he SAl recognlses Lhe ln1CSAl and Lu8CSAl frameworks as a basls of developlng
Lhelr sLandards.
ln SouLh korea, Lhe SAl ls called Cam-sa-won, Lhe 8oard of AudlL and lnspecLlon (8Al), and plays
a cenLral role ln ensurlng LhaL each mlnlsLry conducLs lLs own lnLernal conLrol and lnLernal audlL. 1he
24

8Al promoLes audlL sLandards and guldellnes, buL lL ls noL clear lf Lhe sLandards and guldellnes are
seL dlrecLly by Lhe 8Al.
ln Lhe uk, PM 1reasury seLs Lhe guldellne of how lnLernal conLrol and lnLernal audlL should be
conducLed governmenL-wlde. 1he 1reasury works Lo lmprove governmenL's capablllLy Lo handle
rlsk and uncerLalnLy by provldlng guldance on governance, rlsk managemenL, lnLernal audlL and
fraud" (PM 1reasury: Covernance and 8lsk ManagemenL, 2011a) and produces several guldellnes
and codes of pracLlce handbooks lncludlng 'Managlng ubllc Money', '8egularlLy, roprleLy and
value for Money', and 'CovernmenL lnLernal AudlL SLandards'. 1hese documenLs are Lo be used by
Lhe ueparLmenLal AccounLlng Cfflcers ln Lhe execuLlon of Lhelr duLles perLalnlng Lo lnLernal conLrol
and lnLernal audlL. 1he Crange 8ook whlch provldes guldance on rlsk managemenL sLaLes LhaL
organlsaLlons may choose Lo adopL parLlcular sLandards [and musL] demonsLraLe LhaL rlsk ls
managed ln Lhe parLlcular organlsaLlon ln lLs parLlcular clrcumsLances ln a way whlch effecLlvely
supporLs Lhe dellvery of lLs ob[ecLlves" (PM 1reasury, 2004, p. 11). 1he CovernmenL lnLernal AudlL
SLandards comprlse Lhe ueflnlLlon of lnLernal AudlLlng, Lhe Code of LLhlcs and [Lhe llA framework],
supplemenLed by addlLlonal requlremenLs for uk cenLral governmenL" (PM 1reasury: CovernmenL
and lnLernal AudlL SLandards, 2011b, p. 3)
ln Lhe uS, aL Lhe federal level, Lhere are Lwo bodles LhaL are ln charge of lnLernal conLrol and
lnLernal audlL across governmenL: Lhe resldenLlal Cfflce of ManagemenL and 8udgeL (CM8) and Lhe
uS SAl - Ceneral AccounLlng Cfflce (CAC). 1he overall sLandards for lnLernal conLrol are
promulgaLed by CM8 buL Lhe deslgn and lmplemenLaLlon of Lhe parLlcular conLrols for a speclflc
enLlLy or program are Lhe clear responslblllLy of Lhe leadershlp of Lhe enLlLy" (Luropean Commlsslon,
2004, p. 44). ln addlLlon, Lhe 1982 lederal Managers' llnanclal lnLegrlLy AcL (lMllA) requlres Lhe
CAC Lo lssue sLandards for lnLernal conLrol ln governmenL. ConsequenLly, Lhe SLandards for lnLernal
ConLrol ln Lhe lederal CovernmenL are wrlLLen by Lhe CAC, based on Lhe ln1CSAl framework.
CovernmenL AudlLlng SLandards, Lhe ?ellow 8ook, seL sLandards LhaL all lnspecLor generals across
governmenL are requlred Lo follow.

Interna| contro| and |nterna| aud|t w|th|n ||ne m|n|str|es
ln Canada, Lhe Chlef llnanclal Cfflcer ln each ueparLmenL lmplemenLs Lhe lnLernal conLrol processes,
whlle Lhe uepuLy MlnlsLer oversees and ensures Lhe esLabllshmenL, malnLenance, monlLorlng and
revlew of deparLmenLal sysLem of lnLernal conLrol. 1he focus ls Lo mlLlgaLe rlsks ln Lhe broad
caLegorles of Lhe effecLlveness and efflclency of programs, operaLlons and resource managemenL,
23

Lhe rellablllLy of flnanclal reporLlng, and compllance wlLh leglslaLlon, regulaLlons, pollcles and
delegaLed auLhorlLles" (1reasury 8oard of Canada SecreLarlaL: ollcy on lnLernal ConLrol, 2010).
SeparaLely, Lhe ueparLmenL and Agency AudlL CommlLLees conducL lnLernal audlLs. lL ls Lhe
responslblllLy of Lhe uepuLy MlnlsLer Lo ensure LhaL such CommlLLees are seL up wlLh quallfled
professlonal sLaff LhaL can provlde ob[ecLlve and lndependenL evaluaLlons of Lhe lnLernal processes.
1he uepuLy MlnlsLer selecLs a Chlef AudlL LxecuLlve, who leads Lhe lnLernal audlL processes and
reporLs dlrecLly Lo Lhe uepuLy MlnlsLer. 1he focus of lnLernal audlL ls on all managemenL sysLems,
processes and pracLlces, lncludlng Lhe lnLegrlLy of flnanclal and non-flnanclal lnformaLlon" (1reasury
8oard of Canada SecreLarlaL: ollcy on lnLernal ConLrol, 2010). 1he lnLernal audlL may vary ln lLs
comprehenslveness and rlgor.
ln lrance, Lhe lnLernal AudlL, led by a mlnlsLerlal offlclal, ls responslble for coordlnaLlng lnLernal
audlL pollcles across all of Lhe mlnlsLry's funcLlons and acLlvlLles. 1hls ls a Lruly lnLernal body and
reporLs dlrecLly Lo Lhe MlnlsLer. ln addlLlon, as menLloned prevlously ln Lhls reporL, Lhere are also Lhe
8udgeL ConLrol and AccounLlng Servlce accounLable Lo Lhe MlnlsLry of llnance and Lhe lnLer-
mlnlsLerlal audlL commlLLee, ClA. 1he scope of lnLernal conLrol pracLlces may lnclude, buL are noL
llmlLed Lo, analyslng lnLernal and exLernal lnpuLs and ouLpuLs, deflnlng reference schemes for
processes, descrlblng deLalled operaLlng processes and responslblllLles, and llsLlng Lhe checkpolnLs
and seLLlng quallLy conLrols ln place.
ln Cermany, each mlnlsLry has lLs own lnLernal audlL deparLmenL called lnLernal revlslon.
lollowlng Lhe recommendaLlons seL aL Lhe federal level, Lhese lnLernal revlslon deparLmenLs conducL
Lhelr own lnLernal conLrol and lnLernal audlL pracLlces.
ln lLaly, Lhe Cganlsmo dl valuLazlone lndlpendenLe delle performance (Cvl) ls ln charge of long
Lerm sLraLeglc conLrols Lo check how and Lo whaL exLenL pollLlcal dlrecLlves are carrled ouL ln Lhe
correspondlng llne mlnlsLry. Whlle Lhe MlnlsLer ls responslble for Lhe mlnlsLry's overall ob[ecLlve and
goal seLLlngs as well as performance measuremenL and correcLlve acLlon, Lhe Cvl also oversees Lhe
whole process. 1o Lhls exLenL, Lhe Cvl can also conducL evaluaLlons of managers and make proposals
Lo Lhe MlnlsLer. 1he CenLral AccounLs Cfflce, ln collaboraLlon wlLh oLher lnLernal and exLernal
bodles, checks admlnlsLraLlve and accounLlng regularlLy,
ln Lhe case of SouLh korea, lL was 1962 when Lhe noLlon of lnLernal audlL sysLem was flrsL
lnLroduced aL Lhe llne mlnlsLry level of governmenL. Powever, lL was noL unLll AugusL 2010 when Lhe
ubllc SecLor lnLernal AudlL AcL was enacLed, mandaLlng Lhe esLabllshmenL of lnLernal audlL unlLs
(lAus) wlLhln all publlc organlsaLlons lncludlng llne mlnlsLrles. WlLh Lhls law, Lhe lAus across
26

governmenL galned lndependence and sLrengLhened Lhelr professlonallsm. 1he heads of lAus are
Lo be recrulLed lnLernally or exLernally Lhrough an open compeLlLlon" (8Al, 2011, p. 7), and durlng
Lhelr flxed Lerm of offlce, Lhey are allowed Lo seek consulLaLlon wlLh exLernal experLs when and lf
necessary. AlLhough speclflc pracLlces relaLlng Lo lnLernal conLrol and lnLernal audlL may vary, all
mlnlsLrles' lAus, usually called Lhe Cfflce of lnspecLor Ceneral, conducL lnspecLlons and audlLs for
Lhe own mlnlsLry and all agencles and organlsaLlons belonglng Lo Lhem.
ln Lhe uk, each ueparLmenL has an AccounLlng Cfflcer, who ls appolnLed by Lhe 1reasury and
reporLs dlrecLly Lo Lhe Pead of Lhe ueparLmenL or MlnlsLer. 1he AccounLlng Cfflcer ls Lhe lndlvldual
LhaL has Lo appear before Lhe CommlLLee of ubllc AccounLs (AC) Lo speak regardlng hls
ueparLmenL's performance and ls requlred Lo slgn a SLaLemenL on lnLernal ConLrol arLlculaLlng hls
plans and processes for revlewlng governance, rlsk managemenL and conLrol arrangemenLs.
Moreover, each ueparLmenL develops lLs own lnLernal AudlL CharLer, whlch ls a formal documenL
LhaL deflnes Lhe lnLernal audlL's purpose, responslblllLles and how and by whlch professlonals lL wlll
be conducLed. 1he AccounLlng Cfflcer appolnLs a Pead of lnLernal AudlL who ln Lurn leads an lnLernal
AudlL CommlLLee wlLhln Lhe mlnlsLry. 1he Pead of lnLernal AudlL who reporLs Lo Lhe AccounLlng
Cfflcer and Lo Lhe ueparLmenLal 8oard may be an ln-house employee, an employee of a relaLed
organlsaLlon or an exLernal conLracLor employed Lo fulfll Lhe speclflc role" (PM 1reasury:
CovernmenL and lnLernal AudlL SLandards, 2011, p. 38). lor lndependenL quallLy revlews LhaL assess
Lhe effecLlveness of lnLernal audlL, once every flve year, an lndependenL Leam from ouLslde Lhe
organlsaLlon revlews Lhe effecLlveness of lnLernal audlL (PM 1reasury: CovernmenL and lnLernal
AudlL SLandards, 2011).
ln Lhe uS, each LxecuLlve ueparLmenL has an Cfflce of lnspecLor Ceneral (lC). 1he 1978
lnspecLor Ceneral AcL, as amended, requlres lCs Lo be responslble for conducLlng and supervlslng
audlLs and lnvesLlgaLlons, provldlng leadershlp and coordlnaLlon and recommendlng pollcles Lo
promoLe economy efflclency, and effecLlveness, and deLecLlng and prevenLlng fraud and abuse ln
Lhelr agencles' programs and operaLlons" (8Al, 2003, p. 24).

Invo|vement of Supreme Aud|t Inst|tut|on
1he SAl of Canada ls Lhe Cfflce of Lhe AudlLor Ceneral (CAC). Whlle Lhe CAC conducLs exLernal
audlLs of federal ueparLmenLs, lL also evaluaLes Lhe exLenL Lo whlch Lhe ueparLmenL's lnLernal audlL
processes meeL Lhe llA sLandards. 1he CAC also reporLs on Lhe exLenL Lo whlch ueparLmenLs comply
wlLh Lhe 2009 ollcy on lnLernal AudlL.
27

ln lrance, Lhe 1946 and 1938 lrench consLlLuLlons mandaLed Lhe lrench SAl, Cour de CompLes,
Lo asslsL Lhe CablneL and arllamenL ln regulaLlng governmenL spendlng. 1he Cour de CompLes, an
lndependenL body from boLh Lhe leglslaLlve and execuLlve branches, conducLs flnanclal audlLs of
accounLs and good governance audlLs, provldlng lnformaLlon and advlce Lo Lhe CablneL and
arllamenL.
As menLloned earller, Lhe Cerman SAl, 8undesrechnungshof, does noL lnLervene ln Lhe
mlnlsLerlal efforLs of lnLernal conLrol and lnLernal audlL. Whlle lL does noL play a blg role, lf and when
necessary, lL sLlll conducLs audlLs for governmenL mlnlsLrles and agencles and provldes
recommendaLlons.
ln lLaly, Lhe offlces of lnLernal conLrol are requlred Lo provlde lnformaLlon Lo Lhe SAl, CorLe del
ConLl (arL. 8, law 20/1994).
ln SouLh korea, Lhe 8Al has played an lmporLanL esLabllshlng Lhe governmenL-wlde lnLernal
audlL sysLem. 1he 2010 ubllc SecLor lnLernal AudlL AcL requlred Lhe 8Al Lo play Lhe speclflc roles ln
Lhe followlng aspecLs. As a supervlslng body, Lhe 8Al conducLs a comprehenslve assessmenL on Lhe
performance of lAus on a regular basls" (8Al, 2011, p. 9). 1he 8Al also promoLes audlL sLandards,
guldellnes and manuals by organlslng Lralnlng workshops and semlnars. ln addlLlon Lo Lhese Lwo
roles, Lhe 8Al also communlcaLes wlLh Lhe heads of lAu ln llne mlnlsLrles Lo bulld muLual LrusL (8Al,
2011, p. 9).
ln Lhe uk, Lhe naLlonal AudlL Cfflce (nAC) does noL appear Lo evaluaLe Lhe effecLlveness of
lnLernal audlL, buL raLher conducLs an exLernal check of lnLernal conLrol ln ueparLmenLs or
MlnlsLrles. 1he nAC has a focus on Lhree sLraLeglc Lhemes LhaL lmpacL on all deparLmenLs'
performance ln achlevlng value for money: lmprovlng flnanclal managemenL and reporLlng, maklng
beLLer use of lnformaLlon, and ensurlng LhaL servlces are dellvered cosL-effecLlvely" (nAC: Cur
SLraLegy, 2011).
As Lhe uS Congress monlLors Lhe execuLlon of Lhe laws and oLher acLlvlLles of Lhe governmenL,
Lhe CAC asslsLs Lhls process by conducLlng exLernal audlLs assesslng ueparLmenLal performance wlLh
respecL Lo prlorlLles seL by Lhe Congress. 1he CAC's SLandards for lnLernal ConLrol ln Lhe lederal
CovernmenL as well as Lhe lnLernal ConLrol ManagemenL and LvaluaLlon 1ool provlde guldance for
ueparLmenLal level lnLernal conLrol pracLlces. 1he CAC oversees Lhe submlsslon of annual audlLed
flnanclal sLaLemenLs by each governmenL enLlLy and publlshes a summary of Lhe resulLs of Lhe
accounLlng and conLrol sysLems LesLed ln dlfferenL governmenL enLlLles, ln con[uncLlon wlLh lLs
audlL of Lhe governmenL's consolldaLed flnanclal sLaLemenLs" (Luropean Commlsslon, 2004, p. 44).
28

@%-)3:7)'. '7-1 =0/(7# .)#-&3 =3&A)..7&%2(.

lnLervlews wlLh a number of publlc secLor professlonals furLher complemenLed Lhe exlsLlng llLeraLure
on lnLernal conLrol and lnLernal audlL, lnLernaLlonal sLandards and naLlonal pracLlces LhaL were
ldenLlfled aL Lhe onseL as well as ln Lhe process of Lhe lndlcaLors' developmenL. As explalned above,
research on Lhe sub[ecL maLLer ls scarce and does noL provlde a comprehenslve vlew of whaL
lnLernal conLrol encompasses and especlally how counLrles underLake lnLernal conLrol. ln order Lo
develop comprehenslve and well-consLrucLed lndlcaLors, more research was needed. 1he lndlcaLors
LhaL have been developed for Lhls pro[ecL were Lhus lnformed noL only by Lhe lnLernaLlonal
sLandards and llLeraLure research buL also Lhrough Lhese lnLervlews. 1he meLhodology of Lhe
lnLervlews followed a loosely seml-sLrucLured meLhod of asklng pre-deflned quesLlons as well as
allowlng for new follow-on quesLlons and elaboraLlons. 1he professlonals as well as quesLlons were
ldenLlfled on Lhe basls of whaL lnformaLlon was sLlll lacklng and where furLher daLa needed Lo be
collecLed.
A sample of maln quesLlons of Lhe lnLervlews ls llsLed below. Slnce Lhe lnLervlews dlrecLly
lnformed Lhls pro[ecL's overall research and Lhe developmenL of Lhe lndlcaLors, and for non-
dlsclosure reasons, Lhe full LranscrlpL ls noL presenLed wlLhln Lhls reporL. Powever, wherever
relevanL, lnformaLlon wlLhln Lhls reporL ls approprlaLely sourced referrlng Lo Lhe speclflc lnLervlew.
1ab|e 2: Interv|ew quest|ons
Samp|e of Interv|ew uest|ons
uoes Lhe CompLroller Ceneral of Canada work llke a 'CenLral ParmonlsaLlon unlL' ln LhaL lL works
Lowards unlformlLy ln procedures and pracLlces across federal ueparLmenLs?

Pow can lL be ensured or promoLed LhaL each MlnlsLry/ueparLmenLs adheres Lo Lhe
recommendaLlons made?

WhaL do you see as Lhe maln dlfference beLween flnanclal conLrol and oLher forms of conLrol?
WhaL do rlsk assessmenLs encompass ln Lerms of formallLy of procedures, ldenLlflcaLlon,
measuremenL and dlmenslons?

WhaL challenges are you faclng ln lmplemenLlng lnLernal conLrol across governmenL?
Pow are ln1CSAl or oLher lnLernaLlonal sLandards used ln pracLlce?
WhaL role does MlnlsLry of llnance play ln Lerms of mlnlsLrles' lnLernal conLrol?
ls Lhere a legal framework/foundaLlon for lnLernal audlL and/or lnLernal conLrol?

29

I? J)-1&*&(&+;

1he followlng ouLllnes Lhe meLhodology used ln Lhe creaLlon of Lhe composlLe lndlcaLors of publlc
secLor lnLernal flnanclal conLrol. 1he meLhodology was lnformed by Lhe CLCu Pandbook on
ConsLrucLlng ComposlLe lndlcaLors (2008). 1he enLlre process of composlLe lndlcaLor developmenL
has been broken down lnLo secLlons Lo allow for clarlLy: flrsL, Lhe developmenL of Lhe composlLe
lndlcaLors/dlmenslons and lndlvldual lndlcaLors, Lhen Lhe arLlculaLlon of poLenLlal responses, scorlng
and aggregaLlon. 1he lnformaLlon from Lhe prevlous secLlon lnformed Lhe developmenL of Lhe
lndlcaLors, ln parLlcular Lhe exlsLlng lnLernaLlonal sLandards such as ln1CSAl and CCSC.

B):)(&=,)%- &A *7,)%.7&%. 2%* 7%*7#2-&3.

1he process of developmenL of Lhe composlLe lndlcaLors/dlmenslons and lndlvldual lndlcaLors was
carrled ouL as follows:
1. A Lhorough sLudy of Lhe flve componenLs of lnLernal conLrol, as ouLllned by ln1CSAl ln Lhe 2004
Culdellnes for lnLernal ConLrol SLandards for Lhe ubllc SecLor, was underLaken. lrom Lhls,
came a comprehenslve undersLandlng of many of Lhe relevanL aspecLs Lo lnLernal conLrol and
from Lhere a llsL of quesLlons Lo probe for lnformaLlon regardlng each of Lhe aspecLs was
developed. Speclflcally, as menLloned above, Lhe flve componenLs are: ConLrol LnvlronmenL,
8lsk AssessmenL, ConLrol AcLlvlLles, lnformaLlon and CommunlcaLlon, and MonlLorlng. 1he
quesLlons developed are dlrecLed aL lnLernal conLrol/audlL professlonals or Lop managemenL ln
Lhe federal mlnlsLrles/deparLmenLs/cenLral admlnlsLraLlon bodles of CLCu counLrles.
2. 1he oLher lnLernaLlonal sLandards and frameworks, CCSC, llA, lSC, LlA, and llC were
lnvesLlgaLed. Slnce ln1CSAl ls so closely allgned wlLh CCSC, mosL of Lhe relevanL aspecLs of
lnLernal conLrol LhaL CCSC could offer had already been capLured. 1hen, aLLenLlon was Lurned
Lo Lhe oLher sLandard/framework documenLs. lurLher quesLlons were developed from Lhls
exerclse. lor example, LlA and lLs lndlcaLors LhaL speclflcally relaLe Lo lnLernal conLrol allowed
for Lhe developmenL of quesLlons relaLlng Lo publlc procuremenL, whlch are mosLly absenL from
ln1CSAl. CuesLlons developed were placed under one of Lhe 3 componenLs of lnLernal conLrol.
3. ALLenLlon was Lhen placed on Lhe research of lnLernal conLrol pracLlces and pollcles currenLly ln
place ln a selecL sample of CLCu member counLrles (Lhose prevlously descrlbed) as well as Lhe
resulLs of lnLervlews wlLh relevanL professlonals ln each sLaLe. lrom Lhls, furLher aspecLs of
lnLernal conLrol noL dlrecLly addressed by Lhe lnLernaLlonal sLandard documenLs were ldenLlfled
30

and poLenLlal quesLlons relaLlng Lo Lhese aspecLs were developed. CuesLlons developed were
elLher placed under one of Lhe flve componenLs of lnLernal conLrol or under oLher caLegorles
developed Lo capLure quesLlons whlch do noL dlrecLly fall under one of Lhe flve caLegorles (such
as quesLlons addresslng Lhe lnvolvemenL of Supreme AudlL lnsLlLuLlons, Lhe sLrucLure and
sLandards of lnLernal conLrol ln llne mlnlsLrles, and Lhe use of professlonal neLworks).
4. AL Lhls sLage approxlmaLely 140 quesLlons had been arLlculaLed. 8ecause Lhe flve ln1CSAl
componenLs of lnLernal conLrol or oLher caLegorles of quesLlon developed are noL dlmenslons ln
Lhemselves, Lhe nexL sLep was Lo look for Lrends across all of Lhe 140 quesLlons as Lo whaL lL ls
LhaL cerLaln groups/clusLers of quesLlons are capLurlng and how Lhey could be puL LogeLher Lo
form dlmenslons on whlch a counLry could be placed. 1hls exerclse led Lo Lhe creaLlon of 19
dlfferenL dlmenslons each ranglng from 2 Lo 19 quesLlons ln each dlmenslon. Care was Laken Lo
ensure LhaL Lhe 19 dlmenslons malnLalned Lhe comprehenslve scope of lnLernal conLrol LhaL
had been achleved wlLh Lhe prevlous caLegorlsaLlon of quesLlons.
3. Cnce Lhe dlmenslons were ldenLlfled, quesLlons under each dlmenslon were revlewed and
edlLed where necessary Lo ensure LhaL Lhey were capLurlng aspecLs of lnLernal conLrol dlrecLly
relevanL Lo Lhe dlmenslon under whlch lL ls placed. AL Lhls polnL, such quesLlons can be
consldered lndlcaLors and LogeLher Lhey provlde an lndlcaLlon of where a counLry sLands on a
glven dlmenslon. Lach dlmenslon can be consldered a composlLe lndlcaLor as lL lnvolves Lhe
many faceLs of a concepL, each capLured by an lndlvldual lndlcaLor.
6. AL Lhls sLage Lhere were 19 dlmenslons, however, durlng edlLlng Lhls number was reduced Lo 18
as aspecLs relaLlng Lo Lhe removed caLegory were found Lo be beLLer applled Lo oLher
dlmenslons. Moreover, some quesLlons were ellmlnaLed durlng revlew and edlLlng Lo brlng Lhe
LoLal number of lndlcaLors Lo 128. Slx of Lhe 128 lndlcaLors are quesLlons almed aL gaLherlng
quallLaLlve lnformaLlon and/or prlmlng a follow-up quesLlon. 1hese quesLlons are noL scaled
and Lhus, ln LoLal, Lhere are 122 scaled quesLlons/lndlcaLors.

D|scuss|on regard|ng preparat|on and presentat|on of the survey |nstrument
ln order Lo lmplemenL and use Lhe composlLe lndlcaLors, allowlng for cross-counLry comparlsons,
daLa perLalnlng Lo each of Lhe 128 lndlcaLors musL be gaLhered. Whlle lL may be Lhe case LhaL many
of Lhe lndlcaLor quesLlons can be answered Lhrough Lhe use of publlcly avallable lnformaLlon abouL
each counLry, lL ls our oplnlon LhaL Lhe ma[orlLy of Lhe lndlcaLor quesLlons wlll need Lo be answered
dlrecLly by lnLernal conLrol/audlL professlonals and/or Lop managemenL ln Lhe federal
mlnlsLrles/deparLmenLs/cenLral admlnlsLraLlon bodles of CLCu counLrles. 1hls secLlon provldes some
31

dlscusslon regardlng posslble ways go abouL preparlng and presenLlng Lhe lndlcaLor survey Lo such
lndlvlduals. Speclflcally, Lhere are Lwo lssues ln mlnd. llrsL, Lhe sheer lengLh of Lhe lndlcaLor survey
may pose an lssue. ubllc secLor professlonals are Llme-consLralned and conslderaLlon musL be glven
Lo how besL Lo presenL Lhe survey Lo maxlmlse Lhelr Llme and allow for a hlgh response raLe. lL ls for
Lhls reason LhaL, lf lengLh ls consldered a poLenLlal problem, we propose LhaL Lhe survey glve prlorlLy
Lo dlmenslons 1-13. We belleve Lhese dlmenslons capLure Lhe core lssues relaLlng Lo lnLernal conLrol
and lnLernal audlL. Moreover, dlmenslon 13 ls besL dlrecLed aL Lhe Supreme AudlL lnsLlLuLlon and
Lhls furLher reduces Lhe number or quesLlons almed aL Lhe federal MlnlsLry/ueparLmenL level
professlonals Lo 103 (98 of whlch are scaled). ulmenslons 14-18, whlle also relevanL and gaLher
hlghly lnLeresLlng lnformaLlon, whlch can furLher lllumlnaLe cross-counLry dlfferences, Lhey are
almed aL second order aspecLs of lnLernal conLrol.
1he second concern ls regardlng Lhe percepLlon of Lhe survey by publlc secLor professlonals.
1hey are aware of ln1CSAl and CCSC and wlll llkely be more recepLlve Lo Lhe survey lf Lhey can
clearly see how lL ls llnked Lo Lhese sLandards and/or how lL may even help Lhem evaluaLe how well
Lhey are adherlng Lo Lhe lnLernaLlonal sLandards. As lL sLands now Lhe survey ls organlsed by Lhe
dlmenslons and, whlle very LlghLly allgned and based on ln1CSAl and CCSC, Lhe llnk beLween Lhem
and Lhe lnLernaLlonal sLandards ls noL lmmedlaLe. 1herefore, some re-arrangemenL of layouL may be
useful. We suggesL Lhe followlng: wlLhln dlmenslons 1-13, wlLh Lhe excepLlon of dlmenslon 13 whlch
ls almed aL Lhe Supreme AudlL lnsLlLuLlon, each of Lhe quesLlons/lndlcaLors can be caLegorlsed lnLo
one of Lhe flve ln1CSAl componenLs of lnLernal conLrol (noLe LhaL such a caLegorlsaLlon has already
been underLaken as parL of Lhe lndlcaLor developmenL process). 1hls way, Lhe llnk beLween Lhe
quesLlons/lndlcaLors and Lhe lnLernaLlonal sLandards wlll be apparenLly obvlous Lo Lhe reader. Whlle
Lhese flve componenLs are noL dlmenslons, Lhls ls lmmaLerlal for Lhe lndlvldual compleLlng Lhe
survey. When daLa on each of Lhe quesLlons/lndlcaLors ls gaLhered, Lhe quesLlons/lndlcaLors and
Lhelr answers can be re-sorLed lnLo Lhe dlmenslons from whlch Lhey belong. We feel Lhls approach
Lo presenLlng Lhe survey wlll be effecLlve ln garnerlng a poslLlve recepLlon and hlgh response raLe.

"++3)+2-7&% 2%* .#2(7%+ &A 7%*7#2-&3.

Lach dlmenslon sLands on lLs own so LhaL lndlcaLors wlLhln a dlmenslon can be aggregaLed. 1he
dlmenslons are noL of an evaluaLlve naLure, and hence do noL represenL 'beLLer' or 'worse' pracLlces.
lnsLead, each dlmenslon has lLs own explanaLlon ln Lerms of scallng Lyplcally represenLlng a scale
from 'less' Lo 'more'. lor lnsLance, Lhe dlmenslon 'lovolvemeot of top moooqemeot lo coottol
32

octlvltles' has a scale from no lnvolvemenL Lo very exLenslve lnvolvemenL. 1hls ls furLher explalned ln
SecLlon 4 - ulmeosloos ooJ loJlcotots.
1herefore, lndlvldual lndlcaLors are aggregaLed per dlmenslon. AggregaLlon follows
normallsaLlon of lndlcaLor responses, slnce Lhere ls a range of scales dependlng on each lndlcaLor.
Powever, all scales follow Lhe same prlnclples from 'less' Lo 'more' and only dlffer ln how many
polnLs Lhere are on Lhe same scale. 1he Lable below shows how scales are normallsed Lo a 10-polnL
scale. 1he lefL of each column shows poLenLlal scores for an lndlcaLor and on Lhe rlghL Lhe
normallsed 10-polnL score (from 1 Lo 10 wlLh 0 represenLlng 'none'). 1he followlng graph shows Lhe
daLa polnLs per response on a 10-polnL scale vlsuallsed.
1ab|e 3: Sca|e norma||sat|on
!! # $ % & '()*+,
10 !5 6 !5
4 !5 J !5
2 !5
1 !5
9 6
5 78$
8 7
J 98&
2 '89 7 9
4 '89
1 &
6 '
2 & 5 & J &
1 $8$
0 5
4 %
2 $8$
J $
1 #8&
2 #
1 !89
0 5 1 !
0 5 0 5
0 5 0 5
5cote*1 5cote*1.67 5cote*2.5 5cote*J.J 5cote*5 5cote*10

33

I|gure 2: kesponse data po|nts on 10-po|nt sca|e

lL was ensured LhaL all responses Lo Lhe lndlcaLors reflecL Lhe respecLlve dlmenslonal scale from
'none' (0) Lo 'mosL' (10). lor lnsLance, all responses ln Lhe dlmenslon 'lovolvemeot of top
moooqemeot lo coottol octlvltles' reflecL LhaL recelvlng a hlgher score (wheLher LhaL may be a 'yes'
and hence a 1*10=10 score, or a 4/4 => 4*3.3=10 score) means LhaL Lop managemenL ls lndeed
more lnvolved ln conLrol acLlvlLles. All lndlcaLors per dlmenslon Lherefore represenL dlfferenL aspecLs
of LhaL dlmenslon and measure along Lhe same scale regardless of number of responses for each
lndlcaLor.
Clven Lhe composlLe naLure of some dlmenslons and lndlcaLors, noL all lndlcaLors are scored on
Lhls score. 1o allow for dlfferlng sysLems Lo co-exlsL, buL only be counLed Lowards Lhe overall
dlmenslon score, lL needed Lo be ensured LhaL Lhere are some lndlcaLors LhaL funcLlon as Lrlggers Lo
oLher lndlcaLors. ln addlLlon, Lhere are a number of lndlcaLors LhaL are LreaLed as addlLlonal
quallLaLlve lnformaLlon, wlLhouL any scorlng. 1hese Lwo Lypes are furLher explalned below:
1tlqqet poestloos: Lhls Lype of quesLlon recelves no score. uependlng on Lhe response, a subseL
of new lndlcaLors should be asked LhaL ln Lurn recelve scorlng. lor lnsLance, a Lrlgger quesLlon
Lyplcally has Lwo answer posslblllLles: yes and no. upon answerlng 'yes' a subseL of new quesLlons
may be asked, whereas upon answerlng 'no' a subseL of dlfferenL quesLlons follow. Pence, a Lrlgger
quesLlon requlres follow-up quesLlons Lo shed furLher llghL on an lssue. A Lrlgger quesLlon can also
recelve scorlng (for lnsLance, lf answered 'no', lL may recelve '0' lf no follow-up quesLlons follow).
Powever, Lhls depends on Lhe quesLlon as well as lmporLance Lhereof vls-a-vls Lhe overall dlmenslon.
A Lrlgger quesLlon LhaL recelves no scorlng ls marked as 'Lrlgger' ln Lhe dlmenslons (see Appendlx 3),
whereas one LhaL recelves a score ls LreaLed as a normal lndlcaLor. An example ls Lhe varlaLlon of
scope ln lnLernal audlLs. lf Lhe scope does noL vary, lL wlll noL affecL Lhe scorlng ln Lhe dlmenslon of
0
1
2
3
4
3
6
7
8
9
10
10
7
3
4
3
yes/no
34

rlgour of lnLernal audlL (LhaL ls, no varlaLlon ln scope does noL mean less rlgour of lnLernal audlL).
Powever, lf Lhe scope does vary lL has Lo be ensured LhaL lL varles senslbly. 1haL ls why Lhe quesLlon
follows wheLher Lhose conLrols LhaL address hlgher prlorlLy rlsks are evaluaLed more ofLen. 1hen, lf
Lhls occurs, a hlgher score ls glven, resulLlng ln a more rlgorous lnLernal audlL.
Opeo poestloos: open quesLlons gaLher addlLlonal quallLaLlve lnformaLlon LhaL has no dlrecL
lmpacL on Lhe scorlng of a dlmenslon. Whlle Lhe lnformaLlon lLself may be cruclal, dlfferences have
no dlrecL lmpacL on 'more' or 'less' of a glven dlmenslon. An example ls capLurlng Lhe managemenL's
declslon crlLerla Lo ensure LhaL necessary resources are allocaLed Lo Lhe lnLernal conLrol sysLem.
CuallLaLlve lnformaLlon may be clusLered LogeLher lnLo several caLegorles upon conducLlng a survey,
dependlng on Lhe varleLy of responses, and could Lhen be used for furLher sLaLlsLlcal LesLs and
analyses.
1he suggesLed aggregaLlon meLhod for each dlmenslon ls a slmple average of all lndlcaLors,
whlch means LhaL an aggregaLed score for a dlmenslon conslsLs of Lhe sum of all lndlvldual lndlcaLor
scores wlLhln LhaL dlmenslon dlvlded by Lhe LoLal number of lndlcaLors wlLhln LhaL dlmenslon. lf a
Lrlgger or non-scored quesLlons form parL of a dlmenslon, Lhe LoLal sum of scores should be dlvlded
only by Lhose quesLlons LhaL were requlred Lo answer.
:;+(<,/= >?(/2@?)2 ' A /;./2. )B ?2B)*(+.?)2 @4@./(@ C.?,?@+.?)2
1oLal number of lndlcaLors ln Lhe dlmenslon: 9
number of subseLs wlLh follow-up lndlcaLors: 2
SubseL 1, number of lndlcaLors: 2
SubseL 2, number of lndlcaLors: 1
1he example above shows LhaL Lhe LoLal number of lndlcaLors depends on Lhe response Lo Lwo
lndlcaLors ('Lrlgger quesLlons'). 1hls ls because Lwo lndlcaLors Lrlgger a new subseL of 2 lndlcaLors
and 1 lndlcaLor respecLlvely. 8oLh Lrlgger quesLlons requlre a 'yes' for Lhe subseL of lndlcaLors Lo be
requlred Lo be fllled ln as well. Pence, lf boLh Lrlgger quesLlons were answered wlLh 'yes', Lhe LoLal
sum of scores wlll have Lo be dlvlded by 9. lf only Lrlgger quesLlon 1 geLs a 'yes', Lhe LoLal sum of
scores needs Lo be dlvlded by 8 (9 mlnus 1), and followlng Lhe same loglc, lf only Lrlgger quesLlon 2
geLs a 'yes', Lhe denomlnaLor ls 7 (LoLal overall number of lndlcaLor mlnus number of lndlcaLors ln
subseL 1). Pence, lf boLh Lrlgger quesLlons recelve a 'no' Lhe LoLal number of lndlcaLors ls 6.
1hls baslc way of aggregaLlon and equal welghLlng ls based on Lhe premlse LhaL lndlcaLors ln
each dlmenslon are equally lmporLanL. A composlLe sLrucLure (as ln Lhe example above) was
adopLed where necessary, based on Lhe research and naLlonal pracLlces ldenLlfled. lL ls worLhwhlle
33

Lo menLlon LhaL Lhls meLhodology oughL Lo be closely monlLored whlle gaLherlng more feedback
from publlc professlonals and when plloLlng Lhe survey, allowlng for poLenLlal revlslon ln Lerms of
aggregaLlon and welghLlng. ln parLlcular, lL ls recommended Lo conducL sLaLlsLlcal analyses Lo deLecL
correlaLlons beLween lndlcaLors Lo ldenLlfy Lrends and revlse welghLlng.

K03:); 3)#7=7)%-.

ln Lerms of conducLlng Lhe survey, Lhere are a number of ways of reachlng ouL Lo CLCu member
counLrles and gaLherlng Lhe relevanL responses. 1he followlng provldes a brlef dlscusslon of Lhe
posslble LargeL reclplenLs and a recommendaLlon:
Mlolstty of lloooce/1teosoty: sendlng Lhe survey Lo only Lhe MlnlsLry of llnance has Lhe
advanLage of mlnlmlslng Lhe number of overall reclplenLs. Clven Lhe cenLral role of Lhe MlnlsLry of
llnance ln many CLCu member counLrles ln Lerms of responslblllLy of Lhe budgeL and ofLen also
lnLernal flnanclal conLrol, sendlng Lhe survey Lo Lhls MlnlsLry would be approprlaLe and acknowledge
Lhls role and responslblllLy. Sendlng Lhe survey Lo Lhe MlnlsLry of llnance would assume LhaL Lhe
MlnlsLry ls aware of all pracLlces of lnLernal conLrol and lnLernal audlL noL only ln lLs own MlnlsLry
buL across and wlLhln all MlnlsLrles ln a glven counLry. 1hls ls hlghly unllkely and would Lherefore
severely undermlne Lhe quallLy and deLall of responses Lo all dlmenslons and lndlcaLors and ls
Lherefore noL recommended.
All Mlolsttles/uepottmeots: sendlng Lhe survey Lo all mlnlsLrles lncreases Lhe number of
reclplenLs dramaLlcally. Supposlng Lhe survey ls senL Lo all 34 CLCu member counLrles, wlLh each
counLry possesslng a mlnlmum of 13 MlnlsLrles, Lhe survey wlll have Lo be senL Lo 310 mlnlsLrles.
Whlle Lhls ensures Lo capLure very accuraLe and deLalled daLa, lL has Lhe dlsadvanLage of a very Llme
consumlng process LhaL ls very llkely Lo requlre follow-up.
5omple of lmpottoot Mlolsttles/uepottmeots: lL ls recommended LhaL Lhe survey be senL Lo Lhe
followlng sample of MlnlsLrles ln all 34 CLCu member counLrles. 1he relevancy of Lhls pro[ecL lles ln
Lhe conLexL of wlder publlc flnanclal managemenL and publlc governance. ulLlmaLely, Lhe cruclal
quesLlon ls how lnLernal conLrol affecLs Lhls and how lL can be ensured LhaL publlc spendlng ls
accounLable and spenL efflclenLly and effecLlvely. 1herefore, only Lhose mlnlsLrles LhaL cover Lhe vasL
ma[orlLy of Lhe naLlonal budgeL are cruclal parLs ln Lhls exerclse, and Lhose mlnlsLrles LhaL have only
a small fracLlon of Lhe overall budgeL can be lgnored for Lhe sake of daLa collecLlon as well as Lhe
quesLlon and conLexL above. lL ls Lherefore suggesLed Lo llmlL Lhe reclplenLs Lo a sample LhaL conslsLs
36

of Lhe budgeL-heavy mlnlsLrles. lL ls recommended Lo deLermlne Lhls sample per counLry Lo allow for
aL leasL elghLy per cenL of naLlonal budgeL covered. 1he average number of reclplenLs per counLry
would Lhen be ln Lhe range of beLween roughly four Lo seven MlnlsLrles/ueparLmenLs. lor lnsLance,
ln Cermany Lhe slx budgeL-heavlesL mlnlsLrles are esLlmaLed Lo cover 82 of Lhe naLlonal budgeL ln
2012 (8undesflnanzmlnlsLerlum, 2011, p. 4).

37

0
1
2
3
4
3
6
7
8
9
10
11
12
13
14
13
16
17
0
9
.

A
p
p
r
o
p
r
l
a
L
e
n
e
s
s

o
f

r
e
s
p
o
n
s
e
s

L
o

r
l
s
k

(
C
o
n
g
r
u
e
n
c
e

o
f

c
o
n
L
r
o
l

a
c
u
v
l
u
e
s

a
n
d

r
l
s
k
s
)

0
9
.

A
p
p
r
o
p
r
l
a
L
e
n
e
s
s

o
f

r
e
s
p
o
n
s
e
s

L
o

r
l
s
k

(
A
d
a
p
L
a
b
l
l
l
L
y

o
f

r
l
s
k

a
s
s
e
s
s
m
e
n
L
)

0
3
.

S
L
a

a
w
a
r
e
n
e
s
s

o
f

l
C

1
7
.

1
r
a
n
s
p
a
r
e
n
c
y

L
o

L
h
e

p
u
b
l
l
c

1
8
.

S
o
u
n
d
n
e
s
s

a
n
d

L
r
a
n
s
p
a
r
e
n
c
y

o
f

p
r
o
c
u
r
e
m
e
n
L

p
r
a
c
u
c
e
s

0
7
.

S
L
a
n
d
a
r
d
l
s
a
u
o
n

a
n
d

e
x
L
e
n
L

o
f

c
o
m
m
u
n
l
c
a
u
o
n

0
3
.

l
n
v
o
l
v
e
m
e
n
L

o
f

L
o
p

m
a
n
a
g
e
m
e
n
L

l
n

c
o
n
L
r
o
l

a
c
u
v
l
u
e
s

1
3
.

l
n
v
o
l
v
e
m
e
n
L

o
f

S
A
l

l
n

l
C

1
4
.

u
u
l
l
s
a
u
o
n

o
f

S
A
l

e
v
a
l
u
a
u
o
n
s

1
3
.

S
L
a
n
d
a
r
d
l
s
a
u
o
n

o
f

l
C

a
c
r
o
s
s

g
o
v
e
r
n
m
e
n
L

1
2
.

8
l
g
o
u
r

o
f

l
n
L
e
r
n
a
l

a
u
d
l
L

1
6
.

L
x
L
e
n
L

o
f

c
e
n
L
r
a
l
l
s
e
d

c
o
o
r
d
l
n
a
u
o
n

(
v
s
.

d
e
c
e
n
L
r
a
l
l
s
a
u
o
n
)

1
0
.

8
e
s
p
o
n
s
l
v
e
n
e
s
s

L
o

l
n
L
e
r
n
a
l

c
o
n
L
r
o
l

d
e
c
l
e
n
c
l
e
s

0
2
.

L
x
L
e
n
s
l
v
e
n
e
s
s

o
f

l
n
L
e
r
n
a
l

c
o
n
L
r
o
l

a
c
u
v
l
u
e
s

1
1
.

r
o
c
e
d
u
r
a
l

l
n
L
e
g
r
l
L
y

o
f

l
n
L
e
r
n
a
l

a
u
d
l
L

0
1
.

L
x
L
e
n
L

o
f

l
C

p
r
o
c
e
d
u
r
e
s
'

f
o
r
m
a
l
l
s
a
u
o
n

0
4
.

A
p
p
r
o
p
r
l
a
L
e

a
n
d

a
c
h
l
e
v
a
b
l
e

s
e
m
n
g

o
f

L
a
r
g
e
L
s

a
n
d

o
b
[
e
c
u
v
e
s

0
6
.

L
x
L
e
n
L

o
f

l
n
f
o
r
m
a
u
o
n

S
y
s
L
e
m
s

u
u
l
l
s
a
u
o
n

0
9
.

A
p
p
r
o
p
r
l
a
L
e
n
e
s
s

o
f

r
e
s
p
o
n
s
e
s

L
o

r
l
s
k

(
S
y
s
L
e
m
a
u
c

r
e
s
p
o
n
s
e
s

L
o

r
l
s
k
s
)

0
8
.

8
l
g
o
u
r

o
f

r
l
s
k

a
s
s
e
s
s
m
e
n
L

1,0 11-Scale 2,1,0 3,2,1,0 4,3,2,1,0 none Lrlgger
L? B7,)%.7&%. 2%* 7%*7#2-&3.
1he followlng provldes a compleLe overvlew of all 18 dlmenslons LhaL were developed as parL of Lhls
pro[ecL. Lach dlmenslon holds a number of lndlcaLors.
I|gure 3: D|mens|ons by number of |nd|cators and type of sca||ng

1oLal number of lndlcaLors: 128
38

I|gure 4: Number and percentage of |nd|cators by type of sca||ng

I|gure S: Number of |nd|cators by reference category

1he graphs above and below show Lhe number of lndlcaLors grouped by reference caLegorles.
1hese caLegorles were devlsed prlor Lo Lhe developmenL of Lhe dlmenslons and refer Lo Lhe flve
CCSC/ln1CSAl componenLs of lnLernal conLrol (conLrol acLlvlLles, conLrol envlronmenL, lnfo and
communlcaLlon, monlLorlng, and rlsk assessmenL). 1he oLher reference caLegorles are
compllmenLary ones LhaL capLure processes LhaL Lhe CCSC/ln1CSAl componenLs do noL encompass
(e.g. Lhe lnvolvemenL of Lhe Supreme AudlL lnsLlLuLlon ln lnLernal conLrol).

21, 16
4, 3
61, 48
20, 16
16, 12
3, 4
1, 1
1,0
11-Scale
2,1,0
3,2,1,0
4,3,2,1,0
none
Lrlgger
1
16
13
14
2
20
2
4
32
12
10
Comprehenslveness and 1ransparency
ConLrol Acuvlues
ConLrol LnvlronmenL
lnfo and Communlcauon
Law
MonlLorlng
neLwork
rocuremenL
8lsk AssessmenL
SAl
MlnlsLry/ueparLmenL
39

I|gure 6: D|mens|ons by number of |nd|cators and reference category

1he followlng provldes a brlef descrlpLlon of each dlmenslon, Lhe relevancy of each and whaL a
hlgh score ln a parLlcular dlmenslon means.

1
1
3
4
1
2
2
1
3
2
2
3
3
2
3
9
2 2
4
1
1
2
1
6
6
7
2
4
3
1
3
10
13
6
6
0 1 2 3 4 3 6 7 8 9 10 11 12 13 14 13 16 17
09. ApproprlaLeness of responses Lo rlsk
03. SLa awareness of lC
17. 1ransparency Lo Lhe publlc
18. Soundness and Lransparency of procuremenL
03. lnvolvemenL of Lop managemenL ln conLrol
07. SLandardlsauon and exLenL of communlcauon
13. lnvolvemenL of SAl ln lC
14. uullsauon of SAl evaluauons
13. SLandardlsauon of lC across governmenL
12. 8lgour of lnLernal audlL
16. LxLenL of cenLrallsed coordlnauon (vs.
02. LxLenslveness of lnLernal conLrol acuvlues
10. 8esponslveness Lo lnLernal conLrol declencles
11. rocedural lnLegrlLy of lnLernal audlL
01. LxLenL of lC procedures' formallsauon
04. ApproprlaLe and achlevable semng of LargeLs
06. LxLenL of lnformauon SysLems uullsauon
08. 8lgour of rlsk assessmenL
Comprehenslveness and 1ransparency ConLrol Acuvlues
ConLrol LnvlronmenL lnfo and Communlcauon
Law MlnlsLry/ueparLmenL
MonlLorlng neLwork
rocuremenL 8lsk AssessmenL
SAl
40

01. Lxtent of |nterna| contro| procedures' forma||sat|on
1hls dlmenslon capLures Lhe exLenL Lo whlch lnLernal conLrol procedures are formally enLrenched
wlLhln a mlnlsLry. Such procedures lnclude for lnsLance formal deflnlLlons, sLaLemenLs ouLllnlng sLaff
responslblllLles, and pollcles of conLrol acLlvlLles. lormallsaLlon allows for clarlLy and a polnL of
reference ln Lhe conducL of lnLernal conLrol procedures.
A hlgh score ln Lhls dlmenslon lndlcaLes a hlgh degree of deflned proLocols, procedures, and
deslgnaLed responslblllLles.
02. Lxtens|veness of |nterna| contro| act|v|t|es
lnLernal conLrol acLlvlLles are almed aL prevenLlng Lhe emergence of poLenLlal rlsks and mlLlgaLlng
currenLly ldenLlfled rlsks. 1hey lnclude sLaff appralsals, redundancy checks, value-for-money
assessmenLs, sLaff Lralnlng and clearly deflned sLaff responslblllLles.
A hlgh score ln Lhls dlmenslon lndlcaLes LhaL lnLernal conLrol acLlvlLles are more exLenslve.
03. Invo|vement of top management |n contro| act|v|t|es
1op managemenL ls ulLlmaLely responslble for Lhe operaLlons of a mlnlsLry and Lhey seL Lhe Lone of
Lhe organlsaLlon as well as lLs sLraLeglc dlrecLlon. lL ls Lherefore lmporLanL Lo look aL Lhelr
lnvolvemenL ln conLrol acLlvlLles, whlch ls capLured ln Lhls dlmenslon.
A hlgh score lndlcaLes LhaL Lop managemenL ls more lnvolved ln conLrol acLlvlLles and lnformed
abouL achlevable LargeLs. 1hls means LhaL a mlnlsLry can be more responslve Lo rlsks.
04. Appropr|ate and ach|evab|e sett|ng of targets and ob[ect|ves
lf approprlaLe and achlevable LargeLs are noL seL, a mlnlsLry wlll be aL rlsk of noL achlevlng lLs
ob[ecLlves. "lnLernal conLrol ls deslgned Lo provlde reasonable assurance LhaL Lhe enLlLy's general
ob[ecLlves are belng achleved. 1herefore clear ob[ecLlves are a prerequlslLe for an effecLlve lnLernal
conLrol process" (ln1CSAl, 2004, p.13). 1hls dlmenslon capLures Lhe exLenL Lo whlch LargeLs are
reallsLlcally seL and how closely allgned Lhey are wlLh Lhe overall ob[ecLlves. lL also Lakes lnLo
accounL Lhe lmpacL of rlsks and lnLernal conLrol on Lhe seLLlng of ob[ecLlves.
A hlgh score ln Lhls dlmenslon lndlcaLes LhaL ob[ecLlves are seL approprlaLely Lo Lhe rlsk
envlronmenL and LargeLs are quanLlflable and allgned wlLh ob[ecLlves. lurLhermore, Lhere are
regular performance revlews Lo assess Lhe progress Lowards Lhe achlevemenL of LargeLs.
41

0S. Staff awareness of |nterna| contro|
1hls dlmenslon capLures sLaff knowledge of lnLernal conLrol and Lhe esLabllshmenL of an
envlronmenL conduclve Lo effecLlve lnLernal conLrol. SLaff awareness ls key Lo well-funcLlonlng
conLrol acLlvlLles, slnce Lhey rely on employees Lo be carrled ouL.
A hlgh score ln Lhls dlmenslon lndlcaLes regular Lralnlng on eLhlcs, a formal code of conducL and
lnformaLlon dlssemlnaLlon of lnLernal conLrol procedures.
06. Lxtent of Informat|on Systems ut|||sat|on
1he uLlllsaLlon of lnformaLlon sysLems ls an lnLegral parL of provldlng and accesslng lnformaLlon and
communlcaLlon. "LffecLlve lnformaLlon and communlcaLlon ls vlLal for an enLlLy Lo run and conLrol lLs
operaLlons. LnLlLy managemenL needs access Lo relevanL, compleLe, rellable, correcL and Llmely
communlcaLlon relaLed Lo lnLernal as well as exLernal evenLs" (ln1CSAl, 2004, p.13). 1hls dlmenslon
capLures Lhe usage of lnformaLlon communlcaLlon Lechnologles, boLh general and flnance-speclflc. ln
parLlcular lL looks aL Lhe exlsLence, comprehenslveness and responslveness of managemenL
lnformaLlon sysLems Lo record and access daLa as well as sLaff's undersLandlng of Lhe role of exlsLlng
sysLems.
A hlgh score ln Lhls dlmenslon lndlcaLes easy access Lo Llmely and accuraLe flnanclal and non-
flnanclal daLa Lhrough a managemenL lnformaLlon sysLem.
07. Standard|sat|on and extent of commun|cat|on
Clear and sLandardlsed communlcaLlon beLween managemenL and sLaff ls essenLlal for sLaff Lo be
aware of Lhe enLlLy's ob[ecLlves and Lo creaLe space for a dlalogue on poLenLlal rlsks Lo achlevlng
Lhese ob[ecLlves. 1hls dlmenslon capLures Lhe exLenL of formallsed communlcaLlon channels and
communlcaLlon speclflcally relaLed Lo ob[ecLlves and lnLernal conLrol effecLlveness.
A hlgh score ln Lhls dlmenslon lndlcaLes regular usage of more formal communlcaLlon channels,
Lhe effecLlve communlcaLlon of ob[ecLlves Lo sLaff as well as opporLunlLles for employees Lo provlde
feedback on lnLernal conLrol lssues.
08. k|gour of r|sk assessment
1hls dlmenslon capLures Lhe followlng aspecLs of rlsk assessmenL: Lhe comprehenslveness of rlsk
deflnlLlon, Lhe levels and frequency aL whlch rlsk assessmenLs are underLaken, Lhe degree of
formallLy and deLall of procedures, as well as Lhe lncluslon of lnfluenclng facLors. A more rlgorous
42

rlsk assessmenL allows for a beLLer ldenLlflcaLlon of rlsks. As conLrols are based on rlsks, lL ls
Lherefore key LhaL rlsks are properly ldenLlfled.
A hlgh score ln Lhls dlmenslon lndlcaLes more comprehenslve rlsk assessmenLs ln Lhe aspecLs
menLloned above.
09. Appropr|ateness of responses to r|sk
Cnce rlsks are ldenLlfled, responses are deLermlned (Lransfer, LoleraLe, LreaL, LermlnaLe), whlch ln
Lurn lnform whaL conLrol acLlvlLles should be. lf responses Lo rlsk are noL approprlaLe, Lhls wlll lead
Lo a deflclenL lnLernal conLrol sysLem.
1here are Lhree aspecLs of approprlaLe responses Lo rlsks:
1. Pow adapLable rlsk assessmenL ls Lo changes ln lnLernal and exLernal facLors. A more
adapLable rlsk assessmenL leads Lo a more effecLlve and Llmely ldenLlflcaLlon of rlsks,
Lherefore maklng lL more approprlaLe.
2. 1he exLenL of sysLemaLlc responses Lo ldenLlfled rlsks. More sysLemaLlc responses Lo rlsks
resulL ln a more approprlaLe rlsk managemenL. 1hls means every rlsk ls dealL wlLh followlng
deflned proLocols.
3. 1he congruence of conLrol acLlvlLles and rlsks. lf conLrol acLlvlLles are closely allgned wlLh
rlsks, Lhls lmplles LhaL rlsks are dealL wlLh ln a more approprlaLe manner.
A hlgh score ln Lhls dlmenslon lndlcaLes a more approprlaLe rlsk assessmenL glven Lhe conLexL,
and greaLer Lhoroughness and meLhodlcal rlsk responses. A hlgh score also means LhaL prevenLlve
measures are congruenL wlLh poLenLlal rlsks.
10. kespons|veness to |nterna| contro| def|c|enc|es
SwlfL and approprlaLe responses Lo deflclencles ln lnLernal conLrol are essenLlal Lo ensure LhaL rlsks
are addressed ln an effecLlve and Llmely manner. 1hls dlmenslon capLures Lhe reporLlng of problems,
asslgnmenL of responslblllLles, proLocols Lo deLermlne slgnlflcanL deflclencles, Lhe effecLlveness of
correcLlve acLlon, and follow-up procedures.
A hlgh score ln Lhls dlmenslon lndlcaLes swlfL and approprlaLe response Lo lnLernal conLrol
deflclencles.

43

11. rocedura| |ntegr|ty of |nterna| aud|t
1hls dlmenslon lncludes lnLernal audlL reporLlng, Lhe composlLlon of Lhe lnLernal audlL body, Lhe
formallLy of audlL procedures and how well lnLernal conLrol ob[ecLlves are deflned. lnLernal audlL ls
plvoLal as lL assesses Lhe effecLlveness of lnLernal conLrol procedures.
A hlgh score lndlcaLes a clear deflnlLlon of lnLernal conLrol ob[ecLlves, formal audlL procedures
and lndependence of Lhe lnLernal audlL body.
12. k|gour of |nterna| aud|t
1hls dlmenslon capLures Lhe rlgour of Lhe lnLernal audlL process and how enLrenched lL ls wlLhln a
mlnlsLry. lnLernal audlL assesses Lhe effecLlveness of lnLernal conLrol.
A hlgh score lndlcaLes a hlgher frequency and scope of lnLernal audlL, a greaL exLenL of
evaluaLlons of Lhe effecLlveness of lnLernal audlL, as well as full documenLaLlon of conLrol acLlvlLles.
13. Invo|vement of SAI |n |nterna| contro|
Slnce Lhe SAl can evaluaLe a mlnlsLry's lnLernal conLrol, lL mlghL have a dlrecL lmpacL on Lhe
mlnlsLry's lnLernal conLrol sysLem. 1hls dlmenslon Lherefore capLures whaL Lhe SAl evaluaLes and
how ofLen Lhls occurs.
A hlgh score lndlcaLes greaLer frequency and scope of SAl evaluaLlons and Lherefore a hlgher
lnvolvemenL and lmpacL on Lhe mlnlsLry's lnLernal conLrol.
14. Ut|||sat|on of SAI eva|uat|ons
1hls dlmenslon capLures Lo whaL exLenL SAl evaluaLlons are shared and used by Lhe mlnlsLrles Lo
beLLer lnform Lhelr lnLernal conLrol conducL. ln addlLlon, lL lncludes Lhe accesslblllLy of SAl
evaluaLlons by Lhe publlc and Lhe accounLablllLy of llne mlnlsLrles' managemenL for legal and
regulaLory compllance.
A hlgh score lndlcaLes LhaL evaluaLlons are always shared wlLh Lhe relevanL mlnlsLry and LhaL
formallsed procedures are ln place Lo address ldenLlfled deflclencles.
1S. Standard|sat|on of |nterna| contro| across government
1hls dlmenslon looks aL how enLrenched lnLernal conLrol ls ln Lhe law and lf Lhere are governmenL-
wlde frameworks and sLandards used.
44

A hlgh score ln Lhls dlmenslon lndlcaLes a consLlLuLlonal foundaLlon and Lhe use of governmenL-
wlde frameworks and sLandards.
16. Lxtent of centra||sed coord|nat|on (vs. decentra||sat|on)
1hls dlmenslon capLures Lhe exLenL of cenLrallsed coordlnaLlon wlLh respecL Lo Lhe lnLernal conLrol
sysLem. CenLrallsed coordlnaLlon lmplles Lhe presence of a cenLral body worklng Lo communlcaLe
and supporL Lhe mlnlsLrles wlLh Lhelr lnLernal conLrol pracLlces. Moreover lL enLalls Lhe exlsLence of a
neLwork Lo share besL pracLlces amongsL Lhose lnvolved ln lnLernal conLrol across Lhe governmenL.
A hlgh score ln Lhls dlmenslon lndlcaLes a sLrong lnvolvemenL of Lhe mlnlsLry of flnance, Lhe
exlsLence of a cenLral harmonlsaLlon unlL, a plaLform for besL pracLlces and reporLlng Lo Lhe
leglslaLure.
17. 1ransparency to the pub||c
1hls dlmenslon capLures Lhe exLenL and frequency of dlsclosure of flnanclal and non-flnanclal reporLs
Lo Lhe publlc and how well Lhe publlc can access Lhese reporLs. 1ransparency Lo Lhe publlc ls relevanL
for lnLernal conLrol as concerns ralsed by Lhe publlc may lndlcaLe necessary changes Lo lnLernal
conLrol procedures (lMl, 2007, p. 8).
A hlgh score ln Lhls dlmenslon lndlcaLes dlsclosure of annual flnanclal reporLs, accuraLe and
Llmely non-flnanclal reporLs and easy access Lo Lhese reporLs by Lhe general publlc.
18. Soundness and transparency of procurement pract|ces
CovernmenL funcLlons may ofLen be conLracLed Lo an exLernal parLy and slgnlflcanL publlc spendlng
Lakes place Lhrough Lhe publlc procuremenL sysLem. MlnlsLrles need Lo ensure Lhe soundness and
Lransparency of procuremenL pracLlces. 1hls ensures Lhe Lracklng of publlc money and Lhe
achlevemenL of overall ob[ecLlves, and Lherefore concerns lnLernal conLrol. 1hls dlmenslon lncludes
Lhe exLenL of Lransparency of procuremenL pracLlces, wheLher Lhere ls a procuremenL complalnL
mechanlsm and value for money assessmenLs ln procuremenL.
A hlgh score ln Lhls dlmenslon lndlcaLes LhaL Lhere ls open compeLlLlon for conLracL awards, a
procuremenL complalnLs mechanlsm exlsLs and Lhere are value-for-money assessmenLs carrled ouL.

43

892,=() &A 7%*7#2-&3. 7% &%) *7,)%.7&%

8elow ls an example of Lhe lndlcaLors of one of Lhe 18 dlmenslons as shown above. 1he dlmenslon ls
09. Apptoptloteoess of tespooses to tlsk. 1he followlng shows Lhe compleLe llsL of lndlcaLors ln Lhls
dlmenslon lncludlng responses and explanaLlons. All oLher lndlcaLors are lncluded ln Appendlx 3 aL
Lhe end of Lhls reporL.

1ab|e 4: Ind|cators - appropr|ateness of responses to r|sk
Ind|cator and kesponse Lxp|anat|on
now often |s the r|sk assessment procedure
changed to ref|ect changes |n the bus|ness
env|ronment?
2: regularly (once every Lwo years), 1:
someLlmes (less Lhan once every Lwo years),
0: lnfrequenLly (less Lhan once every flve
years)
8lsk assessmenL ls an on-golng process and ls sub[ecL Lo changes
ln Lhe envlronmenL. Changes ln Lhe exLernal and lnLernal conLexL
may lnduce changes ln rlsk crlLerla and suggesL alLeraLlons ln Lhe
procedures for rlsk assessmenL. ManagemenL needs Lo ensure
LhaL Lhelr conLrol sysLem conLlnues Lo be relevanL and able Lo
address new rlsks (CCSC, 1994, p. 69). 1he more adapLlve rlsk
assessmenL procedures are Lo changes ln boLh exLernal and
lnLernal changes, Lhe more approprlaLe responses Lo rlsks are.
Are the resu|ts from mon|tor|ng and rev|ew
procedures used to |mprove r|sk
assessment?
2: yes, lnformaLlon gaLhered from monlLorlng
and revlew ls used Lo lmprove rlsk
assessmenL 1: yes, lnformaLlon gaLhered ls
made avallable Lo Lhose conducLlng rlsk
assessmenL (buL noL necessarlly used for
lmprovemenL) 0: no Lhe lnformaLlon
gaLhered from monlLorlng and revlew ls noL
used Lo lnform lmprovemenLs of rlsk
assessmenL
MonlLorlng and revlew "ensure LhaL lnLernal conLrol conLlnues Lo
operaLe effecLlvely" (CCSC, 1994, p. 69). 1herefore Lhe purpose
of on-golng monlLorlng and perlodlc revlew ls Lo provlde
managemenL wlLh evaluaLlve lnformaLlon, where Lhey can check
lnLernal conLrol procedures and where necessary lmprove and
amend Lhem. lnformaLlon gaLhered from monlLorlng and revlew
can also be used Lo lndlcaLe problems and Lo slgnal where
lmprovemenLs ln rlsk assessmenL may be necessary (lSC, 2009, p.
20). lf lnformaLlon ls used Lhls way, lL lncreases Lhe adapLablllLy
of rlsk assessmenL, whlch ln Lurn brlngs abouL a more effecLlve
and Llmely ldenLlflcaLlon of rlsks.
Are there mon|tor|ng procedures des|gned
to |dent|fy new emerg|ng r|sks?

2: yes, Lhere are formal procedures, 1: yes,
Lhere are ad hoc procedures, 0: no
procedures are used aL all
Among Lhe purposes of monlLorlng and revlew ls Lo ldenLlfy new
rlsks, whlch emerge ln Lhe perlod beLween formal rlsk
assessmenL procedures. lf such monlLorlng procedures exlsL, rlsk
assessmenL wlll be more approprlaLe and adapLable (lSC, 2009,
p. 20). ConsequenLly, formal monlLorlng and revlew procedures
Lo ldenLlfy new emerglng rlsks are more llkely Lo lead Lo an
effecLlve and Llmely rlsk assessmenL Lhan ad hoc or no
procedures. Moreover, responses Lo rlsk wlll be more
approprlaLe.
46

now c|ose|y are contro| act|v|t|es ||nked to
r|sks |dent|f|ed |n the ent|ty?
2: conLrol acLlvlLles are developed based on
rlsks ldenLlfled ln a rlsk assessmenL, 1: Lhe
developmenL of conLrol acLlvlLles Lakes lnLo
accounL ldenLlfled rlsks buL ls noL enLlrely
based on a rlsk assessmenL, 0: conLrol
acLlvlLles and ldenLlflcaLlon of rlsk are noL
llnked
ConLrol acLlvlLles LhaL are puL ln place musL be allgned wlLh
acLual rlsks lf such rlsks are Lo be mlLlgaLed (CCSC, 1994, p. 31).
lnLegraLlon of conLrol acLlvlLles wlLh rlsk assessmenL process
Lherefore allows for more approprlaLe and Llmely responses Lo
rlsks. ln oLher words, Lhe more conLrol acLlvlLles are shaped
accordlng Lo ldenLlfled rlsks, Lhe more proper and Llmely acLlons
Lhere are Lo address rlsks Lo achlevemenL of ob[ecLlves.
Are there procedures for responses to r|sks?

2: yes, Lhere are formal procedures deflned
(Lransfer, LoleraLe, LreaL, LermlnaLe), 1: yes,
buL Lhey are creaLed case-by-case or as
needed, 0: no
Cnce rlsks are ldenLlfled and analysed, Lhe nexL sLep ls Lo
deLermlne how Lo manage Lhe rlsks. SysLemaLlc responses Lo
rlsks lnvolve rlsk Lransfer, LoleraLe, LreaL and LermlnaLe (ln1CSAl,
2004, p. 26). 1hls lndlcaLor capLures Lhe exLenL Lo whlch
procedures for responses Lo rlsks are formal and Lhus more
sysLemaLlc. 1he raLlonale ls LhaL more formal and sysLemaLlc
procedures for responses Lo rlsks wlll lead Lo more approprlaLe
responses Lo rlsk.
If so, are these procedures def|ned
|nterna||y by the ent|ty or by an externa|
body?
A: enLlrely deflned by exLernal body, 8: parLly
deflned exLernally, parLly deflned lnLernally,
C: enLlrely deflned lnLernally,
(lease speclfy)
1hls quesLlon gaLhers addlLlonal lnformaLlon regardlng who
deflnes formal procedures for responses Lo rlsk.
Is there an esca|at|on process to dea| w|th
s|gn|f|cant r|sks?

2: yes, Lhere ls a formal escalaLlon process, 1:
yes, Lhere ls an lnformally deflned escalaLlon
process, 0: no escalaLlon process exlsLs
roper reporLlng and escalaLlon processes can enhance
accounLablllLy ln managlng rlsks (lSC, 2009, p. 11). lf an enLlLy
has an escalaLlon process Lo deal wlLh slgnlflcanL rlsks, Lhls ls a
Lype of sysLemaLlc response Lo rlsks. 1he more formal Lhe
escalaLlon process ls, Lhe more sysLemaLlc and hence Lhe more
approprlaLe responses Lo rlsk are. SlgnlflcanL rlsks wlll be dealL
wlLh aL Lhe approprlaLe level ln a Llmely manner and sLaff wlll be
more easlly held accounLable for addresslng slgnlflcanL rlsks.
lormal escalaLlon processes provlde documenLs Lo whlch sLaff
can refer, whereas lnformally deflned escalaLlon processes may
become more dlfflculL Lo access and refer Lo over Llme.
Does the r|sk assessment def|ne the |eve| at
wh|ch r|sk becomes acceptab|e or to|erab|e?
1: yes, Lhere ls a deflned numerlcal Lhreshold,
1: yes, professlonal [udgemenL ls used Lo
deLermlne lf a rlsk ls accepLable, 0: no
Cne way Lo evaluaLe Lhe slgnlflcance of rlsk ls Lo seL Lhe rlsk
crlLerla and deflne Lhe level aL whlch rlsk becomes accepLable or
Lolerable (lSC, 2009, p. 17). WheLher Lhe level ls clearly deflned
numerlcal Lhreshold or a maLLer of professlonal [udgmenL, havlng
such a Lhreshold allows for a sysLemaLlc response Lo rlsk and ln
Lurn rlsks wlll be dealL wlLh ln an approprlaLe manner.
47

Does the r|sk assessment exp||c|t|y
recommend to top management wh|ch r|sks
need a response and the pr|or|ty for the
|mp|ementat|on of responses?
2: yes, Lhe rlsk assessmenL documenL
conLalns expllclL recommendaLlon Lo
managemenL as Lo whlch rlsks requlre a
response and Lhe prlorlLy for response
lmplemenLaLlon, 1: yes, Lhe rlsk assessmenL
documenL conLalns expllclL recommendaLlon
Lo managemenL as Lo whlch rlsks requlre a
response, buL noL Lhe prlorlLy for response
lmplemenLaLlon, 0: no, Lhe rlsk assessmenL
does noL expllclLly provlde such
recommendaLlons Lo Lop managemenL
AfLer Lhe rlsk assessmenL, an enLlLy deLermlnes whlch rlsks need
a response and Lhe prlorlLy for Lhe lmplemenLaLlon of responses.
Whlle Lhe rlsk assessmenL wlll llkely always provlde useful
lnformaLlon abouL rlsks and lndlcaLe where responses may be
necessary, lL may or may noL expllclLly make recommendaLlons
Lo Lop managemenL on Lhese maLLers. lf Lhe rlsk assessmenL
documenL lncludes recommendaLlons on whlch rlsks requlre
responses and Lhe prlorlLy for Lhe lmplemenLaLlon Lhls ls llkely Lo
lmprove rlsk responses and make Lhen more approprlaLe.
Is there a procedure to address res|dua|
r|sks? (those rema|n|ng after |n|t|a| r|sk
treatment)
2: yes, Lhose conducLlng rlsk assessmenL
provlde furLher recommendaLlons for Lhe
LreaLmenL of resldual rlsk, 1: yes, Lhe resldual
rlsk ls communlcaLed Lo Lhe unlL manager
and lL ls Lhe responslblllLy of Lhe unlL
manager Lo respond, 0: no, Lhere ls no
procedure Lo address resldual rlsk
Cnce Lhe slgnlflcance and llkellhood of rlsk have been assessed,
managemenL needs Lo conslder how Lhe rlsk should be managed
(CCSC, 1994, p. 42). 1he compleLe ellmlnaLlon of LhreaLs ls
vlrLually lmposslble, hence, Lhe rlsk assessmenL ls llkely Lo be
more approprlaLe lf lL hollsLlcally evaluaLes Lhe lmpacL of Lhe rlsk
response, and speclflcally Lhe effecL of Lhe LhreaLs LhaL are sLlll ln
place afLer Lhe responses.
Does r|sk assessment |nc|ude a way to
dec|de whether res|dua| r|sk |eve|s are
to|erab|e?

1: yes, Lhere ls a deflned numerlcal Lhreshold,
1: yes, professlonal [udgemenL ls used Lo
deLermlne lf rlsk ls accepLable, 0: no
Lven afLer rlsk LreaLmenL, lL ls llkely LhaL some level of resldual
rlsk wlll always exlsL (CCSC, 1994, p. 43). ueclslon makers wlll
have Lo declde wheLher resldual rlsk levels are Lolerable, and lf
noL Lolerable, Lhey wlll generaLe a new rlsk LreaLmenL plan and
assess Lhe effecLlveness of LhaL LreaLmenL (lSC, 2009, p. 19). A
mlnlsLry ls more llkely Lo have approprlaLe sysLemaLlc responses
Lo rlsks lf Lhey have elLher a deflned numerlcal Lhreshold of
Lolerable rlsk or professlonal [udgmenL of accepLable rlsk.
Llkewlse, a mlnlsLry whose rlsk assessmenL does noL deflne Lhe
level of Lolerable resldual rlsk ls less llkely Lo have approprlaLe
sysLemaLlc responses Lo rlsks.
Are p|ans for responses |nformed by |essons
|earned from past |mp|ementat|ons of
s|m||ar responses?
2: yes, Lhere ls a conslsLenL and expllclL
accounL of pasL experlences when a plan ls
drafLed, 1: yes, pasL experlences are
consldered buL noL ln a conslsLenL and
formallsed way, 0: no
1hls lndlcaLor relles on Lhe ldea of learnlng organlsaLlons (see
LasLerby-SmlLh eL al., 1999). 1he effecLlve use of lnformaLlon
collecLed durlng prevlous aLLempLs Lo deal wlLh rlsks ls essenLlal
Lo beLLer deslgn Lhe rlsk LreaLmenL. Moreover, lL helps reduce
Lhe scope of unforeseen resldual rlsks. ln sum, Lhe deslgn of
LreaLmenL plans ls more llkely Lo be approprlaLe when lL
effecLlvely accounLs for pasL experlences.
48

now often |s cost benef|t ana|ys|s used as an
e|ement of assess|ng r|sk response?

roporLlon of rlsk LreaLmenLs LhaL are sub[ecL
Lo cosL-beneflL analyses (for example, 90)
SelecLlng Lhe mosL approprlaLe rlsk response opLlon lnvolves
balanclng Lhe cosLs and efforLs of lmplemenLaLlon agalnsL Lhe
beneflLs derlved (lSC, 2009, p. 19, ln1CSAl, 2004, p. 8). ln oLher
words, lL ls senslble Lo lmplemenL a rlsk LreaLmenL only lf Lhe
payoff offseLs Lhe cosLs. 1hus, Lhe response Lo rlsk ls llkely Lo be
more approprlaLe lf lL ls analysed ln Lerms of cosLs and beneflL.
ConsequenLly, Lhe score for Lhls lndlcaLor ls a proporLlon of Lhe
rlsk LreaLmenLs LhaL are sub[ecL Lo cosL-beneflL analyses.
Is there a forma| procedure to manage the
r|sks caused by unforeseen events (cr|s|s
management)?

2: yes, Lhere are formal procedures, 1: yes,
Lhere are procedures on a case-by-case basls,
0: Lhere are no formal procedures
lL ls unfeaslble for an enLlLy Lo predlcL every posslble rlsk.
1herefore, someLlmes Lhe enLlLy has Lo deal wlLh unforeseen
LhreaLs. ln Lhls case, Lhe enLlLy should puL ln place procedures Lo
cope wlLh Lhese new rlsks as soon as unforeseen evenLs occur
and are ldenLlfled as LhreaLenlng (CCSC, 1994). 1he response ls
more approprlaLe lf lL follows a pre-exlsLlng procedure, raLher
Lhan Lrylng Lo declde how Lo deal wlLh Lhe problem by ear, whlle
Lhe crlsls has already occurred.
Are r|sk response p|ans wr|tten down? (|.e.,
a document on how the chosen treatment
opt|ons w||| be |mp|emented)
?es/no
lf a rlsk response plan ls wrlLLen down, responses wlll be more
sysLemaLlc and ln Lurn, lL ls more llkely LhaL responses Lo rlsk are
more approprlaLe.
Is there a procedure for r|sk report|ng?

2: yes, Lhere ls a formal reporLlng procedure,
1: yes, buL lL ls deflned case by case, 0: no
rlsk reporLlng procedure exlsLs
8esponses Lo rlsk rely on Lhe accesslblllLy of relevanL lnformaLlon
on Lhe naLure of Lhe LhreaLs. CrganlzaLlons are complex
envlronmenLs, llnklng complex neLworks of sLakeholders
(8owley, 1997). 1hus, lL ls posslble LhaL a subseL of sLakeholders
ls more capable Lo recognlze a LhreaL. Pence, lL ls crlLlcal Lo
deslgn a procedure LhaL allows Lhls lnformaLlon Lo flow and Lo
reach Lhe declslon makers ln a Llmely and proper manner. 1hls
lndlcaLor alms Lo measure Lhls phenomenon.

49

M? 8:2(02-7&% &A =3&D)#- 2%* %)9- .-)=.

8elow ls Lhe dlscusslon of Lhe lmporLance of lncorporaLlng feedback from publlc secLor professlonals
prlor Lo Lhe lmplemenLaLlon sLage of developlng Lhe survey. An evaluaLlon of sLrengLhs and poLenLlal
weaknesses follows wlLh regards Lo Lhe lndlcaLors and dlmenslons. 1hls secLlon concludes wlLh a
broader assessmenL of Lhls pro[ecL and recommendaLlons of nexL sLeps.

6))*/2#$ A3&, =0/(7# .)#-&3 =3&A)..7&%2(.

A selecLlon of Lhree dlmenslons and respecLlve lndlcaLors were senL Lo publlc secLor professlonals ln
lnLernal conLrol, lnLernal audlL and/or Supreme AudlL lnsLlLuLlons ln some of Lhe sample counLrles.
1he purpose of Lhe dlsLrlbuLlon was Lo gaLher feedback on Lhe developmenL of Lhe lndlcaLors and
Lhelr relevancy.
1he Lhree dlmenslons selecLed were 1. 1he exLenslveness of lnLernal conLrol acLlvlLles, 2. 1he
lnvolvemenL of Lop managemenL ln conLrol acLlvlLles, and 3. 1he responslveness Lo lnLernal conLrol
deflclencles. 1hese conslsL of 19 lndlcaLors ln LoLal. 1he dlmenslons were chosen as Lhey cover some
of Lhe mosL lmporLanL aspecLs of lnLernal conLrol and lnLernal audlL. 1he lndlcaLors were also
meLhodologlcally lmporLanL as Lhey cover a wlde range of posslble quesLlon Lypes and scales.
See Appendlx 3 for Lhe expllclL lnsLrucLlons regardlng feedback, LhaL were senL ouL and
Appendlx 4 for a compleLe llsL of Lhese professlonals who have recelved Lhe drafL lndlcaLors.
AlLhough mlnlmal feedback has been recelved, lL ls hlghly recommended LhaL lnlLlal feedback ls
collecLed prlor Lo progresslng Lo conducLlng Lhe survey ln all CLCu member counLrles. Such feedback
ls vlLal Lo ensure LhaL counLrles and lndlvldual MlnlsLrles/ueparLmenLs Lhereln undersLand Lhe
dlmenslons and lndlcaLors and are able Lo respond ln a useful manner. 1hls allows for lncreased
response raLes and Lherefore more quallLy daLa.

8:2(02-7&% &A 7%*7#2-&3.

A poLenLlal weakness of Lhe lndlcaLors and dlmenslons developed ls LhaL counLry-speclflc research
led Lo Lhe developmenL of some lndlcaLors. lf Lhose counLrles are noL represenLaLlve of wlde-spread
pracLlces across, or appllcable Lo, all CLCu member counLrles, Lhese lndlcaLors could poLenLlally
30

generaLe skewed or blased resulLs. Powever, Lhe ma[orlLy of lndlcaLors were developed uslng noL
only counLry-speclflc research buL also lnLervlews and exlsLlng sLandards, see SecLlon 4 - ulmeosloos
ooJ loJlcotots. 1herefore, Lhe ma[orlLy of lndlcaLors are noL affecLed by Lhls poLenLlal lssue.
1he sLrengLh of Lhe lndlcaLors and dlmenslons ls LhaL Lhey are comprehenslve of all aspecLs of
lnLernal conLrol and lnLernal audlL. Moreover, a varleLy of sources were used ln Lhelr developmenL,
lncludlng boLh publlc and prlvaLe secLor sLandards, see SecLlon 2.
uue Lo Lhe sheer number of lndlcaLors, lL would be helpful lf some of Lhe daLa could be
collecLed from publlcly avallable sources, so LhaL Lhe survey dlrecLed aL MlnlsLrles/ueparLmenLs
could be reduced ln slze (llmlLed Lo Lhose varlables for whlch daLa ls noL publlcly avallable).
1herefore, Lhe underLaklng of an analysls of daLa avallablllLy was consldered aL Lhe early sLages of
Lhe pro[ecL. Powever, we dld noL proceed wlLh Lhls analysls for Lhe followlng reason:
8ased on Lhe naLlonal pracLlces research as well as lnLervlews, we learned LhaL Lhere ls a wlde
varlaLlon ln Lerms of publlcly avallable lnformaLlon across CLCu counLrles. 1herefore, consLrucLlng a
survey whlch ls appllcable Lo all Lhese naLlons ls noL posslble. 1hls ls because a sample of counLrles
LhaL have a cerLaln amounL of daLa publlcly avallable does noL lmply LhaL Lhe remalnlng counLrles
also have Lhe same daLa publlcly avallable. We would Lherefore be unable Lo llmlL Lhls exerclse Lo
only a subseL of counLrles. Powever, glven Lhe Llme consLralnLs such an underLaklng of Lhls daLa
avallablllLy analysls for each counLry and creaLlon of counLry-speclflc survey was noL feaslble.
1hese Llme consLralnLs also apply Lo pre-populaLlng daLa ln Lhe survey. re-populaLlng means
LhaL some or all survey responses are provlded wlLh a suggesLed answer LhaL Lhe reclplenL can Lhen
elLher conflrm or modlfy. 1hls requlres Lhe avallablllLy of rellable daLa so LhaL senslble suggesLlons
can be made. lrom our research we have seen LhaL Lhe level of deLall ln Lhe lnformaLlon LhaL ls
publlcly avallable ls largely lnsufflclenL Lo provlde lnslghLs lnLo posslble suggesLed answers.
1herefore, we declded Lo noL pre-populaLe Lhe survey.

N3&2*)3 2..)..,)%- &A =3&D)#-

1he facL LhaL such a pro[ecL Lo develop lndlcaLors for cross-counLry comparlson of lnLernal conLrol
and lnLernal audlL had noL been carrled ouL before posed a challenge, yeL also offered an
opporLunlLy. 1he sLrengLh of Lhls pro[ecL ls LhaL lL ls Lhe flrsL of lLs klnd and provldes a good basls Lo
conducL furLher research. Moreover, Lhls conLrlbuLes a slgnlflcanL plece of work lnLo a deflclenL fleld
31

of academlc research ln lnLernal conLrol. WlLh regards Lo furLher research perLalnlng Lo Lhls pro[ecL,
lL ls recommended LhaL one could focus on Lhe followlng aspecL: Lhe lndlcaLors are developed Lo
measure lnLernal conLrol and lnLernal audlL and so focuses on whaL ls lmmedlaLely measureable.
Powever, due Lo Lhe naLure of lnLernal conLrol and lL belng embedded ln Lhe day-Lo-day operaLlons
of an enLlLy, Lhe lndlcaLors may noL capLure all Lhe relevanL aspecLs of lnLernal conLrol and lnLernal
audlL or provlde a useful proxy ln all cases. 1herefore, lL ls recommended LhaL furLher follow-up and
evaluaLlon of Lhe usefulness of Lhe lndlcaLors and Lhelr relevance Lo capLurlng lnLernal conLrol be
conducLed.

<)#&,,)%*2-7&%.E +&7%+ A&3'23*

As prevlously dlscussed, gaLherlng feedback from publlc secLor professlonals regardlng Lhe sLrucLure
and relevancy of Lhe lndlcaLors ls lmperaLlve. AfLer Lhelr commenLs and suggesLlons are
lncorporaLed, Lhe pro[ecL can move lnLo Lhe plloLlng sLage. See SecLlon 3 for a dlscusslon of Lhe
lnLended reclplenLs of Lhe survey and opLlons for survey formaLLlng. 1he plloLlng sLage wlll llkely
lllumlnaLe areas for lmprovemenL, such as rephraslng, and suggesLlons for ellmlnaLlng and/or addlng
furLher lndlcaLors. uurlng Lhls enLlre process, lL ls recommended LhaL Lhose worklng on Lhe pro[ecL
sLay abreasL of new research and professlonal developmenLs ln Lhe area of lnLernal conLrol. Cnce
Lhls pro[ecL ls compleLed, and resulLs have been gaLhered allowlng for cross-counLry comparlsons of
lnLernal conLrol, a new pro[ecL can begln Lo focus on evaluaLlng Lhe effecLlveness of dlfferenL
pracLlces ln relaLlon Lo publlc flnanclal managemenL.

32

4&%#(0.7&%

1hls pro[ecL ls Lhe flrsL of lLs klnd ln LhaL lL aLLempLs Lo develop composlLe lndlcaLors of lnLernal
flnanclal conLrol for Lhe publlc secLor. lL has been a complex and challenglng process Lo flnd baslc
lnformaLlon and complle lL lnLo a workable basls for Lhe developmenL of solld lndlcaLors. ln Lhls
process, we found Lhe currenL sLaLe of academlc research and llLeraLure perLalnlng Lo lnLernal
conLrol ln Lhe publlc secLor ls mlnlmal. 1hus, Lhls area warranLs greaLer aLLenLlon glven Lhe Lrend of
decenLrallsaLlon ln Lhe publlc secLor and adopLlon of non-hlerarchlcal forms of conLrol, whlch allow
for greaLer poLenLlal mlsuse of publlc funds and resources. Cur examlnaLlon of lnLernal conLrol
pracLlces ln a sample of CLCu member counLrles, and lnLervlews wlLh publlc secLor professlonals ln
Lhe fleld, lndlcaLe LhaL Lhere ls a wlde varlaLlon ln naLlonal pracLlces and sysLems. As ouLllned ln Lhe
meLhodology secLlon of Lhls reporL, Lhe developed lndlcaLors Lhen wlll allow for sysLemaLlc
comparlsons ln how counLrles operaLe Lhelr lnLernal conLrol and lnLernal audlL. Clven Lhe lack of
knowledge, our lndlcaLors wlll help Lo esLabllsh Lhe sLaLe of Lhe arL and galn deeper lnslghLs lnLo how
lnLernal conLrol and lnLernal audlL sysLems are arranged. 1he composlLe lndlcaLors encompass 18
dlmenslons, whlch comprehenslvely capLure dlfferenL aspecLs of lnLernal conLrol and lnLernal audlL.
1hls pro[ecL serves as an lnlLlal sLep Lowards furLher research, whlch focuses on emplrlcally
evaluaLlng whaL makes effecLlve lnLernal conLrol. Such research ls currenLly mlsslng from Lhe already
deflclenL body of lnLernal conLrol llLeraLure.

33

N7/(7&+32=1;

Allan, M., 8undle, 8., & 1onkln, P. (2002). 8eocbmotkloq tbe lotetool ooJlt fooctloo. follow-oo
tepott. beocbmotkloq stoJy. Canberra, AusLralla: AusLrallan naLlonal AudlL Cfflce.
AlLamuro, !., & 8eaLLy, A. (2010). Pow does lnLernal conLrol regulaLlon affecL flnanclal reporLlng?
Iootool of Accoootloq ooJ cooomlcs, 49(1-2), 38-74.
Andrews, M. (2010). Cood governmenL means dlfferenL Lhlngs ln dlfferenL counLrles. Covetoooce,
23(1), 7-33.
8Al. (2003). Ooestloooolte teqotJloq lotetool ooJlt ooJ tbe 5Al, ooJ Jlsclosote of ooJlt tesolts. Seoul:
1he 8oard of AudlL and lnspecLlon of korea.
8Al. (2011, SepLember). SLrengLhenlng ubllc llnanclal ManagemenL Lhrough lnLernal AudlL 8eform.
resenLaLlon prepared for Lhe 1sL ASCSAl-Lu8CSAl !olnL Conference, lsLanbul, 1urkey.
8arreL, . (2010). uebaLe: approaches Lo conLrol-a vlew from AusLralla. lobllc Mooey ooJ
Moooqemeot, 30(1), 4-6.
8edard, !. C., PolLash, 8., & PolLash, u. (2009). Lvldence from Lhe unlLed SLaLes on Lhe LffecL of
AudlLor lnvolvemenL ln Assesslng lnLernal ConLrol over llnanclal 8eporLlng. lotetootloool Iootool
of AoJltloq, 13(2), 103-123.
8lldlsel, 8., opa, A., 1lron-1udor, A. , & larcane, n. (2010). llnanclal managemenL and conLrol ln
publlc secLor. Aoools of ftlmle Motqo uolvetslty keslto, losclcle ll, cooomlc 5toJles, 11-18.
8londal, !. 8. (2003). 8udgeL reform ln CLCu member counLrles Common Lrends. Ocu Iootool oo
8oJqetloq, 2(4), 7-23.
8Ml. (2008). mpfeblooqeo foet lotetoe kevlsloo lo Jet 8ooJesvetwoltooq. 8eLrleved 27 CcLober
2011, from
hLLp://www.bml.bund.de/Shareduocs/uownloads/uL/nachrlchLen/ressemlLLellungen/2008/04
/lnLerne_revlslon.pdf
8undesflnanzmlnlsLerlum. (2011). Cesomtploo Jes 8ooJesbooltsploos 2012. 8eLrleved 28 lebruary
2012, from hLLp://www.bundesflnanzmlnlsLerlum.de/bundeshaushalL2012/pdf/vsp_2.pdf
Cohen, A.-C. (2007). lobllc lotetool floooclol coottol. o oew ftomewotk fot pobllc sectot
moooqemeot. AlLamonLe Sprlngs, lL: llA 8esearch loundaLlon.
CCSC. (1994). lotetool coottol loteqtoteJ ftomewotk. 8eLrleved 10 CcLober 2011, from
hLLp://www.snal.edu/cn/servlce/llbrary/book/0-lramework-flnal.pdf
CCSC. (2004). otetptlse tlsk moooqemeot - loteqtoteJ ftomewotk (execotlve sommoty). 8eLrleved
10 CcLober 2011, from hLLp://www.coso.org/documenLs/CCSC_L8M_LxecuLlveSummary.pdf
CCSC. (2012). webslte. 8eLrleved 20 !anuary 2012, from hLLp://www.coso.org
34

CurrlsLlne, 1. (2006). CovernmenL erformance Lessons and Challenges. Ocu Iootool oo 8oJqetloq,
3(1), 127-131.
u'Aqulla, !. M. (1998). ls Lhe conLrol envlronmenL relaLed Lo flnanclal reporLlng declslons?
Moooqetlol AoJltloq Iootool, 13(8), 472-478.
uawes, !. (2008). uo daLa characLerlsLlcs change accordlng Lo Lhe number of scale polnLs used? An
experlmenL uslng 3-polnL, 7-polnL and 10-polnL scales. lotetootloool Iootool of Motket keseotcb.
tbe Iootool of tbe Motket keseotcb 5oclety, 30(1), 61-78.
ue konlng, 8. (2007). lllc. pobllc lotetool floooclol coottol . o otopeoo commlssloo loltlotlve to
bollJ oew sttoctotes of pobllc lotetool coottol lo oppllcoot ooJ tbltJ-potty cooottles. SlnL
kaLherlna Lombeek: ue konlng.
ue 8enzlo, . (2009). 1okloq stock - wbot Jo llA ossessmeots tell os oboot llM systems octoss
cooottles? (Worklng paper 302). London: Cverseas uevelopmenL lnsLlLuLe.
ulamond, !. (2002). 1be tole of lotetool ooJlt lo qovetomeot floooclol moooqemeot. oo lotetootloool
petspectlve (W/02/94). WashlngLon, u.C.: lnLernaLlonal MoneLary lund.
uoyle, !., Ce, W., & Mcvay, S. (2007a). Accruals quallLy and lnLernal conLrol over flnanclal reporLlng.
Accoootloq kevlew, 82(3), 1141-1170.
uoyle, !., Ce, W., & Mcvay, S. (2007b). ueLermlnanLs of weaknesses ln lnLernal conLrol over flnanclal
reporLlng. Iootool of Accoootloq & cooomlcs, 44(1), 193.
urorl, C. S., Meyer, !. W., & Pwang, P. (2006). Clobollzotloo ooJ otqoolzotloo. wotlJ soclety ooJ
otqoolzotloool cbooqe. Cxford: Cxford unlverslLy ress.
Lconomlcs and uevelopmenL 8esource CenLer. (1999). nooJbook fot tbe ecooomlc ooolysls of wotet
sopply ptojects. Manlla: Aslan uevelopmenL 8ank.
Lurofund. (2008). lotetool coottol 5tooJotJs. 8eLrleved 24 CcLober 2011, from
hLLp://www.eurofound.europa.eu/abouL/publlcaccess/caLegorles/general/lnLconLrol.hLm
Luropean Commlsslon. (2004). lotetool coottol systems lo cooJlJote cooottles. 8eLrleved 20 !anuary
2012, from hLLp://eca.europa.eu/porLal/pls/porLal/docs/1/134676.ul
Luropean Commlsslon. (2006). welcome to tbe wotlJ of lllc - lobllc lotetool lloooclol coottol.
8eLrleved 10 CcLober 2011, from
hLLp://ec.europa.eu/budgeL/llbrary/blbllo/documenLs/conLrol/brochure_plfc_en.pdf
Luropean unlon ulrecLoraLe 8udgeL. (2006). llC - ubllc lnLernal llnanclal ConLrol. 8eLrleved 28
CcLober 2011, from
hLLp://ec.europa.eu/budgeL/llbrary/blbllo/documenLs/conLrol/brochure_plfc_en.pdf
lourle, u. (2007). llnanclal conLrol measures enhanclng good governance. Iootool of lobllc
AJmlolsttotloo, 42(7), 733-743.
33

CAC. (1999). 5tooJotJs fot lotetool coottol lo tbe feJetol qovetomeot. WashlngLon, u.C.: unlLed
SLaLes CovernmenL AccounLablllLy Cfflce.
CAC. (2001). lotetool coottol moooqemeot ooJ evolootloo tool. WashlngLon, u.C.: unlLed SLaLes
CovernmenL AccounLablllLy Cfflce.
CAC. (2009). ueslqooteJ feJetol eotltles sotvey of qovetoooce ptoctlces ooJ tbe lospectot Ceoetol
tole . tepott to tbe kookloq Membet, commlttee oo lloooce, u.5. 5eoote. WashlngLon, u.C.:
unlLed SLaLes CovernmenL AccounLablllLy Cfflce.
Cerman lederal MlnlsLry of llnance. (2009). CrundsaLze guLer unLernehmens- und
8eLelllgungsfhrunglm 8erelch des 8undes. 8eLrleved 23 CcLober 2011, from
hLLp://www.bundesflnanzmlnlsLerlum.de/nn_33848/uL/WlrLschafL__und__verwalLung/
8undesllegenschafLen__und__8undesbeLelllgungen/ubllc__corporaLe__governance__kodex/0
10709__publCov__anl,properLy=publlcaLlonllle.pdf
Clddens, A. (1990). 1be coosepoeoces of moJetolty. SLanford, CA: SLanford unlverslLy ress.
CovernmenL of SouLh AusLralla. (2011). webslte. 8eLrleved 28 lebruary 2012 from
hLLp://www.decd.sa.gov.au/pmla/pages/maln/audlLconLrol/?rellag=1
CrlfflLhs, . (2003). klsk boseJ ooJltloq. [LlecLronlc verslon]. AldershoL, PanLs: Cower.
Cunnlngham, n., Crabosky, . n., & Slnclalr, u. (1998). 5mott teqolotloo. Jeslqoloq eovltoomeotol
pollcy. Cxford: Clarendon ress.
CuLhrle, !., Clson, C., & Pumphrey, C. (1999). uebaLlng developmenLs ln new publlc flnanclal
managemenL: Lhe llmlLs of global Lheorlslng and some new ways forward. lloooclol
Accoootoblllty ooJ Moooqemeot, 13(3&4), 209-228.
Parden, l. (1993). Money and Lhe consLlLuLlon: flnanclal conLrol, reporLlng and audlL. leqol 5toJles,
13(1), 16-37.
PM 1reasury. (2004). 1be Otooqe 8ook. moooqemeot of tlsk - ptloclples ooJ coocepts. London:
PMSC.
PM 1reasury. (2011a). Covernance and rlsk managemenL. 8eLrleved 28 CcLober 2011, from
hLLp://www.hm-Lreasury.gov.uk/psr_governancerlsk_lndex.hLm
PM 1reasury. (2011b). CovernmenL lnLernal audlL sLandards. AlLamonLe Sprlngs, lL: llA.
PoggeLL, . (1996). new modes of conLrol ln Lhe publlc servlce. lobllc AJmlolsttotloo, 74(1), 9-32.
Pood, C. (1991). A publlc managemenL for all seasons? lobllc AJmlolsttotloo, 69(1), 3-19.
Pood, C. (1993a). 1he new publlc managemenL" ln Lhe 1980s: varlaLlons on a Lheme. Accoootloq,
Otqoolzotloos ooJ 5oclety, 20(2-3), 93-109.
Pood, C. (1993b). 1he rlsk game and Lhe blame game. Covetomeot ooJ Opposltloo, 37(1), 13-37.
36

llAC. (2010). nooJbook of lotetootloool poollty coottol, ooJltloq, tevlew, otbet ossotooce, ooJ
teloteJ setvlces ptooooocemeots. new ?ork: n?, lnLernaLlonal lederaLlon of AccounLanLs.
8eLrleved from hLLp://www.lfac.org/publlcaLlons-resources/2010-handbook-lnLernaLlonal-
quallLy-conLrol-audlLlng-revlew-oLher-assurance-a
llA. (2010). lotetootloool stooJotJs fot tbe ptofessloool ptoctlce of lotetool ooJltloq. 8eLrleved 8
CcLober 2011, from hLLp://www.Lhella.org/download.cfm?flle=33336
llA AusLralla. (2010). lnLernal audlLor compeLency framework. 8eLrleved 20 CcLober 2011, from
hLLp://www.lla.org.au/Llbrarles/Learnlng_uevelopmenL/lnLernal_AudlL_CompeLency_lramewor
k.sflb.ashx
lMl (2007). Mooool oo flscol ttoospoteocy. 8eLrleved 13 !anuary 2012, from
hLLp://www.lmf.org/exLernal/np/pp/2007/eng/031307m.pdf
ln1CSAl. (1992a). Code of eLhlcs and audlLlng sLandards. 8eLrleved 10 CcLober 2011, from
www.Llde.org.Lr/uploads/ln1CSAl_CCL_and_SLandards_01-03.pdf
ln1CSAl. (1992b). ColJelloes fot lotetool coottol stooJotJs. 8eLrleved 8 CcLober 2011, from
hLLp://www1.worldbank.org/publlcsecLor/pe/befa03/lnLernalConLrolSLandards.pdf
ln1CSAl., & uS CAC. (1993). Accoootloq stooJotJs ftomewotk. WashlngLon, u.C: unlLed SLaLes
CovernmenL AccounLablllLy Cfflce
ln1CSAl. (2001). l55Al 100 8oslc ltloclples lo Covetomeot AoJltloq. 8eLrleved 11 CcLober 2011, from
hLLp://www.lssal.org/medla(629,1033)/lSSAl_100_L.pdf
ln1CSAl. (2004a). lmplemeototloo qolJelloes fot petfotmooce ooJltloq. 8eLrleved 20 !anuary 2012,
from hLLp://www.lnLosal.org/uploads/1lmplgperfaude.pdf
ln1CSAl. (2004b). ColJelloes fot lotetool coottol stooJotJs fot tbe pobllc sectot. 8eLrleved 8 CcLober
2011, from hLLp://www.lssal.org/medla(374,1033)/ln1CSAl_CCv_9100_L.pdf
ln1CSAl. (2010). l55Al 100J lloooclol AoJlt ColJelloe - Clossoty of 1etms to tbe lN1O5Al lloooclol
AoJlt ColJelloes. 8eLrleved 11 CcLober 2011, from
hLLp://www.lssal.org/medla(800,1033)/lSSAl_1003_L_LndorsemenL_verslon.pdf
ln1CSAl. (n.d.). ColJooce fot tepottloq oo tbe effectlveoess of lotetool coottol. 5Al expetleoces lo
lmplemeotloq ooJ evolootloq lotetool coottols. 8eLrleved 8 CcLober 2011, from
hLLp://www.lssal.org/medla(373,1033)/ln1CSAl_CCv_9110_L.pdf
ln1CSAl. (n.d.). lotetool coottol. ptovlJloq o foooJotloo fot occoootoblllty lo qovetomeot. 8eLrleved
8 CcLober 2011, from hLLp://www.lssal.org/medla(376,1033)/ln1CSAl_CCv_9210_L.pdf
ln1CSAl. (n.d.). lottbet lofotmotloo oo eotlty tlsk moooqemeot. 8eLrleved 8 CcLober 2011, from
ln1CSAl. (n.d.). lotetool AoJlt loJepeoJeoce lo tbe lobllc 5ectot. 8eLrleved 8 CcLober 2011, from
37

ln1CSAl. (n.d.). co-otJlootloo ooJ co-opetotloo betweeo 5opteme AoJlt lostltotloos ooJ lotetool
ooJltots lo tbe pobllc sectot. 8eLrleved 8 CcLober 2011, from
lonescu, L. (2011). lnLernal conLrol for economlc crunch. cooomlcs, Moooqemeot, ooJ lloooclol
Motkets, 6(2), 791-799.
lSC. (2009). l5O J1000 - klsk moooqemeot - ltloclples ooJ qolJelloes. Ceneva: lnLernaLlonal
CrganlzaLlon for SLandardlzaLlon.
!acobs, k. (1998). value for money audlLlng ln new ealand: compeLlng for conLrol ln Lhe publlc
secLor. 1be 8tltlsb Accoootloq kevlew, 30(4), 343-360.
!ames, k. L. (2003). 1he effecLs of lnLernal audlL sLrucLure on percelved flnanclal sLaLemenL fraud
prevenLlon. Accoootloq notlzoos. 17(4), 313-328.
!ensen, M. C. (2000). A tbeoty of tbe fltm. qovetoooce, teslJool clolms, ooJ otqoolzotloool fotms.
Cambrldge, MA: Parvard unlverslLy ress.
kennedy, !. (1993). ueblaslng Lhe curse of knowledge ln audlL [udgmenL. Accoootloq kevlew, 70(2),
249-273.
keLLl, u. l. (1997). 1he global revoluLlon ln publlc managemenL: drlvlng Lhemes, mlsslng llnks. Iootool
of lollcy Aoolysls ooJ Moooqemeot, 16(3), 446-462.
klnnock, n. (2002). AccounLablllLy and reform of lnLernal conLrol ln Lhe Luropean Commlsslon. 1be
lolltlcol Ooottetly, 73(1), 21-28.
kllngensLlerna, u. (2009, March). coottollloq pobllc mooey. lotetool floooclol coottol ooJ extetool
ooJlt' lo 5oppott fot lmptovemeot lo Covetoooce ooJ Moooqemeot (5lCMA). aper presenLed aL
Lhe Conference on ubllc AdmlnlsLraLlon 8eform and Luropean lnLegraLlon, 8udva, MonLenegro.
kulaslngham, L.1., & 1lwarl, A.C. (1992). llnanclal accounLablllLy and managemenL ln governmenL.
[LlecLronlc verslon]. Seoul: Aslan CrganlzaLlon of Supreme AudlL lnsLlLuLlons (ASCSAl).
Laughlln, 8. (1992). Accoootloq coottol ooJ coottollloq occoootloq. tbe bottle fot tbe pobllc sectot?
Sheffleld: unlverslLy of Sheffleld, ManagemenL School.
Ll, ?. (n.d). A compototlve stoJy oboot lotetool ooJltloq opptoocb betweeo Cetmooy ooJ cbloo.
unpubllshed academlc paper. SouLhwesLern unlverslLy of llnance & Lconomlcs, Chengdu, Chlna.
Lubek, . (2003, november). lotetool coottol ooJ ooJlt lo tbe cootext of tbe boJqet tefotm lo ltooce.
resenLaLlon prepared for lSA Conference, 8russels, 8elglum.
Mal[oor, S. (2000). 1he lnLernal conLrol exploslon. lotetootloool Iootool of AoJltloq, 4(1), 101-109.
MaLheson, A., & kwon, P. S. (2003). ubllc secLor modernlsaLlon a new agenda. Ocu Iootool oo
8oJqetloq, 3(1), 7-23.
38

McCulloch, 8. W., & 8all, l. (1992). AccounLlng ln Lhe conLexL of publlc secLor managemenL reform.
lloooclol Accoootoblllty ooJ Moooqemeot, 8(1), 7-12.
Mcklnney, !. 8. (2004). ffectlve floooclol moooqemeot lo pobllc ooJ oooptoflt oqeocles. WesLporL,
C1: raeger.
Mcklnnon, u. l. (1993). 1be otJet of ecooomlc llbetollzotloo, floooclol coottol lo tbe ttoosltloo to o
motket ecooomy. 8alLlmore, Mu: 1he !ohns Popklns unlverslLy ress.
McLaughlln, k., Csborne, S. ., & lerlle, L. (2002). New pobllc moooqemeot. cotteot tteoJs ooJ
fotote ptospects. London: 8ouLledge.
MlnLzberg, P. (1980). SLrucLure ln 3's: A SynLhesls of Lhe 8esearch on CrganlzaLlon ueslgn.
Moooqemeot 5cleoce, 26(3), 322-341.
nAC. (2011). Oot sttoteqy. 8eLrleved 21 CcLober 2011, from
hLLp://www.nao.org.uk/abouL_us/whaL_we_do/our_sLraLegy.aspx
C'8rlen, !. A. (1999). Moooqemeot lofotmotloo systems. moooqloq lofotmotloo tecbooloqy lo tbe
lotetoetwotkeJ eotetptlse. 8osLon, MA: lrwln/McCraw-Plll.
CLCu. (2002). Clossoty of stotlstlcol tetms. 8eLrleved 11 november 2011, from
hLLp://sLaLs.oecd.org/glossary/
CLCu. (2006). Ocu 8oJqet ptoctlces ooJ ptoceJotes sotvey. 8eLrleved 10 CcLober 2011, from
hLLp://www.oecd.org/daLaoecd/30/43/39466141.pdf
CLCu. (2009). coottollloq pobllc mooey. lotetool floooclol coottol ooJ extetool ooJlt. 8eLrleved 20
CcLober 2011, from hLLp://www.oecd.org/daLaoecd/48/33/42734433.pdf
CLCu. (2011). Covetomeot ot o Clooce 2011. arls: CLCu.
CLCu. (2011, Aprll). lotetool coottol ooJ lotetool ooJlt. eosotloq pobllc sectot loteqtlty ooJ
occoootoblllty. aper presenLed aL Lhe Semlnar organlsed [olnLly by CLCu lnLernal AudlL and Lhe
CLCu ubllc Covernance and 1errlLorlal uevelopmenL ulrecLoraLe, arls, lrance.
arry, M. (2010). 1he four dlmenslons of publlc flnanclal managemenL. lotetootloool Iootool of
Covetomeot lloooclol Moooqemeot, 10(1), 98-196.
LlA. (2003). lobllc floooclol moooqemeot. petfotmooce meosotemeot ftomewotk. 8eLrleved 27
CcLober 2011, from hLLp://slLeresources.worldbank.org/LlA/8esources/MlLngllshllnal.pdf
LlA. (2012). webslte. 8eLrleved 6 !anuary 2012, from hLLp://www.pefa.org
ower, M. (2007). OtqoolzeJ oocettoloty. Jeslqoloq o wotlJ of tlsk moooqemeot. Cxford: Cxford
unlverslLy ress.
8aglonerla Cenerale dello SLaLo. (2012). webslte. 8eLrleved 28 lebruary 2012, from
hLLp://www.rgs.mef.gov.lL/vL8SlCnL-l/La-8aglone/
39

8ahaman, A. S., & Lawrence, S. (2001). A negoLlaLed order perspecLlve on publlc secLor accounLlng
and flnanclal conLrol. Accoootloq, AoJltloq & Accoootoblllty Iootool, 14(2), 147-163.
8aLcllffe, 1. A., & Landes, C. L. (2009). uoJetstooJloq lotetool coottol ooJ lotetool coottol setvlces.
new ?ork, n?: Amerlcan lnsLlLuLe of CerLlfled ubllc AccounLanLs.
8evlslon Cnllne. (2010). lotetoes koottollsystem. 8eLrleved 27 CcLober 2011, from
hLLp://www.revlslon-onllne.lnfo/lndex.php/lnLernes_konLrollsysLem
8oblnson, M. (2002). llnanclal conLrol ln AusLrallan governmenL budgeLlng. lobllc 8oJqetloq ooJ
lloooce, 21(4), 80-93.
8owley, 1. !. (1997). Movlng beyond dyadlc Lles: a neLwork Lheory of sLakeholder lnfluences.
AcoJemy of Moooqemeot kevlew, 22(4), 887-910.
Schlck, A. (1978). ConLemporary problems ln flnanclal conLrol. lobllc AJmlolsttotloo kevlew, 38(6),
313-319.
SLaLe of Callfornla. (2008). 5tote AJmlolsttotlve Mooool. cboptet 20000 lnLernal conLrol. 8eLrleved 3
november 2011, from hLLp://sam.dgs.ca.gov/1CC/20000/20030.hLm
SLelnhoff, !. C. (2003). lloooclol moooqemeot effectlve lotetool coottol ls key to occoootoblllty.
[LlecLronlc verslon]. WashlngLon, u.C.: unlLed SLaLes CovernmenL AccounLablllLy Cfflce.
SLerk, M., Scheers, 8., and 8ouckaerL, C. (2003). 1he modernlzaLlon of Lhe publc conLrol pyramld:
lnLernaLlonal Lrends (8eporL 2003/10106/018). Leuven: 8esLuurll[ke CrganlsaLle vlaanderen.
Szymanskl, S. (2007). now to lmplemeot ecooomlc tefotms. bow to flqbt cottoptloo effectlvely lo
pobllc ptocotemeot lo 5 cooottles. arls: CLCu.
1reasury 8oard of Canada SecreLarlaL. (2007). Aboot lotetool ooJlt. 8eLrleved 10 CcLober 2011, from
hLLp://www.Lbs-scL.gc.ca/la-vl/abu-ans/abu-ans-eng.asp
1reasury 8oard of Canada SecreLarlaL. (2010). lollcy oo lotetool coottol. 8eLrleved 29 CcLober 2011,
from hLLp://www.Lbs-scL.gc.ca/pol/doc-eng.aspx?ld=13238&secLlon=LexL
?ang, u. C., & Cuan, L. (2004). 1he evoluLlon of l1 audlLlng and lnLernal conLrol sLandards ln flnanclal
sLaLemenL audlLs: Lhe case of Lhe unlLed SLaLes. Moooqetlol AoJltloq Iootool, 19(4), 344-333.

60

"==)%*7#).

"==)%*79 >E 5)3,. &A 3)A)3)%#)

1he followlng shows Lhe Lerms of reference as agreed aL Lhe onseL of Lhe pro[ecL. Powever, over Lhe
course of Lhe pro[ecL some aspecLs have been revlslLed ln accordance wlLh Lhe CLCu. Some Lasks
were omlLLed and added. ln parLlcular, as laLer dlscussed, a daLa avallablllLy analysls was noL
feaslble. Moreover, no plloLlng of Lhe lndlcaLors or survey was compleLed. lnsLead, a subseL of
lndlcaLors has been selecLed and senL Lo relevanL publlc secLor professlonals ln selecLed CLCu
member counLrles for revlew and feedback.
C|ar|f|cat|on of requ|rements
1he overall goal of Lhls pro[ecL ls Lo develop composlLe lndlcaLors whlch wlll allow Lhe CLCu Lo
measure and compare Lhe funcLlonlng of lnLernal flnanclal conLrols wlLhln Lhe level of clvll
governmenL mlnlsLrles / deparLmenLs and relevanL, close-llnked, cenLral/naLlonal/federal agencles
where appllcable. 1he composlLe lndlcaLors wlll be composed of a serles of sub-lndlcaLors. lnLernal
audlL wlll also be covered, as one key componenL of lnLernal flnanclal conLrol. 1he scope of Lhls
pro[ecL wlll be llmlLed Lo lnLernal flnanclal conLrol and all shorLhand references Lo 'lnLernal conLrol'
should be undersLood as 'lnLernal flnanclal conLrol' below: however, we wlll be aware of Lhe
llLeraLure appllcable Lo oLher forms of lnLernal conLrol (lncludlng cenLrally-run conLrols on P8, lC1s,
procuremenL pracLlces, eLc.).
1hls pro[ecL malnly bullds upon prevlous work by Lhe CLCu, speclflcally Lhe sLudy arLlculaLed ln
Lhe reporL on lnLernal ConLrol and lnLernal AudlL: ensurlng publlc secLor lnLegrlLy and
accounLablllLy". 1he developmenL of Lhe lndlcaLors wlll be lnformed by a llLeraLure revlew of exlsLlng
lnLernaLlonal sLandards of lnLernal conLrol and lnLernal audlL for Lhe publlc secLor, such as:
Lhe lnLernaLlonal CrganlsaLlon of Supreme AudlL lnsLlLuLlons' (ln1CSAl) Culdellnes for
lnLernal ConLrol SLandards for Lhe ubllc SecLor"
Lhe CommlLLee of Sponsorlng CrganlsaLlons of Lhe 1readway Commlsslon's
(CCSC)lnLernaLlonal ConLrol lnLegraLed lramework"
Lhe lnsLlLuLe of lnLernal AudlLors' (llA) lnLernaLlonal SLandards for Lhe rofesslonal
racLlce of lnLernal AudlLlng"
61

We wlll evaluaLe Lhe avallablllLy of Lhe daLa requlred Lo compleLe Lhe composlLe lndlcaLors for
Lhe followlng counLrles: uk, uSA, Canada, SouLh korea, lLaly, Cermany, and lrance. lor Lhose
lndlcaLors where daLa ls noL publlcly avallable, we wlll develop quesLlons Lo be able Lo collecL Lhe
necessary lnformaLlon.
8y Lhe mld-pro[ecL revlew sLage we wlll evaluaLe Lhe posslblllLy of plloLlng Lhe survey Lo collecL
Lhe daLa LhaL ls noL publlcly avallable ln Lhe selecLed counLrles. We wlll also evaluaLe Lhe exLenL Lo
whlch Lhe composlLe lndlcaLors may be plloLed (wlLh publlcly avallable daLa only or wlLh boLh
publlcly avallable daLa and survey resulLs). Powever, Lhe Llme requlred for underLaklng Lhe plloLlng
process wlLh governmenL offlclals may noL flL wlLhln Lhe Llmellnes of Lhls pro[ecL, so LhaL adequaLely
compleLlng Lhe plloLlng may noL be reallsLlc glven Lhe currenL Llmellne (see secLlon 3 below).

1he key dellverables of Lhls pro[ecL are as follows:
1. Mld-pro[ecL revlew (max. 8 pages)
a. A summary of acLlvlLles compleLed, a summary of acLlvlLles yeL Lo be compleLed, an
updaLed schedule (CanLL charL formaL) lncludlng progress agalnsL Lhe orlglnal plan
(see secLlon 3 below), a Lable of conLenLs for Lhe flnal reporL
2. llnal pro[ecL dellvery
a. A flnal reporL (max. 40 pages)
b. An annex lncludlng Lhe survey lnsLrumenL
c. A owerolnL presenLaLlon

Cur key pro[ecL llalson and maln cllenL aL Lhe CLCu ls !ames Sheppard, ollcy AnalysL of Lhe CLCu
ulrecLoraLe for ubllc Covernance and 1errlLorlal uevelopmenL. 1he flnal deadllne for presenLaLlon
of Lhls pro[ecL aL Lhe CLCu wlll be Lhe lasL week of lebruary or flrsL week of March 2012 (wlLh
dellvery of Lhe full reporL manuscrlpL, lncludlng annexes, and correcLed owerolnL Lo LSL by Lhe
end of Lhe Lhlrd week of March). We envlsage Lwo on-slLe vlslLs aL Lhe CLCu headquarLers, one for
pro[ecL revlew ln Lhe beglnnlng of !anuary and one aL pro[ecL compleLlon.

62

Methodo|ogy
LlLeraLure revlew
1he llLeraLure revlew wlll survey:
CurrenL lnLernaLlonal sLandards for lnLernal conLrol, such as Lhose menLloned ln secLlon 1
asL aLLempLs Lo conducL cross-counLry comparlsons of lnLernal conLrol, such as Lhe CLCu
sLudy
naLlonal pracLlces ln lnLernal conLrol
o We wlll focus on whaL lnsLrumenLs, processes, and sLrucLures exlsL wlLhln counLrles,
and how Lhese funcLlon aL Lhe level of mlnlsLrles / deparLmenLs

uevelopmenL of composlLe lndlcaLors
We wlll look for Lrends ln Lhe surveyed llLeraLure Lo ldenLlfy approxlmaLely 6-8 macro
lndlcaLors. 1hese lndlcaLors wlll alm Lo be a comprehenslve represenLaLlon of lnLernal conLrol. 1he
macro lndlcaLors wlll be composed of a serles of sub-lndlcaLors.
lull [usLlflcaLlon of Lhe relevance of all lndlcaLors wlll be glven as well as Lhe meLhodologlcal
reasons for cholces of scorlng, welghlng and aggregaLlon. All lndlcaLors wlll be sLandardlsed and
normallsed Lo allow for comparablllLy across lndlcaLors and counLrles.
Checks for assesslng Lhe robusLness of Lhe composlLe lndex wlll also be conducLed.

Analysls of daLa avallablllLy
We wlll seek Lo map Lhe avallablllLy of relevanL daLa necessary Lo provlde a score for each
lndlcaLor. Cur lnvesLlgaLlon of daLa avallablllLy wlll be llmlLed Lo a selecLlon of clvll governmenL
mlnlsLrles/deparLmenLs (mlnlmum of 3) ln Lhe followlng seven counLrles: uk, uSA, Canada, SouLh
korea, lLaly, Cermany, and lrance. 1hls mlghL lnvolve a varleLy of meLhodologlcal approaches, such
as accesslng sLaLlsLlcal daLabases, phone, emall and poLenLlally ln-person lnLervlews, naLlonal
records and governmenL webslLes and documenLs.

63

Survey lnsLrumenL developmenL
lor Lhose lndlcaLor areas where daLa ls noL publlcly avallable or daLa ls Loo llmlLed Lo provlde a
rellable score, we wlll develop a survey Lo gaLher Lhe necessary daLa, seeklng Lo develop quesLlons
relevanL Lo collecLlng daLa for all clvll governmenL mlnlsLrles. 1he survey wlll malnly comprlse closed-
ended quesLlons (such as yes/no, mulLlple provlded answers, x-polnL scale), buL open-LexL boxes wlll
be lnLerspersed Lo allow respondlng deparLmenLs Lo explaln/ clarlfy Lhelr flxed response answers
where needed.

oLenLlal plloLlng
ln Lhe mld-pro[ecL revlew wlLh !ames Sheppard, aLrlck uunleavy and Lhe pro[ecL Leam, we wlll
evaluaLe wheLher Lo proceed wlLh a plloLlng of Lhe survey lnsLrumenL ln Lhe selecLed mlnlsLrles /
deparLmenLs ln Lhe above menLloned counLrles, or a sub-seL of Lhe counLrles.
Optloo 1: uslng only publlcly avallable daLa, we would plloL Lhe composlLe lndlcaLors for Lhe
selecLed mlnlsLrles and counLrles. 1hls means we would collecL Lhe publlcly avallable daLa and
provlde an lndlcaLlve score for each sub-lndlcaLor and where posslble Lhe relevanL flnal composlLe
score. 1hls opLlon ls more feaslble Lhan opLlon 2 below glven Lhe Llmellne (see secLlon 3).
Optloo 2: uslng boLh Lhe publlcly avallable daLa and Lhe resulLs from plloLlng Lhe survey
lnsLrumenL, we would provlde a score for each sub-lndlcaLor and Lhe relevanL flnal composlLe score
ln Lhe selecLed mlnlsLrles and counLrles.

LvaluaLlon
We wlll evaluaLe Lhe work compleLed, lllumlnaLlng sLrengLhs and weaknesses. ln addlLlon we
wlll assess
any lssues LhaL arose durlng lndlcaLor developmenL and could poLenLlally compromlse Lhe
robusLness of Lhe lndlcaLors
poLenLlal problems afLer Lhe compleLlon of Lhe pro[ecL, such as daLa collecLlon or Lhe
lmplemenLaLlon of Lhe survey lnsLrumenL

1he evaluaLlon of Lhe survey lnsLrumenL and composlLe lndlcaLors ls conLlngenL on Lhe exLenL of
plloLlng Lhe survey lnsLrumenL and/or Lhe composlLe lndlcaLors.
64

LvaluaLlon of Lhe survey lnsLrumenL wlll be based on Lhe lssues arlslng from Lhe plloLlng sLage.
We wlll reporL on 1) Lhelr readlness Lo respond Lo Lhe survey ln a frank and open manner, 2)
relevance, clarlLy and lnLeresL of Lhe proposed quesLlons, 3) Lo provlde more lnformaLlon as Lo Llme
esLlmaLed for survey compleLlon.
LvaluaLlon of Lhe composlLe lndlcaLors wlll be based on lssues arlslng from Lhe plloLlng sLage.
8ased on our resulLs, we wlll reporL on any problems ldenLlfled wlLh our lndlcaLor developmenL.
As parL of Lhe overall evaluaLlon, dependlng on our flndlngs of Lhe llLeraLure revlew, we wlll
compare our resulLs wlLh oLher cross-counLry sLudles of lnLernal conLrol.

ro[ect comp|et|on
1he flnal reporL for Lhe CLCu (max. 40 pages) wlll lnclude Lhe llLeraLure revlew, Lhe
composlLe lndlcaLors and [usLlflcaLlons of Lhe cholces made ln Lhelr composlLlon lncludlng scorlng,
welghlng and aggregaLlon, and any analysls and evaluaLlon of Lhe resulLs from Lhe poLenLlal plloLlng.
Annexes wlll lnclude 1) Lhe survey lnsLrumenL, 2) collecLed daLa and resulLs of any plloLlng,
3) blbllography and 4) any oLher supporLlng maLerlals. 1he verslon Lo be submlLLed Lo LSL wlll
lnclude all elemenLs.

ro[ect t|me||ne

63

"==)%*79 FE O(&..23;

1he followlng ls a llsL of Lerms frequenLly used ln Lhls reporL, Lhe dlmenslons as well as lndlvldual
lndlcaLors:
1erm Def|n|t|on Source
Act|v|ty AcLlvlLles refer Lo pro[ecLs, programmes or oLher
unlL-level funcLlons ln a mlnlsLry.

ASCSAI Aslan CrganlsaLlon of Supreme AudlL lnsLlLuLlons www.asosal.
org
Aud|t comm|ttee An audlL commlLLee ls comprlsed of members
lndependenL of Lhe enLlLy's execuLlve managemenL,
and ls responslble for Lhe lndependenL revlew of
lnLernal conLrol, rlsk managemenL and Lhe lnLernal
audlL funcLlon, lncludlng Lhe monlLorlng of Lhe
lndependence of Lhe lnLernal audlL funcLlon.
CLCu 2011
Comp||ance 1) Pavlng Lo do wlLh conformlng wlLh laws and
regulaLlons appllcable Lo an enLlLy (CCSC 1992).
2) ConformlLy and adherence Lo pollcles, plans,
procedures, laws, regulaLlons, conLracLs, or oLher
requlremenLs (llA).
ln1CSAl
2004
Contro| act|v|ty ConLrol acLlvlLles are Lhe pollcles and procedures
esLabllshed Lo address rlsks and Lo achleve Lhe
enLlLy's ob[ecLlves. 1he procedures LhaL an
organlsaLlon puLs ln place Lo LreaL rlsk are called
lnLernal conLrol acLlvlLles. lnLernal conLrol acLlvlLles
are a response Lo rlsk ln LhaL Lhey are deslgned Lo
conLaln Lhe uncerLalnLy of ouLcome LhaL has been
ldenLlfled.
ln1CSAl
2004
Contro| env|ronment 1he conLrol envlronmenL seLs Lhe Lone of an
organlsaLlon, lnfluenclng Lhe conLrol consclousness
of lLs sLaff. lL ls Lhe foundaLlon for all oLher
componenLs of lnLernal conLrol, provldlng dlsclpllne
and sLrucLure.
ln1CSAl
2004
CCSC Commlsslon CommlLLee of Sponsorlng CrganlsaLlons
of Lhe 1readway Commlsslon, a group of several
accounLlng organlsaLlons. ln 1992, lL publlshed a
slgnlflcanL sLudy on lnLernal conLrol LlLled lnLernal
ConLrol - lnLegraLed lramework (ln1CSAl 2004).
www.coso.or
g
Cost-benef|t ana|ys|s CosL-beneflL analysls ls a Lechnlque for decldlng
wheLher Lo make a change. As lLs name suggesLs, lL
compares Lhe values of all beneflLs from Lhe acLlon
under conslderaLlon and Lhe cosLs assoclaLed wlLh lL.
CLCu 2007
66

Def|c|ency A percelved, poLenLlal or real lnLernal conLrol
shorLcomlng or an opporLunlLy Lo sLrengLhen
lnLernal conLrol Lo provlde a greaLer llkellhood LhaL
Lhe enLlLy's ob[ecLlves are achleved.
ln1CSAl
2004
Lnt|ty 1he Lerm 'enLlLy' has been employed as a generlc
word Lo cover all Lhe Lermlnologles used ln dlfferenL
counLrles, such as CenLral CovernmenL
AdmlnlsLraLlon, Agency, naLlonal ueparLmenL,
lederal MlnlsLry, CenLral AdmlnlsLraLlon eLc.
CLCu 2011
LUkCSAI Luropean CrganlsaLlon of Supreme AudlL lnsLlLuLlons www.eurosal
.org
Lxterna| aud|t AudlL carrled ouL by a body whlch ls exLernal Lo and
lndependenL of Lhe audlLee, Lhe purpose belng Lo
glve an oplnlon on and reporL on Lhe accounLs and
Lhe flnanclal sLaLemenLs, Lhe regularlLy and legallLy
of operaLlons, and/or Lhe flnanclal managemenL.
ln1CSAl
2004
IMIS lMlS sLands for 'flnanclal managemenL lnformaLlon
sysLem'. An lMlS ls used Lo analyse flnanclal aspecLs
of operaLlonal acLlvlLles ln an organlsaLlon. An lMlS
refers Lo Lhe group of lnformaLlon managemenL
meLhods Lled Lo Lhe auLomaLlon or supporL of
human declslon maklng and ls heavlly based on
lnformaLlon Lechnology and lnformaLlon sysLems.
C'8rlen,
1999
Iramework A documenL ouLllnlng recommendaLlons and
guldellnes.

IIAC lnLernaLlonal lederaLlon of AccounLanLs www.lfac.org
IIA lnsLlLuLe of lnLernal AudlLors (llA). lL ls an
organlsaLlon LhaL esLabllshes eLhlcal and pracLlce
sLandards, provldes educaLlon, and encourages
professlonallsm for lLs members.
www.Lhella.o
rg
Informat|on system A compuLer lnformaLlon sysLem (ClS) envlronmenL
exlsLs when a compuLer of any Lype or slze ls
lnvolved ln Lhe processlng by Lhe enLlLy of (flnanclal)
lnformaLlon of slgnlflcance Lo Lhe audlL, wheLher
LhaL compuLer ls operaLed by Lhe enLlLy or by a Lhlrd
parLy.
llAC,
ln1CSAl
2004
Interna| aud|t 1) 1he funcLlonal means by whlch Lhe managers of
an enLlLy recelve an assurance from lnLernal sources
LhaL Lhe processes for whlch Lhey are accounLable
are operaLlng ln a manner whlch wlll mlnlmlse Lhe
probablllLy of Lhe occurrence of fraud, error or
lnefflclenL and uneconomlc pracLlces. lL has many of
Lhe characLerlsLlcs of exLernal audlL buL may
properly carry ouL Lhe dlrecLlons of Lhe level of
managemenL Lo whlch lL reporLs (ln1CSAl AudlLlng
ln1CSAl
2004
67

SLandards).
2) An lndependenL, ob[ecLlve assurance and
consulLlng acLlvlLy deslgned Lo add value and
lmprove an organlsaLlon's operaLlons. lL helps an
organlsaLlon accompllsh lLs ob[ecLlves by brlnglng a
sysLemaLlc, dlsclpllned approach Lo evaluaLe and
lmprove Lhe effecLlveness of rlsk managemenL,
conLrol and governance processes (llA).
3) lnLernal audlLlng ls an appralsal acLlvlLy
esLabllshed wlLhln an enLlLy as a servlce Lo Lhe
enLlLy. lLs funcLlons lnclude, amongsL oLher Lhlngs,
examlnlng, evaluaLlng and monlLorlng Lhe adequacy
and effecLlveness of Lhe accounLlng and lnLernal
conLrol sysLems (llAC).
Interna| contro| lnLernal conLrol ls an lnLegral process LhaL ls affecLed
by an enLlLy's managemenL and personnel and ls
deslgned Lo address rlsks and provlde reasonable
assurance LhaL ln pursulL of Lhe enLlLy's mlsslon, Lhe
followlng general ob[ecLlves are belng achleved:
execuLlng orderly, eLhlcal, economlcal, efflclenL and
effecLlve operaLlons, fulfllllng accounLablllLy
obllgaLlons, complylng wlLh appllcable laws and
regulaLlons and safeguardlng resources agalnsL loss,
mlsuse and damage.
ln1CSAl
2004
IN1CSAI lnLernaLlonal CrganlsaLlon of Supreme AudlL
lnsLlLuLlons (ln1CSAl) ls Lhe professlonal
organlsaLlon of supreme audlL lnsLlLuLlons (SAl) ln
counLrles LhaL belong Lo Lhe unlLed naLlons or lLs
speclallsed agencles. SAls play a ma[or role ln
audlLlng governmenL accounLs and operaLlons and ln
promoLlng sound flnanclal managemenL and
accounLablllLy ln Lhelr governmenLs. ln1CSAl was
founded ln 1933 and has grown from Lhe orlglnal 34
counLrles Lo a membershlp of over 170 SAls
(ln1CSAl 2004).
www.lnLosal.
org
ISSAI lnLernaLlonal SLandards of Supreme AudlL
lnsLlLuLlons seLs Lhe baslc prerequlslLes for Lhe
proper funcLlonlng and professlonal conducL of
Supreme AudlL lnsLlLuLlons and Lhe fundamenLal
prlnclples ln audlLlng of publlc enLlLles.
www.lssal.or
g
LSL London School of Lconomlcs and ollLlcal Sclence www.lse.ac.u
k
M|n|stry See enLlLy

68

MIS MlS sLands for 'managemenL lnformaLlon sysLem'.
An MlS embodles Lhe same Lechnology and purpose
as an lMlS, however ls larger ln scope and
encompasses operaLlonal acLlvlLles beyond merely
flnanclal lnformaLlon. An MlS ls Lyplcally a cusLom-
bullL compuLerlsed appllcaLlon, such as L8 or 8M
sofLware.
MA MasLer of ubllc AdmlnlsLraLlon aL LSL www.lse.ac.u
k/mpa
Cb[ect|ve 1he overall goal or goals of an enLlLy or unlL.
Cb[ecLlves are on a hlgher level Lhan LargeLs.

CLCD CrganlsaLlon for Lconomlc Co-operaLlon and
uevelopmenL
www.oecd.o
rg
LIA LlA ls Lhe ubllc LxpendlLure and llnanclal
AccounLablllLy rogramme ulrecLoraLe by Lhe World
8ank and oLhers. LlA refers Lo Lhe framework
developed by Lhe ulrecLoraLe Lo measure and
compare lM pracLlces across counLrles wlLh
parLlcular focus on developlng naLlons.
www.pefa.or
g
IM ubllc llnanclal ManagemenL
IIC 1he acronym sLands for "publlc lnLernal flnanclal
conLrol", however Lhere are Lwo concepLs assoclaLed
wlLh Lhls:
1. llC represenLs Lhe recommended sLandards for
accesslon lnLo Lhe Luropean unlon (ue konlng,
2006).
2. llC ls used as Lhe shorL form for lnLernal flnanclal
conLrol ln Lhe publlc secLor ln general (Cohen, 2007).

kes|dua| r|sk 1he rlsk LhaL remalns afLer managemenL responds Lo
Lhe rlsk.
ln1CSAl
2004
k|sk assessment 8lsk assessmenL ls Lhe process of ldenLlfylng and
analyslng relevanL rlsks Lo Lhe achlevemenL of Lhe
enLlLy's ob[ecLlves and deLermlnlng Lhe approprlaLe
response.
ln1CSAl
2004
k|sk response 8lsk response refers Lo Lhe varlous posslble
responses Lo rlsk, speclflcally, rlsk Lransfer, LoleraLe,
LreaL and LermlnaLe. 1he enLlLy can choose Lo
respond Lo rlsk by Lransferrlng lL, for example Lo a
dlfferenL unlL or perlod ln Llme. lL can also respond
by LoleraLlng Lhe rlsk or LermlnaLlng Lhe acLlvlLy
poslLlng Lhe rlsk. LasLly, Lhe rlsk can be LreaLed by
lmplemenLlng conLrol acLlvlLles.
ln1CSAl
2004
69

SAI 1he publlc body of a SLaLe whlch, however
deslgnaLed, consLlLuLed or organlsed, exerclses by
vlrLue of law Lhe hlghesL publlc audlLlng funcLlon of
LhaL SLaLe.
ln1CSAl
2004
Sens|t|v|ty ana|ys|s A whaL-lf" Lype of analysls Lo deLermlne Lhe
senslLlvlLy of Lhe ouLcomes Lo changes ln
parameLers. lf a small change ln a parameLer resulLs
ln relaLlvely large changes ln Lhe ouLcomes, Lhe
ouLcomes are sald Lo be senslLlve Lo LhaL parameLer.
CLCu 2007
Stakeho|ders arLles LhaL are affecLed by Lhe enLlLy, such as Lhe
communlLles ln whlch Lhe enLlLy operaLes,
employees, cusLomers and suppllers.
ln1CSAl
2004
Standards SLaLemenLs of baslc requlremenLs for Lhe
professlonal pracLlce of lnLernal conLrol or lnLernal
audlL and/or for evaluaLlng Lhe effecLlveness of
performance, whlch are appllcable across
governmenL or Lhe enLlLy.
llA 2010
1arget 1argeLs are a serles of deflned goals, whlch are
necessary Lo meeL ln order Lo achleve Lhe overall
ob[ecLlve.

1op management Comprlses offlcers and oLhers who also perform
senlor managerlal funcLlons. ManagemenL lncludes
dlrecLors and Lhe audlL commlLLee only ln Lhose
lnsLances when Lhey perform such funcLlons.
ln1CSAl
2004
Uncerta|nty lnablllLy Lo know ln advance Lhe exacL llkellhood or
lmpacL of fuLure evenLs.
ln1CSAl
2004
Un|t A unlL refers Lo any sub-componenL of an enLlLy Lo
whlch ls asslgned parLlcular funcLlons/acLlvlLles.

Va|ue-for-money Achlevlng economy, efflclency and effecLlveness.
Lconomy: mlnlmlslng Lhe cosL of resources used for
an acLlvlLy, havlng regard Lo Lhe approprlaLe quallLy
and acqulslLlon aL Lhe rlghL Llme and lowesL cosL of
flnanclal, human and maLerlal resources whlch are
sulLable ln Lerms of boLh quallLy and quanLlLy.
Lfflclency: relaLlonshlp beLween Lhe ouLpuL, ln Lerms
of goods, servlces or oLher resulLs, and Lhe resources
used Lo produce Lhem. Also, Lhe use of flnanclal,
human and maLerlal resources ln such a way as Lo
maxlmlse ouLpuL for a glven amounL of resources, or
Lo mlnlmlse lnpuL for a glven quanLlLy or quallLy of
ouLpuL. LffecLlveness: exLenL Lo whlch ob[ecLlves are
achleved and Lhe relaLlonshlp beLween Lhe lnLended
lmpacL and Lhe acLual lmpacL of an acLlvlLy. Also Lhe
exLenL Lo whlch Lhe sLaLed ob[ecLlves have been
aLLalned ln a cosL-effecLlve way.
ln1CSAl
2004
70

"==)%*79 IE @%.-30#-7&%. A&3 =0/(7# .)#-&3 =3&A)..7&%2(.P A))*/2#$

1he followlng ls Lhe documenL LhaL was aLLached Lo Lhe sample lndlcaLors glven Lo Lhe publlc secLor
professlonals for feedback:

24 January 2012

London School of Economics (LSE)
Institute of Public Affairs, MPA Programme

Draft
Indicators on Public Internal Financial Control

This is a preliminary set of indicators that have been developed to measure and compare how internal
financial control is carried out in the public sector across member countries of the Organisation for
Economic Co-operation and Development (OECD). The indicators are strongly informed by
international standards on internal control, specifically by the International Organization of Supreme
Audit Institutions (INTOSAI) and the Committee of Sponsoring Organizations of the Treadway
Commission (COSO). However, these indicators are not aimed at evaluating adherence to these
standards or the effectiveness of internal control. Rather, they are to provide information on policies
and practices currently used in member states and illuminate differences. The development of the
indicators will inform work within the Public Governance and Territorial Development Directorate of
the OECD.

The indicators presented below fall within the following three dimensions:
1. Extensiveness of internal control activities
2. Involvement of top management in control activities
3. Responsiveness to internal control deficiencies

The final version of the indicators will be presented as a survey to be completed by a selection of line
ministries within member countries. We intend to distribute the final survey to five ministries within
each member country, specifically those ministries with the highest budgetary spending (excluding
Defense).

As you will see, the indicators have responses that are on different scales. Each response will be
normalised to a 0-10 rating, thus each indicator will have equal weighting in aggregation.

The purpose of this document is to gather initial feedback on the following aspects:
71

i. Clarity of questions, responses and the corresponding explanations
ii. Relevancy and appropriateness of indicators as part of the dimension as well as in general
with respect to internal control
iii. How realistic responses are in terms of capturing the true range of potential responses
iv. Level of detail of the questions, responses and explanations (for example, too detailed or
broad)
v. How realistic it is for a line ministry to be able to respond accurately to the survey in a timely
manner
vi. Which ministries should receive the survey (based on size of budget allocation or other
criteria)
vii. At which level of government the survey should be distributed to although we have indicated
that we intend to distribute the survey to a selection of individual ministries, this may not be
the best or most efficient way to obtain the relevant information. We would appreciate your
professional insights.

Moreover, we would highly appreciate any other comments and feedback. Please provide general
feedback within the large blue box below. Please provide your comments regarding individual
indicators within the comment boxes below each indicator. We would like to thank you very much in
advance and hope to hear from you by Friday the 15th of February, 2012. However, if this is not
possible, we would appreciate your response at your earliest convenience.

"==)%*79 LE G0/(7# .)#-&3 =3&A)..7&%2(.

8elow ls Lhe compleLe llsL of publlc secLor professlonals ln lnLernal conLrol, lnLernal audlL and/or
Supreme AudlL lnsLlLuLlons who have recelved drafL lndlcaLors Lo provlde feedback:

Canada
1. !ean Leclerc M.Sc. M8A ClA, ulrecLor lnLernal AudlL ulvlslon, AudlL and LvaluaLlon 8ranch,
LnvlronmenL Canada
2. Annle uugas, CA - ullA, ClL Manager, lnLernal AudlL SecLor, Cfflce of Lhe CompLroller
Ceneral, 1reasury 8oard of Canada SecreLarlaL

72

Germany
3. LsLher Meyer, 8eferaL 124 8evlslon, 8undesmlnlsLerlum fr wlrLschafLllche usammenarbelL
und LnLwlcklung
4. ChrlsLlne 8abenschlag, 8eferaL lnLernaLlonale AngelegenhelLen, 8undesrechnungshof
3. MarLlna Pampel, 8eferaL lnLernaLlonale AngelegenhelLen, 8undesrechnungshof
6. Werner elzer, CrundsaLzfragen, 8undesrechnungshof
Ita|y
7. uoLL.ssa uanlela Creco, SegreLarlaLo generale, Servlzlo dl conLrollo della gesLlone, CorLe del
conLl
8. Marcello 8essone, ufflclo vlll - lnspeLLoraLo generale dl llnanza 8aglonerla generale dello
SLaLo MlnlsLero dell'economla e delle flnanze
South korea
9. S.?. !eong, Pead of 8esearch 1eam 3, 8esearch lnsLlLuLe, Lhe 8oard of AudlL and lnspecLlon
of korea
10. C.C.Seo, AudlL and lnspecLlon ulvlslon, MlnlsLry of Land, 1ransporL and MarlLlme Affalrs
11. P.C. ?oon, Pead of AudlL ulvlslon, AudlL and lnspecLlon 8ureau, MlnlsLry of ubllc
AdmlnlsLraLlon and SecurlLy, 8epubllc of korea
Un|ted k|ngdom
12. !oyce urummond-Plll, Pead of lnLernal AudlL and Assurance, MlnlsLry of !usLlce
13. SLeve 8arnes, Lead AudlL ollcy Advlsor, llnanclal ManagemenL and 8eporLlng Croup, PM
1reasury
14. !ennlfer earce, Pead of llnanclal ManagemenL rocesses, llnance rofesslonallsm, PM
1reasury
13. !on WhlLfleld, Pead of lnLernal AudlL, ueparLmenL for 8uslness, lnnovaLlon and Skllls (8lS)
16. Melvyn neaLe, PM 8evenue & CusLoms, ulrecLor of lnLernal AudlL

"==)%*79 ME @%*7#2-&3.
01. Extent of IC procedures' formalisation
1. Does the entity have well defined reporting procedures in place?
2: Very well defined and formalised in writing;
1: somewhat informal;
0: no defined reporting procedures
Reference category: Control Environment
Reporting procedures are one of the strategies used to establish effective communication between
management and staff. Reporting allows for monitoring of staff activities. It also ensures that staff roles and
responsibilites are carried out in an effective manner (INTOSAI, 2004, p. 20). Since reporting procedures are
an internal control activity, if there are well defined procedures in place, this indicates a high level of
formalised internal control procedures.
2. At what levels are internal control procedures defined?
2: At all levels within the entity;
1: some levels;
0: not defined at any level
If internal control procedures are defined at all levels wtihin the entity this means there is a higher extent of
formalisation of internal control procedures (INTOSAI, 2004, p.6). 'All levels' refers to the ministerial level (top-
management), departments within the ministry, as well as units within departments.
3. Is there a formal definition of internal control?
1: Yes (please specifiy in what document or policy the definition can be found);
0: No
Internal control is embedded in the day-to-day activities of an entity (COSO, 1994). Consequently, it may be
the case that there is no explicit definition of internal control. A defintion of internal control could encompass
what internal control is and what the goals of internal control are. Hence, if there is a formal definition, there is
a higher level of formalisation of internal control.
4. Is there a formal definition of internal audit?
1: Yes (please specifiy in what document or policy the definition can be found);
0: No
Internal audit is part of internal control and plays a key role in supporting the functioning of the control
activities (INTOSAI, 2004). A defintion of internal audit could encompass what internal audit is and what the
goals of internal audit are. Hence, if there is a formal definition of internal audit, there is a higher level of
formalisation of internal control.
73
5. Is there a specific policy outlining how control activities are to be carried out?
2: Yes, written down (and orally);
1: Yes, orally only;
0: No
Reference category: Control Activities
Control activities "help ensure that necessary actions are taken to address risks to achievement of the
entity's objectives" (COSO, 1994, p.4). Thus, they are a key part of the internal control. Consequently, the
existence of a specific policy outlining the way control activities are to be carried out implies greater
formalisation of internal control.
6. Is there an individual and/or unit in charge of internal control in the entity?
Yes/No
Reference category: Ministry/Department
Internal control is embedded in the day-to-day activities of an entity; hence the line management is primarily
in charge of carrying it out (COSO, 1994). However, it may be the case that an individual or a unit is directly
responsible for internal control, for instance by defining standards or control activities. In this case, internal
control is more formalised.
7. Is there a formal internal audit function?
Yes/No
Internal audit plays a key role in supporting the functioning of internal control by evaluating the effectiveness
of control activities (INTOSAI, 2004). The existence of a formal internal audit function, hence, means a higher
level of formalisation of internal control.
8. Does the head of internal control and internal audit sign a statement outlining their responsibilities?
2: yes, formal, legally binding statement;
1: yes, formal statement not legally binding;
0: no
In some countries, the relevance of the internal control and internal audit function is emphasised via a formal
acknowledgement of roles and responsibilities of the staff ultimately responsible for the internal control and
internal audit. One way to do to is by requiring the signature of a formal statement. The existence of such
requirements signals higher formalisation of internal control.
02. Extensiveness of internal control activities
9. Are there multiple checks (otherwise referred to as redundancy checks) whereby more than one person
signs off on transactions?
74
2 : Yes, for all transactions;
1: Yes, for all transactions above a given threshold (please specify the threshold);
0: No
Redundancy checks are an internal control activity (INTOSAI, 2004, p.29). Redundancy is one of the possible
solutions to the problem of accountability, in which overlapping (and ostensibly superfluous) accountability
mechanisms reduce the centrality of any one of them (Scott, 2000, p. 52). These procedures may be set in
place for every transaction or for a relevant subset. Consequently, an higher share of transactions that are
subject to redundancy checks indicates a more extensive internal control. This indicator aims to capture this
phenomenon by assigning a higher score (2) in case redundancy checks are set in place for every
transaction. 1 point is assigned when only a subset of transactions is subject to redundancy check. No point
is assigned if no redundancy check is provided.
10. Is there periodic comparison of physical assets recorded in the accounting system with the actual physical
assets?
4: Yes, periodically for every asset;
3: Yes, periodically for a sample;
2: Yes, irregularly for every asset;
1: Yes, irregularly for a sample;
0: No
Although internal control is highly focused on monetary transactions, non-monetary flows are also very
important (UN SNA, 2008). Hence, an extensive internal control system should be able to monitor both
monetary and non-monetary transactions. This indicator highlights how frequently and comprehensively the
entity verifies that records and physical assets match. This is a form of verification and reconciliation
(INTOSAI, 2004, p.30).
11. Are value-for-money (economy, efficiency, effectiveness) assessments carried out within the entity?
3: systemically (very regularly on a set schedule)
2: occasionally (regularly, but on an ad hoc basis);
1: rarely (very infrequent);
0: never
In the past decades, following the theories of New Public Management, many countries have attempted to
reform the public sector to enhance the focus on performance (Holmes, 1992; Hood, 1991, 1995). One way to
do so has been strengthening the link between policy and accounting with the introduction of value-for-money
(VFM) auditing (Jacobs, 1998). Therefore, the introduction of VFM broadens the boundaries of the control
activities (INTOSAI, 2004, p.30). This indicator aims to capture the extensiveness of the VFM evaluation,
along a continuum going from systematic assessments to none.
12. How many days of professional development training per staff (on average) are provided each year by the
entity?
4: More than 10 days;
3: 6 to 10 days;
2: 2 to 5 days;
1: 1 day;
0: none
75
Providing staff members with professional development training can be considered an internal control activity.
Development training helps in qualifying staff better for their jobs and provides incentives for good
performance. If staff are fully qualified and up-to-date on professional standards this will reduce risk of poor
performance due to staff incompetency. (INTOSAI, 2004, p.20)
13. Are staff responsibilities clearly defined?
4: Yes, written down and reviewed more than once a year;
3: Yes, written down and yearly reviewed;
2: Yes, written down;
1: Yes, communicated orally;
0: No
Control activities need a set of preconditions in order to function properly. One such precondition is the
possibility to make actors accountable. In turn, accountability depends on the clarity of responsibility, which
is the possibility to clearly identify roles and performances (Sbragia, 2007, Tavits, 2007) and to avoid
problems of blame shifting (Hood, 2003). Consequently, clear and well defined roles allow the internal control
activities to be more extensive and detailed. In this case, the formal specification of roles and the presence of
a revision process are associated with a more extensive internal control system (INTOSAI, 2004, p.31).
14. What are the management's decision criteria to ensure that necessary resources are allocated to the IC
system?
(open question) -
As any other activity in an entity, the functionality of internal control is conditional on the allocation of the
necessary resources, in terms of personnel, expertise, funds, and technology. Consequently, the
extensiveness of the internal control is a function of the level of resources assigned to it. This indicator aims
to identify the existence of specific criteria to ensure that the resources that are allocated to the IC system
are sufficient to ensure its functioning. Examples of such criteria are that resources may be allocated
according to the level of risk of the activity or by the percent of the budget consumed by the activity.
15. Are routine evaluations made to monitor how well employees are achieving performance targets?
2: formalised and regular employee evaluations to monitor whether performance targets are achieved;
2: Informal but regular evaluations;
1: formalised but irregular employee evaluation;
1: Informal ad hoc evaluations;
0: no evaluations
Performance targets help identify the actual results of the single components of the organization, vis--vis the
expected ones. An extensive and regular assessment of these results helps identify unexpected trends and
the underlying phenomena that can jeopardize the achievement of the overall objectives (COSO, 1994). Thus,
the extensiveness of internal control activities is a function of the existence of routine employee evaluations.
Performance appraisals are a good reminder to staff of their obligations (INTOSAI, 2004, p.19).
03. Involvement of top management in control activities
76
16. Does the top management conduct value-for-money (economy, efficiency, effectiveness) assessments?
0: never
Value-for-money (performance) assessments are a key aspect of internal financial control as they reveal how
well public resources are being used to achieve desired outcomes (INTOSAI, 2004, p.30). If top management
is involved in conducting value-for-money assessments they will be in a position of greater information when
setting the strategic direction of the entity and making decisions regarding the allocation of resources.
Moreover, the more regularly that top management is involved in value-for-money assessments, the more
they may be aware of risks and take appropriate action.
17. Does the top management compare activities with those outlined in the budget?
2: yes at the line item level;
1: yes at the cost centre;
0: no
The expenditures associated with the activities of an entity should align with expenditure allocations in the
entity's budget. Discrepancies may indicate that lower level staff are not using public resources in an
approved manner. This indicator captures whether top management compares the expenditures made by its
various units to the allocations made in the approved budget and, if so, the level of scrutiny at which the
comparisons are made (INTOSAI, 2004, p. 29,30).
18. Are unit managers required to report to top management on the extent to which their targets are being
reached?
2: yes, formal reporting is required,
1: yes, but only informal,
0: no
A unit's achievement of its targets can be considered a determining factor in whether objectives are going to
be reached. The more often a unit manager is required to report to top management on progress towards
targets, the more likely the unit manager will monitor the achievement of targets closely. Moreover, the more
aware that top management is of the performance of various entities in reaching their targets, the more able
they are to initiate corrective action if objectives are at risk of being reached. This indicator captures whether
unit managers are required to report to top management regarding progress to targets and the level of
formality that such reporting takes (INTOSAI, 2004, p. 30).
19. > If formal, how is this reporting done?
A: written reports, B: through information system, C: emails, D: verbal, E: other (please specify)
This question gathers further information about the nature of formal reporting and is not scaled with
77
quantitative values.
20. Does the top management modify the entity's operating decisions based on poor performance?
2: yes, policies are always amended, carried on or dropped due to performance assessment;
1: yes, they are sometimes amended;
0: no, top management does not modify the operating decisions based on poor performance
Top management may use the results of performance assessments to inform their decisions regarding the
operations of the entity. This indicator captures the extent to which top management adjusts entity operating
systems due to poor performance. The more they adjust operations, the more they are involved in internal
control of the entity, as poor performance is a significant risk to reaching overall entity objectives. In this
context performance is taken to be the results of value-for-money assessments, compliance or regularity
audits and other measures of performance (INTOSAI 2004 p. 30).
04. Appropriate and achievable setting of targets and objectives
21. Does the entity check/evaluate internally whether they are setting realistic performance targets?
2: yes, formal and regular evaluation conducted;
1: yes, occasional process of evaluation;
0: no
By keeping their performance targets realistic, an entity can ensure efficient progression towards objectives.
Moreover, it will reduce the likelihood of unethical behavior among employees. "Setting realistic performance
targets [!] reduces counterproductive stress as well as the incentive for fraudulent financial reporting that
unrealistic targets create" (COSO, 1994, p.25). It is desirable for a entity to conduct an internal evaluation of
whether their targets are realistic and achievable. The more formal and periodic the internal evaluation is, the
more likely targets will allow for progression towards objectives and serve as a safeguard against incentive for
improper and undesirable behavior.
22. Are high-level targets aligned with entity-wide objectives?
2: targets developed to be very closely aligned with obejectives;
1: targets somewhat aligned with objectives;
0: targets not closely aligned with objectives at all
Entity-wide objectives are represented by the entitys mission and value statements, and they lead to the
development of an overall strategy (COSO, 1994, p.33). Following the entity's overall strategy, more-specific
objectives and corresponding high-level targets to meet these objectives are established. Developing targets
that are consistent with entity-level objectives is a desirable condition for the entity to identify critical success
factors and thus achieve their objectives. This indicator captures the extent to which targets are developed to
be aligned with entity-wide objectives. The more closely aligned targets are with entity-wide objectives, the
less likely the entity encounters the risk of failing to achieve their objectives.
23. Do risks and internal control impact the setting of policy objectives?
78
2: yes, IC is an integral part of objective setting processes;
1: Yes, IC is somewhat considered in objective setting;
0: no
Reference category: Risk Assessment
In achieving objectives, an entity encounters risks at all levels within their organisation. Although internal
control cannot perfectly eliminate all risks for the entity, it certainly reduces risks and helps the entity achieve
its objectives (COSO, 1994, p.6). Hence, if an entity's objective setting process is closely related with risks
and IC, it is more likely to be able to achieve its objectives.
24. Are the entity-wide policy objectives clearly defined?
2: yes, objectives are defined in a written format;
1: somewhat defined in a written forma;t
0: not defined in a written format
Setting clearly defined entity-wide objectives helps identify critical risks and success factors to achievement
of the objectives. In addition, as internal control relies on checks and balances among employees at all levels
within an entity, explicitly stated objectives are likely to provide a clear understanding of roles and
responsibilities of different personnel in achieving common objectives (COSO, 1994, p.89). If objectives are
clearly explained in a written format, they are likely to serve as points of reference for the expectation of staff
performance and evaluation.
25. How specific are entity-wide policy objectives?
Percentage of objectives quantified (100% = 10, 50% = 5, etc.)
Specificity of objectives enables an entity to better identify different kinds of risks to achievement of their
objectives. Therefore, the more specific an entity's objectives are, the more it is likely to achieve its
objectives. This indicator assesses how specific objectivies are, capturing the percentage of objectives that
are written in quantitatively measurable terms.
26. At the entity level, is there a procedure for performance reviews to assess the progress towards targets?
2: yes there is a procedure which extensively uses quantifiable indicators of performance;
1: yes there is a procedure but with few quantifiable indicators;
0: no
Setting measurable targets that align with overall objectives provides an entity with a clear direction, toward
which it moves in conducting its activities and achieving objectives (COSO, 1994, p.39). The extent to which
these measurable targets are being reached can be assessed by formal performance reviews. If a
performance review exists there will therefore be more appropriate and achievable setting of targets and
objectives. A performance review procedure which uses quantifiable indicators of performance is likely to
better assess an entity's progress towards meeting their targets than a procedure which does not or barely
use quantifiable indicators does.
27. At the unit level, is there a procedure for performance reviews to assess the progress towards targets?
79
2: yes there is a procedure which extensively uses quantifiable indicators of performance;
1: yes there is a procedure but with few quantifiable indicators;
0: no
This is the same question as the one above, but looks at the unit level.
28. How closely are unit-level objectives aligned with entity-wide objectives?
2: unit level objectives are very closely aligned with entity objectives;
1: unit level objectives are somewhat aligned with entity objectives;
0: unit level objectives are not closely aligned with entity objectives
The objectives of internal units and functions must be aligned with entity-wide objectives (COSO, 1994, p.
38). Linkage of unit-level objectives with entity-level objectives and overall strategic plans is likely to reduce
risks to achievement of objectives.
05. Staff awareness of IC
29. Is there a code of conduct?
2: yes, written formally,
1: yes, orally;
0: no
Staff members contribute significantly to internal control. Internal control is an explicit or implicit part of
everyones duties and all staff members play a role in effecting control. (INTOSAI, 2004, p. 43) The indicator
looks at whether there is a formalised code of conduct in place which ensures that staff can always refer back
to a document which implies high awareness of internal control. An orally communicated code of conduct may
produce more ambiguity and more difficulty in accessing and referring back to the code of conduct.
30. Is there training on ethics?
3: regularly (once a year or more often);
2: sometimes (less than once a year);
1: once when staff join;
0: there is no training on ethics
Internal control is closely linked to ethics. Providing training can raise the awareness of public servants of the
internal control objectives and, in particular, the objective of ethical operations, and helps them to understand
the internal control objectives and to develop skills to handle ethical dilemmas (INTOSAI, 2004, p. 18).
31. Are staff made aware of internal control procedures?
80
3: regularly (once a year or more often);
2: sometimes (less than once a year);
1: once when staff join;
0: staff are not explicitly made aware of IC procedures
Staff need to understand the internal control procedures in order to carry them out successfully. This requires
that they are made aware of these procedures (INTOSAI, 2004, p. 39 & p. 43). This indicator measures the
extent to which staff are made aware. There are different ways of providing this awareness, for instance
through workshops or training. What is crucial with respect to staff awareness of internal control is the
regularity of such workshops or trainings to remind staff of the current procedures.
06. Extent of Information Systems utilisation
32. Does a management information system (MIS) exist at the unit level?
3: yes, operational in all or most units;
2: yes, operational in some units, and in the process of planning and/or development in others;
1: in the process of planning and/or development;
0: no MIS exists at the unit level
Reference category: Info and Communication
Control activities significantly rely on the flow of relevant information (COSO, 1994; ISO, 2009). Hence, the
existence of a management information system is particularly critical. "Organisations have become
increasingly dependent on computerized information systems to carry out their operations and to process,
maintain, and report essential information. [...] Information systems is an integral part of most control
activities" (INTOSAI, 2004, p. 32).
33. > Is the management information system (MIS) responsive to changes in the business environment?
2: the MIS is responsive whenever there is a change in the business environment;
1: the MIS is sometimes responsive to changes in the business environment;
0: the MIS does not take into consideration changes in the business environment
Ideally, the MIS should ensure that relevant information flows across the entity, informing decision makers in
a timely and comprehensive manner. As the business environment is consistently changing, the information
system may need to adapt its technical capabilities or the way in which information is collected and
disseminated. Changes in the business environment may include: external as well as internal changes that
affect the way the business operates. If the MIS is responsive to the business environment, this indicates
that the system is utilised to a greater extent and allows decision makers to make more appropriate choices.
34. > How comprehensive is the management information system (MIS): to cover operational, financial and
evaluative functions?
3: the MIS covers all aspects of operational, financial and evaluation functions;
2: the MIS covers two of the three functions (specify which!);
1: the MIS covers one of the three functions (specify which!);
0: the MIS does not incorporate operational, financial and evaluative functions (please specify what the MIS
covers)
81
If the MIS is more comprehensive, it will cover a greater amount of information and thus, there is greater
likelihood that it will be utilized. The more comprehensive the MIS, incorporating different types of information,
the greater the availability of information within the entity. Future decision making in the management of
financial resources can be taken from a more informed position (INTOSAI, 2004, p. 37). Responses to this
indicator capture the comprehensiveness of the MIS without placing specific value on any one type of
information (i.e. operational, financial or evaluative).
35. Does a financial management information system (FMIS) exist at the entity-wide level?
2: yes, in operation already;
1: in the process of planning and/or development;
0: no
Internal financial control may be better or more efficiently conducted if a financial information system is in
operation within an entity (INTOSAI, 2004, p. 37). This indicator captures whether a MFIS is in use. If not
currently in use, a MFIS may be in the stages of development which indicate a formal information system for
financial matters will soon to be utilised.
36. > Is the FMIS responsive to changes in the business environment?
2: the FMIS is responsive whenever there is a change in the business environment;
1: the FMIS is sometimes responsive to changes in the business environment;
0: the FMIS does not take into consideration changes in the business environment
The more responsive the MFIS is to changes in the business environment, the greater the likelihood that the
information gleaned from its use will be accurate and appropriate, leading to better informed decision making.
Responsiveness can imply many things such as, for example, changes in the way financial information is
recorded, who is engaged in the recording, the timeliness of record entry into the system after a transaction,
etc. (INTOSAI, 2004, p. 38) This indicator captures the extent of MFIS responsiveness to changes in the
business environment with a greater responsiveness implying that the information system is more likely to be
utilized to a greater extent in decision making.
37. To what extent does the information system (MIS and/or FMIS) inform strategic decisions?
4: always;
3: often;
2: occasionally;
1: rarely;
0: never
This indicator captures to what extent the information system is used to inform strategic decision making.
The information system may include relevant information to lead to better informed decision making and the
more it is used, the more appropriate the strategic decisions chosen may be to the current state of the entity.
The responses capture how often the information system is used by strategic decision makers.
38. How long is the average time taken between a financial transaction occuring and it being recorded in the
82
information system?
4: whenever there is a financial transaction, it is immediately recorded and updated in the information system;
3: maximum a day;
2: less than a week;
1: more than a week;
0: financial transactions are rarely recorded
The shorter the delay between a financial transaction occurring and its appearance in the information system,
the more accurate and up to date the information system will be. A more accurate and up to date information
system is an indicator of the extent of information system utilization as the more the system is relied upon to
inform the entity the more critical its timeliness and accuracy will be. The responses capture the range of how
promptly financial information may be recorded in the system (INTOSAI, 2004, p. 37).
39. Is the role of information systems clearly communicated to management and staff?
3: the role of information systems is communicated at regular intervals to all staff;
2: the role of information systems is communicated at irregular intervals or on a case-by-case basis;
1: staff are made aware of the role of information systems when they newly join;
0: there is no formalised procedure to inform staff of the role of information systems
If the role and importance of information systems is clearly communicated to staff, there is a greater
likelihood that the staff will update the systems regularly and use the systems to inform their activities. This
indicator captures the regularity at which staff are given instruction regarding the role of information systems
(INTOSAI, 2004, p. 38).
40. How accessible are internal records (financial and non-financial)?
2: Very easily accessible: all in one system accessible to all;
1: accessible but time consuming and/or spread across different systems;
0: hardly accessible: information spread across systems that may require specialist to access
Information can be difficult to access by general staff as the overall information system may be such that
information is spread across many separate systems. This requires greater effort by staff to gather and
compare relevant data. Moreover, the system may require a specialist to access and thus staff use of the
system may be minimal. The ease of use of the information system impacts how often and to what extent the
system is utilised by staff (and perhaps top-management) to inform decision making (INTOSAI, 2004, p. 38).
This indicator captures the range of how accessible information systems are to individuals in the entity.
07. Standardisation of communication between management and staff
41. Are objectives effectively communicated to employees?
3: Various channels are regularly used to explain and update on the objectives to all staff in all levels;
2: Staff are made aware of the objectives in irregular intervals or on an ad-hoc basis;
1: Staff are made aware of the objectives when they newly join;
0: There is no formalised procedure to inform staff of the objectives
83
A key aspect of communication between management and staff is the effective communication of objectives.
This indicator measures whether objectives are clearly communicated in relation to the standardisation of
communication. Therefore, the most standardised means that objectives are communicated to staff regularly
and through a variety of defined channels.
42. Are there formal communication channels between management and staff?
2: Yes, there is more than one formal communication channel (such as regular meetings, MIS, email, etc. -
please specify);
1: Yes, there is one formal communication channel (please specify);
0: No, there are no formal communication channels, all communication occurs on a case by case basis
One of the most critical communications channels is that between management and its staff (INTOSAI, 2004,
p. 39). This indicator looks at whether there are formal communication channels in place that facilitate
communication between management and staff. The goal of this indicator is to measure the extent to which
this communication is formalised through the number of channels.
43. > If yes, how regularly are formal communication channels between management and staff used?
2: on a regular, re-occuring basis at least once a week;
1: on a semi-regular basis;
0: very irregularly or there are no formal communication channels used
In addition to the number of channels used for communication between management and staff, a second
aspect of standardisation refers to the frequency. Therefore, this indicator measures how regularly these
formal communication channels are used, where a set schedule with frequent occurrence receives a higher
score.
44. Are there opportunities for employees to provide feedback to management on whether internal controls are
effective?
2: Yes there is more than one formal communication channel reserved to provide feedback to management
(such as through regular feedback meetings, MIS feedback surveys, etc.);
1: Yes, there is one formal communication channel for feedback;
0: No, there are no formal communication channels, all communication regarding feedback occurs on an ad-hoc
basis and/or occurs informally
Reference category: Monitoring
"Effective communication should occur in all directions, flowing down, across and up the organisation,
throughout all components and the entire structure. [!] Management must be kept up to date on
performance, developments, risks and the functioning of internal control, and other relevant events and
issues" (INTOSAI, 2004, p. 38-39). This indicator looks at whether staff have the opportunity to provide this
feedback through defined formalised channels.
07. Standardisation and extent of communication
84
45. How often are external stakeholders engaged in an exchange of information?
3: occasionally (regularly, but on a case-by-case basis);
1: never, but planned in the next year;
0: never
The involvement of external stakeholders is critical to the functioning of internal control. In particular, external
stakeholders may make it easier for the entity to identify risks in a more timely and comprehensive way
(COSO, 1994; ISO, 2009). This indicator aims to capture the extent to which communication is embedded in
the internal control activities.
08. Rigour of risk assessment
46. At what level(s) are risks assessed?
2: at all levels within the entity;
1: some levels;
0: not assessed at any level
Risks can occur at any level within an entity. In order to assess risks in a more rigorous manner, they need to
be assessed at all levels. 'All levels' refers to the ministerial level (top-management), departments within the
ministry, as well as units within departments (INTOSAI, 2004, p. 23).
47. At what level(s) are risks defined?
2: At all levels within the entity;
1: some levels;
0: not defined at any level
As well as being multi-dimensional, risks may present themselves in different ways depending on what level
within an entity they occur. That is to say a financial risk has different implications for management than for a
small operational unit. Therefore, a risk assessment is more rigorous if risks are defined at all levels. 'All
levels' refers to the ministerial level (top-management), departments within the ministry, as well as units within
departments.
48. How many types of risks do you define?
2: A variety of dimensions are taken into account (such as financial, operational, political, reputational risk,
human and cultural factors; please specify);
1: Risk is defined in only one dimension (please specify);
0: No definition of risk is provided
Risk is typically a multi-dimensional issue that encompasses financial risk, reputational risk, political risk and
others. A risk assessment is more rigorous if it takes into account several risk dimensions and defines these
85
clearly.
49. How formal are the procedures for risk assessment?
2: very formal (defined in a policy);
1: somewhat formal (routinely completed following the same procedures);
0: not formal, procedures on a case by case basis
A more formal procedure for risk assessment implies a more rigourous risk assessment.
50. How often is a risk assessment on a strategy level undertaken by top management?
4: systemically (very regularly on a set schedule);
0: never
Top management is responsible for strategy and therefore they should subject their strategic planning to risk
assessment. In doing so, the policy objectives defined will more likely be achieved. A systematic
assessment of risks ensures that emerging risks can be identified swiftly. If top management is involved in
risk assessments at a greater frequency, this translates into a more rigorous risk assessment in general.
51. How often is a risk assessment on an activity level undertaken?
0: never
This indicator captures the frequency of risk assessment in the same way the indicator above does. However,
this indicator looks at activity level risk assessments.
52. Who performs risk assessment?
(open question)
This is an open question that seeks to capture which body within the entity performs risk assessments.
53. Are individuals external to a specific unit involved in risk assessment?
2: Yes, always,
1: Yes, sometimes,
0: No
86
Having an external body involved in risk assessment ensures objectivity and independence from the specific
unit that undertakes its risk assessment. Processes that may seem natural or negligible but potentially pose
risks can easier be detected from the outside. This ensures that a risk assessment is carried out with a
greater scope, thereby making the risk assessment more rigorous (INTOSAI, 2004, p. 43).
54. Does risk assessment address the limitations of data or modelling used as input to the risk assessment
process itself?
2: Yes, always;
1: yes, sometimes (please specify in which cases);
0: no
An important aspect of the risk assessment is the methodology of the assessment itself. It is crucial to ask
how the modelling of risk was done and where its limitations lie as well as the limitations of data used. Risks
can only be identified if the methodology allows it to be identified and therefore if modelling or data is poor,
certain risks may not be perceivable (ISO, 2009, p. 7). For a more rigorous risk assessment, these modelling
and data limitations have to be addressed. In this question, we seek to capture whether these factors are
generally taken into consideration in risk assessments. If, for instance, only capital projects or a subset of
risk assessments address these limitations, please specify.
55. Is anyone responsible for the development and revision of the framework/procedures for risk assessment?
2: there is an official position whose role includes this taks;
1: this responsibility is assigned on a case-by-case basis;
0: there is no assigned responsibility for this
A clear responsibility to develop, implement and maintain the framework as well as procedures for risk
assessment ensures that the risk assessments are up-to-date and in line with the business processes. Risk
assessment is more rigorous with an individual responsible for these tasks (ISO, 2009, p. 11)
56. Are there processes for consultation with internal stakeholders?
2: yes, formal (defined in a policy or document);
1: yes, informal;
0: no
Units within an entity typically operate in a way such that there are a number of entity-internal but unit-external
stakeholders integrated in the business process. By consulting with these stakeholders, a risk assessment
can take into account further points of view, making the risk assessment more rigorous (ISO, 2009, pp. 22-
23).
57. Is there a procedure to quantify the magnitude of a risk?
2: yes, formal;
87
1: yes, informal;
0: no
If the magnitude of risk is quantified it will provide a measurable estimate with regards to the effects a risk
might have (ISO, 2009, p. 6). A well-defined, formal, procedure means quantifying the magnitude of risk can
be carried out easily and the risk assessment itself will be more comprehensive and rigorous. An informal
procedure may also exist, for instance a common practice that has not been formally been recorded in a
document or through a policy.
58. In general, do risk assessments consider timeframes (assessing short and long term risks)?
2: yes both short and long term risks;
1: yes, only one (please specify whether short OR long term risks);
0: no
If a risk assessment makes clear associations of a risk to a timeframe and distinguishes between short and
long term risks (which pose different threats to business processes and should be thusly handled differently)
the risk assessment is more rigorous (ISO, 2009, p. 17).
59. Does the risk assessment include sensitivity analysis?
2: yes, for all projects;
1: yes, for some projects;
0: no
Sensitivity analysis allows one to see how the conclusions of risk assessments may change as the
assumptions used in a model vary. As an aid in decision making, sensitivity analysis can also aid in
identifying the most sensitive or important decision variables (EDRC, 1999; Frey and Patil, 2001). Therefore,
being an integral part of risk assessment, a more rigorous risk assessment includes one or more methods of
sensitivity analysis.
60. Does risk assessment include the assessment of risk treatment options (transfer, tolerate, terminate, treat)?
2: yes, all risk treatment options are assessed;
1: yes, but only some risk treatment options are assessed;
0: risk assessment does not include an assessment of risk treatment options
How the organisation responds to identified risks can bear risks in itself. In other words risk treatment might
pose new risks. In order for a rigorous risk assessment to be carried out, these risk treatment options should
be assessed to fully understand the breadth and depth of potential risks (INTOSAI, 2004, pp. 22, 26).
61. Is complimentary research undertaken on the industry/sector in which the entity operates?
2: yes, very thorough research is conducted;
1: yes, some research is conducted;
88
0: typically there is no research conducted
Complimentary research helps to understand how organisations in the same or a comparable industry/sector
operate. For instance, there may be common risks identified in a certain sector that can complement the
entity's risk assessment and make it more rigorous.
09. Appropriateness of responses to risk (Adaptability of risk assessment)
62. How often is the risk assessment procedure changed to reflect changes in the business environment?
2: regularly (once every two years);
1: sometimes (less than once every two years);
0: infrequently (less than once every five years)
Risk assessment is an ongoing process and is subject to changes in the environment. Changes in the
external and internal context may induce changes in risk criteria and suggest alterations in the procedures for
risk assessment. Management needs to ensure that their control system continues to be relevant and able to
address new risks (COSO, 1994, p. 69). The more adaptive risk assessment procedures are to changes in
both external and internal changes, the more appropriate responses to risks are.
63. Are the results from monitoring and review procedures used to improve risk assessment?
2: yes, information gatherered from monitoring and review is used to improve risk assessment
1: yes, information gathered is made available to those conducting risk assessment (but not necessarily used
for improvement)
0: no the information gathered from monitoring and review is not used to inform improvements of risk
assessment
Monitoring and review "ensure that internal control continues to operate effectively" (COSO, 1994, p. 69).
Therefore the purpose of ongoing monitoring and periodic review is to provide management with evaluative
information, where they can check internal control procedures and where necessary improve and amend
them. Information gathered from monitoring and review can also be used to indicate problems and to signal
where improvements in risk assessment may be necessary (ISO, 2009, p. 20). If information is used this
way, it increases the adaptability of risk assessment, which in turn brings about a more effective and timely
identification of risks.
64. Are there monitoring procedures designed to identify new emerging risks?
2: yes, there are formal procedures;
1: yes, there are ad hoc procedures;
0: no procedures are used at all
Among the purposes of monitoring and review is to identify new risks which emerge in the period between
formal risk assessment procedures. If such monitoring procedures exist, risk assessment will be more
appropriate and adaptable (ISO, 2009, p. 20). Consequently, formal monitoring and review procedures to
identify new emerging risks are more likely to lead to an effective and timely risk assessment than ad hoc or
89
no procedures. Moreover, responses to risk will be more appropriate.
09. Appropriateness of responses to risk (Congruence of control activities and risks)
65. How closely are control activities linked to risks identified in the entity?
2: control activities are developed based on risks identified in a risk assessment;
1: the development of control activities takes into account identified risks but is not entirely based on a risk
assessment;
0: control activities and identification of risk are not linked
Control activities that are put in place must be aligned with actual risks if such risks are to be mitigated
(COSO, 1994, p. 51). Integration of control activities with risk assessment process therefore allows for more
approrpriate and timely responses to risks. In other words, the more control activities are shaped according to
identified risks, the more proper and timely actions there are to address risks to achievement of objectives.
09. Appropriateness of responses to risk (Systematic responses to risks)
66. Are there procedures for responses to risks?
2: yes, there are formal procedures defined (transfer, tolerate, treat, terminate);
1: yes, but they are created case-by-case or as needed;
0: no
Once risks are identified and anlaysed, the next step is to determine how to manage the risks. Systematic
responses to risks involve risk transfer, tolerate, treat and terminate (INTOSAI, 2004, p. 26). This indicator
captures the extent to which procedures for responses to risks are formal and thus more systematic. The
rationale is that more formal and systematic procedures for responses to risks will lead to more appropriate
responses to risk.
67. > If so, are these procedures defined internally by the entity or by an external body?
A: entirely defined by external body; B: partly defined externally, partly defined internally; C: entirely defined
internally; (Please specify)
This question gathers additional information regarding who defines formal procedures for responses to risk.
68. Is there an escalation process to deal with significant risks?
2: yes, there is a formal escalation process;
1: yes, there is an informally defined escalation process;
0: no escalation process exists
90
Proper reporting and escalation processes can enhance accountability in managing risks (ISO, 2009, p. 11). If
an entity has an escalation process to deal with significant risks, this is a type of systematic response to
risks. The more formal the escalation process is, the more systematic and hence the more appropriate
responses to risk are. Significant risks will be dealt with at the appropriate level in a timely manner and staff
will be more easily held accountable for addressing significant risks. Formal escalation processes provide
documents to which staff can refer, whereas informally defined escalation processes may become more
difficult to access and refer to over time.
69. Does the risk assessment define the level at which risk becomes acceptable or tolerable?
1: yes, there is a defined numerical threshold;
1: yes, professional judgement is used to determine if a risk is acceptable;
0: no
One way to evaluate the significance of risk is to set the risk criteria and define the level at which risk
becomes acceptable or tolerable (ISO, 2009, p. 17). Whether the level is clearly defined numerical threshold
or a matter of professional judgment, having such a threshold allows for a systematic response to risk and in
turn risks will be dealt with in an appropriate manner.
70. Does the risk assessment explicitly recommend to top management which risks need a response and the
priority for the implementation of responses?
2: yes, the risk assessment document contains explicit recommendation to management as to which risks
require a response and the priority for response implementation;
1: yes, the risk assessment document contains explicit recommendation to management as to which risks
require a response, but not the priority for response implementation;
0: no, the risk assessment does not explicitly provide such recommendations to top management
After the risk assessment, an entity determines which risks need a response and the priority for the
implementation of responses. While the risk assessment will likely always provide useful information about
risks and indicate where responses may be necessary, it may or may not explictly make recommendations to
top management on these matters. If the risk assessment document includes recommendations on which
risks require responses and the priority for the implementation this is likely to improve risk responses and
make then more appropriate.
71. Is there a procedure to address residual risks? (those remaining after initial risk treatment)
2: yes, those conducting risk assessment provide further recommendations for the treatment of residual risk;
1: yes, the residual risk is communicated to the unit manager and it is the responsibility of the unit manager to
respond;
0: no, there is no procedure to address residual risk
Once the significance and likelihood of risk have been assessed, management needs to consider how the risk
should be managed (COSO, 1994, p. 42). The complete elimination of threats is virtually impossible; hence,
the risk assessment is likely to be more appropriate if it holistically evaluates the impact of the risk response,
and specifically the effect of the threats that are still in place after the responses.
72. Does risk assessment include a way to decide whether residual risk levels are tolerable?
91
1: yes, there is a defined numerical threshold;
1: yes, professional judgement is used to determine if risk is acceptable;
0: no
Even after risk treatment, it is likely that some level of residual risk will always exist (COSO, 1994, p. 43).
Decision makers will have to decide whether residual risk levels are tolerable, and if not tolerable, they will
generate a new risk treatment plan and assess the effectiveness of that treatment (ISO, 2009, p. 19). An
entity is more likely to have appropriate systematic responses to risks if they have either a defined numerical
threshold of tolerable risk or professional judgment of acceptable risk. Likewise, an entity whose risk
assessment does not define the level of tolerable residual risk is less likely to have appropriate systematic
responses to risks.
73. Are plans for responses informed by lessons learned from past implementations of similar responses?
2: yes, there is a consistent and explicit account of past experiences when a plan is drafted;
1: yes, past experiences are considered but not in a consistent and formalised way;
0: no
This indicator relies on the idea of learning organisations (see Easterby-Smith et al, 1999). The effective use
of information collected during previous attempts to deal with risks is essential to better design the risk
treatment. Moreover, it helps reduce the scope of unforeseen residual risks. In sum, the design of treatment
plans is more likely to be appropriate when it effectively accounts for past experiences.
74. How often is cost benefit analysis used as an element of assessing risk response?
Proportion of risk treatments that are subject to cost-benefit analyses (for example, 90%)
Selecting the most appropriate risk response option involves balancing the costs and efforts of
implementation against the benefits derived (ISO, 2009, p. 19; INTOSAI, 2004, p. 8). In other words, it is
sensible to implement a risk treatment only if the payoff offsets the costs. Thus, the response to risk is likely
to be more appropriate if it is analysed in terms of costs and benefit. Consequently, the score for this
indicator is a proportion of the risk treatments that are subject to cost-benefit analyses.
75. Is there a formal procedure to manage the risks caused by unforeseen events (crisis management)?
2: yes, there are formal procedures;
1: yes, there are procedures on a case-by-case basis;
0: there are no formal procedures
It is unfeasible for an entity to predict every possible risk. Therefore, sometimes the entity has to deal with
unforeseen threats. In this case, the entity should put in place procedures to cope with these new risks as
soon as unforeseen events occur and are identified as threatening (COSO, 1994). The response is more
appropriate if it follows a pre-existing procedure, rather than trying to decide how to deal with the problem by
ear, while the crisis has already occurred.
92
76. Are risk response plans written down? (ie. a document on how the chosen treatment options will be
implemented)
Yes/No
If a risk response plan is written down, responses will be more systematic and in turn, it is more likely that
responses to risk are more appripriate.
77. Is there a procedure for risk reporting?
2: yes, there is a formal reporting procedure;
1: yes, but it is defined case by case;
0: no risk reporting procedure exists
Responses to risk rely on the accessibility of relevant information on the nature of the threats. Organizations
are complex environments, linking complex networks of stakeholders (Rowley, 1997). Thus, it is possible that
a subset of stakeholders is more capable to recognize a threat. Hence, it is critical to design a procedure that
allows this information to flow and to reach the decision makers in a timely and proper manner. This indicator
aims to measure this phenomenon.
10. Responsiveness to internal control deficiencies
78. Are procedures or protocols in place to determine which internal control deficiencies are significant and
should therefore be reported to top management?
2: yes, there are formal protocols;
1: yes, there are informal procedures to determine which IC deficiencies are significant, using for example
professional judgement;
0: There are no protocols in place to determine the significance
There may be a range of internal control deficiencies, however not all such deficiencies may be significant in
magnitude and warrant corrective action. Protocols may be used to separate the significant findings from
those of lesser importance (COSO, 1994, p. 76). If only those of significant magnitude are reported to top
management, this allows top management to better focus its attention on and address the most pressing
issues, making the entity more responsive to such issues. Moreover, protocols will allow for audit findings to
be dealt with in a uniform manner, removing the scope for potential errors in judgment regarding which findings
should be reported to top management.
79. Are procedures or protocols in place to communicate problems identified with internal control to the
appropriate decision making bodies with the authority to take corrective action?
2: yes, there are formal protocols;
1: yes, there are informal procedures to communicate IC problems;
0: There are no procedures in place to communicate internal control problems
In order to take corrective action, addressing identified internal control deficiencies, the existence of such
93
deficiencies must be reported to the appropriate individuals. Specifically, deficiencies should be reported to
those with the authority to make decisions regarding what corrective action to take and ability to enforce such
decisions. This indicator captures whether there are specific protocols in place that ensure the appropriate
individuals are informed of internal control deficiencies identified through either internal or external audit
(COSO, 1994, p.76; INTOSAI, 2004, p. 42).
80. How often are internal control problems reported to those who have authority to take corrective action?
4: always;
3: often;
2: occasionally;
1: rarely;
0: never
In order to take corrective action addressing identified internal control deficiencies, the existence of such
deficiencies must be reported to the appropriate individuals. Specifically, deficiencies should be reported to
those with the authority to make decisions regarding what corrective action to take and ability to enforce such
decisions (COSO, 1994, p. 75; INTOSAI, 2004, p. 42). This indicator captures whether the appropriate
individuals are informed of internal control deficiencies identified through either internal or external audit.
81. How often are problems reported to those one level up so that there is assurance that the corrective action
is taken?
4: always;
3: often;
2: occasionally;
1: rarely;
0: never
Even if internal control deficiencies identified through internal or external audit are reported to individuals with
the authority to take corrective action, in addition it may also be necessary to report the deficiency to those
one level above. This ensures that decisions regarding corrective action are appropriate and such decisions
are followed through with action (COSO, 1994, p. 75; INTOSAI, 2004, p. 42). This indicator captures whether
deficiencies are reported to those one level above to ensure an effective response.
82. Are there procedures for follow-up and monitoring of the effectiveness of corrective action?
3: very formal (defined in a policy)
2: somewhat formal (routinely addressed following the same procedures)
1: case-by-case procedures;
0: No procedure for follow-up are in place
A corrective action taken to address an internal control deficiency may not always be effective in reducing
risk. Thus, it may be necessary to follow up and monitor whether corrective actions are having the intended
effect of risk mitigation (INTOSAI, 2004, p. 42). This indicator captures whether there are procedures in place
for such monitoring and the level of formality that these procedures take. If formal procedures exist this
indicates that the entity is more responsive to internal control deficiencies, as irregular or case-by-case
approaches allow for inconsistencies.
83. Are there procedures to evaluate the appropriateness of internal audit reporting lines and follow-up
94
procedures?
2: somewhat formal (routinely addressed following the same procedures);
0: no procedure
The reporting procedures for internal audit findings as well as procedures for follow-up to corrective action
should be appropriate. This means audit findings should not be shared with too many individuals or, to the
contrary, too few, which may risk whether corrective action is taken at all. Moreover, follow up procedures to
monitor the implementation and effectiveness of corrective action should not be overly rigorous expending un-
necessary resources or, in contrast, too lax and informal. Thus, an appropriate balance needs to be achieved
and continuous evaluations of reporting and follow up procedures may be necessary to maintain such
balance. This indicator captures whether evaluative procedures exist and the level of formality they take
(COSO, 1994, pp. 74-76).
84. Is the entity's top management held responsible for ensuring that there is a follow-up to internal control
deficiencies as identified by internal audit?
Yes (please specify how) / No
If the top management of the entity is held responsible for ensuring that follow-ups are carried out in terms of
internal control deficiencies, it is more likely that the entity will be in compliance. Any irregularities found
through internal audit will more likely be acted upon and in a timely manner.
11. Procedural integrity of internal audit
85. Are there clear objectives defined for internal control activities?
3: each internal control activity has a clearly defined objective;
2: only major control activities have clearly defined objectives;
1: objectives are defined for internal control activities on a case-by-case basis;
0: control activities typically do not have defined objectives
As part of an internal audit, the effectiveness of internal control activities can only be evaluated if there are
clear objectives outlined for such activities. Control activities are evaluated in relation to their effectiveness in
meeting such objectives (INTOSAI, 2004, p. 41). This indicator captures the extent to which there are clear
objectives for control activities which in turn allow for a more rigorous and procedurally sound audit.
86. Does the internal audit body report to top management?
2: yes, only to top management;
1: yes, to top management and others (e.g. unit managers, please specify);
0: no, the internal audit body does not report to top management
That an internal audit body only reports to top management is a key component contributing to the
95
independence of the audit body. Independence is thought to lead to a more rigorous and transparent internal
audit function (INTOSAI, 2004, p. 20). This indicator capture whether the internal audit body reports to top
management or others.
87. Is the internal audit body composed of individuals external to the entity?
2: yes, at least 50% (the other part being individuals internal to the entity);
1: yes, a minority of the internal audit body are individuals external to the entity;
0: no, entirely composed of individuals internal to the entity
If an internal audit body contains individuals external to the entity being audited this may contribute to the
independence and objectivity of the assessment. Independence is thought to lead to a more rigorous and
transparent internal audit function (INTOSAI, 2004, p. 45). This indicator captures the extent to which the
internal audit body is composed of individuals external to the entity in which the audit is being conducted.
88. Is the internal audit body composed of qualified auditors and accountants?
3: yes, all of the internal audit body is composed of qualified auditors and accountants;
2: yes, the majority are qualified auditors and accountants;
1: yes, a minority are qualified auditors and accountats;
0: no, there are no qualified auditors and accountants
An audit conducted by individuals with professional training in accounting and or auditing may be more
compliant to protocol, rigorous, and thorough in identifying deficiencies in internal control. This indicator
captures the extent to which the internal audit body is composed of qualified individuals.
89. Is there a document outlining the following? the purpose of internal audit, responsibilities of those
involved in internal audit, and a definition of a clear procedure for how internal audits should be conducted
3: yes, document in place and reviewed once or more a year;
2: yes, document in place and reviewed less than once a year;
1: document in place but no review;
0: no
If there is a document outlining the purpose of internal audit, responsibilities of those involved in internal audit
and defining a clear procedure for how internal audits should be conducted, this allows for clarity within the
entity regarding internal audit and may improve the audit function. Audits are more likely to be conducted in a
uniform manner comparable across time. This indicator captures whether such a document exists and how
often it is reviewed (studied and/or changed) by those involved in internal audit.
90. If some of the entity's activities are outsourced, does internal audit evaluate the effectiveness of the internal
control activities of the outside organisation?
2: yes, for all outsourced activities;
1: yes, for a subset of outsourced activities;
0: no, internal audit does not evaluate internal control activities of outside entities; N/A: no activities are
outsourced
96
Outsourcing may pose a risk to achieving an entity-wide or unit objective if the entity conducting the
outsourced activity does not have its own effective internal controls in place. Thus, the internal audit of an
entity may expand its scope to include monitoring the control activities of the external entity conducting the
outsourced activity. In doing so, this allows for a more comprehensive audit assessment and deficiencies in
the internal control of the external organisation (which may pose risks to the entity) may be identified. This
indicator captures whether and to what extent the internal audit does include an assessment of the external
entity where outsourcing exists.
91. Is reporting of sensitive problems (such as illegal or improper acts) handled by!
2: formal protocols universally applied;
1: case by case, but general guidelines in place;
0: case by case only, no guidelines exist
Findings of illegal or improper conduct may need to be handled in a specific manner following protocols
different from those used to handle other findings of an internal audit (INTOSAI, 2004, p. 42). The presence of
such protocols allows for transparency and removes any conflict of interest issues in the handling of illegal
conduct. This indicator captures whether such protocols exist.
12. Rigour of internal audit
92. How often are internal audit assessments done?
3: occasionally (regularly, but on a case-by-case basis);
0: never
This indicator captures how often internal audit assessments are completed and if they are completed on a
planned schedule (COSO, 1994, p. 71). The implication is that the more often and systematically internal
audits are conducted the more rigorous the internal audit function.
93. In addition to the frequency stated in the question above, are internal audits performed more often in units
where discrepancies have been identified?
Yes/No
The internal audit function will be more rigorous and contribute to effective internal control if audits are
conducted more often on units where internal control deficiencies have been identified and thus, pose a higher
risk. Close monitoring may assist in ensuring that the deficiencies are addressed. Such monitoring could
include an assessment of the level of risks, the competency of those involved in implementing controls, and
the effectiveness of ongoing monitoring of internal control (COSO, 1994, p. 71).
94. Does the scope of internal audits vary?
97
Yes/No
Whether or not the scope of internal audits varies does not necessarily have an effect on the rigour of internal
audit. However, if the scope does vary it is important to measure how it varies, which is captured in the next
indicator.
95. > If so, are controls that address higher priority risks evaluated more often?
Yes/No
This indicator captures how internal audits vary in relation to the rigour of internal audit. Based on the indicator
above, it is established that the scope of internal audits does vary. In order to have a more rigorous internal
audit, the internal audit needs to evaluate those controls more often that address higher priority risks.
96. Is there extensive documentation of the current internal control activities in place?
2: fully documented;
1: partly documented;
0: not documented
With full, extensive documentation, auditors will have full knowledge of controls and are able to conduct a
thorough and accurate evaluation (INTOSAI, 2004, p. 38). Documenting controls will allow for more efficient
internal audit evaluations (COSO, 1994, p. 73). Therefore, full documentation results in a more rigorous
internal audit.
97. Is there any procedure to evaluate the effectiveness of internal audit?
2: yes, there is a procedure to evaluate the effectiveness of internal audit and it looks at the logic and
appropriateness of evaluation;
1: yes there is a procedure to evaluate the effectiveness of internal audit and it looks at (only) how closely the
IA procedures match that of international standards;
0: no procedure
While internal audit is important in that it evaluates internal control, a rigorous internal audit also means that
the internal audit function itself is logical and appropriate. This needs to be established through evaluations of
the internal audit function. If there is a procedure that evaluates the effectiveness of internal audit, this
indicator receives a higher score in the dimension of rigour of internal audit. Internal audit in the public sector
is commonly based on international standards and evaluations may look at the compliance of internal audit
with these standards. A close alignment does not, however, necessarily mean that the internal audit function
is appropriate and contextualised enough, as an entity may have specialised controls.
13. Involvement of SAI in IC
98. Does the supreme audit institution evaluate the effectiveness of internal control or effectiveness of internal
audit or both?
98
2: yes, both internal control and internal audit;
1: yes, internal control only;
1: yes, internal audit only;
0: neither
Reference category: SAI
This indicator captures the level of involvement of the SAI in evaluations of the effectiveness of IC and/or IA.
If the SAI evaluates the effectiveness of both IC and IA within an entity it can be said to be engaged with the
entity's IC system to a greater extent. The greater involvement can provide the entity with an additional check
on its internal financial control practises, complementing ongoing monitoring procedures and self-evaluation
(INTOSAI, 2004, pp. 41,46).
99. Does the supreme audit institution evaluate the compliance of internal control or compliance of internal
audit or both?
2: yes, both internal control compliance and internal audit compliance;
1: yes, internal control compliance only;
1: yes, internal audit compliance only;
0: neither IC nor IA compliance
This indicator captures the level of involvement of the SAI in evaluations of the complianceof IC and/or IA to
government-wide policies. If the SAI evaluates the compliance of both IC and IA within an entity to
government-wide policies on IC and IA, it can be said to be engaged with the entity's IC system to a greater
extent. The greater involvement can provide the entity with feedback on its adherence to government policies,
allowing deficiencies to be addressed (INTOSAI, 2004, p. 46).
100. > If yes, how often does the supreme audit institution conduct compliance audits in
ministries/departments?
0: never
This indicator captures how often the SAI is involved in conducting compliance audits. A higher frequency
implies a greater involvement of the SAI in assisting the internal control of a ministry/department. Compliance
audits evaluate how well a ministry/department is complying to government-wide policies on IC and IA. Such
involvement of the SAI provides an additional opportunity to indentify potential risks to achieving program
objectives (INTOSAI, 1992, pp.32-33).
101. How often does the supreme audit institution conduct performance audit in ministries/departments?
0: never
This indicator captures the regularity at which the SAI is involved in conducting performance audits within a
99
given ministry/department. A higher regularity implies a greater involvement of the SAI in assisting the
internal control of a ministry/department. Performace audits evaluate whether the ministry/department is
achieving economy, efficiency and effectiveness in the use of resources. Such assessments are also
referred to as 'value-for-money' assessments (INTOSAI, 2004, p. 44; INTOSAI 2004a, p. 11).
102. How often does the supreme audit institution conduct systems-based audits in ministries/departments?
0: never
This indicator captures the regularity at which the SAI is involved in conducting systems-based audits within
a given ministry/department. A higher regularity implies a greater involvement of the SAI in assisting the IC of
a ministry/department. A systems-based audit focuses on the adequacy of controls rather than checking
transactions directly (Griffiths, 2005; ISSAI, 2001).
103. To what extent does the supreme audit institution evaluate the transaction in ministries/departments?
fraction of monetary value of transactions checked to monetary value of all transactions (scoring: 100% = 10,
50% = 5, etc.)
This indicator captures the extent to which the SAI is involved in evaluating transactions within a given
ministry/department. A higher percentage of monetary value included in transactions checked implies a
greater chance that irregularities will be captured by the SAI and improvements can be made to the internal
control of a ministry/department.
14. Utilisation of SAI evaluations
104. To what extent are supreme audit institution assessment findings accessible to the public?
3: public can freely access a variety of SAI assessments;
2: public can freely access upon specific requests to SAI;
1: public can access upon payment;
0: public does not have access to SAI findings
SAI, as the central organisation, may conduct evaluations of ministries' internal control and/or audit practices
and it may be beneficial to utilise the findings of those evaluations. If the public can easily access the
findings of these SAI assessments SAI evaluations are considered to be more utilised. In the case where the
public should place a special request or make a payment to access SAI assessment results, it is considered
that SAI evaluations are less utilised. Accordingly, when the public does not gain any access to SAI findings,
SAI evaluations are not utilised.
105. Are the findings shared with the ministry/department assessed?
2: Yes, always;
100
1: Yes, only in case of irregularities;
1: Yes, sometimes (specify why);
0: No
Utilisation of SAI evaluations can be partially assessed by evaluating whether the SAI conveys its
assessment results to the ministry/department assessed. If the findings are communicated to the
ministry/department at all times, it is more likely that the SAI evaluations will be highly utilised and the that
the ministry/department will be fully aware and responsible of its internal control and audit practices. If a
ministry/department receives notifications from SAI only in the case of irregularities or at any other specified
times, it is less likely that the ministry/department is utilising SAI evaluations to enhance their internal control
and audit practices.
106. Are there procedures in place to address problems with internal audit identified from the supreme audit
institution assessments of the effectiveness of internal audit?
0: no procedure
Once problems or deficiencies in internal audit are identified during an SAI evaluation and shared with the
entity, it is desirable for the entity to follow a formal procedure to address them. The more formal the
procedure is, the higher the liklihood that the entity will be able to respond to the deficiency and use the SAI
evauation to improve its practises.
107. Are there procedures in place to address problems with internal control identified from the supreme audit
institution assessments of the effectiveness of internal control?
0: no procedure
This is the same question as the one above, but looks at internal control as opposed to internal audit.
108. Is the entity's management held responsible for legal and regulatory compliance (with respect to findings
from supreme audit institution)?
Yes (please specify how) / No
If the top management of the entity is held responsible for legal and regulatory compliance with respect to SAI
evaluation findings, it is more likely that themanagement will adjust their practises to ensure alignment and
compliance with regulations. They will adjust practises to meet SAI evaluation criteria.
109. Does the supreme audit institution provide a platform to share lessons learned and best practices between
ministries / departments?
101
1: yes, SAI provides a platform (please specify what kind, e.g. website, conferences, meetings with internal
audit departments of ministries, written reports);
0: No
If SAI provides a platform for ministries to share lessons learned and best practices, it is more likely that
ministries will improve their practices and conform more closely to what are believed to be best standards.
Information can be shared through websites, regular conferences and meetings as well as written reports,
increasing the level of utilisation of SAI evaluations.
15. Standardisation of IC across government
110. Is top management told what to do by an external body or do they have the autonomy to define their
internal control standards or framework?
2: yes, top management is told explicitly what to do by an external body;
1: yes, top management is given a rough guideline by an external body;
0: no, the top management has its autonomy to define the internal control activities;
If internal control procedures and activities are defined by an external body it means that internal control has a
higher degree of standardisation across government. The external body could for instance be the SAI, the
Ministry of Finance, a Central Harmonisation Unit, or another body specifically given the task to define
internal control for ministries.
111. > If yes, who
(open question)
This is an open question and captures what external body (bodies) is (are) responsible for defining internal
control activities.
112. Does internal control have a legal foundation?
1: yes, constitutional; 1 yes, other laws;
0: no
Reference category: Law
If internal control have a legal foundation within a country, it is more likely that the internal control function will
be standardised across government ministries. Whether it is defined in the constitution or in other laws, the
notion of legal foundation is enough to indicate standardisation of practice.
113. Does internal audit have a legal foundation?
1: yes, constitutional; 1 yes, other laws;
0: no
102
Reference category: Law
This is the same question as the one above, but looks at internal audit as opposed to internal control.
114. Is there a government-wide framework or standards used for internal control?
1: yes, international frameworks / standards like INTOSAI, COSO, etc.;
1: yes, other (e.g. own) standards / frameworks;
0: no
International standards such as INTOSAI are generally regarded as reflecting best practices of public sector
internal control and it is generally recommended that countries will keep their standards consistent with the
international standards (Diamond, 1994, p. 4). By referring to certain international standards, a country can
standardise its internal control practices across all ministries. Moreover, if a country develops its own
framework (which may or may not be based on the international standards) this would also allow for
standardisation of internal control across ministries.
115. Is the conduct of internal audit based on INTOSAI or other international standards?
1: yes, INTOSAI;
1: yes, other international standards;
0: no
This is the same question as the one above, but looks at internal audit as opposed to internal control. This
indicator captures whether internal audit is conducted in a similar manner across ministries/departments.
16. Extent of centralised coordination (vs. decentralisation)
116. Is there a platform / network to share best practices, lessons learned etc. amongst the heads of internal
audit? (Please indicate all that apply)
1: yes, digital network;
1: yes, conferences;
1: yes, workshops;
1: yes, publications
1: yes, others (namely: !);
0: no, a platform/network does not exist
Reference category: Network
Different organisations have a tendency to develop siloed practices, with little possibility to share useful
information among different entities (Kennedy, 1995.) The presence of platforms and networks explicitly
developed to share information is expected to facilitate the dissemination and adoption of best practices.
Hence, this indicator captures the existence of such platforms / networks which may lead to higher levels of
centralized coordination.
117. > If the heads of internal audit meet, how often do they meet?
4: 6 or more times a year on a regular basis;
103
3: more than once a year, less than 6 times a year;
2: once a year;
1: less than once a year;
0: never
Reference category: Network
The frequency of meetings is considered a proxy for the importance of the network as a form of knowledge
exchange which may lead to more centralized coordination.
118. Is there a central or federal government body in charge of overseeing the conduct of internal
control/internal audit within ministries/departments?
2: yes, (specify body);
1: currently in the process of establishing;
0: no
A country with a body in charge of overseeing or setting standards for internal control/internal audit at the
central or federal government level is expected to have a higher level of centralised coordination, as
compared to countries where each ministry/department is in charge of its own internal control/internal audit
practises without central oversight. In some countries, this body may be the Ministry of Finance/Treasury.
119. > If yes, how involved is this body in the ministry's/department's internal control/internal audit process?
4: the body sends relevant personnel to conduct internal control/internal audit in ministries;
3: the body conducts part of internal control/internal audit in ministries;
2: internal control/internal audit personnel need to report to the body;
1: the body sets guidelines/recommendations regarding internal control/internal audit;
0: the body has no direct involvement
The more direct involvement of the central or federal government body in internal control and internal audit in
ministries/departments, the greater the level of centralised coordination.
120. Is there a central harmonisation unit (CHU)?
2: yes;
1: currently in the process of establishing;
0: no
"Central Harmonisation Unit or CHU stands for a central government organisation responsible for developing
and promoting internal control and -audit methodologies on the basis of internationally accepted standards and
best practices and to co-ordinating the implementation in all the administrative bodies of the government the
new legislation on managerial accountability (financial management and control systems) and internal audit.
Usually, this responsibility is given to the Ministry of Finance/Treasury, although other solutions are possible"
(European Commission, 2004, p. 49).
121. Does the entity report to the legislature on internal control and audit issues?
104
2: The ministry submits official reports to the legislature on a regular basis;
1: the ministry reports to the legislature, but timeliness varies;
0: the ministry does not report to the legislature
If entities report to the legislature on a regular basis, this means that ministries are subject to a central
mechanism of accountability. If this reporting exists, ministries will be more likely to adhere to government
wide policies and standards. This means that there is a higher degree of centralised coordination.
17. Transparency to the public
122. Are those financial reports published to the general public disclosed in a timely manner?
3: yes, annual financial reports;
2: yes, financial reports are published every two to three years;
1: yes, less than once every three years;
0: financial reports are not disclosed to the public
This indicator captures the extent to which the general public is made aware of the entity's financial activities
and reports. Publishing external financial reports in a timely manner provides better understanding of the
entity's operations and enhances the entity's transparency to the public. The more frequently financial reports
are published, the more transparent the entity is.
123. How current are non-financial publicly available reports?
3: Reports made available to the public cover events/issues within one year of the event/issue;
2: within two years of the event/issue;
1: within three years of the event/issue;
0: more than three years after the event/issue or no non-financial reports are made available to the public
Communications to external parties including publicly available reports should be meaningful and provide
pertinent and timely information (COSO, 1994, p. 65). Even in the case where a non-financial report is
published in a timely manner, if the report does not address current events and issues, it can be meaningless
and irrelevant to those who seek information. This indicator captures the extent to which an entity is open and
effective in reporting current events and issues in their non-financial reports.
124. How accessible is key fiscal information to the public through published reports?
3: public can freely access a variety of fiscal reports (please specify if online or other channels);
2: public can freely access upon specific requests;
1: public can access upon payment;
0: public does not have access to fiscal reports
Reference category: Comprehensiveness and Transparency
This indicator addresses the openness and effectiveness of channels through which an entity publishes its
reports and disclose fiscal information, which is a critical factor for the entity's transparency to the general
public. Transparency of fiscal information is primarily assessed by evaluating whether the documentation is
available and readily accessible to the general public (PEFA, 2009, p. 54).
105
18. Soundness and transparency of procurement practices
125. What is the extent of open competition for award of contracts that exceed the nationally established
monetary threshold for small purchases (percentage of the number of contract awards that are above the
threshold which are subject to open competition)?
Approximate percentage of contracts above the threshold awarded through open competition (100% = 10; 0% =
0)
Reference category: Procurement
Significant public spending takes place through the public procurement system. A well-functioning
procurement system ensures that money is used effectively and efficiently. Open competition in the award of
contracts has been shown to provide the best basis for achieving efficiency in acquiring inputs for and value-
for-money in delivery of programs and services by the government (PEFA, 2005, p. 38).
126. Where contracts above the threshold are awarded using less competitive procurement methods what is
the extent of justification?
2: Whenever there is a non-competitive procurement, justification for it is always given;
1: for a non-competitive procurement, justification is sometimes given and sometimes not or handled case by
case;
0: for any non competitive procurement, justfication is never given
There may be cases where procurement methods are used that are not open competition. In order for a sound
and transparent procurement system to exist it is crucial that there are clear justifications as to why a less
competitive procurement process has been chosen.
127. Is there a procurement complaints mechanism?
3: A process (defined by legislation) for submission and timely resolution of procurement process complaints is
operative and subject to oversight of an external body with data on resolution of complaints accessible to public
scrutiny.
2: A process (defined by legislation) for submitting and addressing procurement process complaints is
operative, but lacks ability to refer resolution of the complaint to an external higher authority.
1: A process exists for submitting and addressing procurement complaints, but it is designed poorly and does
not operate in a manner that provides for timely resolution of complaints.
0: No process is defined to enable submitting and addressing complaints regarding the implementation of the
procurement process
The direct involvement of participants from the private sector is unique to the public procurement process.
These private sector participants, along with citizens, are direct stakeholders in the outcome of the
procurement process. "A good procurement system uses the participation of these stakeholders as part of the
control system by establishing a clear regulated process that enables the submission and timely resolution of
complaints submitted by private sector participants. Access to the process and information on complaints
allows interested stakeholders to participate in the control of the system" (PEFA, 2005, p. 38).
128. Is there a cost-benefit analysis or a similar measure to evaluate value-for-money in procurement?
106
1: yes, a cost benefit analysis is used;
1: yes, other (namely!);
0: no
A cost-benefit analysis or a similar measure that evaluates value-for-money is important in making sure the
public procurement process is sound. A cost-benefit analysis compares costs and benefits of a procurement
and can thus shed light on whether a procurement is necessary and how it should be carried out most
effectively.
107

OECD - Public Internal Financial Control Report

Caricato da

Informazioni sul documento

Copyright

Formati disponibili

Condividi questo documento

Condividi o incorpora il documento

Opzioni di condivisione

Hai trovato utile questo documento?

Questo contenuto è inappropriato?

Copyright:

Formati disponibili

OECD - Public Internal Financial Control Report

Caricato da

Copyright:

Formati disponibili

!"#$%& ()+,,"- .&%%"/ 0&11&- 2$$3"% 4+- !

Potrebbero piacerti anche