Mitigating the global_financial_crisis_impact_-_chambers_icgfm_miami_2011
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Mitigating the global_financial_crisis_impact_-_chambers_icgfm_miami_2011

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  • 1. Mitigating the Global Financial Crisis ImpactThe Role of Government Auditors
    Richard F. Chambers CIA, CGAP, CCSA
    President and CEO – The Institute of Internal Auditors
  • 2. Overview
    Global Financial Crisis: Impact on Governments Worldwide
    Government Auditors: An Overview
    Mitigating GFC Impacts: Five Ways Government Auditors can Add Value
    Conclusions
  • 3. We All Know the Problem…
    Revenues from sales tax, property tax, income tax, and fees have declined
    Citizens need higher levels of government services in times of financial difficulty
    Most OECD countries are running significant budget deficits
    State/local governments must run balanced budgets
    This means difficult and painful choices.
  • 4. Budget Squeeze
    • Sales tax revenues down
    • 5. Property taxes down
    • 6. Income taxes down
    • 7. Investments down
    • 8. Fee income down
    • 9. Increased use of social programs
    • 10. Economic stimulus programs
    • 11. Automatic triggers (unbudgeted)
  • h
  • 12. Recent Austerity Measures
    Source: Limiting Central Government Budget Deficits: International Experiences, Congressional Research Service, 2011
  • 13. The Status Quo is Unacceptable
    Rising public expectations for demonstrable results and enhanced responsiveness
    Government performance/ accountability and high-risk challenges
    Additional resource demands due to economy, healthcare costs, terrorism…
  • 14. Government Auditors:
    Work for “good government”
    Help improve performance and assure accountability
    Help identify and mitigate risks
    Maintain independence to make difficult decisions
    “With light comes heat, and with heat comes action, and action is what we want. How can we make government work better? By improving the economy, efficiency, and effectiveness of government.”
    T - The Honorable David M. Walker
    Former Comptroller General of the United States
  • 15. Audit and the Financial Crisis
    Two potential solutions:
    Control costs
    Traditional audit “sweet spot”
    Grow revenue
    Potential audit opportunities
    With change comes risk
    Increases need for audit
  • 16. Mitigating GFC Impacts: Five Ways Government Auditors can Add Value
    Providing assurance on the accuracy of financial reporting
    Providing assurance that government resources are being used efficiently and effectively
    Fostering accountability by government officials
    Identifying opportunities for cost reduction and containment
    Fostering greater public trust
  • 17. 1. Providing Assurance on the Accuracy of Financial Reporting
    Generally accepted accounting principles
    Adequacy and accuracy of disclosures
    Privileged and confidential information
    Report distribution
    Five Ways Government Auditors can Add Value
    In today’s economy, financial reports are under intense scrutiny by public officials, legislators, and citizens.
  • 18. 1. Providing Assurance on the Accuracy of Financial Reporting
    Financial audits include determining whether:
    Financial information is presented in accordance with established or stated criteria,
    Entity has adhered to specific financial compliance requirements, or
    The internal control structure over financial reporting and/or safeguarding assets is suitably designed and implemented to achieve control objectives.
    Five Ways Government Auditors can Add Value
  • 19. 1. Providing Assurance on the Accuracy of Financial Reporting
    Financial audits also evaluate:
    Poor financial management systems
    Corruption, fraud, fund diversions
    Use of reserves during unexpected events
    Inadequate funding
    Release of funds to Ministries/Departments/Agencies
    Initiation of spending
    Payment
    Recording of transactions
    Production of accounting/budgeting reports
    Five Ways Government Auditors can Add Value
  • 20. Five Ways Government Auditors can Add Value
    2. Providing Assurance that Resources are Being Used Efficiently and Effectively
    We need to know whether or not government programs operate economically and efficiently
    We need to know which initiatives are showing results and which are not
    We need verifiable evidence of success
    In today’s economy, government leaders need to know which programs are effective and which are not so they can make tough choices.
  • 21. Five Ways Government Auditors can Add Value
    2. Providing Assurance that Resources are Being Used Efficiently and Effectively
    During difficult economic times government auditors can provide consulting services that will show if the organization is conducting operations effectively (meeting its goals) and efficiently (controlling costs)
    Services might include “management studies” that identify opportunities for enhancing the efficiency of operations
  • 22. Five Ways Government Auditors can Add Value
    3. Fostering Accountability by Government Officials
    Public officials are responsible for:
    Complying with applicable laws and regulations
    Using resources efficiently, economically, and effectively
    Establishing and maintaining effective controls to ensure that appropriate goals and objectives are met
    Officials and employees who manage government programs need to render an account of their activities to the public
    Auditing provides objective evidence enabling us to hold management accountable for key responsibilities
  • 23. Five Ways Government Auditors can Add Value
    3. Fostering Accountability by Government Officials
    • Government officials should abide by a Code of Ethics/Conduct and establish a culture for preventing, detecting and reporting fraud and corruption

    “In the last analysis, of course, an oath will encourage fidelity in office only to the degree that officeholders continue to believe that they cannot escape ultimate accountability for a breach of faith.” - James L. Buckley
  • 24. 4. Identifying Opportunities for Cost Reduction and Containment
    Lack of coordination among departments
    Inadequate cost information
    Substandard contract management
    Mission fragmentation/program overlap
    Ineffective procurement controls
    Poor planning
    Burdensome legal mandates
    Five Ways Government Auditors can Add Value
  • 25. 4. Identifying Opportunities for Cost Reduction and Containment
    Scrutinizing processes can identify opportunities for increased efficiency
    Encouraging adoption of performance measurement systems can help departments focus their energies and monitor quality and effectiveness.
    Advocating rigorous, data-driven decision making processes can lead to better outcomes
    Five Ways Government Auditors can Add Value
  • 26. 5. Fostering Greater Public Trust
    Auditing provides credibility to the information reported by or obtained from management through objectively acquiring and evaluating evidence
    Audit of government reporting is an essential element of public control
    Five Ways Government Auditors can Add Value
    In today’s economy, auditing provides transparency to meet the growing demand for objective information about government programs and services.
  • 27. Five Ways Government Auditors can Add Value
    5. Fostering Greater Public Trust
    “Citizens deserve to know that their state government is spending their tax dollars wisely on vital programs and services that directly benefit them and make a measurable difference in their lives.”
    - Edward G. Rendell
    Two-term Governor of Pennsylvania
  • 28. Conclusions
    The status quo is unacceptable in times of global financial crisis.
    A fundamental review of government programs and policies is necessary to determine what the government should do and how the government should do business in the future.
    In times of financial crisis, internal audit is key to assuring ongoing government efficiency, effectiveness, and transparency.
  • 29. For more information, contact:
    Richard F. Chambers
    President and Chief Executive Officer
    The Institute of Internal Auditors
    richard.f.chambers@theiia.org
    Questions?