3. GoA is a leader and a strong proponent of
Good Governance
and
Accountability
in the belief that countries that receive
GoA aid and have the two attributes,
improve the effectiveness of aid and
reduce corruption. These goals are in line
with the Paris Declaration.
3
4. The Paris Declaration
In March 2005, representatives of developed and developing
countries (including Australia) meeting at the High Level
Forum on Aid Effectiveness in Paris “resolve[d] to take far-
reaching and monitorable actions to reform the ways we
deliver and manage aid”. The result was the Paris Declaration
on Aid Effectiveness
Selected Summary of Indicators of Progress
1. Partners have operational development strategies
2. Partners have reliable public financial management and
procurement systems
3. Capacity will be strengthened by coordinated support
THIS PROGRAM FALLS WITHIN THE GUIDELINES & PRIORITIES
OF GOA
4
6. The IG
understands that changes must be made to improve
the operations in order to meet GoI obligations as IG
and to make the unit into Professional Auditors
was the primary mover in proposing the Reform
Agenda – he is the Change Agent
is Chairman of the 565+ IGs in GoI & wants to
continue a leadership role to set an example
Believes this experience can be a template to
replicate at other IG Operations
understands the challenges going forward and has
shown ownership
wants to work with AusAID
6
10. Background
• Early 2009, IG proposed a Reform Agenda (RA) for better
value-added services to MPW on budget impact,
infrastructure development and activity safeguards.
• Indicative trigger for World Bank’s IDPL 4: Adoption of an
Action Plan to strengthen staff capacity and introduce modern
RBIA methodology & practices to provide assurance on
internal control systems and compliance.
• Initial discussions identified the need for continuing support
over stages, grouped by achievements / identified
deliverables.
• IndII support commenced in June 2009;
• Earlier IndII support helped IG to improve and strengthen its
capacity / technical ability to do internal audit work at MPW.
• However, although substantial groundwork for fundamental
auditing using RBIA techniques has been established, there
are fundamental “roadblocks” within the IG structure and
operations that must be resolved if the gains made to date
are to be maintained and further improved.
10
11. Therefore, it was timely to consider other critical areas of
improvement, to ensure sustainability of progress
In order to have sustainability:
Processes must have the ability to be repeated
In order to repeat processes
there must be a supporting infrastructure with
systems that are imbedded and
institutionalized.
11
12. Overview : Current Activity: IndII Activity P243-02:
Governance Reform in Internal Audit Function (IG-MPW)
Moving from IACM Level 2 to Level 3
Change Management, Training, Education & Quality Assurance
Pillar 1 Pillar 2 Pillar 3
Institutional Better Enhanced
Strengthening Procurement Anticorruption
Practices Environment
Internal Control System PP 60
Partners: Partners:
Partners: MPW management, all
MPW Management, BPKP MPW Management, all
DGs, BPKP, LKPP & KPK DGs, KPK
IG MPW as The Change Agent (with AusAID / IndII support)
13. An entirely new program, both in scope and approach
• Although it builds on the prior Activities of IndII
support to the IG, we concluded there was a serious
danger that gains made may not be sustained longer-
term and be capable of being used as building blocks
for further improvements unless fundamental
roadblocks such as updated relevant management
structures and support mechanisms were addressed;
therefore the importance of IACM (Pillar 1).
• In addition, GoI is now more focused on eliminating
(or at least reducing) corruption; thus Pillar 2, a
concentration on improving procurement practices,
doing better and more procurement auditing and
• Pillar 3 - creating / monitoring a corruption-free
environment.
13
14. Internal Audit Capability Model
(IA-CM) for the Public Sector
Overview Presentation
Libby MacRae
Bob McDonald
14
15. Agenda
The IA-CM
– Its structure and underlying concepts
– Principles in its application
– Using the IA-CM
15
15
16. What is the IA-CM?
• A universal model with comparability – principles,
processes and practices
• To be used globally to improve internal auditing
• Framework for assessing capabilities against standards
and practices
• Communication vehicle for defining and advocating
the importance of internal auditing
• Roadmap and toolkit for orderly improvement
16
17. Underlying Principles
IA Activity’s Obligations
• Be an integral component of effective governance in the
public sector
• Assist organizations achieve their objectives and account for
their results
Organization’s Obligations
• Determine optimum level of IA capability to support required
governance structures
• Achieve and maintain the desired capability
17
17
18. Underlying Principles
Selecting Optimum Capability
• Three variables
– Environment
– Organization
– IA Activity
• Different capability required
• Auditing must be cost-effective
• No “one size fits all”
18
18
19. IA-CM Levels
IA learning from inside and outside the organization for LEVEL 5
continuous improvement Optimizing
IA integrates information from across the organization to improve LEVEL 4
governance and risk management Managed
IA management and professional practices LEVEL 3
uniformly applied Integrated
Sustainable and repeatable IA LEVEL 2
practices and procedures
Infrastructure
No sustainable,
repeatable
capabilities –
LEVEL 1
dependent upon Initial
individual efforts
19
19
20. Level 1- Initial
• Ad hoc or unstructured
• Isolated single audits, document reviews, transaction
verification
• Outputs dependent on incumbent skills
• No professional practices or standards applied
• Funding approved by management as needed
• Absence of Infrastructure
• Auditors likely belong to a larger organizational unit
• Institutional capability not developed
20
21. Level 2- Infrastructure
• Repeatable processes or capability established
• Reporting relationships, management, administrative
infrastructure, professional practices established
• Audit planning based principally on management
priorities
• Continued reliance essentially on skills and
competencies of incumbents
• Partial conformance with IIA Standards
21
22. Level 3 - Integrated
• Defined IA policies, procedures, documented and
integrated into organization structure
• IA management and professional practices well
established, uniformly applied
• IA beginning to align with business and its risks
• IA providing advice on performance and
management of risks
• Focus on team building and IA capacity and
independence and objectivity
• Generally conforms to IIA Standards
22
24. Key Process Area (KPA)
Key Process Area
Purpose
Essential
Activities
Outputs
Outcomes
Institutionalizing Practice
Examples
24
24
25. People Management
Level 2 – Infrastructure
Skilled People Identified and Recruited
Purpose – To identify and attract people with the necessary competencies and
relevant skills to carry out the work of the IA activity. Appropriately qualified
and recruited internal auditors are more likely to provide credibility to the
internal audit results.
Essential Activities
• Identify and define the specific audit tasks to be conducted
• Identify the knowledge, skills (technical and behavioral), and other
competencies required to conduct audit tasks
• Develop job descriptions for positions
• Determine proper pay classification for positions
• Conduct valid, credible recruitment process to select appropriate candidates
25
25
26. People Management
Level 2 – Infrastructure
Skilled People Identified and Recruited
Outputs
• Internal audit positions are filled with appropriately qualified persons
Outcomes
• Audit work is conducted with due professional care
• There are credible audit observations, conclusions, and recommendations
Institutionalizing Practice Examples
• Visible commitment and support through senior management action to ensure that a
competent and qualified CAE is in place, and the necessary resources are provided to
appropriately staff the IA activity
• Staffing and recruitment policy
• Job descriptions
• Classification system, including levels specific to internal auditing
26
26
27. Institutionalizing a Key Process Area
Commitment
To Perform
Activities
Activities Ability to
Verified Perform
Key Process
Activities
Area
Activities Activities
Measured Performed
27
28. Using the IA-CM as an Assessment Tool
• Understand the purpose and structure of the IA-CM
• Identify the KPAs that appear to be institutionalized by
the IA activity
• Obtain and review documentation re: IA activity,
organization, and environment
• Interview managers/stakeholders
• Confirm the actual KPAs institutionalized
• Determine the capability level
• Communicate and confirm the opportunities for
improvement
• Develop and implement the improvement plan
28
28
29. Principles in its Application
• Apply professional judgment
• Environmental and organizational factors
• A practice cannot be improved if it cannot be repeated
• Capability gets built in steps/stages
• KPAs at one level set the foundation for KPAs at the next
level
• A KPA is achieved when it is institutionalized into the
culture of the IA activity
• All KPAs, up to and including the KPAs at a given level,
must be institutionalized to achieve that level
• Not all all elements need be at the same level 29
29
30. Important Considerations
• All levels in the IG participate
• Organizational management and stakeholder support
• Processes are institutionalized and sustainable
30
31. Procurement Standards in
Indonesia
IndII Activity P243-02: Governance Reform
in Internal Audit Function (IG-MPW)
Presented by Rob Thompson
IndII Activity P243-02: Governance Reform
9/6/2012
in Internal Audit Function (IG-MPW)
32. The Procurement Process
Identify the Need
Review of Approval to Proceed
Performance
Develop Contract Strategy
Payment
Manage Set Evaluation Criteria
Relationship
Develop the Specification
Monitor
Performance Define the
Contract Award Contractual Terms
Clarify/ PTN VFM Research the
Analyse Quotes/ Market
Tenders
Invite Quotes/ Identify Pre-Qualification
Tenders and Select Bidders
33. Key Areas of Procurement Activity
• Good Sourcing Principles and Practices
• Price and Cost Analysis
• Inventory Management
• Legal Protection
Procurement Competencies being prepared
34. Approach
• Analysis of current competencies, procedures, practices and policies
• Work with MPW management and selected DG’s to enhance
procurement competency
• Develop and support the ULP in developing good procurement
practice
• Applying Risk Assessment & Management techniques to all
procurement
• Introduction of best practice procurement training
• Presenting and mentoring the introduction of new procurement
tools and techniques
• Providing practical guidance to MPW & DG’s to ensure a consistent
application of best practice techniques
35. Key Messages
• Early involvement (by both parties) in the
procurements to resolve potential risk areas in
time
• Shared understanding of what is procurement
• Integrate lessons learnt from past experience in
future training and procurement practices
• Best practice contract management
• Cost not price
• Performance not conformance
• Consistency in actions.
36. Best Practice Procurement
WILL
achieve compliance,
Compliance alone does not
ensure a best value for money
procurement.
IndII Activity P243-02: Governance Reform
9/6/2012
in Internal Audit Function (IG-MPW)
38. Role in Change Management
• Private and Public Sectors
– Reform efforts gone under many banners
• TQM, PRR, Reengineering, restructuring, cultural
change, turnaround
• Core focus: “making fundamental changes in
doing business”
– Results variable
• Some reforms successful & few utter failures & most fall
somewhere in between
• Lessons learned are significant
38
39. CMSP at core of reform
• CMSP + CM Strategy (D5)
– Inform & guide key strategic/operational
decisions the MoW/IndII Team make
– Address and overcome Roadblocks
– Linked closely to long-term approach
outlined in the 'roadmap’
39
40. Lessons Learned
• The most general lesson is change is a series
of steps/stages over considerable time (5-10
years)
– Tenacity to skip stages and creates an illusion of
speed and never produces satisfying results
• Critical mistakes during stages have a
devastating impact on the reform program
– Declaring early victory
• Negative impact, momentum lost
• Erodes/negates progress made
40
41. Lessons Learned (con’t)
• Transformation thus is a process not an event
– Series of building blocks
– 5-10 year time frame
– Resist skipping stages
• Standard approach to CM
– Targeted areas are:
• Org's Strategy
• People, pay, processes
• Move staff
• Realign functions
• Rewards and incentives
• Remove inefficiencies
41
42. Lessons Learned (con’t)
Sustainable and effective leadership is often the missing Ingredient in reform
implementation
Leadership
• MPW leaders as 'Guiding Coalition’
• IndII Team as 'Change Agents'
• Selected employees as CAs
• Establish CM mechanism
Effective persuasion campaign
• Early activation/weeks or months
• IndII Team instrumental here/design and implement
• goals: ensure employees listen to tough messages
• Understand institutional and national psychology
Campaign goals: ensure employees listen to tough messages; question old
assumptions; embrace new ways
IndII Team mentor and nurture/training (technical&CM)
42
43. Key IG MPW - IndII Team Phased Steps
(Source: JP Kotter)
• Sense of urgency/identify crises & opportunties
• Forming a powerful coalition to lead change
• Create Vision to direct reform
• Communicate Vision/use every vehicle available
• Empowering others to act on vision (get rid of
obstacles (encourage risk taking/change systems
or structures that undermine the vision
43
44. Key IG MPW - IndII Team Phased Steps
(Source: JP Kotter)
• Planning for and creating short term wins
(plan and create performance improvements)
• Consolidate improvements and produce even
more change (hire promote and develop
employees who can implement vision)
• Institutionalise (highlight link between new
behaviours and Departmental success/ensure
succession
• M&E/Impact Focus
44
45. Case Study: MAIL/Afghanistan
• Institutional mandate for reform mandatory (link to strategic level
leadership in national public sector reform program)
• Capacity development
– Based on long term commitment
– competency based incentives
– mentoring by national specialists
• Inst'l reforms not too ambitious
– No 'whole inst't approach
– select small operational priorities
– Use them as cascading models to demonstrate CM principles
• Monitor and evaluate management ‘energy’ in the Department
• Vertical/Horizontal communications is critical
• Establish mechanism for wide ranging stakeholder collaboration and
coordination
• Guaranteed funding critical 45
