Eric MONNIER• Lecturer at Geneva University• Managing Director of Euréval (France)

Internal Audit Service 2009 Conference

« Borderlines concept »

Content

Three key borderlines

Why? Complementarity or overlapping judgements?What? The floating boundaries of the judgement scopeWho? Insiders vs Outsiders

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“The borderline syndrome: a pattern of instability in mood, interpersonal relations, and self-image, and manifested by self-destructive, impulsive, and inconsistent behavior”

Why?

The value added of an audit

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1.1. a cognitive purposeproviding a better empirical knowledge

2.2. a normative purposeformulating a judgement about observed

reality

3.3. an instrumental purposerecommending solutions to overcome

problems

What is the reality?

Is the reality acceptable?

How to improve it?

Why?

Performance audit

Programme evaluation

Management audit

Legal control

“Due to corruption, the waste treatment plant was not built which has diverted local industrial projects andhampered the development of the region.”

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The overlapping syndrome

Source: an audit report

of the last century

Why?

From legal to political responsibilities

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…interactwith outsiders...

...lose contactwith end beneficiaries

Publicorganisations...

...fully responsible...partly responsible

…politically responsible?

Inputs Outputs

Results

Impacts

...accountable before

...are legally responsible

the Courts

the executiveManagement

the Board or the Government

Parliament

and Society

Why?

Procedures

and rules

Organisational benchmarks

Managementaudit

Programme evaluation

Legalcontrol

Societyvalues

Performanceaudit

Operational goals

Complementarity or overlapping ?

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Inputs

Outputs

ORGANISATION SOCIETY

Results

Impacts

Type

of

exer

cice

Judg

men

t cr

iter

ia

Compliance

Coherence

EfficiencyCoherence

RelevanceEffectiveness

EfficiencyEffectivenessCo

re

judg

men

ts

The

scop

e

What?

The scope of the audit: Where are the boundaries?

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a single mission or several conflicting missions?

Organi-sation

Organi-sation

Action 1

Action 4

Action 2

Action 3

a separate organisation or a delivery system?

What?

The various missions of a given organisation compete.

■ Generic benchmarks vs ad hoc management criteriaBalance between missions changes over time and context.

■ Comparative analysis confronted to uneven weighting of judgment criteria

The pace of innovations and social changes is unsteady.

■ The impossible anticipation of the obsolescence of solutions .

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How far enlarging the operational scope?

What?

How far enlarging to the delivery system?

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Organisation Interdependency

Negotiations Conflicts

The boundary paradox: Focussing on the organisation audited in view offormulating robust judgments Enlarging the scope to the delivery system for ensuring fair judgments

Delivery system

Who?

Auditors: the insider/outsider dilemna

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Strengths Weaknesses

Internal audit

• Better tailored to the organisation and board needs

• Good knowledge of the organisation and access to data

• Strong impact on decision makers

• Scope limitation to managers interest

• The lack of hindsight • Risk of pro domo plea• Less comparative capacity

External audit

• More legitimacy for the tiers because of legal requirements

• Non biased by the organisation’s implicit assumptions

• Good capacity to organise cross-fertilization amongst organisations

• Limited to the legal boundaries

• Difficult access to information

• Risk of coalition against the outsider

• Less impact on decision makers

Who?

Advantage and danger of internal consensus

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Agreement about values or goals

Disagreement

about facts or solutionsDisagreementAgreement

Consensus

Blocked situations

Negotiated compromises

Negotiated compromises

Who?

Straddling the borderline deliberately

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Internal auditors

Hybrid audit team

External auditors

Mixed Audit

Committee

Audited organisationManagin

gBoard Outside

peers

Who?

Promote clearer distinctions and complementarities with Control and Evaluation is crucial to get the best from Management and Performance Audits.

Defining the scope of a audit requires to reach a good compromise in order to support reliable and fair judgments.

Developing hybrid auditing system (committee and team) may be the best way to combine reliable and useful conclusions for decision makers.

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Some contributions to the debates

…..

Information about the following slides: s3-6: The MEANS collection (“Evalsed” Web site:) and the Europeaid collection of 4

guidelines (see Europeaid’s Web site) s9: Crozier M.; Friedberg E. "L'acteur et le système« Editions du Seuil, 1981 ;

Morin E. « La méthode: la nature de la nature » Seuil, 1977 s11: Kickert W. J.M. et alia “Managing Complex network: strategies for the public

sector” 1997 S12: Morel Ch. “Les décisions absurdes : Sociologie des erreurs radicales et

persistantes” Gallimard, 2002Vaughan D. “The Challenger launch decision: risky technology, culture, and deviance at NASA” University of Chicago Press, 1996

Contact: Eric Monnier monnier@eureval.fr University of Geneva, Faculté des sciences économiques et sociales Euréval, 13bis place Jules Ferry, 69006 Lyon www.eureval.org

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