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Fundamental elements of internal control

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Reputation promise/mission

The Auditor-General has a constitutional mandate and, as the Supreme Audit Institution (SAI) of South Africa, it exists to strengthen our country’s democracy by enabling oversight, accountability and governance in the public sector through auditing, thereby building public confidence.

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Introduction: Why the need for internal control?

An organisation needs internal control to:

• Provide greater assurance that they will achieve their operating, financial reporting and compliance objective

• Internal control helps ensure that direction, policies, procedures, and practices are designed and approved by management and put into place and functioning and desired.

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Fundamental elements of internal control

1. Leadership• Tone from the top – creating an environment

favorable to good financial management and service delivery

• Identifying key controls aimed at achieving clean audit reports

• Assessing skills / competencies of finance staff, ensuring the right staff mix, and managing consultants to ensure effective skills transfer

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Fundamental elements of internal control (cont.)

2. Financial management• Monthly financial statements and non-financial

performance information, plus continuous monitoring

• Sound financial management systems and documentation control procedures needs to be institutionalised

• Operating basic internal controls for an efficient financial management environment

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Fundamental elements of internal control (cont.)

3. Governance

• Adequately resourced and effectively functioning internal audit and audit committee

• Maintenance of effective risk management strategies, including fraud prevention plans

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AGSA role to enhance oversight of the Executive

Oversight focus

• Budget information• Performance information• Financial information/management• Compliance information• AGSA visibility• Engagement with Executive Authorities

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Questions and Discussions!