1. The Role of the AU Office of Internal Audit (OIA), PRC Sub Committee on Audit Matters and Relationship with PAP African Union Commission Office of Internal Audit 29 July 2016 1 Presented by: Mr. Getinet Tesfaye (MBA, FCCA, CIA, CFE, CCSA, CGAP) Senior Auditor

2. Outline Background and Mandate of OIA Responsibilities and functions of OIA PRC Sub Committee on Audit Matters Internal Audit Progress Committee (IPAC) Relationship with the PAP Questions & Comments 2

3. Background The Office of Internal Audit (OIA) was established by the AU Executive Council Decision in July 2003 in Maputo, Mozambique. OIA is a directorate reporting to the Chairperson of the Commission. OIA also reports to the PRC Sub-Committee on Audit Matters. OIA is a secretariat to the Internal Audit Progress Committee (IAPC). 3

4. …Background Internal Auditing is an independent, objective, assurance and consulting activity designed to add value and improve an organization’s operations. It helps an organization to accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes. Thus it helps the organization to maintain effective controls by evaluating their effectiveness and efficiency and by promoting continuous improvement. (IIA Standard 2120) 4

5. Mandate of OIA Article 3 of the AU Internal Audit Regulations (AU IAR, internal audit charter) mandates the OIA to conduct audit activities/special investigations of the AU Commission and all other AU organs. The OIA also provides independent and objective appraisal of the activities of AU Organs for operational efficiency. Article 4 of the AU IAR outlines specific responsibilities of the OIA. 5

6. Organogram 6

7. Responsibilities of OIA Article 4 of the AU IAR outlines specific responsibilities of the OIA including: o Review the soundness, adequacy and application of systems, procedures and related internal controls, and recommend improvements thereto; o Review the reliability and integrity of financial and operating information and the means used to identify, measure, classify and report such information; o Review the system established to ensure compliance with the AU Rules and Regulations; o Review the means of safeguarding assets; 7

8. …Responsibilities of OIA o Appraise the economy and efficiency with which financial, physical and human resources are employed; o Review operations or programs to ascertain whether the results are consistent with established objectives and goals, and are being carried out as planned; o Appraise the economy and efficiency with which financial, physical and human resources are employed; o Conduct any investigation as and when deemed necessary from the findings of the OIA’s planned audit activities, or when requested by management of the Organs; 8

9. …Responsibilities of OIA o Monitor and evaluate the effectiveness of the risk management systems of all the AU Organs; o Undertake advisory services designed to mitigate risk, improve operations and/or assist the management of the African Union Organs in achieving their objectives; o Prepare coherent and concise quarterly and annual inspection and audit reports containing the position of budget performance and specific recommendations about required improvements for consideration by the Chairperson and the PRC; 9

10. Services Provided Audit Services o Financial Audits o Compliance Audits o Certification Audits o Operational Audits/Performance Audits o Information Systems Audits Advisory Services o Internal Controls Systems o Systems Development 10

11. …Services Provided Investigative Services o OIA Investigation Unit established and operational o SOP and Investigation manual approved o Hotline to start soon 11

12. Internal Audit Process (Performance Standards – 2000) Planning  Annual Audit plan  Quarterly Plan–and Specific plans with programs Fieldwork  Entry meeting with Auditees  Audit fieldwork (testing & documenting)  Exit meeting with Auditees Reporting  Draft Audit Report and reviews  Request Management comments  Final Report issued Follow up  Periodic follow-up on recommendations and reviews  Before start of next audit & stand alone projects  MK insight (to automate the follow-up) 12

13. OIA Reports Regular Audit Reports As per approved annual audit plan Special Audit Reports Issued for matters requiring management urgent attention pending the issuance of the Regular Report, after a normal audit. Audit Reports on Special Requests Reports on audits conducted based on management request Investigation Reports Report based on management request or the results of audit work on any risk area or information received. Certification Reports Based on the MOUs with our Development Partners / Donors. Reports to PRC Sub Committee on AM Report on budget performance audits Status of implementation of audit recommendations, key/risk areas noted during audits 13

14. PRC Sub Committee on Audit Matters The Assembly Decision Ref Assembly/Au/Dec.416(XIX) of July 2012 which adopted the African Union Internal Audit Regulations required the establishment of such Sub Committee. Established by the Executive Council Decision ref. EX.CL/Dec.732(XXII) of January 2013. The purpose is to assist the PRC and the Executive Council in fulfilling the oversight responsibilities for the financial reporting process, the system of internal control, the audit process, and the Union’s process for monitoring compliance with laws and regulations and the code of conduct. The Sub Committee currently has 13 Members. 14

15. Roles of PRC Sub Committee on Audit Matters Consider the work of all oversight bodies employed and/or appointed by the African Union. Institute investigations as and when necessary. Seek any information it requires from the African Union employees. Hire the services of outside counsel, experts and other advisors to the sub-committee as it may deem appropriate. 15

16. Responsibilities of PRC Sub Committee on Audit Matters Oversee the implementation of audit recommendations of all oversight operations. Review and consider the audited annual financial statements as presented by the Board of External Auditors. Approve the work plan of the OIA, taking into account the work plans of the other oversight bodies, Review the budget proposal of the OIA taking into account its work plan, and to make recommendations to the PRC, Advise the PRC on the effectiveness, efficiency and impact of the audit activities and other oversight functions, 16

17. …Responsibilities of PRC Sub Committee on Audit Matters Consider any changes to the internal audit regulations, Ensure that the internal audit function is organizationally independent from authority operations. Review the performance of the Board of External Auditors. Consider management’s assessment of the effectiveness of the Union’s internal controls and consider the report on internal controls by the Board of External Auditors as a part of the financial audit engagement. Receive quarterly Inspection and Audit Reports containing specific recommendations about required improvements for consideration by the PRC. Present annually to the PRC a written report of how it has discharged its duties and met its responsibilities as outlined in the TOR’s. 17

18. Meetings of PRC Sub Committee on Audit Matters The sub-committee meets a minimum of four times a year, with additional meetings to adequately fulfill all the duties and responsibilities outlined in the TOR’s. The sub-committee will meet with the Director OIA and the Board of External Auditors at least annually to discuss the financial statements, oversight of management's internal controls, compliance and risk assessment practices of the Union. Minutes of these meetings are recorded. 18

19. Internal Audit Progress Committee (IAPC) The Executive Council Decision Ref.Ex.Dec.697(XXI)i of July 2012 required the establishment of IPAC. Established in 2013 by the African Union Commission (AUC) in conformity with Article 10.i of the Internal Audit Regulations(IAR). The purpose of the Internal Audit Progress Committee is to assist the Chairperson in the examination, evaluation and follow-up of implementation of audit recommendations. IPAC consists of four (4) Commissioners and representatives of the Offices of the Chairperson and the Deputy Chairperson. 19

20. Internal Audit Progress Committee (IAPC) The Committee meets at least four times a year. Responsibilities of IPAC include: o Advise the Commission and the Union on the implementation status of audit recommendations of all oversight functions; o Advise the Chairperson on the quality and overall effectiveness of risk management procedures; o Advise the Chairperson on deficiencies in the internal control framework of the Commission. o Review management’s assessment of the effectiveness of the Commission’s internal controls. 20

21. Relationship with the PAP To re-enforce the Coordination of all AU Internal Audit functions in line with both AU Financial Rules and Regulations and AU Internal Audit Rules and Regulations a decision was made in 2015. The Executive Council decision ref. EX.CL/Dec.854(XXVI) of January 2015 requires ‘The Commission to harmonize and coordinate all internal audit functions of the African Union as enshrined in the Internal Audit Regulations and the Financial Rules and Regulations’ OIA periodically conducts the audit of PAP in coordination with PAP Internal Audit. 21

22. New developments affecting the work of OIA Reporting to PRC Sub-Committee on AM - Since 2013, this was done on budget performance audits, but challenge is on getting reports from all organs. So only AUC has been presented. IIA standards requires reporting to the Audit Committee in key/risk areas noted during audits. This has not yet started at African Union level due to political nature of organization. E&Y institutional audit by Partners has failed AU-IA on this issue and measures are being put in place to start consolidating all AU Organs key IA issues quarterly/half yearly and report to Sub-Com on AM and to Assembly through the Ex. Counsel. OIA will need your support and full ownership of Internal Control Systems to report positive things. 22

23. THANK YOU 23