1. Page 1 Fundamental elements of internal control Sharonne Adams, Senior Manager 13 April 2010

2. 2 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.

3. 3 Internal Control “There is weak financial management, which often results in irregular expenditure, corruption, and adverse audit outcomes by the Auditor-General” President Jacob Zuma, 2009

4. 4 Internal Control Why all the recent fuss over internal control ? Perception – effective internal control helps prevent fraud. What do we mean by internal control ? –More than just checks and balances –Responses to risk threatening objectives

5. 5 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.

6. 6 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

7. 7 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

8. 8 3. Governance Adequately resourced and effectively functioning internal audit and audit committee Hyperlink: PFMA, sect 38 re IA and risk management Hyperlink: Treasury Regulations, Sect 3 re IA and AC Maintenance of effective risk management strategies, including fraud prevention plans

9. 9 Internal Control Questions and discussion