ANNUAL RISK-BASED INTERNAL AUDIT PLAN AKLAN PROVINCIAL INTERNAL AUDIT OFFICE

ANNUAL RISK-BASED INTERNAL AUDIT PLAN AKLAN PROVINCIAL INTERNAL AUDIT OFFICE TABLE OF CONTENTS I. SUMMARY OF INTERNAL AUDIT PLAN …………………………… … 1 A...
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ANNUAL RISK-BASED INTERNAL AUDIT PLAN

AKLAN PROVINCIAL INTERNAL AUDIT OFFICE

TABLE OF CONTENTS

I. SUMMARY OF INTERNAL AUDIT PLAN …………………………… … 1 A. Overview …………………………………………………………………… 1 B. Identification of Risks and Prioritization of the Audit Areas ……………………………………………………….. 1 II. ENGAGEMENT TYPE AND WORK SCHEDULE ……………………. 3 A. Engagement Type …………………………………………………….. … 3 B. Scope of Audits ………………………………………………………….. 3 C. Audit Work Schedule …………………………………………….…….. 4 D. Calculation of Audit Hours …………………………………………… 5 III. STAFFING PLAN ………………………………………………….………. 6 A. Staff Composition ……………………………………………………….. 6 B. Training Schedule ………………………………………………………. 7 IV. FINANCIAL BUDGET …………………………………………………..... 7 ANNEXES A. Prioritized Audit Areas using risk assessment matrices/reports (RAR) ………………………………………………… 9 B. Audit Work Schedule CY 2013-2014 ………………………………..14 C. Approved Annual Audit Agenda ……………………………………... 20 D. Computation of Available Audit Hours ………………..…………… 22 E. Computation of Audit Engagement Days …………………..……… 24 F. Risk Assessment Matrices 1. PPDO ……………………………………………………………………. 25 2. PHRMO …………………………………………………………………. 37 3. PEO ……………………………………………………………………… 50 4. PBO ……………………………………………………………………… 75 5. PGSO/BAC …………………………………………………………….. 82 6. PACCO ……………………………………………………………….. … 101 7. PTO ………………………………………………………………………. 112 8. PGO-MIS ……………………………………………………………….. 120 G. Executive Order No.111: An Executive Order Approving the 2013 Annual Risk-Based Internal Audit Plan of the Province of Aklan ………………………………………………………………........ 125

I. SUMMARY OF INTERNAL AUDIT PLAN A. Overview This Annual Internal Audit Plan was prepared by the Aklan Provincial Internal Audit Office (APIAO) to be used as the basis in conducting its internal audit activity giving due consideration on the availability of resources, the capability of APIAO’s existing staff complement, the time allotted to finish the audit within the period of one year and the priority of the Governor. The plan contains the lists of the audit engagements, the scope of audit, and the types of audit that will be conducted. It also contains the audit activities and the estimated man-days to complete each audit. It covers, as well, the staffing plan and budgetary allocation that primarily focus on improving the competence of the personnel by attendance to trainings, other capability development activities, and hiring of additional staff on the 3rd quarter. B. Identification of Risks and Prioritization of the Audit Areas The first step that was conducted by the APIAO in the formulation of its Annual Internal Audit Plan was the identification of risks that would prevent the Provincial Government from meeting its target and achieving its goals and objectives. Before the formulation of risk matrices and identification of potential risks in the provincial government, PRMF consultant, Mr. Ricardo San Andres conducted an orientation seminar and led APIAO and twelve (12) road related (RR) departments in a small group workshop. And on March 11-15, 2013, another PRMF Consultant, Ms. Mary Jane Rosales trained and coached the same departments to develop their Risk Assessment Matrices and document their Internal Control System. As an initial output, the 8 road related offices (PPDO, PEO, PHRMO, PGSO/BAC, PBO, PACCO, PTO and PGO-MIS) completed their risk assessment matrices and internal control documentations. The road related departments’ risk assessment matrices were formulated using a risk assessment process that included identifying risks that would prevent achievement of their objectives and assessing these risks in terms of likelihood of occurrence and impact using the following assessment factors: a. Assessment Factors in measuring Likelihood: 1. Culture or Control Environment 2. Historical Occurrence 3. Complexity of processes/Systems b. Assessment Factors in measuring Impact:

1. Economic Growth 2. Poverty Reduction Aklan Provincial Internal Audit Office | 1

3. Public Access to Infrastructure services 4. Reputation/Perception of Constituents 5. Financial Targets Rating Scale: Likelihood 1 - Rare 2 – Possible 3 – Almost Certain

Impact 1 – Minor 2 – Moderate 3 – Catastrophic

The resulting assessment of risks was placed in a risk map to determine which risks are significant/high, moderate and low. The annual internal audit plan for CY 2013 came from the risk assessments performed by each office that form part of the commitment to PRMF. The high risks identified by the offices were collated by APIAO and prioritized using the following factors (risk ranking criteria) with equivalent weights that has been agreed to by APIAO in its first year of audit engagement:

1. Contributing to the 5 Reform Agenda of PRMF-PGA-40%. (1.

Sustainable Road Maintenance, 2. Transparent and accountable budget and expenditure management system, 3. Fully functional internal control system including an independent internal audit, 4. Transparent procurement process, 5. Comprehensive Human Resource Development Plan (HRMDP) and Management Strategy)

2. Control Environment-30%. (It epitomizes the entire physique of

the LGU, i.e., the program, procedures, day-to-day operations of the organization, basic internal control safeguard and personnel. The following are also essential ingredients of a favorable controlled environment: tone at the top, compliance with policies and procedures, reliable systems, prompt detection and correction of errors, adequate staffing, etc.)

3. Complexity-30%. (Extent of Automation, Complex Calculations, Interrelated and interdependent activities, Number of products or services, the time spans of estimates, Dependency on third parties, Customer Demands, processing times, Applicable laws and regulations, etc.) Rating Scale: 1 Probably not a problem 2 Possibly a problem 3 Probably a problem After the comprehensive analysis of risks, those interrelated risks were consolidated to form several audit areas. Considering the office resources, APIAO will initially engage audit areas with rating above 80% Aklan Provincial Internal Audit Office | 2

starting 2nd quarter of CY 2013 and those below will be audited on the 1st– 2nd quarters of CY 2014. The Annual Audit Plan was primarily based on the vision of the APIAO and the vision of the Province of Aklan in relation to the five key reform areas.

II. ENGAGEMENT TYPE AND WORK SCHEDULE A. Engagement Type The two types of engagements in an Internal Audit Plan are: 1. Assurance Service – Objective examination of evidence for the purpose of providing an independent assessment on governance, risk management, and control processes for the PGA. This type of engagement employs the following types of audits as embodied in Chapter 4.4 of the IA Operations Manual of APIAO: 1) Operations /Management Audit, 2) Compliance Audit, 3) Information Systems Audit, 4) Fraud Audit/Forensic Audit, and 5) Special Audit. For this year the APIAO will engage in the following types of audit:  Operational/Management Audit – Audit Activities which may be performed to assist management in the review or examination of policies and procedures. They focus on the ability of an organization to achieve its business objectives in the areas of efficiency and effectiveness of operations.  Compliance Audit - Audits that are largely directed at evaluating compliance with established policies, laws, procedures, regulations, contractual provisions, etc. 2. Consulting Services – An advisory and related client service activities, the nature and scope of which are agreed with the client, are intended to add value and improve an organization’s governance, risk management, and control processes without the internal auditor assuming management responsibility. Examples of this activity are advisory, facilitation, training and benchmarking. As an initial consulting activity, the APIAO shall facilitate RISK ASSESSMENT WORKSHOP for all hospitals, other non-RR departments and other EEDD Units on June 2013. This is to ensure all offices in the provincial government carry out risk assessment regularly and come up of comprehensive risk universe. B. Scope of Audits The Institute of Internal Auditor’s International Standards for professional Practice of Internal Auditing addresses the scope of audit work as follows: Aklan Provincial Internal Audit Office | 3

 

 

Review the reliability and integrity of financial and operational information and the means used to identify measure, classify and report such information; Review the systems established to ensure compliance with those policies, plans, procedures, laws and regulations, which could have a significant impact on operations and reports, and should determine whether the office or unit is in compliance; Review the means of safeguarding assets and as appropriate verify the existence of such assets; and Appraise the effectiveness and efficiency of operations within the department of office.

C. Audit Work Schedule The Audit Universe of LGU-PGA as identified by the 12 RR departments can be found in Annex A. For this year, APIAO will have the following Audit Agenda as its initial audit activities: ANNUAL AUDIT AGENDA - CY 2013 DEPT/ OFFICE / UNIT

AUDIT AREAS

Types of Audit

AUDIT WORK SCHEDULE 2ND QTR 2013

3RD QTR 2013

4TH QTR 2013

Scope No. 1 - Ascertaining the Reliability and Integrity of financial and operational reporting: 1 PEO, Allocation of budget for local roads Management/ x PBO may not be adequate to fund the Operations Audit prioritized provincial road projects in maintenance, improvement rehabilitation during the year. 2 PEO, Local counterpart funds for infra Management/ x PBO, projects maybe inadequate. Operations Audit PACCO Dependent to the arrival of funds from donor agencies (DOH)may result to the delayed implementation of project s. 3 PTO, Revenues from Philhealth claims Management/ x EEDD may not be fully collected Operations Audit 4

PPDO, PBO

AIP not fully funded by the General Management/ Fund Operations Audit

x

5

PHRM O, PBO

Lack of budget on the conduct of Management/ training programs and training Operations Audit equipment.

x

Scope No. 2 - Evaluating the efficiency and effectiveness of Revenue Collection, Planning, Budgeting, Processing of Transactions, Project Implementation, Monitoring and Evaluation Activities: PTO, Poor Road Condition may affect the Management/ X PEO collections efficiency of Real Operations Audit 6 property Taxes 7

PPDO & PBO

Delayed preparation/approval Annual Investment Plan.

of Management/ Operations Audit

x

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PPDO

Delayed submission of PPAs of the different offices due to multiple changes of priorities. PEO & No established system for PGSO monitoring fuel consumption

Management/ Operations Audit Management/ Operations Audit

x

Management/ Operations Audit

x

10

PEO, PGSO, PACCO

11

PEO, PPDO, PPMC

8 9

Delay in the preparation and processing of transaction documents Inefficient Monitoring and Evaluation of Projects

Management/ Operations Audit

x

x

PPDO No prescribed official monitoring Compliance Audit x 12 & tool. PPMC Scope No. 3 - Evaluating the Degree of compliance with laws, regulations and managerial policies and operating procedures in the Procurement System: x x BAC & Delays on procurement/release of Compliance Audit 13 budget PBO Failure of Bidding. Compliance Audit x Splitting of Purchase Request Compliance Audit x No quorum Compliance Audit x Delayed/incomplete delivery of Compliance Audit x 17 PGSO goods. Delivery of goods may not in Compliance Audit x accordance with the technical 18 PGSO specifications, programs of works and plans stipulated in the contract/purchase order. Scope No. 4 - Ascertaining the extent to which the assets and other resources of the provincial government are accounted for and safeguarded from losses of all kinds: PEO, Break-down of ageing equipment Management/ x PGSO may result to delayed Operations Audit 19 implementation of road maintenance activities. Lack of storage facilities resulting to Management/ x 20 PGSO loss of properties Operations Audit 14 15 16

BAC BAC BAC

21

PGSO

Unregistered motor vehicles

22

PGSO

Uninsured/expired Insurance Motor Vehicles and Building

23 24

Compliance Audit

x

of Compliance Audit

x

PTO

Lack of vaults for un-deposited Management/ cash/safekeeping. Operations Audit

x

PGSO

Unlicensed possession of apprehended

firearms/illegal Compliance Audit firearms when

x

D. Calculation of Audit Hours The calculation of Available Audit Hours is included as Annexes C and D of this plan. The initial audit engagement of APIAO will commence on Aklan Provincial Internal Audit Office | 5

April 16, 2013, after the formulation of the initial Risk-Based IA Plan. A total of 8, 352 hours will be available for the period April 16, to December 31, 2013. The calculation of Available Audit Hours was divided into six categories. The six categories are: 1 2 3 4 5 6

Audits & Project Works – Assurance Services Audits & Project Works – Consulting Services General Administration Training/Seminar Holidays Vacation/Sick Leave

4,708 audit hours 440 audit hours 1, 892 audit hours 360 audit hours 680 audit hours 272 audit hours

The audit works for Assurance Engagement Services requires a total number of 5,376 hours for the year 2013, however, the available audit hours for this project is only 4,708 hours, a difference of 668 hours. There is a need for employment of at last one internal auditor; a CPA would be an advantage, either by job order or by contractual basis to complement the existing limited number of staff auditors. The deficiency in audit hours may also be resolved by requiring the staff auditors to render overtime services during Saturdays, Sundays and holidays.

III. STAFFING PLAN A. Staff Composition For the year 2013, the APIAO has employed the following personnel: Position Title No. Status Internal Auditor IV 1 Permanent Internal Auditor III 1 Permanent Administrative Officer 1 Permanent IV(equivalent to Internal (Aus-AID Auditor II, CPA) SCHOLAR) Internal Auditing 1 Permanent Assistant Legal Researcher 1 Consultant Software Engineer Civil Engineer Certified Accountant Total

1 1 Public 7

Incumbent Elyen C. Agcaoili Brenda O. Magalit Eumir Raymund SM. Atienza Mae A. Cawaling

Atty. Christian S. Itulid Contractual Joven T. Punzalan Job Order Engr. Niño Chris I. Villorente Contractual To be hired on the 3rd quarter Actual performing (full time) = 5

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The total actual performing full time personnel of APIAO as of the second quarter of CY 2013 are only five (5). The office aims to employ one (1) Contractual CPA by the 3rd Quarter. B. Training Schedule To improve the competence of the APIAO personnel in performing their functions, they are required to undergo seminar and workshops on the following courses: 1. Basic Internal Control System Framework (In-house orientation – 1st Quarter) 1.1. Joven T. Punzalan 1.2. Engr. Niño Chris I. Villorente 1.3. New comer auditor 2. Risk Assessment: A Planning Tool (PRMF-1st Qtr) 2.1. Elyen C. Agcaoili 2.2. Brenda O. Magalit 2.3. Mae A. Cawaling 2.4. Atty. Christian S. Itulid 2.5. Joven T. Punzalan 2.6. Engr. Niño Chris I. Villorente 3. Effective 3.1. 3.2. 3.3.

Internal Audit Report Writing (AGIA-3rd Quarter) Elyen C. Agcaoili Brenda O. Magalit Mae A. Cawaling (Optional)

4. AGIA Convention cum Seminar (Boracay-4th Quarter) 4.1. Elyen C. Agcaoili 4.2. Brenda O. Magalit

IV. FINANCIAL BUDGET Expenditure Item 1

Travelling Expenses:

2

Training Expenses:

 

 

Estimated Amount

Transpo & per diems during Fieldwork Travel Exp - attendance to Seminar

Registration Fees – Seminar Catering (Food & Venue) – conduct of RA Workshop to all Dept & EEDD Units

20,000.00 20,000.00 30,000.00 90,000.00

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3

Office   

4

Personal Services:  

Supplies: Handouts for the workshop Audit Working Papers Audit Reports/Communications

15,000.00 15,000.00 15,000.00 50,000.00 120,000.00 375,000.00

Overtime Services Wages for Contractual/Job Order

TOTAL

Except for the budget for Wages of Contractual which we planned to augment from the savings of Salaries from the vacant position of PGDH, all the Expenditures Items hereto enumerated are within the appropriation of CY 2013 Budget of Aklan Provincial Internal Audit Office. Respectfully submitted:

_______________________________ ELYEN C. AGCAOILI OIC-Internal Auditor IV Aklan Provincial Internal Office

_______________ Date

Approved as submitted:

_______________________________ HON. CARLITO S. MARQUEZ Provincial Governor Province of Aklan

_______________ Date

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