Effective risk management aligns with government’s objectives and aids managerial decision-making. Risk assessments help governments to identify and understand the root causes of risks, how to mitigate them and the players involved.
Internal control and audit
Robust internal control and risk management systems are essential for upholding public integrity. Effective frameworks reduce vulnerability to fraud and corruption by providing reasonable assurance that the organisation is achieving its objectives and managing risk, and help to ensure value for money by ensuring governments are optimally delivering programmes.
Key messages
Internal control processes protect governments from fraud, corruption, waste and abuse. They help governments to measure value-for-money, assess risk, and ensure compliance with laws, regulations and policies. Managers are the first responsible for internal control activities. Others, including risk managers, inspectors and internal auditors, also contribute, providing advice and independent assurance.
This is done by both internal and external auditors. Internal auditors provide decision-makers with unbiased perspective on the performance of programmes, policies as well as emerging risks. The Supreme Audit Institution (SAI) is a government entity whose external audit role consists in overseeing public expenditures and conducting financial and compliance audits but also more and more to support more informed policy-making.
Context
Countries’ regulations on risk management and internal control are strong, but those on internal audit could improve
Across OECD countries, regulations on risk management and internal control are strong, with countries on average having 72% and 81% of the elements of standard regulations. On the other hand, on average countries only have 51% of standard regulation on internal audit, highlighting this as an area for further improvement. These regulations also address fraud and corruption risks in most cases. 70% of countries have issued guidelines on fraud and corruption prevention as part of their internal control systems, and 71% of countries explicitly address these risks in their risk management framework.
Countries addressing fraud and corruption in their internal control framework
Internal audit remains an underutilised governance tool against corruption
Internal audit is only effective if it can cover an adequate part of the public budget. Internal audit provides assurance on the operation of internal control and can have a considerable deterrent effect on fraudulent activities and officials. Legislation and practice varies significantly across OECD countries: some countries have full coverage both in legislation and in practice, whereas others have full coverage in legislation but do not audit all entities in practice. Some countries do not extend internal audit coverage to the full public budget, and many countries do not collect the necessary data to be able to assess this.
Auditing practices differ significantly on coverage of national budget
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