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SPECIALIZED AUDIT DEPARTMENT This Department handles the Value for Money audits (Performance Audits), Environmental Audits,Public Debt Audits, Fraud Investigations Audit, Quality Assurance and emerging audits. The Department isorganized as shown below:- |
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1. The Mandate for Value-for-Money Audits Public Audit Act, 2003 in Part V Sections 29-33 provides for carrying out of Value-For-Money examinations. It states ‘'the Controller and Auditor General may examine the economy, efficiency and effectiveness with which the Government, a State Corporation or a Local Authority uses its resources'' . 2. The establishment of Value-For-Money Auditing Division in KENAO The Value for Money Division of the Kenya National Audit Office was established in August 2005 when two teams made up of five officers each were constituted by the Controller and Auditor General. In September 2006 the Controller and Auditor General constituted one more team, thus increasing to three the number of Value for Money auditing units in the Division. 3 . What value- for- money auditing is all about Value-For-Money Auditing examines whether public organizations or programmes have attained economy, efficiency and effectiveness in the management of resources at their disposal. It is commonly referred to as the audit of the three ‘Es' which are defined as follows: • Economy - acquiring resources at the lowest cost while having due regard to quality; in short, keeping the costs low. • Efficiency - the rate at which resources used (inputs) are converted to goods and services (outputs). The goal is to attain the highest possible quantity of goods or services of acceptable quality from given inputs, or looked at differently, minimize the inputs used to produce a given quantity of acceptable output; in short making the most out of the available resources. • Effectiveness - the extent to which objectives have been achieved and the relationship between the intended and actual impacts of activities; in short, achieving the stipulated aims and objectives. In view of its involvement in measuring how well agencies carry out their activities, value-for-money auditing is often referred to as Performance Auditing. Performance auditing is concerned with accountability of the government for results and outcomes in its programmes. Public accountability means that those put in charge of government, programme or Ministry are held responsible for the economic, efficient and effective running of that programme. Value for Money or Performance Auditing is an important way for tax payers, financiers, members of Parliament, ordinary citizens and the Media to obtain insight into the running and outcomes of different public activities. 4. What the Kenya National Audit Office intends to achieve through Value- for- Money audits In establishing the Value-for Money Audit Division, the Controller and Auditor General aims to enable the Office fulfill its role and responsibilities stipulated in the national Constitution and in the Public Audit Act, 2003. Through audit reports arising from work carried out by the Division, the Office intends to; • provide Parliament and the public at large with independent, timely and objective information on the performance of activities and programmes funded from public resources. • promote accountability in the management of public resources by reporting whether managers of public organizations, in addition to fulfilling their obligation to answer for the discharge of responsibilities conferred to them by Parliament , demonstrate and take responsibility for performance in light of agreed targets or expectations. • promote cost-effective and better use of public resources by highlighting opportunities for public organizations to spend less without reducing the extent and impact of their programs or lowering their quality. • promote better service delivery to the public by pointing out for rectification by agency managers systems , procedures and practices that hinder the delivery by the agencies of timely high quality services that meet or surpass the expectations of the public. • confirm and report to Parliament, the government and the public at large whether executed public programmes attain their objectives. • Fulfill the need by stakeholders for information showing whether public managers entrusted with public resources have used them for the intended purposes and to ensure that the programme managers attain the goals of the public projects. • provide accurate reliable and timely performance information to agency managers for use in decision-making and in control of programme activities. 5. What the Division has accomplished so far The Value for Money audit unit has successfully carried out two (2) audits. The study on Repairs and Maintenance of National roads network is in the final stages while fieldwork has been finalised on the second study which is on Crop Seed and Livestock Development. The unit has further completed three (3) pre-studies in readiness for the full studies on usage of CDF Funds, utilization of Sugar Development Levy Fund and the operations of the Public Pensions Fund. • How the Office intends to grow its value-for money auditing work The passing of the Public Audit Act, 2003 and the subsequent creation of the Value-For-Money Auditing Division in the Kenya National Audit Office has come at a time of increasing expectations for better performance of public agencies not only by Parliament but the government, the general public and other stakeholders. The Kenya National Audit Office is committed to providing all stakeholders with accurate and reliable information on levels of performance attained by the agencies by; • steadily increasing the proportion of its resources dedicated to Value-for-Money auditing. • setting up reliable quality control systems ensure the accuracy, reliability, timeliness and integrity of its reports. • continuously improving its work methods and processes so as to measure up to established international standards for Value -for- Money Auditing through training and consultations with more developed SAIs.. What is Environmental Audit Environmental Audit is the audit whose attention is devoted to the disclosure of Environmental assets and liabilities and Compliance with Environmental Legislations and Conventions, both national and international. An environmental audit could be devoted to measures instituted by an entity to promote economy, efficiency and effectiveness in the daily operations of an Institution and checks how the operations of that particular entity affect the environment. In simple terms Environmental audit " seeks to establish the impact of management actions on the Environment" D.G. Njoroge 2004- former C& AG of Kenya
Objectives Part II Section 3 (ii) of the Environmental management and co-ordination Act 1999 states that ‘every person in Kenya is entitled to a clean and healthy environment and has the duty to safeguard and enhance the environment'. Our objectives will therefore be:- • To ascertain how far activities of government institutions, Local Authorities and State Corporations have conformed to the existing Environmental Legislation in place in Kenya , and other International conventions. • To establish how far the government is effectively controlling environment risks from its own operations. • To confirm whether the government and other institutions have put in place effective accountability framework for its environmental programmes and policies. • To establish whether the auditee is meeting environmental performance targets it has set up for itself. • To report on non-compliance on any of the above, among others. 1. In the conduct of Financial audits, KENAO is required to do the following:
2. In Compliance audits, KENAO will seek to provide assurance that Government activities are conducted in accordance with relevant Government laws, standards and policies ,both at national and international (where relevant) levels 3. In Performance audits, KENAO will strive to ensure that:-
Challenges • No Environmental audit guidelines developed by the Office. KENAO will however use the guidelines developed by INTOSAI and the working group on environmental audit and adopt these to its environment.. • No reference materials. In the meantime the Office will use the INTOSAI and other materials developed by bodies handling environmental concerns. • Numerous legislation on waste management with overlapping roles. The office will however review this issue. Achievements
Way Forward (i) With the current strength KENAO will carry out two audits per year. (ii) The office plans to carry out Environmental audits on the following areas.
1. Formation of Public Debt Unit The Public Debt Unit was formed on 10 August 2006 to look at issues of Public Debt Management in Kenya . Public Debt Management needs to be linked to a clear macroeconomic framework, under which the Government seeks to ensure that the level and rate of growth in public debt are sustainable. 2. Definition Public Debt is all domestic and foreign borrowing by the Government. Public Debt may further include guarantees by the Government for borrowing by the state corporations and local authorities and the liabilities incurred by the Quasi-Government bodies. 3. Role of KENAO in Audit of Public Debt The role of KENAO in the audit of Public Debt shall be to give the Kenyan public the assurance that internal and external borrowing is properly managed and that the funds borrowed are used economically, efficiently and effectively to benefit the people of Kenya . To achieve this, KENAO will seek to:- • Ensure that all Public Debt commitments are identified and properly recorded. • Ensure that there are proper procedures for authorizing all Public Debt Commitmments and that all these procedures are applied. • Ensure that records on all public borrowings and loan guarantees are well maintained. • Assess the economy and effectiveness of a particular borrowing. • Assess the borrowing structural, regulatory, legal framework and legal provisions on borrowing and debt management, including such matters as ceilings for borrowing, authorisations, provisions governing the use of particular debt instruments, budgetary law requirements, adjustments of provision to changed environment. Introduction
ISSUES TO BE ADDRESSED In the year 2006 the Controller and Auditor-General established the Fraud and Investigation unit under the Specialized Audit Section to address issues including Investigations into Receipts and Payment transactions, Payroll frauds, Procurement frauds, Contract frauds, Computer crimes, Health care frauds, Overtime, Other allowances and Honoraria claims, cheques and credit cards frauds, falsification of documents and records and other emerging issues that may require to be investigated and reported upon. The role of KENAO in investigating the audit areas above shall be as follows:- MODE OF OPERATION
Quality assurance is the adoption and application of policies and procedures to ensure the work of the entity meets required standards. Additionally, it involves constant reviews of the policies and procedures for efficiency and effectiveness. The quality Assurance Unit was established in 2004 in accordance with the requirements of International Organization of Supreme Audit Institutions (INTOSAI). Its main objective is to ensure that KENAO attains best audit results and outputs in all audit work. The unit will further be ensuring that all KENAO's audit work is carried out professionally by confirming that the audit is carried out in accordance with internationally recognized auditing standards, guidelines, manuals and quality control models. Quality assurance, at KENAO is deemed necessary because good governance in a democratic society like Kenya demands high quality audit work. Quality control policies and procedures at the KENAO are implemented at both the entity level and on individual audits. These policies and procedures are designed in a way that ensures all audits are conducted in accordance with INTOSAI Auditing Standards as well as the International Standards on Auditing. Purposes of Quality Assurance at the KENAO (i) Ensures high quality of the results of audit work and non audit work (ii) Ensures right quality in the inputs in the work process (iii) Ensures maintenance of high degree of integrity, accountability and independence (iv) Improves competitiveness of KENAO as the Supreme Audit Institution (SAI) in Kenya (V) Enhances the credibility and reputation of the KENAO (Vi) Aids in avoiding possible litigation Available Quality Assurance Tools at KENAO 1. INTOSAI Auditing Standards 2. International Standards on Auditing 3. KENAO Financial Audit Manual (Under Process) 4. Code of Conduct and Ethics 5. Quality Assurance Models (Quality Review Checklists)
The computerised Audit Unit promotes use of Computer Assisted Audit Techniques (CAATs) in the audit Process. Currently the unit is using Audit Command language (ACL) for data analysis. The unit has successfully carried out data analyses in several ministries and state corporations. This unit is also empowered to audit Government Computer Systems
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