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Re-Designing State Internal Auditing in Illinois

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                     Re-Designing State Internal
                        Auditing in Illinois
                                   A Value-Added Approach
                       Presented by John W. Cressman, Chief Internal Auditor
                                  Illinois Office of Internal Audit
                       As Introduced by William G. Holland, Auditor General
                                           State of Illinois
    Illinois Management Issues

• Reducing Budget Deficits
• Increasing state government efficiency and
  producing cost savings
• Coordinating functions common to multiple
  agencies
• Sharing information and developing
  standards across like functions
• Establishing a statewide risk management
  structure
  Governor’s Executive Order 2003-10

• Coordinate certain functions common to many
  state agencies, including facilities
  management, staff legal functions, and internal
  auditing
• Consolidated the internal audit function from
  26 agencies into a single statewide function
  covering 46 agencies/boards/commissions.
• Created a statewide risk management structure
  for effective management control, proactive
  risk management, governance, and ongoing
  business process improvement.
      Audit Process Efficiencies

                        Before        After
                     Consolidation Consolidation
Senior Management         30             8
Audited Agencies          26            46
Physical Locations        26             2
Audit Plans               26             1
Budget                  11.3M          8.6M
Pre-Consolidation
              Post-Consolidation

                                 Governor



                                                   Governor’s
               Director of CMS
                                                 Audit Committee



                              Illinois Office
                             of Internal Audit


• Increased objectivity
• Increased independence
                                         A Closer Look At IOIA
                                                                                                                     Illinois Governor

       Illinois Office of Internal Audit


                                                                       Director CMS                                                                                      Audit Committee
                                                                                                                                                                     Members Named By Governor




                                                                                      Administration                                                           Program
                                              Administrative Support
                                                                                                                    Chief Internal Auditor




                            Admin Support                  Division Manager                                                                                                                             Division Manager             Admin Support




            Admin Support     Audit Manager                      Audit Manager        Admin Support                                     Audit Manager                            Audit Manager               Admin      Audit Manager        Admin
                                                                                                                                                                                                            Support                         Support



                         Economic Development,                  Government Services                                             Business Regulation & Labor               Human Services & Grants                      Public Services
Office Operations    Environmental Regulation & Law               & Infrastructure                      Quality                          Relations                                                                                               IT Operations
     Manager                  Enforcement                                                              Assurance                                                         Aging                                    Emergency Mgt Agency              Manager
                                                            Arts Council                                Manager                  Financial Regulations                   Children & Family Services                - Nuclear Safety
                      Agriculture                           Capital Development Board                                            - Banks & Real Estate                   Criminal Justice Info Authority          State Fire Marshal
                      Commerce & Economic Op                Central Management Services                                          - Financial Institutions                Deaf & Hard of Hearing Com               Military Affairs
                      Corrections                           Illinois Community College Board                                     - Insurance                             Development Disabilities Council         Public Aid
                      Environmental Protection Agency       Historic Preservation Agency                                         - Professional Regulations              Employment Security                      Public Health
                      Law Enforcement Trng & Std Bd         Property Tax Appeal Board                   Quality                 Education Labor Relations Board          Guardianship & Advocacy Com              Veteran Affairs                IT Operations
Office Operations                                                                                                                                                        Human Rights
                      Natural Resources                     Revenue                                    Operations               Labor
                      Illinois State Police                   - Illinois Gaming Board                                           Labor Relations Board                    Human Rights Commission                                                General Controls
 Administrative                                                                                                                                                          Human Services
                      Prisoner Review Board                   - Liquor Control Commission        Quality                                                                                                                                        Application Audits
 Support
                      Violence Prevention Agency              - Lottery                          Assurance                                                                                                                                      System
 Human
                                                              - Illinois Racing Board            Risk                                                                                                                                           Development
 Resources
                                                            Toll Highway Authority               Assessment                                                                                                                                     IT Support
 Fiscal Operations
                                                            Transportation




                                                                             Operational   -   Compliance     -     Financial   -   Special   -   Consulting   - Shared Services

                                                                                               Springfield Office                                  Chicago Office
      How Risk-Based Auditing
           Adds Value

• Creates pro-active risk management
• Identifies high-risk audit areas across 46
  agencies/boards/commissions.
• Allows resources to be allocated to audit
  projects by risk.
• Identifies patterns of risk across multiple
  agencies/boards/commissions.
Adding Value through Statewide and
     Multi-Agency Auditing

• More flexibility in scheduling auditors.
• Ability to match auditor expertise to cover
  multi-agency/statewide functions.
• Ability to assess similar agencies with similar
  functions in order to identify similar problems.
• Ability to implement recommendations and
  corrective action plans that impact statewide
  problems.
         Adding Value with
       Consolidated IT Auditing

• Ability to establish IT audit teams with
  specialized skill sets to provide statewide
  audit coverage.
• Increased coverage of IT systems and
  controls including those at smaller agencies
  that previously did not have an IT staff.
• Ability to assess similar agencies with
  similar data systems in order to identify any
  similar problems.
The Governor’s Audit Committee
  • To ensure independence of internal audit
    functions.
  • To ensure IOIA follows accepted
    auditing standards.
  • Approves the appointment of the IOIA
    Chief Internal Auditor.
  • Reviews and approves the IOIA Audit
    Charter and 2-year Audit Plan.
         Adding Value by
Expanding Cooperative Relationships

• Office of the Auditor General (OAG)
   – Communication
   – Information Sharing
• Inspector General
   – Referrals
• Legislative Audit Commission
   – Information Sharing
• State Agency Management
   – Consulting Projects
              Standards
      Illinois Internal Auditing

• Executive Order 2003-10 requires a statewide
  risk management structure.
• Fiscal Control and Internal Auditing Act
  (FCIAA) Compliance.
• The State Internal Audit Advisory Board
  (SIAAB) promulgates the standards and rules
  for Internal Auditing in Illinois.
• SIAAB adopted The Institute of Internal Audit
  (IIA) Standards for Internal Auditing that
  require risk-based auditing.
            Assessing Risk

• Statewide Risk Assessment
  – Risk Assessment meetings conducted at 46
    agencies/boards/commissions.
  – Risk Matrix completed that represented over
    500 risk variables within each of the 46
    agencies/boards/ commissions.
  – Agencies/boards/commissions and statewide
    functions are grouped by risk to prioritize
    audits and provide statewide coverage.
                                        The Risk Matrix
                                                                                                                  Risk Categories




                                                                                                                                                      Compliance/Legal/Reg
                                                                                                                        Facilities/Capital




                                                                                                                                                                                                                                      Org/Structural
                                                                                                                                                                                                             Strategy/Perf.
                                                                                                                                                                                      Media Issues
                                                                           Process/Ops


                                                                                                 Technology




                                                                                                                                                                                                                                                               Programs
                                        Funding


Index                                                     People
  #         Audit Area              I             L   I            L   I                 L   I                L     I                        L    I                          L    I                  L   I                    L   I                    L   I              L   Additional Inform ation
A     Program Delivery
B     Program Adm inistration
C     Grant Adm inistration
D     Debt
E     Revenue/Receivables
F     Treasury
G     Personnel & Payroll


Key   Description                                                                                                                                Key                             Description
 0    Auditable segment not present/not know n to exist at this agency                                                                              I                            Impact to agency if risk materializes
 1    Low                                                                                                                                          L                             Likelihood, or probability, or risk materializing
 2    Low -Medium
 3    Medium-High
 4    High
                                             Risk Rankings
  Agency           Audit Area                    Auditable Entity                  Audit Department          Agency      App. Risk
                                                                                                              Type       Level Score

                                          Residential Finance (Thrift and
Illinois Of f ice of Banks and Real EstateMortgage Banking)
                 Program Delivery                                             Environment & Business Reg.    Agency       C     720
                                          Mental Health & Developmental
                                          Disabilities Programs & Substance
Depar tm of Program Delivery
          ent Hum S vices
                      an er               Abuse Programs                      Human Services                Department    A     710
Depar tm of Program tation
          ent Tr anspor Delivery          Roadway Maintenance/Repair          Government Services           Department    A     670
          ent Pr of essional Regulation Licensing and Testing
Depar tm of Program Delivery                                                  Environment & Business Reg.   Department    C     660
Depar tm of Program tation
          ent Tr anspor Delivery          Highway Contruction                 Government Services           Department    A     660
Depar tm of Information Tech.
          ent S    tate Police            Information Security                Law Enforcement               Department    B     660
Depar tm of Debt
        ent Em ploym S
                     ent ecur ity     Debt Management                         Economic Development          Department    B     520
        ent Pr of essional Regulation Adjudication
Depar tm of Program Admin                                                     Environment & Business Reg.   Department    C     520
Depar tm of Program Deliveryvices Vehicle Services
        ent Centr al Mgm St. er                                               Government Services           Department    A     520
Depar tm of Program tation
        ent Tr anspor Delivery        Public Transportation                   Government Services           Department    A     520
                                   ic Monitoring
Depar tm of Granter ce and Econom Oppor tunity and Management
        ent Com Admin
                 m                                                            Economic Development          Department    A     260
Depar tm of Personnel & Payroll Compensation and Classification
        ent Labor                                                             Economic Development          Department    D     260
Depar tm of Accounting Regulation Financial Reporting
        ent Pr of essional                                                    Environment & Business Reg.   Department    C     260
Depar tm of Communications
        ent Tr anspor tation          Public Information                      Government Services           Department    A     260
                                      Systems Dev., Implementation, Major
Depar tm onInformation Tech.
        ent Aging                     Modifications                           Human Services                Department    B     260
Depar tm of Program Admin
        ent State Police              Monitoring and Compliance               Law Enforcement               Department    B     260
                 The Future
         Illinois Internal Auditing
• To improve auditing services that result in:
   – More efficient interagency communications and
     collaboration.
   – Expanded capabilities to perform special projects
     requested by the Governor, Audit Committee, and
     Agency Management.
   – Proactive statewide risk management.
   – Identification of opportunities to improve utilization
     and coordination of available resources.
   – Enhanced communication, cooperation and
     coordination with the Office of the Auditor General
     resulting in more comprehensive audit coverage.

								
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