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By CPA George Omondi Amimoh

The Institute of Certified Public Accountants (ICPAK) was established by the laws of Kenya under Cap 531 to regulate the activities of all Certified Public Accountants by ensuring credibility, professionalism and accountability in the Accounting profession. The Institute has a mandate to safeguard public interest through enhancing her contribution on implementation of the legislation that facilitates effective and efficient use of public resources so as to achieve value for money.

The Public Finance Management Act 2012, and Public Finance Management regulations 2015 requires that each public entity shall establish an Audit Committee. The Audit Committee is key in providing independent expert assessment of the activities of the top executive management, the quality of risk management, financial reporting, financial management and internal Audit to the top management. The Audit Committee ensures that external Audit recommendations are fully addressed and that the quality of internal Audit is of appropriate standard and that the management has full regard to the internal Audit recommendations.

When the Audit Committee properly exercises her role as the watchdog on the independence of internal Audit and ensures that the quality of information obtained from financial and governance affairs of the public institution, future prospects and effective service delivery will be efficiently achieved by the said public entity. Section 73(5) of the Public Finance Management Act 2012, provides for each Accounting officer of a department must and each governing body shall establish an Audit Committee for the entity. This Committee will provide assistance to the Accounting officer or a governing body.

Audit Committees promote the integrity and quality of internal and external reports by providing high level of assurance and checks by providing adequate mechanism of enabling the Audit Committee facilitate adequate disposal of all Public Investment Committee (PIC) /Public Accounts Committee (PAC), Office of the Auditor General (OAG) recommendations by doing constant follow ups to ensure positive action is taken by the public entity. The Audit Committee ensures and reviews the effectiveness of the entity’s internal Audit function and in absence, the committee considers on the need for an internal Audit function that makes recommendation to the top management of the public entity.

When the Audit Committee properly exercises her role as the watchdog on the independence of internal Audit and ensures that the quality of information obtained from financial and governance affairs of the public institution, future prospects and effective service delivery will be efficiently achieved by the said public entity

In her Audit report of 2020/2021, the Auditor General expressed her opinion on wasteful spending and unexplained expenditures by various Ministries, Departments and Agencies. The report revealed that in some departments, existing Audit Committees met only once in a year contrary to the requirement of quarterly meeting and in some departments, this Committee does not exist. Majority of County Governments are not in compliance with regulations hence the wanton wastage of public resources and many Audit queries are not adequately addressed.

The report also revealed that in some departments’ prior year Audit recommendations were not addressed creating more Audit queries. Further, The Auditor General observes effective mechanism for follow ups on implementation of Audit recommendations is lacking and as a result most Audit queries recur in subsequent Audit reports due to lack of requisite action hence the need putting Audit Committees in place. Section 204(1) (g) of The Public Finance Management Act 2012 provides that the CS treasury/Finance may apply sanctions to National Government/ County Government entities that fail to address issues raised by the Auditor General to the satisfaction of The Auditor General.

The Auditor General in her Audit report of 2020/2021 of various Public Institutions, her report indicates lack of accountability and documents to support legality and effectiveness in the use of public resources. The failure to apply requisite sanctions has resulted to some Accounting Officers not adequately accounting for the management and use of public resources whereby they mismanage public funds with a lot of impunity with disregard to the rule of law and International Public Sector Accounting Standards (IPSAS).

The Public Finance Regulations 2015, on the membership, Appointment and replacement of Audit Committee members require that at least one member of the Audit Committee must have relevant qualifications and expertise in Audit, financial Management or Accounting with experience in public service or devolved system of Government and knowledge in risk management and must be a member of a professional body in good standing.

ICPAK should therefore ensure that these Committees are protected under relevant applicable laws since they serve as watchdogs against wasteful expenditures and also encourage her members to take up these positions on the Audit Committees so as to instill financial discipline, review internal controls and promote good governance to reduce and or stop pilferage of public funds. The purpose and authority of Audit Committee is provided for in the Public Finance Management regulations.

The Audit Committee guidelines through the gazette notice no. 2690 provides the guidance intended to offer best practices on Audit Committee operations, capable of implementation into the public sectorgovernance entities responsible for a wide range of differing missions and objectives. The guidelines carefully define the roles of Audit Committees.

These set up of Audit Committees will provide the requisite oversight on the public financial management systems and shall assist the governing bodies/County Governments’ top management in fulfilling their responsibilities in the financial reporting process, internal control system, risk management, the internal and external Audit process and the governing entities’ process for monitoring compliance with financial and governance laws and regulations.

The government lost Sh226.71 million due to corruption-related acts reported in 20 public institutions in 2021.

County Governments are under immense and increased pressure to reduce costs and improve accountability and performance, effective risk management and coordination with a strong internal Audit function that is critical to the success and prudent financial management of the respective governing entity. ICPAK should strongly come in to ensure compliance and offer guidance on overview and need to implement an integrated risk management approach by ensuring implementation of Audit Committees as required by The PFM Regulations 2015 in County Governments to ensure constant review of best practices in risk management in internal and external Audits.

ICPAK (2016), evaluation of the effectiveness of Audit Committees in the public sector revealed gaps in the general implementation of Audit Committee functions across the Country. ICPAK should push for adequate funding of Audit Committees and advocate for strict adherence to the reporting structure by these Audit Committees in County Governments in compliance with the guiding principles on the formation and objectives of these Committees in the County Governments.


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