Public Finance Management (PFM) focuses on resource mobilisation and expenditure management in the public sector. Expenditure on public services accounts for over one-third of the Gross Domestic Product (GDP) in most countries; therefore, the interest in and expectations for these services are high, and the management of public funds must withstand scrutiny from all quarters.
A well-functioning PFM system is crucial for achieving the objectives of the public sector, as it enhances service delivery, promotes fiscal discipline, and fosters sustainable development. Sustainable service delivery ensures that the community’s current needs are not compromised by the way those services are provided. At the centre of service delivery are accountability, value for money, efficient and effective use of resources, improved communication, and decision-making processes.
Internal audit plays a critical role in enhancing an organisation’s ability to serve the public interest. It is a key governance mechanism that provides assurance and advisory services to improve financial management, mitigate risks, and enhance operational efficiency.
In Uganda, the establishment and operation of public sector internal audit functions are rooted in the Public Finance Management Act Cap.171. Specifically, Section 48 of this Act mandates the creation of an internal audit unit in every government vote. In line with this legal mandate, the role of an internal auditor in promoting public financial management for sustainable service delivery encompasses the following;
i. Enhancing accountability and transparency; Internal audit ensures compliance with financial regulations, detecting fraud and mismanagement of public funds. By reviewing financial transactions and processes, internal audit not only promotes transparency but also builds public trust in government institutions, reassuring the public about the integrity of public institutions.
ii. Strengthening financial controls: Internal auditors assess the adequacy of internal controls, identifying weaknesses in budgeting, expenditure tracking, and revenue collection. Implementation of recommendations from the internal auditor helps Ministries, Departments, Agencies and Local Governments strengthen the internal control processes and reduce financial leakages.
iii. Championing risk management: Public sector entities face risks such as fraud and corruption, operational inefficiencies and contingent liabilities. Internal Audit helps the entity by identifying and evaluating exposures to significant risks, thereby safeguarding public resources and ensuring sustainable financial practices.
iv. Conducting performance audits for better service delivery;
Performance audits assess value for money, ensuring that government programmes achieve their intended outcomes.
Despite established legal frameworks, internal audit functions in Uganda encounter challenges that hinder their effectiveness. These include limited independence, inadequate funding, outdated technology, weak implementation of recommendations, and capacity gaps in specialised skills such as IT auditing and performance evaluation.
To maximise the impact of internal audit as a tool for good public financial management for sustainable service delivery, the following best practices should be adopted;
i. Ensure independence and objectivity: Internal audit units should report directly to accounting officers and/or audit committees, free from undue influence, to provide unbiased assessments and recommendations. Internal auditors must perform their work with honesty and professional courage, and the legal frameworks should protect them from retaliation.
ii. Adopt agile auditing, a risk-centric approach that focuses on addressing management’s most urgent risk assessments and conducting iterative audits, emphasising high-impact areas such as procurement, payroll, and revenue collection. Agile auditing encourages frequent and open communication between auditors, control owners, and other stakeholders to address issues promptly.
iii. Leverage technology: Utilise data analytics and Artificial Intelligence (AI) tools to identify anomalies, enhance audit efficiency, and deliver real-time insights.
iv. Strengthen capacity building: Providing continuous training for auditors on emerging trends (e.g., cybersecurity, forensic auditing, auditing big data, ESG auditing) enhances their effectiveness, enabling them to navigate the complexities of public financial management more effectively.
v. Foster collaboration with external oversight bodies: Coordination with the Office of the Auditor General, Inspectorate of Government, and legislative committees to promote a culture of accountability and continuous improvement.
vi. Promote a culture of compliance: Management should promptly act on audit recommendations, fostering a culture of accountability and continuous improvement.
vii. Allocate adequate resources, both financial and human to internal audit functions to enable comprehensive audits and timely reporting.
In an era of increasing fiscal pressures and demand for accountability, internal audit is a cornerstone of sound PFM, ensuring that public resources are managed efficiently and service delivery is sustainable. To realise its full potential, internal audit must be independent, well-resourced, and supported by strong governance frameworks coupled with the adoption of International Standards on Auditing. Investment in robust internal audit systems will not only safeguard public funds but also enhance trust and deliver better services.
Pertinent discussions revolving around what it takes for a state-owned enterprise to be sustainable, the role of the accountant in public governance, risk management and oversight and the developments in public finance reporting shall be held at the 3rd Public Finance Management Conference organised by the Institute of Certified Public Accountants of Uganda (ICPAU).
All accounting officers, accounting and finance professionals, auditors, policymakers, planners, economists, development partners, civil society actors, parliamentarians, and PFM consultants are encouraged to attend this conference to engage in building resilient PFM systems for sustainable and equitable service delivery.
Registration for the conference is in progress via https://icpauportal.com/online/webinars/seminar_booking
CPA Perpetua Kabaitira Biraaro, the author, is a Member of the Public Sector Panel Institute of Certified Public Accountants of Uganda
