Opportunities for Internal Audit Capacity Development
Strategy 2020, the long-term strategic framework of the Asian Development Bank (ADB) for 2008–2020, identifies good governance and capacity development as drivers of change. Ultimately, this improves the delivery of public goods and services, broadens inclusiveness, and reduces the impact of corruption on development effectiveness.
In this context, ADB's Second Governance and Anticorruption Action Plan (GACAP II) identified three priorities: (i) public financial management; (ii) procurement; and (iii) combating corruption, where actions could be applied at the country (systems), sector, and project levels. Through governance, institutional and corruption risk assessments and opportunities for supporting good governance and capacity development were identified and built into ADB-funded projects, programs, and technical assistance.
Looking specifically at capacity development of internal audit functions, ADB's Office of the Auditor General made out that ten (out of 1,825) projects, programs, and technical assistance from 2010 to 2014 had intended outcomes related to institutional strengthening and/or capacity development of internal audit activities in ADB's developing member countries (DMCs). It noted that building and developing internal audit activities in DMCs could ensure that (i) funds from ADB loans, grants, and technical assistance are used effectively, with economy, and for the intended purposes; and (ii) risk management, internal control, and governance processes are appropriately designed and function effectively to help attain operational objectives and outcomes.
This brief makes the case that a strong and effective internal audit function in executing and implementing agencies, state-owned enterprises, and project partners can encourage if not prompt them to (i) be more responsible in discharging their public financial management, procurement, and anticorruption obligations during the implementation of projects and programs; (ii) manage or mitigate risks in their financial and procurement activities and operations; and (iii) improve their governance in public financial management and operations, so they may better respond to the growing demand for public expenditure and fiscal accountability in DMCs.