Changing Internal Audit in Higher Education - The Need for Transformation

In recent years, the London Universities’ Purchasing Consortium (LUPC) identified significant dissatisfaction amongst London HEIs with the quality of internal audit services delivered from both outsourced arrangements and by some in-house provision. These difficulties continue and the reasons often relate to quality of staffing, including the inability to attract and retain high calibre audit staff to small in-house teams and, from an outsourced perspective, the use of unqualified and inexperienced staff by the accountancy and audit firms, thereby keeping the cost of service provision low. These difficulties often lead to poor value for money for HEIs from internal audit services. The KCG Consortium was specifically established to address these difficulties and to raise the standards of internal auditing by providing an alternative model of service provision tailored to meet the needs of the HE sector and individual HEIs.

Other difficulties relate to dated internal audit methodology and approach with in-house provision, adding little value to institutional management, and lack of in-depth knowledge and experience of HE sector culture and issues which often results from outsourced provision. These issues are summarised below:

Difficulties perceived with current outsourced arrangements:

• Internal audit arrangements are provided “off the shelf”, not tailored to HEIs’ specific needs. “One size fits all” model.
• Outsourced providers provide a large resource base to draw on. However, audit teams often lack depth of knowledge, experience and expertise of HE sector issues and institutional culture.
• Outsourced providers deliver the majority of services using unqualified and inexperienced staff.
• Outsourced providers often tend to experience high turnover of staff, leading to difficulties with staff continuity and knowledge retention.
• Reporting is widely criticised as bland, over-cautious and non-committal in delivering advice, conclusions and opinions.

Difficulties perceived with current in-house arrangements:

• In-house internal audit services are often unable to deliver “value” due to limited resources and skills base.
• Often use a dated approach to internal audit, with no opportunity to access more modern techniques, technologies and methodologies.
• In-house recruitment and retention of high calibre professional internal audit staff is extremely difficult to achieve due to small team environment, lack of career progression and personal development opportunities and training. In-house internal audit in the HE sector does not tend to be an attractive career move to high calibre audit professionals.