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 quality audit staff within small in-house teams and, from an outsourced perspective, the high use of unqualified and inexperienced staff by the accountancy and audit firms. 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 shared service provision tailored to meet the needs of the HE sector and individual HEIs.

 

Other difficulties relate to the use of a dated internal audit methodology and approach with small in-house provision, adding little value to institutional management and Audit Committees, 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.

• Outsourcing may allow access to a large resource base. However, audit teams often lack depth of knowledge, experience and expertise of HE sector issues and institutional culture. Internal audit services are also often delivered by external auditors, who tend to focus predominantly on financial systems.

• 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 quality professional internal audit staff is difficult to achieve due to small team environment, lack of career progression and personal development opportunities and training.

 

The HE sector is large and complex, and is about to be transformed as a result of the HE White Paper in June 2011. This will bring a significant period of legislative, system and organisation change. In future, funding for HE learning and teaching will be directly influenced by the choices of students and allocated through publicly funded tuition fee loans. HEFCE funding will be channelled towards public benefit objectives only – supporting widening participation and retention, small specialist institutions, high-cost subjects and vulnerable disciplines. The role of internal audit in HE has never been more important and needs to be strictly fit for purpose to meet the challenges facing HEIs at the present time. The KCG Consortium is fully resourced and equipped to meet those challenges.