Scottish Local Authority Chief Internal Auditors Group Conference - June 2013

A Balanced Scorecard What is a Balanced Scorecard? Robert Kaplan and David Norton published an approach to corporate performance measure named a balanced scorecard in A key difference in a BSC is it recognises that measuring financial business figures alone does not give management an overall picture of how the organization is operating. This approach takes various “perspectives” into consideration that demonstrates a “balanced” view of the entire organization. This same approach for organisations can be adapted for internal audit and has become widely adopted as leading practice. Utilising a balanced scorecard within the internal audit activity can answer the following questions: – Is Internal Audit adding value? – Is Internal Audit contributing to overall business performance? – Is Internal Audit achieving its vision, mission, and objectives?

Benefits Identified by SLACIAG A common framework and language to share experience and best practice in auditor activity A balanced scorecard that specifies qualitative and quantitative metrics that can be used to assess the effective implementation of the SLACIAG strategic plan Improved levels of transparency and greater understanding about SLACIAG’s work The potential for greater stakeholder satisfaction with Internal Audit Departments within the 32 Scottish Local Authorities The potential for greater integration with colleagues in external audit functions Improved levels of service delivery within Scottish Local Authority Internal Audit Departments

List here. Balanced Scorecard for Internal Auditing Board/Audit Committee OBJECTIVES MEASURES List here. Management/Audit Customers OBJECTIVES MEASURES List here. List here Innovation/Capabilities OBJECTIVES MEASURES List here. Internal Audit Processes OBJECTIVES MEASURES List here. INTERNAL AUDIT STRATEGY CORPORATE STRATEGY Experience Education Training Certification Reporting Relationships Expectations Perspective on IA Roles Satisfaction Surveys Requests Complaints Importance Levels Improvements Findings Repeat Findings Savings Quality Assessment Perspective on IA Roles Satisfaction Surveys Risk Concerns CAE/AC Private Meetings

SLACIAG’s Objectives To proactively raise the profile of the group with key stakeholder groups e.g. CIPFA, IIA, SOLACE, Audit Scotland, Audit Committee Chairs, the Directors of Finance Group and potential partner groups e.g. NHS, Police, SCDEA, with the objective of being recognised as the logical, respected and essential source of opinion on consultations and all matters of debate relevant to the Internal Audit role. To identify on a rolling basis those areas of Internal audit work where a pan Scotland and or inter authority approach to internal audit activity i.e. audits, audit planning and or development work, will bring benefit to our people, our auditees and our stakeholders. To seek statutory recognition for the role of Internal Audit in Scotland by lobbying key stakeholders and politicians. To consider the development and training needs of Internal Audit people as a collective to ensure that the best available products are procured at the best price.

Strategy Map for SLACIAG Innovation and Capabilities Internal Auditing Processes Management & Auditees Audit Committee Improve Standing with Audit Committee Improve Auditee Communication Processes Improve Auditee Satisfaction Increase impact or value of work Increase quality of audit work Increase reliance which can be placed on audit work Focus on competency development Embrace more efficient work practices Propagate best practice

SWOT Analysis WEAKNESES /CHALLENGE(address) Understaffing or quality of staff Timeliness of reports Lack of follow up Alignment with Key risks Lack of vision Dumping Ground OPPORTUNITIES (harvest) Technological change Change perception of IA Partner with clients Pro-active recommendations Greater focus on value added services THREATS (attack) Merger Staff shortages Salary levels External Suppliers Level of reliance from external audit Funding pressures

Number of one to one meetings with Chair of Audit Committee %age corporate risks audited in a reporting period Compliance with out internal audit strategy Balanced Scorecard for SLACIAG Audit Committee OBJECTIVES MEASURES To maintain our understanding of key stakeholders To continue to align our work to the key corporate risks %age high satisfaction rates from Client Surveys (scores of 4 or 5 in a 5 point ranking system) Number of meetings held with CEO and Chief Officers Involvement of IA staff in major change initiatives Management/Audit Customers OBJECTIVES MEASURES To maintain strong relationships with departments and chief officers To be the provider of choice of internal audit services %age qualified staff Staff compliance with CPDs Training hours per year per auditor grade Innovation/Capabilities OBJECTIVES MEASURES To have a high quality staff complement (capability and training) %age points follow up on %age adoption of PSIAS across SLACIAG %age Customer Satisfaction with Audit Reports Internal Audit Processes OBJECTIVES MEASURES To adopt an effective follow up process To continue to promote the highest professional and ethical standards To maintain the highest quality and content in our internal audit reports which effectively communicate key messages and report on the right things INTERNAL AUDIT STRATEGY CORPORATE STRATEGY

ObjectiveMeasureTargetInitiatives Audit Committee To maintain our understanding of key stakeholders Number of one to one meetings with Chair of Audit Committee One per quarterPropagate CIPFA best practice to members of the Audit Committee To continue to align our work to the key corporate risks %age corporate risks audited in a reporting period Audits planning approach uses a risk based methodology based on the level of risk management capability within the authority Ensure the annual audit plan identifies the risks which will be audited and which assurance will be provided on Compliance with our internal audit strategy Management/Customers To be the provider of choice of Internal Audit Services Involvement of IA staff in major change initiatives Set as part of internal audit strategyIncorporate into regular meetings with Chief Officers To maintain strong relationships with Departments and Chief Officers %age high satisfaction rates from Client surveys (scores 4 or 5 in a 5 point ranking system) Planned quarterly meetings with Chief Officers – particularly if there is on-going work in the quarter Number of meetings held with CEO and Chief Officers IA Processes To adopt an effective follow up process%age points followed up on100% follow up on all outstanding Internal Audit and Management Letter points identified To continue to promote the highest professional and ethical standards %age adoption of PSIAS across SLACIAG100% complianceRecognising PSIAS is the key code of practice for Internal Audit To maintain the highest quality and content in our internal audit reports which effectively communicate key messages and report on the right things %age Customer satisfaction with audit reports 100% complianceSurvey end users on effectiveness and fitness for purpose of reporting Innovation/Capabilities To have a high quality staff complement (capability and training) %age qualified staffAll staff to have minimum professional qualifications with recognised professional bodies Develop a capability/competence matrix for each grade of staff Staff compliance with CPDsDevelop personal development plans for each member of staff based on career progression and business needs Training hours per year per auditor (grade) Review training needs based on personal development plans