Federally funded tribal programs fulfill critical needs for the communities they serve, protecting tribal resources and providing important services. Some of these programs include:
- Housing and community development
- Social services
- Education
- Preservation
- Land management
- Food and nutrition
However, these programs often don’t receive the support they merit. To strengthen tribal programs and prove their value to funding agencies and stakeholders, tribes can implement an internal audit function.
Internal Audit Benefits
An internal audit function works on behalf of governance and tribal leadership, providing a holistic and proactive approach to risk management. It analyzes key programs and controls, often resulting in continued or increased federal program funding, while helping tribes achieve the following:
- Identify and manage program risks
- Determine if program personnel responsibilities are defined and properly documented
- Identify gaps or weaknesses in controls and program compliance
- Evaluate and improve program effectiveness and efficiency
Put more simply, an internal audit can help tribes safeguard key resources and give community members and tribal employees peace of mind. Here’s a look at why an internal audit is important and some key outcomes your tribe may achieve through implementing or expanding an internal audit program.
Internal Audit Approach
An internal audit function can support and improve tribal programs through the following steps:
- Risk assessments
- Performance audits
- Internal control analysis project
- Policies and procedures enhancement
Let’s take a look at the proceedings and benefits of each step.
Risk Assessments
A risk assessment is a cooperative process in which program management and the internal auditor work together to identify risks to the success of the program. Once identified, risks can be prioritized based on the likelihood of a negative outcome and the potential impact of that outcome. Your tribe can then determine an appropriate approach to manage the risk.
Programs face a wide range of risks that may not always be top-of-mind. A program-specific risk assessment can help answer key questions and provide guidance on filling existing gaps. A risk assessment might answer important questions, such as:
- Do program personnel have enough resources to achieve program goals?
- Are there community concerns surrounding the program?
- Are appropriate controls in place to prevent fraud or error?
Answering these questions and identifying key risks can help your tribal government determine which steps it needs to take to better protect its data and internal controls.
Performance Audits
Programs must be managed in accordance with grant requirements and regulations, and compliance is the minimum requirement. It’s also important to determine whether or not the program is serving the people it’s intended to serve in the way they need to be served.
A performance audit evaluates if programs are using available resources to achieve intended economy, efficiency, and effectiveness. These audits can provide valuable insight to tribal leadership and help enhance the value of a tribe’s programs.
Internal Control Analysis Project
Internal control assessments and testing can help determine if programs have effective controls in place and if they’re functioning as intended.
Although program personnel may not consider the importance of internal controls, understanding and evaluating controls over key areas such as cash receipts, purchases, inventory, reporting, and fixed assets is vital to making sure tribal assets and resources are protected and errors are prevented or detected.
Policies and Procedures Enhancement
A comprehensive policies and procedures (P&P) analysis can provide significant value to programs across the tribe by identifying missing or outdated P&Ps, bringing awareness to the importance of consistently following them, and ensuring they’re periodically reviewed and updated.
Comprehensive P&P analysis should cover all key functions within a program, providing guidance to existing personnel, protecting the program in the event of turnover, and, if properly evaluated and developed, promoting a sound internal control environment and increasing accountability.
Next Steps
Annual compliance audits of federal funds play an important role and provide valuable information to funding agencies and stakeholders. However, by relying solely on these audits to measure program success and identify program risks, tribal leaders may miss an opportunity to provide programs that go beyond basic compliance.
They may also miss out on determining if their programs have the resources and guidance necessary for meeting the needs of those they serve. That means your tribe can also benefit from considering additional tools, such as a risk assessment or P&P analysis.
We’re Here to Help
Whether your tribal government hires internal auditors or partners with an organization that specializes in this area, an effective internal audit function can be an invaluable tool for protecting future funding and allowing for program results.
For more information about the internal audit or to get starting with the process, contact your Moss Adams professional.