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One in three public sector bodies ‘not effectively managing risk’

By Richard Johnstone | 16 December 2013

More than a third of public sector organisations fear they do not have effective mechanisms in place to manage risk, which could leave them vulnerable to major financial and operational failures, research has revealed.

A poll of 93 heads of internal audit in both Whitehall and local government found that 42% in central government and 37% in councils rated their organisation’s awareness of risk as ‘in the early stages’, ‘in development’ or even ‘non-existent’.

The Chartered Institute of Internal Auditors, which undertook the survey, warned this lack of expertise could lead to service problems in a large proportion of the public sector. The report highlighted that effective internal audit could help tackle poor management, such as occurred at Mid Staffordshire NHS trust, and improve poor governance, which led to the botched West Coast mainline franchise award.

The institute stated it had worked with CIPFA and other internal audit standard setters in the public sector to launch the first internal audit standards to apply across the whole of the public sector earlier this year.

However, IIA chief executive Ian Peters said these standards were not yet being fully adhered to in some areas.

‘The public sector is undergoing huge structural reorganisation at the moment, and with restructuring invariably comes new and changed risks,’ he said.

‘This makes the poor ratings on the management of risk given by many public sector heads of internal audit to their own organisations a matter of serious concern. Whilst heads of internal audit understand they cannot be immune from the drive for greater efficiency, the ability of the profession to respond to these challenges is being constrained by a lack of resources.’

The IIA’s research also found that public sector heads of internal audit are allocating less priority to supplier risk than those in the private sector, despite increased levels of outsourcing.

In the survey, just 12% of respondents said outsourcing was one of the top risks that they devote time to, compared to 37% in a similar poll in the private sector.

‘The private sector is generally aware of the risks of outsourcing – if a supplier fails to deliver on price, quality and deadlines that can wreak significant financial and reputational damage,’ Peters added.


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