CHAPTER 14

INTERNAL AUDIT AND INVESTIGATIONS

Preamble

The Internal Audit Division functions independently with objective assurance and consulting activity designed to add value and improve the operations of Finance, Academic and Non-Academic administration of the University and its Postgraduate Institutions (PGIs) individually. This Division helps the University and its PGIs accomplish their Vision and Mission by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, controls and governance processes.

Contents of the Chapter

15.1 Legal Framework of Internal Audit 15.2 Responsibility 15.3 Specific Functions 15.4 Pre-Auditing 15.5 Audit and Management Committee

15.1 Legal Framework of Internal Audit _{Financial Regulations 133,}

134.

The Section 4 under Chapter I of the Establishment Code- UGC; Financial Regulations

(FR) 133, 134; and Sections 40 and 41 of the National Audit Act No 19 of 2018. National Audit Act No 19 of

2018

15.2 Responsibility

The Internal Audit Division of the University carries out risk-based audits to ensure prevention, detection and resolution of frauds and errors in fulfilling its responsibility. The responsibility is ensured through implementation of an effective system of Internal Controls of the University of Peradeniya and its Postgraduate Institutes with meticulous monitoring.

The Internal Auditor (IA) is the Head of Internal Audit Division of the University who shall be functioning under the supervision and guidance of the Audit and Management Committee and the Vice Chancellor. He/She directly reports to the Vice Chancellor and the Audit and Management Committee of the University. Also, he/she may report to the University Grants Commission and Ministry of Higher Education through the Vice chancellor whenever necessary or directly where justifiable necessity exists.

In the case of Internal Audits related to the Postgraduate Institutes, the Internal Auditor shall function under the supervision and guidance of the Audit and Management Committee of the respective PGI and shall directly report to the Director of the Institute through the Vice Chancellor of the University and the Audit and Management Committee of the respective PGI. He/She may also report such findings to the University Grants Commission and the Ministry of Higher Education through the Vice Chancellor whenever necessary or directly where justifiable necessity exists.

15.3 Specific Functions

The duties and responsibilities of the Internal Audit Division of the University of Peradeniya are as follows:

to review the system of internal controls on the operations of Finance, Academic and Non-Academic administrations of the University and its PGIs. It is required to carry out continuous surveys and assessments of such operations as independent appraisals to ensure soundness and adequacy of the internal

checks/controls adopted/established for prevention and detection of errors and frauds.

to assist the Audit and Management Committees, Vice Chancellor/Directors of PGIs and Governing Council/Board of Management in ascertaining the progress made on funds, works, projects, programmes and events in fulfillment of the plans and programmes laid down for or undertaken by the University/PGIs, as the case may be.

to evaluate and improve the internal controls related to financial and operational reporting to ensure their accuracy, reliability and integrity.

to monitor effectiveness of risk management systems, corporate oversights, safeguard of assets, economical, effective & efficient use of resources, and compliance with laws & regulations.

15.4 Pre-Auditing

Operational Procedures followed in Pre-Auditing

i. Recommending the payment of Gratuity, University Provident Fund,

University Pension as appropriate of all employees of the University

(temporary and permanent) when an employee resigns/retires/is

terminated/vacated/dismissed/ dead or any other terms of cease of service as

per the available provisions.

Examining the accuracy of calculating the Values of Bonds and Agreements

of employees who enter into bonds and agreements when granting study

leave/ employment leave with pay/ no pay.

Recommending the payment of the final bill for Construction Contracts (Works) as per the Procurement Manual & Guidelines 2006, Building

Standard Rates (BSR), Standard Bidding Documents (SBD) issued by the

Gratuity Act No 12 of 1983, UGC Circular 05/2019, 952, 223.

University Provident FundPart XII of University Act no

16 of 1978, UGC Finance

Circular 13/2002, 9/96,

07/1992/,02/95,7/97,5/2001,

19/2001, UGC Internal

Audit Circular 1/98, UGC Circular 155,208,253.

Pension Circulars 1-13.

Institute for Constructions Training and Development (ICTAD) and

Construction Industry Development Authority (CIDA).

Examining the accuracy of salary revision and arrears payment.

Compiling the replies to the audit queries and reports to the Auditor General.

UGC Circular 747

Chapter X of UGC

Establishment Code, UGC

Circulars 920,377,907 and

Establishment Circular

9/2010

Existing salary revision

15.5 Audit and Management Committee

15.5.1 There shall be a separate Audit and Management Committees for the University of

Peradeniya and its three (03) PGIs appointed by the respective Governing Council/Board of Management, to assist by undertaking continuous review of operations and, to periodically report to the Vice Chancellor/Director PGIs or the respective Governing Council/Board of Management of the University/PGIs, as the case may be. The responsibilities and functions of the said Committee shall be as follows:

circulars

Financial Regulations (FR)

452

Review all audit and management aspects of the University/ PGIs to ensure that its resources, are used economically, effectively and efficiently for the purpose of achieving the predetermined objectives of such entity as a whole, or in respect of any specific project or programme undertaken, giving priority to the resources available in the University/ PGIs.

Ascertain whether such objectives have actually been achieved within the authorized time limits and in relating to the disbursement of funds for such activity, and whether any completed project or programme is in actual operation as envisaged in the plans.

University Grants

Commission Circular No 807 dated 02.08.2002

Section 41 of the National Audit Act No 19 of 2018

Public Enterprises Circular

No PED 12 dated

02.06.2003

Determine the responsibilities and scope of the Internal Audit Division of the University/PGIs.

Review and approve the annual internal audit plan and the work-programme prepared by the Internal Auditor in consultation with the External Auditor/ Auditor General.

Review and evaluate the internal control systems covering accounting, financial and operational activities of the University /PGIs.

Review the external auditor’s report and take corrective measures as may be required, to avoid recurrence.

Liase with External Auditors/Auditor General and follow up on Auditor General’s management letters and reports and the managements responses to the same .

Review preliminary internal financial statements including budgets & review reports, and evaluate the cost-effectiveness, performance and achievement of targets.

Review annual financial statements for compliance with accounting standards, Sri Lanka Public Sector Accounting standards and other applicable legal requirements.

Ensure timely submission of final accounts, annual reports etc.

Promote/ensure interactions with the Internal Auditors and External Auditors.

Ensure that the Officers of the senior management is familiar with the statutory and other rules and regulations.

Create awareness on the requirement for compliance with treasury circulars and other directives.

Review all matters relating to personnel and administration and make recommendations for decisions.

Review all human and other resource development matters and submit reports for decisions.

Review matters pertaining to elimination of waste and corruption and make the University/PGIs cost conscious.

Review the compliance with statutory and other rules and regulations.

Review internal auditors’ report regularly and ensure, prompt actions have been taken on shortcomings pointed out.

Review of implementation of recommendation of the Committee on Public Enterprises (COPE).

Submit the progress report on the recommendation of COPE to the Secretary to the Ministry of Higher Education / Board with regard to Public Enterprises for necessary action.

Monitor actions/ rectification based on recommendations of the Audit and

Management Committee

Submit reports on the Audit & Management Committees performance for inclusion in the annual report/ administration reports.

The Structured Framework of Internal Audit Division, University of Peradeniya

Recommended

Not

Recommended

Pre

Auditing and Audit Investigations

Pre Auditing of Gratiuty, University Provident Fund, Value of Bond and Agreement, Salary conversions and

Final Bills of the Construction Contracts

Evaluate and Review the internal controls of the financial and operational reporting with regard to its accuracy, reliability

integrity etc. and monitor effectiveness of risk management processes, corporate oversight, safeguarding of assets ,

economical and efficient use of resources and complience with rules and regulations

Preparation the Annual Internal Audit Plans

Approval of the Audit and Management Committee

Accessment

Accessment of the risk areas

Referring to the Governing Council/ Vice

Chancellor

The Minutes of the Meetings are presented to the Governing Council/ Board of Management by the convener for necessary actions

d/ or approval of the actions taken by the Audit

and Management Committee

Referring to the Audit and Mangement Committee

Recommondations and Directions of the Audit and Management Committee

Issuing an Internal Audit Report with the recommondations

Worksheets & connected documents and maintaining an audit querry/ reports register

15.5.2 Composition of the Audit and Management Committee

The Audit and Management Committee should comprise at least three nonExecutive members of Governing Council/Board of Management, chaired preferably by a Treasury Representative or a person possessing financial management skills. The Internal Auditor serves as the convener.

A representative of the Auditor General should be invited as an observer for every meeting.

If there is no Treasury Representative in the Governing Council/ Board of

Management, a Treasury representative shall be appointed by the Secretary to the General Treasury

Vice Chancellor and/or Deputy Vice Chancellor, Registrar, Librarian, Bursar and respective Heads of Division are invited for every meeting for the Audit and Management Committee of the University. The Deans of Faculties shall also be invited when required for the meeting.

Director of the PGIs and all Heads of divisions related to financial management and administration of the PGIs are invited for the Audit and Management Committee of the respective PGIs.