Internal audit is an independent, objective assurance and consulting activity designed to add value and improve the operations of an organization. It is an internal function that provides an organization with an independent and systematic evaluation of its risk management, control, and governance processes. Internal audit plays a crucial role in ensuring transparency, accountability, and effective risk management within the organization.
The following are four main ways internal audit can transform SACCOS;
- Internal audit can help Saccos cut costs
Internal audit can help Saccos cut costs by ensuring an increase in profitability through:-
- Process Innovation
Process innovation is implementation of new or improved processes within an organization and it focuses on rethinking and redesigning the way tasks, activities, and operations are carried out so as to enhance efficiency, effectiveness, and productivity. Process innovation significantly reduce costs in SACCOS by optimizing workflows, eliminating inefficiencies, and streamlining operations. By implementing automation tools and technologies, SACCOS can streamline manual and repetitive tasks, reducing the time and effort required to complete them. Automated processes can lead to faster turnaround times, improved accuracy, and cost savings associated with manual labor.
- Product Innovation
Product innovation refers to the creation and development of new or improved products or services that offer unique features, benefits, or value to customers. It aims to meet customer needs, differentiate from competitors, and drive business growth. Product innovation can streamline internal processes and operations, leading to cost savings. By identifying and eliminating inefficiencies in product development, delivery, and servicing, SACCOS can reduce costs associated with resource utilization, time wastage, and redundant activities.
- Technological Innovation
Technological innovation refers to the creation, development, and application of new technologies or the improvement and application of existing technologies in unique ways. It involves introducing or adopting technological advancements to enhance processes, products, services, or systems within an organization or industry. Technological innovations, such as process automation and workflow management systems, eliminates manual and repetitive tasks, reducing the time and effort required for administrative activities. By automating processes like data entry, transaction processing, and document management, SACCOS can decrease labor costs and improve operational efficiency.
- Service Innovation
Service innovation focuses on understanding customer needs, identifying gaps in existing services, and finding innovative solutions to meet those needs more effectively or efficiently. It emphasizes on the development and improvement of intangible offerings, such as customer support, consulting, financial services, healthcare, transportation, or hospitality. Service innovation by automating service processes can lead to significant cost savings. Online self-service platforms, mobile apps, and digital channels can enable members to access services without the need for in-person interactions, reducing administrative and operational costs.
2. Internal Audit can Prevent Fraudulent Activities.
- Assets Fraud
Asset fraud refers to fraudulent activities that involve the misappropriation, manipulation, or theft of assets owned or entrusted to the SACCOS. It occur through various means and involves individuals or groups exploiting their positions or access to deceive or manipulate financial records, transactions, or operations for personal gain. Asset fraud is crucial to mitigate its impact on costs therefore SACCOS should establish effective internal control of systems.
- Financial Fraud
Financial fraud refers to fraudulent activities that target the financial resources, transactions, or operations of SACCOS. These fraudulent acts can have damaging effects on the SACCOS, its members, and stakeholders. To prevent and detect financial fraud it is crucial to establish robust internal controls, implement proper segregation of duties, conduct regular audits, and promote a strong ethical culture within the organization.
- Resource Fraud
Resource fraud in SACCOS refers to fraudulent activities that involve the misappropriation, manipulation, or theft of resources owned or entrusted to the SACCOS. These resources can include physical assets, such as cash, equipment, or inventory, as well as intangible assets like intellectual property or member information. To prevent and detect resource fraud in SACCOS, it is important to establish robust internal controls, implement proper security measures, conduct regular audits, and promote a strong ethical culture within the organization.
- Procurement Fraud
Procurement fraud in SACCOS refers to fraudulent activities that occur within the procurement process of the SACCOS. It involves the manipulation, deception, or abuse of procurement procedures, contracts, or purchasing systems for personal gain or to benefit external parties. To prevent and detect procurement fraud in SACCOS, it is important to establish and enforce robust internal controls and procedures. This includes implementing transparent procurement policies, conducting regular audits, promoting competition, and ensuring proper segregation of duties.
3. Internal Audit can help Monitor Strategy
Internal Audit can help Monitor Strategy through
- Implementation and ensure Compliance to Strategy
Internal Audit can monitor compliance with laws, regulations, and internal policies related to the organization’s strategy by assessing whether the strategy aligns with applicable legal and regulatory requirements.
- Implementation of the Strategic Objectives and Goals
Monitoring strategy will ensure that strategic objectives and goals of the Sacco are met hence transforming the Sacco and ensure adherence to it.
- Report on Non-Conformities
Internal Audit reports the results of non-conformities to management and the board of directors by communicating findings, recommendations, and areas of concern related to the organization’s strategy. This report ensures that stakeholders are informed about the status, risks, and performance of the strategy.
- Advise on the Alignment of SACCO activities to the SACCO Goals.
Internal audit ensures that the Sacco continuously aligns it goals with its activities through monitoring the activities and also give advice on the goals not achieved and recommend on how to ensure they are achieved.
4. Internal Audit can help Champion Good Governance
Internal Audit can help Champion Good Governance through
- Checks and Balances
Checks and balances are important mechanisms in good governance that help ensure accountability, transparency, and prevent the abuse of power. They are designed to distribute power among different entities and provide oversight to ensure that no single entity has unchecked authority.
- Institute tools of Governance
Internal Audit can review the governance framework of the SACCOS, including the roles and responsibilities of the board of directors, management, and committees. This includes assessing the effectiveness of governance structures, the independence of board members, and the clarity of decision-making processes. Internal Audit provide recommendations to enhance the governance framework and promote good governance practices.
- Constant Reviews.
Constant review ensures that governance practices, policies, and systems remain effective, relevant, and responsive to changing circumstances by regularly assessing and evaluating governance processes, structures, and outcomes to identify areas for improvement and make necessary changes.