Internal auditing within Banverket, the Swedish Rail Administration SRA

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Internal auditing within Banverket,the Swedish
Rail Administration (SRA)
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The Central Government sector
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SRA an Agency in the Decentralised Swedish
Administration

• The Swedish Rail Administration
• - No transportation
• - Infrastructure (REST - Rail, Electricity,
  Signals, Tele communications)
• - Trafficplanning (timetables), supervision and
  traffic management

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Some facts

• Banverkets operating volume. SEK million
• 2006 2005
• Operating volume 17 145 16 094
  
• Of which new investments 7 464 7
  200
• Staff at the respective year-end 6 551 6 503

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BanverketSwedish Rail Administration
Board of Directors
Internal Audit
Director General
Director Generals Office
Operations Division
Banverket Production
Investments Division
Banverket Consulting
Expert Support Unit
Banverket ICT
Business Support Unit
Banverket Training Centre
Banverket Material Services
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BanverketSwedish Rail Administration
Board of Directors
Internal Audit
Director General
Profit centres
Director Generals Office
Operations Division
Banverket Production
Core business
Investments Division
Banverket Consulting
Expert Support Unit
Banverket ICT
Banverket Training Centre
Business Support Unit
Banverket Material Services

• Provide opportunities for the traffic of today
• Invest in and develop the railway for the
  traffic of tomorrow

GE 2007-10-10
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The Internal Audit

• The Swedish Rail Administration became an Agency
  in 1988
• No Internal Audit
• 1996 -- The Internal Audit ordinance
• 1996 Internal Audit outsorced
• 1997 -- Staff with 5 persons Head of Internal
  Audit, three internal auditors, one auditor
  assistant

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Production statistics last years

• Number of audits 15-25
• Number of reports 15-25
• Recommendations per report 5-15
• Recommendations to the board lt5 per report

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Internal Audit and its environment
Reports
External demands
Director-General
Board
Decisions
Allotments
Follow up
Internal demands
Reporting
Value added to SRA
Resources
Reports Answers Dialogues Advices Etc.
Internal Audit processes
Productivity
Effectiveness
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What governs the IA within SRA?

• External demands
• - Internal Auditing Ordinance
• - Ordinance about the Swedish Rail Administration
• - Best practice according to the Institute of
  Internal Auditors (IIA)
• Internal demands
• - guidance decided by the Board of SRA
• - annual audit plan decided by the Board of SRA
• - annual agreement with the Director-General of
  SRA about the budget

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What does IA do?

• The Internal Audit shall
• Evaluate the existence, compliance and efficiency
  of the internal control and give recommendations
  to improvements. The reviews include all of
  Banverkets activities and all activities that
  Banverket are responsible for
• Internal control is a process, effected by
  Banverkets board of directors, management and
  other personnel, designed to provide a reasonable
  assurance regarding the achievement of the
  objectives in the following categories
• effectiveness and efficiency of operations
• reliability of financial and other reporting
• compliance with applicable laws and regulations.

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The Audit Process (simplified)
The Management System
Design
Implementation/ functioning
Exists
and fullfils its intended function?
If not, whats the reason, what should be
changed so that the goals can be reached?
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An audit exampleInvestments in
infrastructure-new rail, electricity equipment,
signals, telecommunications etc- components or
new lines, tunnels, bridges etc
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AuditInvestments in infrastructure

• Which guidelines concerning management and follow
  up of investmentsprojects exists within Banverket
  and how are they implemented within the regions ?
• (Audit plan 2004)

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AuditInvestments in infrastructure

• Focus on calculations, cost estimates, control
  and reporting of costs, retrieval of experiences
• Specific interviews with 10 persons in two
  regions
• Also informations from other former and parallel
  audits

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Production statistics

• Number of Audits 1 information from
• Number of reportings 1 written ..
  presentations
• Recommendations to responsible unit 11 detailed
• Recommendations to the board 3 overall

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Banverkets organisation
Board of Directors
Internal Audit
Director-General
Rail Traffic Administration
Railway Inspectorate
Head Office
Banverket Production
Northern Track Region
Banverket Consulting
Central Track Region
Industrial Division
Banverket Telecom
Eastern Track Region
Western Track Region
Railway Training Centre
Materials Service
Southern Track Region
Banverket Traffic
Banverket IT
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The Audit Process
Audit year
Audit year - 1
Reports
Decision
Reports
Risk analysis
Decision
Board
Audit plan
Annual report
Risk identif analysis
Audit planning
Audits
Analysis adjustment
Ad hoc audits
Audit
Reports questio- naire
Reports questio- naire
Discussion w. Management
Risk adjustment
Consultation w. the Supreme Audit Institution
Other
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Audit of investments in infrastructure

• 1. 2003-11 -- 12 Risk analysis
• 2. 2004-04-01 Audit plan
• 3. 2004-10-20 Planning document

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Audit of investments in infrastructure

• Are there good conditions for and routines for
• - for implementation of the four-step-model?
• - to discover and report rased expenses in time,
  especially if more then 10 extra?
• - to retrieve experiences with after-calculation?

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The Audit Project
Closing meeting
Follow-up activities
Opening meeting
Draft report
Client information
Report
Post audit
Field audit
Follow-up
Audit preparation
4. 2004-10 -- 2005-02 Audit, Draft report written
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Audit of investments in infrastructure

• 4. 2004-10 -- 2005-02 Audit, Draft report
  written
• 5. 2005-03-31 Final Report decided
• 6. 2005-03-31 Annual report to board
• 7. 2005-04 Board meeting with presentation
• 8. 2005-05-13 Report, presentation to regions

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Investments in infrastructure

• 11 detailed recommendations, summarised in
• There are acceptable conditions and routines
  which make it possible to discover and report of
  increases in expenses for investment projects
• Retrieval of experiences and follow-up
  calculations can be improved
• The work with the four-step modell can be
  improved

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The Audit Process
Audit year
Audit year - 1
Reports
Decision
Reports
Risk analysis
Decision
Board
Audit plan
Annual report
Risk identif analysis
Audit planning
Audits
Analysis adjustment
Ad hoc audits
Audit
Reports questio- naire
Reports questio- naire
Discussion w. Management
Risk adjustment
Consultation w. the Supreme Audit Institution
Other
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Audit of investments in infrastructure

• 9. 2005- Questionairy to responsible unit
• 10. 2005-11 Follow-up
• 11. 2004-04 new risk analysis
• 12. 2006-12 -- 2007-03 Special follow-up in new
  audit
• 13. 2007-02 New organisation Investments
  division

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BanverketSwedish Rail Administration
Board of Directors
Internal Audit
Director General
Director Generals Office
Operations Division
Banverket Production
Investments Division
Banverket Consulting
Expert Support Unit
Banverket ICT
Business Support Unit
Banverket Training Centre
Banverket Material Services
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And some more if we have extra time

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How do we do it? (1)

• Generell principles
• Process oriented working procedure
• Everybody participates
• Continuous improvements
• Regulating documents
• Audit manual
• Plan of activities in annual process
• Decision about areas to collect information
  about

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How do we do it? (2)

• Planning of operations
• Risk analysis Audit plan Production plan
• Balanced scorecard
• Budget
• Competence provision plans (group and
  individual)
• Decision of distribution of areas to collect
  information about
• Carry out operations
• Audit projects
• Competence development
• Information collecting activities

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How do we do it? (3)

• Follow up the operations
• Recommendations
• Quality (effectiveness)
• Productivity (key indicators)
• Continous improvement
• Dialogue during audit planing
• Dialogue during auditing
• Self evaluation (annual)
• External evaluation (once every five years)

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The Audit Process
Audit year
Audit year - 1
Reports
Decision
Reports
Risk analysis
Decision
Board
Audit plan
Annual report
Risk identif analysis
Audit planning
Audits
Analysis adjustment
Ad hoc audits
Audit
Reports questio- naire
Reports questio- naire
Discussion w. Management
Risk adjustment
Consultation w. the Supreme Audit Institution
Other
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The Audit Project
Draft report and client dialogue
Client information and dialogue
Closing meeting
Follow-up activities
Opening meeting
Report
Post audit
Field audit
Follow-up
Audit preparation
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How we report

• All audit reports etc. are public.
• Basic principles for reporting
• Significant observations are reported to the
  board.
• The audit reports are distributed to the units
  subject for audit, the CFO and the
  director-general.
• The audit reports are distributed to the Supreme
  Audit Institution.
• The significance of the observations are decided
  after consultation between the auditor and the
  head of internal audit.
• A concluding annual report shall be approved by
  the board.
• A follow-up of previous observations, without
  finished actions, are reported to the board as a
  balance list once a year.

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Continuous improvements
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Networks

• Network of IA from infrastructure
  agencies/companys (from former ministry of
  communications). Once a year meeting with head of
  IA to share experiences.
• Networks within the Swedish branch of IIA

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Cooperation between internal audit of Road and
Rail Administrations - 1

• BACKGROUND
• Belongs to the same ministry
• Infrastructure agencies with sectorial
  responsibility and of about the same size
• Obliged to coordinate strategic infrastructure
  planning
• Both have head office och internal audit in the
  same city, Borlänge

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Cooperation between internal audit of Road and
Rail Administrations - 2

• COOPERATION
• Discussions during Risk analysis and Audit
  planning
• Competence development - lectures and exercises
  together at least once a year
• The IA departments have audited each others HQ
  -independency
• Joint audit of an Investment Project performed by
  the Road and Rail Aministrations together
  (simultaneous building of road and railway in a
  narrow valley).
• Reporting during meeting with the Boards of both
  agencies

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Relation to central harmonisation unit (CHU)

• The Swedish IIA-branch is an established forum
  for discussions, education and exchange of
  experinces
• The Swedish CHU is new. Therfore limited
  experinces of contacts with CHU.