In recent years, the central government has transferred more and more tasks and powers to municipalities. Think of youth care, work and income, care and parenting and security. On top of this comes the impact of the Temporary Measures COVID-19 Act on municipalities. It is a fact: municipalities are getting more and more on their plates. It turns out - with all the best intentions and many efforts of many - to be a major and sometimes almost impossible challenge to perform these tasks properly, let alone to be demonstrably in control. After all, also in the field of internal control, municipalities are facing more and more challenges and stakeholders such as the central government, auditors and citizens expect municipalities to have their internal control constantly in order.
A new requirement that municipalities have to respond to is that from the 2021 financial year, they have to independently include a legitimacy statement in the financial statements. This has implications for the way of working in municipal organisations and the design of the internal control apparatus.
Where do I start?
Reliable reporting on legality is all about insight. Insight:
- materiality of processes
- the design and timeliness of processes and process descriptions with appropriate control measures
- relevant laws and regulations
- control of applications and quality of source data
And above all: insight into the status of internal control and risks of unlawful actions within these processes! In other words, the extent to which your organisation is 'in control' of its processes.
How will my organisation get the insight it needs?
Freek Vermeulen and Eelco Nijholt, Risk Consultants at consulting firm Improven, apply integral risk management to gain this insight. In doing so, they involve all three 'lines' from the Institute of Internal Auditors' (IIA) 'Three Lines Model' (see figure opposite). Similarly, the Municipality of Zaanstad. Over the past year, Zaanstad municipality's internal organisation has been prepared to provide reliable legitimacy accounts for the 2021 financial year. The focus was on identifying the most material processes and recording them in the Business Process Management tool. Together with the line, all relevant process information was captured and the quality of source data was checked, improved and documented. The most added value for gaining the necessary insight into the degree of internal control is the detailed inventory of risks and current control measures with regard to financial legitimacy. In doing so, opportunities for process improvement were naturally included.
So what is the result?
The result of this work translates into an internal control 'framework'. The control framework was analysed by Freek and Eelco and supplemented with new control measures where necessary. The line organisation has been closely involved during this exercise, ensuring support for the control system's implementation. In turn, the effectiveness of the control measures implemented by the line organisation is independently tested. This is done through independent quality controls (self assessments) and the Specialised Internal Controls (VICs) by audit. The newly rigged 'framework' not only provides the municipality with the necessary tools and insight to report reliably via the legitimacy accountability and interactive dashboards, but also provides insight into the overall level of internal control of operations. This allows it to respond more quickly to any high-risk situations.
Are you curious about the steps to take within your organisation?
Freek and Eelco are happy to think with you! Feel free to get in touch via:
Freek Vermeulen | T: +31 (0) 6 83100421 | E: email@example.com
Eelco Nijholt | T: +31 (0) 6 23265993 | E: firstname.lastname@example.org
Improven is incidentally rated excellent for our risk management services with a 4th place by the independent survey by Consultancy.nl. For that, take a look at: