A little education isn't a dangerous thing.

• Author: Ormsby, Liz
• Position: Management & Careers

As never before, citizens expect municipal governments to provide high-quality services within an approved budget in a transparent, accountable, and ethical way. Municipal audit committees carry out specific responsibilities assigned to them by the city council--typically oversight of financial reporting, risk management, internal controls, ethics, and audit activities. Effective orientation helps members of public-sector audit committees meet the increasing challenges of their critical role in organizational oversight. In this article, the City of Calgary shares hints and tips on providing an effective orientation, based on recent experiences.

EXPECTATIONS

The Institute of Internal Auditors' professional guidance publication, The Role of Auditing in Public Sector Governance, notes that:

Government auditing is a cornerstone of good public-sector governance. An effective public-sector audit activity strengthens governance by materially increasing citizens' ability to hold their government accountable. The audit committee can greatly strengthen the independence, integrity, and effectiveness of government audit activities by providing independent oversight of the internal and external audit work plans and results, assessing audit resource needs, and mediating the auditors' relationship with the organization. Audit committees also ensure that audit results are aired and any recommended improvements or corrective actions are addressed or resolved. Citizen expectations of audit committees have never been higher. As the global economic downturn continues, municipalities around the world are facing the challenge of delivering more services with less funding, Meanwhile, media interest in municipal governance is also increasing, and coverage of hot-button municipal issues--such as the filing for bankruptcy protection by the City of Detroit, Michigan--has further heightened public awareness. Citizens expect audit committees to take a leading role in ensuring the accountability and transparency of their local municipality. Audit committee members must have the skill and knowledge to work together to meet these high expectations.

Leading practice organizations across all sectors recognize the benefits of skilled and experienced audit committee members who can independently review key aspects of an entity's operations, including governance arrangements, risk management frameworks, internal control and compliance frameworks, and financial statement responsibilities. Financial literacy is a requirement for audit committees in many private-sector organizations. The New York Stock Exchange, for example, requires all audit committee members to be "financially literate" as interpreted by the business judgment of the company's board, or to become financially literate within a reasonable period after being appointed to the committee. In addition, at least one member must have "accounting or related financial management expertise," again as interpreted by the board.

ASSISTING COMMITTEE MEMBERS

Municipal audit committees face challenges in gathering together relevant skills, knowledge, and expertise to form a truly effective committee. Typically, municipal audit committees are primarily made up of elected officials. The election process does not guarantee that elected officials have financial literacy, nor a background in governance, risk, and control. For example, the City of...