4. In which ways is the initiative creative and innovative?
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The development of AIMS involved three stages namely planning stage, development stage and implementation stage.
1. Planning Stage. At the planning stage, Innovative and Creative Circle (ICC) was formed at IAD that consists of 11 members of internal auditors to review the internal audit processes. Through brainstorming session, the team had identified 10 common problems that hindered the effectiveness and efficiency of the IAD. Using Force Ranking Approach (refer Table 1), the identified problems was ranked into ‘Very Serious’ and ‘Less serious’ problem, in which only 5 problems was regarded as ‘very serious’ namely the need to enhance audit procedure, expediting auditing processes and collecting audit feedback, reducing audit costs and improving audit efficiency.
Further analysis using SMART technique (refer Table 2), only three problems were identified that needed immediate attention, namely enhancing the audit procedure, expediting auditing processes and improving audit efficiency. Using Matrix Analysis (refer Table 3), the problems identified has been further analysed against cost, time, objective and credibility, in which enhancing the audit procedure scored the highest marks, indicating the need for immediate attention by IAD. The team believed that enhancing the audit procedure could give positive impact in achieving the vision and mission of the Ministry, especially in achieving zero financial mismanagement.
2. Development Stage. Development stage involved the development of online self-assessment auditing to enhance the audit procedures and practices. The proposed solution should be able to address the problems namely limited time, manual audit practices, workload and shortage of staff, budget issues and location of RCs.
The first step in designing the AIMS was to understand the whole work processes and how it can be automated. With the assistance from ICT Division, IT officers were seconded at the IAD to develop AIMS. The development stage took one year to be completed (refer Table 4) which involve identifying requirements, design, testing, improvement, evaluation, trial run and monitoring.
3. Implementation Stage. Implementation stage involves pilot project and road shows of AIMS. After completion and approval received from the management, AIMS was then tested at 12 RCs in January 2009. The purpose was to gather feedback from auditees on the shortcoming of the new system and to find further improvement to the system. The feedback was collected and brought to the attention of top management, especially on the internet connectivity, PCs requirement and audit questionnaires used in AIMS. Subsequently several sub-committee was formed to work on the feedback/proposal received from auditees. In May 2009, AIMS was officially implemented at all RCs following letter of instruction issued by Secretary General. AIMS successfully run every year performing financial management audit.
4. Future Plan: A Way Forward. AIMS was recognized by Public Service Department (PSD) and Auditor General Malaysia as new approach in auditing which set a new benchmark in audit system. Using all the feedbacks from users and interested organizations, AIMS will continue to be upgraded in line with present technology and regulations. Ministry of Defence believed that the system is applicable to most government agencies and private sector which deals in financial management. AIMS will constantly be promoted as an innovation to be shared for the best interest of a financial organization.
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5. Who implemented the initiative and what is the size of the population affected by this initiative?
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In the implementation of the AIMS the stakeholders are as follows:
Primary Stakeholders
1. The Secretary General of the Ministry of Defence, who is the process owner.
2. The Internal Audit and the ICT Division, who designed and implement the system.
3. The Programme Managers, heads of RCs and CCs who are given the powers by the Controlling Officer to carry out expenditures of the Ministry. They use the AIMS to revise their work and to comply with existing financial regulations.
Management Stakeholders
1. The Chief of the Defence Forces, the Chiefs of Services (Army, Navy and Air Force). They monitor the respective RCs to ensure that the RCs carry out their audits using the AIMS within the stipulated period. They can see the responses from the RCs as well as the scores obtained.
External Stakeholders.
2. The Auditor General and the Ministry of Finance (Treasury). These are the two external agencies which have contributed to the development of the AIMS. The IAD practises the Internal Audit Guidelines issued by the Auditor General’s Office. The financial regulations issued by the Treasury is used as a reference for each of the questions in the AIMS. Both these agencies receive the final AIMS report which is included in the annual IAD report.
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6. How was the strategy implemented and what resources were mobilized?
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The resources used in developing and implementing AIMS can be summarized in term of Manpower, Machine, Material and Money.
1. Manpower refers to officers and staff in developing and implementing the system. The development of AIMS used in-house expertise, existing ICT facilities and staff. This project proves that smart partnership between IAD and ICT Division can share experience and expertise to develop an effective innovation.
Furthermore, the success of AIMS could not be achieved without the commitment by top management. Participation of the top management at every stage consistently had facilitated the completion of the project.
2. Machine refers to equipment needed to develop and implement the system. AIMS uses server and desktop from respective offices and existing network within the organization. AIMS requires a minimum software application to run the system. AIMS used open source software such as PHP, MySQL and Extended JavaScript, as it is freely available and no third party license involved. As it was internally developed, there was no issue of source code and hence it is upgradable as and when required according to the user requirement as well as changes in financial procedures.
3. Material refers to the information needed to develop and implement the system. Questionnaires and vital information was derived from the Internal Auditing Guideline, Treasury Instruction, and Treasury Circulars. This information need to be reviewed and adopted in the AIMS, at any time the rule and regulation can be amended when changes occurred.
4. Money refers to the cost involved in developing the system. Even though AIMS as a new project, there was no special fund was allocated. AIMS was developed using internally available resources. Cost was only incurred during the initial stage of implementation which involved roadshow, promotion and training.These activities were provided with the knowledge how on the implementation of AIMS to the auditee.
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7. Who were the stakeholders involved in the design of the initiative and in its implementation?
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RC Being 100% Audited Simultaneously. AIMS have changed the conventional method of manual auditing to on-line auditing system. The numbers of auditees who are involved in financial practices and management that require to be audited at least once a year are 106 RCs and 436 CCs. Due to the limitation of manpower not all RC were able to be audited annually. With the implementation of AIMS in 2009, all RC were audited online annually. Subsequently, some RCs were selected for manual audit and within 3 years all will be manually audited. In the future, AIMS will be expanded to 436CC and Defence Attaché Offices around the world.
Immediate Result Online.Through AIMS audit report can be generated immediately, accurately and timely. The reports are complete with star rating which enables the management to visualize the auditees' performance and their respective level of achievement. The system ensures that the report produce in a standard format, comprehensive and able to be used for continuous monitoring by auditors and management.
Alert Financial Regulation. AIMS were designed with a list of questionnaires, rule and regulations. This information will not only help the auditee to conduct self-auditing but also to be used as a reference for daily task in financial management. The design of AIMS is in line with the call of the government towards improving the quality of the delivery system through the provision of circulars and regulations, as well as financial regulation either from the treasury or MinDef and either related government department. Therefore, AIMS will be able to increase the auditees knowledge with latest rules and regulations imposed on them.
Low Cost High Impact. AIMS has reduced tremendously the movement of auditors to the various locations of RCs and CCs for inperson audit. However the on-line auditing provides the same audit result as per manual audit which are graded with star rating system.
Audit Responsibility Is Shared By Auditee. In normal circumstances the audit work to be carried out by independent third party. However AIMS has changed the conventional method of manual auditing with partially transfer to the auditee responsibilities. AIMS had changed the auditee perception on auditors and self auditing since they are able to identify their strengths and weaknesses from the self-auditing. Auditees will then be able to improved and correct any mistake found during self-auditing. As a result, AIMS has improved auditee awareness, accountability and integrity in financial management.
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8. What were the most successful outputs and why was the initiative effective?
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AIMS success was due to the strong commitment and support from the top management within Ministry of Defence. This support was initiated during the development and implementation of AIMS. Subsequently IAD constantly monitors the implementation of AIMS with the appointment of following working committees.
a. Main Working Committee. The role of this committee is to provide policy, guidelines and directions to the implementation of AIMS. The committee is also responsible in endorsing the final results of AIMS.
b. Technical Working Committee. The role of this committee is to develop, maintain and upgrade the functionality of the system. The committee is also responsible on information security and hardware at its optimum level.
c. Questionnaire Panel Committee. The role of this committee is to compare, review and updating the questionnaire in line with current rules, regulations and International Audit Standards.
d. Report Committee. The role of the committee is to analyze the result of AIMS and subsequently report the grading to the Main Working Committee for verification and approval.
Apart from the committee set up to monitor the progress of AIMS, IAD also establish helpdesk team. The helpdesk is the direct link to the auditee who will assist them throughout on-line auditing period. Any issues raised will be dealt immediately and forwarded to the respective committee for prompt action.
At the end of the AIMS’s session, auditees are required to provide the feedback on customer satisfaction survey. This survey is to evaluate the effectiveness and any comments, remarks and suggestion provided by the auditees will be used to improve the system.
The performance of the RCs on AIMS will be used as one of the criteria for the selection of the best RC of the year. The selection committee is headed by Secretary General. The successful RCs will be awarded with certificate of achievement and increase in spending threshold up to RM200,000.
This monitoring and evaluation mechanism has been documented in MS ISO 9001:2008 for the Ministry of Defence under the Procedures of Auditing Financial Management Online (AIMS) PK (O).KPM.BAD .01.
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9. What were the main obstacles encountered and how were they overcome?
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1. Planning Stage. The main obstacle faced at this stage was low commitment among ICC team due to work priority that requires them to focus on their audit work. To overcome these problems, motivators and trainers were also invited to guide and inspire the team to complete the project. Management was advised to participate in the discussion to motivate the team.
2. Development Stage. The main obstacle was lack of ICT knowledge. IAD personnel do not have the skill and qualification in computer programming. To overcome this problem, fulltime/dedicated ICT officer from ICT Division of Ministry of Defence was seconded to IAD to lead, develop and test the system.
Besides that, existing computer server does not support AIMS requirement. This was later solved by using high end PC and later sharing of server with other system in Ministry of Defence.
Another obstacle was different level of understanding among auditees on their interpretation and understands the questionnaires resulting to wrong answer given. To overcome this problem, sub-committee was formed to review the questionnaires and helpdesk was created.
3. Implementation Stage. The main obstacle during implementation stage is the resistance to change and the feeling of complacency among some of auditees. AIMS as a new initiative in auditing, requires auditees support and commitment. To overcome this problem, training, road show and promotion was conducted involving auditees at RCs.
During the pilot project, there was a problem regarding the request for new PC and internet coverage/connectivity for certain area of RCs. Digital divide issues among auditees was also a problem as not all auditees are ICT literate. Level of understanding among auditees and auditors are also different resulted in wrong interpretation of audit questionnaires used in AIMS. All these problems were overcome by providing training and road show.
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