Shfleto menyne

Internal Audit

Strengthening Internal Audit for more Accountable Municipalities and increased Public Trust

Dardan Maliqi & Saranda Husaj Baraliu

Internal audit, coupled with a robust internal control system, effective risk management, and external audit, is fundamental for safeguarding public money, ensuring accountable governance and integrity, and preserving public trust in Kosovo municipalities. In Kosovo, despite the establishment of the Municipal Internal Audit Units, as well as an increasing importance of internal audit reporting and recommendations, every year municipalities get serious findings from the National Audit Office in relation to inadequate financial management and procurement processes, asset management, recruitment, and contract management procedures, ultimately affecting public trust. As a result, in recent years, attention has been focused on how effective the internal audit units are and how they can be strengthened. 

Regulatory Framework Governing Public Internal Audit

While the regulatory framework governing public internal financial control, especially the internal audit function, is generally robust and firmly in place, there are notable areas requiring attention. In addition to the statutory laws and secondary regulations, the availability of a comprehensive set of working papers is an asset, providing essential guidance and support for internal auditors during their audit activities. However, there are shortcomings within the current framework. The risk assessment methodology, for instance, has not undergone updates in several years, rendering it inadequate for addressing the ever-evolving circumstances. 

Furthermore, the identified risk factors do not directly impact the operational scope of the Internal Audit Unit, ultimately affecting the quality and effectiveness of their work. Addressing these issues is imperative for ensuring a consistently high standard of internal audit and financial control.

Functionality and Challenges of Internal Audit Units

In municipalities, Internal Audit Units have been established in accordance with current legislation. However, the quality of planning and reporting is weak, and follow-up on addressing audit recommendations is in the initial phase. Strategic and annual plans of Internal Audit Units are too long, sometimes not specific and in some cases without any risk-based analysis. There are improvements in the quality of internal audit reports but most of them still lack definition of clear audit criteria and clear presentation of findings, making these reports difficult to understand. This has several consequences. First, it may create a wrong impression over governance processes. Second, it may fail to present the cause and effect of irregularities or shortcomings identified and to prevent potential misuse of public funds. 

There are more challenges to overcome, including underfunded and understaffed IAUs, delays in recruiting auditors, and a lack of appreciation from the management in the work of Internal Audit Units, in certain cases. Additionally, Internal Audit Committees often have weak roles, and their chairpersons are sometimes seen as tools for mayoral control rather than supporters of internal auditors. While there appears to be a reasonable level of cooperation between internal auditors and the auditees during the audit process, offering timely access and information, it’s worth noting that the implementation of audit recommendations remains a significant challenge to Kosovo municipalities. To ensure transparent financial management, meet citizens’ needs, and encourage development, it’s crucial to address these obstacles and strengthen the functioning of Internal Audit Units and Internal Audit Committees in Kosovo’s municipalities.

DEMOS’ Approach in Strengthening Internal Audit 

In response to these challenges and with the aim to enhance the performance of Kosovo’s municipalities, the DEMOS project is providing capacity development activities for Internal Audit Units and Internal Audit Committees including on-job coaching and mentoring activities. The project commenced by conducting a thorough analysis of the deficiencies and opportunities for improvement within Internal Audit Units and Internal Audit Committees. Thorough examination was conducted to assess rules, methods, and the recognition of potential widespread problems. 

Tailored solutions were then provided to enhance compliance with government policies, standards, and guidelines, with a particular focus on strengthening Internal Audit Units and Committees. 

In addition, DEMOS helped municipalities to enhance their ability to plan and audit effectively. This led to better risk analysis and planning in municipalities. Also, the database was set up to track audit recommendations, and it was introduced a risk assessment model to improve the quality of audit reports.

This model has been distributed to the municipal internal auditors, the National Audit Office, and the Central Harmonization Department (Ministry of Finance, Labour and Transfers). 

Impact of Project Intervention


Kefsere Koxha, the internal auditor in the municipality of Kaçanik/ Kačanik says that some of the recommendations received from DEMOS experts have been very useful for her work. “I have been advised to address my reports directly to the mayor in such a way that my recommendations are clear and applicable, and leave no room for interpretation”, she added. 

Kefsere, who has been working in the field of audit for more than 40 years, underlines the importance of a quality internal audit. “A good audit process would help the management to improve the internal control processes in the organization, and if these processes are improved, there is no problem for further evaluations”, she says. 
Throughout the project, DEMOS will continue supporting municipalities to enhance the functionality of their internal audit mechanisms. This effort aims to raise the quality of audit reports and increase the level of addressing recommendations. These efforts are expected to have a positive impact on local government and contribute to the overall improvement of service delivery for citizens.

The Internal Auditor in the municipality of Novobërdë/Novo Brdo, Kujtim Arifi, estimates that the support provided by DEMOS has contributed to the improvement of the quality of internal audits in general. “As an auditor, I estimate that the greatest benefit has been in the advancement of reporting, but in addition to this, with the help of DEMOS, we have managed to improve the management of municipal assets, which has reflected positively in the audit opinion issued by the National Audit Office”, said Mr. Arifi.

What is DEMOS