Organizational Learning, Capability Development, and Portfolio Substitution: A Framework Analysis of Government Internal Auditors in South Sulawesi, Indonesia

Abstract

Introduction: Government internal audit functions are critical for promoting transparency, accountability, and effective governance within the public sector. In Indonesia, particularly South Sulawesi Province, internal auditors face growing expectations to ensure institutional integrity and performance. However, their effectiveness depends on organizational capabilities, including learning systems, capability development, and adaptive oversight strategies, which remain underexplored in developing country contexts.

Objective: To examine the organizational capabilities of government internal auditors in South Sulawesi Province using a framework that highlights organizational learning, capability development, and portfolio substitution as dimensions of institutional effectiveness.

Methodology: This study employed a qualitative case study design, using in-depth interviews with stakeholders from provincial and district inspectorates, oversight bodies, and law enforcement institutions. Data were analyzed to identify patterns of organizational learning, capability enhancement, and portfolio transformation in internal audit practices.

Results: Findings indicate structured learning initiatives through formal training and collaboration, though technology-based learning and inter-institutional knowledge transfer remain underdeveloped. Capability development revealed gaps in independence, technology use, and professional integrity, largely due to resource constraints and institutional limitations. Portfolio substitution shows gradual progress from reactive to proactive oversight, with risk-based allocation and consultative functions emerging as promising practices.

Conclusion: The study highlights that while foundational capabilities are in place, significant improvement is required to reach optimal standards. Strengthening independence, investing in technology, building comprehensive learning systems, and applying strategic resource allocation are essential. The findings contribute to the limited literature on dynamic capabilities in public sector auditing and provide valuable insights for policymakers, practitioners, and researchers seeking to enhance governance effectiveness...