NAREIM Member Survey: Internal Audit practices

Key takeaways, results release

December 12, 2024

Real estate investment managers will increasingly focus on changing laws and regulations as they look to the future of their internal audit functions - whether they are inhouse or outsourced roles.

NAREIM's latest member survey questioned members on how they staff and structure internal audit roles, to what degree it is outsourced - and the priorities of internal audit now and in the future.

Asked to list their top risk in three years time, investment managers agreed changes in laws and regulations would be the biggest area of concern where they'd spend most time and effort. That was followed by changing market conditions and organizational governance and reporting.

• To download the results of the NAREIM Member Survey: Internal Audit, click here.

Key highlights from the Survey showed:

Staffing & process

• Two-thirds (67%) of participants outsource the internal audit (IA) function

• Just 25% of managers keep IA inhouse, and of those just 40% have dedicated IA personnel, with most IA team members at the mid-level, such as VP, director, manager or senior associate.

Responsibilities

Most firms undertake an enterprise risk assessment to prioritize areas for IA to focu, while many also have a set checklist of procedures.

• Inhouse IA: Right now, inhouse IA teams are focused largely on risks relating to service providers and vendors followed by environmental sustainability & climate change; and communications & reputation.

• Outsourced IA: External IA resources however focus on different areas of risk. The top three areas of responsibility today are environmental sustainability & climate change in joint first place with financial & liquidity risk; followed by communications & reputation.

Future risks: 

All participants agreed that in three years time priorities and areas of risk will change with the top five areas of concern as follows:

• Change in laws & regulation

• Commercial real estate market changes (competition, cycles, investor diversification)

• Organizational governance & reporting

• Service providers and vendors (excluding JV/operating partners)

• Human capital & retention

A total of 12 NAREIM members participated in the internal audit member survey, conducted between November 19 and December 6, 2024, the majority indepependent firms and not affiliated with a larger parent company.

To download the results of the NAREIM Member Survey: Internal Audit, click here.