2005 performance auditing for the public sector

2005 PERFORMANCE AUDITING FOR THE PUBLIC SECTOR

Organised by:

ASIA BUSINESS FORUM

Singapore 5 May – 6 May 2005


3KEY WORDS

Performance Measurements

Balanced Scorecard

Risk Management


day one : thursday 5th may 2005

1 a modern approach to strategic internal audit planning for the public sector and a brief of the performance measurements in use by internal auditors today

2 public sector performance management – using the balanced scorecard as a tool



3 real-life experiences in the development and implementation of the balanced scorecard for auditors in the public sector

4 developing effective corporate governance for internal auditors in the public sector to achieve strategic results – challenges, opportunities and pitfalls



5 the KPMG Public Sector BSC: three Pillars – outcomes and transparency in Public Sector Management

6 making the best of enterprise risk management and internal audit tools to enhance the internal audit function

7 integrated strategic enterprise governance framework: next step for performance auditing


day two : friday 6th may 2005

1 the global move towards better public sector financial reporting – the way to good performance

2 detection, mitigation & prevention of fraud & corruption in the public sector

3 current developments and challenges of performance auditing in malaysian central government


day two : friday 6th may 2005

4 risk mapping: a powerful tool for public sector audit risk management

5 enterprise-wide risk management – a practical approach to standards for the public sector auditor

6 risk based auditing – the practical approach


performance measurements used by internal auditors? Examples:

• stakeholders > value creation (i.e. profit) and socially responsible (i.e. inda ‘timing’)

• financial > healthy cash flow

• customer & employees > satisfaction & loyalty

• suppliers > reliable & many


balanced scorecard?

a framework to implement strategy into action

buzz words: mission, customer, financial, internal processes, learning & growth

“the balanced scorecard process allows an organization to align and focus all its resources on its strategy” – robert kaplan


how to manage risks? what is risk?

in the context of financial auditing? failure to detect error (error means financial statements do not give true and fair view)

in the context of performance auditing (di setiap jabatan dan agensi kerajaan)? failure to highlight kerugian / losses (value creation), management oversights iaitu inda mematuhi surat keliling, akta, garispandu (socially responsible) etc.


“internal audit should establish key performance indicators (KPIs) to measure its own performance. these should be linked to the audit mission and objectives that are contained in the internal audit charter”

– stephen linden, chairman of stanton partners


“over 90% of organizations have not effectively aligned their strategy at all levels of the organization” and

“leadership is the influence an individual exerts on the behaviour of others. it is the ability to maintain morale and to inspire or persuade others to convert dreams, desires and aspirations into action”

– ron cartey, chairman of the AT Group


singapore healthcare system – key issues

“disease prevention & management, good care delivery standards, develop relationship with customers, public positioning, improve cost efficiency, increase revenue, IT infrastructure support and retention & recruitment of manpower”

– tay guan mong, senior vice president

Artemis International


“as information trickles out and the finger pointing begins, its clear many people involved had spotted warning signs of Enron’s accounting malfeasance long before the company’s fall” – TIME.com

12 Feb 2001: new CEO joined, kenneth lay stays as chairman (stock price >US$70)

26 Jun 2001: enron’s stock price at US$4421 Aug 2001: lay sells 93,000 shares, earns $2m (tapi suruh

kakitangannya membali saham enron)16 Oct 2001: enron reveals $1.2billion decrease in company value2 Dec 2001: enron files for bankruptcy, stock price at 26cents


1 service

2 collaboration

3 resource management

– dr terry reilly, associate director

KPMG Business Advisory


“how automation helps?risk assessment data is centralised;auditor can ‘pull’ the data into audit planning

module to do risk-based audit planning;provide functionality to rank ‘auditable areas’

based on user-defined scoring / weighting criteria…”

– Foo Mei Ling Director of Training

Advent CGS


“comes from 3-tiered approach, which should be implemented in phases for maximum effectiveness

1 enterprise risk management – organisational health check

2 balanced scorecard – corporate strategic direction & benchmarks

3 human resource performance management – embedding strategies into key performance indicators”

– margaret chin, managing director of Roots Consulting


“losses and long-term liabilities are often hidden by cash-bound accounting systems”

“state treasurers are the best-placed agent to determine national accounting standards…”

“EU has announced that its member countries will adopt IAS and IPSAS in 2005… seven countries in latin america have adopted accrual accounting...”

– david tong, managing partner of Pannell Kerr Forster


“results of national fraud initiative 2002/2003:total detected fraud and overpayments - £83mfraudulent benefit payments to public sector

employees – 1,600 casesoccupational pensions in payments after death of

pensioner – 2,076 casesduplicate employmentfraudulent housing tenancies” – mike langley, anti-fraud & corruption unit, UK Audit Commission


“PA is undertaken by the AG’s Dept on a limited number of cases per year (i.e. 31 cases for year 2003 (due to capacity)”

“each division of AG’s Dept is responsible for the designated sectors of public services”

“example – auditing civil servant housing project at jalan duta, kl…”

“in each division, PA is undertaken based on cycle, or at time based on priorities- obvious mismanagement and public complaints”

– dr muslim harsani mohamad, International Islamic University Malaysia


“main types of fraud: corruption (wrongful use of power & influence), asset misappropriation (theft or misuse) and fraudulent statements (falsification of legal & financial statements)”

“common anti-fraud elements in place: *a culture of honesty and ethics*anti-fraud processes and controls*appropriate oversight process”“fraud risk map”– marc ronez, managing director of Asian Risk

Management Institute


Hig

h

Sig

nif

ican

ce

Lo

w

Fraudulent Statements

ForgeryEspionage

ManipulationCyber Crime

I/P Fraud

SkimmingEmbezzlement

Kickbacks

Fraudulent Disbursements

Bid Rigging

LappingGhost Employee

Illegal Comm.

Bribery Theft

Likelihood HighLow

Misappropriation

Petty Cash Fraud

Conflicts of interest

Credit Card


THANKS

2005 performance auditing for the public sector

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