Audit of predetermined objectives PFMA 2014-15

Reputation promise/mission

The Auditor-General of South Africa has a constitutional mandate and, as the Supreme Audit Institution (SAI) of South Africa, exists to strengthen ourcountry’s democracy by enabling oversight, accountability and governance in the public sector through auditing, thereby building public confidence.

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Topics to discuss

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Background

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Audits performed by the AGSA

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Clean administration – from annual audits

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Annual audit of reported actual performance against Annual audit of reported actual performance against predetermined objectives, indicators and targets as predetermined objectives, indicators and targets as contained in the annual performance report contained in the annual performance report

It is an integral part of the annual regularity audit process, confirming –

• compliance with related laws and regulations• usefulness of performance information• reliability of performance reporting

Audit of predetermined objectives defined

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An audit report must reflect an opinion or conclusion on the performance of the auditee against predetermined

objectives

Sections 20(2)(c) and 28(1)(c) of the Public Audit Act (PAA) require that:

Applicable to all spheres of governmentApplicable to all spheres of government

Auditing requirements

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Legislative requirements and framework for performance management and reporting

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Public Finance Management Act , 1999 (Act No. 1 of 1999) (PFMA)

Treasury Regulations issued in terms of the PFMA, 2002

National Treasury Framework for managing programme performance information (issued by the National Treasury in May 2007)

This represents the performance management and reporting framework against which the performance information should be managed and reported.

The principles and requirements set out in the framework are used as a basis for the audit.

Guidelines, instruction notes issued by National Treasury

National Treasury Framework for strategic plans and annual performance plans(issued by the National Treasury in August 2010)

Legislative requirements and framework

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Performance planning, budgeting and reporting cycle

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Chapter 5: Strategic planning requirements for departments, trading entities and constitutional institutionsChapter 29: Corporate planning requirements for schedule 2, 3B and 3D public entitiesChapter 30: Strategic planning requirements for schedule 3A and 3C public entitiesPublic Service Regulations, part III B.1(a), (g): Only applicable to departments

Treasury Regulations issued in terms of the PFMATreasury Regulations issued in terms of the PFMA

Strategic planning and budgeting requirements

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Section 40(3)(a): Applicable to departments, constitutional institutions and trading entities.

Section 55(2)(a): Applicable to public entities.

PFMAPFMA

Chapter 18: Reporting requirements for departments, trading entities and constitutional institutions

Chapter 28: Reporting requirements for all public entities

PSR, part III B.1(f)(i)-(iii) & J.1, J.3: Monitoring and management of performance information for departments

TreasuryTreasury RegulationsRegulations issued in issued in terms of the PFMAterms of the PFMA

Reporting requirements

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Annual performance report submission

All departments, constitutional institutions, trading entities and public entities must submit the annual performance report for audit purposes with the annual financial statements (by 31 May) to enable the auditors to perform the necessary final audit procedures.

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Key performance accountability documents

• Consistent structures to facilitate understanding and accountability

• Enable linkage between plans and actual performance

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AppropriateAvoid unintended consequences and encourage service delivery improvements

ReliableMust be accurate enough for its intended use and respond to changes

RelevantMust relate logically and directly to an aspect of the institution's mandate

Well definedClear, unambiguous definition so that data will be collected consistently and will be easy to understand and use

VerifiablePossible to validate the processes and systems

Cost-effectiveUsefulness of the indicator must justify the cost of collecting the data

Good performance indicators should be:

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SMART performance targets

SS

MM

AA

RR

TT

Nature and required level of performance can be clearly identified

Required performance can be measured

Realistic given existing capacity

Required performance is linked to achievement of goal

Time period/deadline for delivery is specified

PECIFICPECIFIC

EASURABLEEASURABLE

ELEVANTELEVANT

CHIEVABLECHIEVABLE

IME BOUNDIME BOUND

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Audit process

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Completed phased audit approach

Audit to the extent necessary to express an audit conclusion

Audit conclusion in the management report for all departments, constitutional institutions, trading entities and public entities

Audit reports contain material audit findings – not audit opinions

Phased-in approach Factual audit findings

reported in both management and audit reports

No audit opinion in audit reports

Interaction with stakeholders (NT, Presidency, DPSA) to determine and test audit approach

Inputs to drafting of NT frameworks (FMPPI)

2004-05 to 2008-09 2009-10 to 2014-15

AGSA strategy

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Validity

Accuracy

Completeness

Applicable to performance management and reporting

PresentationMeasurabilityRelevanceConsistency

Compliance with regulatory Compliance with regulatory requirementsrequirements

UsefulnessUsefulness

ReliabilityReliability

Audit criteria

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Understand and test the design and implementation of the performance management systems, processes and

relevant controls 11

Test the measurability, relevance, presentation and consistency of planned and reported performance information22

Conclude on the reliability of the reported performance for selected programmes or objectives55

Test the reported performance information against relevant source documentation to verify the validity,

accuracy and completeness of reported performance information44

Audit approach

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USEFULNESS of reported performance for selected programmes or objectives

RELIABILITY of the reported performance for selected programmes or objectives

Audit reporting – Management report

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Compliance findings relevant to the performance management and reporting

Audit reporting – Auditor’s report

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Audit outcomes PFMA 2013-14

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Quality of annual performance reports (overall)

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With no findings

With findings

• The annual performance reports of of the auditees

were useful and reliable

• Slight improvement over 2012-13

64%2013-14PFMA

Auditees with material findings on usefulness

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2013-14PFMA

Departments Public entities

160 departments

158 departments

293 public entities

288public entities

Improved

Regressed

Stagnant or limited progress

PDO findings

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Roles and responsibilities

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Roles and responsibilities:

Ministers/MECs Accounting officer or head of an institution (assisted by chief information officer)

Line managers Other officials

To ensure that institutions under their control set up appropriate performance information systems

Accountable for establishing and maintaining the systems to manage performance information

Accountable for establishing and maintaining the performance information processes and systems within their areas of responsibility

Responsible for capturing, collating and checking performance data relating to their activities

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The functions of internal audit relevant to performance information and management should typically include the following:

Monitoring of internal controls relating to performance information processes

Examination of the usefulness and reliability of performance information

Review of critical performance management activities Review of compliance with laws and regulations relevant to

performance planning, management and reporting Risk management

Also refer to Treasury Regulations (TR) 3.2.11 - 3.2.12 (applicable to departments) and TR 27.2.10 -27.2.11 (applicable to public entities) for the responsibilities of the internal audit function

Role of internal audit

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Review of draft the APP 2015-16

• Programme 3 - HIV/AIDS, TB , Maternal and Child Care and Programme 5- Hospital, Tertiary Health Services and Human

Resource Development were reviewed as part of an interim audit on the annual performance plan.

• Indicators and targets were reviewed for usefulness• All findings reported to management were satisfactorily addressed

with the final APP

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THANK YOU

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