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Audit of Performance Information (AoPI)

AGSA approach

Reputation promise/mission

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

Outline

Background Legislative requirements AG strategy to AoPI Audit approach Audit reporting Role of the internal auditor

Background

Supreme audit institutions (SAIs) do not only conduct financial audits

Also provides assurance on performance information produced by government departments and entities

Why was this necessary? Public sector reforms Improving public reporting Providing better information on what taxpayers are

getting for their taxes

AoPIAudit of Performance Information

Individual audits

Focused on a specific government policy or management process

Audit criteria are the 3E’s:

Economy

Efficiency

Effectiveness

Done by subject matter experts

Part of Regularity Auditing

Focused on non-financial information in Annual Report

Audit criteria: Compliance (has this

happened), as part of regularity audit process Quality of PI (as per audit

criteria)

Done by audit professionals

PAPerformance Auditing

Difference between AoPI and performance auditing

Performance Information (PI)

= Non-Financial Information about the Service Delivery of Government

Outline

Background Legislative requirements AG strategy to AoPI Audit approach Audit reporting Role of the internal auditor

Legislative requirements - auditing

Sections 20(2)(c) and 28(1)(c) of PAAAn audit report must reflect an opinion or conclusion relating to the performance of the auditee against predetermined objectives

Applicable to all spheres of government, including: national, provincial and local government public entities those the AG opts to perform and opts not to perform institutions funded with public monies institutions that receive money for public purposes

Legislative requirements – planning, budgeting and reporting

PFMA Treasury Regulations

National Treasury guidance: Annual report preparation guide Framework for managing programme performance

information

Legislative requirements – reporting:

PFMA sections 40(3)(a) & 55(2)(a): The annual report and audited financial statements mustfairly present the state of affairs of (...) and its performance against predetermined objectives

Legislative requirements – reporting:

PFMA sections 40(3)(a) & 55(2)(a): The annual report and audited financial statements mustfairly present the state of affairs of (...) and its performance against predetermined objectives

II. Treasury Regulations: Performance management process

Policy development

Strategic planning

Implementation planning and

budgeting

Implementation

End-year reporting

Oversightby Parliament, provincial legislature or municipal council

INSTITUTIONnational department

provincial departmentmunicipality

state controlled institution

municipal entity

Specification of outcomes and outputs

Setting targets and resource allocation

Monitoring and management

Evaluation and adjustment

Identifying desired impacts

Policy development

Strategic planning

Implementation planning and

budgeting

Implementation

End-year reporting

Oversightby Parliament, provincial legislature or municipal council

INSTITUTIONnational department

provincial departmentmunicipality

state controlled institution

municipal entity

Specification of outcomes and outputs

Setting targets and resource allocation

Monitoring and management

Evaluation and adjustment

Identifying desired impacts

II. Treasury Regulations

Departments Public entities

Strategic planning Chapter 5 Chapters 29 & 30

Implementation planning and budgeting

Chapter 5 Chapters 29 & 30

Implementation Chapter 5 Chapter 29 & 30

Reporting Chapter 1818.3.1(b)

Chapter 28

III. Guidelines and frameworks issued by the National Treasury

Treasury guidelines - Preparation of the Estimates of National Expenditure Treasury guidelines – Preparation of Expenditure Estimates for the Medium

Term Expenditure Framework Treasury Practice Note 4 of 2009-2010 Submission of corporate plans in

terms of section 52 of the PFMA Treasury guidelines applicable to provincial departments - Pre-determined

indicators and targets. Provincial Budget and Programme Structures for publication - Budget. Framework for strategic plans and annual performance plans, issued by the

National Treasury, August 2010. (Note: Although the principles in this Framework will only be audited with the 2011-12 audit cycle the NT encourage all auditees to implement the principles as soon as possible).

Departments (national & provincial): Under programme performance section in AR Reporting requirements as per guide:

Must report on each and every performance measure and target specified in its strategic and performance plan

Where unable to do so, this must be stated explicitly State the reasons for major variances between target

and actual

III. Annual report guidance

Format and content of reporting on pi

III. Annual report guidance

Format – Departments (national and provincial)

Sub- programme

Outputs Performance measures /service delivery indicators

Actual performance against target

Target Actual

Reasons for major variances

III. Annual report guidance

Format – Public entities

Goal Key Performance indicator

Target Performance results

Reason for variance

IV. NT Framework for managing programme performance information

Applicable to all entities in the national, provincial and local spheres of government

Copies available at http://www.treasury.gov.za/publications/guidelines

Contents: Introduction Planning, budgeting and reporting Key performance information concepts Developing performance indicators Managing performance information Publishing performance information Roles and responsibilities

Outline

Background Legislative requirements AG strategy to AoPI Audit approach Audit reporting Role of the internal auditor

18

AG strategy to audit performance information

■ Phase-in approach by the AGSA since 2005-06 together with National Treasury■ Stakeholder engagements to clarify approach and essence of AOPI has taken place and will continue throughout 2011■ Summary of findings for 2010 arising from the audit of reporting on predetermined objectives:.

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Outline

Background Legislative requirements AG strategy to AoPI Audit approach Audit reporting Role of the internal auditor

AGSA audit approach – 10/11 and beyond

Understanding and testing of the internal policies, procedures and controls related to the management of performance information.

Understanding and testing of systems and controls relevant to collecting, monitoring and reporting performance information.

Audit and confirm: - Existence of performance information - Consistency of performance information between:

Strategic/annual performance plan, quarterly reports and annual performance report

- Presentation in annual report Audit and compare reported performance information to relevant

source documentation and conduct procedures to ensure validity, accuracy and completeness of reported performance information.

Audit criteria

Main criteria Sub-criteria

1. Compliance with reporting requirements

Existence

Timeliness

Presentation

Measurability

Relevance

Consistency

Validity

Accuracy

Completeness

Performance information framework

AGSA recognises the following as sources of criteria against which the performance management system and annual performance report will be evaluated as a basis for an audit conclusion/opinion:

All relevant laws and regulations  Framework for the managing of programme performance information,

issued by the National Treasury Relevant frameworks, circulars and guidance issued by the National

Treasury and the Presidency regarding the planning, management, monitoring and reporting of performance information.

Submission of performance information to AG

All departments and entities must submit the annual performance information for audit purposes with the annual financial statements by 31 May to enable the auditors to perform the necessary final audit procedures.

Audit reporting

Management report (interim and final)

Report on all material shortcomings identified during execution of audit procedures and audit programmes

Outline

Background Legislative requirements AG strategy to AoPI Audit approach Audit reporting Role of the internal auditor

Audit reporting

Audit report 2010-11: No separate audit opinion on performance information in audit report

BUT an indication what the impact on audit opinion would have been in an annexure to the management report

Audit report – way forward: One audit report containing audit opinion on financial statements,

other matters and audit opinion on performance information Audit opinion on performance information to be report under “other

legal and regulatory responsibilities” heading in audit report Format:

Audit opinion: Unmodified or qualified or adverse or disclaimer of opinion Basis for qualified or adverse or disclaimer of opinion Emphasis of matter Other matters

Audit report - examples

Qualified audit opinion: (audit findings are material) Lack of reporting on all the objectives, indicators and targets as per

the approved strategic or annual performance plan Reporting on objectives, indicators and targets in addition (not

approved) to those as per the approved strategic or annual performance plan

Reasons for variances between planned and actual performance is not included

Logical link between objectives, indicators and targets do not exist Objectives, indicators and targets not consistent between plan and

annual performance report Changes to planned objectives, indicators and targets are not

disclosed

The above can lead to adverse or disclaimer of audit opinions in the case of audit findings being pervasive

Audit report - examples

Qualified audit opinion: (audit findings are material)

Lack of effective, efficient and transparent systems and internal control to provide sufficient, appropriate audit evidence to substantiate reported performance information

Sufficient audit evidence not provided to substantiate reported performance information

Evidence provided to substantiate reported performance information not valid, accurate or complete

Annual performance report was provided too late to conduct any audit work on reported information

All of the above can lead to a disclaimer of opinion in the case of audit findings being pervasive

Outline

Background Legislative requirements AG strategy to AoPI Audit approach Audit reporting Role of the internal auditor

ROLE OF THE INTERNAL AUDITOR

Annual internal audit plan to identify planned audit work relevant to: Performance management Performance measurement Performance reporting at different levels within the department or entity

Internal auditors to assess and audit the following: Risks and control measures over performance information Alignment of objectives, indicators/measures and targets between strategic/annual

performance plan, budget, quarterly report and annual report. Risks and control measures of the systems used to manage and report

performance information (this should include both manual and electronic systems) The accuracy, completeness and validity of performance information reported in

quarterly and annual report

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DISCUSSION AND QUESTIONS