Audit of predetermined objectives PFMA 2014-15

1. Audit of predetermined objectives PFMA 2014-15

2. 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 our country’s democracy by enabling oversight, accountability and governance in the public sector through auditing, thereby building public confidence.

3. Topics to discuss

4. Background

5. Audits performed by the AGSA

6. Clean administration – from annual audits

7. Audit of predetermined objectives defined Annual audit of reported actual performance against predetermined objectives, indicators and targets as 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

8. Auditing requirements Sections 20(2)(c) and 28(1)(c) of the Public Audit Act (PAA) require that: An audit report must reflect an opinion or conclusion on the performance of the auditee against predetermined objectives Applicable to all spheres of government

9. Legislative requirements and framework for performance management and reporting

10. Legislative requirements and framework Public Finance Management Act , 1999 (Act No. 1 of 1999) (PFMA) Treasury Regulations issued in terms of the PFMA, 2002 Guidelines, instruction notes issued by National Treasury National Treasury Framework for managing programme performance information (issued by the National Treasury in May 2007) National Treasury Framework for strategic plans and annual performance plans (issued by the National Treasury in August 2010) 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.

11. Performance planning, budgeting and reporting cycle

12. Strategic planning and budgeting requirements Treasury Regulations issued in terms of the PFMA Chapter 5: Strategic planning requirements for departments, trading entities and constitutional institutions Chapter 29: Corporate planning requirements for schedule 2, 3B and 3D public entities Chapter 30: Strategic planning requirements for schedule 3A and 3C public entities Public Service Regulations, part III B.1(a), (g): Only applicable to departments

13. Reporting requirements PFMA TreasuryRegulationsissued in terms of the PFMA Section 40(3)(a): Applicable to departments, constitutional institutions and trading entities. Section 55(2)(a): Applicable to public entities. 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

14. 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.

15. Key performance accountability documents • Consistent structures to facilitate understanding and accountability • Enable linkage between plans and actual performance

16. Good performance indicators should be: Reliable Must be accurate enough for its intended use and respond to changes Well defined Clear, unambiguous definition so that data will be collected consistently and will be easy to understand and use Verifiable Possible to validate the processes and systems Cost-effective Usefulness of the indicator must justify the cost of collecting the data Appropriate Avoid unintended consequences and encourage service delivery improvements Relevant Must relate logically and directly to an aspect of the institution's mandate

17. SMART performance targets S Nature and required level of performance can be clearly identified PECIFIC M Required performance can be measured EASURABLE A Realistic given existing capacity CHIEVABLE R Required performance is linked to achievement of goal ELEVANT Time period/deadline for delivery is specified T IME BOUND

18. Audit process

19. AGSA strategy 2004-05 to 2008-09 2009-10 to 2014-15 • 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) • 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

20. Audit criteria Main criteria Sub-criteria Compliance with regulatory requirements Applicable to performance management and reporting Presentation Measurability Usefulness Relevance Consistency Validity Reliability Accuracy Completeness

21. Audit approach Understand and test the design and implementation of the performance management systems, processes and relevant controls 1 Test the measurability, relevance, presentation and consistency of planned and reported performance information 2 Test the reported performance information against relevant source documentation to verify the validity, accuracy and completeness of reported performance information 4 Conclude on the usefulness of the reported performance information for selected programmes or objectives 3 Conclude on the reliability of the reported performance for selected programmes or objectives 5

22. Audit reporting – Management report An audit conclusion will be expressed for ALL departments, constitutional institutions, trading entities and public entities in the management report, on the – USEFULNESS of reported performance for selected programmes or objectives RELIABILITY of the reported performance for selected programmes or objectives

23. Audit reporting – Auditor’s report REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS Predetermined objectives Usefulness of information Material audit findings focusing on presentation, consistency, relevance and measurability of reported performance information for selected programmes or objectives Reliability of information Material audit findings focusing on reliability of reported performance information for selected programmes or objectives Compliance with laws and regulations Compliance findings relevant to the performance management and reporting

24. Audit outcomes PFMA 2013-14

25. Quality of annual performance reports (overall) 2013-14 PFMA 64% • The annual performance reports of of the auditees • were useful and reliable • Slight improvement over 2012-13 With no findings With findings

26. Auditees with material findings on usefulness 2013-14 PFMA Departments Public entities Improved Stagnant or limited progress Regressed 293 public entities 288 public entities 160 departments 158 departments

27. PDO findings

28. Roles and responsibilities

29. Roles and responsibilities: FMPPI (chapter 5): Effective management of performance information requires a clear understanding of different responsibilities as well as the structures and systems involved in managing performance

30. Role of internal audit • 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

31. 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

32. THANK YOU