Role of AGSA and internal audit ito predetermined objectives

1. Role of AGSA and internal audit ito predetermined objectives

2. Reputation promise/mission The Auditor-General of South Africa 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.

3. Contents Audit mandate of the AGSA Planning, budgeting and reporting cycle in local government Audit approach Audit reporting Audit outcomes: MFMA 2009-10 The role of the internal audit

4. Audit of predetermined objectives defined as: Annual audit of reported actual performance against predetermined objectives, indicators and targets. Integral part of the annual regularity audit, confirming the credibility of the reported performance information in the annual performance reports of municipalities.

5. Mandate of the AGSA Constitution of SA Public Audit Act of 2004 Functions of the AGSA: Regularity(including financial, performance information and compliance) and performance audits Investigations and special audits

6. Legislative requirements - Auditing Sections 20(2)(c) and 28(1)(c) of the Public Audit Act (PAA) Section 45 of the Municipal Systems Act (MSA), Act No. 32 of 2000 An audit report must reflect an opinion or conclusion relating to the performance of the auditee against predetermined objectives The results of performance measurements in terms of section 41 (1) (c) of the MSA must be audited - as part of the municipality’s internal auditing processes; and annually by the Auditor-General. Applicable to all spheres of government

7. The power of measuring results If you do not measure results, you cannot tell success from failure If you cannot see success, you can not reward it If you cannot reward success, you are probably rewarding failure If you cannot see success, you can not learn from it If you cannot recognize failure, you cannot correct it If you cannot demonstrate results, you cannot win public support Adapted from Osborne and Gaebler, 1992, Reinventing Government

8. Auditing the planning, budgeting and reporting cycle

9. Legislative requirements for planning, budgeting & reporting cycle Municipal Finance Management Act (MFMA) Municipal Systems Act (MSA) LG: Municipal planning and performance management regulations, 2001 – GNR.796 of 24 August 2001 LG: Municipal performance regulations for municipal managers and managers directly accountable to municipal managers, 2006 – effective 1 August 2006 – GNR.805 of 1 August 2006 MFMA circulars Framework for managing programme performance information (issued by the NT in May 2007)

10. Submission of performance information to AGSA All municipalities and entities must submit the annual performance report for audit purposes with the annual financial statements (by 31 August) to enable the auditors to perform the necessary final audit procedures. Note: Annual performance report = report referred to in MSA section 46

11. AGSA strategy to audit of predetermined objectives 2009/10 to 2010/11 2004/05 to 2008/09 • Adopted a phased-in approach • Factual audit findings reported in both management and audit reports • No audit opinion in audit reports – only findings • Regular interaction with stakeholders (NT, Presidency, DPSA) to determine and test audit approach • Provided inputs to drafting of NT Frameworks (FMPPI) • Completed phased audit approach • Audit to the extent necessary to express an audit opinion • Audit opinion in the management report for all high capacity municipalities and their entities • Audit reports contain audit findings – not audit opinions

12. Audit criteria Main criteria Sub-criteria Existence Compliance with regulatory requirements Timeliness Presentation Measurability Usefulness Relevance Consistency Validity Reliability Accuracy Completeness

13. Audit approach • Understand and test the design and implementation of the performance • management systems, processes, the relevant controls • for the selected development priorities or objectives 1 • Test the existence, measurability, relevance, timeliness • presentation & consistency of planned and reported performance information 2 • Test reported performance information to relevant • source documentation to verify the validity, • accuracy & completeness of reported performance information 3 • Conclude on the reliability of the reported performance for • selected development priorities & objectives 4

14. Audit reporting – Audit report REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS Predetermined objectives Reliability of information: Audit findings focus on the validity, accuracy & completeness of reported performance information Presentationof information Usefulness of information: Audit findings focus on the consistency, relevance & measurability of planned & reported performance information. COMPLIANCE WITH LAWS AND REGULATIONS Report non-compliance matters in relation to the performance management systems and processes

15. MFMA audit outcomes 2009-10 Findings on internal audit and audit committeeNo. of Municipalities with findings Non-existence of a performance audit committee 40 Non-functioning performance audit committee 54 No internal auditing of performance measurements 84 Inadequate internal auditing of performance measurements 34

16. MFMA audit outcomes 2009-10Drivers of improved audit outcomes – Leadership

17. MFMA audit outcomes 2009-10Drivers of improved audit outcomes – Financial and performance management

18. MFMA audit outcomes 2009-10Drivers of improved audit outcomes – Governance

19. Internal audit – MPPM regulation 14 Municipality must develop and implement mechanisms, systems and processes for auditing results of performance measurements as part of its internal auditing processes Internal auditors should audit on a continuous basis the following: • Functionality of performance management system • Compliance of the system with the Municipal systems act • Whether the municipality’s performance measurements were reliable in measuring the performance of the municipality on key indicators • Quarterly reports on their audits to the municipal manager and the performance audit committee

20. AGSA and internal audit Partners in promoting and enabling sustainable service delivery through auditing

21. Thank you