PRIORITIZING IMPROVEMENT IN AUDITING PERFORMANCE

1. PRIORITIZING IMPROVEMENT IN AUDITING PERFORMANCE A COUNTRY CASE STUDY FROM SOUTH AFRICA (strategy translated into operational)

2. BACKGROUND The Auditor-General of the 1980’s • Seated within government • The annual budget • The Public Service Commission • The Exchequer’s Act and Audit Circulars • Reporting to segregated Houses of Parliament • The quest for an identifiable public sector audit profession • Shortage of skilled auditors and guidance

3. WHERE DID WE WANT TO BE? • Independent of government • Self-funded • Empowered to obtain skilled resources • Auditable legislative requirements • A credible accountability process • Professionalism • Healthy skills base and adequate tools

4. INDEPENDENCE • Auditor-General is now entrenched in the Constitution of South Africa as an “Institution Supporting Constitutional Democracy” • Auditor-General is appointed, effectively, by Parliament • Has fixed, non-renewable term of between five and ten years • Two thirds majority in Parliament necessary to dismiss • May appoint an office separate of government (Office of the Auditor-General) • CEO of this office reports only to Auditor-General and Audit Commission • Auditor-General and office must display no political agenda and report without fear or favour; may develop government auditing as seen fit

5. SELF-FUNDING • Dependence on vote by National Treasury compromised position • Various other models & options available • AG now invoices auditees; legislation supports recovery • Credit control is continuous management issue • Prepares income and expenditure budget; Audit Commission approves independently of the executive

6. PUBLIC SERVICE COMMISSION (PSC) AND HUMAN RESOURCES • Regulates and controls government human resources • Auditor-General now independent of PSC • Human resources are now an equation of budget, market, needs and performance • Able to implement own systems and performance management process specifically designed for auditors

7. AUDITABLE LEGISLATIVE REQUIREMENTS • Constitutional mandate: to audit and report on - • financial statements • financial management • of all tiers of government • to acquire resources, implement liaisons & processes as needed to do the above • without interference by anyone

8. AUDITABLE LEGISLATIVE REQUIREMENTS (continued) • Therefore, as is international best practice, someone else to regulate - • requirements for financial statements • requirements for financial management • for all tiers of government • Public Finance Management Act (1999) • Municipal Finance Management Bill • Accounting Standards Board only just commenced operations

9. A CREDIBLE ACCOUNTABILITY PROCESS • Segregated houses of Parliament replaced by integrated legislatures for each sphere of government; various Auditors-General negotiated and amalgamated to one • Constitution and subsequent legislation spells out competencies and accountability of each sphere • Audits completed as per internationally standardized process

10. A CREDIBLE ACCOUNTABILITY PROCESS (continued) • Includes queries & management letters to top management, obtains responses before reporting externally • Final reports to relevant legislature, discussions public hearings, corrective measures, follow-up • Municipal process is complex due to number and location of municipalities

11. A CREDIBLE ACCOUNTABILITY PROCESS (continued) • Municipalities amalgamated, elected 2001 • Public entities process under review • Accountability for performance, environment etc. is new

12. PROFESSIONALISM • Affiliation with INTOSAI and development of SA Institute of Government Auditors laid the foundation • Harmonisation with IFAC auditing standards followed • Process not completed as many stakeholders outside the office; the following processes underway: • Accounting Professions Bill • Standardisation of qualifications • Institute for Public Finance and Audit • The Auditing Standards Board of SA, linked to IFAC

13. SKILLED AUDITORS WITH ADEQUATE TOOLS • Independence from government and PSC enabled demand-supply participation on HR market • The development of the profession, and international harmonisation enabled usage of CA’s; article scheme • The promulgation of comprehensive legislation enables compilation of proper programmes and scheduling of audits, e.g. PFMA catch-up action

14. SKILLED AUDITORS WITH ADEQUATE TOOLS (cont.) • Audit software employed to standardise audits, increase cost-efficiency, enforce review of audits & quality control • Harmonisation of auditing standards improved cooperation with private audit firms. • Technical committee process & distribution by cd & intranet

15. CONCLUSION • The relationship with the tax-payer is a long term one that evolves slowly • Auditing performance must first improve and establish value and credibility • It has taken a long time to establish an image of independence at least

16. CONCLUSION (continued) • SA has other historic issues of public trust that are difficult to remedy • Further refinement and consolidation of legislation is underway with the Auditor-General Bill • Public communication & roadshow process inside & outside office was continuous process throughout

17. NEGOTIATIONS,INFORMING OF STAKEHOLDERS REPORTINGBY PUBLICENTITIES ACT INTERN CONSTITU-TION OF SA AUDIT AR- ARANGEMENTS ACT 1992, AMALGAMATE PFMA 1999, made financial management auditable. MFMB 2003 AUDITOR-GENERALACT 1995 1994CONSTITUTION AUDITOR-GENERAL BILL to improve access powers etc BROWN COMMISSION a.o COMMUNICATION CASE STUDY OF HOW SA WENT ABOUT ABOVE PROCESS GLOBAL HARMONISATION & PROFESSIONAL DEVELOPMENT