Review of 2015/16 Annual Performance Plans by Portfolio Committee on Public Enterprises

1. Portfolio Committee on Public EnterprisesReview of 2015/16 Annual performance plansPresenters: Sybrand Struwig – Senior Manager AGSA Waleed Omar –Manager AGSA

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. Roles and responsibilities

25. 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

26. Understanding and monitoring of the accounting officer’s mandate are key to improving internal control environment Role of accounting officer Robust financial and performance management systems Oversight and accountability Commitment and ethical behaviour • Effective, efficient, economical and transparent use of resources • Prevention of unauthorised, irregular and fruitless and wasteful expenditure and, if discovered, reporting to treasury • Efficient and economic management of available working capital • Effective, efficient and transparent systems for • financial and risk management • internal controls (under control of audit committee) • procurement and evaluation • Manage and safeguard assets and liabilities • Take appropriate disciplinary steps against any official contravening the PFMA Therole of the accounting officer is critical to ensure: timely, credible information+accountability+transparency+service delivery Chapter 5 of the Public Finance Management Act, 1999

27. 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

28. Support oversight – complimentary mandate Management assurance First level of assurance Oversight assurance Second level of assurance Independent assurance Third level of assurance Senior management Senior management Accounting officers/ authority Accounting officers/ authority Executive authority Coordinating / Monitoring institutions Internal audit Audit committee Oversight (portfolio committees / councils) Public accounts committee National Assembly Required assurance levels Required assurance levels Required assurance levels Extensive Extensive Extensive Extensive Extensive Extensive Extensive Extensive Extensive • Management’s assurance role • Senior management– take immediate action to address specific recommendations and adhere to financial management and internal control systems • Accounting officers/ authority– hold officials accountable on implementation of internal controls and report progress quarterly and annually • Executive authority– monitor the progress of performance and enforce accountability and consequences • Oversight’s assurance role • National Treasury/ DPSA– monitor compliance with laws and regulations and enforce appropriate action • Internal audit– follow up on management’s actions to address specific recommendations and conduct own audits on the key focus areas in the internal control environment and report on quarterly progress • Audit committee– monitor risks andthe implementation of commitments on corrective action made by management as well as quarterly progress on the action plans • Role of independent assurance • Oversight (portfolio committees)– review and monitor quarterly progress on the implementation of action plans to address deficiencies • Public accounts committee– exercise specific oversight on a regular basis on any report which it may deem necessary • National Assembly – provide independent oversight on the reliability, accuracy and credibility of National and provincial government

29. Interim review of 2015/16 Annual Performance Plans

30. AGSA review of 2015/16 Annual Performance Plan

31. Findings from the AGSA review of 2015/16 Annual Performance Plan

32. Oversight responsibility of Portfolio Committee 32

33. Oversight model OVERSIGHT: Parliament, provincial legislature or municipal council • Identify desired impacts Assess and adjust Specify performance indicators Monitor and take Set targets corrective action and allocate resources Policy development Strategic Planning Operational planning and budgeting Accountability INSTITUTION National department Provincial department Municipality Public entity Municipal entity End-year reporting Implementation and in-year reporting

34. Oversight component - Portfolio committee mandate Role of Portfolio Committees (Rule 201)

35. Considerations for Portfolio Committees when dealing with performance monitoring Portfolio Committee should track any changes to the APP

36. AGSA’S aspirations for the Public Service • Transparent and stable reporting systems • Budgeting and planning processes • Focussed information management platforms • Strong internal audit capabilities Creating a better and dignified life for the citizens of South Africa through timelyeffective, efficient and economicalSERVICE DELIVERY • Reporting to enable effective oversight • Applying consequences for transgressions and poor performance Professionalism • Visible commitment by all players in the public service • Demonstrated impeccable ethical behaviour and professionalism • Independent and relevant reporting by the AG • Value-adding input expressed by the AG 36

37. Questions