Download - INTERNAL AUDIT THE AUDITING OF PERFORMANCE …
PRESENTED BY: RAVEEN SARJU
(SENIOR AUDIT MANAGER : TRANSVERSAL AUDITS )
ETHEKWINI MUNICIPALITY AUDIT AND RISK ASSURANCE SERVICES (EMARAS)
INTERNAL AUDIT
THE AUDITING OF PERFORMANCE INFORMATION PRESENTATION
27 NOVEMBER 2015
AGENDA
NO DESCRIPTION
A. AN UNDERSTANDING OF INTERNAL AUDITING
B. STRUCTURE OF THE MUNICIPALITY AND THE RELATIONSHIP BETWEEN THE ROLE PLAYERS
C. LEGISLATIVE REQUIREMENTS
D. THE ROLE OF INTERNAL AUDIT & THE AUDIT PROCESS
E. THE ROLE OF OVERSIGHT COMMITTEE– AUDIT COMMITTEE
The MFMA and King III strongly emphasize the need for an audit
committee and an internal audit function:
OUR PRIMARY CONSIDERATION
Institute of Internal Auditors (IIA)
Internal Audit is an independent, objective, assurance and
consulting activity that adds value to and improves an organization's
operations. It helps an organisation accomplish its objectives by bringing a
systematic, disciplined approach to evaluate and improve the
effectiveness of governance, risk management, and control processes.
What is Internal Auditing?
AttributeStandards
PerformanceStandards
Standards
Implementation Standards
Our values…… our office ambiance…….
Integrity
Accountability
Honesty
Equality
Fairness
Objectivity
Confidentiality
Competency
Values
Our reputation……
We care
We belong We serve
EMARAS Motto:We assure, we consult and we add value
The relationship between various role players
(Subcommittees, City Manager, Deputy City Manager, Units etc)
Council Structure enhancing Independence & Accountability
Accountability relationships
9
Council
Auditor-General Executive
Independent, objective information
Transparency
Audit
Political
Operational
Policy Direction and Oversight
Accountability relationships
Oversight Roles – Integrated Assurance Framework
Treasury Finance and
Administration (internal
control unit)
Council Executive Committee
COUNCIL
STEWARDSHIP
ASSURANCE
PERFORMANCE
Enterprise Risk
management
Information
Communication and
Technology
Shared services: Human
ResourcesSkills development
Marketing and
customer services
INTERNAL AUDIT COMBINED ASSURANCE
Legal and
compliance Ombudsman
Outsources services
Performance
Management
NATIONAL TREASURY
REGULATORSEXTERNAL AUDIT
OVERSIGHT
Section 79 Committees Administration Committees
Community & Emergency Services Committee
Economic Development & Planning Committee
Finance & Procurement Committee
Governance and & Human Resources
Committee
Human Settlements & Infrastructure
Speaker And Party Whips
Committee
Aids Committee
Municipal Public Accounts
Committee
Audit Committee
Risk Committee
Bid Specification Committee
Bid Evaluation Committee
Bid Adjudication Committee
City Manager DCM’s / Heads/ Senior
Manager
Performance Management
Unit
LEGISLATIVE REQUIREMENTS
LEGISLATIVE REQUIREMENTS
Constitution
Section 152 set out the aims and objective of the municipality and guides municipality in all its activities including planning and service delivery.
White Paper On Local Government
Measures the overall state of local government, monitor effectiveness and delivery strategies and ensurethat scares resources are used effectively.
Municipality Structures Act
Set out the obligation to achieve S152 objectives of the Constitution and set out the responsibility forestablishing the KPI and attaining the standards set by the KPI at the highest level.
Municipality Systems Act
Places a legal obligation to establish performance management system: set targets, monitors an review performance based on indicators linked to their Integrated Development Plan.
Municipality Financial Management Act
Section 17(3) requires the setting of measurable performance objectives during budget process and set out the roles and responsibilities of mayor, chief financial officer and the accounting officer.
National Treasury Regulations
Framework for managing programme performance information: Clarify definitions, standards, roles andresponsibilities for performance information and it improve integrated structures, systems and processesrequired to manage performance information.
PERFORMANCE REGULATIONS / LEGISLATIONS
The Constitution
of RSA, 1996 –chapter 7
Section 152 The White Paper on
Local Government,
1998
Municipality Structures
Act, Act 117 of 1998
Municipality Performance Management Regulations,
2001
Municipality Performance Management Regulations,
2006
Municipality Financial
Management Act, Act 56 of
2003
MFMA Circulars No.
11, 13, 32
DIFFERENCE BETWEEN AUDIT OF PERFORMANCE INFORMATION (AOPI) AND PERFORMANCE
INFORMATION
Performance Information (PI)
= Non-Financial Information about the Service Delivery of Government
AoPIAudit of Performance Information
PAPerformance Auditing
Part of Regularity Auditing
Focused on non-financial information in Annual Report
Done by audit professionals
Audit criteria: Compliance (has this happened), as
part of regularity audit process Quality of PI (as per audit criteria)
Individual audits
Focused on a specific government policy or management process
Done by subject matter experts
Audit criteria are the 3E’s:
Economy
Efficiency
Effectiveness
THE ROLE OF INTERNAL
Assess the functionality of the Performance Management & Evaluation Unit.
Evaluate whether the system complies with applicable Acts.
Determine whether the performance measurements are reliable in
measuring performance.
Continuously audit the performance measurements of the municipality.
Submit quarterly reports on the audits of performance information to the
municipal manager and the performance audit committee.
Internal Audit role in Performance Management System (PMS)
PLAN VS. REALITY
RISK BASED APPROACH
Frequency of the KPIs in the relevant Performance Management reporting cycle. (quarterly, biannually andannually per plan)
Service Delivery Backlogs – KPIs directly relate to the level of service in addressing backlogs, performanceof business against objectives
KPIs financed by external or grant funding - KPIs that require compliance with conditions of finance orgrant agreement.
Legislative reporting requirements of KPIs – KPIs that require monthly reporting to National Treasury andother external parties
Qualitative consideration - take into account the information needs of the stakeholders and users of theperformance information, the qualitative significance of the development priorities and strategic objectivesagainst qualitative criteria (basic service delivery, financial sustainability).
Quantitative consideration – relate to the Total budget both Capital and Operating budget size) of thedevelopment priority and strategic objectives as reflected in the Integrated Development Plan (IDP).
QUALITIES OF AUDIT EVIDENCE
EVALUATION OF PORTFOLIO OF EVIDENCE
• Information is the best attainable information through the use of appropriate methods. Reliable information is competent, valid which accurately represents the status of the KPI being reported.
• Information supports engagement observations and recommendations and is consistent with the objectives for the engagement.
• Information is factual, adequate, and convincing so that the prudent person would reach the same conclusion. The information should have a degree of persuasiveness .
• Information helps the Municipality to meet its goals
Useful Sufficient
ReliableRelevant
Qualities of audit evidence
EVALUATION FOR PERFORMANCE SCORE REPORTED
ACCURACY
COMPLETENESS
Accuracy is free from errors and distortions and are faithful to the underlying facts. The re-performance of a
calculation or formulae with the same information should yield the same result as the actual score presented by the
KPI owner.
Completeness include all significant and relevant information that the auditor will be able to verify and
validate from source documentation to final result of the KPI status reported and vice versa (i.e. from final result
back to source documentation)
VALIDITY
The information supports the actual score reported based on source documents and actual work completed to fairly
represent that status of the KPI achievement for the reporting period in question.
Specific
Measurable
Achievable
Relevant
Time - Bound
SMART principles
“SMART” acronomy
A strategic outcomes oriented goal should ideally be written as a statement of intent that is specific, measurable, achievable and time bound. A useful set of criteria for selecting performance targets is the "SMART" criteria:
• The nature and the required level of performance can be clearly identifiedSpecific
• The required performance can be measured.Measurable
• The target is realistic given existing capacity.Achievable
• The required performance is linked to the achievement of a goalRelevant
• The time period or deadline for delivery is specifiedTime-bound
AOPI AUDIT OBJECTIVES
Review performance information as reported in the scorecard and the evidence in support of the performance scores
Determine the accuracy, completeness and validity of performance information reported
Evaluate the targets in terms of the “SMART” criteria
Evaluate the risks and control measures of the systems used to manage and report performance information
AOPI AUDIT PROCESS
Evaluate portfolio ofevidence in terms ofAccuracy, Validity andCompleteness
Confirm the achievementor non- achievement ofthe performance target
Conclude on the KPI’s interms of the ‘’SMART”criteria
Report audit findings torespective plan owners,KPI owners andPerformancemanagement unit(PME)to take appropriate action
Determine trend analysisof KPI’s that arecontinuously not achievedthroughout theperformance reportingcycles
Conclude on whetherperformance reportedagainst predeterminedobjectives is useful andreliable, in all materialaspects based onpredetermined criteria
THE ROLE OF OVERSIGHT COMMITTEES
Council
Mayor / EXCO
Portfolio/ EXCO
Committee’s
MPAC
Audit and
Risk
Committee
Oversight role
Submit audit report to EXCO
& Council at least twice
during the financial year.
Audit Committee role in implementation of PMS
Review and comment on compliance with statutory requirements and performance management best practices and standards.
Review and comment on the alignment of the Integrated Development Plan, the Budget, Service Delivery and Budget Implementation Plan and performance agreements.
Review and comment on relevance of indicators to ensure they are measureable and relate to services performed by the municipality and its entities.
Reviews compliance with in-year reporting requirements.
Review the quarterly performance reports submitted by internal audit.
Review and comment on the municipality’s and entities annual reports within the stipulated timeframes. Review and comment on the municipality's performance management system and make recommendations for its improvement.
Meet Quarterly during the financial year.
Review the municipality’s Performance Monitoring and Evaluation system and make recommendations to EXCO & Council.
Audit Committee roles in PMS
Review Annual report in terms of matters raised by AG
including Performance management and seek
accountability and responsibility in developing their
report to Council.
MPAC roles in developing PMS
KPIs not meeting the ‘SMART’ principle.
Subject process for translating achievement of SDBIP projects to KPI achievement.
Evidence not submitted for audit.
Inadequate evidence (sufficiency, relevance, accuracy).
Oversight of changes/deletions of KPIs during Midterm.
Challenges
31
Areas of Improvement & Learnings
Engagement of DCMs and relevant clusters on audit outcomes
Monthly Action tracking as part of cluster meetings; and quarterly Self Assessment outcome prior to audit
Quarterly business Performance presentations by Clusters and Units to A BUSINESS PERFORMANCE meeting and reporting to CM
Engagement with PME throughout audit process
AG liaisons on AOPI issues, scope as well as reliance work
“I DO RIGHT- EVEN
WHEN NOBODY IS
WATCHING”
An Anti Fraud and Corruption pledge by: The Premier and The Mayor –ETM
SETTING THE TONE 2nd Line of Defence parties 3rd Line of defence SYNERGY = COHESIVE
KNIT TEAM
o
1 2 3
Political Leadership
WORK – admin. Leadership
GOOD GOVERNNACE = SUSTAINABLE SERVICE DELIVERY (EEEE’S)
We belong, We care and We serve
Integrated Government
We all have a role to play !!!