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. 2

3. Topics to discuss 1. Background 2. Legislative requirements and framework for performance management and reporting 3. Audit process4. PFMA 2013-14 audit outcomes5. Roles and responsibilities 3

4. Background 4

5. Annual mandatory audits Financial statements Report on predetermined objectives Compliance with laws and regulations Discretionary audits Performance audits, e.g. infrastructure Audits performed by the AGSA 5

6. Clean administration – from annual audits Unqualified financial statements No findings on predetermined objectives No findings on compliance with laws and regulations 6

7. 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 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 Audit of predetermined objectives defined 7

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

9. Legislative requirements and framework for performance management and reporting 9

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

11. Performance planning, budgeting and reporting cycle 11

12. 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 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 Treasury Regulations issued in terms of the PFMA Treasury Regulations issued in terms of the PFMA Strategic planning and budgeting requirements 12

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

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. 14

15. Key performance accountability documents 1. Strategic/Corporate plan 2. Annual performance plan (APP) 3. Budget 4. Quarterly performance reports 5. Performance agreements 6. Annual performance report Consistent structures to facilitate understanding and accountability Enable linkage between plans and actual performance 15

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

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

18. Audit process 18

19.  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  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  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)  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) 2004-05 to 2008-092009-10 to 2014-15 AGSA strategy 19

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

21. Understand and test the design and implementation of the performance management systems, processes and relevant controls Understand and test the design and implementation of the performance management systems, processes and relevant controls 11 Test the measurability, relevance, presentation and consistency of planned and reported performance information 22 Conclude on the usefulness of the reported performance information for selected programmes or objectives 33 Conclude on the reliability of the reported performance for selected programmes or objectives Conclude on the reliability of the reported performance for selected programmes or objectives 55 Test the reported performance information against relevant source documentation to verify the validity, accuracy and completeness of reported performance information Test the reported performance information against relevant source documentation to verify the validity, accuracy and completeness of reported performance information 44 Audit approach 21

22. 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 Audit reporting – Management report 22

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

24. Audit outcomes PFMA 2013-14 24

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

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

27. PDO findings 27

28. Roles and responsibilities 28

29. 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 Roles and responsibilities : Ministers/MECsAccounting officer or head of an institution (assisted by chief information officer) Line managersOther officials To ensure that institutions under their control set up appropriate performance information systems Accountable for establishing and maintaining the systems to manage performance information Accountable for establishing and maintaining the performance information processes and systems within their areas of responsibility Responsible for capturing, collating and checking performance data relating to their activities 29

30. 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 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 Role of internal audit 30

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 31

32. THANK YOU 32