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PERFORMANCE AUDIT Presentation to

SADCOPAC

Content

• Who is AFROSAI-E?• What is Performance Audit• AFROSAI-E Toolkit on Meeting PAC’s

expectations for PA• Risks for Expectation Gaps between SAI & PAC• Dealing with Expectation Gaps• Selecting Appropriate audit topics & Problems• Audit Objectives in relation to 3Es• Characteristics of a good report

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Who is AFROSAI-E?

• English-speaking subgroup of AFROSAI• 24 members, including 2 Portuguese speaking• Funded by members and donors• Governance structure

– Statutes and Regulations– Governing Board and committees– Executive secretariat– Annual reports

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Historical Background to Performance Auditing

• PA goes back to the 1960’s• Some of the pioneering countries were USA,

Canada and Sweden • Introduced in the AFROSAI-E/SADCOSAI

regions in the 1990s• PA is now used in many countries all over the

world• In the beginning PA was linked to programme

budgeting

B.2.3

Performance Auditing

• PA has a special purpose• PA deals with many different

problems• PA differs around the world but the

core concepts are the same• PA has many names -VFM, 3Es,

effectiveness audit, Management audit, Operational etc

B.2.4

Definition of performance auditing

• "Performance auditing is an audit of the economy, efficiency and effectiveness with which the audited body uses its resources to achieve its goals."

• Or simpler:

"Are they doing the right thing in the best way?“

B.2.5

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The input-output model

2:4

1 (2)

Effectiveness

Goals

Activities(what

goes on in the org.)Activities(what

goes on in the org.)Input Output Effects

EconomyEfficiency

Effectiveness

B.3.7

Purpose of performance auditing

• Encourage accountability and best practices in Government operations and quasi-government organisations;

• Provide Parliament with:– Objective assessment of the performance of

public/Government activities;– Providing information for policy decisions

• Means of change and development within Government operations and quasi-government organisations

AFROSAI-E Toolkit for SAI’s on communication and reporting in line

with the expectation of PACs

TOOLKIT

• Module 1. Introduction to the Toolkit• Module 2. SAI/PAC Communication

Strategy• Module 3. Meeting PAC’s expectations

for regularity audit reports• Module 4. Meeting PAC’s expectations

for performance audit reports• Training material

AFROSAI-E TOOLKIT ON PAMODULE 4

• Risks for Expectation Gaps• Communication with PAC• Management of Perfomance Audit• Writing Performance audit reports

Risks for Expectation GapsExpectation Gap Challenges How SAIs can improve

Few PA reports Lack of resources -Seek support from PAC-Prioritise PA audits

Reports not easy to grasp

Lack of capacity Improve report writing

Audit problems, findings & conclusions not relevant

SAI capacity in audit selection not adequate

Discuss topics with PACBuild capacity of auditors

Recommendations not practical/relevant

SAIs taking role of management

Write smart recommendations

Audits take too long and are too expensive

Lack of capacityDelays in getting information

Improve operational efficiency

PA reports not submitted to PAC

Mandate might be unclear

Seek support to revise mandate

PAC not deliberating on PA reports

Lack of time or capacity Discuss with PACSelect appropriate areasWrite better reports

Selection of Topics

SAIs should be strategic in the selection of PA topics. SAIs

should consider :• importance of area or topics to the Government

and the PAC, and ultimately the citizens• the importance of the preliminary identified performance

problems in the area, • the potential for improvements in the area as a result of

the audit, and • the capacity of the SAI to undertake such audits. This

should result in a programme of audits that are both attainable and relevant.

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Recommended Criteria for Selection

The selection should take into account:• The main government ministries / departments• Areas of high spending• Major risks to value for money• Topical subjects• Matters of strategic performance to auditees

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General questions SAIs should ask themselves about possible audits topics

• What issues are of most concern to key stakeholders?

• How can we expect the audit to contribute to change and improvement in the area?

• Do we have the technical expertise to investigate this issue?

• Can we break this subject down into manageable portions to maximise the benefits from our limited resources?

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General questions SAIs should ask themselves about possible audits topics(cont)

• Do we need external support to carry out the audit, and if so how do we obtain and/or finance it?

• What are the risks to the reputation of the SAI if it does not examine and report on this subject?

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DEVELOPING AUDIT OBJECTIVES

• Before starting the main study, it is important to define the audit objectives, the scope.

• Audit objectives relate to the reasons for conducting the audit and;

• Should be established early in the execution process to assist in identifying the matters to be audited and reported on.

 

DEVELOPING AUDIT OBJECTIVES

• In determining objectives, the audit team must take into account the roles and responsibilities of the SAI

• Also the expected net impact of the audit as defined in the strategic audit plan.

•  The audit objectives and scope are interrelated and should be considered together.

AUDIT OBJECTIVES AND SCOPE

• The audit objectives and scope are interrelated and should be considered together.

•  The scope defines the boundary of the audit.

• It addresses such things as specific questions to be asked, the type of study to be conducted and the character of the investigation.

AUDIT OBJECTIVES AND SCOPE• The scope of an audit is determined by answering the

following:• What? What specific questions or hypotheses are to be

examined?• What kind of study seems to be appropriate?• Who? Who are the key players involved and the

auditee(s)?• Where? Are there limitations in the number of locations

to be covered?• When? Are there limitations on the time frame to be

covered?

AUDIT OBJECTIVES IN RELATION TO THE 3Es

AUDIT OBJECTIVES - ECONOMY

Objectives of economy Risks to sound financial management

Issues to be addressed in audit

Keeping the costs low to achieve given objectives

Waste

Overpayments

Whether acquisitions were of appropriate type, quality and amount at minimum cost

Whether audited entity manages its resources with a view to minimizing outlay.

Whether audited entity design or implementation were done in a way which results in lower costs.

AUDIT OBJECTIVES - EFFICIENCY

Objectives of efficiency Risks to sound financial management

Issues to be addressed in audit

Managing the most of available resources to maximise productivity

Resources used do not lead to desired outputs

Non-optimal input/output ratios

Slow implementation of intervention

Whether outputs or results have been produced cost effectively.

Whether they are any avoidable bottlenecks or unnecessary overlapping.

AUDIT OBJECTIVES - EFFECTIVENESS

Objectives of effectiveness

Risks to sound financial management

Issues to be addressed in audit

Achieving the stipulated aims or objectives

Faulty policy design

Management failures

Management not prioritising the achievement of objectives

Whether the interventions had clear and positive results

PERFORMANCE AUDIT REPORT

CHARACTERISTICS OF A GOOD REPORT

– Address an important topic within the mandate, related to 3Es

– Present an appropriate audit design to efficiently collect sufficient evidence

– Give the reader an appropriate understanding of the organisations, systems and processes subject to audit and how they are expected to function

CHARACTERISTICS OF A GOOD REPORT (cont.)

• Present complete, reasonable, sufficient, relevant, valid, reliable, accurate, objective and logical audit evidence to satisfy the audit objective,

• Present reasonable conclusions • Add value, improve the knowledge,

highlights improvements needed

CHARACTERISTICS OF A GOOD REPORT (cont.)

– Be balanced and fair in tone and content, convincing, constructive, reader-friendly

– Be well structured, with focus on main findings – Include graphics

WAY FORWARD WITH THE PERFORMANCE AUDIT TOOLKIT

WAY FORWARD

• Training of Regional Champions– October 2012

• Workshops at Country Level for AG & PAC – (CCAF involvement)

THANK YOU