PERFORMANCE MONITORING AND EVALUATION

LESSONS LEARNT FROM THE AUDIT OF PRE-DETERMINED

OBJECTIVES

What is a clean audit?

Legal Framework

Audit of Pre-determined objectives

Common Findings

Root Causes

Lessons Learnt

CONTENT

A clean audit (unqualified with no findings) relates only to

three aspects:

The financial statements are free from material

misstatements

There are no material findings on compliance

with key laws and regulations

There are no material findings on the annual

performance report

What is a clean audit?

Legislative requirements and framework

Municipal Finance Management Act (MFMA)

Municipal Systems Act (MSA)

MFMA Circulars

Municipal planning and performance management regulations, 2001-

Municipal performance regulations for municipal managers and managers directly reporting to municipal managers, 2006-

NT Framework for managing programme performance information – Issued by NT 2007

AUDIT FUNCTIONS PERFORMED in terms of the Public Audit Act 2004 (extract)

Financial and performance management is audited as part of the annual audit process. Accordingly, the auditor's report reflects an opinion or material findings on the following:

Reported information on performance against

predetermined objectives

Internal control deficiencies that resulted in findings on

the reported information on performance against

predetermined objectives

Main Criteria

Sub Criteria Definition

Usefulness

MeasurabilityIndicators are well defined and verifiable. Targets are specific, measurable and time bound

RelevanceIndicators relate logically and directly to the entity mandate and realisation

of strategic goals and objectives

ConsistencyObjectives, indicators and targets are

consistent between planning and reporting documents

Audit criteria (derived from performance management

and reporting framework)

Main Criteria

Sub Criteria Definition

Reliability

ValidityActual performance reported has occurred

and pertains to the entity

AccuracyAmounts, numbers and other data relating to

actual performance reported have been recorded and reported appropriately

CompletenessAll actual results and events that should have

been recorded have been included in the annual performance reports

Compliance with legislative requirements

ExistenceObjectives, indicators and targets must be

predetermined and performance information must be reported against them

Timelines

The annual performance report, together with the annual financial statements; must be

submitted for audit purposes to the auditors, within two months after the financial year end

Presentation

Performance information must be presented using the National Treasury guidelines.

Actual performance information in tables and other information included in the annual

report must be consistent.

Material differences between actual and planned performance must be explained

Main Criteria

Sub Criteria Definition

Common Findings

Objectives, indicators and targets not consistent between plan and annual performance report

Reasons for variances between planned and actual performance is not included

Logical link between objectives, indicators and targets do not exist

Changes to planned objectives, indicators and targets are not disclosed

Non-compliance to legislation

Non-timely submission of annual performance report

Indicators are not well defined

Evidence is not verifiable

Targets are not measurable

Audit findings are material – could lead to Qualified Audit

Timely reporting (Source :Cetera Financial Group)

Common Findings

Lack of effective, efficient and transparent systems and internal control to provide sufficient, appropriate audit evidence to substantiate reported performance information

No supporting documents or insufficient supporting documents to support reported targets (validity)

The amounts, numbers and other data related to the actual targets did not agree to the supporting documents provided (accuracy)

The report had missing information, not everything related to the actual results and events were recorded (completeness)

Annual performance report was provided too late to conduct any audit work on reported information

Root causes

Lack of accountability and consequences for actions/inaction

Lack of monitoring by leadership

Inadequate formal planning for Predetermined Objectives

Misalignment between Strategy and Performance Reporting

Organisational structures not aligned

Structures not capacitated

Predetermined reporting not included in Performance Agreements

Poorly defined roles and responsibilities

Inadequate internal audit testing systems and data

Ineffective audit committee oversight

Reporting Tools(Source :Cetera Financial Group)

Lessons Learnt

• To ensure full compliance to the Legislative requirements for performance monitoring, evaluation and reporting

Adequately resourced Performance

Monitoring and Evaluation function

• that provides assurance over the quality of the quarterly and annual performance reports

Adequately resourced and functioning

internal audit unit, audit committee and

MPAC

• Performance Information must be verified by Management in the first instance, then by PME (through a Quality Assurance Process), prior to submission to Internal Audit

3 lines of defence

Lessons Learnt

• must be developed, implemented and reviewed annually.

Policies, procedures and frameworks

• must be SMART Performance

targets

• Performance indicators/Data Elements must be well defined and verifiable.

Technical Indicator Definition

• must be developed for KPI’s and must include monthly and quarterly targets.

Project Plans

• must be alignedIDP/SDBIP/ Budget

and Scorecard

S – Specific

M –measurable

A –Attainable/Achievable

R – Relevant

T - Timely

SMART Targets = SMART information

Lessons Learnt

• must be monitored and evaluated

Planned and actual performance and

budgeted versus actual expenditure

• should be developed, documented and approved by municipal manager.

Formal processes and systems for the collection, collation, verification and

storing of actual performance information

• to support reported results, which are reviewed monthly and audited by the internal auditors.

Portfolios of evidence must be maintained by

management

Lessons Learnt

• must be maintained, with definite actions to address audit findings

An audit action plan based on

the audit findings of the previous financial year

• must be convened to monitor performance, reasons for non-performance and measures to improve.

Quarterly performance

review sessions

Lessons Learnt

• must be thorough and timely.Preparation for the AG’s

Audit

• against performance information reportedAnnual Report check

• must be checked and confirmed to AFSFinancial KPI’s

• must be checked prior to the AG’s visitQuality of Evidence

• must take place prior to the AG audit.Internal Audit of

performance information

• must be interrogated to ensure validity.Reasons for variance and

measures to improve performance

THANK YOU