presentation title imfo audit & risk indaba 2015 20 – 22april 2015: olive convention centre,...

PRESENTATION TITLE

IMFO Audit & Risk Indaba 201520 – 22April 2015: Olive Convention Centre, Durban

Institute of Municipal Finance Officers & Related Professions

THE END IN MIND

ABC of Clean Administration Back to basics through Performance Management service:

Comprehensive performance management system towards clean administration.


Presentation Outline

• The key question

• The end in mind

• Performance Management

• How to achieve clean administration through comprehensive performance management


THE KEY QUESTION

Do we know what must be managed and how it must be managed in order to achieve

clean administration?


THE END IN MIND…..

• Stephen Covey: The 7 habits of highly effective people-

Always start with the end in mind.

• In the organizational environment today we find a multitude of inter related concepts and processes. For example:

Back to basics

Clean audit and clean administration

SDBIP/IDP



As an organisation a key step is therefore to:

• analyse the various initiatives;

• identify required outcomes;

• identify communalities;

• design a focused strategy that would not only seek to achieve the required outcomes but also that would seek to address transversal similar outcomes with a single process.


What is Clean Administration ?


Clean audit = clean administration. However clean administration is the more correct version as it places the emphasis at the right place. Clean Audit =The financial statements are free from material misstatements (in other words, a financially unqualified audit opinion) and there are no material findings on reporting on performance objectives or non-compliance with legislation.

Clean Audit and Clean Administration is underpinned by 3 key drivers:LeadershipFinancial and Performance ManagementGovernance


What is Back to Basics?


Back to basics approach =

Serving Our Communities Better!=

To build a responsive, caring and accountable local government.

Back to Basics is underpinned by 5 building blocks:

•Putting people first Put people and their concerns first and ensure constant contact with communities through effective public participation platforms.




•Delivering basic services Create conditions for decent living by consistently delivering municipal services to the right quality and standard. (Planning, delivery, maintenance, upkeep, budget, no failures - urgent restoration).

•Governance Be well governed and demonstrate good governance and administration cut wastage, spend public funds prudently, hire competent staff, ensure transparency and accountability.

•Sound financial management Ensure sound financial management and accounting, and prudently manage resources so as to sustainably deliver services(EEE).




•Building capacity

Build and maintain sound institutional and administrative capabilities administered and managed by dedicated and skilled personnel at all levels.

“The primary problem we face in the local government system is that we don’t recognise and reward good performance adequately, nor are there sufficient consequences for under-performance.

We will therefore institutionalise a performance management system to effect the changes that we require in the system. We will develop and finalize a set of indicators as per the pillars of the Back-to Basics approach”


Key Performance Areas?


1. Basic Service Delivery 2. Local Economic development 3. Governance and Public Participation 4. Municipal Transformation and Organizational Development 5. Municipal Financial Viability and Management


What is Performance Management

PERFORMANCE MANAGEMENT- THE TOOL

Performance management (PM) includes activities which ensure that goals are consistently being met in an effective and efficient manner. Performance management can focus on the performance of an organization, a department, employee, or even the processes to build a product or service, as well as many other areas.

PM is also known as a process by which organizations ALIGN their resources, systems and EMPLOYEES to strategic objectives and priorities.


http://en.wikipedia.org/wiki/Action_(philosophy)

http://en.wikipedia.org/wiki/Goal

http://en.wikipedia.org/wiki/Performance

http://en.wikipedia.org/wiki/Management

http://en.wikipedia.org/wiki/Organization

http://en.wiktionary.org/wiki/department

http://en.wikipedia.org/wiki/Employee

http://en.wikipedia.org/wiki/Performance_management

http://en.wikipedia.org/wiki/Performance_management

What is Comprehensive Performance Management

PERFORMANCE MANAGEMENT…..

•Performance is measured at all levels in the organisational, including the overall performance of the organisation and the performance of employees.

•The institution measures performance in all required areas.


The Performance Management Cycle


•Performance Planning

•Performance Measuring and Monitoring •Performance Evaluation

•Performance Reporting

•Performance Auditing/Review


The Legislative Environment


•The Constitution of the Republic Of south Africa (Act 108 of 1996) •Municipal Systems Act, 2000 •The Municipal Finance Management Act •Municipal Planning and Performance Management Regulations, 2001 •Municipal Performance Regulations for Municipal Managers and Managers directly accountable to Municipal Managers, 2006 •Municipal Structures Act of 1998


What are the Challenges…..RISKS?

PERFORMANCE MANAGEMENT

•Challenge 1 Lack of alignment

The first challenge is the lack of alignment due to various organisational processes being created in isolation. The link between Strategy development, budgeting and operational planning is developed by different groups of people with different frameworks being used. The performance management system lacks alignment between individual performance, departmental performance and organisational delivery and so all systems default back to financial measurements.


What are the Challenges….RISKS?


•Challenge 2 Lack of Measurements

The second challenge happens at various levels of the organisation in that poor measures are developed, in many cases targets are set but no relevant measure is put in place. In other cases no data can be collected or is kept as evidence to track performance.

•Challenge 3 Leadership and Management commitmentThe Leadership and Management challenge has a huge impact on integrating and aligning a management system to deliver a comprehensive performance management system. The commitment and understanding of leadership and management of the requirements for achieving a workable performance system is critical to performance success.




•Challenge 4 Managing of the performance system

Managing a performance system in an organisation requires a disciplined framework; it requires the organisation to work off one master plan broken down into relevant parts and areas of responsibility. The management responsibility at various levels needs to understand the contracting, measurement development and appraisal process very well and apply it consistently. Secondly management needs to appreciate that performance management is not an event but something that is managed daily but recorded and reported at certain times through reviews and appraisals.




•Challenge 5 Managing poor performance

The management of poor performance is normally a reactive action, but in many cases it is delayed and therefore turns into a discussion that is difficult to make relevant. Another reason poor performance is not managed on time is the lack of valid measurements and the collection of required evidence and measurement data.


Understanding

HOW TO ACHIEVE CLEAN AMINISTRATION THROUGH COMPREHENSIVE PERFORMANCE MANAGEMENT

•As a Performance Management Practitioner you need to have a basic understanding of clean administration.

•There are 2 critical outcomes to Clean Administration:

Attaining Clean Administration; and

Sustaining Clean Administration.

•Each organisation must have an assessment as to where they are holistically as an organisation as well as at the individual process level namely Financial Reporting, Performance Reporting and Compliance.


Maturity Levels

HOW TO ACHIEVE CLEAN AMINISTRATION THROUGH COMPREHENSIVE PERFORMANCE MANAGEMENT…..

•Level 1 - Initial (Chaotic)

It is characteristic of processes at this level that they are (typically) undocumented and in a state of dynamic change, tending to be driven in an ad hoc, uncontrolled and reactive manner by users or events. This provides a chaotic or unstable environment for the processes.

•Level 2 - Repeatable

It is characteristic of processes at this level that some processes are repeatable, possibly with consistent results. Process discipline is unlikely to be rigorous, but where it exists it may help to ensure that existing processes are maintained during times of stress


Maturity Levels.....


•Level 3 - Defined

It is characteristic of processes at this level that there are sets of defined and documented standard processes established and subject to some degree of improvement over time. These standard processes are in place (i.e., they are the AS-IS processes) and used to establish consistency of process performance across the organization.

•Level 4 - Managed

It is characteristic of processes at this level that, using process metrics, management can effectively control the AS-IS process. In particular, management can identify ways to adjust and adapt the process to particular projects without measurable losses of quality or deviations from specifications. Process Capability is established from this level.


http://en.wikipedia.org/wiki/Id_est

Maturity Levels.....


•Level 5 - Optimizing

It is a characteristic of processes at this level that the focus is on continually improving process performance through both incremental and innovative technological changes/improvements


The Process

HOW TO ACHIEVE CLEAN AMINISTRATION THROUGH COMPREHENSIVE PERFORMANCE MANAGEMENT….

•Clean administration must seen as a key performance area and strategic goal/objective.

•KPIs must be set for the achievement of this goal/objective eg Clean Audit Report.

•The current baseline must be determined eg Qualified Audit Report with matters of emphasis.

•The interventions required must be documented.

•The responsibility for the interventions must be documented.

•The timeframes must be specified.Institute of Municipal Finance Officers & Related Professions

The Process....


•In addition:

A comprehensive review must be performed of the current status quo and maturity level of the organisation. This must include a risk and control assessment.

O= Objective

R= Risk

C= Control

A= Assurance


The Process....


The lines of defence must be identified.

•First Line: Policies and Procedures and Operational Management•Second Line: Risk Management and Compliance Functions.•Third Line: Internal Audit, Audit Committee, Oversight Functions, External Audit

The consequences for good and inadequate performance must be identified. This is applicable to both the organisational as well as individual level.


The Assessment Areas and the TOOL therefore


What are some of the common failures in not achieving clean administration:

•Having no plan for achieving clean administration.

•Having a plan that is not adequate. (We may or may not know this.)

•Falling into the complacency trap. The AGSA did not have a finding in this area and therefore there is no problem. (A regression may be just around the corner.)

•Not implementing and/or monitoring the process.

•A lack of real support and will by those entrusted with leadership.Institute of Municipal Finance Officers & Related Professions



Would it not be nice if we have a tool that gives us all the answers:Example 1: Organisational Level

The above is an extract from the Dashboard Report: Drivers of Internal Control. (AGSA document)


Develop and monitor the implementation of action plans to address internal control deficiencies

·SCOPA/ Oversight resolutions have been substantially implemented.·The entity has a plan for addressing internal and external audit findings, and adherence to the plan is monitored on a [monthly/ bi-monthly/ quarterly] basis by the appropriate level of management.·The plan for addressing internal and external audit findings is credible, with actions addressing root causes. It sets clear time frames and assigns responsibilities appropriately.



Example 2: Organisational Level


Implement appropriate risk management activities to ensure that regular risk assessments, including consideration of IT risks and fraud prevention, are conducted and that a risk strategy to address the risks is developed and monitored

· The accounting [officer/authority] ensures that a risk assessment is conducted in accordance with legislated requirements on a [monthly/ bi-monthly/ quarterly/ six-monthly/ annual] basis to identify emerging risks of the entity.· The risk assessment is comprehensive and covers all critical areas.

· The risk assessment is used to identify deficiencies in internal controls, which are responded to in a timely manner.· Assessment of the controls in place is conducted on a [monthly/ bi-monthly/ quarterly/ six-monthly/ annual] basis to prevent and detect fraud and appropriately address any significant deficiencies.· Instances of fraud are appropriately responded to when identified.

· All staff members are made aware of and adhere to the fraud prevention plan.



•It provides a comprehensive baseline list of control activities that should be present in a Department/ Municipality/Public Entity;

•It provides for a focused approach to internal controls by the Department/ Municipality/Public Entity and assurance providers.

•It provides for having a sustainable and adequate control environment if applied correctly.




•The first step that could be taken is to analyse the required key controls as per the list and then in the specific organisational situation determine whether:the organisation has such controls in place; whether the controls is adequately described (documented);assigned to relevant officials; also where applicable if time/frequency lines for performance has been set; andMonitoring/review of performance and timelines has been set.

•It would also be essential to ensure that officials performing the controls know and understand the function/control that they are performing.




• Quality is understood by all to be a prerequisite and is embedded in the entity’s values.

•Implementation of a combined assurance methodology

Combined assurance is a best practice that is advocated amongst others by the King III Report on Corporate Governance and has been included in the revised (draft) Treasury Regulations.

>Assurance is the responsibility of everyone.




• Risk Management

Adequate Risk Management structures and budgets

Risks identified effectively managed and monitored.

Risk management and an effective internal control environment are not just to satisfy the AGSA, the Audit Committee and Internal Auditors, but are the essence of management in all its forms.


The Assessment Areas and the TOOL therefore- Organisational Level


Leadership•Establish a culture of honesty, ethical business practices and good governance

•Exercise oversight responsibility

•Ensure effective human resource practices

•Implement appropriate policies and procedures

•Approve and monitor the implementation of action plans to address internal control deficiencies

•Approve an appropriate information technology governance framework




Financial and performance management•Ensure proper record keeping of all transactions

•Maintain effective controls over daily and monthly processing and reconciling of transactions

•Produce regular, accurate and complete financial and performance (service delivery) reports

•Review and monitor compliance with applicable legislation

•Design and implement formal controls to mitigate information technology risks




Governance•Ensure that risks are periodically identified, assessed and effectively mitigated

•Maintain an adequately resourced and functioning internal audit unit

•Maintain an audit committee that performs its legislated duties and promote accountability and service delivery


The Assessment Areas and the TOOL therefore- Individual Level


•


UNDERSTANDSFor example: Official

who initiates an order Quality

Key Controls

Combined Assurance

Risk Management



“WE ARE WHAT WE REPEATEDLY DO. EXCELLENCE IS NOT AN ACT, IT IS A HABIT”

ARISTOTLE


Thank You!


presentation title imfo audit & risk indaba 2015 20 – 22april 2015: olive convention centre,...

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