Auditing of Performance

1
Auditing of Performance

• A conceptual discussion

2
Objectives

• To demonstrate and discuss the differences
  between auditing of performance information and
  performance auditing
• Roles and responsibilities
• Conceptual differences
• Mandate and methodology
• Skills requirements

3
External auditing in public sector
Why a separate approach?
Performance Auditing
Regularity Auditing

• Audit of financial statements in annual report
• Audit of compliance with laws and regulations
• Audit of performance information in annual report

Evaluate the economic, efficient and effective
utilisation of resources and/or impact of spending

• Confirm credibility of information in annual
  report (financial and performance information)
  against frameworks established by NT
• Entity level evaluation

• Evaluation of impact/outcomes of spending over
  time at project, programme or strategic goal
  level against best practices, norms and standards
  and public interest
• Mostly a transversal evaluation, which could
  cover all three tiers of government and related
  public entities

4
Roles and responsibilities
Framework development
Legislatures / Executive
Policy development
FORESIGHT
Strategy development
AOPI
Perf. Aud
External Audit
INSIGHT
Root causes
Annual evaluation of achievement of milestones
Evaluation of impact over time
5
Conceptual differences






SPECIALISTS (NATIONAL TREASURY, STATS SA)
Reporting framework
National indicators / industry norms
CABINET AND LEGISLATURE
Policy development, strategic planning and budget
EXECUTIVE AUTHORITY
Implementation, monitoring, corrective action and
reporting on performance information
Review and confirm validity and completeness
(assertions)
Evaluate the 3 Es at a project/programme level
EXTERNAL AUDIT
Compliance (has this happened), done by
regularity auditor
Expert analysis (qualitative), often done by
subject matter experts
AOPI
Performance Audit
Report at entity level / transversally (by
segment/cluster and across tiers of government
and related public entities)
Report at entity level
6
Mandate and methodology

• AOPI
• Mandate Must be done annually (PAA)
• Validation of performance information against
  supporting records
• External quality assurance IRBA

• Performance audit
• Mandate May be done (PAA)
• Evaluation of 3 Es comparison of
  outcomes/progress towards goals against norms and
  benchmarks
• External quality assurance International peer
  reviews by other SAIs

7
Mandate and methodology (continued)

• AOPI
• Auditor evaluates the annual performance report
  contained in the annual report.
• This report focuses on WHAT the entity achieved
  during the year, compared to the original
  objectives it set during the budget process for
  that year.
• Objective build 100 houses in year 1
• Annual Perf. Report built 90 houses in year 1
• Aud. Report confirm that 90 houses, as reported,
  were built in year 1

• Performance audit
• Auditor evaluate the utilisation of resources and
  the IMPACT of what was done over a period of
  time, compared to the mandate / strategy of the
  entity involved
• The annual financial and/or performance reports
  may inform aspects of the evaluation, but the
  focus in much wider than just the annual report
• Mandate / strategy provide the housing needs of
  a community, creating safe communities in 5 years
  time
• Audit report confirm that houses were built with
  best possible utilisation of resources
  (efficiency and economy) and that impact
  (effectiveness) as envisaged in long term
  strategy was achieved (or that efforts are still
  on track)

8
Skills requirement

• AOPI
• Done by regularity auditor
• Same skills as required for the evaluation of
  financial information

• Performance audit
• Done using subject matter experts
• Expert analysis and evaluation, different to the
  annual process of evaluating financial and
  performance information as part of regularity
  audit

9
Audit of performance information

• An annual audit of reported actual performance
  against predetermined objectives is an integral
  part of the annual regularity audit (referred to
  as AOPI)
• All public sector entities to report performance
  information in accountability documents (e.g.
  annual reports, that cover financial statements
  and performance reports) to enable Parliament,
  provincial legislatures, municipal councils and
  public to track government performance and to
  hold it accountable.
• Although performance info is annually reported,
  the performance information process continues
  through the planning, budgeting, implementation
  and reporting stages.

10
Performance Auditing

• An independent evaluation of the management
  measures instituted to ensure the economical
  procurement and efficient and effective
  utilisation of resources
• Economical to procure resources of the right
  quality in the right quantities at the right time
  and place at the lowest possible cost
• Efficient to achieve the optimal relationship
  between the output of goods, services or results
  and the resources used to produce them
• Effective to achieve policy objectives,
  operational goals and other intended effects
• During a performance audit the auditor will focus
  on the business processes and specific measures,
  aimed at improving the economy, efficiency and
  effectiveness of the entities activities.
• A performance audit can focus on the entity as a
  whole or a programme or an activity or a project
• The scope of performance audits are not bound to
  a financial year
• Performance audit focus areas are mostly
  addressing transversal issues across government,
  but can also focus on entity specific issues

11
Performance Auditing (continued)

• Ways in which a performance audit can be
  initiated can include international trends and
  focus, research on state of nation address,
  parliamentary interaction and specific requests
• Performance audit reports focus on factual
  findings, leading to AG recommendations (insight)
• Performance audit reports are reported and tabled
  separately from regularity reports to Parliament
  / Provincial Legislatures/ Councils
• Performance audits include interactions with
  expert groups, similar organisations and
  practices outside the public sector