1 Integrated Risk Management: A Provincial Perspective Presentation by the Public Service Commission to the Portfolio Committee on Public Service and Administration Parliament, Cape Town 14 May 2003

2 Risk Management: Provincial Perspective First report on risk management practices in the public service The report provides an overview of the status of integrated risk management in the public service Methodology: cross departmental consultative workshops to determine status of risk management and raise awareness Workshops were done in partnership with the KZN Provincial Treasury.

3 Provincial Workshops Consultative workshops held in seven of the nine provinces in 2001: Eastern Cape Northern Cape Western Cape Mpumalanga Free State Limpopo Province KwaZuluNatal

4 Workshop Focus Participation was focused on heads of department and senior managers with the view to: Establish awareness and commitment at senior level; and Ensure that the utilisation of risk management is cascaded down in departments by means of leadership initiatives 224 senior and middle managers attended Attendance in the majority of cases was unsatisfactory.

5 Risk Management: Workshop Aims Promote awareness amongst senior managers on the use of risk management as part of daily activities to: improve service delivery and prevent fraud and corruption Determine the status application of risk management practices in provincial administrations.

6 Risk Management: Workshop Aims Identify systemic gaps regarding the application of risk management practices Provided officials with a theoretical framework of risk management.

7 Workshop Structure Provide a theoretical overview of the application of risk management principles and practices as it relates to integrated strategic and planning processes Provide participants with relevant material on best practices used elsewhere in the world.

8 Workshop Structure Provide understanding on the roles, responsibilities and relationships in the application of risk management Provide officials with an opportunity to gain experience from good practices elsewhere in the public service. Provide an opportunity to discuss relevant provincial barriers and reflect on “in house” experience and the level of institutionalisation.

9 Risk Management: Findings Formal Commitment to risk management processes exists at highest levels Awareness is high at the level of accounting officers and internal audit components due to legal imperatives of PFMA Awareness levels of risk management are in general low at all institutional levels Pockets of excellence exists in some provinces.

10 Implementation Barriers: Findings Limited integration between strategic planning processes and strategic risk assessment exercises The extent to which fraud prevention plans are based on risk assessment exercises is questionable in most departments The use of consultants to drive and implement risk management processes are prevalent in majority of provinces. The contents of the reports are not cascaded to lower level staff. Consequently the rationale for internal control measures within the risk management framework is not communicated down to supervisory levels.

11 Implementation Barriers: Findings 5 provinces have not repealed the Exchequer Act. Some of these arrangements are in conflict with the PFMA and it leads to confusion and uncertainty All provinces indicated a lack of capacity and resources to ensure effective “role out” of the learning experience to supervisory level Effective implementation of a risk management framework is hampered by the inability to provide Officials at operations level (9-12) with the required background information, knowledge, skills and tools to implement risk management.

12 Risk Management: Best Practice A Comprehensive PFMA compliance monitoring system was developed by the Eastern Cape Provincial Treasury by Sept 2001 when report was completed One area is fraud prevention Implementation Plans The level of compliance of each department is expressed in relation to the average of the province and stated aim of the Provincial Treasury The level at which questions on the completion, communication and implementation of the fraud prevention plan are addressed, is used as a basis for measurement.

13 Risk Management: Best Practice Best practice was developed and implemented in KZN and Western Cape specifically Western Cape (Shared Service Centre) developed a transversal control risk model for the province KZN developed a Provincial Internal Audit Act (2001). Internal Audit functions as a statutory body on the basis of being a shared service for the province.

14 Risk Management: Best Practice The organisational structure in KZN makes provision for separate Risk Management and Internal Audit Functions Internal Audit focus on preventative action and secondly on compliance auditing Risk management component is divided into two: High level specialist assisting departments with risk identification Fraud detection and recovery section Fourteen posts dedicated to this component

15 Risk Management: Regulatory Framework PFMA and Chapter Three of Treasury Guidelines: Responsibility for facilitating a risk assessment vests with the Accounting Officer with the view to determine the material risk to which the institution may be exposed to and to evaluate the strategy to manage that risk Relevant Treasury to be provided with a certificate by no later than 30 June 2001 indicating that a risk assessment wad done and a fraud prevention plan is operational.

16 Regulatory Framework: Continued Internal Audit Unit must prepare, in consultation with and for approval by the audit committee, a rolling three year strategic internal audit plan based on its assessment of risk for the organisation, having regard to its current operations, the proposed strategic plan and its risk management plan These Treasury regulations was an amendment on the 2000 version requiring a certificate by end March 2001.

17 Regulatory Framework: Compliance National Treasury conducted a survey in March 2001 to assess the level of compliance Two of the ten focus areas concentrated on the development of fraud prevention plans and the undertaking of risk assessments Data is for April 2001 The number of departments complying is expressed as a percentage of the departments in the province.

18 Compliance by Provincial Departments: April %80-90%50-80%20-50% Gauteng, KZN N West W Cape Limpopo NoneEastern Cape N Cape F State