1. “Are Quarterly Performance Information Reviews adding Value to our municipalities or are just done for compliance? Follow-the money audit." Paledi Marota, IMFO SCAR Chaiperson Divisional Head :Performance Audit at Ekurhuleni Municipality. Institute of Municipal Finance Officers & Related Professions

2. LEGISLATIVE MANDATE 1. Municipal Finance Management Act No. 56 of 2003 (MFMA) Section 165 (2) (a), (b)(iv) of the MFMA requires that: “(2) The internal audit unit of a municipality or municipal entity must - (a) prepare a risk based audit plan and an internal audit program for each financial year; (b) advise the accounting officer and report to the audit committee on the implementation on the internal audit plan and matters relating to: (v)Performance Management” 2. Municipal System’s Act No. 32 of 2000 (MSA) Section 45 (a) of MSA requires that: “The results of performance measurements in terms of section 41(I)(c) must be audited-as part of the municipality’s internal auditing process.” Institute of Municipal Finance Officers & Related Professions

3. LEGISLATIVE MANDATE…. Continue 3. Municipal Planning and Performance Management Regulations of 2001 Section 14 (1) of MSA requires that: (c) A municipality’s internal auditors must - (i) on a continuous basis audit the performance measurements of the municipality; and (ii) submit quarterly reports on their audits to the municipal manager and the performance audit committee referred to in subregulation (2). Institute of Municipal Finance Officers & Related Professions

4. Problem Statement lack of integration of performance information structures and systems within existing management processes and systems Inadequate systems and documentation for identifying, collecting, collating, verifying, and storing performance information Lack of sufficient and appropriate source documentation to verify the accuracy and completeness of actual service delivery achievements against plans Institute of Municipal Finance Officers & Related Professions

5. Importance of doing AOPI It is a significant initiative to improve public sector reporting by providing council, other stakeholders and the public with better information on what municipal programs are accomplishing. Auditing performance information enables the auditor to provide assurance on whether performance reported against predetermined objectives is useful and reliable, based on predetermined criteria (Indicator protocol sheets and Source Data) Institute of Municipal Finance Officers & Related Professions

6. Common Performance Information findings Noncompliance with regulatory requirements Reported performance that is not reliable Mis-alignment between the approved SDBIP and the Quarterly Report No evidence provided or irrelevant evidence provided Target planned in numbers but reported in percentages or Hectas or Kilometers. Third party confirmations or physical verification results different from the reported information Institute of Municipal Finance Officers & Related Professions

7. Who needs this reports? Public/Communities Council/Board Executive Committee/Mayco Audit Committee Accounting officers Risk Management Auditor general Performance Management Specialist Management Potential Investors Institute of Municipal Finance Officers & Related Professions

8. How can we make them add value? As Internal Auditors we can make this audits add value to all the above stakeholders differently. Few highlighted as below: Communities: By confirming the reality of what they see and experience daily. Let’s stop being paper based auditors and go out to physically verify the projects which service providers and operations departments in our municipalities claims to have done in that quarter. (Website reports) Council/Board/ Audit Committee: Let’s provide factual and reliable quarterly performance reports to enhance their oversight role. Executive Committee/Mayco: To enhance their service delivery monitoring role they need our factual reports Institute of Municipal Finance Officers & Related Professions

9. How can we make them add value?.. Continue Accounting officers/ Risk Management/Management: Understand the environment of the municipality, know the council’s strategy and understand the performance measures for the year under review. Auditor general: They are not in the Municipality 12 months of the year and they only audit on sample basis. Your reliable reports for all the quarters is critical for their planning process and selection criteria. Performance Management Specialist: Internal Audit quarterly reports are their critical baselines for future planning. Potential Investors: All they need is assurance from an Independent party to confirm that the Municipality is doing well in creating a conducive economic environment for investors through Infrastructure services. Institute of Municipal Finance Officers & Related Professions

10. Where do we go wrong? Municipal audit committee not reporting to Council on a quarterly basis on the performance management. Audit Committee which doesn’t understand the role of Performance Auditors and their reports Auditors not being objective to safeguard their careers Auditors not performing Target Setting Reviews annually Not advising management and Council on the interpretation of risk management process to ensure that it is aligned to IDP, Budget and SDBIP. Lack of skills and Capacity Oversight Committees not supportive of the Internal Audit work on Audit of performance information Management’s lack of commitment on the Performance Information reported by their offices Institute of Municipal Finance Officers & Related Professions

11. Where do we go wrong?... Continue Inadequate management processes, Noncompliance with internal policies and procedures or inadequate internal performance management operating procedures, Deficiencies in key controls, and Lack or limited review of performance management processes and reporting by internal audit. Institute of Municipal Finance Officers & Related Professions

12. What must change from now? “The problem is never how to get new, innovative thoughts into your mind, but how to get the old ones out”. By unknown KING III Code on Good Corporate Governance The key principles given prominence; Good governance, with a greater focus on effective leadership and the ability of this leadership to determine or define strategy, provide direction and maintain an internal environment conductive to ethics and values that essentially influence the beliefs and practices of the institution with regard to effective, efficient and sustainable service delivery performance ". This audit should no longer be confused with performance auditing, which is defined as an independent audit of the management measures municipalities institute to ensure economical procurement and efficient and effective utilization of resources. Institute of Municipal Finance Officers & Related Professions

13. What must change from now?.... Continue Promoting appropriate ethics and values within the organization Providing assurance on whether organizational performance management and accountability is adhered. Communicating weaknesses and challenges on performance information to the appropriate areas of the organization Providing consultation services where the organization lacks capacity and the weaknesses remain not addressed for a long time. Development of the Risk Based internal audit Plan which is aligned to Municipality’s Strategy. Institute of Municipal Finance Officers & Related Professions

14. WAY FORWARD

15. What type of audits to do? To address the problem statements highlighted above there is a need for the following Performance Information Reviews to be done: Target setting review Mid-year adjustments Review Quarterly SDBIP Report Review Annual Report Review Performance Management System Audit (Effectiveness) Institute of Municipal Finance Officers & Related Professions

16. The relevant planning approach to follow: CREAM Clear: indicators should be precise Relevant: appropriate to the subject and evaluation Economic: can be obtained at a reasonable cost Adequate: the ability to provide sufficient information on performance Monitorable: easily monitored, and amenable to independent validation For Targets SMART principle is key which is: Specific, Measurable, Achievable, Realistic and Time bound. To set a specific goal you must answer the six “W” questions: *Who: Who is involved? *What: What do I want to accomplish? *Where: Identify a location. *When: Establish a time frame. *Which: Identify requirements and constraints. *Why: Specific reasons, purpose or benefits of accomplishing the goal. Institute of Municipal Finance Officers & Related Professions

17. The relevant audit approach to follow: Understanding and testing of controls related to the management of performance information. Understanding and testing of controls relevant to collecting, monitoring and reporting performance information. Evaluate: Existence of performance information Consistency of performance information between IDP, SDBIP & quarterly report Presentation of the performance report Compare reported performance information to relevant source documentation and conduct procedures to ensure verifiability, accuracy and completeness of reported performance information. Institute of Municipal Finance Officers & Related Professions

18. Conclusion The Power of Measuring Results: If you do not measure results, you can not tell success from failure If you can not see success, you can not learn from it If you can not recognize failure, you cannot correct it If you can demonstrate results, you can win public support “Adapted from Osborne and Gaebler, 1992, Reinventing Government” “Our role is to authenticate the reported performance” Institute of Municipal Finance Officers & Related Professions

19. Thank You For Your Attention Institute of Municipal Finance Officers & Related Professions