1. REPOSITION AND MAXIMISING THE ASSURANCE ROLE
Vice President :Sidwell Mofokeng
GIMFO, CRP GARP(Intl), MIODSA, ACP(SA)

2. WE START, 9th AUDIT AND RISK INDABA 2018

3. LEGISLATIVE REQUIREMENTS AND FRAMEWORK
Municipal Systems Act , 2000 (Act No. 32 of 2000) (MSA)
Local Government: Municipal Planning and Performance management regulation (GNR 796 of 24 August , 2001)
Municipal Finance management Act, 2003 (Act no 58 of 2003)
Municipal Structures Act, 1998 (Act 117 of 1998)
National Treasury Framework for managing programme information (Issued by the National Treasury in May 2007
This represents the performance management and reporting framework against which the performance information should be managed and reported.
The principles and requirements set out in the framework are used as a basis for the audit.
In terms of the PFMA, it is a legislative requirement for accounting officers /accounting authorities to report annually on the performance of the entity against predetermined objectives [section 40(3)(a)].
The PSR, Part III B requires an executive authority to prepare a strategic plan for her or his department.
The framework (FMPPI) issued by National Treasury provides guidance on how to practically adhere to the legislative requirements and reporting on performance, specifically the setting of indicators and targets.
The framework for strategic plans and annual performance plans provides guidance on the development of strategic and annual performance plans. The guidance sets out the framework to align strategic and annual performance planning.
In terms of the audit standards an audit can only by conducted against an approved or recognised framework. The principles and requirements of the legislation and regulations above constitutes the framework for management and reporting on predetermined objectives which is used as the basis for the audit of performance information – similar to the financial reporting framework s such as GRAP which is used for purposes of audit of financial statements.

4. PERFORMANCE,BUDGETING AND REPORTING
To ensure effective and efficient organisational performance management all institutions should have this overall performance management process and system in place, as set out in the Framework for managing programme performance information as issued by the National Treasury.
The planning, budgeting and reporting cycle describes the relationship between these processes and emphasises that the executive is accountable to the relevant elected representative body for the entire process. The performance information process begins when policies are being developed, and continues through each of the planning, budgeting, implementation and reporting stages. Full and regular reports are required at each stage of the process.
Performance information should also be available to managers at each stage of the planning, budgeting and reporting cycle so that they can adopt a result-based approach to managing service delivery. This approach emphasises planning and managing with a focus on desired results, and managing inputs and activities to achieve these results.
It is important to manage performance as a process and not as an event.

5. KEY PERFOMANCE ACCOUNTABILITY DOCUMENTS
1. Integrated Development Plan (IDP) and Strategic Risk Register
2. Service Delivery Budget Implementation Plan (SDBIP)) and Operational Risk register
3. Budget/Adjustment Budget
4. Performance agreements (section 57 Managers)
5. In-year performance reports
Quarterly performance reports
6. Annual performance report
Consistent structures to facilitate understanding and accountability
Enable linkage between plans and actual performance
The key performance planning documents for departments /entities are the annual performance plan (APP), budget and strategic plan (SP).
The SP, APP and budget are forward-looking, set out what the department /entity intends to do and the funds it will raise and spend.
The annual report, on the other hand, is backward-looking as it reports on actual performance at the end of the financial year, reporting on how the APP and budget were implemented.
Annual reports must be aligned with the planning documents and department budget for the year reported on.
This means that the APP, budget, SP , quarterly performance reports and annual report should have similar and consistent structures to facilitate understanding and to enable the linkage between plans and actual performance

6. KEY PERFORMANCE INFORMATION CONCEPT

7. KEY PERFOMANCE INDICATOR
A key performance indicator(KPI) sets a performance measurement for an organisation, a business unit, or an employee which are periodically assess, monitored and evaluated;
KPI’s are commonly defined in a way its understandable, meaningful and measurable.

8. GOOD PERFORMANCE INDICATORS CRITERIA per NT FMPPI and ELM approved PMS Framework which the AG and Internal Audit uses for Audit Criteria
Reliable
Must be accurate enough for its intended use and respond to changes
Well defined
Clear, unambiguous definition so that data will be collected consistently and will be easy to understand and use
Verifiable
Possible to validate the processes and systems and records
Cost-effective
Usefulness of the indicator must justify the cost of collecting the data
Appropriate
Avoid unintended consequences and encourage mandated service delivery improved service levels
Relevant
Must relate logically and directly to an aspect of the institution's mandate
As per the NT Framework for managing programme performance information (FMPPI) , suitable indicators need to be specified to measure performance in relation to inputs, activities, outputs, outcomes and impacts.
A good performance indicator should be:
Reliable: the indicator should be accurate enough for its intended use and respond to changes in the level of performance.
Well defined: the indicator needs to have a clear, unambiguous definition so that data will be collected consistently, and be easy to understand and use.
Verifiable: it must be possible to validate the processes and systems that produce the indicator.
Cost-effective: the usefulness of the indicator must justify the cost of collecting the data.
Appropriate: the indicator must avoid unintended consequences and encourage service delivery improvements, and not give managers incentives to carry out activities simply to meet a particular target.
Relevant: the indicator must relate logically and directly to an aspect of the institution's mandate, and the realisation of strategic goals and objectives.
Based on the nature of the indicator, some of the characteristics may be more important.
Currently the indicators tend to be more of a quantitative nature than qualitative . Indicators should also include qualitative aspects .
In setting indicators, management also need to try and limit the number of indicators as it will impact the proper management and reporting thereof.
The guidance on “technical indicator descriptions’ contained in annexure E of the Framework for strategic plans and annual performance plans issued by National Treasury applicable to PFMA can be used in defining indicators.
For purpose of the audit we only focus on indicators being well defined and verifiable.

9. GOOD PERFORMANCE INDICATORS - MSA
Performance indicators selected should measure the inputs, activities, outputs, outcomes and impact.
Thus the development of indicators needs to be informed by 5 elements above.
Performance indicator selected should also measure the economy, efficiency, effectiveness and equity from data collected.
Economy refers to resource used- salaries, the cost of acquiring inputs at the lowest cost and at the right time. The method of producing outputs is economical – by comparison with similar products available in market
Efficiency, how productive inputs are translated into outputs (turn around time of the process). Refers to optimal level of processing
Effectiveness, relates to outputs and outcomes, how outputs result in achievement of desired outcomes. This can be measured over a period of time
Equality , relates to whether services are being provided impartially, fairly and equitably to the intended beneficiaries. It measure the extent to which the institution has achieved and been able to maintain equitable supply of comparable outputs across the demographic groups.

10. TYPICAL DIRECT INDICATORS per NT FMPPI
i) Cost or Price indicator are both important in determining the economy and efficiency of service delivery.
ii) Distribution indicators relate to the allocation of resources to deliver services and are critical to assessing equity across geographical areas, urban-rural divides or demographic categories. Such information could be presented using geographic information systems.

11. iii) Quantity indicators relate to the number of inputs, activities or outputs. Quantity indicators should be time-bound; e.g. the number of inputs available at a specific point in time, or the number of outputs produced over a specific time period. iv) Quality indicators reflect the quality of that which is being measured against predetermined standards. Such standards should reflect the norms and/ or sector practices while ensuring economy, efficiency and effectiveness. Standards could include legislated standards and/or industry codes.

12. v). Dates and time frame indicators reflect
v) Dates and time frame indicators reflect timeliness of service delivery. They include service frequency measures, lead/time period, response time, turnaround times, time frames for service delivery and timeliness of service delivery.

13. vi). Adequacy indicators reflect the quantity of input
vi) Adequacy indicators reflect the quantity of input or output relative to the need or demand – “is enough being done to address the problem.”
Accessibility indicators reflect the extent to which the intended beneficiaries are able to access services or outputs. Such indicators could include distances to service points, travelling time, waiting time, affordability, language, accommodation of the physically
challenged(quality provided vs recipient).

14. KEY PERFORMANCE TARGET
A performance target should be specific, measurable, achievable, realistic and time- targeted. (SMART)

15. SETTING OF PERFORMANCE TARGETS
MSA Regulation 12 (2) A performance target set in terms of sub-regulation (1) must-
(a) be practical and realistic;
(b) measure the efficiency, effectiveness, quality and
impact of the performance of the municipality,
administrative component, structure, body or person for
whom a target has been set; (c) be commensurate with available
resources;
(d) be commensurate with the municipality’s capacity;
and
(e) be consistent with the municipality’s development
priorities and objectives set out in its integrated
development plan.

16. SMART PERFOMANCE TARGETS per the FMPPI and Council approved PMS framework
Nature and required level of performance can be clearly identified
PECIFIC M
Required performance can be measured
EASURABLE A
Realistic given existing capacity and environment
CHIEVABLE R
Required performance is linked to achievement of goal
ELEVANT
Time period/deadline for delivery is specified T
IME BOUND
The FMPPI also provides guidance on setting of performance targets. Performance targets express a specific level of performance that the institution, programme or individual is aiming to achieve within a given time period.
A useful set of criteria for selecting performance targets is the "SMART" criteria:
Specific: the nature and the required level of performance can be clearly identified
Measurable: the required performance can be measured
Achievable: the target is realistic given existing capacity
Relevant: the required performance is linked to the achievement of a goal
Time bound: the time period or deadline for delivery is specified
For purpose of the audit we only focus on targets being specific, measurable and time bound.

17. PERFORMANCE TARGETS
Performance targets sets the level of execution the institution and its employees will strive to achieve
The development of suitable targets should be informed by current baseline ( current level of performance the institution aims to improve where applicable) or re-establish to suit new developments.
The desired level of performance can be expressed in terms of targets or standard.
Target is a specific level of performance if:
Targets for input, activities and outputs can be measured quarterly or yearly
Targets for outcomes are normally cover more than one period as they follow delivery of outputs
Standard is the minimum acceptable level based on predefined
benchmarks <legislated or industry>

18. When SMART targets/goals are set the following key principle must be considered-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.

19. PERFORMANCE INFORMATION AUDIT
PROCESS
OR AUDITING OF PREDETERMINED
OBJECTIVES

20. What is an audit of predetermined objectives or performance information?
Quarterly and Annual audit of reported actual performance against predetermined objectives, indicators and targets as contained in the quarterly MSA, Section 14(1) and annual performance report. Section 46 report
It is an integral part of the annual regularity audit process, confirming –
compliance with related laws and regulations
usefulness of performance information
reliability of performance reporting
The audit of predetermined objectives is defined as an annual audit of reported actual performance against predetermined objectives. This is executed as an integral part of the annual regularity audit, confirming compliance with applicable laws and regulations, usefulness and reliability of the reported performance information as published in the annual reports of government institutions.

21. ROLE OF DIFFERENT ROLE PLAYERS PER ELM Council Approved Performance Framework
Council -Approval and oversight
Adopts and review the PMS framework;
Adopts Priorities and objectives of the IDP;
Adopts municipality’s corporate strategy that
includes KPI and targets adopts the SDBIPs;
Approves changes to priorities, KPI’s and targets;
Reports Municipal performance to the community twice a year;
Approves the implementation of strategic risk register with the IDP strategic objectives as well as the operational risk register to the SDBIP objectives.

22. ROLE OF DIFFERENT ROLE PLAYERS PER ELM Council Approved Performance Framework
Executive and Mayco - Oversight
Oversees the development performance management system;
Assigns the responsibility of development to the Municipal Manager;
Submits the adopts priorities and objectives of the IDP;
Approves SDBIP;
Quarterly evaluates the performance of the Municipality;
Monitor implementation of internal and external in performance and the PM system;
Monitor and evaluate implementation and alignment of strategic risk register with the IDP strategic objectives and SDBIP to the operational risk register.

23. ROLE OF DIFFERENT ROLE PLAYERS PER ELM Performance Framework
Performance Audit and Audit Committee - Review
Quarterly and annual basis organizational performance
review per legislation;
Report to the Mayoral Committee quarterly.
Assess whether targets are being achieved, the reasons for targets not being achieved where applicable and corrective action that may be recommended.  

24. ROLE OF DIFFERENT ROLE PLAYERS PER ELM Performance Framework
MPAC- Review
Consider and evaluate the content of the annual report and to make recommendations to Council when adopting an oversight report on the annual report.
Examine the financial statements and audit reports of the municipality;
Evaluate the extent to which the Audit Committee’s, Internal Audit and Auditor General’s recommendations have been implemented
Quarterly and annual basis organizational performance
review per legislation;

25. ROLE OF DIFFERENT ROLE PLAYERS PER ELM Council Approved Performance Framework
Ward Committee and Public- Participatory
Advises the Mayor on priorities and objectives of the IDP;
Participates in the drafting and implementation of the IDP;
Oversees the development performance management system;
Discuss the development, implementation and review of the municipality PMS;
Participates in the formulation of proposals for performance improvements;
Participate in the annual review of performance

26. ROLE OF DIFFERENT ROLE PLAYERS PER ELM Performance Framework
Accounting Officer - Planning, Monitoring, Implementation,
Evaluation and Reporting
Manages the development of performance mgt function/framework
Ensures that the top/high score card/SDBIP linked to the IDP, budget and strategic risk register
Ensures that all role players implement the provision of the PMS framework
Receives the quarterly and annual audited performance reports from internal audit for implementation thereof;
Submits timely all necessary reports on performance to mayoral committee and council.

27. ROLE OF DIFFERENT ROLE PLAYERS PER ELM Performance Framework
Senior Mgt - Planning, Monitoring, Implementation, Evaluation
and Reporting
Set KPIs and targets(SMART);
Ensures that plans met set targets;
Ensures that performance objectives in the performance plans and agreements are achieved(R 805)
Ensures that the top/high score card/SDBIP linked to the IDP, budget and strategic risk register.
Ensures that all role players ie all staff members implement the provision of the PMS framework
Retains evidence of all items reported on performance.
Receives the quarterly and annual audited performance reports from internal audit for implementation thereof;

28. ROLE OF DIFFERENT ROLE PLAYERS PER ELM Performance Framework
Performance Mgt - Facilitate, Co-ordinate and Report
Implement PMS Framework, Policy and Manual as approved by Council;
Administer the PMS in an economical, effective, efficient and accountable manner;
Ensure that PMS links to IDP, Budget, Risk Registers;
Ensure that KPI are complied with the NT FMPPI criteria as well as SMART targets ;
Develop and implement mechanisms, systems and process for monitoring, measurement and review performance;
Prepare quarterly and annual on organisation performance;
Ensure that early warning system in place to detect indicators of under-performance;
Ensure corrective measures for under-performance have been identified;

29. ROLE OF DIFFERENT ROLE PLAYERS PER ELM Performance Framework
Internal Audit- Compliance and Assurance Review
 > Assess the functionality of the PMS;
Review that the system complies to MSA;
Determine whether the performance measurements are reliable in measuring performance;
Quarterly and annually audit the results of performance measurement per PMS and MSA;
Submit quarterly reports on the audits to the Municipal Manager, Performance Audit Committee, Mayco and Council.

30. Audit criteria Main criteria Sub-criteria
Compliance with legislative requirements
Applicable to performance management and reporting
Presentation
Measurability
Usefulness
Relevance
Consistency
Validity, SMART Criteria
During the audit of performance information the following audit criteria is tested:
Compliance with regulatory requirements:
Testing against compliance with regulatory requirements is done in relation to performance management and reporting. Examples of this include the need for auditees to have approved strategic plans and annual reports that include the auditee’s performance against predetermined objectives.
Usefulness
Presentation: Performance against predetermined objectives is reported using the relevant principles from the National Treasury guidelines.
Measurability : Indicators are well defined and verifiable, and targets are specific, measurable and time bound, as required by the National Treasury Framework for managing programme performance information.
Relevance : The indicators/measures relate logically and directly to an aspect of the institution's mandate and the realisation of strategic goals and objectives, as required by the National Treasury Framework for managing programme performance information.
Consistency : Objectives, indicators and targets are consistent between planning and reporting documents, as required by the relevant legislation (PFMA)
Reliability:
Validity : Reported performance has occurred and relates to the institution.
Accuracy : : Amounts, numbers and other data relating to reported performance have been recorded and reported correctly.
Completeness : All actual performance that should have been recorded has been included in the reported performance information.
Reliability
Accuracy
Completeness

32. CHALLENGES AND RISKS
PMS not embedded completely in all organisational functions and
processes- Non-alignment of Budget and Service Delivery Implementation
Plans( key planning, Budget and operational activities)
> Financial constraints are placing a burden on meeting performance targets > Lack of Commitment in implementing Performance ( PMS seen as a
function of the department, as apposed to management function)
Regular manager meetings not held to ensure new work performed is
included quarterly target of work
Performance indicators do not always measure the things it should.
Late submission of Portfolio of Evidence
Lack of adherence to timeframe or deadlines as per the approved process plan

33. CHALLENGES AND RISKS
Lack of Integrated System to obtain correct sources of information ( Gaps
in the electronic Monitoring System – QPR system configuration);
Performance management is not implemented at all levels of the municipality but is only directed at Section 57 managers
Consequence Management There is a general failure to improve on issues that led to non-performance
Submitted quarterly reports are simply filed and not scrutinized to ensure that they serve as early indicators of non-performance and that the performance is in line with the set targets.
The Municipality lacks baseline information on the status quo; “they do not consider critically from which basis we are moving and how to set performance targets to monitor progress”.

34. SOLUTIONS AND WAY FORWARD
In the process of the development and approval of the IDP of a municipality, a “top-layer” SMT/Cluster and “technical "departmental Managers Service Delivery and Budget Implementation Plan (SDBIP) should also be developed based on the strategic direction provided by the IDP;
Proper alignment IDP, SDBIP and Budget;
KPI per the criteria and Targets SMART;
Consider alignment in accordance Treasury Framework Good Indicator the indicators and targets in the SDBIP should be similar to those included in the IDP of the Municipality;
Quarterly and Annual Performance Reports reflect the performance of the municipality and measured on the approved Key Performance Indicators (KPIs) and performance targets, as contained in the IDP and the SDBIP

35. SOLUTIONS AND WAY FORWARD
The achievements, reasons for the deviation of progress, and planned remedial action are reported by the respective Clusters per MSA;
Timely reporting and submission of complete information per approved process plans;
Data is supported by the relevant evidence that the clusters capture and maintain as per SMART principles;
PMS should be cascaded to all officials in the municipality per Schedule 2 of MSA– in spite of resistance by labor unions. All officials should have clear job descriptions and job specifications to facilitate the setting of performance targets and performance agreements between supervisors and themselves.

36. 2. PM OFFICE 5 PM AUDIT COMITTEE 6.MAYORAL COMMITTEE 8 MPAC
1. CLUSTERS REVIEW
2. PM OFFICE
3. INTERNAL AUDIT
4. SMT
5 PM AUDIT COMITTEE
6.MAYORAL COMMITTEE
7.COUNCIL
8 MPAC
98 PUBLIC REVIEW