Not only is performance management clearly established in legislation in South Africa, but the promotion of efficient, economic and effective use of resources in public administration is called for in the Constitution of South Africa. The Public Finance Management Act (PFMA) and the Municipal Finance Management Act (MFMA) also requires annual reports to include the performance of the public institution against predetermined objectives.
Performance auditing, then, is an independent evaluation of the measures to ensure efficiency, economy and effectiveness; and it forms a crucial foundation of public accountability against responsibilities. When faced with competing priorities for resources, performance auditing can also assist with decisions on future funding and priorities. Where the focus of regularity auditing is on accounts and financial statements; performance auditing focuses on programmes, projects, systems or activities.
Often, if there are weaknesses in the management measures put in place to ensure the economic procurement of resources and the efficient and effective use of such resources, there is an impact on the institution’s service delivery, the quality of its products and its financial position.
ORCA can lend its extensive experience in performance auditing to develop a customised performance audit programme to assess the adequacy and effectiveness of controls that ensure:
- Reliability: Validity, accuracy and completeness of Performance
- Information (PI)
- Existence: Compliance with reporting requirements (pre-determined objectives against which PI is reported)
- Material differences between actual and planned performance are explained
- Usefulness: Objectives are measurable, relevant and consistent
- An audit involves performing procedures to obtain audit evidence regarding the reporting of performance against predetermined objectives. The procedures selected depend on the internal auditor’s judgement, and include the following:
- Understanding and testing the internal policies, procedures and controls relating to the management of and reporting on performance information
- Evaluating and testing processes, systems, controls and review of documentation in place at a detail level in the audited entity to support the generation, collation, aggregation, monitoring and reporting of the selected performance indicators and targets
- Evaluating, testing and confirmation of the existence and consistency of planned and reported performance information as well as the
- presentation and disclosure thereof in accordance with applicable requirements and guidance
- Conducting detailed audit testing and obtaining sufficient appropriate
- audit evidence to verify the validity, accuracy and completeness of reported indicators and targets