Transcript Document

PRESENTATION TITLE
IMFO Audit & Risk Indaba 2015
20 – 22April 2015: Olive Convention Centre, Durban
Institute of Municipal Finance Officers & Related Professions
THE END IN MIND
ABC of Clean Administration Back to
basics through Performance
Management service:
Comprehensive performance management
system towards clean administration.
Institute of Municipal Finance Officers & Related Professions
Presentation Outline
• The key question
• The end in mind
• Performance Management
• How to achieve clean administration through comprehensive
performance management
Institute of Municipal Finance Officers & Related Professions
THE KEY QUESTION
Do we know what must be
managed and how it must be
managed in order to achieve
clean administration?
Institute of Municipal Finance Officers & Related Professions
THE END IN MIND…..
• Stephen Covey: The 7 habits of highly effective peopleAlways start with the end in mind.
• In the organizational environment today we find a multitude of
inter related concepts and processes. For example:
 Back to basics
 Clean audit and clean administration
 SDBIP/IDP
Institute of Municipal Finance Officers & Related Professions
THE END IN MIND…..
As an organisation a key step is therefore to:
• analyse the various initiatives;
• identify required outcomes;
• identify communalities;
• design a focused strategy that would not only seek to achieve the
required outcomes but also that would seek to address transversal
similar outcomes with a single process.
Institute of Municipal Finance Officers & Related Professions
THE END IN MIND…..
What is Clean Administration ?
Clean audit = clean administration. However clean administration is
the more correct version as it places the emphasis at the right place.
Clean Audit =
The financial statements are free from material misstatements (in
other words, a financially unqualified audit opinion) and there are no
material findings on reporting on performance objectives or noncompliance with legislation.
Clean Audit and Clean Administration is underpinned by 3 key
drivers:
Leadership
Financial and Performance Management
Governance
Institute of Municipal Finance Officers & Related Professions
THE END IN MIND…..
What is Back to Basics?
Back to basics approach =
Serving Our Communities Better!=
To build a responsive, caring and accountable local government.
Back to Basics is underpinned by 5 building blocks:
•Putting people first
Put people and their concerns first and ensure constant contact with
communities through effective public participation platforms.
Institute of Municipal Finance Officers & Related Professions
THE END IN MIND…..
What is Back to Basics?
•Delivering basic services
Create conditions for decent living by consistently delivering
municipal services to the right quality and standard. (Planning,
delivery, maintenance, upkeep, budget, no failures - urgent
restoration).
•Governance
Be well governed and demonstrate good governance and
administration cut wastage, spend public funds prudently, hire
competent staff, ensure transparency and accountability.
•Sound financial management
Ensure sound financial management and accounting, and prudently
manage resources so as to sustainably deliver services(EEE).
Institute of Municipal Finance Officers & Related Professions
THE END IN MIND…..
What is Back to Basics?
•Building capacity
Build and maintain sound institutional and administrative
capabilities administered and managed by dedicated and skilled
personnel at all levels.
“The primary problem we face in the local government system is that
we don’t recognise and reward good performance adequately, nor are
there sufficient consequences for under-performance.
We will therefore institutionalise a performance management system
to effect the changes that we require in the system. We will develop
and finalize a set of indicators as per the pillars of the Back-to Basics
approach”
Institute of Municipal Finance Officers & Related Professions
THE END IN MIND…..
Key Performance Areas?
1. Basic Service Delivery
2. Local Economic development
3. Governance and Public Participation
4. Municipal Transformation and Organizational Development
5. Municipal Financial Viability and Management
Institute of Municipal Finance Officers & Related Professions
PERFORMANCE MANAGEMENT- THE TOOL
What is Performance Management
Performance management (PM) includes activities which ensure
that goals are consistently being met in an effective and efficient
manner. Performance management can focus on the performance of
an organization, a department, employee, or even the processes to
build a product or service, as well as many other areas.
PM is also known as a process by which organizations ALIGN their
resources, systems and EMPLOYEES to strategic objectives and
priorities.
Institute of Municipal Finance Officers & Related Professions
PERFORMANCE MANAGEMENT…..
What is Comprehensive Performance Management
•Performance is measured at all levels in the organisational,
including the overall performance of the organisation and the
performance of employees.
•The institution measures performance in all required areas.
Institute of Municipal Finance Officers & Related Professions
PERFORMANCE MANAGEMENT…..
The Performance Management Cycle
•Performance Planning
•Performance Measuring and Monitoring
•Performance Evaluation
•Performance Reporting
•Performance Auditing/Review
Institute of Municipal Finance Officers & Related Professions
PERFORMANCE MANAGEMENT…..
The Legislative Environment
•The Constitution of the Republic Of south Africa (Act 108 of 1996)
•Municipal Systems Act, 2000
•The Municipal Finance Management Act
•Municipal Planning and Performance Management Regulations,
2001
•Municipal Performance Regulations for Municipal Managers and
Managers directly accountable to Municipal Managers, 2006
•Municipal Structures Act of 1998
Institute of Municipal Finance Officers & Related Professions
PERFORMANCE MANAGEMENT
What are the Challenges…..RISKS?
•Challenge 1 Lack of alignment
The first challenge is the lack of alignment due to various
organisational processes being created in isolation. The link
between Strategy development, budgeting and operational planning is
developed by different groups of people with different frameworks
being used. The performance management system lacks alignment
between individual performance, departmental performance and
organisational delivery and so all systems default back to financial
measurements.
Institute of Municipal Finance Officers & Related Professions
PERFORMANCE MANAGEMENT…..
What are the Challenges….RISKS?
•Challenge 2 Lack of Measurements
The second challenge happens at various levels of the organisation in
that poor measures are developed, in many cases targets are set but
no relevant measure is put in place. In other cases no data can be
collected or is kept as evidence to track performance.
•Challenge 3 Leadership and Management commitment
The Leadership and Management challenge has a huge impact on
integrating and aligning a management system to deliver a
comprehensive performance management system. The commitment
and understanding of leadership and management of the
requirements for achieving a workable performance system is
critical to performance success.
Institute of Municipal Finance Officers & Related Professions
PERFORMANCE MANAGEMENT…..
What are the Challenges….RISKS?
•Challenge 4 Managing of the performance system
Managing a performance system in an organisation requires a
disciplined framework; it requires the organisation to work off one
master plan broken down into relevant parts and areas of
responsibility. The management responsibility at various levels
needs to understand the contracting, measurement development and
appraisal process very well and apply it consistently. Secondly
management needs to appreciate that performance management is
not an event but something that is managed daily but recorded and
reported at certain times through reviews and appraisals.
Institute of Municipal Finance Officers & Related Professions
PERFORMANCE MANAGEMENT…..
What are the Challenges….RISKS?
•Challenge 5
Managing poor performance
The management of poor performance is normally a reactive action,
but in many cases it is delayed and therefore turns into a discussion
that is difficult to make relevant. Another reason poor performance is
not managed on time is the lack of valid measurements and the
collection of required evidence and measurement data.
Institute of Municipal Finance Officers & Related Professions
HOW TO ACHIEVE CLEAN AMINISTRATION THROUGH
COMPREHENSIVE PERFORMANCE MANAGEMENT
Understanding
•As a Performance Management Practitioner you need to have a basic
understanding of clean administration.
•There are 2 critical outcomes to Clean Administration:
Attaining Clean Administration; and
Sustaining Clean Administration.
•Each organisation must have an assessment as to where they are
holistically as an organisation as well as at the individual process
level namely Financial Reporting, Performance Reporting and
Compliance.
Institute of Municipal Finance Officers & Related Professions
HOW TO ACHIEVE CLEAN AMINISTRATION THROUGH
COMPREHENSIVE PERFORMANCE MANAGEMENT…..
Maturity Levels
•Level 1 - Initial (Chaotic)
It is characteristic of processes at this level that they are (typically)
undocumented and in a state of dynamic change, tending to be
driven in an ad hoc, uncontrolled and reactive manner by users or
events. This provides a chaotic or unstable environment for the
processes.
•Level 2 - Repeatable
It is characteristic of processes at this level that some processes are
repeatable, possibly with consistent results. Process discipline is
unlikely to be rigorous, but where it exists it may help to ensure that
existing processes are maintained during times of stress
Institute of Municipal Finance Officers & Related Professions
HOW TO ACHIEVE CLEAN AMINISTRATION THROUGH
COMPREHENSIVE PERFORMANCE MANAGEMENT…..
Maturity Levels.....
•Level 3 - Defined
It is characteristic of processes at this level that there are sets of defined and
documented standard processes established and subject to some degree of
improvement over time. These standard processes are in place (i.e., they are
the AS-IS processes) and used to establish consistency of process
performance across the organization.
•Level 4 - Managed
It is characteristic of processes at this level that, using process metrics,
management can effectively control the AS-IS process. In particular,
management can identify ways to adjust and adapt the process to particular
projects without measurable losses of quality or deviations from
specifications. Process Capability is established from this level.
Institute of Municipal Finance Officers & Related Professions
HOW TO ACHIEVE CLEAN AMINISTRATION THROUGH
COMPREHENSIVE PERFORMANCE MANAGEMENT…..
Maturity Levels.....
•Level 5 - Optimizing
It is a characteristic of processes at this level that the focus is on
continually improving process performance through both
incremental and innovative technological changes/improvements
Institute of Municipal Finance Officers & Related Professions
HOW TO ACHIEVE CLEAN AMINISTRATION THROUGH
COMPREHENSIVE PERFORMANCE MANAGEMENT….
The Process
•Clean administration must seen as a key performance area and
strategic goal/objective.
•KPIs must be set for the achievement of this goal/objective eg Clean
Audit Report.
•The current baseline must be determined eg Qualified Audit Report
with matters of emphasis.
•The interventions required must be documented.
•The responsibility for the interventions must be documented.
•The timeframes must be specified.
Institute of Municipal Finance Officers & Related Professions
HOW TO ACHIEVE CLEAN AMINISTRATION THROUGH
COMPREHENSIVE PERFORMANCE MANAGEMENT….
The Process....
•In addition:
A comprehensive review must be performed of the current status
quo and maturity level of the organisation. This must include a risk
and control assessment.
O= Objective
R= Risk
C= Control
A= Assurance
Institute of Municipal Finance Officers & Related Professions
HOW TO ACHIEVE CLEAN AMINISTRATION THROUGH
COMPREHENSIVE PERFORMANCE MANAGEMENT….
The Process....
The lines of defence must be identified.
•First Line: Policies and Procedures and Operational Management
•Second Line: Risk Management and Compliance Functions.
•Third Line: Internal Audit, Audit Committee, Oversight Functions,
External Audit
The consequences for good and inadequate performance must be
identified. This is applicable to both the organisational as well as
individual level.
Institute of Municipal Finance Officers & Related Professions
HOW TO ACHIEVE CLEAN AMINISTRATION THROUGH
COMPREHENSIVE PERFORMANCE MANAGEMENT
The Assessment Areas and the TOOL therefore
What are some of the common failures in not achieving clean
administration:
•Having no plan for achieving clean administration.
•Having a plan that is not adequate. (We may or may not know this.)
•Falling into the complacency trap. The AGSA did not have a finding
in this area and therefore there is no problem. (A regression may be
just around the corner.)
•Not implementing and/or monitoring the process.
•A lack of real support and will by those entrusted with leadership.
Institute of Municipal Finance Officers & Related Professions
HOW TO ACHIEVE CLEAN AMINISTRATION THROUGH
COMPREHENSIVE PERFORMANCE MANAGEMENT
The Assessment Areas and the TOOL therefore
Would it not be nice if we have a tool that gives us all the answers:
Example 1: Organisational Level
Develop and monitor the implementation of action plans to address internal
control deficiencies
·SCOPA/ Oversight resolutions have been substantially implemented.
·The entity has a plan for addressing internal and external audit findings,
and adherence to the plan is monitored on a [monthly/ bi-monthly/
quarterly] basis by the appropriate level of management.
·The plan for addressing internal and external audit findings is credible,
with actions addressing root causes. It sets clear time frames and assigns
responsibilities appropriately.
The above is an extract from the Dashboard Report: Drivers of
Internal Control. (AGSA document)
Institute of Municipal Finance Officers & Related Professions
HOW TO ACHIEVE CLEAN AMINISTRATION THROUGH
COMPREHENSIVE PERFORMANCE MANAGEMENT
The Assessment Areas and the TOOL therefore
Example 2: Organisational Level
Implement appropriate risk management activities to ensure that regular risk assessments,
including consideration of IT risks and fraud prevention, are conducted and that a risk
strategy to address the risks is developed and monitored
·
The accounting [officer/authority] ensures that a risk assessment is conducted
in accordance with legislated requirements on a [monthly/ bi-monthly/ quarterly/ sixmonthly/ annual] basis to identify emerging risks of the entity.
·
The risk assessment is comprehensive and covers all critical areas.
·
The risk assessment is used to identify deficiencies in internal controls, which
are responded to in a timely manner.
·
Assessment of the controls in place is conducted on a [monthly/ bi-monthly/
quarterly/ six-monthly/ annual] basis to prevent and detect fraud and appropriately
address any significant deficiencies.
·
Instances of fraud are appropriately responded to when identified.
·
All staff members are made aware of and adhere to the fraud prevention plan.
Institute of Municipal Finance Officers & Related Professions
HOW TO ACHIEVE CLEAN AMINISTRATION THROUGH
COMPREHENSIVE PERFORMANCE MANAGEMENT
The Assessment Areas and the TOOL therefore
•It provides a comprehensive baseline list of control activities that
should be present in a Department/ Municipality/Public Entity;
•It provides for a focused approach to internal controls by the
Department/ Municipality/Public Entity and assurance providers.
•It provides for having a sustainable and adequate control
environment if applied correctly.
Institute of Municipal Finance Officers & Related Professions
HOW TO ACHIEVE CLEAN AMINISTRATION THROUGH
COMPREHENSIVE PERFORMANCE MANAGEMENT
The Assessment Areas and the TOOL therefore
•The first step that could be taken is to analyse the required key
controls as per the list and then in the specific organisational situation
determine whether:
the organisation has such controls in place;
whether the controls is adequately described (documented);
assigned to relevant officials;
also where applicable if time/frequency lines for performance has
been set; and
Monitoring/review of performance and timelines has been set.
•It would also be essential to ensure that officials performing the
controls know and understand the function/control that they are
performing.
Institute of Municipal Finance Officers & Related Professions
HOW TO ACHIEVE CLEAN AMINISTRATION THROUGH
COMPREHENSIVE PERFORMANCE MANAGEMENT
The Assessment Areas and the TOOL therefore
• Quality is understood by all to be a prerequisite and is embedded in
the entity’s values.
•Implementation of a combined assurance methodology
Combined assurance is a best practice that is advocated amongst
others by the King III Report on Corporate Governance and has
been included in the revised (draft) Treasury Regulations.
>Assurance is the responsibility of everyone.
Institute of Municipal Finance Officers & Related Professions
HOW TO ACHIEVE CLEAN AMINISTRATION THROUGH
COMPREHENSIVE PERFORMANCE MANAGEMENT
The Assessment Areas and the TOOL therefore
• Risk Management
Adequate Risk Management structures and budgets
Risks identified effectively managed and monitored.
Risk management and an effective internal control environment are
not just to satisfy the AGSA, the Audit Committee and Internal
Auditors, but are the essence of management in all its forms.
Institute of Municipal Finance Officers & Related Professions
HOW TO ACHIEVE CLEAN AMINISTRATION THROUGH
COMPREHENSIVE PERFORMANCE MANAGEMENT
The Assessment Areas and the TOOL therefore- Organisational Level
Leadership
•Establish a culture of honesty, ethical business practices and good
governance
•Exercise oversight responsibility
•Ensure effective human resource practices
•Implement appropriate policies and procedures
•Approve and monitor the implementation of action plans to address internal
control deficiencies
•Approve an appropriate information technology governance framework
Institute of Municipal Finance Officers & Related Professions
HOW TO ACHIEVE CLEAN AMINISTRATION THROUGH
COMPREHENSIVE PERFORMANCE MANAGEMENT
The Assessment Areas and the TOOL therefore- Organisational Level
Financial and performance management
•Ensure proper record keeping of all transactions
•Maintain effective controls over daily and monthly processing and
reconciling of transactions
•Produce regular, accurate and complete financial and performance
(service delivery) reports
•Review and monitor compliance with applicable legislation
•Design and implement formal controls to mitigate information
technology risks
Institute of Municipal Finance Officers & Related Professions
HOW TO ACHIEVE CLEAN AMINISTRATION THROUGH
COMPREHENSIVE PERFORMANCE MANAGEMENT
The Assessment Areas and the TOOL therefore- Organisational Level
Governance
•Ensure that risks are periodically identified, assessed and effectively
mitigated
•Maintain an adequately resourced and functioning internal audit unit
•Maintain an audit committee that performs its legislated duties and
promote accountability and service delivery
Institute of Municipal Finance Officers & Related Professions
HOW TO ACHIEVE CLEAN AMINISTRATION THROUGH
COMPREHENSIVE PERFORMANCE MANAGEMENT
The Assessment Areas and the TOOL therefore- Individual Level
•
UNDERSTANDS
For example: Official
Quality
who initiates an order
Key Controls
Combined Assurance
Risk Management
Institute of Municipal Finance Officers & Related Professions
HOW TO ACHIEVE CLEAN AMINISTRATION THROUGH
COMPREHENSIVE PERFORMANCE MANAGEMENT
The Assessment Areas and the TOOL therefore
“WE ARE WHAT WE REPEATEDLY DO. EXCELLENCE IS NOT
AN ACT, IT IS A HABIT”
ARISTOTLE
Institute of Municipal Finance Officers & Related Professions
Thank You!
Institute of Municipal Finance Officers & Related Professions