Public sector auditing environment. Recent & current issues for WA public sector auditing

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1 Presentation to the Transparency International (WA Branch) The Accountability Role of the Public sector auditing environment Kerry O Neil Deputy for Western Australia July 3, 2002 The WA public sector is large Total assets of $50b: 10 times larger than Western Mining ($5b) and COMPLEX Around 280 diverse audited entities Service and regulation roles Community expectations about public services and taxpayer dollars Recent & current issues for WA public sector auditing Machinery of government reforms Output Based Management Accrual-based appropriations Contracting Accountability is not just about doing the right thing - but doing it well Legal compliance and proper conduct is no longer the sole focus of accountability. Efficiency and effectiveness in achieving desired outcomes is now as important as legal compliance and probity. Accountability Requirements THE PUBLIC INTEREST Principles Conventions Legislation Codes Policies PARLIAMENT EXECUTIVE GOVERNMENT AGENCY PUBLIC SECTOR EMPLOYEES THE PUBLIC INTEREST

2 Accountability Mechanisms Public and Media (including ary Committee System) Independent Statutory Officers Independent Statutory Officers/Agencies Improper conduct or corruption Anti Corruption Commission Ethical behaviour Public Sector Standards Commissioner Administrative complaints Ombudsman Accountability for performance Role of the Functions of the Crown Crown Electors Electors In the public interest Executive Executive Government Government Agencies Agencies Independent Independent Objective Objective The s role as s auditor is unique Opinions Financial Financial Performance Performance Compliance Compliance Investigations Investigations Attest Attest Indicators Indicators &Controls &Controls of of Accounts Accounts Auditing Assertions Agencies Reports Direct Direct Reporting Performance Performance Examinations Examinations Performance Auditing Forms a continuum, ranging from attesting to agency assertions, providing assurance about agency compliance, controls and accountability and reporting on agency performance Attest Audit Controls, Compliance and Accountability Opinions are issued on financial statements, controls, and performance indicators Reviews aspects of public administration which impact on the control, accountability and performance of public sector agencies Performance Examination Provides with information and analyses of public sector program and operational performance, recommending opportunities for improvement when appropriate. Attest Audit Financial Statements Controls Performance Indicators

3 Financial Statements As the external auditor the provides an opinion on whether the financial statements are: based on proper accounts and records fairly presented in accordance with Accounting Standards Controls The provides an opinion as to whether the controls exercised provide reasonable assurance that: receipts expenditure investments acquisitions and disposal of property liabilities incurred have been in accordance with legislative provisions. Audit of Performance Indicators Agencies produce indicators of: efficiency and effectiveness The gives an opinion on whether the indicators are: relevant, appropriate and fairly presented. Performance Indicators Are a guide to organisational performance Provide an insight into an organisation s achievement Are indicators, not precise measures of performance Users of Performance Indicators Types of Indicators INTERNAL Management Staff EXTERNAL PARLIAMENT Press Public IMPACT OUTCOME OUTPUTS PROCESS EFFECTIVENESS EFFICIENCY OUTPUT WORKLOAD INPUTS COST

4 Efficiency Indicators Effectiveness Indicators Relate resource INPUTS to OUTPUTS Financial resources (cost/output) human resources (FTE/output) physical resources (assets employed to produce output) time resource (time taken to produce output) Indicate PRODUCTIVITY of organisation Illustrate OUTCOMES and IMPACTS Indicate the extent to which objectives have been achieved OUTCOME - what has been directly brought about as a result of agency activity IMPACT and/or INFLUENCE - the consequence of the outcome in relation to wider policy objectives. Appropriate Indicators Enable assessment of performance against targets over time compared to others Notes to Explain how the indicators have been derived any variations from previous indicators why the indicators are relevant why these are key indicators how the indicators can assist the user impact of unusual events or circumstances Performance Auditing Forms a continuum, ranging from attesting to agency assertions, providing assurance about agency compliance, controls and accountability and reporting on agency performance Attest Audit Controls, Compliance and Accountability Opinions are issued on financial statements, controls, and performance indicators Reviews aspects of public administration which impact on the control, accountability and performance of public sector agencies Performance Examination Provides with information and analyses of public sector program and operational performance, recommending opportunities for improvement when appropriate. CCAs what are they CCAs are audits of: compliance with legislation; government endorsed policies and procedures; internal control procedures; and/or accepted good management practices. CCAs focus on issues that may not be covered in detail by financial attest audits.

5 Examples of CCAs How are CCAs identified? Administration of Legislation: Administration of the Pawnbrokers and Secondhand Dealers Act 1994 Administration of Deceased Estates and Trusts Administration of Warrants of Execution by the Sheriff s Office Financial Management and Control Issues: Appointment and use of contract staff Valuer s computerised valuation system Internet and Network Security Broad issues identified during financial audits, by reviews of legislation and from complaints received. Issues are researched by Compliance Branch to determine feasibility: Is the issue important? Is timing suitable Are necessary audit skills available? Is the cost justifiable? A scope document is developed with budget and timelines and presented to corporate executive for approval. CCAs - Resources and Timing Audit process Discuss audit with agency Planning -15% Broad criteria: Take approximately 500 hours Can be completed and reported to in around 6 months No Surprises Conduct fieldwork Discuss findings with the AG Discuss findings with agency Fieldwork 60% Draft report Clear report with AG Clear report with agency Report to Reporting 25% Performance Auditing Forms a continuum, ranging from attesting to agency assertions, providing assurance about agency compliance, controls and accountability and reporting on agency performance Performance Examinations Attest Audit Controls, Compliance and Accountability Opinions are issued on financial statements, controls, and performance indicators Reviews aspects of public administration which impact on the control, accountability and performance of public sector agencies Performance Examination Provides with information and analyses of public sector program and operational performance, recommending opportunities for improvement when appropriate. Examinations of agency efficiency and effectiveness Reports made direct to

6 Examples of examination topics: Community based offender programs Complaints Management in WA Public Sector Computers in Schools Stroke Management Youth Self Harm Four Broad Themes State of the State Major financial operations Program Performance Agency implementation of policy objectives Accountability Decisions Identifies weaknesses in accountability New and Emerging Issues Identifies risks emerging in new developments How are topics chosen? Determined by Will consider ary debates, requests from Members of, media issues, complaints received etc. Important and timely Accountability/compliance/efficiency/ effectiveness themes How are topics chosen? (continued) Fits with target mix complex, research-based, original data, focus on effectiveness and outcomes operational, high community interest, analysis of existing data administrative and internal systems emerging accountability issue Can t challenge government policy What resources do we use? Examination Identifying/Selecting Process 12 to 15 staff - Executive Director, Associate Directors, Team Leaders, Performance Analysts 1000 to 2000 hours per project $100k to $200k per project 6 months to 1 year elapsed time contract staff consultants Tabling Report Reviewing Recommending Validating Scoping/Designing Conducting Conclusions/Cause & Effect Examinations are complex and comprehensive

7 Reporting to Discussion & Questions Performance Examinations are reported to as completed and when is sitting