Performance Audit in the Public SectorJohann RieserSenior Auditor, Ministry of Finance, Vienna

Rieser Johann(Senior Auditor, Ministry of Finance, Vienna, Austria)

40 years public service;Risk Management, Performance Audit;20 years auditing EU-funds and „Own Resources“;Public Internal financial Control (PIfC);Expert „Public Internal Control“ (PIC);International networks and working groups;Twinning activities – LT, HU, RO, BG, SI, HR, AL……..

Evolution in Public management

Traditional bureaucracy model: - bureacratic style, ineffective management; The new public management: - market-driven approach, effective management but social disappointments; Good governance: - new syntesis and maturity - aimed to reach sustainable growth and public sector efficiency , as well as citizens satisfaction and social welfare

Performance development

GOAL law & order performance social welfare

PERSPECTIVE state customers citizens, civil society

STEERING MODE hieararchy market, competition networking, partnerships

LANGUAGE juridical economic political

GOVERNMENT GOVERNANCE(state as sole actor) (state is one actor among many)

Traditional Bureaucracy Model(up to 1980s)

New Public Management (1980s)

Good Governance(since 1990s)

Performance relationships

Executive Legislative Politicians (1) Politicians

(3) (2) (6)

(5)

Administration (4) Citizen / customer

1 performance budgets and performance audits between executive and Parliament2 general charters between executives and citizens3 contracts between executives and administration4 specific charters between administration and citizens, service levelagreements and quality survey5 accountabilty agreements between administration and Parliament6 interaction between citizens and Parliament (through input policy process via committee work,

or remodelled ombudsman)

Performance Management – Performance Audit

Performance-based public management – is taking responsibility for the performance of the organisation and system and being accountable for its results, thus the Managerial Accountability (MA) of public managers has become a crucial issue.

Performance auditing works with the same performance management concepts used by program managers to plan, monitor, and evaluate how public resources are used to achieve public policy objectives.

Performance Audit

Performance audits give management valuable recommendations for improving program performance, one of the primary goals of performance management.

Auditors help management understand how to improve the system and use it better to improve decisions, performance, and accountability.

Performance Audit

Performance auditing is a way to ‘execute control’ and to obtain insight into the running and outcome of different government activities.

Legitimacy and trust are essential values in all government undertakings, and performance auditing may contribute to strengthening these values by producing public and reliable information on the economy, efficiency, and effectiveness of government programs (TRANSPARENCY).

Performance Audit – a driver for public reforms

Government audit functions must be configured appropriately to enable governments and government entities to fulfil their duty to be accountable to the citizens, while achieving their objectives effectively, efficiently, and ethically.

IIA-Position Paper The Role of Auditing in Public Sector Governance, 2006

Other examples:Internal Audit Capability Model for the public sector (IIA, 2009)Three Lines of Defence Model (ECIIA, 2012)INTOSAI GOV - e.g. 9140, article 1.6 “The role of internal auditing has evolved from an administrative procedure with a focus on compliance, to an important element of good governance.”

Performance audit – a driver for public reforms and a challenge for auditors

The audit universe is based on the strategy of the organization!Audit engagements result from a risk-oriented and comprehensive approach!

1. positioning directly under the highest management level;2. strategy of the IAS linked to the administration and its dynamic development;3. team-oriented organisation;4. human resource development and knowledge management;5. excellent networking, also with the professional – and scientific community6. internal and external quality assurance;7. measures to safeguard the results

Performance audit – definition

a)Audit of the economy of administrative activities in accordance with sound administrative principles and practices, and management policies;

b)Audit of the efficiency of utilization of human, financial and other resources, including examination of information systems, performance measures and monitoring arrangements;

c) Audit of the effectiveness of performance in relation to achievement of the objectiveness of the audited entity, and audit of the actual impact of activities compared with the intended impact.

And it is intended to improve the “performance” of the organization!

Performance audit – a driver for public reforms

o New challenges arise for public managements and public audits as they have to deal with

- rapid and accelerating economic change, - increasing complexity of regulatory issues, - new technologies and services, and - calls for openness, transparency and citizen

participation.

Performance audit – how and what?Audit universe

• Performance auditing covers the full spectrum of public administration and therefore it is important that the skills and competencies of staff reflect this.

• It is an information-based activity that requires political, analytical and creative skills.

• Additional training and life long learning will be essential to meet the challenge.

Performance audit – a driver for public reforms and a challenge for auditors

0,0

0,5

1,0

1,5

2,0

2,5

3,0management

knowledge of the enterprise

process knowledge

audit competence

internal control, risk management

audit experience

financial knowledges

techncological knowledges

IT knowledge

ethics

flexibility

team orientation

financial exp. technology exp. special investigation IT special agendas

Performance audit – auditing standards

ISSAI 3000 What is Performance Auditing – standards and guidelinesThe guidelines take into account relevant INTOSAI auditing standards based on generally accepted principles of performance auditing, distilled from the experience of INTOSAI members.PERFORMANCE AUDIT MANUAL – ECAThe manual is based on generally accepted principles of performance auditing and current good practice in this area.It explains in broad terms how performance audits should be planned, conducted and reported.

Performance audit – how and what?Audit universe

• „Performance Management“ – all the steps that can be taken to improve the delivery of public services.

• Ensures, the best possible output from limited resources by the public sector.

• The Council of Europe is promoting the improvement of service and value for money through the development of performance management and performance audit!

Performance audit – how and what?Audit universe

• Is there a clear structure of performance goals and have the appropriate priorities and instruments been chosen for the use of public funds?

• Is there a clear distribution of responsibility between the different levels of authority, bearing in mind the principle of subsidiarity?

Performance audit – how and what?Audit universe

• Is there a general cost awareness and an orientation towards production of services, putting citizens’ needs in focus?

• Is there an adequate emphasis on management controls and reporting requirements?

Performance audit – how and what?Audit universe

o Evaluating

o Organizations – objectives, what they are supposed to accomplish;

o Valid measures of performance need to exist;o Accurate measures of cost need to be developed;o Cost and performance information should be brought

together;o Participants need to have incentives to use the

information;

Performance audit – how and what?Audit universe

• Basic questions: Are things being done in the right way - Are the right things being done?

• It is investigatory work that requires flexibility, imagination and analytical skills.

Performance audit – how and what?Audit universe

- Strategy and objectives – defining outcome/output?- Developing effective measurement mechanisms?- Defining adequate standards?- Defining responsibility?

• This should turn public servants into managers, who are made accountable for the performance of their organisation.

Performance audit – how and what?Audit universe

o Internal auditors play a critical lead role in helping management and the board understand, assess, mitigate and manage the organization’s risk through activities detailed in the internal audit plan.

o IA´s commitment to ongoing learning and capabilities improvement, along with a deep understanding of the organization’s needs and how they can be met through the internal audit function.

Thank you very much……Questions?

johann.rieser@bmf.gv.at