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The ANAO’s approach to auditing annual performance statements
Performance statements audits are conducted under the ANAO Auditing Standards. These standards are based on the Standard on Assurance Engagements ASAE 3000 Assurance Engagements Other than Audits or Reviews of Historical Financial Information that is issued by the Auditing and Assurance Standards Board. The aim is to provide reasonable assurance on the quality and reliability of entity performance statements.
Annual performance statements audits are structured similarly to financial statements audits with a planning, interim and final phase to allow entities time to correct issues noted and align with annual report tabling.
To assess whether the annual performance statements comply with Division 3 of Part 2-3 of the Public Governance, Performance and Accountability Act 2013 (the Act), the ANAO applies the following criteria:
- Are the key activities, performance measures and specified targets appropriate to measure and assess the entity’s performance in achieving its purposes?
- Are the performance statements prepared based upon appropriate records that properly record and explain the entity’s performance? and
- Do the annual performance statements present fairly the entity’s performance in achieving the purposes in the reporting period?
The planning phase of the audit should assist the entity to ensure that it has adequate processes in place to meet reporting deadlines and to report reliably to the Parliament at year end.
The aim of the planning phase is to develop an appropriate audit strategy that is presented to the entity’s executives and audit committee. The strategy sets out the audit criteria, key milestones and responsibilities.
- Key considerations during the planning phase include:
- Does the entity have an enterprise performance framework?
- Has the entity developed an integrated control document that defines business rules and processes?
- Are roles and responsibilities for the development and reporting of performance information clearly defined across the entity?
- Is there regular monitoring and performance reporting to senior management and a clear read between key performance documents?
- Does the entity have effective planning processes to support the timely preparation of its corporate plan and annual performance statements?
- Has the entity invested time to adequately plan and prepare for the audit?
- Has the entity established a request register to track audit requests and monitor progress of the audit?
- Is there an appropriate timeline to support the conduct of the audit?
During the interim phase, the audit assesses the performance material in the corporate plan and the PBS and the internal control framework that supports the production of the performance statements to determine if they are appropriate to report reliably on the entity’s performance in achieving its purposes.
At the conclusion of the interim audit phase, an interim management letter (IML) is provided to the entity. The IML contains the ANAO’s findings and recommendations at a detailed level. The IML is designed to assist the entity to address matters relating to the performance statements and/or particular measures prior to the final phase of the audit.
Key considerations during the interim phase include:
- Do the entity’s purposes and key activities adequately address the key matters identified in the entity’s governing legislation and the administrative arrangements order?
- Do the entity’s key activities identify all the important activities that make a significant contribution to achieving the entity’s purposes?
- Do the entity’s performance measures comply with the requirements specified in sections 16E and 16EA of the PGPA Rule?
- Will the results from each performance measure provide the reader with meaningful information on the entity’s achievement of its purposes?
- Has the entity developed a logic model for each measure showing how inputs progress to activities, outputs and outcomes?
- Is there a legislative requirement for achievement of a predetermined target? Has the government, minister or executive set required targets?
- Do new policy proposals set out performance expectations for set levels of funding?
- Does the target reflect a reasonable standard of performance? Has benchmarking been undertaken on expected levels of achievement?
- Has the entity undertaken quality assurance processes to ensure that preparation of the annual performance statements will meet the requirements of the Act and accompanying rule?
During the final phase of the audit, the ANAO’s focus is on testing the accuracy and completeness of the performance information and analysis contained in the entity’s performance statements.
The ANAO prepares a final management letter (FML) and/or closing report which contains the ANAO’s findings and recommendations from the overall audit. Consistent with the approach for financial statements, the FML categorises findings as significant (A), moderate (B) and minor (C) to emphasise their relative importance and support entities to prioritise improvement efforts.
Key considerations during the final phase include:
- Do the performance statements meet the requirements of s16F of PGPA Rule?
- Are the reported results accurate and complete?
- Do the entity workpapers sufficiently demonstrate how data sources, evidence and the methodology were applied to calculate the reported results?
- Are there known limitations or bias with the data or methodology used to calculate a result that should be disclosed in the performance statements?
- Has the entity obtained adequate assurance over the systems used to gather and report performance information, including from third parties?
- Do the performance statements provide a complete and meaningful picture of the entity’s performance in the reporting period?
- Are the performance statements fair, balanced and understandable with all material information disclosed? Does the entity have records to support the disclosures?
- Is there an appropriate plan for regular review and approval of performance information to support the accountable authority in review and sign-off?
- Has the entity undertaken quality assurance processes to ensure that preparation of the annual performance statements is accurate and complete?
- Have the IML findings and recommendations been adequately addressed?
During the post-final phase of the audit, and prior to signing the independent audit report, the ANAO is required to assess whether any subsequent events have occurred that may impact the reader’s understanding of the performance information contained in the entity’s performance statements. This may require additional disclosure by the entity and the provision of additional information and audit evidence.
Finally, the ANAO is required to review the printer’s proof of the annual report to ensure that all information included in the annual report is consistent with the annual performance statements.