Corporate planning and performance statements under the PGPA Act
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Over the past few years, the Auditor-General has conducted three audits of corporate planning and two audits of annual performance statements. This edition of audit insights examines the findings from these reports and discusses key learnings that are relevant for all Commonwealth entities.
Over the past few years, the Auditor-General has conducted three audits of corporate planning and two audits of annual performance statements. The objective was to review the implementation of these key parts of the enhanced Commonwealth performance framework, introduced by the Public Governance, Performance and Accountability Act 2013 and the Public Governance, Performance and Accountability (PGPA) Rule 2014.
The performance framework requires accountable authorities of Commonwealth entities to publish a corporate plan each year. The plan is intended to be the primary planning document of Commonwealth entities and represents the beginning of the annual performance cycle.
The publication of an annual performance statement in the entity’s annual report represents the end of the performance cycle. The performance statement is intended to provide an assessment of the extent to which an entity has succeeded in achieving its purposes, as outlined in its corporate plan.
The Auditor-General’s most recent report on the audit of corporate planning for the 2017–18 reporting period, tabled in April 2018, identified that the four audited entities were at different levels of maturity in implementing the corporate plan requirements.
The most recent report on the audit of annual performance statements for the 2016–17 reporting period, tabled in March 2018, found that the four audited entities published performance statements containing the basic elements set out in PGPA requirements. However, improvements to the quality of those elements are still required to support the presentation of meaningful performance information to the Parliament and the public.
This edition of audit insights examines the findings from these reports and discusses key learnings that are relevant for all Commonwealth entities.
Establishing the corporate plan as the primary planning document
Corporate plans are intended to be the primary planning documents of Commonwealth entities. They are required to set out the purposes and activities that will be pursued and the results that are expected, including explaining the operating environment and context, planned performance measures, risk profile and capabilities.
Corporate planning and performance reporting should be fully integrated into broader planning frameworks and viewed by entities as being a continuous process, such that they are actively used to support decision making and manage the business. When corporate plans have been established as the primary planning document for an entity, there is a clear line of sight between the corporate plan and other planning tools. The corporate plan should also be formally and deliberately driving planning at the business level.
Regular reporting to senior management of progress in achieving the measures and other commitments outlined in a corporate plan supports decision making, and is an indicator of a commitment to positioning the corporate plan as the primary planning document.
Developing the corporate plan
Documenting the processes or key steps and accountabilities involved in developing a corporate plan can assist entities to develop their plan in an efficient and effective manner and ensure compliance with PGPA requirements.
Insights from recent audit activity highlighted the benefits of adopting a structured approach, integrated into broader planning frameworks, to support the development of the plan. Developing a schedule outlining key activities and tasks, dates and responsible owners can also help guide corporate plan development.
Ensuring that senior management are fully engaged as part of a structured corporate planning approach, and that this engagement happens both early and at key points in the process, will benefit the development of the corporate plan.
Content of the corporate plan
High quality content within the corporate plan will assist in reconciling performance at the end of the performance cycle. This includes explaining how the entity has used its resources to achieve the relevant priorities of government and demonstrate that the entity has achieved its purpose.
Although recent audit activity found that each of the selected entities had met the minimum requirements for the publication of their corporate plans, there were two specific issues identified in the course of the audit that provide insights for those involved in corporate plan development.
The first of these issues relates to the PGPA Rule requirement that information relating to environment, performance, capability and risk oversight and management systems be provided for each reporting period covered by the plan (the four-year time horizon). Both the Auditor-General and the Department of Finance have identified this as an area in which entities consistently did not meet the mandatory requirements.
The second issue related to the way in which risk oversight and management systems are covered within corporate plans, and particularly that discussion of risk is meaningful and outlines the interaction of key system elements. Entities should ensure that information about risk goes beyond simply describing risk management processes, and instead describes specific risks that have been identified in the entities operating environment and particularly those that may impact on the achievement of purpose.
The corporate plan should provide a meaningful summary that enables readers to understand and be confident that an entity has established, and is maintaining, an appropriate system of risk oversight and management.
Monitoring achievement against the corporate plan
Entities should be monitoring and reporting, throughout the year, on progress in achieving the measures and other commitments included in their corporate plan. This will not only support decision making and management of the business, but also enable the reporting of relevant, reliable and complete performance information in the annual performance statement.
Further supporting the monitoring of achievement will be roles, responsibilities and accountabilities that are clearly defined, and senior management that are fully engaged and supporting the process from corporate planning through to performance measurement and reporting.
Presentation of results and analysis
Performance statements are intended to be the key accountability document to inform an assessment by the Parliament and the public of non-financial performance, and should present all information and analysis necessary to inform that assessment. Presenting results alongside targets, and providing comparisons to results from previous years or references to related indicators and results, can assist the reader in assessing performance. Readers should not have to rely on additional information presented elsewhere in an annual report to obtain a complete picture of non-financial performance.
Recent audit activity has also highlighted that there are opportunities for entities to increase the quality of analysis presented in performance statements, including presenting analysis that addresses the entities’ purpose directly. The operating context of an entity, including risk and capability, is a key driver of an entity achieving its purpose, and there should be a connection established as to how the risk and capability elements from the corporate plan have influenced performance.
Relevance, reliability and completeness of performance criteria
Appropriate performance criteria are relevant, reliable and complete, and designed in such a way that they meet the information and accountability needs of the Parliament and the public. In order to meet the information needs of diverse audiences, entity-specific terms or technical language should be adequately defined or avoided. The criteria used by the ANAO to assess relevance, reliability and completeness of performance information is available in Appendix 3 of Implementation of the Annual Performance Statements Requirements 2016–17.
Recent audit activity has identified that the completeness of performance criteria is a particular area needing further consideration, including increasing the use of effectiveness and efficiency measures. In situations where effectiveness may not be measurable, perhaps due to cost or a lack of complete information, then other measures may be used as proxies for effectiveness. If this is done then it should be clear why effectiveness cannot be measured and an explanation provided as to why the proxy measures are suitable.
Developing performance criteria that assess a mixture of short, medium and long-term objectives will allow entities to realise the full potential arising from the minimum four-year horizon of corporate plans. Targets that remain static across the four years of a corporate plan make it difficult to analyse medium- or long-term objectives.
Systems, processes and methodologies
When designing performance criteria it is important for entities to consider what information will be required for reporting against the criteria at the end of the period. Data sources need to be identified, and collection methods assessed, at the same time as performance measures are developed, in order to be sure that suitable information will be available when required. The approach taken should be clearly documented in policies and procedures to promote consistency and accuracy in future reporting.
The accountable authority of an entity is required to certify that their performance statements are accurate, and so it is important that they have confidence in entity assurance mechanisms that support their certification. Mechanisms to support the accountable authority’s certification might include the use of internal audit, management certifications and audit committee involvement and endorsement.
Recent audit activity noted that entities need to ensure that audit committee charters reflect the language set out in section 17 of the PGPA Rule—specifically, the requirement that audit committees ‘review the appropriateness’ of the accountable authority’s performance reporting. Audit committee charters should be reviewed regularly to ensure alignment with the PGPA Rule.