Performance audit: focus, process and reporting Jarmo Soukainen National Audit office of Finland 30.6.2011
Contents overview of performance audit: what are we doing? how do we ensure that our recommendations are taken into account?
NAO, external auditor NAO s existence (Act 676/2000) NAO conducts financial audit, performance audit, legality audit and fiscal policy audit to achieve its task activities are based on international standards (ISSAI) as well as legislation NAO s role: independent audit information provider, versus the role of executive government agencies 3
NAO, external auditor broadly audits central government finances, including decision-making that has direct or indirect financial consequences for on the state external audit examines whether the current state of affairs is in line with decisions that have been made -> fulfillment of duties -> ex post -> concerns public spending and impacts on public finances 4
Performance audit NAO is responsible for ensuring sound financial management -> special task of performance audit Focus (Performance audit manual): "Sound financial management means that the responsible authority promotes the optimal use of resources to achieve intended outcomes with the lowest possible costs" 5
Performance audit: basic framework Financial management of the state Identifying social needs and setting objectives Inputs / costs Functions/finances Outcomes 6
Performance audit, financial management based on factors in the effectiveness chain (more in connection with preliminary studies) audit is evaluative, not a direct comparison between needs/objectives and execution evaluation based on criteria 7
Selection of audit topics audits are based on the NAO's audit plan (Act 676/2000, section 3) Auditor General approves the annual audit and makes revisions if necessary 8
Selection of audit topics guided by the NAO's strategy 1. general criteria (economic significance of the matter, risk, production of useful information) supplemented by risk analysis (economy, public finances) 2. permanent audit areas (final central government accounts and the Report on the Final Central Government Accounts, compliance with the budget and agencies' final accounts, performance in financial management, off-budget funds and EU funds) 3. strategic theme areas and themes evaluated annually 9
Selection of audit topics Selection of performance audit topics: 1. strategic theme areas (A productivity, B fiscal policy, C infrastructure and expertise, D quality legislation, E environment, F state activities and assets, G European Union) 2. themes 3. annual risk analyses or updates in administrative sectors -> unit's proposal 10
Conducting an audit performance audit manual: audits must comply with the manual (quality assurance) the manual and audits are in line with international standards (ISSAI) main stages of the audit process: preliminary study - audit - report - follow-up annual report 11
Preliminary study formulates the audit framework, plans how the audit will be conducted elements: main question subquestions criteria data and methods (project plan) 12
Preliminary study, effectiveness chain TRANSPARENCY AND RESPONSIBILITY NEEDS AND OBJECTIVES IMPACTS ACTORS AND FINANCING ACHIEVEMENT OF OBJECTIVES, INPUT-OUTPUT RELATIONS OUTPUTS STEERING AND FUNCTIONS 13
Preliminary study, audit questions questions are identified on the basis of the effectiveness chain main question directly concerns performance or is essential for performance main question indicates what the audit is meant to investigate subquestions dissect the main question into essential elements questions must consider financial perspective 14
Preliminary study, audit criteria criteria are grounds or standards used to evaluate matters in an audit criteria are specified for all audit questions criteria regarding the main question must be derived from Parliament's decisions (acts, budget, other legislation pertaining to government) 15
Preliminary study, data and methods preliminary study plans how to answer audit questions determines what data are needed for each question and suitable methods for collecting and analysing data ideally multiple sources should be used to answer questions 16
Preliminary study, project plan project plan works out the timetable and resources needed for an audit audits are lengthy processes and must be divided into stages basis for monitoring activities and improving efficiency 17
Audit (Full study) audit evidence is produced according to the framework created in the preliminary study production of audit evidence must be objective, critical and logical - generally applied research methods (developing research methods is not our job) - verification of evidence (multiple sources) to provide grounds for conclusions - careful documentation of findings according to guidelines 18
Audit report audit report presents the audit framework, findings and NAO's conclusions and recommendations auditee can give feedback before the final version of a report (a formal procedure) contradictory meetings with the auditees all reports are published and most are covered by press releases 19
NAO's annual activity report NAO must submit an annual report on its activities to Parliament (Act 676/2000) this report contains a summary of audit activities and an overall analysis on the basis of audits reporting on performance audit mainly according to strategic theme areas, plus special themes each year 20
NAO's separate reports NAO can also submit separate reports to Parliament (Act 676/2000) it submits a separate report on the audit of the final central government accounts each year - includes information produced in performance audits an individual performance audit report can also be submitted directly to Parliament 21
Follow-up what measures has the auditee taken on the basis of the NAO:s conclusions and recommendations? every audit report is followed up (follow-up plan, incl. a request to the auditee) follow-up period: 2-3 years follow-up report, which includes the NAO s opinion on the adequacy of the measures the auditee has taken; sent to the auditee and the audit committee
Facts about performance audit NAO's personnel totals about 145 (performance audit 55, financial audit 65, corporate services 10, administrative and communication services 15) Performance audit headed by assistant auditor general, senior directors, 5 audit groups audit personnel must a university degree 23
Organization of performance audit Assistant Auditor General Vesa Jatkola Audit Director Jarmo Soukainen Principal Performance Auditor Leena Juvonen Audit Manager Esa Pirilä Audit Group 1 Lassi Perkinen Off. of Pres. of Rep., PM's Office except ownership steering, Foreign Affairs, Justice, Interior, Defence Hamppula-Luoto Anne Lehtinen Timo (on leave) Lammi Katri Lindman Berndt Miettinen Eeva Määttä Kalle Nurmi Petri Ollila Sanna (on leave) Takala Maarit (on leave) Audit Group 2 Arto Seppovaara Ag. & For., Transport & Com., Environment except housing Estlander Katja Hoikkala Ari Kahelin Juhani Mäkinen Reijo Niemenmaa Vivi Paajanen Visa Siirola Jari Turtiainen Markku Vehkasalo Ville Vuorinen Sami Kivimaa Paula (temp) Audit Group 3 Armi Jämsä Education & Culture, Soc. & Health, Finance/municipal affairs, Environment/housing Hanhinen Sari Kalijärvi Teemu Kirjavainen Tanja Koskinen Mikko Martikka Nina Metsä Kimmo Nurminen Juho Oksanen Timo Rintala Taina Vuorela Terho (on leave) Audit Group 4 Hannu Rajamäki Finance except municipal affairs Alatalo Nina (on leave) Juutilainen Jukka Luoto Olli-Pekka Mustonen Vuokko Naumanen Klaus Niemelä Juha Näätänen Tuula Oksanen Eija Ollakka Esko Paukkala Erja Voutilainen Tomi Kouki Suvi (temp) Audit Group 5 Employment & Economy, PM's Office/ownership steering, state/ownership steering, off-budget funds Halonen Osmo Isola-Miettinen Hannele (on leave) Juvonen Leena Koivunen Vesa Ojala Matti Pottonen Markku Sälli Kirsti Tervo Hannu Statements and legal advice Sälli Timo-Veli Miettinen Mikko 24
Performance audit in figures 15-20 performance audits and follow-ups a year 1-2 international parallel audits a year 1-5 other publications numerous statements and appearances before committees as part of expert activities various seminars and training sessions 25