PROGRESS REPORT ON THE IMPROVEMENT OF FINANCIAL …pmg-assets.s3-eu-west-1.amazonaws.com › docs...
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PROGRESS REPORT ON THE IMPROVEMENT
OF FINANCIAL MANAGEMENT - 2012
STANDING COMMITTEE ON PUBLIC ACCOUNTS
Presenter: Mr. Freeman Nomvalo | Deputy Director-General - National Treasury | 26 March 2013
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CONTENTS
• Background
• Audit Outcomes Explained
• Analysis of Audit Outcomes – National Departments
• FMCMM Introduction
• 2012 FMCMM Assessment
• Key findings
• National Treasury Initiatives
• Conclusion
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Background
• Public Finance Management Act (Act 1 of 1999) took effect 12 years ago
• FMCMM was developed in 2008 after being used by Auditor-General
• Audit Outcomes remain an independent and objective measure of the financial
health of institutions
• Presentation covers report to SCOPA and SCOF on improvements in Financial
Management in preceding year (2011/12)
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AUDIT OUTCOMES - EXPLAINED
Audit Opinion Severity of Opinion Explanation
Adverse Most severe opinion
The misstatements in the financial
statements are, individually or in
aggregate, material and pervasive.
Disclaimer More severe opinion
The possible effects of the inability to
obtain sufficient appropriate audit
evidence could be both material and
pervasive.
Qualified Severe opinion
The misstatements in the financial
statements are, individually or in
aggregate, material but not pervasive.
Financially Unqualified
with Other Matters Least severe opinion
The financial statements fairly present, in
all material respects, the financial position
of the institution but drawing attention to
the users of other matters.
Financially Unqualified
with NO Other Matters
Good opinion (No
issues affecting AFS)
The financial statements fairly present, in
all material respects, the financial position
of the institution.
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ANALYSIS OF AUDIT OUTCOMES
0%
10%
20%
30%
40%
50%
60%
70%
2007/08 2008/09 2009/10 2010/11 2011/12
3% 0% 0%
3% 3% 0% 0% 0% 0% 0%
31%
40%
33%
26%
14%
47% 47%
57%
64%
56%
19%
13% 10%
8%
28%
NATIONAL DEPARTMENTS
Disclaimer Adverse Qualified Unqualified (with findings) Unqualified (with no findings)
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FMCMM - INTRODUCTION
• Tool to assess the financial management maturity departments
• Comprises a set of 583 questions
• Framework for strengthening financial management
• The Model consists of six (6) progressive levels of maturity
• Levels 1 - 3 focus on development and implementation of
frameworks and policies.
• Levels 4 - 6 measure optimal use of information and resources
to achieve objectives.
• Functional areas tested: Revenue Management; Asset
Management; Liability Management; Goods and Services;
Compensation of Employees; Transfer Payments and General
(IT and General Controls)
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FMCMM LEVELS
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FMCMM – 2012 ASSESSMENT
• Objective: To measure the level of progress made by
departments in addressing weaknesses identified during
the 2011 assessments
• Focus on questions previously answered “No” and “Partial”,
indicating limitations in those areas.
• Focussed approach to address weaknesses and
improvements.
• Results show a steady improvement in financial management
and correlates with audit outcomes.
• Results indicate that partnerships between departments and
National Treasury are yielding desired results of improving
financial management.
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FMCMM – AVERAGE NATIONAL SCORES
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2,60
2,65
2,70
2,75
2,80
2,85
2,90
2,95
3,00
2010 2011 2012
2,75
2,88 2,93
Average National Score
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FMCMM – % PROGRESS MADE (2011 – 2012)
10
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Improved Deteriorated Unchanged
61%
35%
4%
78%
0%
22%
Progress made - % of Departments 2011 Progress made - % of Departments 2012
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FMCMM - % DEPARTMENTS PER LEVEL RANGE
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0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2.00-2.70 2.71 - 2.97 2.98 - 3.00
7%
68%
25%
0%
70%
30%
% of departments per levels range 2011 % of departments per levels range 2012
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FMCMM – MATURITY LEVELS PER FUNCTIONAL AREA
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2,4
2,5
2,6
2,7
2,8
2,9
3
AssetManagement
Compensationof Employees
General Goods andServices
LiabilityManagement
RevenueManagement
TransferPayments
NationalAverage
2,6
2
2,7
8
2,7
6
2,7
9
2,7
7
2,7
8
2,7
5
2,7
5 2,8
1 2
,88
2,8
7
2,8
9
2,8
9
2,9
3
2,9
1
2,8
8
2,87
2,94
2,9
1
2,94
2,93
2,97
2,94
2,93
2010 2011 2012
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FMCMM – WEAKNESSES INDENTIFIED
• Lack of documented processes and procedures
• High vacancy rates
• Strategies and plans not implemented
• Lack of understanding of risks and controls
• Lack of skilled personnel and training
• Excessive use of contractors for recurring activities
• Lack of systems to improve processes
• Poor compliance environment and culture
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FMCMM – AVERAGE % OF NON COMPLIANCE
PER FUNCTION
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0%
5%
10%
15%
20%
25%
30%
AssetManagement
Compensationof Employees
General Goods andServices
LiabilityManagement
RevenueManagement
TransferPayments
NationalAverage
27%
18% 19%
17% 19%
15%
20% 19%
12%
5%
7%
5% 7%
3%
5% 6%
Average % of non-compliance per function 2011 Average % of non-compliance per function 2012
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INITIATIVES TO ADDRESS KEY FINDINGS
• Strategic support plans and Corrective plans
• Creating synergies with leadership and oversight structures
• Financial management capacity and skills development
• Risk management initiatives
• Supply Chain Management Initiatives (MAWG)
• OAG – Specialised Audit Services Unit
• Public Sector Audit Committee Forum
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INITIATIVES TO ADDRESS KEY FINDINGS cont.
• National Treasury CFO Handbook
• National Treasury Departmental Reporting Framework
• Interim Financial Statements
• Contracts Management Frameworks
• Revision of the FMCMM Model
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CONCLUSION
• Results indicate the challenges yet to be overcome but also the
substantial progress made to achieve sustainable financial management
in departments.
• Management should set the right tone on the severity of non-compliance
and take appropriate action on transgressors.
• National Treasury will continue to provide support to departments in the
form of FMCMM assessments and results; Strategic Support Plans and
Corrective Plans
• The onus lies with those charged with governance to bring impetus to the
process of improving financial management; HOWEVER –
• It is the responsibility of every government official to ensure adequate
financial management in order to further the service delivery objectives of
each government department for the citizens of South Africa
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THANK YOU