RIAM:SPECIALREVIEWS:Programme Reviews (Government)

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Inclusion of Program Reviews in Annual Audit Plans

Inclusion of a Program Review into an annual plan should be done only after taking account of planned evaluations, recent or pending ANAO audits, and recent or planned system and program changes, and associated post implementation reviews. any of these activities should influence the timing of the audit within a particular calendar year, and may cause the audit to be postponed to a subsequent year.

Allocation of Program Reviews to States/Territories

Responsibility for the conduct of a Program Review should be allocated a particular State/Territory or Central Office as part of the Annual Audit Plan planning process. In allocating this responsibility consideration should be given to the materiality of the particular program in that administration, balanced against the need to ensure appropriate work allocation across all audit units.

Appointment of Audit Manager

Each Program Review should be managed by a designated Audit Manager (or other such designation, eg Audit Leader). Appointment should be at the SOG B or C classification, depending on the materiality of the program and the development needs of the staff considered.

Responsibilities of the Audit Manager

The Audit Manager should be responsible for:

(1) Consulting and liaising with Program and Divisional management in Central Office; (2) Preparing a National Field Plan for approval by the Director, Internal Audit, Canberra; (3) Preparing advice of the audit for issue to appropriate client managers; (4) Conducting the audit in his/her State/Territory, and in C.O, as required; (5) Providing audit programs for application in all other participating States/Territories; (6) Performing quality assurance checks on the work done in the other participating States/Territories; and (7) Conducting national exit discussions in C.O. and preparing the National Report.

National Field Plan

The Audit Manager should be responsible for the preparation of a National Field Plan prior to the commencement of the audit. Its preparation requires research of background information relating to the program being audited and discussion with program managers in C.O. and his/her State/Territory.

The plan should contain the following:

 Assignment Cover Sheet

To indicate audit title, AAP Task Number, table of contents, date of preparation, name and location of preparer, and name & signature of officer approving the plan.

 Statement of Scope and Boundaries

To specify the audit coverage. The audit boundaries should be identified for audits which are restricted in scope and don't address all aspects of a program's operation.

In general terms, the audit should cover all processing and accounting arrangements, all publicity and marketing arrangements, all management information systems, all evaluation strategies (including performance indicators), and aspects of resource allocation to the program's administration.

 Statement of Audit Objectives

There should be common core objectives for all Program Reviews, as follows -

To provide an opinion on:

(1) Compliance with Commonwealth legislation and regulation, and Departmental policy and procedure (2) The efficiency and effectiveness of controls in achieving legislative, government and department objectives; (3) The extent to which human, financial and physical resources are economically and efficiently managed; (4) The reliability of management data used for decision making; (5) The extent to which accountability relationships are reasonably served through appropriate information flows and evaluations of performance;

and recommend:

(6) Options for improvement to current arrangements.

 Statement of Audit Method

A summary statement of the audit method to be used should be outlined. System based methods involving the following steps of modelling, documentation, analysis, testing, consulting and reporting should be followed.

 Assertion Model

An Assertion Model should be prepared following research of the relevant legislation and regulations, and discussions with program and line managers concerning their objectives. It should contain statements of system objectives, management assertions, and desirable controls for each of the systems or sub-systems subject to audit. System objectives and assertions should be agreed by the appropriate management.

Other planning or modelling techniques that may be identified for inclusion as appropriate include:

 Lists of exposures and an indication of their perceived risk  Criteria for the evaluation of effectiveness or efficiency

 Audit Budget

The budgeted audit time for the conduct of the audit should be specified.

 Audit Timetable

The planned timetable of the audit, showing the dates of the audit in the various States/Territories, and the completion date of the audit.

 Planned Consultation and Reporting arrangements

Details of the managers with whom entry interviews are planned/have been conducted, and with whom regular liaison during the course of the audit and exit interviews at the conclusion of the audit will be held should be specified.

 Other Considerations

In the course of preparing the National Field Plan the Audit Manager should establish with the relevant program and line managers areas of particular concern to them. Reference should be made in the plan to these requests/areas of interest, particularly if they would not normally be covered by the audit.

Similarly, other review activity conducted by the program or evaluation areas of the department, or by line management, should be identified during this planning phase. Some integration of review activity may be desirable.

Advice of the Audit

Formal advices should be prepared for issue under the signature of the Director, Internal Audit, to all Program and line managers who have a responsibility for the administration of the program subject to audit. At a minimum these should be all Division Heads and relevant Branch Heads in C.O., and all State/Territory Directors. The advice should detail the scope and objectives of the audit, the participating States/Territories, its planned duration, and provide the name of the Audit Manger to contact purposes.

Conduct of the Audit

The principle governing the conduct of Program Review audits should be that they constitute a single national audit where, to ensure national coverage, fieldwork is done in a number of representative States, and in a number of representative Area/Regional administrations within these States (as appropriate).

The sampling of administrative units (both States and offices within States) for the purpose of audit coverage is largely an efficiency consideration. The soundest statistical approach would be to randomly draw transaction samples form the national population. However, this approach is logistically difficult and provides no assurance that an opinion on individual Areas or States can be formed (to satisfy the interest/needs of these levels of management). Stratification of the national population of offices should provide for efficient sample selection and scrutiny. A sample of 30 (from a population of, say, 200 offices) should minimise the extent to which this stratification becomes statistically significant.

To achieve a focus on a national product it is essential that the audit remains under the control of the Audit Manager. It is also essential that all fieldwork be completed within a short timeframe as possible to ensure that common administrative and processing arrangements are audited and results are current when presented to national management.

The audit should be conducted as follows:

(1) Fully completed in the home State/Territory of the Audit Manger - including preparation of the State report and the conduct of exit discussions;

and then, shortly after

(2) Completed in the other participating States/Territories utilising a comprehensive audit program prepared by the Audit Manager following the completion of the audit and his/her home State/Territory - including preparation of the State report and the conduct of exit discussion.

Audit Programs

Conduct of the audit in the Audit Mangers home State/Territory should be in accordance with the IA section's preferred methodology. Full system documentation, analysis, testing and system/program evaluation should be completed.

Conduct of the audit in the other participating States/Territories should then be in accordance with an audit program prepared by the Audit Manager. The major component of the fieldwork will be the (re)performance of the tests done by the Audit Manager to provide further evidence to support/deny hypotheses and assertions. To this end the following should apply:

(1) The participating States/Territories be requested to confirm the system and program descriptions prepared by the Audit Manager. All major differences should be accounted for, particularly if they represent differences in program delivery strategies and/or internal control systems;

(2) Where no major differences are detected, testing should be conducted as directed by the Audit Manager; and

(3) Where major differences are detected, testing programs should be redesigned to take account of the different control systems, approved by the Audit Manager, and then conducted.

Quality Assurance

Quality assurance should be the responsibility of the Audit Manger. All working papers should be reviewed by him/her at the completion of fieldwork prior to the preparation of the national report. All State reports should also be reviewed by him/her prior to their submission/discussion to ensure consistency, particularly of issues that may become part of the national report.

The Audit Manager's papers should be subject to quality assurance review by his/her State Audit Manger where that is appropriate. The papers of Audit Managers who are themselves a State Audit Manager, or a SOG B in C.O., should be reviewed by another SOG B as a form of QA peer review.

In all States/Territories where the audit is conducted the relevant State Audit Manager has responsibility for the day-to-day supervision and review of the audit, and should participate in entry and exit discussions and the preparation of the State report.

National Reports

A draft national report should be prepared by the Audit Manger following the completion of audit fieldwork and State reporting.

In addition to providing a balanced view of the performance of the program audited the national report should distinguish between national and local issues. National issues are those aspects of the programs administration that require action to be taken at a national (C.O.) level; E.g. ADP system enhancements, redesign of evaluation strategies, procedural amendment to ensure national consistency of approach, etc. Local issues are largely operational in nature and can/have been addressed by the appropriate line managers following discussions with the auditors; E.g. non-compliance with established procedure, provision of training, alternation of workflows, etc. Their inclusion in a national report is largely for information purposes.

Care should also be taken to consult as widely as possible on the issues to be raised in the report, particularly if recommendations for major changes are proposed. In some instances it may be desirable to seek the views of State/Area/Regional managers and staff to the options being considered, or to have them to propose the solutions.

Exit discussions in C.O. should be on the basis of the draft national report. The Audit Manger should attend, with other audit representation as appropriate.

Distribution of the final national report should be to all managers who were originally advised of the conduct of the audit. Management responses should be included against all audit recommendations. For States/Territories where the audit was not conducted an invitation should be made to them to take account of the issues raised in the report, particularly the local operational issues, and review their performance and take corrective action as required.

State Reports

All participating States/Territories should prepared local State reports. These should drawn on the analysis of the national program review and be supported by local test results. In preparing these reports, purely local findings should be highlighted as action will be possible at a local level to resolve the problems identified. National findings and the planned release of a national report should be flagged.

Full consultation on these reports should be completed before their circulation outside the State in question (other than circulation within the audit team). This is to ensure appropriate consideration is given of findings and recommendations, and to involve local management in the development of solutions as much as possible.