Understanding and Using this Act > Normative Measures for Financial Management > Annexure A : User Manual for applying NMFM

Critical Performance

Area

Basic Evaluation

Yes/

Performance Indicator/Measure/ Requirement

Performance

Remarks/Reference Annexure

Norm

Actual

1)	Accounting officer (AO)

Chief financial officer (CFO)

and other

organisational issues

1)	Has an employment contract/annual performance agreement been prepared between the executive authority and the accounting officer? [sec 36(5) of the PFMA & PSR, Chapter 1 Part VII.B.2]

Existence

Frequency of evaluation and updating

Quality of performance agreement

Quality of employment contract

Signed performance agreement on or before 30 April or within three months from date of appointment

4 times per year

Includes performance standards which are in line with objectives in the strategic plan

Responsibilities of AO in terms of sec 38-42 of the PFMA form part of the agreement

Specified main delegations or authorisations

A1.1

1)	Has a competent CFO been appointed? [TR 2.1]

Appropriate qualifications

Appropriate experience

CA/ MBA/ B Comm

± 5 years financial management experience

A1.2

1)	Has an annual performance agreement been prepared between the AO and the CFO? [PSR, Chapter 4 Part III]

Existence

Frequency of evaluation and updating

Quality of performance agreement

Signed agreement on or before 30 April or within 3 months from date of appointment

4 times per year

Include performance standards which are in line with objectives in the strategic plan

A1.3

1)	Is the CFO seen as a business partner who is actively involved in the strategic issues facing the department?

Effective contribution

CFO attends at least 12 senior (Top) management meetings per year and reports on financial issues

CFO correctly placed on the departments organogram to allow direct accountability to the AO

A1.4

1)	Has the CFO and his/her financial team prepared a strategic plan for the finance component and is this plan updated regularly?

Documented evidence

Frequency of updating

Strategic plan exists

Annually

A1.5

1)	Has the finance component been aligned to support the CFO and implementation of the PFMA?

Existence of key personnel

Financial accountant

Management accountant

Supply chain management practitioner

A1.6

1)	Is the vacancy rate in the finance component addressed on a regular basis? [PSR, Chapter 1, Part III]

No. of vacancies X 100

Establishment of finance

Component

Average length of vacancy

3 months

A1.7

1)	Are the staff in the finance component appropriately qualified? [PSR, Chapter 1 Part I.B]

% of staff who have finance related qualifications or who are studying towards obtaining related qualifications

90%

A1.8

1)	Have development plans been drawn up for all staff members in the finance section? [PSR, Chapter 1 Part VIII.B]

% of financial staff with development plans

% implementation of structured training programme

100%

A1.9

1)	Have job descriptions been prepared for each post or group of posts in the finance component? [PSR, Chapter 1 Part III.I]

Existence of job descriptions

Frequency of updating

100%

Every 3 years

A1.10

1)	Are all departmental policies and procedures within the finance component documented?

% of departmental policies and procedures documented

Compliance

Frequency of updating

100%

In-line with latest Treasury Regulations

Annually

A1.11

1)	Does the rest of the management team in the department understand the principles of good financial management and are they aware that all are responsible for financial management? [sec 44 & 45 of PFMA]

Frequency of information sessions

2 sessions per year

A1.12

1)	Are performance agreements/plans drawn up at all levels of the hierarchy? [PSR, Chapter 1 Part VIII.]

Existence

Timeliness

Frequency of performance evaluation

Documented plans/agreements

1 April

4 times per year

A1.13

1)	Are officials within the department acquainted with the measures set out in the code of conduct for the public service? [PSR, Chapter 2 ]

Frequency of information sessions

2 sessions per year

A1.14

1)	Has your department established processes to ensure suitable oversight over public entities under the control of your executive authority? [sec 63(2) of PFMA]

Compliance

Schedule 2 PE and Schedule 3 business enterprises

Submission of corporate plans

Submission of estimates of revenue & expenditure and borrowings

Annual shareholders compact

Quarterly reports regarding performance

Schedule 3 PE

Submission of strategic plans

Submission of estimates of revenue & expenditure

Quarterly reports regarding performance

A1.15

1)	Has your department established processes to ensure suitable oversight over trading entities under its control [TR19.3.1]

Compliance

Documented policy and reporting framework

A1.16

1)	Has the accounting officer delegated his/her responsibility to other officials in terms of the PFMA? [sec 44 of the PFMA]

Existence of delegations in writing and updated on a regular basis

Complete set of delegations for :

-PFMA

-Treasury Regulations

Updated annually

A1.17

1)	Has the executive authority delegated his/her responsibilities to officials in terms of the Public Service Regulations? [PSR, Chapter 1 Part 11.B]

Existence of delegations in writing and updated on a regular basis

Complete set of delegations for :

-Public Service Act

-Public Service Regulations

Updated annually

A1.18

2)	Risk management

1)	Has the AO accepted responsibility for the total process of risk management, as well as forming his/her own opinion on the effectiveness of the process? [TR 3.2.1]

Existence and communication

Written, approved documents exist and are properly distributed/ communicated

A2.1

1)	Has the AO made use of generally recognised risk management and internal control models and frameworks?

Existence and best practice

Documented, approved system of risk management and internal control based on a recognised model

A2.2

1)	Has the AO ensured that a formal risk assessment is under-taken to determine the major risks (key strategic and material/ significant risks) facing the organisation? [TR 3.2.1]

Frequency

At least annually

A2.3

1)	Has a comprehensive system of control been established by the AO to ensure that the identified major risks are mitigated and that the organisation’s objectives are attained? [TR 3.2.1]

Existence

Documented, approved portfolio of evaluated control activities for each risk identified

A2.4

1)	Are the strategies and control activities implemented by management adequate and appropriate to mitigate identified major risks?

Regular feedback

Twice per annum

A2.5

1)	Does the strategy to manage identified risks include a fraud prevention plan?[TR 3.2.1]

Existence

Implementation

Documented plan

2 reports per year

A2.6

2)	Internal control procedures

1)	Are proper internal control mechanisms designed and implemented?

Internal audit findings

Favourable

A3.1

1)	Are the activities of the department organised in such a manner that the following functions are segregated in each cycle :

•	Execution of the transaction

•	Accounting for the transaction

•	Custody of the related assets

Internal audit findings

Favourable

A3.2

1)	Is the accounting for each transaction type organised in such a manner that different persons perform the following activities:

•

Approving

•	Processing

•

Recording

•	Reconciling

Internal audit findings

Favourable

A3.3

1)	Does the department have documented levels of authority?

Frequency of revision

Internal audit findings

Annually

Favourable

A3.4

1)	Are audit enquiries raised by the Auditor General being finalised timeously?

Timeliness

Audit queries : 30 days

Interim audit management letters : 21 days

Final audit management letters : 14 days

A3.5

4)	Internal audit

1)	Does the department have an effective system of internal audit? [sec 38(1)(a) (ii) of the PFMA] [TR 3.2]

Existence and effectiveness

Internal Audit Unit

Reliance by top management

Reliance by the external auditor

At least 4 recommendations annually

75% of recommendations implemented

A4.1

1)	Has a competent head of internal audit been appointed?

Appropriate qualifications

Appropriate experience

CIA/MBA/B. Com/ACIS

5 years management experience in internal auditing

A4.2

1)	Does the internal audit unit report at a level within the organisation that allows it to accomplish its responsibilities fully? [TR 3.2.9]

Documented reporting line

Report directly to accounting officer

A4.3

1)	Is the purpose, authority and responsibility of the internal audit activity formally defined? [TR 3.2.5]

Documented proof

Internal audit charter is approved by the Audit Committee

Rolling three year strategic plan

Annual internal audit plan

Plans indicating proposed scope of each audit

A4.4

1)	Is the internal audit effort based on the strategy for managing departmental risks? [TR3.2.1]

Documented proof

Internal audit plan addresses risk areas

A4.5

1)	Is the internal audit function evaluated to ensure that internal audits are performed with proficiency and due professional care?

Regular reviews

Annual review by audit committee

Every 5 years quality assurance review by an independent, external party

A4.6

1)	Does internal audit submit reports to the audit committee detailing performance against the internal audit plan? [TR 3.2.7 (d)]

Frequency

Timeliness

Quarterly reports

15 days after each quarter

A4.7

1)	Is the internal audit function scrutinised and evaluated to ensure that it maximises the benefits from its independent status?

Frequency

Review by audit committee performed at least every 3 years

A4.8

1)	Does internal audit assess the operational procedure and monitoring mechanisms over all transfers made and received in terms of the annual Division of Revenue Act?[TR 3.2.8]

Frequency

Annually(form part of annual plan)

A4.9

5)	Audit committees

1)	Has an audit committee been established? [sections 38 (1) (a) (ii) & 77 of the PFMA and TR 3.1]

Establishment of an effective independent audit committee

Must have appropriate experience

Consultation with executive authority

At least three members

Majority of members may not be in the employ of the department

One member from outside the public service

Chairperson may not be in the employ of the department

A5.1

1)	Does the audit committee have formally determined, written terms of reference dealing with membership, mandate audit approach and operating procedures? [TR 3.1.8]

Existence

Formal, written terms of reference, approved by the accounting officer

A5.2

1)	Does the Audit Committee meet with the external auditors on a regular basis? [TR3.1.16]

Frequency

At least once a year

A5.3

1)	Does the audit committee have clearly agreed reporting lines? [TR3.1.12]

Clear reporting lines

Report to accounting officer

A5.4

1)	Is the audit committee subject to regular evaluation by the accounting officer as to its performance and effectiveness?

Frequency

Annually

A5.5

1)	Does the audit committee meet on a regular basis? [sec 77 of PFMA ]

Frequency

At least twice per annum

A5.6

1)	Does the Audit Committee render an effective service to the department? [TR 3.1]

Coverage and quality of reports

Effectiveness of internal audit function

Effectiveness of internal control

Risk areas to be covered in internal and external audit

Reliability and accuracy of financial reports

Compliance with legal and regulatory provisions

A5.7

1)	Does the audit committee submit a report for purposes of the annual report? [TR 3.1.13]

Coverage of report

Effectiveness of internal control

Quality of in year management and monthly reporting in terms of the PFMA and DORA

Evaluation of annual financial statements

A5.8

Understanding and Using this Act

Normative Measures For Financial Management

Annexure A : User Manual for applying NMFM

A. Management Arrangements