Inclusion of performance information in annual reports of public sector entities can improve ‘quality’ service delivery.

An increase in the demands of taxpayers for quality, timely and appropriate service delivery by public institutions, has substantiated the need for accountability. This cannot be over emphasised by both legislature and other government watchdog bodies.

This has inevitably led to calls from various stakeholders for the inclusion of performance information in the annual reports of all public sector institutions to be more meaningful.

“Performance information has previously been on the back burner because entities were implementing effective and efficient internal control structures for financial management. Various stakeholders were obtaining assurance from the financial statements but the financial statements did not provide information on how the entities were achieving against their mandates agreed with government. Now, all government departments and public entities are expected to comply with the Public Finance Management Act (PFMA) (1999) requirements regarding reporting on performance,” says George Higgins (pictured), Associate Director, Assurance Technical, at Ernst & Young.

He affirms that key performance indicators, set by an entity to achieve its legislated mandate, must be included in the annual reports. “This information must be reviewed by the auditors against the actual achievements of these entities.”

“Adopting a private sector business principle where performance is measured punctiliously is a good starting point. Public entities may choose to replace the current profit orientation with service delivery and require performance benchmarks if they want to be serious about the efficient delivery of quality services. Various incidents have demonstrated a need for a standard or benchmark against which local performance could be scored,” he adds.

Higgins acknowledges that in a competitive environment there is a clearer focus on the importance of financial results and improved business performance. In the private sector, he continues, it has become standard practice to align accountability for driving out the benefits of change programmes through the line management of the business. This key principle can be adopted in the public sector as well.

“There is, therefore, a major opportunity for the public sector to derive much more benefit from the inclusion of performance information in their financial reports. This also requires a fundamental change of mindset, to place continuous improvement at the heart of managing the business of service delivery,” he says.

Higgins concludes: “Measuring performance will not only result in operational improvement, it will guide management. Managers equipped with a good set of performance measures are better able to detect operational strengths and weaknesses, to provide relevant feedback to employees and work units, and to deploy close supervision where it is needed most.