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“AUDITING IN THE PUBLIC INTEREST” NEWSLETTER, WINTER 2001
Providing quality audit outcomes
“… we all need to be conscious of the public’s expectation … [for us to provide] quality audit outcomes for all of the various stakeholders with an interest in the effectiveness, efficiency and accountability of the public sector.”
Autumn and early winter is always a very busy time for our Office – finalising reports to Parliament before the House rises for its winter recess and preparing for the 30 June audit round. By now, audit planning for the latter will be well advanced, if not completed. The early signs are that many public sector entities expect to have their financial statements completed and available for audit earlier this year than in the past. Although this makes us and our external audit service providers extremely busy, these signs, in the interest of public accountability, are very encouraging since we all know that the timely provision of information is the most valuable.
The quality assurance review of all external audit service providers and Audit Directors within the Victorian Auditor-General’s Office is materially complete. Feedback has been provided to auditors on the outcome of that work. This important step is designed to ensure that all audit work is done to the highest possible standard and that all aspects of my audit mandate are considered when audit work is undertaken in the field.
The quality assurance review was also an important pre-requisite to the conduct of the current tender round, wherein 164 audits were made available to the private sector for the supply of audit services to the office. Those tenders have closed and I await the outcome of the tender evaluation exercise.
As I mentioned at a recent conference, significant commercial failures in the private sector, mainly HIH Insurance, Harris Scarfe and OneTel have refocused the attention of the public on the effectiveness of the role of auditors in our society. More than ever before, we all need to be conscious of the public’s expectation that competent and independent audits will be undertaken - none more so than for public sector entities. The public’s expectation is that our work will be timely, comprehensive, and competently performed. In the case of the public sector, the outcome of that audit work is publicly conveyed so that the public derives assurance and comfort from that audit activity. We need, therefore, to bear this in mind during the current audit round as a spur to providing quality audit outcomes for all of the various stakeholders with an interest in the effectiveness, efficiency and accountability of the public sector.
Wayne Cameron
Auditor-General
Reports tabled during the Spring 2001 Session
As a organisation with a client base of around 550 public sector entities, the Office plays an important role in the public sector accountability process. Through this process, we endeavour to contribute to improved performance and enhanced accountability within the Victorian public sector.
An essential component of this process involves the preparation of audit findings arising from our financial statement and performance audits. These findings are presented to Parliament as reports of the Auditor-General.
The Office tabled 4 reports in the Parliament during the recent Spring Session. The reports included:
• Implementing Local Priority Policing in Victoria (tabled 2 May 2001);
• Teaching equipment in the technical and further education sector (tabled 16 May 2001);
• Report on results of 1999-2000 audits by Ministerial Portfolio (tabled 6 June 2001); and
• Managing Victoria’s growing salinity problem (tabled 13 June 2001).
Printed copies of all Auditor-General’s reports are available from:
• Information Victoria Bookshop
356 Collins Street
Melbourne, Vic. 3000
AUSTRALIA
Phone: (03) 1300 366 356 (local call cost)
Fax: (03) 9603 9920
or
• Victorian Auditor-General's Office
Level 34, 140 William Street
Melbourne Vic. 3000
AUSTRALIA
Phone: (03) 8601 7000
Fax: (03) 8601 7010
E-mail: comments@audit.vic.gov.au
The full contents of all reports are also included on the Office’s website at www.audit.vic.gov.au
Implementing Local Priority Policing in Victoria
The Local Priority Policing model of community policing is a major initiative aimed at improving the effective utilisation of police resources. The initiative is being implemented in 3 phases, with the final phase due for completion by July 2002.
Mobile facilities are used as self-contained mini-command posts at crime scenes
or as bases for public relation activities.
This performance audit assessed whether Victoria Police has effectively managed the implementation of Local Priority Policing to date. Our Report stressed that while it was too early to make definitive assessments, there were strong indications that Local Priority Policing may not achieve its objectives unless Victoria Police promptly addresses a number of important issues, including:
• establishing suitable project management and monitoring arrangements;
• formalising relationships with key agencies, addressing duplications and overlap with other government agencies, and identifying joint priorities and actions to promote achievement of the whole-of-government objectives of Local Priority Policing;
• improving interactions with the community; and
• ensuring it has the right staff to implement the initiative.
Victoria Police responded positively to the report indicating that the majority of issues raised were being addressed and that the audit suggestions would provide guidance to enhance Local Priority Policing. Issues raised by the audit team with Victoria Police during the conduct of the audit led to the establishment of the Local Priority Policing Steering Committee to monitor and manage the implementation of the initiative and action taken in response to the report.
Teaching equipment in the technical and further education sector
This report addressed issues arising from a performance audit of teaching equipment used in delivering vocational education and training. The conduct of an audit in this area was considered important given that the effective delivery of training is directly linked to the Government’s policy objective of developing a strong skills base within Victoria.
Information technology utilised for online learning.
(Photo courtesy of Goulburn Ovens Institute of TAFE.)
The audit identified that insufficient funds have been provided in recent years to enable technical and further education (TAFE) institutes to implement structured equipment replacement programs. As a result, the Government will face increased funding demands in future years. The need for TAFE institutes to adopt improved asset management practices was also evident, particularly in the areas of strategic planning, preventative maintenance, information systems and consideration of alternative purchasing options.
The Department of Education, Employment and Training and individual TAFE institutes responded positively to the report. The Department indicated that the recommendations resulting from the audit would provide an appropriate framework for the development of future strategies.
Post-acute care planning
Over the past decade, significant changes in acute health care, including declining patient length of stay in acute hospitals, have meant that patients are increasingly receiving care in the community, subsequent to discharge or “post-acute” care.
This audit described the changes in activity throughout the decade in acute, sub-acute and post-acute care and the level of resources, and examined the Department of Human Service’s strategic planning and policy and funding frameworks, its approach to encouraging innovation and improved service delivery by health service providers, and its program monitoring and evaluation practices.
Recommendations made addressed areas such as data availability, co-ordination of activities between the State and Commonwealth Governments, monitoring of effectiveness of service delivery and evaluation of programs. The Department agreed with each of the recommendations made in the report.
Full details on this performance audit were included with the Report on results of 1999-2000 audits by Ministerial Portfolio, June 2001.
Report on results of 1999-2000 audits by Ministerial Portfolio
The report provided information to Parliament on a wide range of issues, primarily relating to the financial years 30 June 2000 and 31 December 2000. The report also contained some special reviews undertaken up to the date of preparation of the report.
Topics covered in the report included:
Education, Employment and Training
• Status of Bio21 (a Melbourne University project);
• Impact of the creation of Melbourne University Private on the University of Melbourne;
• Financial viability of public technical and further education providers; and
• School Global Budget.
Human Services
• Financial viability of hospitals;
• Rural hospital information technology alliances; and
• Post-acute care planning.
Infrastructure
• Local government performance reporting; and
• Property valuations used for rating purposes.
Justice
• Management of the Metropolitan Women’s Correctional Centre; and
• Estate Agents Guarantee Fund.
Natural Resources and Environment
• Summary of audit results;
• Automation of the Land Titles Register;
• Wind-up of the Victorian Dairy Industry Authority;
• Buy-out of bay and inlet commercial fishing access licences; and
• Alpine resorts land stability.
Remedial works being carried out at Higgi Drive, Mt Hotham, behind the Arlberg apartments.
(Photo courtesy of Mt Hotham Alpine Resort Management Board.)
State and Regional Development
• Progress with Federation Square development;
• Status of the Melbourne Docklands development; and
• Regional Infrastructure Development Fund.
Federation square development - Atrium interior.
Treasury and Finance
• Financial standing of the Victorian WorkCover Authority;
• Motor vehicle fleet management by Department of Treasury and Finance; and
• State Revenue Office information technology systems.
Broad scope issues
• Performance reporting within the budget sector; and
• Outcome of IT audits of government departments and selected other agencies.
The report is a key means for ensuring that the Government is fully accountable not only for its financial operations but also for its performance to Parliament, and to the Victorian community.
The findings and recommendations contained in the report are aimed at presenting value-adding and constructive suggestions for the better financial and resource management of the Victorian public sector.
Managing Victoria’s growing salinity problem
The salinisation of Victoria’s land and water assets poses a serious threat to our natural resource base. For this reason, it was timely to re-visit this topic previously audited in 1993, in order to examine the appropriateness of action taken in response to our earlier recommendations, and to assess Victoria’s preparedness to implement the 2000 Salinity Management Framework.
The audit found that the State had invested $257 million on salinity management since 1990 and had contributed to improved salinity conditions in Victoria’s major irrigation districts. However, salinity in non-irrigated (or dryland) areas had worsened over the same period. Based on past achievements, only a few Catchment Management Regions are on schedule to meet their 30-year revegetation targets.
We concluded that, although Victoria is in a relatively good position to implement management options under the 2000 Salinity Management Framework, the scale of the worsening salinity problem may overwhelm future effort.
The Department of Natural Resources and Environment responded positively to the audit and has undertaken to work towards addressing the suggestions for improvement made in the Report.
Planning for the future
Corporate planning is essential for the future success of an organisation. Strategic long-term and short-term planning, whether within the private or the public sector, provides a sharp focus on an organisation’s future directions, goals, measures of performance and levels of effectiveness.
Following the recent re-structuring of the Victorian Auditor-General’s Office and the significant legislative reforms impacting on the operations of the Office, we have prepared a new 3-year Corporate Plan (for the period 2001-01 to 2003-04). As required by legislation we have also prepared an Annual Plan for 2001-02, and this Annual Plan was tabled in Parliament in June 2001.
The Corporate Plan provides readers with some Office profile information as well as details on our planning cycle and, importantly, our objectives, strategies, performance measures and key targets for the next 3 years. Our 5 key objectives over the 2001-02 to 2003-04 period are to:
• deliver value-adding reports to the Parliament;
• undertake high quality independent audit activities;
• meet the needs and expectations of our stakeholders;
• be identified as a preferred employer; and
• manage our business with maximum efficiency and effectiveness.
Our Annual Plan for 2001-02 provides the Parliament with details on our planned performance for the year, focusing on our 2 principal areas of activity, namely, the provision of reports to Parliament and the conduct of financial statement audits. We have set out our output targets with reference to quality, timeliness, quantity and costs, as they relate to our provision of products and services.
The Annual Plan also outlines details of major audits in progress, as well as details of major audits to commence during 2001-02. Further details on these audits are provided below.
The full contents of the Corporate Plan and the Annual Plan are available on the Office’s website at www.audit.vic.gov.au Printed copies are available from the Office upon request.
Audits planned for 2001-02
At June 2001, the Office was well advanced in the conduct of 2 major audits, namely, “Management of serious injury claims by the Victorian WorkCover Authority” and “Management of major claims by the Transport Accident Commission”.
In addition, the following potential major audits are planned for commencement during 2001-02:
Across government
• Departmental performance management and reporting; and
• Parliamentary control and management of appropriations.
Health
• Mental health services; and
• Health workforce planning.
Education
• Primary and secondary teacher workforce planning; and
• Overseas students - impact on Victorian universities
State Development
Local Government
• Infrastructure asset management within local government; and
• Food safety and inspection regime.
Environment
Justice
An outline of each of these potential audit topics is contained in the Office’s Annual Plan for 2001-02 at www.audit.vic.gov.au under “Annual Plan”, “Planned performance for 2001-02”.
New office video
As part of the Office’s corporate relations activities, we have updated our corporate video to reflect our changed operational environment following legislative amendments passed by Parliament.
The 8 minute video, titled “Auditing in the Public Interest”, provides viewers with brief background information on the role of the public sector in providing a range of services to the Victorian community, as well as details on the range of the Office’s client base, and the services they provide. The video also outlines the processes we follow in conducting audit operations and provides information on the important accountability role played by the Office, especially through the tabling of our reports in Parliament.
The video is intended for a wide audience, including our key stakeholders such as Parliament (and Members of Parliament), our audit clients, and community and professional groups with an interest in the Office. The video is also used for educational and recruitment activities at tertiary institutions.
Copies of the video are available from the Office at a cost-recovery price of $15, including GST and postage. Please email requests to kim.nolan@audit.vic.gov.au
Accounting standards - update
There are a number of new/revised Accounting Standards that have been issued by the Australian Accounting Standards Board that are applicable to the preparation of a general purpose financial report at 30 June 2001:
The Trilogy
AASB1018/AAS1 - Statement of Financial Performance
AASB1040/AAS36 - Statement of Financial Position
AASB1034/AAS37 - Financial Report Presentation and Disclosure
Revaluations and Impairment
AASB1041/AAS38 - Revaluation of Non-Current Assets
AASB1010/AAS10 - Recoverable Amount of Non-Current Assets
Industry
AASB1037/AAS35 - Self-generating and Regenerating Assets
Other
AASB15/AAS21 - Acquisition of Assets
Application of AAS1 in the public sector
AAS27 "Financial Reporting by Local Governments", AAS29 "Financial Reporting by Government Departments" and AAS31 "Financial Reporting by Governments" require the operating statement to be prepared in accordance with AAS1. AAS1 requires that when a requirement of this Standard conflicts with the requirement of another Standard, the requirement of the other Standard prevails. As a general rule, the statement of financial performance should be presented in the format required by AAS1. As the format specified in AAS1 is flexible, conflicts will be rare, especially as many of the requirements of the revised AAS1 relate to the provision of additional information.
AAS1 introduces new terminology, however, this need not become a major issue. While use of the new terminology is preferred, if the same results are calculated and the required disclosures are provided in a statement titled other than "statement of financial performance", it can be argued that the objectives of the Standard have been achieved. While the Standard requires specific line items to be disclosed in the statement, many of these are identifying the amounts to be disclosed, but not necessarily the description that needs to be used in all situations. The terminology should be indicative of the nature of the item and be relevant to the circumstances of the entity and the likely users of the financial report.
Copies of publications issued by the AASB, including Accounting Standards, are available directly from the AASB: telephone (03) 9617 7600, website: www.aasb.com.au
Auditor-General's assessment on preparation of State Budget
The Financial Management (Financial Responsibility) Act 2000 requires the Auditor-General to annually review the Government’s estimated financial statements that accompany the Government’s Budget Papers. In accordance with section 16B of the Audit Act 1994, the Auditor-General must review each set of estimated financial statements prepared and make a report to Parliament as to whether it appears that:
• the statements have been prepared on a basis consistent with the accounting policies on which they are stated to be based;
• the statements are consistent with the targets specified in the current financial policy objectives and strategies statement for each key financial measure specified in that statement;
• the statements have been prepared in accordance with the requirements of section 23K of the Financial Management Act 1994 (for details see below); and
• the methodologies used to determine those assumptions are reasonable.
This audit assurance does not imply that the Auditor-General is guaranteeing the achievement of the projected budget outcome; that remains the Government’s responsibility. Rather, the Auditor-General provides an assessment of the reasonableness of the key methodologies and processes followed to determine the assumptions and data upon which the Estimated Financial Statements are based. The level of assurance provided is less than what would be normally provided in an audit.
An audit certification on estimated financial statements was provided on 9 May 2001 and included with the Government’s Budget Papers which were tabled in Parliament on 15 May 2001
Annual Report Award for the Office
The 51st Annual Report Awards were held in Melbourne on 7 June. The Awards recognise best practice in annual reporting and attract entries from listed companies, government agencies, community groups and not-for-profit organisations. Annual reports from around Australia, and some from overseas, are assessed against criteria developed by the Annual Report Awards organisation.
This year, some 340 organisations entered their annual reports into the Awards, and almost 100 entries were received from Victoria. The Victorian Auditor-General’s Office entered its 1999-2000 Annual Report and was successful in achieving a high standard of excellence, and was presented with a Silver Award. The Annual Report was commended for its quality coverage of most aspects of the ARA criteria and outstanding disclosure in key areas of the criteria.
The Annual Report is available on the Office’s website at www.audit.vic.gov.au
Further Information
Further information about any of the issues contained in this publication, or about the Victorian Auditor-General’s Office, may be obtained from:
John Olesky
Manager, Reports and Communications
Victorian Auditor-General’s Office
Level 34, 140 William Street
Melbourne Vic. 3000
Fax: (03) 8601 7099
Email: john.olesky@audit.vic.gov.au
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