AUDITING IN THE PUBLIC INTEREST”
NEWSLETTER, SPRING 2006

NEW AUDITOR-GENERAL,
DES PEARSON, APPOINTED

Mr Des Pearson took up the position of Auditor-General of Victoria on 1 October 2006. He was previously Auditor-General of Western Australia (since 1991).

Mr Pearson commenced his public service career in 1970 as a graduate Cadet Auditor with the Australian Auditor-General’s Office and progressed through a range of field auditor positions in Brisbane and Canberra to become Chief Auditor, Northern Territory Region.

From 1979 to 1988 he worked with the Australian Department of Primary Industries and Energy as Assistant Secretary, Corporate Resources and later as Senior Assistant Director with the Australian Quarantine and Inspection Service of that Department.

Mr Pearson was the Associate Director, Corporate Services with the Canberra Institute of Technology from 1988 to 1991. During that period he acted for extended periods as Director of the Institute.

Mr Pearson has been an involved member of CPA Australia, the Institute of Public Administration and the Australian Institute of Management having served all three bodies as WA President and at National Board level. He was CPA Australia’s National President in 2001 and was elected a National Fellow of the Institute of Public Administration in 2002.

He was also a member of the Auditing and Assurance Standards Board from 1997-2000 and Convenor of the Australasian Council of Auditors General from 1997-1999.

He is currently a member of the Australasian Council of Auditors General and of the Australian Accounting Standards Board.

Mr Pearson is a Life Member and Fellow of CPA Australia, a Fellow of the Australian Institute of Management, a National Fellow of the Institute of Public Administration Australia and a Fellow of the Institute of Chartered Accountants in Australia.

RECENT REPORTS TABLED IN PARLIAMENT

Government advertising (September 2006)

The audit of government-funded advertising and communications arose from concerns expressed from parts of the community about the quantum and nature of government-funded communications towards the end of 2005. The audit’s primary purpose was to determine whether selected public sector advertising campaigns complied with the government guidelines and whether processes around the management of government advertising were adequate.

We conducted assessments of 8 campaigns, namely, Our Water, Our Future; Bringing Learning to Life; CrimeSmart: Do Your Part; Better State of Health (Blueprint and Rural Health Services campaign components); Alpine Grazing; Make it Happen in Provincial Victoria; World Class Performance; and Building a World Class Victoria. Our assessment of the selected campaigns showed that while the Make it Happen in Provincial Victoria and Alpine Grazing campaigns complied with the government Guidelines for Victorian Government Advertising and Communications, aspects of the remaining 6 campaigns did not.

During the audit we developed better practice, Criteria for government-funded publicity activities and believe they set a higher test for determining the appropriateness of government-funded publicity activities (including advertising and communications). We consider that, if these criteria were applied to the selected campaigns, aspects of a number of the campaigns would not meet better practice. The government guidelines should be enhanced to provide for a test of the basic purpose for which government-funded advertising and communications are conducted, and consideration of the need for the activities. The 2006 better practice, Criteria for government-funded publicity activities, could provide a basis to review the current government guidelines.

We also examined the level of advertising and communications expenditure, including media buying; the appropriateness of the use of media buying rebates; procurement of services for each of the 8 campaigns to determine compliance with procurement requirements; and the appropriateness of arrangements in place to ensure effective governance and oversight of government advertising and communications activities. In the absence of readily available data on the level of Victorian public sector advertising and communications, data we collated showed that the amounts involved were significant, and growing, in nominal dollar terms.

Auditor-General’s Report on the Annual Financial Report of the State of Victoria, 2005-06 (October 2006)

The Auditor-General’s Report on the Annual Financial Report of the State of Victoria, 2005-06 was tabled in parliament 4 October 2006.

The report set out the results of our audit of the Financial Report for the State of Victoria for the year ended 30 June 2006. A clear audit opinion was issued on the Annual Financial Report (AFR).

The report highlighted several issues that impacted on the preparation of the AFR which require attention in 2006-07 to improve the timeliness of its completion and the quality of information presented therein. These include:

• the need for some major state agencies to improve the timeliness of their financial reporting

• some improvements in the presentation of information included in the report about state expenditures and financial commitments.

Importantly, the report confirmed the government’s assessment of the favourable financial outcomes achieved by the state for 2005-06, and the sound financial condition of the state at 30 June 2006, as reported in the AFR. It highlighted that the state achieved a substantial operating surplus for the year and remains in a strong financial condition. However, it also identified a need for ongoing monitoring by government of several external factors (such as the growth in general government expenditure, and the performance of the economy and the financial and property markets), given the major impacts they can have, and therefore risks they pose, on the state’s financial performance and condition.

Finally, the report set out the results of our audit of the special purpose Report on the Financial Contribution by the Victorian Government to the Melbourne 2006 Commonwealth Games that was prepared by the government to facilitate transparency and accountability about the financial outcomes of the games, and their impacts on the state’s finances.

2005-06 ANNUAL REPORT

Our annual report for 2005-06 was tabled in parliament on 4 October 2006.

The theme of the annual report was “Informing parliament and the community”. During 2005-06, we sought to ensure that we ably informed parliament and the community through:

• our positive responses to external reviews on our operations, thereby enhancing our performance and accountability to parliament

• our value-adding parliamentary reports and services

• undertaking independent, professional audits of the financial statements of our audit clients

• the effective management of our Office so as to deliver our products and services economically and efficiently

• prudent management of the financial performance of the Office.

Some of the highlights contained in the annual report included:

Accountability to parliament

• We continued to implement recommendations directed at our Office contained in 2 reports issued by the independent performance auditor and the Public Accounts and Estimates Committee.

Parliamentary reports and services

• We achieved an 81 per cent client satisfaction rating (target 80 per cent) from stakeholders on our surveyed parliamentary reports.

Audit reports on financial statements

• We issued 631 audit opinions (target of 625); 27 more than 2004-05.

• Eighty-one per cent (target of 80 per cent) of our audit clients expressed their satisfaction with the way we conducted our financial statement audit work.

Managing our Office

• We successfully introduced wireless technology for use by audit field staff.

• We launched our new financial audit toolset (IPSAM) in November 2005, and commenced a major review of our performance audit and special reviews methodology (EMPERA).

• Our Green Office Group continued to conserve energy, reduce waste and promote recycling.

Financial management

• Our net financial result for the year was a surplus of $909 074 ($966 607, 2004-05).

• Audit fee income for the year was $14.996 million ($14.268 million, 2004-05).

The annual report is available on our website at <http://www.audit.vic.gov.au/reports_annual/agar06cv.html>.

STAFF NEWS

Senior staff movements

Appointments

• Ray Winn, has been appointed to the position of Director, Performance Audit.

• Steve Mackessy, formerly Office of the Auditor-General for Western Australia, has been appointed to the position of Director, Computer Risk Management.

Departures

• David Kennedy, Chief Information Officer, Information Management, to Pitcher Partners.

OFFICE EXHIBIT AT THE 2006 ROYAL MELBOURNE SHOW

Each September, the Office stages an exhibit at the Royal Melbourne Show. This year, following completion of a major redevelopment of the showgrounds, government departments and agencies were housed in a new Victorian Government Expo Centre, where they displayed and demonstrated their initiatives, products, services and achievements to the community. Around 400 000 people visited the expo centre over the 11 days of the show.

As the Royal Melbourne Show venue is primarily one for families, our exhibit focused on providing a fun and educational experience for visitors of all ages. Our exhibit featured a corporate information area, as well as an “Audit Wizard Numbers game” which allowed participants to understand some basic audit principles and practices.

Many visitors to the exhibit complemented us on the exhibit theme and layout, with comments such as:

• “An excellent way to make the public more aware of the Auditor-General’s Office”

• “The exhibit is creative, and gives awareness about the Auditor-General’s work for the general public – well done”

• “Excellent introduction to the workings of the Auditor-General’s Office”

• “It is a great exhibit – I certainly learnt a lot about the Office”.

Staging the exhibit at the government expo remains a key component of our Office’s communications strategy – particularly our interaction with the community. Our participation aims to broaden the community’s understanding of our important financial management and accountability role – which we undertake on behalf of parliament and, indeed, all Victorian taxpayers.

Our Office exhibit at the Royal Melbourne Show attracted visitors of all ages.