Auditing in the Public Interest

We have completed the important steps associated with the preparation of our corporate and strategic audit planning processes. These processes lead to the development of our Annual Plan covering our office operational and audit activities. The draft Annual Plan for 2001-02 has been prepared and, following consultation with the Public Accounts and Estimates Committee, is required to be tabled in Parliament.

Wayne Cameron, Auditor-General with graduate staff members Katryna Nguyen and John Buordolone.

We are also moving steadily towards completing our reporting program for the 2001 Autumn Session. Reports expected to be tabled include our ministerial portfolios report and reports on the results of 4 performance audits.

As an office of authoritative opinion on public sector financial accountability matters, we have been busy with providing advice and assistance to a number of policy and guideline development projects. I see our role in these areas as an important contribution to adding value to the management and accountability practices adopted in the public sector in Victoria.

Readers will also note our contribution to providing advice and training to public sector auditing organisations outside Australia. We value our relationships with other auditing organisations from around the world, and we regularly participate in activities with national and some international auditing and financial management organisations. Besides keeping the Office up-to-date with developments at national and international levels, it also provides the opportunity to share our expertise and recognised excellence in public sector auditing.

Wayne Cameron
Auditor-General

NEW CORPORATE PLAN, 2001-2004

During the latter part of 2000, the Office carried out a 3 year forward planning exercise. Following that process, we developed a Corporate Plan that sets out our objectives, action strategies, performance measures and targets to guide our work over the 3 year period July 2001 to June 2004.

Under the Plan, we have adopted the following 5 corporate objectives:

• To deliver value-adding reports to Parliament;

• To undertake high quality, independent audit activities;

• To meet the needs and expectations of our stakeholders;

• To be identified as a preferred employer; and

• To manage our business with maximum efficiency and effectiveness.

Collectively, these objectives reflect our commitment to professional excellence in the provision of independent assurance to the Parliament on the management of public resources, and in the conduct of audit activities.

As part of the planning process, we have put in place several output targets that are aimed at bringing about continuous improvement in the efficiency and timeliness of our audit practices, e.g. all reports to Parliament to be completed within planned timelines, and all opinions on financial statements to be issued within 4 weeks of receipt of statements from agencies.

We also aim to be highly effective in our professional relationships with key stakeholders such as the ParliamentÕs Public Accounts and Estimates Committee and audited agencies. We recognise within the Plan the importance of timely and well co-ordinated communications with stakeholders, including pro-active identification of issues and developments impacting on resource management and accountability across the public sector, and within individual agencies.

PERFORMANCE AUDITS IN PROGRESS

The following 4 performance audits are currently in progress and will be the subject of reports planned for tabling in the 2001 Autumn Session of Parliament:

• Local Priority Policing - this audit considers whether the implementation of Local Priority Policing (community policing) by Victoria Police has been effectively managed;

• Teaching equipment in the TAFE sector - this audit examines the asset management practices (with a special focus on computer facilities) within the TAFE sector. The suitability of teaching equipment, from a student and teacher perspective, has also been assessed as part of the audit;

• Managing change in health service delivery - this audit involves describing the changes which have occurred in health service delivery in recent years and examines the approach of the Department of Human Services in managing the changing health service environment; and

• Management of salinity - this audit follows-up the key recommendations of our 1993 report on this topic, gathers information on the trends in salinity and comments on government initiatives underway to address the issue. The audit comments on how well Victoria is planning to tackle salinity in the future.

Salinity continues to be a significant environmental
issue in Victoria’s irrigated areas.

Audits of the management of major injury claims by the Victorian WorkCover Authority and the Transport Accident Commission are also underway and reports are expected to be tabled in the 2001 Spring Session of Parliament.

To assist in conducting performance audits, the Office engages outside contractors and/or specialists. In line with this approach, a public tender was advertised in January for a contractor to undertake a component of the claims management audit within the Transport Accident Commission.

The views of the public and interest groups provide an important input to our performance audit work. These views are often sought through a public advertisement as was recently the case with the Management of salinity audit which was the subject of a public submission process during March.

DEVELOPMENT OF MODEL DEPARTMENTAL FINANCIAL REPORT

While the quality of financial reports prepared by Victorian Government departments has improved considerably over recent years, further improvement is possible to enhance the consistency of disclosures and presentation Š which would improve the transparency and comparability of these reports.

In recognition of the benefits that would accrue to the Parliament and the public from improved departmental financial reporting, earlier this year the Department of Treasury and Finance commenced work to develop a model financial report for departments. This work has included input from a private accounting firm acting as consultants to the project, and other major stakeholders including all departments and our Office. We have also provided substantial feedback on working drafts of the model report.

The current intention is that the model financial report will be finalised and available for circulation in April, with application by departments to the preparation of the 2000-01 financial reports.

NEW PROBITY POLICY AND GUIDELINES

A number of recent reviews of the purchasing and outsourcing practices of Victorian public sector agencies have identified substantial issues associated with probity, due process and the management of such transactions. A key part of the GovernmentÕs policy response to the issues identified was the release in October 2000 of a policy statement entitled Ensuring Openness and Probity in Government Contracts.

In the context of this policy statement, late last year the Victorian Government Purchasing Board (VGPB) commenced the development of a new probity policy and revised guidelines for application across the entire public sector, aimed at improving practices and understandings. Our Office has played an important role in this development through the provision of constructive advice on issues requiring attention.

It is expected that the new probity policy and the associated guidelines will be approved by the VGPB and the Minister for Finance later in March 2001, for immediate application across the Victorian public sector. These documents will be available on the VGPB website once approved.

RECENT OVERSEAS TRAINING PROJECTS

Pacific Region

Last year, our Office successfully undertook 2 AusAID in-country training projects in the Pacific Region, namely, Samoa and Kiribati. The overall aim of both training projects was to provide the local Audit Office with competency-based training designed to address areas of priority where local auditing expertise was not available.

The 2 projects were delivered during late November and early December 2000 in the following areas:

• EDP Audit/Audit of Information Systems Skills Training for the Government Audit Office of Samoa; and

• Comprehensive Government Audit Practices, including EDP Audit and Planning/Management Skill Training for the Kiribati National Audit Office.

Both training projects were co-ordinated by Margaret Salter and delivered by 2 very enthusiastic teams. The Samoan training was delivered by Peter Dixon and Annette Cruz, and the Kiribati training was delivered by Michael Almond, Peter Gallagher and Remy Szpak.

Participants were mainly from the local Audit Offices and public sector agencies. Participants from the private sector were also involved in the training conducted in Samoa. The participants and AusAID were impressed with the quality of the training provided, as well as with our neighbourly spirit.

Kiribati has asked us to return in May 2001 to conduct a follow-up training workshop.

The Office provided information systems skills training
to the Government Audit Office of Samoa.

Mongolia

The Office recently provided support to the State Audit Board of Mongolia (SAB), in association with an Asian Development Bank-supported Governance Reform Program. The support involved auditors from the Office working alongside SAB auditors to review financial statements that had been approved by 5 pilot agencies. Training was also provided in risk-based auditing concepts.

REVALUATION OF NON-CURRENT PHYSICAL ASSETS

The issue of “revaluation of non-current physical assets” may offer challenges for public sector entities and the auditor in the forthcoming 30 June 2001 reporting period. There has been a great deal of discussion about the “fair value” requirement contained in AAS 38 “Revaluation of Non-Current Assets” and how that requirement contrasts with the “deprival value” requirement that Victorian departments and public bodies are required to follow in accordance with the Financial Management Act.

One potential area of concern relates to the large number of public sector entities that are now due to revalue classes of non-current assets in accordance with the Department of Treasury and Finance policy document Recognition and Valuation of Non-Current Physical Assets (issued in January 1995). The policy document requires entities to adopt the Ņdeprival value basisÓ for 30 June 1995 financial reports and to undertake subsequent revaluations at least every 5 years. Compliance with this requirement will be an area of audit focus for 30 June 2001 and 31 December financial reports.

In relation to the concepts of "fair value" and the "deprival value", the Office's Accounting and Auditing Policy Group has been liaising with the Department of Treasury and Finance in an attempt to provide an interim policy to resolve any apparent difficulties. The Department of Treasury and Finance is expected to issue an Accounting and Financial Reporting Bulletin shortly to clarify the GovernmentÕs expectations with respect to revaluation of non-current physical assets. The OfficeÕs Accounting and Auditing Policy Group will issue further guidance to auditors shortly.

OFFICE RELOCATION FINALISED

In February, the Office completed is relocation from 222 Exhibition Street to 140 William Street, Melbourne.

Our new Office contact details are:

Victorian Auditor-General’s
Office Level 34, 140 William Street
Melbourne Vic. 3000

Telephone: (03) 8601 7000
Facsimile: (03) 8601 7010
Email: comments@audit.vic.gov.au
Website: www.audit.vic.gov.au

ADDITIONAL COPIES OF Auditing in the Public Interest A number of recipients of our newsletter have contacted us to request extra copies to distribute within their organisation. If you would like additional copies dispatched to you on a regular basis please email Kim Nolan on kim.nolan@audit.vic.gov.au