PUBLIC SECTOR AUDIT IN VICTORIA – THE NEXT PHASE

Presentation to
Committee for Geelong
11 May 2007

By Des Pearson
Auditor-General of Victoria

Our accountability framework

• Under the Westminster parliamentary system, power is vested in government and ministers.

• Executive Government decides on the direction and management of State resources and must account to the Parliament for its actions.

• Parliament reviews performance through - debates and joint parliamentary committees.

• Public as against private sector accountability.

Role of the Auditor-General

• Auditing in the public interest since 1851.

• Principal aim: To conduct quality financial and performance audits of public sector organisations and comprehensively report to Parliament.

• A key link in the accountability process.

• Constitutional safeguard to serve interests of Parliament.

• Arguably the most “independent” powers for an Auditor-General in Australia.

• Formal relationship with Public Accounts and Estimates Committee (PAEC).

Audit coverage

Around 650 agencies with:

• Assets – $185 billion

• Liabilities - $58 billion

• Revenue – $51 billion

• Expenses – $45 billion.

(Office budget output appropriation $27 million 2007-08.)

Comparison with private companies

Client base

Client agencies include:

• government departments and other budget sector agencies

• companies, trusts and joint ventures

• public bodies

• public hospitals and ambulance services

• local councils and regional library corporations

• water authorities

• police, emergency services and courts

• universities and TAFEs

• financial institutions and insurance bodies

• superannuation schemes.

Auditor-General’s mandate

• Financial audit.

• Performance audit:

• regard to whether any wastage of public resources or lack of probity or financial prudence in the management or application of public resources

• not to question the merits of policy objectives.

Financial audit

• Opinion on whether entity financial statements:

• give a true and fair view

• comply with Australian accounting standards.

• Report on State’s:

• Estimated Financial Statements

• Annual Financial Report.

Performance audit

• Determine whether an authority is:

• achieving objectives economically, efficiently and effectively

• operations or activities are being performed effectively, economically, and efficiently in compliance with all relevant Acts.

• Performance indicators.

• Financial benefits given by State or authorities.

• Acting as auditor under the Corporations Act.

• Other auditing services.

Reports to Parliament

• Results of Financial Statement Audits (x2) - 30 June and 31 December.

• Annual Report on State’s Finances (x1).

• Omnibus (Multi-topic) Reports (x3):

• Smaller audits

• Follow-up audits.

• Single-topic reports (x10).

Victorian context

• Assurance re finance and performance reports.

• Improving performance of agencies through:

• constructive advice

• guidance

• critical analysis.

Environmental influences

• Oversight and regulation of auditing profession.

• Community expectations.

• Policies and initiatives.

• Standards having force of “law”.

• Generally Accepted Accounting Principles/Government Finance Statistics.

Jurisdictional differences

• Number of audit clients.

• Local government.

• Nature of “economy”.

• Level of co-ordination.

• Governance.

Personal dispositions

• League tables/benchmarking.

• Third party criteria.

• Balancing process with outcomes.

• Doing best with available resources.

• Public sector leadership and sustainability.

The next phase

• Build on strengths.

• Developing and rewarding staff .

• Promote KPIs.

• Promote “cost and management” accounting.

• Promote “sector engagement”.

• Seek recognition as a “best practice” audit office.