Auditing in the Public Interest

Victorian Auditor-General’s Office

Parliament's Auditor - Role & Perspectives

Des Pearson, Auditor-General10 November 2009, IPAA

Auditing in the Public Interest

Parliament's auditor

ParliamentParliament

AgenciesAgencies

ElectorsElectors

ExecutiveGovernment

ExecutiveGovernment

IndependentIndependent ObjectiveObjective

Auditor-GeneralAuditor-General

Auditing in the Public Interest

Role of Auditor General

Our Purpose: Providing assurance to Parliament on the accountability and performance of the Victorian public sector

• Auditing in the public interest since 1851.• Constitutional safeguard to serve interests of

Parliament.• A key link in the accountability process.

Auditing in the Public Interest

Role of Auditor-General - continued

• Constitution Act – ‘Independent officer of Parliament’ – S. 94B

• “has complete discretion in the performance or exercise of his or her functions or powers and, in particular, is not subject to direction from anyone”

• Accountable to Parliament via the PAEC• Recommends appointment of Auditor-General• Oversees performance audit of VAGO• Recommendations on annual budget• Consulted on annual plan and audit specifications

Auditing in the Public Interest

Role of Auditor-General: Context

Victorian public sector • One of the State’s largest businesses• More than 232 000 employees; $73 billion annual turnover

Government departments Local government

Companies, trusts & joint ventures Water authorities

State Owned Enterprises Police, emergency services & courts

Public hospitals & ambulances Universities & colleges

Financial institutions Superannuation schemes

620+ Client agencies include:

Auditing in the Public Interest

Context: changing role for reporting & audit

Increased stakeholder expectations in transparency, governance and reporting

Increased role for audit in public sector

Expand audit beyond review of financial statements → efficiency & effectiveness, probity & compliance

Auditing in the Public Interest

Auditor-General’s mandate

Financial Audit • Review financial statements of 620+ agencies each year

• Around 70% of audits undertaken by audit service providers

• Report on State’s Estimated Financial Statements & Annual Financial Report

Performance Audit • Determine whether an authority is achieving objectives

& operating economically, efficiently and effectively in compliance with all relevant Acts

• Not question merits of policy objectives• Not to second guess reasonable management judgements

Auditing in the Public Interest

Implications: changing service delivery

Last 20 years: changes in the way government delivers services

• Commercial arrangements e.g. contracting out, Public Private Partnerships

• Victoria has 39% (value) of all PPP projects in Australia (at Dec 2006)

• New legal entities being created ‘outside’ government → access other revenue sources and more flexible governance regimes

• e.g. housing associations, community health centres, University companies and subsidiaries

Services increasingly ‘outside’ accountability frameworks

→ Erosion of Parliament’s audit mandate

Auditing in the Public Interest

Risk & Materiality:• In economic, social and environmental impact

terms

Having regard to:• Growing Victoria Together• Financial Management and Reporting• Financial prudence, legislative compliance and

avoidance of waste

Audit Planning – Determining audit priorities

Auditing in the Public Interest

VAGO Topic selection framework

Determine Areas of

Performance Audit Interest

for Annual Plan

Assess Risk & Materiality Prioritise

Prospective Audit Topics

Analyse Public Sector

Programs and Initiatives

Identify Potential Areas

of Audit Interest

Auditing in the Public Interest

Audit Planning – PAEC Involvement

Annual Plan-consultation• November – indicative proposals• February – firm proposals• May – tabling in Parliament

Individual Audit Specifications-consultation• Clear month to consider

Auditing in the Public Interest

VAGO Annual Plan

• Annual Plan 2009-10 tabled 6 May 2009:• Selected performance audits for 2009-10• Prospective areas of audit interest 2009-10 to

2012-13 • New this year – ‘sector reports’ for financial

audit results

• Comprehensive sector consultation

• Robust and transparent topic section framework

Auditing in the Public Interest

VAGO Strategic Plan 2007-08 to 2009-10

Objectives:1. Authoritative and relevant reports and advice

2. Being highly regarded by Parliament

3. Fostering productive relationships with audit clients

4. Being an employer of choice

5. Being innovative and cost effective

Auditing in the Public Interest

VAGO Structure

Auditing in the Public Interest

VAGO Strategic Plan 2007-08 to 2009-10

Objectives:1. Authoritative and relevant reports and advice

2. Being highly regarded by Parliament

3. Fostering productive relationships with audit clients

4. Being an employer of choice

5. Being innovative and cost effective

Auditing in the Public Interest

Auditor-General’s Office

Questions?

Auditing in the Public Interest

Key audit themes 2008-09

1. Oversight and coordination

2. Outcomes and benefits

3. Performance information

4. Training and knowledge management

5. Records management

6. Boards and governing councils

Auditing in the Public Interest

1. Oversight and coordination

Devolved accountability and ‘subsidiarity’• Increasingly common in Victorian accountability arrangements →

principle of “delegation to lowest/ least centralized authority”• Applies both within portfolios (Departments and agencies) and inside

entities (accountable officer and program area).• However – you can delegate responsibility, but not accountability!

Audits found:• Gaps and challenges in oversight arrangements – who is monitoring?• Program outcomes compromised and challenged by lack of clarity of

roles/responsibilities • Several audits recommended Departments

• strengthen their oversight role• more actively monitor/respond to subsidiary performance information.

Auditing in the Public Interest

Preparedness to Respond to Terrorism Incidents: Essential Services and Critical Infrastructure (Jan 2009)

• Devolved governance arrangements underpin Victoria’s terrorism response framework

Audit found:

• Lack of clarity of roles and governance responsibilities – lead agency (DPC), committees, networks, steering group and line agencies.

• “Confusion and gaps” • some Depts unaware of requirements under the policy and legislation

• varying progress in meeting policy targets and legislative responsibilities

• We recommended → DPC strengthen oversight & coordination arrangements.

• DPC questioned this stronger role: “VAGO advocates a role that DPC should perform…. that is different to that which DPC believes it should undertake”, highlighting need for greater clarity of governance arrangements.

Auditing in the Public Interest

2. Outcomes and benefits

Policies, plans and procedures are often in place • This is positive from a controls and compliance

perspective

Audits found:• Need to shift focus beyond plans, policies and procedures

to outcomes, implementation & delivering program benefits

→ From ‘compliance’ to ‘performance’• This ‘focus on outcomes’ will inform our 2009-10 audit

program

Auditing in the Public Interest

Implementing Victoria Police’s Code of Practice for the Investigation of Family Violence (June 2009)

• Victorian Police Code of Practice for the Investigation of Family Violence – a policy designed to improve the effectiveness of police response, and better meet community expectations

Audit found:

• Victoria Police were complying with Code requirements

• Related activity (attendance incidents, intervention orders, criminal charges, investigations and prosecutions) has increased

• However - data does not show whether this has improved outcomes for victims of family violence.

• We recommended → VicPol focus on measuring outcomes of this policy, through measures such as appropriate service referrals, successful prosecutions and repeat offences.

Auditing in the Public Interest

3. Performance information

In the public sector, performance information is crucial in demonstrating public value – a ‘proxy for profit’

This is a continuing theme from previous years’ audit programs

Themes from a number of 2008-09 auditsSector-wide need to improve the use of performance information

• External reporting → need to improving the use of effectiveness measures to show outcomes are being achieved.

• Internal management information → better integration of performance information in planning, management and internal controls frameworks.

Looking ahead → in 2009-10, we plan to undertake a significant cross-agency audit of performance reporting

Auditing in the Public Interest

4. Training and knowledge management

Efficient and effective service delivery depends on the capabilities of responsible public sector staff, particularly when

• Delivering specialised services i.e. case management (Claims Management by the Victorian WorkCover Authority)

• Managing major projects (Connecting Courts - the Integrated Courts Management System)

• Supporting good governance (Governance and Fraud Control within Selected Adult Education Agencies)

Audits found good public sector governance was sometimes undermined by ongoing skills shortages and staff turnover

As such, audits proposed attention to training and knowledge management

Auditing in the Public Interest

5. Records management

Records and recordkeeping are fundamental to transparent, accountable government.

Cross-agency audit and good practice guide (July 2008) identified:• Lack of senior management support and promotion for records

management. • Most agencies did not adopt a strategic approach to records

management.• Electronic records were not well managed.

Other audits have found deficits in record-keeping supporting decision-making in agencies e.g.

• Key financial and human resources decisions (Governance and Fraud Control within Selected Adult Education Agencies)

• Decisions about the direction of major projects (Buy-back of the Regional Intrastate Rail Network)

Auditing in the Public Interest

Discussion?

More information

www.audit.vic.gov.au