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
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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
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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
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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
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