Role of the Auditor-General
Who is the Auditor-General?
The current Acting Auditor-General
is Dr Peter Frost. He
is an independent officer of the Victorian Parliament,
appointed under legislation to examine, on behalf of Parliament and
Victorian taxpayers, the management of resources within the public
sector. The Auditor-General is not subject to control or direction
by either Parliament or the government.
The independence of the Auditor-General is
enshrined in Victoria’s Constitution Act 1975.
This independence ensures that findings which arise from a range of
financial statement and performance audits are communicated to
Parliament without interference, fear or favour.
The Audit Act 1994 is the main
legislation governing the powers and functions of the
Auditor-General. The Act provides the legal basis for the
Auditor-General’s access to all government information and the
freedom to report findings arising from audits to Parliament.
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Why have an Auditor-General?
The government is obliged to account to
taxpayers for its management of public funds and services. It must
ensure that funds are properly raised, protected from loss, and
spent with maximum efficiency and effectiveness for the purposes
approved by Parliament. In other words, government programs should
be managed in a way which represents value for money for the
taxpaying community.
Members of Parliament are responsible for
overseeing the performance of the Executive Government. To fulfil
this role effectively, they need reliable and accurate information.
The information needs to be examined by a suitably qualified,
independent person to ensure that it is sound, accurate and
complete. Under our Westminster system of government, the person
with this important responsibility is the Auditor-General.
The public sector outlays around $50 billion
each year in delivering an extensive range of services for all
Victorians. The Auditor-General, through reports to Parliament,
provides an independent assessment on whether these services have
been managed economically, efficiently and effectively. The reports
also contain value-adding suggestions to Parliament on ways the
government, through public sector agencies, can improve resource
management, such as reducing waste and eliminating inefficient
practices.
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What does the Auditor-General do?
The Auditor-General’s principal aim is to
provide assurance to Parliament on the accountability and
performance of the Victorian public sector.
The Auditor-General is responsible for the
audit of around 550 public sector organisations, including
Parliament, government departments, public bodies, business
enterprises, superannuation funds, health services, universities
and other educational institutions, municipal councils, and water
authorities. Audit findings and recommendations address:
- the degree to which
value-for-money has been achieved for taxpayers'
dollars
- the effectiveness of
organisations in meeting government objectives
- the quality of
management and use of resources
- improvements in
management practices and systems of government
organisations
- the fair presentation of
annual financial statements prepared by agencies
- compliance with
legislative and other requirements.
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How does the office support the Auditor-General?
The Victorian Auditor-General’s Office (VAGO)
plays a key role in preserving the financial integrity of the
state’s system of government.
The Auditor-General is supported by around 150
staff who plan and conduct audits, oversee the work undertaken by
some contract audit service providers and prepare major reports for
tabling by the Auditor-General in Parliament. While most staff are
auditors with accounting or economics qualifications, many come
from other professional disciplines, such as program evaluation,
social sciences and finance, which are necessary to carry out a
broad range of duties associated with planning, conducting and
managing performance and other audits.
VAGO is structured under three main
business areas: Policy and Coordination Directorate;
Audit Operations; and the Audit Support Group. The activities of
each of these areas are guided by a strategic business plan which
identifies the broad sense of direction for focusing our energies
on those areas of public activity which require our attention. The
plan provides a framework against which VAGO can progressively
monitor and measure the achievement of its strategic
objectives.
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What outputs does the Auditor-General produce?
The work of VAGO results in providing a range
of reports arising out of financial statement and performance
audits. Financial statement audits give rise to:
- the expression of an
audit opinion as to whether the financial statements prepared by
the public sector entity present fairly its financial position,
cash flows and results of operations for the year under
audit
- the issue of a letter
(report) to the governing body of the auditee on matters arising
from the audit. Typically, the letter will contain observations
about the quality of internal controls in place, accounting issues
and matters relating to compliance with applicable laws
- reports to Parliament on
significant issues arising out of audits, either for the individual
entity or for the sector as a whole.
- Performance audits
result in a separate report to Parliament following the completion
of each audit.
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What types of audits are carried out?
As mentioned earlier, we undertake two
types of audits: financial statement audits and performance
audits.
Financial statement audits
provide independent assurances to Parliament and the community that
the information contained in the financial statements of public
sector entities is presented fairly in accordance with Australian
accounting standards and applicable legislation.
A performance audit is an
audit which evaluates whether an organisation or government program
is achieving its objectives effectively, and doing so economically
and efficiently, and in compliance with all relevant
legislation.
The Audit Act 1994 also assigns to
the Auditor-General responsibility for carrying out audits to
establish whether government grants provided to non-government
organisations or persons have been applied for the purposes for
which the grant was made, and whether the money has been applied
economically, efficiently and effectively.
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How is an audit conducted?
Financial statement audits
are undertaken on around 550 public sector entities each
year. Around half of these audits are undertaken by our own
staff, and the remainder are undertaken by audit service providers
following a process of contestability overseen by the
Auditor-General.
As the Auditor-General is the principal
auditor of all public sector entities, quality assurance reviews
are undertaken by office staff on all audit work before issuing an
audit opinion on the financial statements of public agencies.
Performance audits extend
beyond the examination of the financial affairs and transactions of
a government agency to encompass wider management issues of
significance to the community. The performance audit process
begins with the planning phase which identifies the issues to be
examined, timing, objectives, approach to be used and the resources
required.
The next stage involves the evidence
gathering; encompassing examination and evaluation of information,
the development of suggestions and formulation of
conclusions. The results of each audit are discussed with,
and formally communicated to, senior management of audited
organisations. The audit process culminates in the Auditor-General
presenting a report on the audit to Parliament.
More information on how audits are conducted
can be found in our Audit Practice
Statement
and our Performance Audit Practice
Statement.
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What happens to Auditor-General’s Reports?
The tabling of Auditor-General’s Reports in
Parliament generates considerable parliamentary and community
debate.
The reports highlight issues of importance to
Parliament and the government, and contain suggestions to improve
the management of organisations and increase their operational
effectiveness.
The Auditor-General does not have the
authority to implement recommendations – that is the role of the
government.
Recommendations of the Auditor-General, when
adopted, can lead to substantial savings in public funds, and
efficiencies and improvements within the public sector. Our overall
aim is to ensure that significant and relevant issues are addressed
in reports. It is primarily through constructive, value-adding
observations and recommendations that the work of the
Auditor-General and his staff can lead to improved management of
public sector resources in Victoria.
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