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Performance Audit Practice Statement

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Performance audits

A performance audit assesses whether an agency is meeting its aims effectively, using its resources economically and efficiently, and complying with legislation. It can cover all or part of an agency’s activities, or the activities of a number of agencies.

Section 15 of the Audit Act 1994 governs performance audits. They are funded through Parliament, not the agency being audited.

Performance audits do not extend to questioning the merits of government policy objectives.

Why have performance audits?

Performance audits offer independent assurance to Parliament and the community that public money has been spent wisely and that the results meet Parliament’s expectations.

They also recognise management initiatives and successes and are a catalyst for continuous improvement in the public sector.

Access to information

The Audit Act 1994 provides the auditor with full access to information irrespective of any agency obligation of confidentiality. This overrides any other legislation that might restrict disclosure, such as secrecy or privacy laws.

The Audit Act 1994 exempts all files and working papers the auditors obtain during an audit from the Freedom of Information Act 1982. This means these documents cannot be accessed from VAGO.

How was this audit topic selected?

The Auditor-General determines the annual program of performance audits after consultation with the Parliament’s Public Accounts and Estimates Committee (PAEC).

Details are provided in VAGO’s Annual Plan, which is tabled in Parliament. Prospective audit topics for the three subsequent years are also included in the plan.

The Auditor-General determines the objectives and scope of each performance audit. PAEC and the audited agency are, however, consulted in the development of the proposed objectives and scope of audits.

The performance audit process

Preparing for a performance audit

To prepare for an audit you need to:

• understand the objectives, scope, focus and timing of the audit – they are generally foreshadowed in the Annual Plan tabled in Parliament each year, and detailed in the audit specification
• review relevant plans, records and source data, and make sure they are up-to-date and available for the audit team
• compile documentation on how your agency monitors and measures the effectiveness, economy and efficiency of the audited activity and have the most recent results ready
• check that the staff likely to be needed in the audit will be available in the times set out in the engagement letter and audit specification
• provide the audit team with suitable on-site accommodation when it is needed.

Communication

At the start of the audit, the audit team agrees on a communication protocol with the agency. The audit engagement letter names the engagement leader who is the main audit office contact.

The engagement leader will discuss significant findings and emerging issues with the agency’s nominated contact officer progressively to keep them fully informed. Summaries of emerging issues and of indicative audit findings and conclusions will be sent to the agency head and nominated contact officer progressively.

A preliminary draft of the audit report is issued at the end of the conduct phase. It is the final opportunity to correct errors of fact or context, before the Audit Act section 16(3) proposed report is issued.

The agency head may respond to the proposed report within 10 business days. Any response is included in the tabled audit report. Responsibility for the accuracy, balance and fairness of the response rests solely with the agency head. If considered necessary, additional comment by the Auditor-General will be included in the report.

After the performance audit

Briefing Members of Parliament

Shortly after tabling a report in Parliament, VAGO briefs Members of Parliament on the audit results.

Improvements to resource management

Parliament and the Executive Government have the power to act on audit recommendations. The Minister for Finance reports to Parliament annually on what action agencies have taken arising from all reports to Parliament including performance audits.

PAEC also selectively follows up matters raised in Auditor-General reports. The committee may seek a briefing from the Auditor-General’s office and may also require an agency to provide further information and/or give evidence at a hearing.

Agency feedback

Following a performance audit VAGO sends a survey to the audited agency seeking feedback. VAGO is interested in the agency’s views on the audit process and the Parliamentary report, and uses the results to identify areas for improvement, and to report on its own performance to Parliament.

Key points to remember

• Prepare early for the audit—the topic and its proposed timing is usually flagged up to four years in advance in our Annual Plan.
• Provide timely and unrestricted access to information—there are no legal impediments to audit access; the Audit Act has provisions that can compel access if needed.
• Liaise regularly and brief upwards—there are set briefing points throughout the audit, but maintain regular contact, and internally escalate significant audit issues to the agency head as they arise.
• Carefully review the preliminary draft—it is the last opportunity before the reporting time frames mandated in the Audit Act apply.