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Victorian Auditor-General's Office Annual Report 2012–13

Accountable officer’s declaration

In accordance with Financial Management Act 1994, I am pleased to present the Report of Operations for the Victorian Auditor General’s Office for the year ended 30 June 2013.

Signature of John Doyle (Auditor-General)

John Doyle
Auditor-General

Melbourne

4 September 2013

The Hon. Bruce Atkinson MLC
President
Legislative Council
Parliament House
Melbourne
The Hon. Ken Smith MP
Speaker
Legislative Assembly
Parliament House
Melbourne

Dear Presiding Officers

I am pleased to transmit, in accordance with section 16AB of the Audit Act 1994, my annual report of the Victorian Auditor-General's Office for the year ended 30 June 2013 for presentation to Parliament.

Yours faithfully

Signature of John Doyle (Auditor-General)

John Doyle
Auditor-General

4 September 2013

Structure of this report

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Highlights

Highlights of the year at VAGO

[Figure 1] Five-year statistics

Five-year statistics

2012–13

2011–12

2010–11

2009–10

2008–09

Reports tabled in Parliament

Auditor-General's report on the finances of the state

(number)

1

1

1

1

1

Sector-based reports on results of attest audits

(number)

5

5

6

5

3

Performance audit reports

(number)

29

29

30

26

26

Non-audit reports (annual report and annual plan)

(number)

2

2

2

2

2

External assessment of Parliamentary reports

(score)

84

83

Parliamentarian satisfaction with reports and services

(per cent)

92

93

98

92

92

Audit reports on financial statements

Audit responsibilities (entities at 30 June 2013)

(number)

550

561

551

557

587

Unqualified opinions issued during reporting year

(number)

547

545

547

553

588

Disclaimed opinions issued during reporting year

(number)

14

Qualified opinions issued during reporting year

(number)

3

4

5

4

4

Total opinions issued during reporting year

(number)

550

563

551

557

592

Audit opinions issued within time frame

(per cent)

100

99

99

100

98

Audits externally reviewed meet standards

(per cent)

100

100

Audit reports on performance statements

Audit reports on local government performance statements

Unqualified opinions issued during reporting year

(number)

79

77

77

77

78

Qualified opinions issued during reporting year

(number)

2

1

1

1

Total opinions issued during reporting year

(number)

79

79

78

78

79

Audit reports on regional water authority performance statements

Unqualified opinions issued during reporting year

(number)

16

16

15

15

16

Qualified opinions issued during reporting year

(number)

Total opinions issued during reporting year

(number)

16

16

15

15

16

Audit reports on technical and further education institute performance statements

Unqualified opinions issued during reporting year

(number)

20

20

20

20

19

Qualified opinions issued during reporting year

(number)

Total opinions issued during reporting year

(number)

20

20

20

20

19

Resources

In-house staff

(number)

179

176

170

173

153

Attest audit service providers (partners)

(number)

36

41

40

36

34

Average days sick leave per employee

(number)

7.3

6.4

7.2

6.2

7.1

Workers compensation claims

(number)

2(a)

5

4

4

3

Injuries reported

(number)

2

4

4

4

3

Grievances lodged

(number)

2

5

2

2

Training and professional development per employee

(days)

8.5

6.1

6.7

9.7

6.4

Financial management

Expenditure on audit service providers

($ million)

10.7

10.8

10.2

9.5

9.7

Revenue from audit fees

($ million)

23.1

22.5

21.9

20.8

19.3

Operating surplus/(deficit)

($ million)

1.5

0.6

0.5

0.8

(1.5)

Assets

($ million)

15.4

13.4

12.7

11.4

10.9

Liabilities

($ million)

7.3

6.8

6.6

5.8

6.1

(a) Both claims are ongoing from previous years.

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About Us

Our history

The Office of the Auditor-General was established in July 1851 and, to this day, continues to play a key role in providing Parliament and the Victorian community with assurance on the financial integrity and performance of the state.

Over this time, the Auditor-General's approach to providing this assurance has evolved, most notably with the adoption of risk-based attest auditing and the development of performance auditing, which evaluates the efficiency, economy and effectiveness of public sector performance.

In 2000, legislative changes relating to the appointment, independence and tenure of the Auditor-General were enshrined in the state's Constitution Act 1975.

Principal legislation

The Constitution Act 1975, Part V, Division 3 governs the appointment and independence of the Auditor-General.

The Audit Act 1994 defines the powers and responsibilities of the Auditor-General and VAGO.

Audit responsibilities

The Auditor-General is responsible for:

The Audit Act 1994 gives the Auditor-General extensive access and reporting powers to enable fulfilment of this mandate.

The Auditor-General's audit responsibilities cover around 550 agencies including government departments, public bodies, educational institutions, public hospitals and local government authorities.

The agencies we audit:

Accountability

Balancing these extensive powers is a suite of accountability measures. Most notably, VAGO must consult with the Public Accounts and Estimates Committee on our annual work program—the annual plan—and our performance audit specifications. We are also subject to regular attest and performance audits.

Our resources

[Figure 2] Financial summary 2012–13 and 2011–12

Financial summary

2012–13 ($'000)

2011–12 ($'000)

Change (per cent)

Operating revenue

38 654

37 120

4.1

Operating expenses

37 197

36 542

1.8

Total assets

15 448

13 446

14.9

Total liabilities

7 333

6 787

8.0

Surplus/(deficit)

1 457

578

152.1

Net equity

8 115

6 658

21.9

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Auditor-General's review

Figure 1A is a photo of the Auditor-General John Doyle

The Auditor-General, John Doyle

As I write this, I am just weeks into my appointment as Auditor-General of Victoria, having commenced on 1 July 2013. As such, this report covers the final six months of the term of the previous Auditor-General, Des Pearson, and the remaining months covered by the Acting Auditor-General and Chief Operating Officer, Dr Peter Frost.

I wish to recognise the legacy of Mr Pearson, who has left VAGO a strong organisation with a reputation for scrutiny, rigour and transparency. Under Des's leadership, the work of VAGO has grown and received increased attention from Parliament, the public sector and the community. I would also like to thank Peter, who has led the office successfully since Des's retirement, as shown by the strong performance for the year.

A very successful year

I have inherited a high-performing organisation conducting its operations effectively. This is clearly shown by the fact that VAGO met all of its performance expectations in 2012–13 and delivered 550 audit opinions and 37 reports. This is an excellent result, especially in a time of transition.

VAGO's work is having a clear impact on the public sector. We are seeing more examples of audits stimulating reforms and reviews, informing Parliamentary debate, and being used by the media and community.

We are hearing more examples of agencies using reports of audits that they were not part of as a source of guidance and better practice information. For example, a local council advised us that it had used VAGO's report on Fraud Prevention Strategies in Local Government (June 2012) to inform its own fraud management approach. This shows the relevance of VAGO's work and makes the most of the state's investment in audit.

We look for opportunities to share our audit findings directly with professionals involved to increase this impact. During my term I will be working to get our audits used even more in this way.

Dedicated and highly qualified staff

These achievements are due in no small part to the staff of VAGO. The office is made up of dedicated professionals who are highly skilled and trained, and who are committed to producing quality work. Staff report a strong sense of achievement and that their work is interesting, challenging, meaningful and making a difference.

Our staff are highly qualified. Eighty-nine per cent of staff hold tertiary degrees, nearly half of whom have postgraduate degrees. This is well above the Victorian public sector average of just over 60 per cent holding tertiary degrees. As an organisation, we have a strong commitment to ongoing training and development. In 2012–13, this included new performance audit technical training, to boost workforce skills and capacity.

We have an excellent Executive Management Group leading four teams. Our two audit teams are well supported by two corporate teams, and this reflects a recent focus on working more cohesively as one office. We encourage movement between these teams to build knowledge transfer and communication, and we are seeing great results as a consequence.

An organisation set up for success

VAGO has a very strong focus on audit quality and practice management.

Our audit methodologies are the foundation of our work. Our attest audit methodology, developed in collaboration with the Queensland Audit Office, is used in four other Australian jurisdictions.

This year, VAGO continued to refine our approach to auditing non-financial performance statements. Starting with local government—with plans to move into the tertiary and water sectors—VAGO will begin to examine the relevance and appropriateness of performance indicators. This will encourage these sectors to improve their performance statements.

Across the organisation, changes to audit methodologies and corporate policies and procedures were also made this year to ensure compliance with the recent amendments to integrity and accountability legislation.

Not only are our quality systems well-developed and mature, but there is an obvious commitment to continuous improvement. Between 2011 and 2013, our attest audit reports were externally reviewed. We received positive feedback as well as lessons to be incorporated into future attest audit reports.

Auditing the auditors

In the coming year we ourselves are subject to a performance audit. Under the Audit Act 1994, a performance audit is conducted every three years to determine whether the Auditor-General and VAGO are achieving our objectives effectively and doing so economically and efficiently and in compliance with the Act. This is a reflection of the performance audits we undertake of other public sector bodies.

This is a key accountability mechanism, as well as an opportunity for furthering our continuous improvement. It will test our quality control systems and, while I am confident of an overall positive outcome, I am also looking forward to some valuable advice on improving our operations. PricewaterhouseCoopers has been appointed as the auditor by the Public Accounts and Estimates Committee, and the audit has commenced. I look forward to its outcome.

The value of audit

The role of Auditor-General is a crucial part of Victoria's accountability framework. To the citizens and Parliament of Victoria, it is a principal source of information on the performance of the public sector. We provide information on how well the sector is managing the resources of the State of Victoria, and we report what we find—good and not so good.

I have arrived in Victoria at a time when this independent, objective review is more important than ever. The global economic downturn is being felt more strongly every year, with budget cuts, redundancies, and restructures across the public sector aimed at achieving efficiencies.

Doing the same job with fewer resources will therefore continue to be a challenge for the public sector. Recent machinery-of-government changes have created further challenges.

Under these pressures, agencies may decide to cut back on the resources they direct to internal audit and accountability mechanisms, leading to less internal scrutiny of financial management and performance. The scrutiny of the external auditor will therefore become even more important.

Challenges to the audit mandate

There are, however, some pressures on, and limitations to, my ability to provide the independent scrutiny valued by the sector and the Parliament.

As Auditor-General, I have extensive powers to protect my independence and allow me to fulfil my mandate. The new integrity system reforms, however, have introduced some serious challenges to the effectiveness of my office's operations. While many issues have been resolved, some very problematic provisions remain that may compromise our timeliness and efficiency.

Some changes also challenge the independence of the office. The Constitution Act 1975 gives me complete discretion in performing my functions and exercising my powers, and states I am not subject to direction from anyone. Provisions introduced by the recent reforms, however, may be counter to these protections.

These issues do not appear hostile or intentional. Nonetheless, they are likely to have a significant impact on VAGO's operations and ultimately the independence of the role of Auditor-General.

The effectiveness of our operations is also subject to some longstanding limitations. In particular, activities by third-party providers funded by government to achieve government objectives are currently beyond my mandate. In effect, spending of significant funds, including through public-private partnerships, are not subject to audit scrutiny.

Reform of the Audit Act 1994 to address these challenges to our operations is urgent. The Minister for Finance has stated that reform of the Act will be a priority for 2013–14. I expect to see significant progress.

Engaging effectively with agencies

The recent staff reductions across the Victorian public sector and restructures associated with the budget cuts are challenging agencies and impacting on our audits.

We are experiencing more difficulties with engagement with agencies on our audits, during conduct and clearance. VAGO is working with agencies to manage this, including running workshops with agency contacts on our audit and engagement processes and methodologies. We want to maintain our timely and thorough reporting, while understanding the pressures on the public sector in a resource-constrained environment.

Building our relationships

In a year made busy by the retirement of an Auditor-General, the appointment of a new Auditor-General, overhaul of the integrity system, and achievement of all performance targets, VAGO also maintained extensive external engagement.

VAGO provided support to the Public Accounts and Estimates Committee in its Inquiry into Effective Decision Making for the Successful Delivery of Significant Infrastructure Projects. The first collaborative audit by participating Australian audit offices was also completed, with VAGO tabling Addressing Homelessness: Partnerships and Plans in February. It is also important to note VAGO's active role in the implementation of new auditing and accounting standards through the Australasian Council of Auditors-General.

Our international engagement was formalised with VAGO now 'twinned' with two Pacific audit offices—Tuvalu and Nauru—to provide support and guidance in their developing performance audit function.

Our external relationships are crucial and, as Auditor-General, I aim to be accessible. I am currently meeting ministers, secretaries and community leaders, to start conversations about performance and accountability in the public sector. This will be a priority in my first year.

Another priority will be reviewing our annual plan, which sets out our program for the year. This plan allows the community, the public sector and Parliament to examine our program, and is an important accountability check over the office.

Like any organisation, VAGO operates within resource constraints and the constraints of our required outputs. We therefore seek to target our efforts to maximise the impact of our program. I have inherited a four-year rolling program of audit topics and a key focus this year will be to review this plan and bring in my perspectives on the risks in the Victorian public sector.

The year ahead

The year ahead will be business as usual, as we continue to deliver a diverse array of audits. I will bring in my views in terms of audit focus, which will in time be seen in my annual plan. The year will also be filled with action on audit legislation reform, external engagement, review of annual planning and responding to the performance audit of the office.

I appreciate the honour afforded me to take up this office. I am looking forward to working with my colleagues to provide the citizens of Victoria a level of assurance services that will make a difference.

Signature of John Doyle (Auditor-General)

John Doyle

Auditor-General

4 September 2013

Auditor-General of Victoria, 2006–2012 Des Pearson, BBus, GradDip Mgt, Hon D Bus, FCPA, FIPAA, FAIM, FCA

Photo of Des Pearson, Auditor-General from 2006-2012

Des Pearson served as Auditor-General of Victoria from October 2006 to December 2012. During his term, Des improved the transparency and engagement in audit planning, the clarity, accessibility, relevance and impact of reports, and relationships with stakeholders. In particular, Des achieved great gains in improving the timeliness of the audit program and the quality of VAGO's outputs. Under his leadership, VAGO moved to tabling a report every sitting week of the year and now tables around 35 audit reports annually, compared to 11 in 2006.

Mr Pearson began his public service career in 1970 with the Australian National Audit Office, becoming Chief Auditor, Northern Territory Region in 1976. Subsequently he held senior executive roles with the Commonwealth Department of Primary Industries and Energy and ACT TAFE and was appointed Auditor-General of Western Australia in 1991. He held this position for 15 years. From 2001 to 2006 he was also Commissioner and Inaugural Chair of the State Records Commission of Western Australia.

Mr Pearson is a Life Member and Fellow of CPA Australia, Life Member and Fellow of the Australian Institute of Management WA, a National and Victorian Fellow of the Institute of Public Administration Australia, and a Fellow of the Institute of Chartered Accountants in Australia.

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Our impact

At a glance

Parliament

Value to agencies

Public debate

Increasing impact

Number of references to reports in Parliamentary debate

Figure is the number of references to the Auditor-General's reports in Parliamentary debate.

Introduction

Our audits provide valuable reflections, findings and recommendations on how to improve accountability and performance in the public sector. They can be a catalyst for change and an impetus for decision-makers.

Therefore, we reflect on the contribution of our activities to continuous improvement across the public sector. We use a range of measures to assess this impact.

We look at the value of our audits to Parliament by examining the extent to which our audit reports are drawn on to support Parliament's decision-making and debate, which can consequently change how the public sector operates.

Public sector agencies are the subjects of our audits and respond directly to them. We look at the extent to which they are making changes to their practices on the basis of our findings and recommendations.

As our reports are publicly available, they can influence public debate, which in turn can influence Parliament and agencies. As such, we look for evidence of audits being used by the general public, community groups and the media.

We undertake a range of activities to increase the impact of our audits. Many of these activities are conducted at the request of the sector, as they seek to utilise the knowledge and continuous improvement advice available through our reports.

This chapter looks at our:

Impact on Parliament

A key measure of the impact of our work is Parliamentarians' use of our audit reports.

To assess the extent to which Parliamentarians use our reports, we look at how they use them in Parliamentary debates and to support their inquiries, and their survey feedback on our performance.

Parliamentary debate

Parliamentarians use our reports more and more every year. Over the past few years we have seen a significant increase in references to our reports in Parliamentary debates.

Hansard transcripts show that references to our audit reports in Parliamentary debate rose by 25 per cent in 2012–13, reflecting Parliamentarians' continuing high level of interest in and use of our work. This year Parliamentarians made 327 references to our audit reports.

Parliamentarians used our reports to support their discussion of:
'The Auditor-General has provided a clear pathway with his recommendations for improving our public health system, and I support them all.'

Infection Prevention and Control in Public Hospitals, June 2013 – Nazih Elasmar, MLC, Australian Labor Party, Hansard 26 June 2013.

The report referenced most frequently was the Auditor-General's Report on the Annual Financial Report of the State of Victoria, 2011–12, with around 10 per cent of mentions. Most of the speeches referencing this report were in relation to findings about water company dividends, the regional rail link and the state's financial position.

Older reports that continue to be regularly referenced include the Allocation of Electronic Gaming Machine Entitlements (June 2011) and Access to Ambulance Services (October 2010).

When Parliament uses our audits to support the passage of new legislation, this delivers some of our most significant impact. Examples of bills debated in 2012–13 where a VAGO report was referenced include:
'The office of Auditor-General is one of the most critically important agencies and institutions when it comes to integrity.'
Jill Hennessy, MLA, Australian Labor Party, Hansard 28 November 2012
Resources developed by the Parliamentary Library to support new bills draw on VAGO reports. Recent library research papers in relation to bills have referenced the following audit reports:

Parliamentary inquiries

Our audit reports are used to inform and support the activities of Parliamentary Committees. These activities are important within the accountability framework as they are often a means by which agencies are called to account for actions in response to our reports.

In 2012–13, there was a significant increase in the number of Committee reports drawing on VAGO reports. This reflects the efforts VAGO has made to engage with these Committees.

'It is a very insightful report, so much so that the Economic Development and Infrastructure Committee, a joint all-party committee, is going to invite the Auditor-General to present the findings of this audit summary to the committee as part of its inquiry into local economic development'.

Investment Attraction, August 2012 – Inga Peulich, MLC, Liberal Party, Hansard, 29 August 2012

Of note, the Public Accounts and Estimates Committee (PAEC) tabled its report on its Inquiry into Effective Decision Making for the Successful Delivery of Significant Infrastructure Projects. VAGO provided significant input to this inquiry and the final report referred extensively to 11 VAGO reports.

The following Committee inquiry reports also referred to VAGO reports:

Feedback from Parliamentarians

We request feedback from Parliamentarians annually through a confidential survey. This collects information about Parliamentarian engagement with VAGO's reports and services.

This year's results are encouraging. Ninety-two per cent of respondents indicate they were satisfied or very satisfied overall with our reports and services, and 97 per cent agreed that the reports and services provided valuable information on the public sector.

Survey results show Parliamentarians accessed reports more in 2012–13. There was a significant increase in the number of Parliamentarians who responded to our surveys who had dealings with VAGO over the year, up from 37 to 54 per cent. All respondents were aware of our performance and attest audit reports. Half reported referring to a performance audit report often or very often during the year, and just over a quarter reported referring to an attest audit report often or very often. Ninety-one per cent of those who referred to an attest audit report said the report helped them to monitor the accountability and performance of the sector.

Value to agencies

As agencies are the subjects of our reports and recommendations, we look for evidence of their improved practices in response to them. We also look to see the commitment agencies have made to implement the recommendations, through their responses to reports and their feedback on how valuable a report was.

We often see changes to agencies' practices in response to our reports. In some cases, reports contribute to significant reviews of an agency or business activity. Other reports contribute to internal changes to improve processes and controls. Recent audits have contributed to some significant changes, as discussed in Figures 3 and 4.

[Figure 3] Audits contributing to substantial changes or reviews by agencies

Case studies

Compliance with Building Permits (December 2011)

Following VAGO's report on Compliance with Building Permits, major reforms to governance arrangements in the building sector were outlined in A fresh start for building industry regulation: Reforming Victoria's building system (November 2012). In particular, the Victorian Building Commission was replaced with the Victorian Building Authority.

Managing Drug and Alcohol Prevention and Treatment Services (March 2011)

Following VAGO's report of Managing Drug and Alcohol Prevention and Treatment Services, a new whole-of-government strategy for reducing drug and alcohol harm was released: Reducing the alcohol and drug tollVictoria's plan 2013–2017 (January 2013). This plan outlined legal and regulatory reform, service delivery, cultural change and research.

Municipal Solid Waste Management (June 2011)

In response to VAGO's audit of Municipal Solid Waste Management, changes were announced to performance reporting and knowledge management in the government's 30-year vision for waste and resource recovery, Getting Full Value: The Victorian Waste and Resource Recovery Policy (April 2013).

Performance Reporting by Local Government (April 2012)

In response to one of VAGO's recommendations in the audit Performance Reporting by Local Government, Local Government Victoria has taken significant action to implement a new reporting framework for local government. A pilot commenced in July 2013 with full rollout planned for 2014.

[Figure 4] Audits stimulating changes to processes and controls in agencies

Case studies

Freedom of Information (April 2012)

Following VAGO's report into freedom of information (FOI), the Department of Justice (DOJ):
  • began publishing a Part II statement as required by legislation, to aid the public when making an FOI application.
  • released a practice note to guide other departments in producing their own Part II statements.
  • reformed its internal FOI processes, including tighter time frames, closer monitoring of FOI processing time, and redeveloped FOI training and education to departmental staff.

Since these reforms, DOJ reports its timeliness has improved significantly, down from 55.4 days per request to 36.

Managing Major Projects (October 2012)

In hearings for PAEC's Inquiry into the Budget Estimates 2013–14, the Minister for Major Projects reported that Major Projects Victoria had developed new Budget Paper 3 measures in response to VAGO's report Managing Major Projects, to give a clear indication of project delivery performance.

Managing Stormwater Flooding Risks in Melbourne (July 2005)

VAGO's report on Managing Stormwater Flooding Risks in Melbourne recommended that 'Melbourne Water and councils explore opportunities for working collaboratively to address the management of flooding risks with a view to optimising the efficient and effective use of their flood mitigation resources'. This became the catalyst for Melbourne Water developing the 2007 Port Phillip and Westernport Region Flood Management and Drainage Strategy. Following this, Melbourne Water collaborated with local councils and the Victorian State Emergency Service (SES) to create Municipal Flood Management Plans for each of the 38 council areas within the Port Phillip and Westernport region. These plans are intended as live documents with progress reviewed annually to ensure they accurately reflect flood risks and how they should be best treated within each municipality. In July 2013, Melbourne Water invited participating councils, SES representatives and VAGO to an event recognising this achievement.

Portfolio Departments and Associated Entities: Results of the 2011–12 Audits (November 2012)

The Department of Treasury and Finance's 2012–13 Model Report for Victorian Government Departments contained recommended presentation of trust account balances based on a VAGO recommendation from our report on Portfolio Departments and Associated Entities. VAGO also provided additional contributions to, and support for, the Model.

Tertiary Education and Other Entities: Results of the 2011 Audits (May 2012)

Following VAGO's report on the results of audits of alpine resorts, the Alpine Resort Management Boards have strengthened internal controls through revision of procedures and realignment of duties.

Throughout each of our audits, we brief the audited agencies progressively on emerging findings. Sometimes, agencies will make changes in response to these findings while the audit is still being conducted. The following are recent examples of changes made by agencies during an audit:

We have also observed changes made by agencies that were not subject to the audit. This is particularly encouraging as it shows the broad relevance of our reports and makes the most of our audits. An example of this is a local council that advised us it had used VAGO's report on Fraud Prevention Strategies in Local Government (June 2012) to carry out a self-assessment of its fraud management.

Agency implementation of recommendations

For our more recent reports, it is less likely that agencies will have had the time to implement responses to our recommendations. We therefore look to see whether agencies have committed to implementing our recommendations.

There are two ways we look at the level of support for our recommendations. The Department of Treasury and Finance tables a report on the Government Response to the Auditor-General's Reports. This report looks at the previous financial year's audits, counting the number of responses to recommendations—one recommendation may have several responses from different agencies.

The most recent report included responses to reports tabled in 2011–12. Of the 445 responses to recommendations, 90 per cent were either in support or being reviewed by the relevant agency.

In addition, we do an internal count of the number of supported recommendations in performance audit reports for the most recent financial year, based on agencies' formal submissions to our reports. This is limited in that agencies sometimes do not clearly state their response to the recommendations.

Across our performance audit reports in 2012–13, VAGO made 214 recommendations based on our findings. Of these, our internal assessment estimates that 209 (98 per cent) were supported.

Extracts from agency submissions to reports provide examples of the usefulness of recommendations and the commitment of agencies to implement the changes.

Extracts from responses to VAGO reports
Carer Support Programs (August 2012)

'The findings and recommendations of the audit will also inform Victoria's participation in the important development of the National Disability Insurance Scheme and response to Victoria's Vulnerable Children Strategy.'

Response provided by the Secretary, Department of Human Services.

Energy Efficiency in the Health Sector (September 2012)

'The department accepts all the recommendations and looks forward to working with health services, the Department of Treasury and Finance and Energy Service Companies to further improve the energy efficiency of the Victorian public health care system.'

Response provided by the Secretary, Department of Health.

Port of Melbourne Channel Deepening Project: Achievement of Objectives (November 2012)

'I also welcome the audit as it provides a valuable case study for the effective and efficient delivery of environmental regulation.'

Response provided by the Secretary, Department of Sustainability and Environment.

Value of audits to audited agencies

Another way of gauging agency commitment to implementing our recommendations is whether audited agencies said they found the audit valuable.

For every performance audit, we seek this information through a post-audit survey. These surveys give us information on the extent to which the audited agency agreed that the:

For performance audits tabled in 2012–13 the indexed ratings for audit value survey questions rose slightly from 2011–12 from 69 to 70. Allowing for the fact that agencies can be resistant to audits, we consider this a good result.

We also seek comments from agencies in these surveys. Extracts shown here are not attributed to preserve anonymity.

We did not survey agencies on their experiences of attest audit surveys this year.

Extracts from post-audit surveys of agencies

'Findings and recommendations from VAGO audits are always useful in considering improvements in administration of audited activities, current or future activity audits.'

'I found the VAGO process to be professional and respectful of our circumstances. It is a challenging position to be able to grasp our unique situation... The reporting was accurate and honest and was easy to draw conclusions from.'

'The auditors took the time to understand our organisational environment and as such the final report was balanced in its presentation of issues and findings.'

Impact on public debate

Public debate often draws on our audits. This debate can create greater transparency around some key accountability and performance issues raised by our audit program, and encourage the government to act on critical findings. The extent to which the public responds to and uses our reports is, therefore, another important factor when gauging the impact of our work.

We measure our impact on public debate though media coverage and website activity.

Media coverage

While we do not set out to gain media attention, our reports can ignite debate on issues of public interest in the media. To some extent, the degree of media attention reflects whether an issue is topical. Also, media coverage tends to focus on exceptions and rarely canvasses positive findings. Nonetheless, when considered within a suite of measures, the degree of media interest does provide some insight into the level of public interest for VAGO reports. Media attention can also be a positive reflection on the relevance of our topic selection.

[Figure 5] Number and types of media mentions

Figure 5 shows the number of media mentions in print, broadcast, and web articles for 2012-13

Our reports regularly feature in national, state, regional and local media. Our method of collating and analysing media has changed significantly since 2011–12, so the data below cannot be directly compared to last year's figures.

In 2012–13, there were 771 items in print, broadcast or online media that mentioned the Auditor-General or VAGO. Of these, 440 were print articles, 186 items were broadcast on local radio or television stations and 145 articles were published on websites. There was mention of the Auditor-General or VAGO in every week of the year. This coverage is especially encouraging as VAGO only tabled reports in 17 of those weeks (during Parliamentary sitting weeks).

Most coverage was in relation to our audit reports, with 487 items. Several reports generated intense media interest and coverage. The reports receiving the most coverage were:

Our older reports continued to receive media attention, accounting for 170 mentions. As in previous years, there was interest in the State Investment in Major Events performance audit (June 2007), mostly during the period before the 2013 Grand Prix. Access to Public Housing (March 2012) and Access to Ambulance Services (October 2010) received the most coverage. The oldest reports mentioned were from 2005.

There were also 119 mentions of the Auditor-General and VAGO relating to matters other than audit reports. Topics included the retirement of the former Auditor-General and commencement of the 26th Auditor-General, sign-off of financial statements, requests for audits and integrity system reform.

Website activity

All VAGO reports are published on our website. VAGO's reports are being accessed more often, by more people.

In 2012–13, there were around 115 650 visits by 73 992 visitors to the VAGO website, an increase of 13 per cent. New visitors made up 60 per cent of all visitors.

Figure 6 shows the website visits in 2012–13. The peaks coincide with report tabling days.

[Figure 6] Website visits 2012–13

Figure 6 shows the number of website visits in 2012-13

Increasing the impact of our audits

We conduct a range of activities to increase the impact of our audits, and therefore, the value and usefulness of them and the likelihood our recommendations will be implemented. We look for opportunities to share lessons and the knowledge we have gained from our audits with government, peak bodies, individual agencies and the general public.

This year's activities included:

Identifying and sharing recurring audit themes

In 2012, to identify recurring findings across our audits, we analysed the 200 reports tabled during the former Auditor-General's tenure from 2006–12. We identified six aspects of public sector operations where VAGO reports have found persistent problems across the past six years.

Recurring themes we identified were in relation to:

We published the results of this analysis in a special edition of our Auditing in the Public Interest newsletter, called Reflections on audits 2006–2012: Lessons from the past, challenges for the future. We shared the newsletter with audited agencies including secretaries.

By publishing this analysis we aimed to increase the value of our individual audits and provide agencies with an indication of risks they might be facing.

Parliamentary briefings and engagement

We continued our briefings and engagement activities with Parliamentarians and provided assistance in identifying relevant audit findings.

Across 2012–13, VAGO provided 37 briefings to ministers or their offices, 25 of which Ministers personally attended. We also provided four briefings to individual PAEC members on issues relating to their areas of interest. This is a significant increase in uptake on last year's result when 18 briefings were delivered to ministers or their offices. It is also above the previous high of 31 in 2010–11.

We also conduct briefing sessions in Parliament House whenever we table an audit report, detailing key findings. These sessions are open to all Parliamentarians. In 2012–13, we conducted 17 briefing sessions—one every week that Parliament sat. VAGO was commended in Parliament for the quality of these briefings.

Fewer individual Parliamentarians attended these sessions in 2012–13, with 26 coming to one or more sessions (31 in 2011–12). However, other measures of Parliamentarian engagement discussed earlier clearly indicate that our reports are receiving increased attention and use by Parliamentarians.

Photo of Steven Vlahos, Performance Audit Sector Director, presenting at a Parliamentary briefing

Steven Vlahos, Performance Audit Sector Director, presents at a Parliamentary briefing.

'In moving this motion I wish to say at the outset that I have the highest regard for the work of the Auditor-General. In the six years the Parliamentary Greens have been in this Parliament we have had a representative at every Auditor-General briefing, because we rely on the Auditor-General's reports as a reliable, credible, authoritative source of information about the workings of government.'
Colleen Hartland, MLC, The Australian Greens

Average attendance at these briefings remained consistent at around nine per session, showing that certain Parliamentarians are attending regularly. This suggests that the Parliamentary briefing is a convenient way for those individuals to access our audit findings, while others are accessing them in other ways.

VAGO continues to investigate new ways of communicating audit findings to Parliamentarians. For example, in 2012–13 we will trial audio presentations on our website in relation to each of our audits, to allow Parliamentarians to access this information in their own time. This will also make these presentations accessible to the general public.

Presentations and addresses

Throughout 2012–13, the Auditor-General and senior VAGO staff presented at a range of events about our audits and activities, as well as broader issues such as accountability, governance and performance management. A major goal of this engagement is to make our audit findings and recommendations directly accessible to interested professionals. We presented at conferences, educational courses, and professional and industry groups.

As well as the following regular presentations, see Appendix 2 for a full list of presentations made by senior staff in 2012–13.

Departmental audit committee chairs meetings

Twice a year, VAGO and the Department of Treasury and Finance co-host meetings with chairs of departmental audit committees. We use these meetings to drive action on our audit findings, as well as to improve the efficiency and effectiveness of our operational relationships.

Regional engagement

To enhance relationships with audited entities, the Auditor-General regularly visits regional areas. In 2012–13, the Auditor-General visited Morwell, Benalla and Ballarat. These visits are also an opportunity to promote recent reports, especially from the Financial Audit group.

Attendance this year continued to be strong, and included representatives from local government, water authorities, health services and educational institutions.

Parliament House Open Day

Parliament House Open Day is an annual event for the public. VAGO participated again this year to engage with the public, communicate about VAGO and promote our reports.

Improving accessibility and communication of reports

To improve the accessibility of our reports and other information about VAGO, this year we reviewed the accessibility of our website and implemented a suite of actions. These included improving the search capability of the website, the quality of our subscription service, and how the public contacts the office.

The quality of our reports is also an ongoing focus in terms of improving accessibility to our findings and conclusions. A key focus for the coming year will be looking at how we can continue to improve accessibility and communication of our reports for Parliamentarians, agencies and the community.

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Our core business

At a glance

Quantity

Quality

Timeliness

Cost

Audit opinions issued within the statutory deadline (per cent)

Figure shows the audit opinions that were issued within the statutory deadline from 2008-13

Introduction

The Victorian Government's reporting framework requires departments and agencies to report against outputs, and resourcing is allocated based on these outputs.

The outputs we are funded to provide reflect the two elements of assurance we provide to Parliament:

Against each of these outputs, we have measures and targets for quantity, quality, timeliness and cost. This chapter discusses our performance against these measures.

Parliamentary reports and services

Output group 1 relates to our Parliamentary reports and services.

We table reports in Parliament on the results of our attest and performance audits. We also provide a range of other services to Parliament using our skills and experience, to encourage improvement in the management of public resources. These services, along with our reports, help foster better accountability and performance, and promote better practice resource management in the public sector.

Figure 7 outlines our performance against our measures for Parliamentary reports and services and the following section discusses this performance in more detail.

[Figure 7] Performance against output group 1 targets

Performance measures

Unit of measure

Target 2013–14

Actual 2012–13

Target 2012–13

Actual 2011–12

Quantity

Auditor-General's reports

(number)

36

37(a)

36

37

Quality

Average score of audit reports by external assessors

(score)

80

84

80

83

Overall level of external satisfaction with audit reports and services—Parliamentarians

(per cent)

85

92

85

93

Timeliness

Reports completed on time

(per cent)

90

97(b)

90

87

Inquiries from Members of Parliament and the public responded to within 28 days

(per cent)

95

99

95

99

Cost

Total output cost

($ million)

15.3

14.5

14.9

13.7

(a) The higher than target result is due to carry forward of one audit from 2011–12.

(b) This improvement reflects better planning and scheduling, and more consistent management of project time lines.

Quantity

In relation to reporting to Parliament, each year we produce:

As shown in Figure 8, this year we met our quantity targets for reports. These results are discussed in more detail below.

The reports we tabled in Parliament during 2012–13 are listed in Figure 9. Consistent with the approach used in our Annual Plan 2012–13, our audit reports are presented against each of the government's five goals for a stronger, fairer and safer Victoria.

[Figure 8] Performance for each category against 2012–13 targets

Product type

Target 2013–14

Actual 2012–13

Target 2012–13

Performance audit reports

28

29

28

Reports on results of attest audits

5

5

5

Report on the annual financial report of the state of Victoria

1

1

1

Annual plan

1

1

1

Annual report

1

1

1

Total

36

37

36

Photo of Performance Audit Sector Directors
Performance Audit Sector Directors: Steven Vlahos, Paul O'Connor, Andrew Evans, Chris Sheard, Dallas Mischkulnig, Kristopher Waring and Ray Winn. Not pictured: Michele Lonsdale and Renée Cassidy.

[Figure 9] Reports tabled in Parliament during 2012–13

A growing economy

Fare Evasion on Public Transport

Managing Traffic Congestion

Organisational Sustainability of Small Councils

Planning, Delivery and Benefits Realisation of Major Asset Investment: The Gateway Review Process

Port of Melbourne Channel Deepening Project: Achievement of Objectives

Investment Attraction

Services that work

Consumer Participation in the Health System

Consumer Protection

Implementation of School Infrastructure Programs

Infection Prevention and Control in Public Hospitals

Learning Technologies in Government Schools

Management of Unplanned Leave in Emergency Services

Prison Capacity Planning

Programs for Students with Special Learning Needs

Management of Staff Occupational Health and Safety in Schools

Student Completion Rates

Strong families and vibrant communities

Carer Support Programs

Collections Management in Cultural Agencies

Addressing Homelessness: Partnerships and Plans

Management of the Provincial Victoria Growth Fund

Secure water and a healthy environment

Effectiveness of Compliance Activities: Departments of Primary Industries and Sustainability and Environment

Energy Efficiency in the Health Sector

Management of Freshwater Fisheries

Government you can trust

Auditor-General's Report on the Annual Financial Report of the State of Victoria, 2011–12

Environment and Sustainability Sector: Performance Reporting

Flood Relief and Recovery

Local Government: Results of the 2011–12 Audits

Managing Major Projects

Portfolio Departments and Associated Entities: Results of the 2011–12 Audits

Public Asset Valuation

Public Hospitals: Results of the 2011–12 Audits

Rating Practices in Local Government

Tertiary Education and Other Entities: Results of the 2012 Audits

The State of Victoria's Children: Performance Reporting

Water Entities: Results of the 2011–12 Audits

Performance audit reports

A performance audit examines a program or area of government to determine whether government objectives have been achieved.

This year we produced 29 performance audit reports (target 28). This is consistent with previous years. The additional audit was carried over from 2011–12.

Acquittal against our annual plan

We tabled:

The two audits listed in the Annual Plan 2012–13 that were not tabled were:

Reports on results of attest audits

Our attest audit reports inform Parliament about the results of our audits of financial and non-financial performance statements including matters of significance identified during the audits.

This year, we tabled five sector-based reports on attest audits, as planned. This is consistent with previous years.

The reports cover the following sectors:

Each report discusses:

Each report includes focus areas that look at activities in more detail, providing a high-level review of the sector's performance.

Report on the annual financial report of the State of Victoria

The Auditor-General is required to audit the financial report of the state and make a report to Parliament.

VAGO uses the report to discuss significant projects and developments. This includes projects where Parliament or the public would have a reasonable expectation of timely, independent disclosure of the related financial implications, and that are not otherwise required to be reported.

The Auditor-General's Report on the Annual Financial Report of the State of Victoria, 2011–12, was tabled on 14 November 2012.

Annual plan

The Audit Act 1994 requires the Auditor-General to develop an annual plan that sets out the work program for the year and present it to Parliament.

The cover of the 2013-14 Annual plan

Our Annual Plan 2013–14 was tabled on 26 June 2013.

In developing our annual plan, we consult the Public Accounts and Estimates Committee (PAEC), as well as departments—including their audit committees—stakeholders such as peak bodies, industry bodies and subject-matter experts.

For six years, our annual plan has provided our work plan on a four-year rolling basis. This exceeds the legislative requirement for a one-year plan.

Annual report

The annual report is another of our outputs. We tabled our Annual Report 2011–12 on 28 August 2012.

Quality

To report externally on the quality of our audit reports, we use two measures:

In 2012–13, we met our targets for quality of our reports and services. This is discussed below.

Independent assessments of report quality

Each year, our performance audit reports are reviewed by independent assessors, who examine their quality. The reviewers read the report only, and provide an indication of the quality of our communication of audit findings.

The Australasian Council of Auditors-General (ACAG) has a panel of three independent assessors to conduct these reviews across participating jurisdictions. The current assessors are:

The reports are assessed against criteria that have been agreed across the Australian audit offices that participate.

Performance audit reports

Around a third of our performance audit reports are assessed annually. In 2012–13, the following 10 reports were assessed:

In 2012–13 we met our target for external assessments, with an average score of 84 (target 80).

This is consistent with previous years' results (83 in 2011–12). Our performance improved against four of the five criteria. Detailed results for performance audit reports assessed in 2012–13 and 2011–12 are shown in Figure 10.

'The benefits and economic arguments are excellently articulated throughout and the proposals to improve the system are clearly stated.'
Quote from an assessor on Energy Efficiency in the Health Sector

[Figure 10] Average scores out of five for performance audit reports against ACAG criteria

Figure 10 shows average scores out of five for performance audit reports against ACAG criteria for 2011-12 and 2012-13
Attest audit reports

VAGO produces six attest audit reports annually and over the past two years were also assessed through the ACAG external assessment process.

Results from both years were positive, with overall scores of 86 in 2012–13 and 81 in 2011–12. In particular, the assessors highlighted the quality of report conclusions, writing style, layout of the report, and the use of charts.

Due to the high scores, positive feedback and stable nature of the content and layout of these reports, VAGO will not continue to have them assessed. This will be reviewed if there are any changes to content and layout. Therefore, the results for the attest audit reports were not included in VAGO's BP3 performance score for 2012–13.

Detailed results for attest audit reports assessed in 2012–13 and 2011–12 are shown in Figure 11.

[Figure 11] Average scores out of five for attest audit reports against ACAG criteria

Figure 11 shows average scores out of five for attest audit reports against ACAG criteria for 2011-12 and 2012-13
Feedback from Parliamentarians

For several years now, VAGO has requested feedback from Parliamentarians through an annual survey. This is an important part of our efforts to improve our performance and services and is collected by an accredited research company, to better assure the validity of the results.

In 2012–13, 92 per cent of Parliamentarians who responded indicated they were satisfied or very satisfied overall with our reports and services. This exceeds our target of 85 per cent and is consistent with last year's result (93 per cent). As in previous years and other jurisdictions, the survey response rate was low. Forty Parliamentarians responded—down slightly from last year (44 respondents). This represents 32 per cent of all Parliamentarians. Therefore, results must be interpreted with caution.

Highlights from Parliamentarian feedback

[Figure 12] Parliamentarians' satisfaction levels with the Auditor-General's reports and services

Figure 12 shows the percentage of parliamentarians satisfied with the Auditor-General's reports and services from 2008-2013

Timeliness

To measure the timeliness of our reports and services, we report two measures:

In 2012–13, we met our targets for timeliness of our reports and services.

Reports completed on time

Each report is managed as a project with internal time lines used to set the Parliamentary tabling program. We aim to table 90 per cent of our reports within one month of the planned tabling date.

We met our target for timeliness of reports, with 36 reports (97 per cent) tabled within one month of the planned tabling date (target 90 per cent)

This is a strong improvement on our 2011–12 results (87 per cent) and is a result of better planning and scheduling, and more consistent management of project time lines. The one report that was late—Investment Attraction—was carried over from the previous financial year and tabled late due to a change of audit team mid-audit.

[Figure 13] Timeliness of report tabling

Figure 13 shows the percentage of reports we completed on time from 2008-2013

Timeliness of responses to inquiries

Parliamentarians and members of the public contact us about issues that concern them. In many cases, these inquiries seek to trigger or contribute to audit activity under VAGO's mandate.

Inquiries can help refine the focus of our audits and are taken into consideration when developing our Annual Plan. The timeliness of our response to unsolicited inquiries measures our responsiveness in one of our most significant direct interactions with Parliamentarians and the general public.

In 2012–13 we responded to 99 per cent of inquiries within 28 days (target 95 per cent). This is in line with last year's result (99 per cent). Our average response time was 15 calendar days.

The level of inquiry correspondence in 2012–13 eased from last year, down by 23 per cent. We received 107 letters, emails or phone calls:

There were several requests for audit attention in relation to the local government sector, with the issue of increasing rates figuring prominently. We audit the local government sector annually through our attest audits of councils and their associated libraries. We also conduct a number of performance audits of the local government sector each year. In 2012–13, this included an audit of Rating Practices in Local Government.

Cost

VAGO was allocated $14.9 million to deliver Output group 1—Parliamentary reports and services in 2012–13.

The cost of delivering our Parliamentary reports and services in 2012–13 was below target at $14.5 million.

This underspend was largely due to lower expenditure on employee-related expenses, temporary staff and recruitment.

The cost of our performance audits ranged from $260 000 to $550 000 in 2012–13. The average cost was $367 862, which is significantly lower than last year's average ($429 827) and our internal benchmark target ($415 000). This reduction in cost reflects the improved timeliness and shorter average duration of audits this year.

The cost of our attest audit reports ranged from $155 000 to $225 000. The average cost per attest audit report increased in line with CPI to $195 000, compared to $185 000 last year.

Audit reports on financial statements

VAGO's output group 2 relates to audit reports on financial statements. In addition to our audit opinions, we also issue interim and final management letters to advise agencies of issues raised in our audits.

Figure 14 outlines our performance against our measures for our audit opinions and the following section discusses this performance in more detail.

[Figure 14] Performance against output group 2 targets

Performance measures

Unit of measure

Target 2013–14

Actual 2012–13

Target 2012–13

Actual 2011–12

Quantity

Audit opinions issued on the financial statements of agencies

(number)

559(a)

550(b)

563

563

Audit opinions issued on non-financial performance indicators

(number)

115

115

114

115

Quality

External/peer reviews finding no material departures from professional and regulatory standards

(per cent)

100

100

100

100

Timeliness

Audit opinions issued within statutory deadlines

(per cent)

98

100

98

99

Management letters issued to agencies within established time frames

(per cent)

90

92

90

96

Total output cost

($ million)

22.3

22.7

22.7

22.8

(a) The reduction in target between 2012–13 and 2013–14 reflects a change in the number of entities subject to audit.

(b) Following reporting to the Public Accounts and Estimates Committee and the Department of Treasury and Finance, VAGO was advised that two more opinions were required. These were for entities that ceased operation in 2012–13 and required an opinion on their financial statements for the year ending 30 June 2012 as well as their final financial statements. The lower than target result reflects a change in the number of entities subject to audit in 2012–13.

Photo of Financial Audit Directors

Financial Audit Directors: Paul Martin, Travis Derricott, Charlotte Jeffries, Tim Loughnan, Jo Marsh, Ron Mak, Craig Burke and Simone Bohan. Not pictured: Anna Higgs.

Quantity

VAGO is mandated to provide attest audit opinions on public sector entities. In 2012–13, while our target for number of opinions issued as reported in the budget papers was 563, following the publication of the budget papers, this number was revised down as entities ceased to operate. As such, in 2012–13 VAGO was required to audit 550 entities. Figure15 shows the type and number of the entities audited.

[Figure 15] Type and number of entities the Auditor-General is responsible for auditing

Figure 15 shows the Type and number of entities the Auditor-General is responsible for auditing

The attest audit outputs we produce each year are:

We also provide authorisation of warrants for expenditure of public funds, and acquittals of Commonwealth grants to the Victorian Government. These are not included in our output targets.

This year we met our quantity targets for audit opinions. These results are discussed in more detail below.

<
Audit opinion on the annual financial report of the State of Victoria

The state's accountability framework requires the government to prepare and present consolidated whole of government financial statements to Parliament annually. The statements consolidate all the public sector entities the government controls. It excludes universities and local government entities as they are not controlled by the state.

On 5 October 2012, the Auditor-General provided a clear audit opinion on the State's annual financial report for 2011–12.

The Department of Treasury and Finance tabled the state's annual financial report, with VAGO's opinion, in Parliament on 15 October 2012.

Review of the estimated financial statements of the State of Victoria

The estimated financial statements (EFS) are another aspect of state-level finances that the Auditor-General examines.

Under the Audit Act 1994, the Auditor-General is required to report to Parliament on whether the:

On 3 May 2013 the Auditor-General's report on the review of EFS for the financial year ending 30 June 2014 and the following three years was completed.

The Budget Papers, presented to Parliament on 7 May 2013, included the Auditor-General's independent review report.

Audit opinions issued on entities' financial statements

VAGO is required to provide an attest audit opinion on all public sector entities. Independent audit opinions add credibility to financial statements by providing reasonable assurance that the information reported is reliable.

During 2012–13, VAGO issued 550 opinions on entities' financial statements. This included the audit opinion on the annual financial report of the state, and the review opinion on the review of the EFS.

The lower than target number of opinions reflects a change in the number of entities subject to audit (target 563).

An 'unqualified' audit opinion means that the financial statements fairly present the transactions and balances in accordance with the relevant legislative reporting framework. A 'qualified' audit opinion is issued when a material misstatement exists within the financial statements, while not being pervasive to the financial report.

The attest opinions on the financial statements of three entities (four in 2011–12), which represent less than 1 per cent of all audited entities, were qualified in 2012–13 because:

Audit opinions issued on entities' non-financial performance statements

As well as preparing financial statements some entities are required to prepare non-financial performance statements that must also be audited.

These statements report against the performance measures and targets identified in:

VAGO issues an opinion on whether a non-financial performance statement is presented fairly.

In 2012–13, we issued 115 attest opinions on non-financial performance statements.

These statements comprised:

No entities received qualified audit opinions on their performance statements in 2012–13 (two in 2011–12).

Quality

Our performance measure for the quality of our attest audit reports on financial statements is the proportion of external/peer reviews of our audits finding no material departures from professional and regulatory standards.

In 2012–13, external/peer reviews were conducted on 11 attest audits—seven audits that were conducted by VAGO staff and four that were conducted by contracted audit service providers.

The reviews found that 100 per cent of the audits reviewed fully complied with professional and regulatory standards.

This meets our target (100 per cent) and is consistent with our result for 2011–12 (100 per cent).

Timeliness

There are two timeliness measures for our attest audits:

In 2012–13, we met our targets for our timeliness measures.

Audit opinions issued within statutory deadlines

Departments and other public sector entities are required to submit their annual financial statements to the Auditor-General within eight weeks of the financial year end. According to section 9(2) of the Audit Act 1994, the Auditor-General must then express an opinion on the financial statements within four weeks of receipt of the certified statements for audit.

We issued 100 per cent of our audit opinions within the statutory deadlines.

As shown in Figure 16, this is consistent with last year's result (99 per cent) and exceeds our target (98 per cent). It continues our trend of high performance against this target.

[Figure 16] Audit opinions issued within the statutory deadline

Figure 16 shows the percentage of audit opinions issued within the statutory deadline between 2008-13

Management letters issued within established time frames

VAGO communicates significant issues identified from attest audits in management letters during and at the completion of an audit.

In 2012–13, we issued 92 per cent of final management letters within our established time frames. This is slightly lower than last year's result (96 per cent), but above target (90 per cent).

Cost

VAGO was allocated $22.7 million to deliver Output group 2—Audit reports on financial statements.

The cost of producing our audit reports on financial statements was $22.7 million. This is on target and decreased slightly from $22.8 million last year. The cost of individual attest audits ranged from $520 to $498 000, with an average cost of $41 168. The increase in the average cost of attest audits since 2011–12 is in line with CPI.

[Figure 17] Cost of audit opinions on financial statements

Figure 17 shows the Cost of audit opinions on financial statements between 2008-13 comparing those conducted by audit service providers and those conducted by in-house staff

[Figure 18] Trends in average cost of audit opinions

Unit of measure

Target 2013–14

Actual 2012–13

Actual 2011–12

Actual 2010–11

Actual 2009–10

Actual 2008–09

Attest audit opinions

(number)

559

550

563

551

557

592

Cost

($ million)

22.3

22.7

22.8

21.2

20.4

19.8

Average cost per audit opinion(a)

($'000)

40

41

40

39

37

33

(a) The average cost calculation does not separate the cost of non-attest audit opinions, where relevant.

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Our quality

At a glance

Audit processes

Oversight and external review

Benchmarking our activities

Continuous improvement

Total audit costs per thousand dollars of public sector transactions, 2012–13

Figure shows the total audit costs per thousand dollars of public sector transactions for 2012-13 for the Victorian Auditor-General's Office compared to other state audit offices

Total audit costs per thousand dollars of public sector assets, 2012–13

Figure shows the total audit costs per thousand dollars of public sector assets for 2012-13 for the Victorian Auditor-General's Office compared to other state audit offices

Introduction

Appropriate quality control policies and procedures are critical to fulfilling our purpose to provide assurance to Parliament. The Audit Act 1994 requires a summary of these policies and procedures in this report.

VAGO has a range of quality systems in place over our audits and our business operations. These systems and the associated activities help us continually raise our standards, and better meet the needs of Parliament and audited agencies. VAGO also conducts other continuous improvement activities to improve the quality and effectiveness of our operations.

This chapter discusses our quality controls and assurance activities, and our continuous improvement activities.

Quality framework

VAGO measures and monitors the quality of our audits and operations through our Quality Framework. The framework brings together the quality systems and processes in place at VAGO. A key component of the framework is an internal assessment of the maturity of these systems and processes against the Australasian Council of Auditors-General's (ACAG) Governance and Audit framework. ACAG's framework covers the requirements of APES 320 Quality Control for Firms and ASQC1 Quality Control for Firms that Perform Audits and Reviews of Financial Reports, Other Financial Information, and Other Assurance Engagements.

Recent reviews of VAGO's compliance with the ACAG framework have demonstrated that VAGO has adequate systems of quality control and meets or exceeds legal and legislative requirements and professional standards applicable to public sector audit offices.

We also have a Continuous Improvement Register to monitor progress on agreed actions that come out of review activities such as internal audit reviews, post audit quality reviews, audited agency and Parliamentarian survey results, audit debriefs and external reviews.

Quality controls built into our audit processes include our:

Quality assurance activities conducted over our audits include:

This section discusses these controls and activities.

Framework for selecting areas of audit focus

The quality of VAGO's reports and advice begins with the choice of the right area of audit focus. VAGO has a rigorous approach to our annual planning. Our planning approach includes:

Selection of performance audit topics

With around 28 performance audits a year, VAGO seeks to maximize the impact of our performance audit program.

To do this, when shortlisting potential performance audit topics, we assess the risk and materiality of the public sector activity that an audit would examine. Risks include the threat to the achievement of government objectives, and materiality includes the economic, social and environmental significance of an activity.

[Figure 19] Performance audit topic selection framework

Figure 9 shows the performance audit topic selection framework

(a) 'Five goals for a stronger, fairer and safer Victoria'. The Governor outlined this framework at opening of the 57th Parliament, 21 December 2010.

In addition, some programs in some sectors do not rank highly against this framework, but they may provide services that are highly topical and visible. Our performance audit topic selection process includes consideration of these programs for audit attention. See Appendix C of the Annual Plan 2013–14 for more discussion of VAGO's performance audit topic selection process.

Review of our topic selection process.

In 2013, VAGO's internal auditors examined our performance audit topic selection framework.

This review found that the systems and processes surrounding the identification of performance audit topics are adequate, with rigorous planning and consultation with stakeholders and good transparency around consideration of stakeholder input.

In addition, Parliamentarians write to the Auditor-General to suggest areas for audit attention. In 2012–13 the Auditor-General received two inquiries from Parliamentarians seeking to stimulate audit activity. The performance audit Managing Major Projects, which was tabled in October 2012, was brought forward and its scope modified in response to a request made by the Public Accounts and Estimates Committee (PAEC).

Selection of attest audit areas of focus

Each year, our attest auditors review and test key internal controls over financial systems of each government entity to assess the risk of material misstatements in the financial report. In addition, they test aspects of controls or activities in detail, to draw out and report on systemic or sector-specific issues.

These 'areas of focus' are selected based on our experience of whether issues of governance, probity, fraud, waste and noncompliance are likely. The selected areas of financial audit focus are identified in VAGO's annual plan and are aligned with the following components of the financial report:

For each sector, two to three areas of focus are examined each year.

See Appendix D of the Annual Plan 2013–14 for more discussion of VAGO's attest audit areas of focus.

Standards-based audit methodology

Under the Audit Act 1994, we must comply with the auditing standards issued by the Australian Auditing and Assurance Standards Board. These cover aspects of an audit including planning, communication, conduct, evidence, quality assurance, delegations and reporting.

We comply with all Australian Auditing Standards and have developed our audit methodologies based on these standards. VAGO has methodologies to guide our attest and performance audits.

The Audit Act 1994 also enables the Auditor-General to apply additional auditing standards for the conduct of audits. An additional auditing standard was applied in 2012–13, Additional Auditing Standard 2006:02

Additional Auditing Standard 2006:02

This standard requires that, where Auditing and Assurance Standards issued by CPA Australia and the Institute of Chartered Accountants in Australia have not yet been revised and reissued by the Auditing and Assurance Standards Board (AUASB), they are to be applied where they are not inconsistent with the AUASB's standards.

In 2011–12, this included the following standards issued by the Australian Accounting Research Foundation, on behalf of CPA Australia and The Institute of Chartered Accountants in Australia:

  • AUS 804 The Audit of Prospective Financial Information
  • AUS 810 Special Purpose Reports on the Effectiveness of Control Procedures.

Key quality controls incorporated into our audit methodologies include:

In addition, VAGO's Technical Issues Committee provides advice on proposed modified audit opinions.

Attest audit methodology

VAGO's attest audit approach enables us to form an audit opinion on agencies' financial statements and non-financial performance statements.

Our attest audit methodology is integrated into our electronic audit toolset, IPSAM, which was developed under a joint arrangement with the Queensland Audit Office and is either in use, or being implemented, in four other Australian jurisdictions.

Performance audit methodology

VAGO's performance audits are conducted using AmP, which was developed in-house and is our performance audit methodology and electronic database. AmP is used to document work and evidence, and assist in managing and reviewing the audit project.

AmP contains policies, guidance and standard procedures which must be followed when carrying out a performance audit.

Methodology for reviewing the estimated financial statements

VAGO's review of the state's estimated financial statements is performed applying the principles in ASRE 2410 Review of a Financial Report Performed by the Independent Auditor of the Entity and AUS 804 The Audit of Prospective Financial Information. There is no specific auditing standard that deals with review conclusions issued on prospective financial information.

Technical Issues Committee

This committee provides advice and recommendations to the Auditor-General on proposed modifications to attest audit opinions, the appropriate policy or guidance that VAGO should adopt in relation to significant financial reporting and auditing issues, and issues affecting the legislative mandate of the office.

The committee comprises the Assistant Auditor-General, Financial Audit; the Director, Methodology and Standards; and at least two Financial Audit Directors.

After considering the advice of the committee, the Auditor-General establishes VAGO's position on the matters under consideration.

Parliamentary accountability measures

The Constitution Act 1975 states that the Auditor-General has complete discretion in his or her activities and is not subject to direction from anyone.

Balancing these profound protections of independence is a suite of accountability requirements. Under the Audit Act 1994, we must consult PAEC when developing our annual plan and on the specification for each performance audit. This reflects that VAGO undertakes its work on behalf of Parliament.

VAGO is also subject to both attest and performance audits, conducted on behalf of Parliament. Our financial statements are audited annually, and every three years we are subject to a performance audit. The performance audit examines and reports on both the audit and operational aspects of VAGO.

The next performance audit of VAGO commenced in July 2013. VAGO has been preparing for this performance audit through a cycle of self-assessment, ACAG peer review and an external review.

Reviews of audit processes

To seek assurance that our audits meet the profession's and VAGO's quality standards, we engage external parties to undertake 'cold' reviews of a selection of completed attest and performance audits, including audits conducted by our contracted attest audit service providers.

Attest audits

Matters covered in the reviews of attest audits include whether:

The overall result from our cold reviews of attest audits is our performance measure of quality for Output group 2—Audit reports on financial statements.

Performance audits

For performance audits, we engage external parties to undertake a review of a sample of performance audits to assess whether the:

In 2012–13, four performance audits were reviewed by peer reviewers from other Australian audit offices. All audits were found to have complied with the performance auditing standards and VAGO policy and procedures. The reviewers considered that the four reports covered highly relevant subject areas and the findings were likely to be of interest to Parliamentarians, agencies and the wider community.

The results of the reviews were shared with Performance Audit staff. Actions to address the minor issues raised included reinforcing existing requirements with staff and updating performance audit training material.

ACAG assessments of audit report quality

Since 2004, a selection of VAGO's audit reports has been reviewed by independent external reviewers. The reviewers assess the quality of the report and whether it is clear and understandable to readers.

The results of the assessments are captured in the continuous improvement register and fed back in to our audit processes.

The results are also used as a performance measure of quality for Output group 1—Parliamentary reports and services.

Surveys of key stakeholders

VAGO surveys a range of key stakeholders to collect feedback on our audits. The results of these surveys are used to identify new improvement initiatives and monitor progress on existing initiatives. The surveys are run by an independent survey company to better assure the validity of the results, and high-level results are published on VAGO's website.

In 2012–13, we broadened the range of stakeholders we surveyed while limiting audited agency surveys to performance audits.

In 2012–13, we surveyed:

Surveys of Parliamentarians

VAGO surveys Parliamentarians and results are used as a performance measure of quality for Output group 1—Parliamentary reports and services.

For the first time, in 2012–13 we interviewed Parliamentarians face to face to collect more qualitative information. Some opted, however, for a telephone interview or to fill in a written survey.

Surveys of audit committee chairs

Audit committees are important users of our work, with their significant involvement in the attest audit process, and increasing engagement in relation to performance audits.

In 2011, following feedback from meetings with chairs of audit committees, VAGO conducted a pilot survey of chairs. The pilot survey results provided interesting insights and so we decided to do this again in 2013.

The majority of chairs who responded indicated they were satisfied with the financial statement audit process, that they found our attest audit services valuable, and that our engagement was clear and timely.

Approximately half of the audit committees had considered a performance audit report, and their responses were generally positive. Respondents reported that planned performance audits were used to inform their organisations' internal audit work program.

VAGO will use these results to help us prepare for future engagement with audit committees.

Surveys of audited agencies

Surveys of audited agencies were previously output quality measures. To provide the data for these measures, VAGO surveyed:

Following the change to our quality measures, we reconsidered our survey approach. In particular, the results of the surveys about attest audits had been consistent for several years and were providing limited new information. As such, we did not survey audited agencies on attest audits in 2012–13.

We did, however, continue to seek feedback on each performance audit, as these are discrete projects and often involve different agency staff. They also provide information of direct relevance to the audit team.

VAGO surveyed agencies on their perceptions of the audit process, reporting and value. The performance audit results for 2012–13 continue the steady improvement over recent years and in 2013 the overall result was the highest achieved to date.

Over recent years, survey results have been monitored to assess the impact of activities which aimed to increase the clarity of audit reports, better understand the audited agency's environment, and improve communication with audited agencies—including earlier notification of significant issues identified during an audit.

The results this year showed a marked increase in agreement that the organisation was promptly informed of significant issues. Results were on par with prior years for effective communication and understanding of the organisation.

Surveys of departmental secretaries

This year, we also directly interviewed departmental secretaries for the first time, on their perception of VAGO, how audits inform their strategic decision-making, and opportunities for improving our communications with them.

Results are yet to be received. They will be examined in the coming months, and will feed into our continuous improvement activities.

Debrief process

At the end of every performance audit we conduct an internal audit debrief to reflect on and identify positives and negatives about the quality of the audit process and reporting. Quantitative and qualitative information is collected about each report, and areas for improvement identified are considered in future activities.

Benchmarking our activities

VAGO cooperates with audit offices across Australia in measuring quantitative and qualitative benchmarks of the operations of audit offices and specific characteristics of each jurisdiction. We use the results of this benchmarking to identify priority areas for improvement.

Two of the measures compare audit office costs as a proportion of total state assets and transactions. In 2012–13, VAGO's audit cost as a proportion of:

These results compared with other offices as expected because, while Victoria performed better than the national average, this should be interpreted with caution given the differences between jurisdictions and audit offices.

When allowing for the fact that overall we produce a higher proportion of performance audits, we feel we are performing well on these measures.

Additional continuous improvement activities

VAGO also conducts other activities to improve the quality and effectiveness of our office.

Working with other integrity bodies

Increasingly, there are occasions when VAGO sees merit in working with other integrity bodies on projects. We are largely prevented by the Audit Act 1994 from sharing information collected during the course of an audit. However, we work within these limitations.

In February 2013, VAGO tabled our report Addressing Homelessness: Partnerships and Plans. This audit was conducted concurrently with six other Australian audit offices, all examining the implementation of the National Partnership Agreement on Homelessness, using a common scope and planning approach. This was the pilot concurrent audit and VAGO supports continuing to undertake concurrent audits.

Recent changes to our legislation, as part of the reform of Victoria's integrity system, has instituted interactions between Victorian integrity bodies, including mandatory notification of some matters and the capacity to receive referrals and share information with other integrity bodies.

While to date there has been no sharing of confidential audit information, there is the potential for coordinated investigations, and VAGO has commenced its mandatory reporting.

VAGO provided support during the establishment phase of Victoria's Independent Broad-based Anti-corruption Commission (IBAC). VAGO contributes a representative to IBAC's ongoing Prevention and Education Advisory Group. Further, a staff member was seconded to assist the development of IBAC's internal audit functions and frameworks.

Engaging with the Australasian Council of Auditors-General

In 2012–13 VAGO continued to be actively involved in the national and international development of public sector audit, through our participation in the ACAG. This engagement provides the opportunity to share information and drive better practice in public sector audit offices.

The Auditor-General attended ACAG meetings in Brisbane and Melbourne in 2012, and the Acting Auditor-General attended a meeting in Sydney in April 2013. The Sydney meeting was timed to coincide with a meeting of the Australasian Council of Public Accounts Committees.

VAGO participates in specialist ACAG networks that allow senior staff to share views and learn from each other.

In 2012–13, VAGO attended or hosted meetings of the ACAG:

Key sub-group projects this year included:

[ Contents of this report | VAGO Home | VAGO Publications ]

Our organisation

At a glance

Executive management

Risk and audit

Legislation and policy

Environmental management

Contribution to capacity building

Photo of John Doyle, Auditor-General with His Excellency, the Honourable Alex Chernov AC QC, Governor of Victoria, at Mr Doyle's swearing-in ceremony

John Doyle, Auditor-General (right) with His Excellency, the Honourable Alex Chernov AC QC, Governor of Victoria, at Mr Doyle's swearing-in ceremony.

Introduction

VAGO's governance arrangements are critical to our organisational performance. We also contribute to building the capacity of our international peers in our region—sharing systems, practices and insights.

This chapter discusses our executive management structure, risk and audit, legislation and policy and contribution to capacity building.

Executive management

The Executive Management Group (EMG) provides advice and counsel to the Auditor-General to assist with the delivery of his statutory objectives as described in the Audit Act 1994. The EMG members are the:

Key functions and responsibilities of the EMG include:

The following subcommittees report directly to the Auditor-General:

Other subcommittees report to the EMG:

Changes in senior management

The former Auditor-General, Des Pearson, resigned from the office in 2012 and had his final day on 14 December. Mr Pearson had been Auditor-General of Victoria since October 2006. Peter Frost, Chief Operating Officer, was Acting Auditor-General from 17 December 2012 until the commencement of John Doyle as Auditor-General of Victoria on 1 July 2013.

In September 2012, Nancy Stefanovski was appointed Executive Director of the Audit Support Group.

[Figure 20] Executive management organisational chart

Figure 21 shows the executive management organisational chart
Auditor-General of Victoria

John Doyle, MBA, MAcc, FCPA, CA, CIA, FIIA, FCCA (United Kingdom), FCA (Canada)

Photo of John Doyle, Auditor-General

John Doyle commenced as Auditor-General of Victoria in July 2013. John was previously Auditor General of British Columbia (2007–13) and Deputy Auditor General of Western Australia. John was an Associate Professor and Head of the School of Accounting and Finance at the University of Notre Dame in Western Australia, and has also held the position of Chief Financial Officer in a number of organisations in Western Australia.

John exercises his audit powers and functions under the Constitution Act 1975 and the Audit Act 1994 and reports to the Parliament of Victoria.

Chief Operating Officer

Peter Frost, BA, BLitt, MPhil, MEd, PhD

Photo of Peter Frost, Chief Operating Officer

Peter was appointed VAGO's Chief Operating Officer in January 2007. Peter has extensive senior public sector management experience, gained primarily in the Victorian public sector, higher education, and international development with the Commonwealth Secretariat, World Bank and Asian Development Bank.

Peter reports directly to the Auditor-General on the management and performance of office operations, and oversees our technical and audit operation activities, as well as our business support activities.

Assistant Auditor-General, Financial Audit

Ellen Holland, BBus (Acc), FCPA, MIPAA

Photo of Ellen Holland, Assistant Auditor-General, Financial Audit

Ellen was appointed Assistant Auditor-General, Financial Audit in March 2011 after 17 years in the Performance Audit Group, including three years as Senior Director. Before moving to Performance Audit, Ellen held various positions in the Financial Audit Group.

Ellen manages the Financial Audit Group and contributes to the office's strategic and business unit planning.

Assistant Auditor-General, Performance Audit

Natalia Southern, BBus (Hons), MPubPol

Photo of Natalia Southern, Assistant Auditor-General, Performance Audit

Natalia joined the Auditor-General's Office in May 2012. Natalia is an economist with experience in a range of Commonwealth and state policy and regulatory bodies. Prior to joining VAGO, Natalia was a senior consultant at ACIL Tasman where she advised government and private sector clients on energy, water and transport sector issues.

Natalia manages the Performance Audit Group and contributes to the office's strategic and business unit planning. Natalia is also responsible for the development of our Annual Plan.

Executive Director, Audit Support Group

Nancy Stefanovski, BSc (Hons), Grad Dip Ed

Photo of Nancy Stefanovski, Executive Director, Auditor Support Group

Nancy was appointed Executive Director, Audit Support Group in September 2012 after five years in the Performance Audit Group as a Senior Audit Manager and Business Manager. Nancy's previous experience in the public sector includes contract management, reporting and evaluation.

Nancy provides strategic advice on business solutions and is responsible for the Finance, Reports and Communications, Information Technology and Services, and People and Culture Units.

Director, Policy and Coordination Directorate

Marco Bini, MCom, LLM, MPubPol

Photo of Marco Bini, Director, Policy and Coordination Directorate

Marco joined the office in September 2007 and was appointed Director of the Policy and Coordination Directorate in January 2009. Marco has significant public sector experience including with the Department of Premier and Cabinet, WorkCover, and the State Revenue Office.

Marco provides a range of legal, policy and administrative advice to the office. Marco also manages the Policy and Coordination Directorate, which provides a range of internal policy, governance and strategy services.

Risk and audit

Risk management

VAGO's office-level risk management is conducted and monitored through our risk register, which is reviewed annually as part of VAGO's business planning processes. The register is updated and reported on monthly to EMG and quarterly to VAGO's Audit Committee.

The following is an attestation on VAGO's compliance with the Australian/New Zealand Risk Management Standard:

I, John Doyle, certify that the Victorian Auditor-General's Office has critically reviewed the risk profile within the last 12 months and has robust risk management processes, including internal control systems that enable the executive team to understand, manage and control risk exposures. These processes have been verified as being consistent with the Australian/New Zealand Risk Management Standard AS/NZS ISO 31000:2009.

The Audit Committee agrees that this attestation is consistent with the committee's understanding of VAGO's risk management policies and processes, based on the evidence, reports and communications provided to the committee throughout the year.

Signature of the Auditor-General

John Doyle

Auditor-General

6 August 2013

Insurance

Current Victorian policy requires public sector agencies to assess their risk exposure and manage that risk appropriately. These requirements are in place to ensure that insurance decisions are embedded in a broader risk-management framework, and that departments and agencies bear the ultimate accountability for protecting the resources they manage on behalf of the state.

The following is an attestation that VAGO is insured appropriately, having regard to relevant government guidelines and the Standing Directions of the Minister for Finance.

I, John Doyle, certify that the Victorian Auditor-General's Office has complied with Ministerial Direction 4.5.5.1Insurance.

Signature of the Auditor-General

John Doyle

Auditor-General

6 August 2013

Internal audit

Moore Stephens, Accountants and Advisers, are appointed as VAGO's Internal Auditor for the period August 2010 to June 2015. The Internal Auditor reports to VAGO's Audit Committee. A three-year internal audit program has been approved by the Audit Committee and the following reviews were carried out in 2012–13:

The Audit Committee's report

Legislation and policy

There is a range of state and federal legislation and policy which VAGO must comply with, and report on in this report.

In addition, VAGO has a range of policies in place to direct staff activities in relation to finance, people and culture, information systems and technology, and governance.

Audit opinion delegations

The Auditor-General can delegate the authority to sign audit opinions under section 9 of the Audit Act 1994. Under the Act, VAGO must report the names of persons to whom the Auditor-General delegated the power to sign attest audit opinions.

VAGO's Audit Opinions Delegations policy states that the Auditor-General signs audit opinions for all material and high-risk entities, including the opinion on the annual financial report of the State of Victoria. Under a formal instrument, the former Auditor-General delegated the authority to sign other audit opinions under section 9. In 2012–13, this delegation applied to 13 individuals.

Audit opinion delegations

In 2012–13, the following individuals had this delegation:

Peter Frost

Ellen Holland

Natalia Southern

Kristopher Waring

Steven Vlahos

Simone Bohan

Tim Loughnan

Charlotte Jeffries

Jo Marsh

Ron Mark

Craig Burke

Travis Derricott

Anna Higgs.

Executive remuneration

VAGO's remuneration policy supports our strategic goals and business objectives, and is consistent with our human resources management strategies and policies.

The Remuneration Committee is responsible for this policy, and monitoring the executive officer annual performance appraisal process and salary review. This committee comprises the Auditor-General, the Manager People and Culture, and an independent member. In 2012–13, the independent member was Ms Liz Roadley.

Managing and responding to complaints

VAGO has two complaints policies—one on the management of complaints about the conduct of audits,and another on the management complaints about matters other than audits. These policies require us to make publicly available an annual summary of complaints received and any trends arising.

In 2012–13, no complaints were made to VAGO under the Managing complaints about matters other than audits policy. One complaint was made to VAGO under the Managing complaints about the conduct of audits policy. This complaint was acknowledged within five business days and the final response was completed within 28 days.

Protected disclosures

To enable and encourage people to make disclosures about improper conduct within the public sector, Victorian legislation protects the confidentiality and welfare of these individuals and sets up a system to investigate disclosed matters.

In February 2013, the Whistleblowers Protection Act 2001 was replaced by the Protected Disclosures Act 2012.

This substantially altered VAGO's responsibilities VAGO can no longer receive protected disclosures of any kind (previously VAGO could receive disclosures about VAGO officers) and therefore no longer has a protected disclosure coordinator.

Disclosure about VAGO officers may now be made to the Independent Broad-based Anti-corruption Commission or the Victorian Inspectorate. Other public officers or bodies that can receive protected disclosures are listed on VAGO's website.

VAGO has new responsibilities to establish procedures for the protection of persons making, or involved with, investigations of protected disclosures. These were established by 10 August 2013 as required. These procedures can be accessed by VAGO staff through our central repository of internal policies and guidelines.

External guidance on VAGO's changed responsibilities was also developed in this time frame, and is available at http://www.audit.vic.gov.au/about_us/corporate_information/whistleblowers.aspx.

In the eight months that the Whistleblowers Protection Act 2001 was still in effect,there were no disclosures made to VAGO. There were no other disclosures to report under the superseded Act.

Oversight by the Victorian Inspectorate

The Victorian Inspectorate was established in 2012 as part of the reform of Victoria's integrity systems. The Inspectorate has monitoring and oversight functions in respect of certain integrity bodies including VAGO.

The Inspectorate's role is to review and assess the use of coercive powers by these bodies, to ensure that those powers are exercised appropriately, proportionately and in accordance with the law. The Inspectorate also has power to receive and investigate complaints about the Auditor-General and VAGO officers.

In 2012–13, VAGO did not formally exercise its coercive powers. Therefore, VAGO had nothing to report to the Inspectorate and the Inspectorate did not review any of VAGO's activities.

Freedom of information

The Freedom of Information Act 1982 provides the community the right to access, as far as possible, information held by the Victorian Government.

Section 20A of the Audit Act 1994 broadly precludes us from disclosing information we gather during an audit to a third party, other than reporting to Parliament. Section 20B of the Audit Act 1994 also precludes third parties from accessing any audit-related information and documents we hold.

Our administrative processes, however, come under the state's freedom of information legislation. VAGO received one application under this legislation in 2012–13. In order to maintain the confidentiality of this request, we are not disclosing its nature or outcome.

Freedom of information requests

Requests for access to information and documents not related to audits can be made to the Executive Director, Audit Support Group:

Via email:

nancy.stefanovski@audit.vic.gov.au

In writing:

Freedom of Information

Victorian Auditor-General's Office

Level 24, 35 Collins St

Melbourne 3000

Information on what VAGO does in relation to the Freedom of Information Act 1982, how we act, what information we hold and how to access the information is available in our Part II Information Statement, published on the VAGO website: http://www.audit.vic.gov.au/about_us/corporate_information/freedom_of_information.aspx. See also Appendix 5.

National Competition Policy

The Victorian Government is part of the intergovernmental Competition Principles Agreement. The principle of this policy is to not restrict competition. VAGO is compliant with the National Competition Policy, including compliance with requirements of the Department of Treasury and Finance's Competitive neutrality policy.

Victorian Industry Participation Policy

In October 2003 the Victorian Parliament passed the Victorian Industry Participation Policy Act 2003 that requires public bodies and departments to report on the application of the Victorian Industry Participation Policy (VIPP). This is intended to promote employment and business growth by expanding opportunities for local industry. Departments and public bodies are required to apply VIPP in all tenders of more than $3 million in metropolitan Melbourne and $1 million in regional Victoria. VAGO did not complete any tenders or contracts that were subject to VIPP during 2012–13.

Building Act

VAGO does not own or control any government buildings and, therefore, has no responsibilities under the Building Act 1993.

Overseas travel

All overseas travel by VAGO staff must be approved by the Auditor-General. In 2012–13, VAGO sent the following staff overseas:

Photo of Ellen Holland, Assistant Auditor-General Financial Audit, presenting in Vietnam

Ellen Holland, Assistant Auditor-General, Financial Audit, presents to auditors, accountants and students in Vietnam on behalf of CPA Australia.

Environmental management

Environmental management has been a focus at VAGO for a number of years, as we recognise the role we play in making Victoria more sustainable for future generations. We aim to minimise our:

In 2012–13 we continued to implement our two-year ResourceSmart strategy, which was aimed at helping us make the environment central to our planning, operations and policy decisions.

Governance

The Environmental Management Committee provides advice and recommendations to EMG on improving VAGO's environmental management. The committee's responsibilities include:

In 2013–14, the committee will develop and launch a new environmental management strategy to target further possible areas for improvement and strive for better practice.

Environmental performance

VAGO monitors its environmental performance against seven focus areas. We collect data on each of these areas to help us understand our environmental impacts, identify areas for improvement and to allow us to benchmark our performance against other jurisdictions. Comprehensive reporting is available on our website, and is audited by NetBalance.

We are also rated by the National Australian Built Environment Rating System (NABERS), which is a performance-based rating system that rates a building on the basis of its historical measured operational impacts on the environment.

Our overall NABERS rating in 2012–13 was 3.5 stars. This is below the general aspirational government target of 4.5 stars. It is, however, similar to other equivalent offices and is largely due to our building fit-out.

The following section summarises our performance against focus areas in 2012–13.

Energy use

VAGO's energy use is mostly attributable to our lighting, computer servers and ventilation. We purchased 100 per cent green power in 2012–13.

This year, we reduced electricity use by 3.2 per cent, mostly due to the installation of new servers that are more energy efficient.

Our energy use for 2012–13 was 4 846MJ/FTE, which is substantially below the government average of around 7 000MJ/FTE. Given VAGO is an office-based organisation, this is an appropriate energy usage level.

Waste production

In 2012–13, we recycled 84.3 per cent of our total waste. This result is above our target of 80 per cent, and the average for equivalent offices of 50 per cent.

We compared well to other similar government agencies, producing 64.5kg/FTE of waste. This is below our strategy target of 71kg/FTE and the average for equivalent offices of around 100kg/FTE. This strong performance is largely due to our behaviours in relation to recycling.

Our volume of landfill waste fell from 12.7 to 10.1 kg/FTE (20 per cent) and brings us in line with similar offices (around 10kg/FTE/year).

Paper use

Our paper use fell in 2012–13 from 19.7 to 17.8 reams/FTE (9.6 per cent). While this is a good reduction, we remain above the average for equivalent offices of around 12 reams/FTE.

VAGO is investigating options for reducing the number of reports we print, and internally we are seeking to become a 'paperless' office, to improve our environmental performance, reduce costs associated with printing, and improve our efficiency.

Water consumption

VAGO's water consumption rose slightly in 2012–13 to 4.4kL/FTE from 4.0kL/FTE. This is still in line with good practice.

Transportation

VAGO's main transportation usage is through travelling to agencies as part of our audit conduct. Staff also travel to participate in conferences, audit and accountability industry meetings, and to peer offices for secondments and other learning opportunities. Figure 21 shows the impact of vehicle use and flights taken by VAGO staff.

[Figure 21] Vehicle use and flights taken by VAGO staff

2012–13

2011–12

Vehicles (fleet vehicles and hire vehicles)

kilometres travelled

217 238

206 640

tonnes CO2-e

43

49

Flights (short/medium/long haul)

kilometres travelled

211 254

132 891

tonnes CO2-e

50.9

30.4

The kilometres travelled by our total vehicle use increased but our CO2 emissions fell 12.2 per cent to 43 tonnes. This was a result of our change in practice in 2012–13 to hire fuel-efficient cars.

Taxi trips by staff also decreased from 826 to 532, resulting in a 35.5 per cent reduction in CO2 emissions to 2.9 tonnes.

The number of kilometres travelled on flights increased substantially in 2012–13. This is a result of a number of exchanges between VAGO and the Audit Office of British Columbia.

Greenhouse gas emissions

Greenhouse gas emissions provides an overall combined measure of the impact of the above measures—energy use, waste production, paper use, water consumption and transportation—as well as the greenhouse gas emissions from our office refrigerators.

VAGO's greenhouse gas emissions for 2012–13 was 0.9 tonnes/FTE. This is a slight increase from 2011–12 (0.8 tonnes/FTE), largely due to the increase in international flights taken. It is still, nonetheless, below the average consumption by equivalent offices of 2.0 tonnes/FTE.

Procurement

VAGO's policy on procurement and purchasing commits us to sustainable purchasing, planning and practices to reduce environmental impacts and to support suppliers that demonstrate a commitment to environmental initiatives and performance.

In relation to office supplies, purchasing considers the environment as well as other aspects such as price and availability. This will be given greater priority in our next environmental management strategy.

Contributing to capacity building

International engagement

VAGO shares insights, systems and practices with international stakeholders to help them grow capacity and knowledge. We also participate in secondment and internship programs with government organisations and universities from around the world.

Over the past few years, VAGO has focused our engagement with international stakeholders on information needs relevant to VAGO's work. Implementation of our International Engagement Policy, better coordination with ACAG and improved external communication has assisted international visitors in determining whether a visit to VAGO is right for them. As a result, visits have been better with more engaged and relevant visitors.

Appendix 2 lists the delegations, placements and secondments for 2012–13.

Pacific Association of Supreme Audit Institutions (PASAI)

PASAI is the official association of supreme audit institutions in the Pacific region. While VAGO is not a national audit institution, we engage with and support this association. In 2012–13, VAGO continued our assistance to PASAI.

This year, our support has become more targeted, as a 'twinning' framework was agreed between Australian and Pacific audit offices based on the framework in place between Parliaments.

Under this framework, Australian offices are 'twinned' with one or more Pacific offices, to provide a program of assistance. VAGO was allocated Nauru and Tuvalu.

Throughout the year, VAGO has sought to build this support in the follow ways:

To date, this assistance has been focused on Tuvalu, which has a more mature audit function. VAGO will shortly be commencing engagement with Nauru.

Collaboration with CPA Australia

In November 2012, the Assistant Auditor-General, Financial Audit, travelled to Vietnam to share practices, knowledge and experience with auditors, accountants and students. The event was organised by CPA Australia.

The Assistant Auditor-General presented on:

[ Contents of this report | VAGO Home | VAGO Publications ]

Our people

At a glance

Workforce capacity

Employment and conduct

Photo of Business Operations Group

Business Operations Group: Desiree D'Argent, Skye Wighton, Megan Mithen, Linda Pemberton, Jenny Casey, Nicole Mumford, Anna MacGill and Li La'Brooy. Not pictured: Bianca Davey and Amy Harrison.

Introduction

Our people are key to the success of our organisation. We value them and seek to provide rigorous performance planning and management, challenging work, flexible work arrangements and a close-knit, collaborative culture. We also make sure we have a safe and healthy workplace.

This chapter discusses our workforce, employment and conduct, and the workplace.

Workforce capacity

VAGO staff numbers are reported in accordance with the financial reporting direction FRD 29, and employees have been correctly classified in workforce data collections.

At 30 June 2013 we had 179 staff—161 ongoing staff and 18 fixed-term or casual staff.

Our staff profile

Of our 161 ongoing staff, 140 work full-time and 21 work part-time. Of our 18 fixed-term and casual staff, 15 work full-time and three work part-time or casual hours.

Figure 22 shows our employee numbers, and Figure 23 shows our workforce by gender, age and classification.

[Figure 22] Staff profile by employment type

Figure 22 gives a staff profile by type of employment

[Figure 23] Employee profile by gender, age and classification

30 June 2013

30 June 2012

Ongoing

Fixed-term and casual

Ongoing

Fixed-term and casual

Number (headcount)

FTE

Number (headcount)

FTE

Number (headcount)

FTE

Number (headcount)

FTE

Gender

Male

70

69.0

8

7.7

69

66.3

3

2.0

Female

91

84.9

10

9.5

93

85.7

11

8.6

Age

Under 25

11

11.0

1

1.0

12

12.0

1

0.0

25–34

69

67.0

7

6.5

66

60.8

8

6.0

35–44

40

36.5

5

5.0

42

38.6

2

1.6

45–54

23

21.8

3

2.8

24

23.0

2

2.0

55–64

17

16.6

1

1.0

17

16.6

1

1.0

Over 64

1

1.0

1

0.9

1

1.0

0

0.0

Classification

VPS Executives

19

19.0

1

1.0

19

18.9

0

0.0

VPSG1

0

0.0

0

0.0

0

0.0

0

0.0

VPSG2

6

6.0

0

0.0

9

8.4

2

1.0

VPSG3

38

37.0

3

3.0

32

31.3

4

3.0

VPSG4

30

29.4

4

3.5

32

30.2

2

1.0

VPSG5

29

26.5

4

4.0

25

22.7

2

2.0

VPSG6

33

30.5

4

3.8

38

33.9

3

2.6

VPSG7(a)

6

5.5

2

1.9

7

6.6

1

1.0

(a) The VPSG7 (also known as Senior Technical Specialist) roles at VAGO comprise six specialist senior auditing roles, one senior accounting role and one senior legal role.

Executive information

VAGO reports separately on executive officers, as required by financial reporting directions. This information is also available to members of Parliament and the public on request.

Figure 24 shows the breakdown of executive officers by classification. All VAGO's executive officers are responsible for ongoing functions or outputs and none are conducting special projects. Figure 25 show the breakdown of executive officers by gender and variance since 2011–12. Figure 26 shows our executive remuneration and vacancies, and reconciles with our financial report.

[Figure 24] Number of executive officers by classification

All

Ongoing

Classification

2011—13

2011–12

2012–13

2011–12

Auditor-General(a)

1

1

1

1

EO2

3(b)

3

3(a)

3

EO3

19

18

19

18

Total

23(c)

22(d)

23

22(d)

(a) The Auditor-General is VAGO's Accountable Officer and is an officer of Parliament, not a VPS executive as the definition of executive officer excludes Governor-in-Council appointments of statutory office holders. However, the Auditor-General is considered in the same salary band as an EO1 and as such has been included in this table.

(b) As at 30 June 2013, the Chief Operating Officer was Acting Auditor-General. However, for the purposes of this table, he has been counted in his substantive role as an executive officer in the EO2 band.

(c) The increase from 2011–12 to 2012–13 is due to an executive officer being employed to backfill a period of maternity leave.

(d) Comparatives have been adjusted for 2011–12 to reflect ongoing vacancies.

[Figure 25] Breakdown of executive officers by gender

Male

Female

Ongoing vacancies

Classification

Number

Variance

Number

Variance

Auditor-General(a)

0

–1

0

0

1

EO2

1(b)

0

2

0

0

EO3

11

1

6

1

2(a)

Total

12

0

8

1

3(c)

(a) The Auditor-General is VAGO's Accountable Officer and is an officer of Parliament, not a VPS executive, as the definition of executive officer excludes Governor-in-Council appointments of statutory office holders. However, the Auditor-General is considered in the same salary band as an EO1 and as such has been included in this table.

(b) At 30 June 2013, the Chief Operating Officer was Acting Auditor-General. However, for the purposes of this table, he has been counted in his substantive role as an executive officer in the EO2 band.

(c) The vacancies include that of the Auditor-General, a staff member on maternity leave—both of which are filled by staff members acting on higher duties allowance—and an ongoing vacancy that was vacant for the entire period.

[Figure 26] Reconciliation with executive numbers

30 June 2013

30 June 2012

Executives employed with total remuneration over $100 000

19

16

Vacancies

3(a)

3

Executives employed with total remuneration below $100 000

2

6

Accountable officer

0(a)

1

Separations

–1(b)

–4

Total executive numbers at 30 June

23

22

(a) At 30 June 2013, the Chief Operating Officer was Acting Auditor-General and Acting Accountable Officer. However, for the purposes of this table, he has been counted in his substantive role as Chief Operating Officer, and the role of Accountable Officer has been reported as vacant.

(b) The separation included in this table is the Auditor-General, who resigned in December 2012.

Recruitment and retention

Voluntary turnover is considered to be resignation from an ongoing position or a request to terminate a fixed-term contract early.

In 2012–13, the overall voluntary turnover was 5.6 per cent, compared with 11.9 per cent in 2011–12. VAGO made no exemptions from notification of vacancy for ongoing positions in 2012–13.

[Figure 27] Departures from VAGO

Ongoing (including executives)

Fixed term and casual

Year

Employees (headcount)

FTE

FTE

Voluntary turnover rate (per cent)

2009–10

14

14.0

16.0

17.3

2010–11

27

26.4

18.8

19.7

2011–12

21

19.7

11.8

11.9

2012–13

7

6.3

2.7

5.6

Employee qualifications and training

The work of an audit office requires people that are highly qualified. VAGO's staff are professionally qualified and accredited in a broad range of disciplines. Many of our staff are qualified in the accounting field, and we also have economists, forensic accountants and staff with other qualifications, such as IT, policy, business and public sector administration.

Eighty-nine per cent of all VAGO employees have a qualification at bachelor level or higher. Many of our staff have double degrees, and 4 per cent have a PhD. A breakdown by staff type is shown in Figure 28.

In addition, our financial auditors are required to undertake professional accounting accreditation from CPA Australia or the Institute of Chartered Accountants in Australia (CA). All financial audit staff are encouraged to be accredited by these organisations or a similar overseas organisation. In 2012–13, 31 VAGO employees had CPA accreditation, 21 had CA accreditation and four staff members had accreditation from similar overseas organisations.

We also invest heavily in learning and development for our staff. In 2012–13, VAGO staff spent on average 8.5 days in training.

This includes hours spent in training provided by VAGO and was delivered at a total cost of $483 277. Learning and development expenditure includes expenditure on training providers, study assistance, external course and seminar attendance, coaching, and professional memberships. The overall cost does not include the salary cost for staff hours spent receiving or delivering training.

[Figure 28] Qualifications of VAGO staff by business unit

Bachelor degree held (per cent)

Postgraduate degree held (per cent)

Total staff with a tertiary qualification (per cent)

Performance Audit staff

98

72

100(a)

Financial Audit staff

95

23

95

Other staff

64

36

67(a)

All VAGO staff

89

42

89

(a) Postgraduate degrees are held by some staff without bachelor degrees.

Employment and conduct

Staff cultural alignment survey

VAGO's main source of information about the quality of our management of people, culture and performance is our biennial staff cultural alignment survey. Our third survey in recent years was conducted in 2012–13.

The survey results indicated that VAGO, as an organisation, displays high levels of corporate responsibility. Employees are committed to achieving operational excellence and clearly understand the behavioural and performance standards expected of them.

Since the last survey in 2010–11, results showed improvement for every measure. VAGO's highest scoring measures related to IT effectiveness, roles and expectations, corporate responsibility, work/life balance and cost consciousness. The survey identified areas for improvement in relation to organisational cohesion and empowerment. VAGO is developing an action plan in response to the results. This will include consultation with the Staff Consultation and Development Group. Actions already agreed include executive coaching for Executive Management Group (EMG) members to improve information sharing between business units.

Photo of Performance Audit Directors

Performance Audit Sector Directors' Meeting: Natalia Southern, Assistant Auditor-General, Performance Audit, Susanna Young, Senior Adviser, Strategy and Policy, and Dallas Mischkulnig, Sector Director, Performance Audit.

Staff Consultation and Development Group

This group provides a channel of communication between staff and management on matters directly affecting the culture and business of VAGO.

The 12-member group has a rotating chair and comprises representatives at various levels across the four business units. Meetings are also attended by the Executive Director, Audit Support Group as the representative of the EMG, the Manager, People and Culture, and a Social Club representative. The Auditor-General and Chief Operating Officer attend at least one meeting a year.

In 2012–13, the group worked to improve communication and engagement with staff on long-term leave, continued a program of guest lectures for staff, and provided input into VAGO's response to the biennial staff survey and the rewards and recognition program.

Merit and equity

VAGO is obliged to comply with a range of federal and state legislation in relation to merit and equity, as well as the relevant Victorian Public Sector Standards and Guidelines.

VAGO has a range of policies and procedures in place to support the organisational commitment to making our workplace free from discrimination, harassment and bullying, including:

Occupational health and safety

VAGO is an office-based work environment, with staff making off-site visits. The Occupational Health and Safety Act 2004 sets out the key principles, duties and rights in relation to occupational health and safety (OH&S) in Victoria.

Photo of first aid officers

First aid officers: Dean Anagnos, Kate Kuring, Elsie Alcordo and Rowan Jennion. Not pictured: Jan Carrigg and Kobi Perkal.

VAGO's OH&S management emphasises individual health, and includes a strategy to identify and manage hazards associated with psychological health. VAGO has an OH&S policy and a range of other policies in relation to the working environment such as a WorkCover policy.

In 2012–13, there were two injuries reported under our OH&S policy, and no critical incidents. There were no new workers compensation claims over the reporting period.

In 2012–13:

Our performance indicators for OH&S are reported in Figure 29.

[Figure 29] Performance against OH&S performance indicators

Performance indicator

Met?

Performance

All new and existing staff are offered ergonomic assessments and required products are sourced and purchased

All staff have been offered an ergonomic assessment within two weeks of commencement

All claims received are lodged with WorkCover within five working days

100 per cent

All reported incidents and accidents are followed up within 24 hours and closed as soon as practicable

100 per cent

Return to work plans are in place, as soon as practicable and regularly monitored until complete

Met in accordance with WorkCover requirements

Report on the number of claims and costs is provided to EMG as required

Reported as required

Coordinate and chair the OH&S committee and schedule quarterly meetings

Four meetings held in 2012–13, meeting the requirements of the Occupational Health and Safety Act 2004

Work arrangements for staff

In 2012–13 we reviewed our relevant policies to provide broader access to flexible working arrangements, in response to increasing requests for flexible working arrangements and new legislative obligations for employers to provide flexible working conditions. We encourage our staff to take advantage of the arrangements available to them.

Declaration of interests

All executive officers and business unit managers have completed statements declaring whether their interests, shares in, and other benefits from business enterprises could give rise to a conflict of interest, and there were no such conflicts.

Social Club

Staff engage in a range of activities that contribute both to our own vibrant organisation and more broadly as we seek to be good corporate citizens.

Our social club arranges events to promote a spirit of teamwork and maintain a high level of staff morale. Staff participate in various events, such as the Biggest Morning Tea, rock climbing, futsal, netball, Run Melbourne and an annual sports contest with the Department of Treasury and Finance.

We also conducted fundraising activities for various charities, including Jeans for Genes, the Cancer Council, RSPCA, the National Breast Cancer Foundation, Movember, Suicide Prevention Australia, Fragile X, and Surf Life Saving.

Photo of the VAGO social club

Team Unhealthy took out the inaugural VAGO Futsal Championship.

Photo of a rock climber

Social Club rock climbing event

[ Contents of this report | VAGO Home | VAGO Publications ]

Our financial management

At a glance

Financial performance

Consultancies and contractors

Revenue and expenses for Output groups for 2011–12 and 2012–13

The chart shows the Revenue and expenses for Output groups for 2011–12 and 2012–13

Financial performance

Our net financial result for the year was a surplus of $1 457 260 (compared with a surplus of $578 173 in 2011–12). This surplus is a result of a reduction in the average cost of audits, more even tabling of audits across the year, less recruitment due to the Sustainable Government Initiative, and a vacancy of a senior key executive.

Figure 30 shows the movement in both actual revenues and expenses

[Figure 30] Revenues and expenses, 2012–13 and previous four years

2012–13 ($'000)

2011–12 ($'000)

2010–11 ($'000)

2009–10 ($'000)

2008–09 ($'000)

Revenue

General appropriation

14 661

13 959

13 612

13 433

11 696

Section 32 carry-over

344

200

360

Section 29

23 136

22 547

21 899

20 829

19 317

Special appropriation

362

456

447

445

410

Other

151

158

332

643

222

Total revenue

38 654

37 120

36 490

35 710

31 645

Total expenses

37 197

36 542

35 974

34 928

33 186

Surplus/(deficit)

1 457

578

516

782

(1 541)

Revenue

VAGO is funded through Parliamentary appropriations and Financial Management Act 1994 section 29 revenue.

Revenue increased in 2012–13 mainly due to general price increases plus a carry-over of appropriation of $344 000 into 2012–13 year following a deferral of performance audit project expenses. Our Special Appropriation was reduced as a result of the departure of the previous Auditor-General at mid-year.

[Figure 31] Source of VAGO funding over the past five years

Figure 31 shows the Source of VAGO funding over the past five years

Expenses

VAGO spends most of its budget on employees, contract audit services, accommodation, and supplies and services.

Expenditure in 2012–13 increased mainly as a result of general price increases, higher use of contract performance audits, higher employee costs, and higher consultancy costs due to an external review.

This is offset by gains from a downward revaluation of long service leave provisions (following an increase in the discount rate) and lower recruitment and training activities following lower staff turnover and a poor employment market.

[Figure 32] Expenses from ordinary activities for 2012–13 and previous four years

2012–13 ($'000)

2011–12 ($'000)

2010–11 ($'000)

2009–10 ($'000)

2008–09 ($'000)

Expenses

Depreciation and amortisation

802

732

764

801

928

Employee expenses

19 587

18 917

18 862

17 946

15 829

Contract audit services

11 956

11 531

11 558

10 859

11 220

Rental expenses – accommodation

1 462

1 477

1 475

1 454

1 437

Supplies and services

3 408

3 317

3 060

3 580

3 297

Other operating expenses

(18)

568

255

288

475

Total expenses

37 197

36 542

35 974

34 928

33 186

[Figure 33] Expenses, 2012–13 and four previous years

Figure 33 shows Expenses, 2012–13 and four previous years

Output results

The financial results for our two output groups were:

[Figure 34] Total revenues and expenses attributed to outputs for 2012–13 and 2011–12

2012–13

2011–12

Output group

Revenue ($’000)

Expenses ($’000)

Net result ($’000)

Revenue ($’000)

Expenses ($’000)

Net result ($’000)

1.

Parliamentary reports and services

15 255

14 472

783

14 293

13 719

574

2.

Audit reports on financial statements

23 399

22 725

674

22 827

22 823

4

Total

38 654

37 197

1 457

37 120

36 542

578

Financial position

Our financial position at 30 June 2013 remained strong, with total assets of $15.4 million, total liabilities of $7.3 million and net assets of $8.1 million.

[Figure 35] Asset and liability movement over five years

2012–13 ($’000)

2011–12 ($’000)

2010–11 ($’000)

2009–10 ($’000)

2008–09 ($’000)

Financial assets

12 930

10 755

9 734

8 361

7 933

Non-financial assets

2 518

2 690

2 978

2 991

2 924

Total assets

15 448

13 445

12 712

11 352

10 857

Total liabilities

7 333

6 787

6 631

5 787

6 069

Net assets

8 115

6 658

6 081

5 565

4 788

Other financial matters

Financial report

Pursuant to Standing Direction 4.2 of the Financial Management Act 1994, the financial statements of government departments must be presented fairly and in accordance with the requirements in the model financial report. The annual report of the Victorian Auditor-General's Office complies with this requirement.

Consultancies

In 2012–13, we engaged four consultancies where the total fees payable to the consultants were greater than $10 000. Details of these consultancies are outlined in the table below. We also engaged four consultancies where the total fees payable to the consultants were less than $10 000, with a total expenditure of $23 770 (excluding GST).

[Figure 36] Details of individual consultancies

Consultant

Purpose of consultancy

Start date

End date

Total approved project fee (excluding GST)

Expenditure 2012–13 (excluding GST)

Future expenditure (excluding GST)

Dr Gordon M Robertson

Review of current public audit legislation in Australia

2 May 2013

31 July 2013

$21 240

$21 240

Oakton Services Pty Ltd

Targeted performance review of the Office.

4 March 2013

Early July 2013

$188 800

$188 000

$800

Quantum Management Indicators

VAGO employment engagement survey

18 March 2013

29 April 2013

$18 355

$18 355

Sinclair Knight Merz Pty Ltd

Advice regarding the practice of flexible working arrangements and its impact on operational performance

16 April 2013

24 May 2013

$22 727

$22 727

Performance audit contractors

In 2012–13, we paid $1.2 million ($0.8 million in 2011–12) to 32 contractors for services related to our performance audits.

[Figure 37] Payments to performance audit contractors, 2012–13

Performance audit contractor

2012–13 ($'000)

2011–12 ($'000)

Aperium Pty Ltd

36

0

Australian Survey Research Group Pty Ltd

41

0

Certitude Pty Ltd

46

0

Collison Fogarty Laws P/L

0

64

E W Russell & Associates Pty Ltd

93

137

Eastern Health

0

45

Ernst & Young

0

218

Gardner Group Pty Ltd

0

72

Gartner Australasia Pty Ltd

0

29

HLB Mann Judd (Vic) Pty Ltd

101

0

J H Resources Pty Ltd

145

68

Ovum Pty Ltd

33

0

P S Consulting

56

0

Paul Edney

16

37

P G Rorke

143

32

Pivotal Point Consulting Services

83

0

Replete Group

46

0

Stuart McLennan

0

6

The Allen Consulting Group

26

0

The Kiwipower Group

0

55

Trusted Impact

201

0

Other – 18 service providers (8 in 2011–12)

175

11

Total

1 241

774

Attest audit service providers

In 2012–13, we paid $10.7 million ($10.8 million in 2011–12) to 24 audit firms (36 partners) that provided services related to our attest statement audits.

[Figure 38] Payments to attest audit service providers, 2012–13

Attest audit service provider

2012–13 ($'000)

2011–12 ($'000)

Accounting and Auditing Solutions

45

39

BDO East Coast Partnership (previously Pannell Kerr Forster)

29

16

Coffey Hunt & Co

462

522

Crowe Horwath Melbourne (previously WHK Horwath)

959

1 143

Davidsons

34

10

Deloitte Touche Tohmatsu

678

697

DFK Collins

109

163

Dixon & Associates Pty Ltd

57

113

Ernst & Young

1 366

1 230

HLB Mann Judd (Vic) Pty Ltd

2 062

1 983

Johnsons MME

322

269

KPMG

141

305

LD Assurance

154

267

McLean Delmo Hall Chadwick

279

288

MGR Accountants Pty Ltd (previously Mulqueen Griffin Rogers P/L)

97

126

Richmond Sinnott & Delahunty

875

803

RMA Specialists

10

60

RSM Bird Cameron

1 266

1 244

UHY Haines Norton (Vic) Pty Ltd

930

595

University of Melbourne(a)

52

84

WHK Audit (Vic)

582

554

WHK Audit & Risk Assessment

107

162

Other—two service providers (four in 2011–12)

99

84

Total

10 715

10 757

(a) The University of Melbourne was engaged to assist in the review of the estimated financial statements. While the University of Melbourne is also one of the entities the Auditor-General is required to audit, it has not been engaged by VAGO directly or indirectly to audit its own financial statements.

Financial report

Contents

Declaration

Declaration

Independent auditor’s report

Independent auditor's report

Comprehensive operating statement

Comprehensive operating statement

Balance sheet

Balance sheet

Statement of changes in equity

Statement of changes in equity

Cash flow statement

Cash flow statement

Notes to the financial statements

Note 20. Summary of complicance with annual Parliamentary and special appropriations

Note 22. Remuneration of executives

[ Contents of this report | VAGO Home | VAGO Publications ]

Appendix 1: Audit reports to Parliament

Date report was tabled

VAGO report number

Report title

15 August 2012

2012–13:1

Carer Support Programs

15 August 2012

2012–13:2

Investment Attraction

29 August 2012

2012–13:3

Fare Evasion on Public Transport

29 August 2012

2012–13:4

Programs for Students with Special Learning Needs

12 September 2012

2012–13:5

Energy Efficiency in the Health Sector

10 October 2012

2012–13:6

Consumer Participation in the Health System

10 October 2012

2012–13:7

Managing Major Projects

24 October 2012

2012–13:8

Collections Management in Cultural Agencies

24 October 2012

2012–13:9

Effectiveness of Compliance Activities: Departments of Primary Industries and Sustainability and Environment

14 November 2012

2012–13:10

Auditor General's Report on the Annual Financial Report of the State of Victoria, 2011–12

14 November 2012

2012–13:11

Public Hospitals: Results of the 2011–12 Audits

14 November 2012

2012–13:12

Water Entities: Results of the 2011–12 Audits

14 November 2012

2012–13:13

Port of Melbourne Channel Deepening Project: Achievement of Objectives

28 November 2012

2012–13:14

Portfolio Departments and Associated Entities: Results of

the 2011–12 Audits

28 November 2012

2012–13:15

Local Government: Results of the 2011–12 Audits

28 November 2012

2012–13:16

Prison Capacity Planning

28 November 2012

2012–13:17

Student Completion Rates

12 December 2012

2012–13:18

Management of the Provincial Victoria Growth Fund

12 December 2012

2012–13:19

Learning Technologies in Government Schools

6 February 2013

2012–13:20

Addressing Homelessness: Partnerships and Plans

20 February 2013

2012–13:21

Implementation of School Infrastructure Programs

20 February 2013

2012–13:22

Rating Practices in Local Government

6 March 2013

2012–13:23

Management of Unplanned Leave in Emergency Services

20 March 2013

2012–13:24

Management of Freshwater Fisheries

17 April 2013

2012–13:25

Managing Traffic Congestion

17 April 2013

2012–13:26

Consumer Protection

17 April 2013

2012–13:27

Public Asset Valuation

8 May 2013

2012–13:28

Planning, Delivery and Benefits Realisation of

Major Asset Investment: The Gateway Review Process

29 May 2013

2012–13:29

Tertiary Education and Other Entities: Results of the 2012 Audits

29 May 2013

2012–13:30

The State of Victoria's Children: Performance Reporting

29 May 2013

2012–13:31

Management of Staff Occupational Health and Safety in Schools

12 June 2013

2012–13:32

Infection Prevention and Control in Public Hospitals

12 June 2013

2012–13:33

Organisational Sustainability of Small Councils

26 June 2013

2012–13:34

Environmental and Sustainability Sector: Performance Reporting

26 June 2013

2012–13:35

Flood Relief and Recovery

[ Contents of this report | VAGO Home | VAGO Publications ]

Appendix 2: External engagements

Presentations by the Auditor-General and senior staff in 2012–13

Date

Presentation to

Topic

20 July

CPA Australia Public Sector Leaders Luncheon

Ten challenges facing the Victorian public sector: an audit perspective

9 August

Chartered Secretaries Australia Governance Luncheon

Lessons from audits: Key themes from VAGO's 2011–12 audit program

17 August

Japan Local Government Centre (CLAIR Sydney)

Performance Reporting in Victorian Local Government

6 September

Local Governance Association Leading Edge Forum

Rating Practice in Local Government Performance Audit

10 September

Monash University Governance Masters course

Parliament's Auditor: Role and Perspectives

5 October

Municipal Association of Victoria's Insurance and Risk Conference

Fraud prevention strategies in local government

8 and 19 October

ANZSOG and University of Melbourne

Auditing in the public interest

17 October

Neil Walker memorial lecture, CPA Australia's Congress 2012

Significant reforms in public sector audit-staying relevant in times of changes and challenge

23 October

KPMG Public Sector Audit Committee Lunch

Parliament's Auditor: Roles and Perspectives

25 October

Local Government Financial Professionals

FinPro Professional Development Seminar

26 October

Department of Sustainability and Environment's Risk and Audit Committee

Role of the Auditor-General and Key Audit Themes 2011–12

30 October

Financial Reporting in Higher Education Forum

Improving accountability and performance in the tertiary education sector

15 November

International Water Association Finance Special Interest Group

The year in review

15 November

State Audit Vietnam, for CPA Australia

Challenges for Victoria's environment and natural resources—findings from recent performance audits

16 November

Vietnam Association of Certified Public Accountants, for CPA Australia

Key themes from VAGO's 2011–12 performance and financial audit reports

16 November

Faculty of Accounting and Auditing, Banking Academy, Vietnam, for CPA Australia

Accountability and transparency in the public sector—the role of audit

16 November

International Ombudsman Conference

Public Sector Accountability: Keeping pace with a changing public service landscape

28 November

VPS Graduate induction

Auditing in the Public Interest

29 November

Lean Government Congress

Performance measurement in the public sector: Lessons from audits

29 November

Department of Justice Contract Managers Forum

Managing Major Projects performance audit

5 December

Municipal Association of Victoria Annual Conference

Performance and accountability—reflections from audits

22 January and 30 April

Swinburne University Professional Issues in Information Technology Masters course

Auditing of public sector ICT projects

12 February

VicWater

How PCI DSS compliance might be considered as part of the financial audit

22 February

Victorian Ombudsman Investigation Skills Workshop

Project Planning and Management

1 March

Local Government Financial Professionals

FinPro Annual Conference

21 March

IPWEA Victorian Annual Conference

Reflections of audit

22 March

University of Melbourne

Reflections on Victoria's changing integrity system: an Auditor-General perspective

12 April

University of Melbourne

Oversight of the public sector: explosion or erosion?

17 April

Revenue Management Association Annual Country Conference

Auditing in the Public Interest

19 April

Health Informatics Society of Australia Big Data conference

ICT and the Victoria Public Health Sector: What lessons can we learn from the last decade

23 April

Department of Environment and Primary Industries

Improving accountability and performance in the public sector

14 May

Australian and New Zealand Universities Internal Auditors Group

VAGO recently released reports with learnings for Universities

31 May

VicWater

What's on the radar for 2012–13?

13 June

Local Government—FinPro Professional Development Seminar

Year End Audit

19 June

5th Annual Victorian Transport Infrastructure Conference

Managing Traffic Congestion

International delegations to VAGO in 2012–13

Organisation

Dates

Purpose, interest or theme of visit

18 July

Thai Comptroller-General's Department

Role and responsibility of VAGO

5 Sept

Jiangsu Provincial Audit Department

IT audit methodology

24 Oct

Chinese National Audit Office

Annual planning process

21 Nov

Chinese Ministry of Finance (external presentation)

Accountability processes for infrastructure financing

22 Nov

Jiangxi Provincial Audit Office (external presentation)

Role and responsibility of VAGO and types of Performance Audits

29 Nov

BPKP Indonesia: Finance and Development Supervisory Agency

Internal controls and risk management

17 April

International Partnership Program (IPP) via CPA

VAGO's interaction with the accounting profession

International secondments in 2012–13

Organisation

Dates

Purpose, interest or theme of visit

Secondment to the Office of the Auditor General, British Columbia

20 August–28 April

VAGO Performance Audit Director seconded to BC—knowledge transfer and professional development

Secondment to the Office of the Auditor General, British Columbia

20 February–7 June

VAGO Financial Auditor seconded to BC—knowledge transfer and professional development

Secondment to the Office of the Auditor General, British Columbia

14 January– 31 May

VAGO Financial Auditor seconded to BC—knowledge transfer and professional development

Secondment from the Office of the Auditor General, British Columbia

6 February–7 December

BC auditor seconded to VAGO—knowledge transfer and professional development

Secondment from the Board of Audit and Inspection of Korea (BAI)

2 July–31 May

BAI auditor seconded to VAGO—knowledge transfer and professional development

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Appendix 3: Disclosure index

VAGO's annual report is prepared in accordance with all relevant Victorian legislation and pronouncements.

This index has been prepared to facilitate identification of VAGO's compliance with statutory disclosure requirements.

Legislation

Requirement

Page reference

Ministerial directions

Report of operations—FRD guidance

Charter and purpose

FRD 22C

Manner of establishment and the relevant minister

3

FRD 22C

Objectives, functions, powers and duties

Inside cover, 3

FRD 22C

Nature and range of services provided

3

Management and structure

FRD 22C

Organisational structure

45

Financial and other information

FRD 8B

Budget portfolio outcomes

118

FRD 10

Disclosure index

116–117

FRD 15B

Executive officer disclosures

57–58

FRD 22D, SD 4.2(k)

Operational and budgetary objectives and performance against objectives

19–34

FRD 22D

Employment and conduct principles

60–62

FRD 22D

Occupational health and safety policy

61

FRD 22D

Summary of the financial results for the year

64–66

FRD 22D

Significant changes in financial position during the year

66

FRD 22D

Major changes or factors affecting performance

64–66

FRD 22D

Subsequent events

108

FRD 22D

Application and operation of Freedom of Information Act 1982

50

FRD 22D

Compliance with building and maintenance provisions of Building Act 1993

51

FRD 22D

Statement on National Competition Policy

51

FRD 22D

Application and operation of the Protected Disclosures Act 2012

49–50

FRD 22D

Statement of availability of other information

119

FRD 22C

Application and operation of the Whistleblowers Protection Act 2001

50

FRD 22C

Details of consultancies over $10 000

67

FRD 22C

Details of consultancies under $10 000

67

FRD 25A

Victorian Industry Participation Policy disclosures

51

FRD 29

Workforce data disclosures – Public Sector Employees

56–59

SD 4.5.5

Risk management compliance attestation

47

SD 4.5.5.1

Ministerial Standing Direction 4.5.5.1 compliance attestation

47

SD 4.2(j)

Sign-off requirements

Inside cover

Fiancial report

Financial statements required under Part 7 of the Financial Management Act 1994

SD2.4(a)

Statement of changes in equity

75

SD4.2(b)

Comprehensive operating statement

73

SD4.2(b)

Balance sheet

74

SD4.2(b)

Cash flow statement

76

Other requirements under Standing Directions 4.2

SD4.2(b)

Notes to the financial statements

77–112

SD4.2(c)

Compliance with Australian accounting standards and other authoritative pronouncements

71

SD4.2(c)

Compliance with Ministerial Directions

71

SD4.2(c)

Accountable officer's and chief finance and accounting officer's declaration

71

SD4.2(d)

Rounding of amounts

79

SD4.2(f)

Compliance with Model Financial Report

67

Other disclosures as required by FRDs in notes to the financial statements

FRD 9A

Disclosure of administered assets and liabilities

89

FRD 13

Disclosure of Parliamentary appropriations

106–107

FRD 21B

Disclosures of responsible persons, executive officers and other personnel (contractors with significant management responsibilities) in the financial report

107–108

FRD 26A

Accounting for VicFleet Motor Vehicle Lease Arrangements

99

FRD 103D

Non-current physical assets

93–94

FRD 106

Impairment of assets

82

FRD 109

Intangible assets

95

FRD 110

Cash flow statements

76

FRD 112C

Defined benefit superannuation obligations

80, 98

FRD 114A

Financial Instruments – General Government Entities and public non-financial corporations

82, 101–104

FRD 119

Contributions by owners

85

FRD 120F

Accounting and reporting pronouncements applicable to the 2012–13 reporting period

86

FRDs applicable to VAGO with no disclosures to make in 2011–12

FRD 11

Disclosure of ex-gratia payments

FRD 12A

Disclosure of major contracts

Legislation

Financial Management Act 1994

77

Audit Act 1994

3

Freedom of Information Act 1982

50

Building Act 1993

51

Protected Disclosure Act 2012

49–50

Whistleblowers Protection Act 2001

50

Victorian Industry Participation Policy Act 2003

51

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Appendix 4: Budget portfolio outcomes

The following table provides a comparison between the actual financial statements of VAGO and the forecast financial information published in the Budget Paper No. 5 Statement of Finances 2012–13 (BP5), for the portfolio of Parliament. The table comprises the comprehensive operating statement. The table has been prepared on a consolidated basis and includes all general government sector entities within the portfolio. Financial transactions and balances are classified into either controlled or administered categories as agreed with the Treasurer in the context of the published statements in BP5. The following statements are not subject to audit and are not prepared on the same basis as VAGO's financial statements as they include the consolidated financial information of the Parliament entity.

Budget portfolio outcomes for 2012–13
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Appendix 5: Additional information available on request

This report and the VAGO website publish all information required by the Directions of the Minister for Finance. Further details in relation to the information items below have been retained by VAGO and are available if requested (subject to the Freedom of Information requirements, if applicable):

This information can be requested from VAGO's Freedom of Information officer:

In relation to the following areas there were no relevant activities undertaken by VAGO:

The following information is available from VAGO's website:

  • details of publications produced by VAGO about its activities
  • copies of VAGO reports since 1956
  • alist of all entities currently audited by VAGO.

www.audit.vic.gov.au

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