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Victorian Coat of Arms

Annual Plan 2016–17

The Victorian Auditor-General's Annual Plan 2016–17 was prepared pursuant to the requirements of section 7A of the Audit Act 1994, and tabled in the Victorian Parliament on 8 June 2016.

2. Factors shaping our audit program

2.1 A relevant, responsive and risk-based program

In developing a quality work program, VAGO gathers a wide range of information, applies rigorous analysis, and undertakes extensive stakeholder consultation to identify and guide the development of our audit topics and areas of focus.

This input also ensures that our audit program keeps up with the changing priorities and challenges of the Victorian public sector.

2.2 Where do we get our ideas?

To identify potential performance and financial audit topics we:

2.2.1 Environmental scanning

Environmental scanning is a year-round process which includes ongoing research as well as the identification of key risks and challenges for public sector performance and accountability. It provides audit teams with an understanding of the particular context of that sector, as well as any relevant policy goals and service objectives set by the government of the day.

Our scanning includes consideration of research, statistical data and reports from external sources, information gathered from audits, and the examination of underlying trends to identify recurring findings. Key risks against our responsibilities under legislation are also considered as part of this process.

Examples of scanning activities include sourcing information from the Australian Bureau of Statistics, Parliamentary committees, other Auditor-General offices, integrity bodies, various documentation—such as budget papers and annual reports—and agencies' strategies and structures.

We also use input from members of the community who have shared their concerns about public sector performance and accountability. Examples of proposed audits arising from issues raised by the community in the past year include:

Stakeholder consultation

We consult widely to gather information and ideas for audit topics and to discuss the merits of, and approach to, potential audit topics. We seek input from Parliamentarians, Parliamentary committees, the public sector and other key stakeholders. This consultation helps us to refine our audit topics and areas of focus.

We analyse consultation feedback to identify recurring themes and instances of high relevance to our mandate. These are then fed into the planning process for consideration.

Public sector and other key sector stakeholders

Along with gathering information from the public sector, we consult heads of agencies, boards, audit committees and agency staff to help us understand the context of the information we have gathered and to assess the value of potential audit topics. We also consult other Victorian integrity bodies including the Independent Broad-based Anti-corruption Commission (IBAC) and the Victorian Ombudsman.

Audit teams also meet with representatives from industry, peak bodies, advocacy groups, community groups, unions and academics. This engagement can be through one-on-one meetings, facilitated focus groups, roundtable discussions and surveys.

Examples of proposed audits arising from issues raised by public sector and other key stakeholders in the past year include:

Parliamentarians

The interests of Parliamentarians are particularly relevant to our work, as they represent the interests of their communities. Throughout the year, we collect ideas and feedback from Parliamentarians on our work program through Parliamentary report tabling briefings, one-on-one meetings, surveys and correspondence.

Examples of proposed audits arising from issues raised by Parliamentarians in the past year include:

Public Accounts and Estimates Committee

Our key mechanism for consulting Parliament on our proposed audit program is through the Public Accounts and Estimates Committee (PAEC). The Audit Act 1994 requires us to seek PAEC's comments on our draft annual plan.

This year, PAEC provided useful inputs to our annual plan, including proposed audits for our future audit program and suggestions to improve the transparency and accountability of the plan.

Our legislation requires us to publish in the annual plan any changes to the draft plan suggested by PAEC that the Auditor-General does not adopt. Figure 4 identifies the suggestions and responses provided to PAEC for areas that we have not included in our 2016–17 annual plan.

Figure 4: VAGO response to PAEC's suggested changes not included in the Annual Plan 2016–17

PAEC consideration

VAGO response

For the performance audit on V/Line Passenger Services, in lieu of recent developments occurring in V/line, this performance audit should be moved to 2016–17 instead of 2017–18.

Keeping the proposed audit in 2017–18 allows sufficient time for V/Line to fully implement corrective actions currently underway, and enables the audit to determine whether these actions have addressed the range of service delivery issues recently encountered.

Input for future audit topics

We will continue to consult with key stakeholders, including audited agencies and their audit committees, as we develop audit topics for future annual plans. VAGO also welcomes ideas and input from the community on topics of interest for future years. Suggestions can be directed to the Auditor-General via email, post or the easy-to-use contact form on our website, www.audit.vic.gov.au.

2.3 Deciding on the program

Our scanning, consultation and analysis led to the identification of a large range of possible audit topics for 2016–17 and 2017–18. Each potential audit topic was assessed as part of the selection process, and then the balance and coverage of the program was considered as a whole.

2.3.1 Assessing topics

Potential financial audit areas of focus are selected by considering how effectively they cover our legislative obligation to assess waste, probity and financial resource management, and address risks within the operating environment of the audited agency.

Potential performance audit topics are assessed based on a consideration of the following factors.

Risk

We use a definition of risk consistent with AS/NZS ISO 31000:2009 Risk Management. For each topic, we assess the possible impact and consequences if the public sector services were not delivered or if government's objectives were not achieved.

Materiality

Materiality describes the size or scale of the relevant operational area or public sector program. It is a concept that helps us consider how significant the audit will be to the Victorian community. We consider three kinds of materiality:

Potential for VAGO to have an impact

In examining the potential impact of a particular audit topic, we seek to determine if it has the potential to:

Potential for VAGO to address matters of public interest

We also consider the potential for an audit topic to address matters of significant public interest—specifically, if the audit topic has the potential to improve:

Balance and coverage of the program

When finalising topic selection, we consider whether we have effectively covered our legislative obligations to review efficiency, effectiveness, economy and compliance with all relevant Acts and to consider waste, probity and resource management. We also consider the spread of activity across both the sectors and selected themes, and the number of standalone and other topics, as well as ensuring that there is coordination between the financial audit and performance audit programs. Additionally, we consult with integrity bodies and agencies to minimise duplication across the broader integrity system.

We believe that this process has created a balanced, efficient and effective audit program for 2016–17 and 2017–18 that addresses our legislative obligations while remaining responsive to areas of public interest.

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