Results of 2017–18 Audits: Local Government

Tabled: 19 December 2018

Appendix C. Financial reporting maturity framework

Figure C1
Financial reporting maturity framework

Component

Risk definition

Developing

Intermediate

Mature

Advanced

 

Policies and procedures

  • Month- and year‑end reporting policies and procedures are not documented
  • Reconciliations are not performed
  • Reporting is on a cash basis
  • Month- and year‑end reporting policies and procedures are updated regularly
  • Reconciliations are performed for some accounts, including all material accounts
  • Estimates and accruals are used for some accounts
  • Month- and year‑end reporting policies and procedures are reviewed in a two‑year cycle
  • Manual reconciliations are prepared for all accounts
  • Estimates and accruals are used every reporting end
  • Month- and year‑end reporting policies, processes and procedures are annually reviewed and updated with extensive consultation and are well understood
  • Automated / partially automated reconciliations are performed for all accounts
  • Estimates and accruals are used every reporting end and adjusted periodically where appropriate

 

People and organisation

  • Roles and responsibilities are broad / not clear or not defined
  • Staff always work overtime during reporting end
  • No training exists
  • Roles and responsibilities are assigned but some confusion and overlap exists
  • Staff sometimes work overtime during reporting end
  • Informal training / on‑the-job training exists
  • Roles and responsibilities are clear and well understood
  • Occasional overtime is required
  • Training is provided as part of the onboarding process
  • Roles and responsibilities are clearly understood and well documented
  • Overtime is rare
  • Training is provided as part of the onboarding process, with a formal training program in place to aid with staff development

 

Data and technology

  • Sub-ledger is manually uploaded to the general ledge with adjustments to entries required
  • Financial statements are manually prepared
  • Statutory entity reporting and management reporting are two separate processes
  • Sub-ledger data is interfaced with the general ledger, with manual intervention and reconciliations required to ensure accuracy
  • Financial statement preparation is automated, with manual adjustments required
  • Statutory entity reporting and management reporting are two separate processes, with a formal reconciliation process
  • Sub-ledger is electronically transferred to the general ledger, with few adjustments required
  • Financial statement preparation is mostly automated
  • Statutory entity and management reporting have been made consistent, with manual intervention required
  • Sub-ledger data automatically interfaces with the general ledger and is balanced daily
  • All financial statement preparation is automated
  • Statutory entity and management reporting is consistent

 

Internal controls over financial reporting

  • Controls are mostly manual
  • Controls are reviewed by management on an ad hoc basis
  • Key accounts are included in the financial statement risk assessment, but this process is not documented
  • Controls are typically system based and integrated with core financial applications
  • Controls are routinely monitored by management
  • Key accounts are included in the financial statement risk assessment based on a predetermined assessment
  • Majority of controls are automated and managed electronically
  • Controls are effectively monitored against process effectiveness
  • A formal risk assessment has been completed where key accounts are reviewed more frequently than others
  • Controls are highly automated and managed through core financial application roles
  • Controls are monitored against defined criteria and balanced against process effectiveness
  • A formal risk assessment has been completed where key accounts are reviewed monthly; all accounts are reviewed at least once annually

Source: VAGO.

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