Results of 2018‒19 Audits: Local Government

Tabled: 27 November 2019

Report overview

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102 Unmodified opinions

  • 78 councils
  • 10 library corporations
  • 14 associated entities

Sector reports presented fairly

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4 Audit opinions outstanding

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76 council financial reports and performance statements finalised within the statutory reporting deadline

187
financial statement errors identified

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$240.4 million indicating required improvement over quality assurance procedures for council draft financial statements

127

New medium and high-risk internal control issues

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Overall decline in the last four years, but an increaseMagnifyingGlass.PNG in high-risk issues (14) and number of councils (10)

Issues mainly related to:

  • asset management and valuation processes
  • procurement processes
  • found assets

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Councils assessed themselves as being adequately prepared for the incoming accounting standards

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Councils assessed the impact on their financial statements as low

Sector-wide developments

Combustible cladding
Waste and recycling
Corporate governance failures

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Sector-wide issues

Procurement processes
Vendor master file changes and user access rights
Corporate cards
Outsourced services providers
Asset management and valuation process

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Generally, Victorian councils continue to be financially sound.

Source: VAGO.

Report structure

In this report, we summarise the outcomes of our audits on the financial reports, and performance statements, of the Victorian local government sector for the year ended 30 June 2019.

We also report on key matters arising from our audits and analyse the sector's financial performance. A summary of our recommendations is outlined below.

We carried out the financial audits of these entities under the Audit Act 1994 and Australian Auditing Standards. Each entity pays the cost of its audit.

The cost of preparing this report was $200 000, which is funded by Parliament.

Recommendations

We recommend councils:

1. monitor the impact and progress of Cladding Safety Victoria's rectification works and continue to identify buildings at risk (see Section 1.2)

2. work with the state government to explore sustainable, innovative and longer-term solutions to recyclable waste (see Section 1.2)

3. ensure they have strong frameworks, policies and controls in place for the use of corporate and procurements cards (see Section 3.2)

4. maintain sufficient oversight of activities outsourced to external service providers (see Section 3.2).

We recommend that Local Government Victoria:

5. continues to provide sector-wide guidance, overarching frameworks and policies relating to the incoming Australian Accounting Standards as the sector begins to recognise the impacts of these standards (see Section 3.2)

6. provides further guidance on the presentation requirements of Australian Accounting Standards Board 1052 Disaggregated disclosures to ensure consistency across the sector (see Section 3.2)

7. provides further sector-wide guidance on asset valuations (see Section 3.3).

Submissions and comments received

We have consulted with the Department of Environment, Land, Water and Planning (DELWP) and the entities named in this report, and we considered their views when reaching our conclusions. As required by the Audit Act 1994, we gave a draft copy of this report to those entities and asked for their submissions or comments. We also provided a copy of the report to the Department of Premier and Cabinet (DPC).

The following is a summary of formal responses received. The full responses are included in Appendix A:

  • DELWP notes our findings and supports in principal the recommendations in the report—where applicable, we have amended our report based on the submission from DELWP.
  • Campaspe Shire Council provided an update on their management letter issues.

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