Victorian Auditor-General's Office

4 Financial sustainability

At a glance

Background

The financial sustainability of the 79 councils and 12 regional library corporations (RLCs) can be assessed by analysing their capacity to meet current and future expenditure as it falls due. The entities must also be able to absorb the effect of financial risks materialising, without significantly changing their revenue and expenditure policies.

This Part provides our insight into the financial sustainability using six indicators for councils and five indicators for RLCs.

2 Audit opinions and quality of reporting

At a glance

Background

This Part deals with the results of the audits of 79 local councils, 12 regional library corporations and 14 associated entities. The timeliness and accuracy of an entity's financial report is integral to the quality of financial reporting. This part compares financial reporting practices in 2010–11 against better practice and time lines, and with 2009–10 performance.

1 Background

1.1 Introduction

This report covers the results of the audits of 105 local government sector entities, comprising councils, regional library corporations, companies, trusts and joint ventures, as set out in Figure 1A. The 105 entities are named in Appendix B of this report.

Figure 1A

Local government reporting entities

Type of entity

2010

2011

Councils

Audit summary

Background

This report covers the results of our financial audits of 105 entities within the local government sector, consisting 79 councils, 12 regional library corporations (RLCs) and 14 companies, trusts and joint ventures. It informs Parliament about significant issues arising from the audits of financial, standard and performance statements for 2010–11, and augments the assurance provided through audit opinions included in the entities' annual reports.

Local Government: Results of the 2010–11 Audits

Body
This report provides the results of the audits of approximately 100 entities in the local government sector addressing the timeliness of their financial and performance reporting, their financial sustainability, their utilisation of internal audit and aspects of how they manage assets and procurement.

Appendix H. Audit Act 1994 section 16— submissions and comments

Introduction

In accordance with section 16A and 16(3) of the Audit Act 1994 a copy of this report, or relevant extracts from the report, was provided to the Department of Treasury and Finance, the Department of Sustainability and Environment, the Valuer-General Victoria, the Essential Services Commission, the State Owned Enterprise for Irrigation Modernisation in Northern Victoria and the 20 entities with a request for submissions or comments.

Responses were received as follows:

Appendix G. Performance indicators

This Appendix sets out the performance indicators against which water entities are required to report. Financial Reporting Direction 27B Presentation and Reporting of Performance Information specifies the entities required to prepare and submit for audit a performance report. Ministerial directives issued under section 51 of the Financial Management Act 1994 specify the performance indicators that need to be reported in a performance report.

Financial indicators

Indicator

Appendix F. Entity level financial sustainability

This Appendix details the overall financial sustainability assessment of each entity over the past five years given six indicators.

The overall financial sustainability risk assessment has been calculated using the ratings determined for each indicator as outlined in Figure F1. Appendix E provides further information on each indicator.

Figure F1

Overall financial sustainability risk assessment

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