We have consulted with all water entities, the Department of Environment, Land, Water & Planning, the Essential Services Commission and the Valuer-General Victoria throughout the course of the audit. As required by section 16(3) of the Audit Act 1994, we gave a draft copy of this report, or relevant extracts, to those agencies and asked for their submissions or comments.

Responsibility for the accuracy, fairness and balance of those comments rests solely with the agency head.

The state has invested significantly in water infrastructure assets to deliver essential water services to the community. In 2015–16, 19 water entities controlled more than $42.3 billion of the state's $226.6 billion in physical assets. These assets are measured at fair value in accordance with Australian Accounting Standards and government financial reporting directives.

In this Part, we provide an insight into the 19 water entities' financial sustainability using a suite of commonly used financial indicators.

To be financially sustainable, entities need to be able to fund their current and future spending. They also need to be able to absorb the financial effects of changes and financial risks, without significantly changing their revenue and expenditure policies.

In this Part we comment on the results of our financial and performance report audits of the state's 19 water entities and the financial outcomes for the sector for 2015–16.

We also comment on the internal control and/or financial reporting matters we found during 2015–16 and provide an update on matters raised in previous audits.

In this report we detail the matters arising from the 2015–16 financial and performance report audits of the 19 public entities that make up the water sector. We also assess the sector's financial performance during 2015–16 and its sustainability as at 30 June 2016.

We comment on the key matters that arose during our audits and provide an analysis of information in water entity financial and performance reports. This is one of a set of parliamentary reports on the results of our 2015–16 financial audits.

Ordered to be published

VICTORIAN GOVERNMENT PRINTER November 2016

PP No 224, Session 2014–16

Accountability

Responsibility of a public sector entity to achieve its objectives, with regard to reliability of financial reporting, effectiveness and efficiency of operations, compliance with applicable laws, and reporting to interested parties.

Acquisition

Establishing control of an asset, undertaking the risks and receiving the rights to future benefits, as would be conferred with ownership, in exchange for the cost of acquisition.

This Appendix details the design principles of a better-practice liquidity management framework, summarised in Figure B1.

Figure B1

Better-practice design principles for liquidity management