Performance Audit of VAGO 2013

The Committee wishes to direct the successful tenderer to conduct the performance audit in accordance with the following legislative context and terms of reference.

The Audit Act 1994 provides for the triennial performance audit of the Victorian Auditor-General and the VAGO to specifically determine whether the Auditor-General and the VAGO are achieving their objectives effectively and doing so economically and efficiently and in compliance with the Audit Act 1994, as amended. In this context and without limiting the scope of the audit, the following areas should be considered and assessed as part of the audit:

VAGO Governance and Planning

1. Review the governance structure and planning activities of VAGO with particular attention to:

(a) The adequacy and appropriateness of the organisational and management structures in place to promote the effective governance of VAGO activities and operations (e.g. the organisational structure facilitates the achievement of VAGO goals and objectives; the roles and responsibilities of groups and sections are clearly defined; roles and responsibilities of steering/management committees are clearly defined and relevant; committees meet regularly and actions are identified and implemented);

(b) The quality of Strategic Planning undertaken by VAGO in terms of its comprehensiveness, relevance and clarity of direction;

(c) The adequacy and effectiveness of VAGO’s annual planning process including intelligence gathering and stakeholder consultation in relation to the identification of areas of audit focus, having regard to risk factors and other relevant considerations across the Victorian public sector;

(d) The relevance and appropriateness of VAGO’s Annual Plans for 2010-11, 2011-12 and 2012-13, to VAGO’s legislative mandate and Strategic Plan, and the extent to which the activities identified in the Annual Plans have been, and are being, achieved;

(e) The extent and quality of internal planning directed at the efficient and effective management of VAGO (e.g. workforce management; succession planning; fee setting and cost recovery; and budget and expenditure control);

(f) The effectiveness of the Audit Committee in oversighting the scope, quality and effectiveness of the internal audit function within VAGO and in highlighting any risk management issues pertinent to the operations of the VAGO appointed Committee; and

(g) Consider the extent of progress made and the effectiveness of actions and measures implemented by VAGO to address the recommendations made in the 2010 Performance Audit report. Notwithstanding that the previous Auditor-General had not accepted 50 per cent of the recommendations made, consider the ongoing validity and application of those recommendations to VAGO.

Conduct and management of Attest Audits

2. Review the efficiency and effectiveness of the management and conduct of financial audits undertaken by the Victorian Auditor-General’s Office, considering but not limited to the following:

(a) The adequacy of the audit methodology and quality control procedures to assist in the identification of any material or significant risks and to ensure that findings and conclusions arising from the attest audits are adequately supported;

(b) Compliance with the relevant statutory requirements and Australian Auditing Standards for the conduct and reporting of attest audits;

(c) Completion of attest audits on time and within budget; (d) Whether the selection techniques employed by VAGO to gather audit evidence comply with all relevant Australian auditing standards;

(e) The adequacy and appropriateness of the methodology used to determine focus areas for detailed internal control assessment in each of the financial audit sectors consistent with a risk-based approach to financial audit;

(f) Whether any risks identified during the course of an attest audit, which were not originally anticipated in audit plans, are adequately and effectively considered and addressed in a timely manner;

(g) Processes for the engagement of contracted financial audit services have considered relevant government purchasing policies and good practice and procedures and are conducted with due regard to probity and value for money; and

(h) The effectiveness of procedures in place to monitor the quality and performance of contracted financial audit services.

Conduct and management of Performance Audits

3. Review the efficiency and effectiveness of the management and conduct of performance audits (both broad scope and limited scope) undertaken by the Victorian Auditor-General’s Office, with particular attention to:

(a) Whether VAGO’s performance audit methodology provides comprehensive guidance for the conduct of performance audits and is regularly reviewed and updated to ensure it retains its rigor and relevance;

(b) Compliance with the relevant provisions of the Audit Act 1994 and Australian Auditing Standards for the conduct and reporting of performance audits;

(c) Whether the selection of agencies for review is supported by an appropriate rationale (e.g. such as risk; preliminary evidence/findings; materiality; or geographical/character representation);

(d) The adequacy and effectiveness of methodologies and/or processes in place for the development of realistic budgets (cost and time) for the conduct of performance audits and for monitoring performance audit budgets from the planning phase through to report tabling;

(e) Any instances of pressures in adhering to time and cost budgets resulting in curtailed planned audit activity and potentially impacting on the comprehensiveness of issues reported to Parliament;

(f) Whether significant issues arising during the course of a performance audit, that were not identified in audit plans, are adequately and effectively considered and addressed in a timely manner;

(g) The appropriateness of the mix between specialist expertise, contractors and suitably qualified in-house staff in undertaking particular performance audits

(h) Whether processes for the engagement of specialist services and/or consultants comply with relevant government procurement policies and procedures and are conducted with due regard to probity and value for money; and

(i) Whether specialist skills engaged in relation to performance audits are evaluated in terms of the usefulness and value they have added to the conduct of the audit.

Monitoring and measuring performance and effectiveness

4. Review and provide an assessment of key performance management systems and measures together with any recommendations for improvement, including but not limited to the following areas:

(a) The adequacy and effectiveness of management information systems in place to measure and improve productivity including cost effectiveness and human resource management within VAGO;

(b) The appropriateness and veracity of the performance indicators and benchmarks which VAGO uses to measure its performance in relation to the achievement of its strategic objectives;

(c) Any initiatives and/or improvements which have flowed from VAGO’s evaluation of its performance over the past three years;

(d) The extent to which VAGO has reviewed and considered best practice public sector management and auditing in other relevant national and international jurisdictions over the past three years to evaluate its own performance and practices;

(e) Assess VAGO’s use of the results of independent assessments of the quality of performance audits by the Australasian Council of Auditors General (ACAG) over the past three years;

(f) Assess VAGO’s use of the results of peer reviews to assess the quality of attest audits over the past three years;

(g) Assess the soundness and comprehensiveness of processes followed by VAGO in undertaking periodic “client” surveys (including those of Members of Parliament and audited agencies) and the uses made of the results to improve business processes and outputs. Consider whether an additional independent survey of the effectiveness of VAGO should be conducted;

(h) The extent and usefulness of processes and/or measures used by VAGO to assess the impact of its audit activities on operations and management practices across the Victorian public sector;

(i) The adequacy of time recording and costing systems in identifying all recoverable costs and the appropriate allocation of costs to ensure there is no cross subsidisation between chargeable and non-chargeable activities or between performance and attest audits; and

Reporting the audit findings

6. The report of the performance audit should:

(a) specify the performance criteria and measures (both qualitative and quantitative) against which VAGO has been measured and assessed;

(b) provide an opinion on VAGO’s compliance with Australian Auditing and Accounting Standards and relevant legislative requirements;

(c) provide an independent assessment of the facts, detail the basis for findings and conclusions and include clear, meaningful and feasible recommendations linked to findings;

(d) provide an overall opinion as to whether VAGO is achieving its objectives effectively, economically and efficiently and in compliance with the Audit Act 1994, as amended; and