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Report on Ministerial Portfolios .0^ ^^^/\/ **' ^'^ -\ VICTORIA 'ip.' Ji- ^•*JL ^m4 xr VICTORIA Report of the AUDITOR-GENERAL on Ministerial Portfolios May 1989 Ordered by the Legislative Assembly to be printed MELBOURNE JEAN GORDON GOVERNMENT PRINTER 1989 No. 55 AO?^ .Gf^, 1 MACARTHUR STREET MELBOURNE, VIC, 3002 TELEPHONE: 651 6012 FAX NO 650 5391 May 1989 The Honourable the Speaker Legislative Assembly Parliament House Melbourne, Vic. 3002 Sir Under the authority of Section 48 of the Audit Act I transmit a report on the audit of Ministerial Portfolios. TTiis report completes the cycle of my auditing activities in relation to the 1987-88 financial year. Yours faithfully yC.C?. /C-, ^^C^ C.A. BARAGWANATH Auditor- General - Ill - CONTENTS Page PART 1 FOREWORD 3 PART 2 EXECUTIVE SUMMARY PART 3 AUDIT OF MINISTERIAL PORTFOLIOS 3.1 Agriculture and Rural Affairs 17 3.2 Arts 24 3.3 Attorney-General 30 3.4 Community Services 38 3.5 Conservation, Forests and Lands 44 3.6 Consumer Affairs 53 3.7 Education 58 3.8 Ethnic Affairs 104 3.9 Health 106 3.10 Housing and Construction 132 3.11 Industry, Technology and Resources 144 3.12 Labour 170 3.13 Local Government 184 3.14 Planning and Environment 188 3.15 Police and Emergency Services 191 3.16 Premier and Cabinet 200 3.17 Property and Services 203 3.18 Sport and Recreation 222 3.19 Tourism 230 3.20 Transport 235 3.21 Treasurer 269 3.22 Water Resources 281 3.23 Parliament 299 PART 4 OTHER ISSUES 4.1 Disaster Recovery Planning for Computerised Systems 305 4.2 Qualified Audit Opinions on Financial Statements 310 PARTI FOREWORD 1. FOREWORD Very shortly after my appointment in management of audited financial October 1988, 1 transmitted to statements. Such statements allow Parliament the Treasurer's Statement shareholders and other interested for the year ended 30 June 1988, parties such as creditors to make accompanied by my report on that decisions whether or not to maintain Statement and other matters their investments or to continue to concerning Victorian public sector provide credit. Many of these decisions resource management. are based on an entity's performance as reflected by its profits and it could As one of the prerequisites for therefore be said that private sector appointment to the position of Auditor- entities are primarily held accountable General was the ability to deliver through their "bottom line". authoritative advice to Parliament on the management of public resources, 1 The public sector, however, by its very took the opportunity in my first report nature differs from the private sector to clearly explain the audit role as my and this has consequential implications predecessors had done in the past. for the nature of, and mechanisms used to achieve accountability. Two Recent events have evidenced a such important differences which have questioning, and at times a a direct impact on the concept of misunderstanding, of the concepts of accountability in the public sector are: audit and accountability in the public sector. • the objectives of the public sector are related not to profit These events have occurred at a time maximisation as is generally the when numerous public reports have case in the private sector, but led to a heightened awareness of the rather to the achievement of a need to maintain and strengthen the diversity of often competing accountability of officials and social, political and economic government organisations. goals on behalf of the public at It is therefore appropriate and indeed large. These goals are set in important that 1 now again clarify these broad terms through the political concepts with respect to the Victorian process and further refined public sector. through administrative processes within the government. This In basic terms, accountability means diversity of objectives means that the responsibility of those entrusted "bottom line" accountability is with the resources of others to account often inadequate in the public to the owners of those resources. sector since it is rarely an In the private sector, one of the main accurate reflection of mechanisms for achieving performance; and accountability is the provision by -3 • those who participate in business must ensure that effective risk ventures, be it as sole traders, management strategies are in place, partners or shareholders in including the implementation of companies, do so voluntarily. It appropriate internal controls and is their capital which is at risk. By internal audit. Effective risk way of contrast, governments management is necessary not only to have the power to compulsorily safeguard public resources but also to acquire financial resources and ensure the efficient and effective use this power to tax members of utilisation of those resources for the the community. This compulsory public benefit in the manner authorised power is accepted by taxpayers by Parliament. in the expectation that there will Management of public sector entities be a full accounting for the use of are responsible to their Minister and such resources in terms of accountable, through their Minister, to probity, legality, economy, Parliament and ultimately the public. efficiency and effectiveness. The tabling by Ministers of the audited In view of such differences, the financial statements of public sector concept of accountability in the public entities under their control is a key sector takes on additional significance. mechanism in this process. In the public sector, those who have To ensure that the chain of been entrusted with the resources of accountability is complete and the public at large, and with the power effective, it is Parliament's responsibility to regulate many aspects of the lives of to review public sector entities' others, must recognise and respond to financial operations and other relevant the consequential responsibility to fully information available to it. Foremost account to the public for all resources among such other information are the used and for all aspects of their reports of the Auditor-General which performance. include substantive issues related to The concept of accountability has public sector resource management. implications for all levels of public Reports of the Auditor-General are administration i.e. agencies, central therefore a vital link in the chain of agencies, the Auditor-General and public sector accountability. Parliament. Fulfilment by each level of One of the principal and traditional its responsibilities with respect to objectives of Auditors-General, both in accountability makes up the chain of terms of convention and legislative accountability. Should any level be mandate, is the promotion of more deficient in fulfilling its role, the chain efficient and effective resource will be broken and the duty of utilisation in the public sector. This has accountability to providers of public been translated in the past into a sector resources will not be fully comprehensive audit approach which, satisfied. in addition to the audit of the accounts Under the Westminster system of of the State and the extent of parliamentary control of the "public compliance by agencies with purse", government initiated revenue legislation and government directions, and expenditure proposals require entails the review of resource arliamentary authority before they can management. In conducting Ce implemented. Once implemented, comprehensive audits an assessment management of public sector entities, has been made in the past of how whether government departments, efficiently and effectively public funds statutory authorities, government are being managed and suggestions controlled companies or other bodies. for improvement to existing practices are proposed. The independence of the Auditor- General, which is enshrined in the Audit Act, gives him a great advantage over other review agencies and avoids conflicts of interest which may exist if an agency of the executive arm of government were to be given responsibility for any part of the audit continuum of financial regularity, legal compliance and efficiency and effectiveness. This statutory independence bestows credibility on the Auditor-General's reports to Parliament. Further, the Auditor- General has unique powers of access to the records of government agencies which are stronger than the powers of any other office holder. The Auditor-General has an unequivocal mandate to conduct financial audits, which have provided, in the past, a foundation for reviews of efficiency and effectiveness. The reports of the Auditor-General to Parliament on the results of these reviews are a vital link in the chain of public sector accountability. -5- PART 2 EXECUTIVE SUMMARY HHH^IBiei 2. EXECUTIVE SUMMARY Key findings arising from the audits of ministerial portfolios are highlighted at the beginning of each individual section within Parts 3 and 4 of the report. Major findings are summarised below: ATTORNEY-GENERAL • Beneficiaries' assets in excess of $11 million transferred to the ownership of the State Trust Corporation by statute. para 3.3. t CONSERVATION, FORESTS AND LANDS • Revenue forgone of approximately $1.8 million per annum from Crown Land occupations. para 3.5.1 CONSUMER AFFAIRS • Legislation is silent on the application of accumulated surpluses of $16.8 million derived from tenants' bond moneys. para 3.6.1 EDUCATION • School bus transportation services: substantial annual cost savings to the Ministry would be likely if fixed-term contracts and periodic re-tendering could be agreed with the Bus Proprietors Association; and there is potential for annual savings of $7 million to be achieved by streamlining the existing framework. para 3.7.1 • Serious financial management problems have been experienced at the Victorian College of the Arts. para 3.7.82 HEALTH Need for improved management practices in the development and operation of the Department's 91 Community Health Centres. para 3.9.1 Inadequate disclosure in departmental financial statements of payments amounting to $1.7 billion from the Hospitals and Charities Fund. para 3.9.37 Lack of strategic planning for the introduction and use of information technology throughout the Department.
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