- Most state government entities prepared satisfactory quality financial statements and KPIs for 2017-18, however some still need to improve their quality review processes.
- Sixty-three percent of state government entities were ready for their audit within 20 days of year end. Last year this result was 70%.
- We have acknowledged the top 40 ‘Best Practice’ entities across 2 categories for timeliness in their financial reporting, good financial controls and reporting practices.
As reported on page 22, the new departments established under the Machinery of Government changes experienced challenges with amalgamating systems of the various constituent entities, with most departments continuing to operate on several financial, human resource and administrative systems. This generally had an effect on the quality of financial reporting.
Overall for all entities, the number of errors identified and corrected during the 2017-18 audit process was similar to the previous year. We again found that many entities continue to make key decisions about their financial reporting late in the financial year, or after year end, resulting in rushed transactions and adjustments and consequent errors. In some entities a more robust quality review process needs to implemented to ensure that their financial statements are complete and accurate and the working papers adequately support the reporting figures in their financial reports.
To ensure timely and accurate financial reports it is important that management in each reporting entity keeps proper accounts and records. Management should undertake various best practice initiatives throughout the financial year and after year end to improve the quality of their financial reporting.
At the beginning of the financial year, entities should confirm the accounting policies to be applied for the ensuing year.
Before year end, entities need to:
- prepare a project plan of human and financial resources, assign responsibilities for tasks and set time frames for financial reporting
- avoid receiving asset valuations late in the financial year or after year end and ensure that management reviews the valuations before they are included in the financial statements
- identify and review changes to accounting standards and reporting requirements and confirm the approach to any changes with the auditors
- determine the form and content of their KPIs and obtain necessary approvals from Treasury
- prepare pro-forma financial reports, including all comparative information that can be reviewed by the auditors well in advance of the final audit visit.
After year end:
- analyse variations between actual and budget as well as previous year results to identify and correct omissions and/or errors
- ensure managers with sign-off responsibility for components of the financial report do so in line with the established timetable
- ensure the draft financial report has received an internal quality assurance review, preferably by internal audit or other suitably qualified professionals.
Sixty-three percent of the entities were ‘Audit Ready’ within 20 days of their financial year end. This result reverses the recent trend of improved timeliness. We saw this partly resulted from reporting challenges from the Machinery of Government changes.
Being ready for audit as soon as possible after year end enables entities to release resources for other important financial management tasks, thereby improving the overall efficiency and financial management of the public sector.
The date when each entity was ‘Audit Ready’ is reported in Appendix 1 (commencing on page 50) while Figure 15 summarises timeliness over the last 10 years.
Each year we rate entities on their financial reporting and financial controls and recognise the top 20 large and top 20 small ‘best practice’ entities (Table 13). We congratulate the entities we rated as the top achievers for 2017-18.
Our assessment criteria include:
- clear opinion on financial statements, controls and key performance indicators
- the number and significance of control weaknesses raised in management letters
- audit ready early, ideally no later than 20 days after financial year end
- good quality financial statements and key performance indicators, supported by reliable working papers and submitted for audit within the agreed timeframe
- management resolution of accounting standards and presentation issues
- key staff available during the audit process.