Performance Audit Practice Statement
A performance audit is an audit
which evaluates whether an organisation or government program is
performing effectively, economically and efficiently, and in
compliance with all relevant legislation.
It can cover all or part of an
agency’s activities, or the activities of a number of agencies, and
can include consideration of public sector services or functions
that are delivered through contracts with private or not-for-profit
providers (known as associated entities).
Performance audits that
consider the services or functions delivered by associated entities
are referred to as ‘follow-the-dollar’ audits.
Section 15 of the Audit Act
1994 (the Act) governs performance audits. These audits are
funded by Parliament, not the agency being audited.
Performance audit reports cannot question the merits of
government policy objectives.
Why have performance audits?
Performance audits offer independent assurance to Parliament and
the community that public money has been spent economically and
that public authorities are operating effectively, efficiently and
in compliance with all relevant Acts.
Performance audits may also identify better practice and are a
catalyst for continuous improvement in the public sector.
Access to information
The Act provides the Victorian Auditor-General’s Office (VAGO)
with full access to information from an agency or an
associated entity irrespective of any obligations for
confidentiality. This overrides any other legislation that might
restrict disclosure, such as secrecy or privacy laws.
All of the information VAGO receives, and working papers that
VAGO creates during an audit are exempt from the Freedom of
Information Act 1982. This means these documents cannot be
accessed from VAGO by any party.
The powers to access information are outlined in section 11 of
the Act. Generally authorities provide us with the information we
ask for, but when they do not we can issue a notice under section
11, and in accordance with our Procedure for Issue of Section
11 Notices, compel them to do so.
We have the power to request and take copies of a broad range of
documents, including documents that:
- are Cabinet-in-Confidence
- are in draft form
- do not belong to a person but are in their possession.
When we use section 11 of the Act to seek information for an
audit, we apply procedural fairness. For instance, if a person is
to be examined on oath, a notice under section 11 must state the
nature of the matters about which the person is to be examined. The
person is entitled to legal representation, and if the person is
under the age of 18, has a mental impairment or insufficient
knowledge of English to understand the questions, there are steps
that the Auditor-General must take to support the individual.
Individuals may complain to the Victorian Inspectorate if they
believe VAGO has not exercised our coercive functions properly.
How are audit topics selected?
The Auditor-General selects performance audit topics after
extensive consultation and research. Our Act requires us to consult
on the selection of topics with the Public Accounts and Estimates
Committee (PAEC). We also:
- undertake wide sector consultation for example, with government
agencies, community interest groups, relevant academics, other
- review publicly available information such as annual reports,
research papers, statistical information
- consider matters raised with VAGO by the public.
Topics are then selected following consideration of risk,
materiality, public interest, and the potential to improve public
administration and/or the achievement of outcomes. The
Auditor-General’s proposed topics are detailed in VAGO’s annual
plan, which is tabled in Parliament.
Some audit topics are ‘whole-of-government’ or cross multiple
agencies. Agencies for inclusion in such audits may not be
specifically identified in the annual plan. Agencies should review
these audits in the annual plan and consider that, where they have
significant activity or involvement in the proposed topic, they may
The performance audit process
There are three key phases during the performance audit
VAGO initiates the audit by writing to the head of the agency to
advise of the start of audit planning. The letter names the VAGO
Engagement Leader responsible for the audit, who is usually a
senior VAGO staff member. An ‘engagement plan’ is also provided
outlining the team, time lines and key milestones for the
The agency nominates a contact person to facilitate the audit
process. The contact person should have sufficient seniority and
understanding of the audited area to coordinate the audit on the
agency’s behalf and to provide an informed view of the agency’s
position on relevant issues.
An entry meeting is held, which
the Engagement Leader for the audit attends, and
which should be attended by appropriately senior agency staff.
Background information is obtained from the agency about the
audited area and time lines and expectations are set out. The audit
team and the agency should identify day-to-day staff contacts for
communications and coordination of meetings and evidence requests.
Often during planning and/or conduct, VAGO staff base themselves at
the audited agency for a period of time to ease access to
information and communication. This should also be arranged at the
We engage with agencies on the scoping and planning of audits
continuously. This means that VAGO may commence collecting
information before an audit has begun, to inform initial audit
scoping and/or as part of the annual planning and topic selection
process. Early collection of information also provides the agency
with an opportunity to brief VAGO staff and ensure understanding of
the relevant issues and context.
VAGO develops an ‘audit specification’ that outlines the audit
objectives, issues and agencies to be examined, and an ‘audit plan’
that further describes the audit objectives, criteria and scope.
The agency (and PAEC in some cases) is consulted and asked to
provide feedback on the draft audit specification and plan. In the
case of a ‘follow-the-dollar’ audit, VAGO may also consult an
associated entity. The Auditor-General considers any feedback and
approves the final audit specification and plan. A copy of the
final audit specification and plan is sent to the agency a
reasonable time before the commencement of the conduct of the
VAGO gathers audit evidence in line with Australian Auditing
Standards and through its powers in the Act. Where possible,
agencies are encouraged to provide information electronically.
Common types of evidence provided for performance audits
- meeting minutes
- project plans
- evaluation reports
- performance data
- business cases
- contracts and tender documents
- Cabinet-in-Confidence submissions.
The agency’s ability to provide sufficient and appropriate
(i.e. relevant and reliable) evidence is fundamental to
developing robust audit findings. Failure to provide complete and
accurate evidence can lead to incorrect audit findings and delay
the audit process. The Act gives VAGO the right to access all
information in the possession, custody or control of an agency.
VAGO understands the need to inform executive staff of material
provided to VAGO, but this can occur in tandem with the provision
of that information. Agencies must not delay the provision of
requested documents in order to obtain executive approval. Relevant
draft material should also be provided with information about its
status and time lines for finalisation. Updated drafts or final
versions should be submitted as they become available over the
course of the audit.
Further information on audit evidence is covered in our Audit
Evidence Brochure, available at:
The agency’s contact person and senior management are
progressively briefed on evidence gaps, emerging issues and
preliminary findings. This is done formally and informally,
verbally and in writing during the audit.
It is also ideal for the audit team and agency staff to begin
discussing audit findings and recommendations as early as possible.
This assists in developing recommendations and agency responses
that are practical and will meaningfully address the issues
Escalation of issues
It is important for agency contacts to escalate any issues that
require the attention of more senior agency or VAGO staff early, so
they can be addressed promptly. Within VAGO, our escalation process
is as follows:
The Act requires VAGO to provide a proposed draft of the audit
report to the Secretary of the Department of Premier & Cabinet,
audited agencies and, in the case of follow-the-dollar audits, to
associated entities (see section 16(3)).
There are some types of sensitive and confidential information
(such as Cabinet-in-confidence or trade secrets) that may only be
included in a report if the Auditor-General considers it is in the
VAGO usually issues an earlier provisional draft of the report
in addition to the proposed draft, particularly for larger
performance audits. The agency is asked to confirm the accuracy of
the provisional draft. It is the final opportunity to correct
errors of fact or context, before the proposed report is issued.
VAGO provides the agency with an acquittal of its response to the
provisional draft report.
VAGO then issues the proposed report for comment to agencies and
associated entities. Public sector agencies are requested to
include actions to address recommendations and accompanying time
lines. This provides an important opportunity to advise Parliament
and the community about acceptance, or otherwise, of
recommendations, and how and when they will be
VAGO recommendations are directed only at public sector agencies
and not associated entities. Agencies and associated entities
(where relevant) are given 10 business days to submit their
response, or a summary as agreed, which is printed in the tabled
audit report. They are solely responsible for the accuracy, balance
and fairness of their response. The head of the agency and
associated entity (where relevant) should be aware of the status of
their response to the audit. If warranted, the Auditor-General may
include additional comments in the report addressing their
In the very rare instance that the proposed audit report
includes an adverse comment or opinion about a named person who is
an officer or employee of the agency referred to in the report, the
agency head must give that person a reasonable opportunity to
respond to the agency head in relation to the adverse
Under the Act, information from the proposed report cannot be
disclosed until after the Auditor-General has published the report,
unless it is in the course of performing official duties. There are
penalties for improper disclosure.
At times, the Auditor-General may wish to convey a level of detail
regarding audit findings to an agency that is not warranted in the
published report. In these circumstances a management letter may be
provided to the agency, in line with common practice in the
auditing profession in Australia and internationally.
Prior to tabling the report in Parliament, VAGO sends a letter to
the agency head confirming the tabling date.
After the performance audit
Briefing Members of Parliament
In the days just before tabling, VAGO offers verbal briefings on
the report to any relevant ministers.
Shortly after tabling a report in Parliament, VAGO briefs
Members of Parliament on the audit report findings, conclusions and
recommendations. Copies of the reports and other relevant
communications such as presentations and media releases are
available at www.audit.vic.gov.au.
Parliament and the Executive Government have the power to act on
audit recommendations. PAEC selectively follows up matters raised
in Auditor-General’s reports. PAEC may seek a briefing from VAGO
and may also require an agency to provide further information
and/or give evidence at a hearing.
The Auditor-General may also choose to undertake a follow-up
performance audit that examines whether agencies have appropriately
responded to past recommendations and issues. A follow-up
performance audit may take a narrow focus, seeking to examine
agency actions directly in response to some or all past
recommendations. Alternatively, a follow-up may have a broader
focus and review past recommendations as well as new, related areas
of focus. Follow-up audits may be highlighted in the annual plan or
added to VAGO’s program as need arises.
Agencies are therefore encouraged to monitor their responses to
audit recommendations on an ongoing basis.
Following a performance audit, VAGO sends a survey to the
audited agency seeking feedback. VAGO is interested in the agency’s
views on the audit process and the Parliamentary report, and uses
the results to identify areas for improvement, and to report on its
own performance to Parliament.
Key points to remember
Prepare early for the audit
- Understand the objectives, scope, focus and timing of the
audit—they are generally foreshadowed in the annual plan tabled in
Parliament each year, and detailed in the audit specification and
- Provide timely and unrestricted access to information.
- Review relevant plans, records and source data, and make sure
they are up-to-date and available for the audit team.
- Gather documentation on how your agency monitors and measures
the effectiveness, economy and efficiency of the audited activity
and have the most recent results ready.
- There are no legal impediments to audit access—the Act has
provisions that can compel access if needed.
Consider communication and coordination
- Determine how your agency will communicate and
coordinate internally regarding the audit, and with other included
agencies and associated agencies where appropriate.
- Check that the staff likely to be needed will be available for
- Liaise regularly—there are set briefing points throughout the
audit, but maintain regular contact, and engage
on significant audit issues as they arise.
- Start talking about recommendations and responses early.
Carefully review the provisional draft
- It is the last opportunity before the reporting time frames
mandated in the Act apply.
Reporting and follow-up phase