As required by section 16A of the Audit Act 1994, we gave a draft copy of this report to the Treasurer of Victoria and asked for his submissions or comments. As required by section 16(3) of the Audit Act 1994, we gave relevant extracts of this report to named agencies and asked for their submissions or comments. We have considered their views when reaching our audit conclusions. We also provided a copy of the report to the Department of Premier and Cabinet.

The AFR shows the financial performance and position of the State and the GGS.

Separately reporting on the GGS allows the government to demonstrate its results against its published budget. The 2016–17 State Budget sets out the government's sustainability objectives for the GGS, which are supported by three key financial measures.

In this part, we review the State against these three key financial measures and other relevant ones. We also discuss key transactions during the year that influenced the results, and review the GGS against the 2016–17 State Budget.

Effective internal controls help entities reliably and cost-effectively meet their objectives. They are also a prerequisite for delivering sound, accurate and timely external financial reports.

In our annual financial audits, we consider the internal controls relevant to financial reporting and assess whether entities have managed the risk that their financial reports will not be complete and accurate. Poor internal controls make it more difficult for the management of entities to comply with relevant legislation, and increase the risk of fraud and error.

This year we provided clear audit opinions on the financial statements of the 47 significant state-controlled entities included in the AFR, and consequently on the AFR.

A clear audit opinion adds credibility to the financial statements by providing reasonable assurance that reported information is reliable, accurate and in keeping with the requirements of relevant accounting standards and applicable legislation.

Each year, we audit the AFR. It measures the State's financial position at the end of the financial year, and how it performed during the year.

Section 16A of the Audit Act 1994 requires that we report to Parliament on our audit. This report satisfies our obligation.

1.1 Entities included in the AFR

The AFR combines the financial results of 276 state-controlled entities. These are classified into three types:

The Treasurer tabled the 2016–17 Annual Financial Report of the State of Victoria (AFR) in Parliament on 21 September 2017. The AFR includes the financial statements of the State of Victoria (the State) and the general government sector (GGS).

This report provides Parliament with information about matters arising from our financial audit of the 2016–17 AFR. It also provides our assessment of the financial sustainability of the State at 30 June 2017.

Conclusion

We issued a clear audit opinion on the AFR for the financial year ended 30 June 2017.

Ordered to be published

VICTORIAN GOVERNMENT PRINTER November 2017

PP No 345, Session 2014–17

Figure F1 is a copy of the IIA Internal Audit Quality Analysis to conduct self‑assessment against the IIA standards.

Figure F1
IIA Internal Audit Quality Analysis

Figure E1 shows an example of balanced scorecard reporting of better practice performance measures.

Figure E1
Better practice performance measures