This Appendix details the overall financial sustainability assessment of each entity over the past five years given six indicators.
The overall financial sustainability risk assessment has been calculated using the ratings determined for each indicator as outlined in Figure F1. Appendix E provides further information on each indicator.
Figure F1
Overall financial sustainability risk assessment
This Appendix sets out the financial indicators used in this report. The indicators should be considered collectively, and are more useful when assessed over time as part of a trend analysis. The indicators have been applied to the published financial information of the 19 water entities for the five-year period 2006–07 to 2010–11.
This Appendix presents the composition of revenue, expenses, assets and liabilities at an industry, metropolitan, regional urban and rural level.
Figure D1
Revenue composition
Source: Victorian Auditor-General's Office.
Figure D2
Expense composition
Audit types |
Financial report | |||
|---|---|---|---|---|
The responsible minister for the water industry is the Minister for Water. The relationship between the Minister for Water and the water entities is established by the Water Act 1989 and the Water Industry Act 1994.
The Water Group, a business unit within the Department of Sustainability and Environment, supports and advises the Minister for Water.
The 19 entities also report to the Treasurer of Victoria.
| AAS | Australian Accounting Standard |
| AASB | Australian Accounting Standards Board |
| CRC | Current Replacement Cost |
| DRC | Depreciated Replacement Cost |
| DSE | Department of Sustainability and Environment |
| DTF | Department of Treasury and Finance |
| ESC | Essential Services Commission |
| FMA | Financial Management Act 1994 |
| FRD | Financial Re |
This Part presents the results of our assessment of general internal controls over declarations of interests, valuation of assets and outsourcing in water entities.
Internal controls at water entities were adequate for producing reliable, accurate and timely financial reports. Nevertheless, a number of areas requiring improvement were identified.
Sixteen of the 19 water entities are required to include an audited statement of performance in their annual report. The three water entities that report under the Corporations Act 2001 are encouraged to include these reports.
To be financially sustainable, entities need to be able to meet current and future expenditure as it falls due. They also need the ability to absorb foreseeable changes and materialising risks without significantly changing their revenue and expenditure policies. This Part provides our insight into the financial sustainability of the 19 water sector entities based on our analysis of the trends in six indicators over a five‑year period.
The financial performance of entities is measured by their net operating result—the difference between revenue and expenses. Their financial position is measured by reference to its net assets—the difference between its total assets and total liabilities. This Part covers the financial results of the 19 water entities for the year ended 30 June 2011.