As discussed in Part 3 of this report, our review of fraud risk assessment and control monitoring at the eight universities has, in part, been based on the Controlling fraud and corruption: a prevention checklist, issued by the Independent Broad-based Anti‑corruption Commission (IBAC) in November 2013.

The key components of a good fraud control framework are detailed in Figure E1, and are from the IBAC document.

Figure E1

Fraud risk and control monitoring checklist

Figure D1 shows the indicators used in assessing the financial sustainability risks of universities in Part 4 of this report. These indicators should be considered collectively and are more useful when assessed over time as part of a trend analysis.

Figure D1

Financial sustainability risk indicators

Figure C1 shows the risk ratings applied to management letter issues raised during a financial audit.

Figure C1

Definitions of risk rating for issues reported in audit management letters

Figure B1 lists the entities included in this report. It details the date an audit opinion was issued to each entity for their 2016 financial report, and the nature of that opinion.

Figure B1

Audit opinions issued to the university sector for 2016

We have consulted with all universities and the Department of Education and Training throughout the course of the audit. As required by section 16(3) of the Audit Act 1994, we gave a draft copy of this report, or relevant extracts, to those entities and asked for their submissions and comments.

Responsibility for the accuracy, fairness and balance of those comments rests solely with the entity head.

Responses were received as follows:

To be financially sustainable, entities need to be able to fund their current and future spending. They also need to be able to absorb the financial effects of changes and financial risks, without significantly changing their revenue and expenditure policies. This includes the ability to fund asset replacement and renewal in a timely manner. A university's ability to do this can be impacted by funding and regulatory environments.

Effective internal controls help entities to meet their objectives reliably and cost‑effectively. Strong internal controls are a prerequisite for delivering reliable, accurate and timely external and internal financial reports.

There are eight public universities in Victoria, which control a further 51 entities. We conduct the financial audits of all of these 59 entities. This report outlines the results of, and our observations from, these financial audits for the year ended 31 December 2016. We also discuss the frameworks in place for identifying and managing the risk of fraud, and comment on the financial sustainability of the sector.