Effective internal controls help entities meet their objectives reliably and cost‑effectively. Entities also require strong internal controls to deliver reliable, accurate and timely external and internal 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 may not be complete and accurate. Poor internal controls make it more difficult for entities to comply with relevant legislation and increase the risk of fraud and error.

Councils prepare a financial report and performance statement annually. Their financial report shows the council's financial results and is prepared in line with relevant Australian Accounting Standards and applicable legislation. The performance statement outlines the council's performance against performance indicators set by the Minister for Local Government. We audit both the financial reports and the performance statements.

Victoria's Constitution recognises local government as one tier of government. Democratically elected councillors govern councils, and their operations are managed by a council-appointed chief executive officer. While administered under the Local Government Act 1989, each council operates autonomously and is directly accountable to ratepayers.

In Victoria, the local government sector comprises 79 councils, their 10 regional library corporations and 16 associated entities. While administered under the Local Government Act 1989, each council operates autonomously and is directly accountable to ratepayers. Local Government Victoria (LGV), within the Department of Environment, Land, Water and Planning (DELWP), provides policy advice, oversees legislation and works with the Minister for Local Government and local councils.

Ordered to be published

VICTORIAN GOVERNMENT PRINTER November 2017

PP No 347, Session 2014–17

Ordered to be published

VICTORIAN GOVERNMENT PRINTER November 2017

PP No 346, Session 2014–17

Accountability

Responsibility of public entities to achieve their objectives in reliability of financial reporting, effectiveness and efficiency of operations, compliance with applicable laws, and reporting to interested parties.

Amortisation

The systematic allocation of the depreciable amount of an intangible asset over its expected useful life.

Asset

An item or resource controlled by an entity that will be used to generate future economic benefits.

Asset valuation

The fair value of a non-current asset on a specified date.

Financial reporting better practice elements

Our assessment of financial reporting performance against better practice was based on elements outlined in Figure F1.

Figure F1
Better practice elements to financial report preparation

Appendix E sets out the definitions we use for the current and prior years that assist us in assessing and reporting on financial sustainability risks across the water sector.

However, these financial sustainability indicators are only indicative, highlighting financial sustainability risks at a cohort level—metropolitan, regional urban and rural—looking at each entity relative to the cohort against a five-year average.