2016 17 Financial Management Compliance Report Effective financial

2016 -17 Financial Management Compliance Report Effective financial governance and resource management Prepared in accordance with 2016 Standing Directions of the Minister for Finance, Instruction 5. 1 November 2017

1 Background The 2016 Standing Directions of the Minister for Finance have strengthened department and agency focus on achieving a high standard of public financial management and accountability by: • • modernising Victoria’s public financial management strengthening accountability for financial management in departments and agencies Standing Directions of the Minister for Finance • Minimum financial management requirements for the robust management of Victorian public resources • Directions and Instructions apply to all FMA departments and public bodies Transition • Applicable from 1 July 2016, with some transitional provisions for newer requirements Exemptions • Minister for Finance may, by written direction, exempt agencies FMA Standing Directions Instructions • Agency applications must be in writing, stating the rationale for the request and what alternative actions or procedures will be implemented to minimise financial management risks • Exemptions were granted to 29 agencies in 2016 -17 process Guidance Mandated frameworks and policies • More than 270 departments and agencies self-assessed compliance against the mandatory Standing Directions and Instructions

2 New expectations Stronger roles for: • Portfolio departments • Audit committees • Internal audit Increased accountability for: • Accountable officers • Chief finance officers Roles and responsibilities • DTF no longer receives detailed compliance reports. Rather, this information is now held by departments • Departments are playing a stronger role in supporting portfolio agencies • Internal audit is required to periodically review financial compliance • Audit committees are now expected to annually endorse their agency’s compliance assessment with the Directions • Clearer accountabilities are now in place for accountable officers and chief finance officers Accountability DTF Portfolio departments Agencies Reporting Secretary Deputy Secretary, Budget and Finance Secretary Departmental chief finance officer Responsible body Accountable officer Chief finance officer

3 2016 -17 whole of government transitional results Compliance results will improve over time as departments and agencies fully embed the Standing Directions Agency audit committees are now required to review and endorse their agency’s compliance assessment Reported compliance deficiencies indicate departments and agencies are taking financial management legislative obligations seriously Reporting • Most departments and agencies adhered to the reporting timelines • Departments are following up with five agencies that did not submit reports Compliance deficiencies • A small number of departments have reported material compliance deficiencies in their agencies relating to business continuity planning and asset management • Areas of reported compliance deficiencies include: – implementing the Asset Management Accountability Framework, including developing asset management strategies and asset information management systems – developing, implementing and maintaining business continuity plans, including periodic testing – developing and maintaining a sound internal control environment, such as policies and procedures up to date and disseminated – developing, implementing and maintaining fraud, corruption and other losses policies, and reporting significant instances within the required timelines. For example, the new requirements focus more on prevention – developing and maintaining sound financial governance practices, specifically for audit committees and internal audit

4 Strategies for improving future compliance Reported compliance deficiencies are supported by rectification strategies, ensuring issues are resolved in a timely manner Departments and agencies continue to work towards implementing transitional requirements Fraud and corruption prevention continues to be a focus for departments and agencies There has been increased focus on sharing better practices across government Rectification • Departments and agencies with reported compliance deficiencies will work to resolve these in 2017 -18, with the aim of being fully compliant by 2018 -19 • Departments have a responsibility to work with and support their agencies • DTF continues to work with departments to embed compliance practices Transitional provisions • Departments and agencies continue to work towards becoming compliant with the fraud and corruption requirements • The planning requirements are a work in progress for agencies not previously subject to any planning obligations Fraud, corruption and other losses • Departmental and agency focus has shifted from the reporting of all fraud, corruption and other losses, to preventative activities Building a culture of compliance • Activities such as the establishing of community of practices across and in departments has helped build a culture of sharing better practices across government

5 2017 -18 reporting and public attestation process 2017 -18 annual reports will include an attestation against the Standing Directions of the Minister for Finance In the meantime, departments and agencies continue to work towards resolving existing compliance issues Reporting and attestation • The 2016 -17 transition year included an internal trial attestation containing any material compliance deficiencies • In 2017 -18 annual reports will include a public attestation, providing the disclosure of any material compliance deficiencies • Agencies will continue to report other compliance deficiencies internally to portfolio departments in line with reporting timelines • The 2017 -18 process is likely to be impacted by the 2018 parliamentary sitting date schedule for tabling annual reports Areas for focus prior to 2017 -18 reporting and attestation • Resolution of any identified material compliance deficiencies and other compliance deficiencies • Ongoing monitoring of compliance with the Standing Directions • In accordance with mandated requirements, prompt reporting of significant fraud, corruption and other losses

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