Componente 4

2.13.1 Governance - Federal Government of Australia

The Federal Government of Australia (2003)commissioned a study into governance expectations for its statutory agencies. It defines corporate

governance as encompassing the arrangements by which the power of those in control of the strategy and direction of an entity is both delegated and limited to enhance prospects for the entity’s long-term success, taking into account risk and the environment in which it is operating. “Governance is about ensuring the success of an activity.It encompasses the arrangements by which owners, or their representatives, delegate and limit power to enhance the entity’s prospects for long-term success” (Federal Government of Australia 2003:22). This

definition was employed for the review of the corporate governance of Federal government statutory authorities and office holders, to identify reforms that might assist in improving the performance of these bodies, without

compromising their statutory duties – but it was noted that there is no

universally accepted definition of corporate governance, or agreement on the structures and practices that are required to achieve good governance.

2.13.2 Governance - Australian National Audit Office (ANAO)

The Australian National Audit Office (2003) defines corporate governance as “the process by which organisations are directed, controlled and held to account” (ANAO 2003), and argues that it encompasses authority,

accountability, stewardship, leadership, direction and control exercised in the organisation.

Public sector governance covers:

“…the set of responsibilities and practices, policies and procedures, exercised by an agency’s executive, to provide strategic direction, ensure objectives are achieved, manage risks and use resources responsibly and with accountability” (ANAO 2010).

Public sector management requires leadership in ensuring that sound

governance practices are instilled throughout the organization and the wider responsibility of all public servants to apply governance practices and

procedures in their day-to-day work. According to the ANAO’s Better Practice Guide on Public Sector Governance (2003):

“Good governance is about both:

 Performance —how an agency uses governance arrangements to

contribute to its overall performance and the delivery of goods, services or programs, and

 Conformance —how an agency uses governance arrangements to

ensure it meets the requirements of the law, regulations, published standards and community expectations of probity, accountability and openness. “

This means that, on a daily basis, governance is typically about the ways in which public servants take decisions and implement policies. Published in the ANAO’s Better Practice Guide on Public Sector Governance (2003:7-8):

“The governance framework is based on principles of public sector governance including:

 accountability—being answerable for decisions and having meaningful mechanisms in place to ensure the agency adheres to all applicable standards

 transparency/openness—having clear roles and responsibilities and clear procedures for making decisions and exercising power

 integrity—acting impartially, ethically and in the interests of the agency, and not misusing information acquired through a position of trust

 stewardship—using every opportunity to enhance the value of the public assets and institutions that have been entrusted to care

 efficiency—ensuring the best use of resources to further the aims of the organization, with a commitment to evidence-based strategies for improvement

 Leadership —achieving an agency-wide commitment to good

governance through leadership from the top.” (ANAO 2003:7-8)” 2.13.3 Governance in the Victorian Public Sector

Governance principles for the Victorian Public sector are promulgated by the State Services Authority. The exercise of external auditing is conducted by the Auditor General of Victoria. The former Auditor General of Victoria, Wayne Cameron (2003) recognises the value that audit committees contribute to governance, accountability and stewardship. The Victorian Auditor-General’s Office used a conceptual framework (Fig 2.3) to identify the elements that would deliver good governance - performance, accountability, structure, and strategy. The Victorian Auditor General’s (VAGO) Governance Framework identifies four silos, namely performance, compliance, structure, and strategy. Performance means the ability to get the information required on a timely basis. Compliance means the ability to monitor and identify situations when non compliances occur. Structure means having an explicit role definition of key participants in the governance process that includes the control, reporting and accountability arrangements established to facilitate communication, action and monitoring. Strategy means having goals and objectives that are supported by plans

covering finance (budget), assets, and technology and personnel requirements. Government require strategy, policies and other directions to be clearly

Figure 2.3 Victoria Auditor-General’s Office (VAGO) Governance Framework Source: VAGO

Spira (2002) and Turley and Zaman (2004, 2007) calls for additional qualitative research on the audit committee process to increase understanding of the linkages between audit committee inputs and outputs, particularly those related to financial reporting and internal control. Enterprise risk management is

highlighted in Blaskovich J and Taylor EZ (2011)’s article titled By the Numbers: Individual Bias and Enterprise risk management. They found that groups with accounting or financial backgrounds placed greater emphasis on financial risks compared with cross-functional groups, focusing on accounting and financial issues and reporting of business financial results and situation. Audit committee members with accounting and financial audit contribute value to the audit

committee process. Anderson RJ and Frigo M (2012) in their article ERM – What should Directors ask about risk management, draws attention to

enterprise risk oversight and management’s assistance in helping the board add strategic value on process and reporting. The challenge facing boards is how they can effectively oversee the organisation’s enterprise-wide risk

management in a way that balances managing risks while adding value to the organisation. Barua A and Yan YC (2011) in their article titled Appointment of New Executives and subsequent SOX 404 opinion noted that the Chief Financial Officer and the Chief Executive Officer of a company play a crucial role in financial reporting process. They found that newly appointed executives were more critical and report adverse SOX 404 reports that address internal control issues. Roy M. (2011) in his article Board information: meeting the evolving needs of corporate directors found that corporate boards do not receive adequate information to help them fulfil their current and emerging roles.