Skills for Victoria
Contract Compliance Audit Guide
for Registered Training Organisations
Skills for Victoria I Contract Compliance Audit Guide for Registered Training Organisations
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Contents
Introduction…………………………………………………………………………..4
Purpose of the Guide…………………………………………………………….....5
Why do we audit?..............................................................................................6
RTO Responsibilities………………………………………………………………. 7
Audit strategy overview……………………………………………………………..8
Which RTOs will be audited?..........................................................................10
When will RTOs be audited?...........................................................................12
Where will audits be undertaken?...................................................................12
Who will conduct the audit?............................................................................13
How will RTOs be audited?.............................................................................14
- Business Process Audits
- Transactional Compliance Audits
- Evidence of Participation Audits
How can RTOs prepare for audit? ……………………………………………….18
What can RTOs expect on the audit day(s)?..................................................19
Next steps following the audit…………………………………………………….20
Audit Outcomes…………………………………………………………………….21
- Follow-up Audits
- Off-cycle Audits
Audit feedback process………………………………………………………….. 25
Glossary……………………………………………………………………………..26
Tables
1: Skills Victoria Contract Compliance Audit Strategy overview……….............9
2: Risk-based selection of RTOs for Audit……………………………………....11
3: Business Process Audit outcomes…………………………………………... 22
4: Transactional Compliance Audit outcomes…………………………………..23
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Introduction
Under delegation from the Victorian Skills Commission, Skills Victoria contracts
Registered Training Organisations (RTOs) to deliver government-subsidised
training to individuals eligible for the Victorian Training Guarantee (VTG) under
the Skills for Victoria Program.
In accordance with its Contract Compliance Audit Strategy, Skills Victoria
undertakes an annual Contract Compliance Audit Program to ensure that
contracted RTOs are complying with the terms and conditions of their Skills for
Victoria Service Agreement, including training delivery specifications.
Skills Victoria contracts an independent auditor panel to:
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conduct Contract Compliance Audits
report findings
develop Agreed Management Action Plans with RTOs to address instances
of non compliance and
to foster a culture of continuous improvement among contracted RTOs.
The Skills for Victoria Contract Compliance Audit Program assists in maintaining
a high quality Vocational Education and Training (VET) sector in Victoria.
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Purpose of the Guide
This Skills for Victoria Contract Compliance Audit Guide (‘the Guide’) is written
primarily for use by RTOs contracted to deliver government-subsidised training
under the Skills for Victoria program.
The Guide has been developed to assist RTOs to understand the Skills Victoria
Contract Compliance Audit Strategy and to provide information on how to
prepare for Contract Compliance Audits.
The Guide provides:
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the context and key objectives of the audit strategy
an overview of the end to end audit process
preparation tips to assist RTOs to plan for audit
information about next steps in instances where non-compliances with the
Skills for Victoria Service Agreement are identified at audit and
information about the audit feedback process.
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Why do we audit?
The objectives of the Skills Victoria Contract Compliance Audit Strategy are to:
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Confirm funding has been expended appropriately. Audits are undertaken
to confirm that funds provided to RTOs under the Skills for Victoria Program
have been expended for the purpose that the funds were provided and to
seek reimbursement of those funds where this has not occurred in a clear
and transparent manner.
Promote RTO regulatory and standards compliance. Audits are
undertaken to confirm that RTOs are complying with the minimum
requirements of the Skills for Victoria Service Agreement and where this has
not occurred, to recommend penalties and sanctions as appropriate in a clear
and transparent manner.
Promote RTO process quality. Audits are undertaken to identify
opportunities for improvement in RTO business processes and controls to
promote compliance with the Skills for Victoria Service Agreement.
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RTO responsibilities
The Skills for Victoria Contract Compliance Audit Program is premised on the
understanding that an RTO, by entering into a Service Agreement, has
acknowledged the following fundamental responsibilities:
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The RTO is responsible for the maintenance and preparation of relevant audit
evidence in accordance with the Skills for Victoria Service Agreement.
The RTO is responsible for the implementation of an internal control
environment that promotes compliance with the Skills for Victoria Service
Agreement and is designed to detect and limit fraud or error.
In accordance with the Skills for Victoria Service Agreement, the RTO is to
provide Skills Victoria and its auditors with access to all information
reasonably required for the purpose of confirming compliance with the Skills
for Victoria Service Agreement.
Contract Compliance Audits are not a substitute for contract management
practices and do not relieve an RTO of its responsibilities as defined under the
Skills for Victoria Service Agreement.
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Audit strategy overview
The key elements that constitute the audit methodology are:
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Business Process Auditing as an initial focus for audit activity, providing a
mechanism within the Contract Compliance Audit Program for sustainable
improvements in compliance, and with the objectives of minimising the level
of Transactional Compliance Auditing
Transactional Compliance Auditing where business processes are
identified as weak or an RTO is classified as high risk, with a view to
identifying compliance or non compliance with the Skills for Victoria Service
Agreement
Preparation of Agreed Management Action Plans to address any
instances of non compliance based on specific actions, responsibilities and
timelines
Evidence of Participation Auditing in instances where Transactional
Compliance Auditing identifies systemic weakness in this regard
Follow up Auditing as a means of further driving ongoing improvement in
compliance with the Skills for Victoria Service Agreement and
Off-cycle Auditing which may be triggered by matters that come to the
attention of Skills Victoria throughout the year.
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Table 1: Skills Victoria Contract Compliance Audit Strategy overview
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Which RTOs will be audited?
Skills Victoria’s Contract Compliance Audit Strategy is risk based and therefore
focuses more attention on those RTOs that present a greater risk of noncompliance with the Skills for Victoria Service Agreement.
Following an annual risk review, RTOs contracted to deliver training under the
Skills for Victoria Program will be assessed against a set of standard criteria to
enable their classification as ‘high’, ‘moderate’ or ‘low’ risk. The outcome of this
assessment will determine the annual Skills for Victoria Contract Compliance
Audit Program.
Irrespective of the level of risk, the random sample component of the Audit
Strategy means that the potential remains for any RTO in receipt of funding
under the Skills for Victoria Program to be audited.
The extent of audit activity to be undertaken at any one RTO depends on the
controls in place, and the level of risk that an RTO presents to the Skills for
Victoria Program.
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Table 2: Risk-based selection of RTOs for audit
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When will RTOs be audited?
Audits will occur over the course of the year. The auditor will seek to contact an
RTO at least two weeks prior to the commencement of an audit.
Where will audits be undertaken?
Audits will generally be conducted at an RTO. If an RTO operates over multiple
sites, the audit may focus on the location where administrative processes and
transactions typically occur. Alternatively, a multi-site audit may be required.
If this is the case, the RTO should advise the auditor at the time of scheduling.
The auditor will then work with the RTO to determine the most efficient
location(s) for the audit to occur.
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Who will conduct the audit?
The Skills for Victoria Contract Compliance Audit Program will be undertaken by
an independent audit panel contracted by Skills Victoria on behalf of the
Victorian Skills Commission.
The audit panel is appointed on the basis of professional competence in terms of
audit capability, audit methodology, stakeholder engagement, audit experience,
quality systems, and innovation.
On occasion, observers may attend the audit but do not usually have an active
role in the audit itself.
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How will RTOs be audited?
Business Process Audits
Business Process Audits are designed to enable Skills Victoria and its auditors to
obtain an understanding of key business processes employed by an RTO that
directly impact its capacity to remain compliant; and therefore whether the
controls in place provide a stronger or weaker control environment for
compliance with the Skills for Victoria Service Agreement.
This phase of audit activity will assist Skills Victoria to identify and assess the risk
of non-compliance with the Skills for Victoria Service Agreement and to identify
high level themes and opportunities for improvement at an RTO.
Key components of the Business Process Audit will be:
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a short introduction to the context in which the RTO operates in order to set
the scene for the audit. This may include, for example, an overview of the
number of students enrolled; any areas of specialisation in training delivery;
and types of delivery modes utilised.
consideration of how the RTO assigns certain responsibilities to different
individuals to assist in the prevention of fraud and errors i.e. the RTO’s
segregation of duties for identification of any instances of incompatible duties.
examination of internal audit activity undertaken by the RTO to self assess its
compliance with the Skills for Victoria Service Agreement.
the performance of “walkthroughs” of the processes used by the RTO to
promote compliance with the Skills for Victoria Service Agreement. These
include processes relating to:
eligibility assessment
student enrolment
training plan development
training delivery and
reporting.
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In walking through these processes, the auditor(s) will consider the way in which
records are maintained to provide evidence of the operation of business
processes relating to the Skills for Victoria Program. This includes, for example,
student enrolment forms, training plans and Evidence of Participation.
For those RTOs not already considered ‘high risk’, the Business Process Audit
will also assist the auditor(s) in making an assessment as to whether an RTO will
require a Transactional Compliance Audit.
Transactional Compliance Audits
Transactional Compliance Audits are designed to identify compliance or noncompliance with the Skills for Victoria Service Agreement and involve the
detailed examination of a sample of student records to test whether controls are
effectively implemented by an RTO.
The audit will assess an RTO’s compliance with Agreement with respect to areas
including:
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student enrolment
training plan development
training delivery and
reporting.
The Transactional Compliance Audit will also assist auditors in making an
assessment as to whether an RTO will require an Evidence of Participation
Audit.
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Evidence of Participation Audits
RTOs must be able to support the sampled units of competency/ modules with
Evidence of Participation as prescribed in the Skills for Victoria Service
Agreement, in respect of each eligible individual for which it has received funds
for government subsidised training from Skills Victoria.
Should any audit of an RTO identify issues relating to insufficient evidence to
support training delivery to eligible individuals under the Skills for Victoria
Program for which payment has been made, Skills Victoria may instigate an
Evidence of Participation Audit involving a statistically valid sample size.
If the Evidence of Participation Audit reveals that units of competency/ modules
audited are not sufficiently supported then Skills Victoria may seek a refund of
some or all the funds from an RTO in accordance with the Skills for Victoria
Service Agreement.
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How can RTOs prepare for audit?
Undertaking the following activities prior to the Skills for Victoria Contract
Compliance Audit will greatly assist RTOs and the auditors in the conduct of the
audit:
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understanding the requirements of the Skills for Victoria Service Agreement
completion of the Internal Audit Checklist in accordance with timelines
specified in the Skills for Victoria Service Agreement including sign off by the
CEO or CEO equivalent
following up any actions required following completion of the Internal Audit
Checklist
assigning an appropriate staff member to be responsible to support the audit
process
collating all required data and files at the site of the audit in a logical manner,
with particular consideration of tracking the end to end service delivery for
eligible individuals and
ensuring that records in an RTO’s Student Management System and the
SVTS are up to date.
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What can RTOs expect on the audit day(s)?
The auditor/s will arrive at the scheduled date and time and make contact with
the CEO or CEO equivalent to confirm the scope and process of the audit.
An RTO is bound by its Skills for Victoria Service Agreement to permit auditor(s)
to enter its premises to conduct audits, and to participate in and assist, as
required, with any audits required. This includes making available to the
auditor(s) records relating to the training services, including Evidence of
Participation in respect of each eligible individual.
During the audit process, the auditor(s) may need to discuss items with relevant
staff, students and employers (if relevant) to inform their assessment of
compliance with the Skills for Victoria Service Agreement.
The length of the audit will be determined by a range of factors including the size
of an RTO, identified level of risk, availability of required records, and the
complexity of issues which may arise during the audit.
The audit will conclude with an exit meeting between the auditor(s) and CEO or
CEO equivalent to discuss preliminary findings and work on an Agreed
Management Action Plan if necessary.
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Next steps following the audit
At the completion of each audit, the auditor(s) will prepare an audit report which
details the findings of the audit, along with any recommendations and Agreed
Management Action Plan to address those findings.
Agreed Management Action Plans will be developed jointly by the auditor(s) and
the RTO and will describe specific activities to be undertaken by the RTO to
address audit findings identified by the auditor(s), including the name of the
individual/ unit responsible and the agreed date for implementation.
The Agreed Management Action Plan should be formally acknowledged and
agreed to by the RTO and should reflect the ‘SMART’ principles as follows:
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Specific
Measurable
Attainable
Relevant
Time-bound
The audit report will initially be provided to the CEO or CEO equivalent of the
RTO as a draft for acknowledgement and comment.
The RTO will have a period of time to provide management comments to the
auditor(s), including comments in relation to the audit findings and Agreed
Management Action Plan.
The auditor(s) will review any comments provided and amend the report, if
considered necessary or appropriate.
If the RTO does not provide a response within the designated period of time, the
RTO will have waived its right to comment on the audit.
Following consideration of the audit findings, formal correspondence including a
final copy of the audit report will be provided to the RTO in a timely manner. This
correspondence will outline any further steps to be undertaken as necessary.
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Audit outcomes
If an audit identifies that an RTO is not complying with the Skills for Victoria
Service Agreement and/or has not established controls around key processes
including:
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eligibility assessments
student enrolment
training plan development
training delivery and
reporting
appropriate action will be taken by Skills Victoria on behalf of the Victorian Skills
Commission.
In addition to seeking improvement through the implementation of Agreed
Management Action Plans, Skills Victoria may also apply penalties and sanctions
such as:
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the RTO to meet with Skills Victoria to discuss the Contract Compliance Audit
findings and required next steps and/or
performance of a statistically valid Evidence of Participation Audit in
instances where Evidence of Participation is insufficient, which may result in
recovery of funding from the RTO and/or
referral of information regarding the Contract Compliance Audit findings to the
relevant regulator for consideration and/or
not allowing new enrolments until non-compliance matters identified at audit
have been addressed to the satisfaction of Skills Victoria and/or
classification of an RTO as ineligible for a Skills for Victoria contract in the
following year and/or
immediate termination of an RTO’s Skills for Victoria Service Agreement.
In the event that a Contract Compliance Audit finding identified in one year is
again identified in the following year, the reoccurrence will be viewed by Skills
Victoria as a serious matter. Accordingly, reoccurring Contract Compliance Audit
outcomes will attract increasingly severe penalties.
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Table 3: Business Process Audit outcomes
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Table 4: Transactional Compliance Audit outcomes
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Follow Up Audits
Skills Victoria, at its discretion, will select a number of RTOs in the Skills for
Victoria Contract Compliance Audit Program to undergo a Follow up Audit.
Follow up Audits are designed to reinforce the importance of RTO’s taking
corrective action to address any issues identified in either Business Process
Audits or Transactional Compliance Audits.
During the follow up audit the auditor(s) will seek evidence that actions have
been taken as outlined in the RTO’s Agreed Management Action Plan, i.e.
confirmation of the implementation status of the plan.
The exact nature of a specific follow up audit will be influenced by the type of
corrective action being implemented. As such, it may take the form of a desk top
audit, face to face interview, onsite visit or comprehensive further Transactional
Compliance Audit.
Off-cycle Audits
Off-cycle audits may be triggered by matters which come to the attention of Skills
Victoria throughout the year including the identification of issues through ongoing analysis of SVTS data; complaints to Skills Victoria which cannot be
managed as part of the contract management process; or cessation of a Skills
for Victoria Service Agreement.
Off-cycle audits may or may not follow the audit process outlined as part of the
planned Skills for Victoria Contract Compliance Audit Program. These audits
may be particularly targeted to an identified issue.
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Audit feedback process
Skills Victoria is committed to ensuring that its Contract Compliance Audit
Strategy is effective and fair for all stakeholders of the Skills for Victoria Program.
RTOs will be provided with the opportunity to complete an audit satisfaction
survey upon the completion of an audit to encourage open and honest feedback
on the performance of Contract Compliance Audits.
The audit satisfaction survey, which will be administered by Skills Victoria
independently of its auditors, presents RTOs with the opportunity to provide
formal feedback on all elements of the audit including audit planning, audit
execution and audit closing.
In the event that an RTO wishes to raise a matter pertaining to the Contract
Compliance Audit process that cannot be addressed through the audit
satisfaction survey or via contact with the auditor(s) or relevant Skills Victoria
staff member(s), an RTO should submit formal correspondence addressed to:
The Director,
Training Market Funding and Operations,
Skills Victoria,
Department of Education and Early Childhood Development,
P.O Box 266
Melbourne VIC 3001
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Glossary
Audit evidence
Information used by auditors to form the basis of the assessment of audit
outcomes in our reports. Audit evidence can include information contained in
student records such as enrolment forms, training plans, and Evidence of
Participation.
Business process
A collection of activities performed by an organisation to produce a specific
service or product, or to achieve a specific outcome.
Control activities*
The policies and procedures that help ensure that management directives are
carried out; for example, that necessary actions are taken to address risks that
threaten the achievement of the organisation's objectives. Control activities,
whether in IT or manual systems, have various objectives and are applied at
various organisational and functional levels. Control activities are a component of
internal control.
Control environment*
Includes the governance and management functions and the attitudes,
awareness and actions of those charged with governance and management
concerning the organisation's internal control and its importance in the entity.
The control environment sets the tone of an organisation, influencing the control
consciousness of its people. It is the foundation for effective internal control,
providing discipline and structure. The control environment is a component of
internal control.
Service Agreement
The Skills for Victoria Service Agreement between your RTO and the Victorian
Skills Commission.
Risk**
The possibility that an event will occur and adversely affect the achievement of
objectives.
Segregation of incompatible duties
Assignment of different people the responsibility of authorising transactions,
recording transactions and maintaining custody of assets with the intention of
reducing the opportunities to allow any person to be in a position to both
perpetrate and conceal fraud or error due to fraud in the normal course of his or
her duties.
SVTS
The Skills Victoria Training System is a web-based information technology
product used for managing transactions between Skills Victoria and contracted
RTOs including general communications, data reporting, claims and payments.
*
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Source: AUASB Glossary, issued by the Auditing and Assurance Standards Board
Source: Enterprise Risk Management – Integrated Framework (2004), issued by the Committee of Sponsoring
Organisations (COSO)
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