3 November 2015
PDF version [370 KB]
Philip Hamilton
Politics and Public Administration Section
-
Following the appointment in June 2015 of Mr Grant Hehir to a
ten-year term as the Commonwealth’s Auditor-General, this paper briefly
outlines the functions performed by the Auditor-General, the significance of
the Auditor-General’s independence, and some possible issues for the new
Auditor-General.
-
In a Westminster-style governance framework, the Auditor-General
assists the Parliament by scrutinising and reporting on the performance and
actions of the Executive. To perform the role effectively, an Auditor-General
requires independence from the Executive.
-
In the Commonwealth of Australia, the office of Auditor-General was
created in 1901 by the fourth piece of legislation passed by Parliament, and
has existed continuously since then. The Auditor‑General
Act 1997 (Cth)[1]
sets out the main functions and powers of the Auditor-General and, in
combination with the Public
Accounts and Audit Committee Act 1951 (Cth),[2]
ensures that the Parliament has a role in the Auditor-General’s appointment,
funding and work program.
-
The Auditor-General’s role does not extend to
commenting on the merits of government policy, but mainly focuses on financial
statement audits, and performance audits that assess the extent
to which programs have been implemented efficiently and effectively, and in
accordance with legislation and government policy.
-
As an Officer of the Parliament, the Auditor-General’s primary
relationship with the Parliament is with the Joint Committee of Public Accounts
and Audit (JCPAA). The JCPAA has a statutory duty to examine all reports of the
Auditor‑General that are tabled in Parliament.
-
In the short and medium term, the evolution of governance,
performance and accountability frameworks under the Public Management Reform
Agenda, including those promulgated under the Public Governance,
Performance and Accountability Act 2013 (Cth),[3]
presents a changing and challenging environment for the Auditor-General, and
the organisations audited by the Australian National Audit Office (ANAO).
Contents
Executive
summary
Introduction
The Auditor-General’s functions
Auditing standards
Financial statement audits
Performance audits
Performance audits of Commonwealth
partners
Better practice guides
Other assurance activities
Major projects in the Defence
portfolio
Performance indicators
Government advertising
The Auditor-General and government
policy
The Auditor-General’s independence
Officer of the Parliament
Appointment
Australian National Audit Office and
resourcing
ANAO Average Staffing Level (ASL):
2009‒10 to 2015‒16
Recent survey of legislation in
Australia and New Zealand
Issues for the new Auditor-General
Performance audit program
Relationships with stakeholders
Reform of the
Federation: White Paper
The Public Governance, Performance
and Accountability Act 2013
The Public Management Reform Agenda
Conclusion
Immediately after Federation in January 1901, an early
priority for the new Commonwealth Government and Parliament was the appointment
of an Auditor-General. The Audit Act 1901[4]
was the fourth piece of legislation passed by the new Parliament, preceded only
by the Acts Interpretation Act 1901 and two Acts relating to
Consolidated Revenue.[5]
The inaugural Auditor-General was appointed on 1 December 1901.[6]
On 11 June 2015, Mr Grant Hehir commenced a ten-year term as only the fifteenth
person appointed as the Commonwealth Auditor-General.[7]
On the occasion of this relatively infrequent ‘changing of the guard,’ this
paper briefly outlines the functions performed by the Auditor-General, the
significance of the Auditor-General’s independence, and some possible issues
for the new Auditor-General.
In the Westminster model of governance, the Executive is
accountable to Parliament for the use of resources and powers conferred by
Parliament. An Auditor-General assists the Parliament by scrutinising and
reporting on the performance and actions of the Executive.[8]
The Auditor-General
Act 1997 sets out the main functions and powers of the Auditor-General (Part
4), and establishes the Australian National Audit Office (ANAO) to assist in
the performance of the Auditor-General’s functions (Part 6).[9]
Except where noted, the following information about the Auditor-General’s
functions is drawn from the 2013 ANAO publication, About the
Australian National Audit Office.[10]
Under section 24 of the Auditor-General Act 1997, the
Auditor-General sets auditing standards that are to be complied with by persons
performing financial statement audits, performance audits, assurance reviews,
and audits of Finance Minister’s annual financial
statements.[11]
Financial statement audits are independent examinations of
the financial statements of Australian Government entities, companies and
subsidiaries, and the Australian Government as a whole, conducted in accordance
with ANAO auditing standards.[12]
The results of the examination are presented in an auditor’s report which
expresses an opinion on whether the financial statements fairly reflect the
results of each entity’s operation and its financial position.[13]
Performance audits are independent, objective and systematic
assessments of Australian Government entities’, companies’ and subsidiaries’
programs, resources, information systems, performance measures, monitoring
systems and legal and policy compliance. Performance audits also examine how
well administrative support systems operate. Performance audits may consider:
-
economy (minimising cost)
-
efficiency (maximising the ratio of outputs to inputs)
-
effectiveness (the extent to which intended outcomes were
achieved) and
-
legislative and policy compliance.
The Joint Committee of Public Accounts and Audit (JCPAA) can
request the Auditor-General to conduct a performance audit of a Government
Business Enterprise (GBE).[14]
Most performance audits review a program or activity in a
single entity. However, a ‘cross-entity’ audit may review the administration of
one program by a number of entities, or the administration of the same activity
in a number of entities.[15]
The Auditor-General may undertake audit work following
requests from, for example, ministers or other parliamentarians.[16]
In a recent innovation, during the fieldwork phase of a performance
audit, members of the public can contribute information for consideration by
the ANAO.[17]
The ANAO is able to conduct a performance audit of a
Commonwealth partner. The Auditor‑General
Act 1997 provides that:
18B (2) A person or
body is a Commonwealth partner if:
(a) the
Commonwealth provides money for a particular purpose (the Commonwealth
purpose); and
(b) the
person or body receives some or all of the money, whether directly or
indirectly, because the person or body:
(i)
agrees to use the money in achieving the Commonwealth purpose; or
(ii)
has entered into a contract that relates to the Commonwealth purpose; and
(c) an
audit of the person or body could not be conducted under another section of
this Division.[18]
A performance audit may be conducted only to the extent that
it assesses the operations of the Commonwealth partner in relation to achieving
the Commonwealth purpose. Under section 18B(1), where the partner is part of,
or is controlled by, a state or territory government, the audit must be
requested by the Joint Committee of Public Accounts and Audit (JCPAA) or the
responsible Commonwealth minister. Audits of other Commonwealth partners, such
as contractors, may be undertaken at any time.[19]
The first audit conducted under section 18B related to the Mersey Community
Hospital in Tasmania.[20]
Performance audits of Commonwealth partners are sometimes referred to as
‘follow the money’ audits.
Performance audits identify better practices
which may then be incorporated into better practice guides (BPGs) on key aspects
of public administration.[21] Some BPGs are updated from time to time to reflect changes in
legislation or policy. For example, BPGs on grants administration were
published in 1994, 1997, 2002, 2010 and 2013.[22]
The Auditor-General also undertakes other assurance
activities, which generally consist of reviews undertaken by agreement
with Australian Government entities, companies and subsidiaries, either at the
request of the organisation or in response to requests from stakeholders,
including ministers and parliamentary committees.
In 2007‒08, an annual program was
established in conjunction with the Defence Materiel Organisation (DMO) to
enable the ANAO to review and report to the Parliament on the status
of major Defence acquisition projects. The Major Projects Review
(MPR) includes information relating to the cost, schedule and capability
performance of individual projects as at 30 June each year.[23] The ANAO has noted that projects are included in the MPR on the basis
of criteria set out in Major Projects Report Guidelines endorsed by the
JCPAA, and:
[w]hile by its
nature, the report is not as in depth as a performance audit, it provides an
opportunity to analyse data across a consistent range of projects over time.
The benefits of this analysis have been noted by a variety of stakeholders,
including Ministers, Parliamentary Committee members, industry and the media.[24]
On 1 July 2015, the DMO’s core functions and
funding transitioned to the Department of Defence.[25] This administrative
change is likely to necessitate some consultation between the Auditor-General,
Defence and the JCPAA in relation to arrangements for the Defence portfolio
MPR.
The Auditor-General may also undertake audits
of the appropriateness of Australian Government entities’ performance
indicators, and the completeness and accuracy of their reporting in entities’
annual reports.[26]
Two such reports have been published to date.[27]
The Auditor‐General undertakes periodic
performance audits of the administration of government advertising.[28]
From 2008 until March 2010, the governance
framework for government advertising and information campaigns undertaken by
departments and agencies included a role for the Auditor-General. An
independent review report on each proposed campaign's compliance with the government's
advertising guidelines was provided by the Auditor-General to the minister
responsible for the agency that would undertake the campaign. The Auditor‑General's
review reports under this framework are available on the ANAO website.[29]
In a speech in 2011 the then Auditor-General, Mr
Ian McPhee, observed:
It is important to observe here that the office
does not have a role in commenting on the merits of government policy in its
audits but rather is focused on assessing whether government programs have been
implemented, efficiently and effectively, in accordance with legislation and
government policy. In situations where, as an incidental aspect of an audit, we
observe aspects of government policy that would benefit from a review, we have
recommended departments consider the position and, as appropriate, provide
advice to the responsible minister. For me, this is a responsible position for
the office to take in such circumstances.[30]
To perform the role effectively an Auditor-General requires
independence from the Executive—to this end, in Westminster-style jurisdictions,
the Auditor-General may be designated as an ‘officer of the parliament.’[31]
Other key factors for an Auditor-General’s independence are:
-
the extent to which the appointment of the Auditor-General can be
influenced by the Executive and
-
the extent to which the Auditor-General’s budget appropriation is
determined by the Executive.[32]
Section 8 of the Auditor-General Act 1997
establishes that the Auditor-General is ‘an independent officer of the Parliament’
who has ‘complete discretion’ in the performance or exercise of his or her
functions or powers.
8 (4) Subject to
this Act and to other laws of the Commonwealth, the Auditor-General has
complete discretion in the performance or exercise of his or her functions or
powers In particular, the Auditor‑General is not subject to direction
from anyone in relation to:
(a) whether
or not a particular audit is to be conducted; or
(b) the
way in which a particular audit is to be conducted; or
(c) the
priority to be given to any particular matter.[33]
The complete discretion conferred by section 8 is
modified only by section 10, which requires that the Auditor‑General
‘must have regard to’ the audit priorities of the parliament, as determined by
the Joint Committee of Public Accounts and Audit (JCPAA).
The Auditor-General’s primary relationship with the parliament
is with the JCPAA.[34]
With regard to advising the Auditor‑General of the audit priorities of
the parliament, the JCPAA performs this function by writing to
all other parliamentary committees each year to ask for their advice on
programs or functions within their portfolio areas that they believe should be
audited. Following a basic screening process for appropriateness (for example,
to ensure that the ANAO is not asked to comment on the merits of government
policy), this advice, and any audits the JCPAA itself wishes to propose, are
then referred to the Auditor‑General for consideration.[35]
Following this process, in July each year the
Auditor-General publishes an annual Audit Work Program (AWP).[36]
Through the AWP, the Auditor-General informs the parliament, government
entities, and the public of the ANAO’s planned audit and assurance activities
over the financial year. In addition to planned audit and assurance activities,
the Auditor-General may also undertake audit work following requests from, for
example, ministers or other parliamentarians.[37]
Section 8 of the Public Accounts and
Audit Committee Act 1951 provides that the JCPAA has a duty to:
-
examine all reports of the Auditor‑General (including
reports of the results of performance audits) that are tabled in each house of
the Parliament and
-
report to both houses of the Parliament, with any comment it
thinks fit, on any items or matters in those accounts, statements and reports,
or any circumstances connected with them.[38]
As noted in the Auditor-General’s Annual report
2014‒15, the ANAO formally surveys parliamentary stakeholders once
every two financial years, most recently in March 2015.
... overall satisfaction with the ANAO was 84 per cent, which
is broadly consistent with the previous result of 86 per cent in 2011–12. The
ANAO attracted solid ratings across the survey results—particularly for the
responsiveness of our staff (91 per cent) and the integrity of the office (91
per cent)—which is a pleasing result.[39]
...
The report made three
recommendations for improvement, which are currently under consideration:
-
developing and disseminating to
parliamentarians (as well as to other stakeholders and the public) a short
publication which summarises how ANAO audits have improved public sector
administration over the past five to 10 years
-
providing more support to audit
teams so that audit reports communicate more effectively
- allocating more ANAO staff time to
engagement with parliamentarians through non‑JCPAA parliamentary
committee processes.[40]
The Auditor-General is appointed by the Governor-General on
the recommendation of the responsible minister (the Prime Minister). However,
Schedule 1 of the Auditor-General
Act 1997 provides that the Minister must not make a recommendation to
the Governor‑General unless the Minister has referred the proposed
recommendation to the JCPAA, and that the JCPAA has approved. Further
reinforcing the Auditor-General’s independence from the Executive is a
statutory ten-year term of appointment. The practical effect of a ten-year term
is that an Auditor-General is likely to be in office longer than most prime
ministers, ministers, or political parties. An Auditor-General cannot be
reappointed to the position.[41]
The Executive cannot revoke the appointment of an Auditor-General.
Schedule 1 of the Auditor‑General Act 1997
provides that the Auditor‑General can be removed from office in the
following circumstances:
- ‘The Governor‑General may remove the Auditor‑General
from office if each house of the Parliament, in the same session of the
Parliament, presents an address to the Governor‑General praying for the
removal of the Auditor‑General on the ground of misbehaviour or physical
or mental incapacity’ and
- the Governor‑General must remove the Auditor‑General
from office if the Auditor‑General becomes bankrupt.[42]
In undertaking activities, the Auditor-General is supported
by the ANAO, the staff of which is employed under the Public Service Act
1999. In 2015‒16, the ANAO’s Average Staffing Level (ASL) is expected
to be 345.[43]
The ANAO’s ASL has been relatively stable since 2009‒10, as shown in the
following table.
Year
|
2009‒10
|
2010‒11
|
2011‒12
|
2012‒13
|
2013‒14
|
2014‒15
|
2015‒16
(anticipated)
|
ASL
|
346
|
340
|
339
|
340
|
349
|
336
|
345*
|
Sources: ANAO annual reports, and *Australian Government, Budget measures: budget paper no. 4: 2015–16, p. 138.
In addition to ANAO staff, contractors are engaged to
perform some audits, and to provide specialist advice.[44]
The main source of funding for the Auditor-General is an
appropriation in the Commonwealth Budget. The ANAO is currently subject to the
Efficiency Dividend at the same rates as other public service agencies; that
is, 2.5 per cent in 2015‒16 and 2016‒17, and one per cent after
2016‒17.[45]
For 2015–16 the ANAO’s total income is budgeted at
$76.2 million, down slightly from $76.9 million in 2014–15. Of the
$76.2 million, $72.7 million is appropriation funding, with a decrease from
$73.4 million in 2014–15 resulting, in the main, from the Efficiency Dividend
and other savings measures. ‘Other revenue’ of $3.5 million is expected to comprise
international project funding of $1.8 million to support audit authorities in
Indonesia and Papua New Guinea, and $1.7 million from building sublease income
and ‘audits by arrangement’ under section 20(2) of the Auditor-General Act
1997.[46]
In addition, income of $13 million is forecast for
conducting financial statement audits of a range of corporate Commonwealth
entities, companies and their subsidiaries. However, revenues from these audit
fees are paid into the Official Public Account and are not available to the
ANAO.[47]
In another example of the JCPAA’s role in safeguarding the
Auditor-General’s independence, section 8 of the Public Accounts and
Audit Committee Act 1951 provides that the JCPAA has a duty to:
-
consider draft estimates for the ANAO for a financial year before
the annual Commonwealth Budget for that financial year and
-
make recommendations on those draft estimates to both houses of
Parliament, and to the Minister who administers the Auditor‑General
Act 1997.[48]
By convention on Budget day the JCPAA issues a statement
about the proposed appropriation for the ANAO. In May 2014, the JCPAA
stated that it ‘remains strongly concerned about the level of funding
uncertainty [for the ANAO] for the forward years.’[49]
However, in May 2015, the JCPAA reported that the Prime Minister had
permitted the ANAO to retain funding of approximately $1.1 million that had
been allocated to audits of entities that are now scheduled for merger,
abolition or sale, such as Medibank Private.[50]
This retention of funds will have a tangible impact on the ANAO’s audit
program. In May 2014, it had been expected that the number of performance
audits would have to reduce from 49 to 48 in 2015‒16, and then down to 47
in 2016‒17 and subsequent years.[51]
However, in May 2015 the JCPAA Chair reported:
... [t]he Auditor-General has advised the Committee that [the
retention of the funds] will allow the ANAO to deliver one additional
performance audit report each of the Budget and forward years (48 to 49 in
2015‒16 and 47 to 48 in 2016‒17 and 2017‒18). The Committee ...
will continue to support the ANAO’s goal of restoring the performance audit
program to its benchmark of 50 reports over time.[52]
A recent paper commissioned by the Victorian
Auditor-General’s Office compared the independence of auditors‑general in
New Zealand and the nine Australian jurisdictions (the Commonwealth, six states
and two territories). Based on a survey of relevant legislation, the paper
compared the relative independence of the ten auditors-general and rated the
Commonwealth Auditor-General, overall, in the middle of the group.[53]
Of perhaps greater interest than these ratings is the
discussion of how the following factors shape the independence of
auditors-general: statutory framework; appointment and immunity; mandate and
discretion; access to information; reporting rights and obligations; content
timing and publication of reports; follow-up mechanisms; and managerial
autonomy and resourcing.[54]
In that context, the paper emphasises the importance of the relationship
between an auditor-general and the Parliament:
The relationship between the Auditor General and the
Parliament he or she supports is of considerable importance. A strong
relationship will permit the Auditor General to operate more effectively since
it is through the Parliament that the Executive is held to account.
Parliamentary Committees are also used to enhance the accountability of the
Auditor General himself/herself. Accountability is needed to ensure that an
Auditor General continues to operate as intended and makes effective and
efficient use of his or her resources.[55]
In the short and medium term, a number of issues are likely
to vie for the new Auditor-General’s attention.
The ANAO’s annual report for 2013‒14 had foreshadowed
that, in 2014‒15, the ANAO would ‘achieve more balance in the timing of
the delivery of our performance audit program.’[56]
Whereas the timing of financial statements audits is dictated by the cycle of
the financial year calendar, the timing of the more numerous performance audits
is not so constrained. In 2014‒15 about half of the ANAO’s performance
audit reports were published in the final quarter of the financial year—a
result similar to that achieved in 2013‒14.[57]
It would appear that the effort to rebalance the delivery of the performance
audit program will need to continue, if end of year congestion is to be
mitigated.
ANAO performance audits are typically around 120 pages or
longer, and may take nine or ten months to prepare. In contrast, performance
audits in overseas jurisdictions are typically much shorter.[58]
Although the circumstances in the jurisdictions differ, it may be timely for
the new Auditor-General to review the performance audit process and timeline.
The ANAO’s website is a useful source of information about
published audit reports and audits in progress. The ANAO also sends out updates
by email and social media.[59]
In 2011 the then Auditor-General, Ian McPhee, observed:
During my time as Auditor-General, we have
managed to maintain effective working relationships with key stakeholder
groups. We are fortunate to meet many members of Parliament as they become
involved in parliamentary committee work early in their careers in Parliament. This
assists greatly at a later time when they become ministers and audit issues
arise in their portfolios.
It is important that I should also indicate
that no government minister or other member of Parliament has ever sought to
improperly influence my presentation of audit findings. As you would expect,
from time to time there have been fairly robust discussions where ministers and
CEOs have strongly presented their perspective, but properly done, this
generally adds to the understanding of the issues on both sides. Occasionally,
it also adds a bit of colour, but most importantly it reflects well on our
system of government here in Australia and the respect for our institutional
arrangements.[60]
In his Annual report 2014‒15, the new
Auditor-General endorsed Mr McPhee’s emphasis of the importance of sound and
strong relationships with auditees and the Parliament.[61]
The Government has
committed to producing, by the end of 2015, a White paper on the Reform of the Federation. The
White paper will present the Government’s position on a range of issues,
including accountability for performance in delivering outcomes and
performance reporting.[62]
The ANAO has experience in the conduct of performance audits
of Commonwealth partners and in pilot projects on the auditing of
Key Performance Indicators.[63]
Lessons learned through this experience could inform the White paper discussion
of accountability for performance in delivering outcomes, and performance
reporting, in the context of federal-state relations.
The
ANAO’s Annual Report 2013‒14 observed:
We will continue to work with the Department of Finance and
the JCPAA to progress changes intended to improve the public sector financial
management framework, including developments in relation to performance
information and reporting and the implementation of the Public Governance,
Performance and Accountability Act 2013.[64]
The Public
Governance, Performance and Accountability Act 2013 (the PGPA
Act) came into effect on 1 July 2014, and applies
to all Commonwealth entities and Commonwealth companies. The PGPA Act
establishes a system of governance and accountability for public resources,
with an emphasis on planning, performance and reporting. The PGPA Act
sets out main principles and requirements, and these are given effect by rules
and other legislative instruments issued from time to time.[65]
In a speech in August 2015, the Secretary of the Department
of Finance, Ms Jane Halton, discussed the PGPA Act in the context of a
broader agenda of public governance, performance and accountability reforms,
and related initiatives such as digital transformation in the public sector. Ms
Halton observed that five principles underpin the PGPA Act and the
reforms that accompany it:
-
government should operate as a coherent whole
-
a uniform set of duties should apply to all resources handled by
Commonwealth entities
-
the performance of the public sector is more than financial
-
engaging with risk is a necessary step in improving performance
and
-
that the financial framework should support the legitimate
requirements of the government and the parliament in discharging their
respective duties.[66]
This evolution of the Commonwealth’s governance, performance
and accountability frameworks presents a changing and challenging environment
for the Auditor-General, and the organisations audited by the ANAO.
Implementation of changes under the PGPA Act is a key
component of a broader, three-stage Public Management Reform Agenda (PMRA) being progressed by the Department of Finance. The three
stages of the PMRA are:
1.
from 1 July 2014—establishing a single resource management
framework under the PGPA Act
2.
in 2014‒15—focussing on improving the quality of planning,
performance monitoring and evaluation and the transparency and accountability
of the Australian public service and
3.
from 1 July 2015—focussing on improving how the Commonwealth
interacts with external parties from all sectors of the economy.[67]
The JCPAA has indicated that it will maintain an interest in
the PMRA. In March 2015, the JCPAA resolved to inquire into and report on the
development of the PGPA performance framework. The ANAO’s submission to the
inquiry noted ‘positive elements’ of the proposed framework, but also discussed
several areas of concern and proposed some ‘opportunities for enhancement.’ In
its conclusion, the ANAO’s submission observed:
[t]he proposed performance framework contains the right
building blocks but has a strong entity perspective without, in our view,
sufficient attention being given to the needs of the Parliament in formulating
key aspects of the framework. The absence of minimum requirements and
standards, coupled with the open-ended nature of the implementation approach,
including measures to bring home the responsibilities of accountable
authorities to lift the standard of performance reporting, means that the ANAO
has reservations whether the goal of having a performance regime that more
effectively measures the performance of Commonwealth programs and activities
will be achieved over the medium to longer term.[68]
In its 2014 report on rules development under the PGPA
Act, the JCPAA also flagged its intention to inquire into stage three of
the PMRA.[69]
In addition, sections 111 and 112 of the PGPA Act require the Finance
Minister, in consultation with the JCPAA, to conduct an independent review of
the operation of the PGPA Act and its rules after 1 July 2017.[70]
The Auditor-General could be expected to contribute to these review processes.
In the Commonwealth of Australia, the office of
Auditor-General was created in 1901 and has existed continuously since then. The
Auditor-General assists the Parliament by scrutinising and reporting on the
performance and actions of the Executive.
To perform the role effectively, an Auditor-General requires
independence from the Executive. The Auditor‑General
Act 1997 (Cth) sets out the main functions and powers of the
Auditor-General and, in combination with the Public Accounts and
Audit Committee Act 1951 (Cth), ensures that the Parliament has a role
in the Auditor-General’s appointment, funding and work program.
The Auditor-General’s role does not extend to
commenting on the merits of government policy, but mainly focuses on financial
statement audits, and performance audits that assess the extent
to which programs have been implemented efficiently and effectively, and in
accordance with legislation and government policy.
As an Officer of the Parliament, the Auditor-General’s
primary relationship with the Parliament is with the Joint Committee of Public
Accounts and Audit. The Committee has a statutory duty to examine all reports
of the Auditor‑General that are tabled in Parliament.
In the short and medium term, the evolution of governance,
performance and accountability frameworks under the Public Management Reform
Agenda, including those promulgated under the Public Governance,
Performance and Accountability Act 2013 (Cth), presents a changing and
challenging environment for the Auditor-General, and the organisations audited
by the ANAO.
[1]. Auditor‑General
Act 1997 (Cth).
[2]. Public Accounts and
Audit Committee Act 1951 (Cth).
[3]. Public Governance,
Performance and Accountability Act 2013 (Cth).
[4]. Audit Act 1901
(Cth).
[5]. J
Wanna, C Ryan and C Ng, From accounting to accountability: a centenary history
of the Australian National Audit Office, Allen & Unwin, Sydney, 2001, p. 6.
The much-amended Audit Act
1901 was eventually replaced by the Auditor-General Act 1997,
the Commonwealth Authorities and Companies Act 1997 (the CAC Act),
and the Financial Management and Accountability Act 1997 (the FMA Act).
In combination, these three Acts established the ‘CAC-FMA’ financial and
accountability framework for the Commonwealth. On 1 July 2014, the CAC
and FMA Acts were replaced by the Public Governance,
Performance and Accountability Act 2013 (the PGPA Act). The new
framework under the PGPA Act is being implemented over several years.
The Auditor-General’s involvement in this implementation process is discussed
in this Research paper.
[6]. Ibid., p.
16.
[7]. Mr
Hehir’s commencement was closely followed by the appointment of a new Deputy
Auditor-General, Ms Rona Mellor, on 6 July 2015. On 9 July 2015 The
Australian Financial Review reported that Ms Mellor’s predecessor in the
role of Deputy Auditor-General had been unwell for some months: V Burgess,
‘Deputies
enmeshed in musical chairs’, The Australian Financial Review, 9 July
2015, p. 20.
[8]. R
Stapenhurst and J Titsworth, ‘Features and
functions of supreme audit institutions’, PREMnotes, 59, October 2001,
pp. [1-2]. The World Bank has defined supreme audit institutions (SAIs) as
national agencies responsible for auditing government revenue and spending.
SAIs’ legal mandates and reporting relationships vary, but their primary
purpose is to oversee the management of public funds and the quality and
credibility of governments’ reported financial data. Nomenclature for SAIs
varies; typical designations include Comptroller General, Auditor General, or
Comptroller and Auditor General. Auditor-General is the term used in the
Australian Commonwealth, states and territories.
[9]. Auditor-General Act 1997.
[10]. Australian
National Audit Office, About the
Australian National Audit Office, [Canberra], 2013, accessed 29
October 2015.
[11]. Australian National Audit
Office Auditing Standards, Commonwealth of Australia Gazette,
Government Notices, 17 July 2015, accessed 29 October 2015.
[12]. Australian
government entities, companies and subsidiaries are those organisations subject
to the governance, performance and accountability framework established by the Public Governance,
Performance and Accountability Act 2013 (PGPA Act).
[13]. Examples
include: ANAO, Audits
of the financial statements of Australian Government entities for the period
ended 30 June 2014, Audit report, 16, 2014–15, ANAO, Barton, ACT, 2014
and ANAO, Interim
phase of the audits of the financial statements of major general government
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2014–15, ANAO, Barton, ACT, 2015, accessed 29 October 2015.
[14]. As a guide,
three characteristics are considered essential in classifying an
organisation as a Government Business Enterprise (GBE): the GBE has a legal existence independent from
government and the executive; it is controlled by government; and its principal function is to engage in commercial
activities in the private sector. The
Government's relationship to its GBEs is therefore similar to the
relationship between a holding company and its subsidiaries. Under the PGPA
regime, the following organisations are GBEs: Australian
Postal Corporation; Defence Housing Australia; ASC Pty Ltd; Australian Rail
Track Corporation Ltd; Moorebank Intermodal Company Ltd; and NBN Co Ltd. The argument against a general discretion to undertake performance
audits of GBEs is that the pressures of competition and the enforcement of
performance targets are an effective substitute for scrutiny by the
Auditor-General.
[15]. The
administration of one program by a number of entities was examined in ANAO, Screening
of international mail: Department of Agriculture, Australian Customs and Border
Protection Service, Audit report, 42, 2013–14, ANAO, Barton, ACT, 2014.
The administration of the same activity in a number of entities was examined in
ANAO, Fraud
control arrangements: across entities, Audit report, 3, 2014–15, ANAO,
Barton, ACT, 2014, accessed 29 October 2015.
[16]. For
example, ANAO, Representations
to the Department of the Treasury in relation to motor dealer financing
assistance: Department of the Treasury, Department of the Prime Minister and
Cabinet, Audit report, 1, 2009–10, ANAO, Barton, ACT, 2009, accessed 29
October 2015, which was requested by the then Prime Minister (p. 11).
[17]. Auditor-General,
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29 October 2015.
[18]. Auditor-General Act 1997.
[19]. I McPhee, Audits of
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October 2015.
[20]. ANAO, Administration
of the agreements for the management, operation and funding of the Mersey
Community Hospital: Department of Health and Ageing, Department of Health and
Human Services, Tasmania, Tasmanian Health Organisation - North West, Audit
report, 2, 2013–14, ANAO, Barton, ACT, 2013, accessed 29 October 2015.
[21]. ANAO, ‘Better
practice guides’, ANAO website, accessed 29 October 2015.
[22]. ANAO, Implementing
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2013, p. i, accessed 29 October 2015.
[23]. ANAO, ‘Assurance
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[24]. ANAO, 2013‒14
major projects report: Defence Materiel Organisation, ANAO, Audit
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[25]. Australian Government, ‘Part 2: expense measures’, Budget measures: budget paper no. 2: 2015–16,
p. 74.
[26]. ANAO, ‘Assurance
activities’, ANAO website, accessed 29 October 2015.
[27]. ANAO, The Australian Government performance measurement and reporting
framework: pilot project to audit key performance indicators,
Audit report, 28, 2012–13, ANAO, Barton, ACT, 2013; and ANAO, Pilot project to audit key performance indicators, Audit
report, 21, 2013–14, ANAO, Barton, ACT, 2014, accessed 29 October 2015.
[28]. A list of
reports to June 2013 is available in ANAO, Administration of government advertising arrangements: August 2011 to
March 2013, Audit report, 54, 2012–13, ANAO, Barton, ACT, 2013,
p. 15.
[29]. ANAO, ‘Assurance
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[30]. I McPhee, ‘The
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Federation’, Senate occasional lecture,
Papers on Parliament, 57, February 2012, accessed 29 October 2015.
[31]. A Cullen, Independent
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sources that discuss the characteristics of Officers of Parliament, particularly
their focus on independent review or scrutiny on behalf of parliament of the
implementation of executive government policy.
[32]. Ibid.,
p. 3.
[33]. Auditor‑General
Act 1997.
[34]. Wanna, op.
cit., p. 244.
[35]. JCPAA,
Annual
report 2009‒10, Report, 420, The Committee, Canberra, February
2011, p. 3, accessed 29 October 2015.
[36]. ANAO, Audit
work program, ANAO, Barton, ACT, July 2015, accessed 29 October 2015.
[37]. For
example, ANAO, Representations
to the Department of the Treasury in relation to motor dealer financing
assistance: Department of the Treasury, Department of the Prime Minister and
Cabinet, Audit report, 1, 2009–10, ANAO, Barton, ACT, 2009, accessed 29
October 2015, which was requested by the then Prime Minister (p. 11).
[38]. Public Accounts and Audit
Committee Act 1951, accessed 29 October 2015.
[39]. Auditor-General/Australian
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[40]. Ibid., p.
30.
[41]. Auditor-General Act 1997,
accessed 29 October 2015.
[42]. Ibid.,
section 6.
[43]. Australian
Government, Budget
measures: budget paper no. 4: 2015–16, p. 138, accessed 29 October
2015. Budget papers report staffing numbers in terms of Average
Staffing Level (ASL), a method of counting that adjusts for casual and
part-time staff in order to show the average number of full-time equivalent
employees. ASL is almost always a lower figure than a headcount of actual
employees.
[44]. Auditor-General/Australian
National Audit Office, Annual
report 2013‒14, ANAO, Barton, ACT, 2014, pp. 62,
85, and Senate Finance and Public Administration Legislation Committee, Official
committee Hansard, [estimates], 19 October 2015, p. 117, accessed 29
October 2015.
[45]. Senate
Education, Finance and Public Administration Legislation Committee, Official
committee Hansard, [estimates], 25 May 2015, p. 171, accessed 29 October 2015. In place for over
25 years, the Efficiency Dividend (ED) is an annual funding reduction for
Australian Government agencies, in general applied only to ‘departmental’
expenses. The ED has usually been applied at a rate of either 1.00 or 1.25 per
cent; in some years governments have increased the rate, with the highest ED
rate being four per cent.
[46]. Australian
Government, Portfolio
budget statements 2015–16: budget related paper no. 1.14: Prime Minister and
Cabinet Portfolio, 2015, p. 98.
[47]. Ibid., pp. 88
and 106.
[48]. Public Accounts and Audit
Committee Act 1951, accessed 29 October 2015.
[49]. JCPAA, Statement
by the Joint Committee of Public Accounts and Audit on the 2014‒15 draft
Estimates for the Australian National Audit Office and the Parliamentary Budget
Office, The Committee, Canberra, 13 May 2014, p. [2], accessed 29
October 2015.
[50]. JCPAA, Statement
by the Joint Committee of Public Accounts and Audit on the 2015‒16 draft
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[51]. JCPAA, Statement
on the 2014‒15 draft Estimates, May 2014, op. cit., p. [2],
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[52]. JCPAA, Statement
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[53]. G
Robertson, Independence
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[54]. Ibid., pp.
3–4, accessed 29 October 2015.
[55]. Ibid., p.
14, accessed 29 October 2015.
[56]. Auditor-General/Australian
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accessed 29 October 2015.
[57]. Parliamentary
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[58]. Examples
from Canada, the UK and the USA illustrate different approaches to performance
audits. Office of the Auditor General of Canada, Fall
2014 Report of the Auditor General of Canada: Chapter 7 Documentary Heritage of
the Government of Canada—Library and Archives Canada, FA1-2014/2-7E-PDF,
The Office, 2014. National Audit Office, Reducing
costs through ‘Delivering Quality First’, 10596 03/15, NAO,
London, 2015. Government Accountability Office, Government Publishing Office:
Production of Secure Credentials for the Department of State and U.S. Customs
and Border Protection, GAO-15-326R, GAO, Washington, DC, 2015.
[59]. ANAO, ‘Publications’, ANAO website,
accessed 29 October 2015.
[60]. McPhee, op.
cit., p. 20.
[61]. Auditor-General/Australian
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accessed 29 October 2015.
[62]. Department
of the Prime Minister and Cabinet (PM&C), Reform
of the federation white paper: a federation for our future, Issues
paper, 1, PM&C, Canberra, September 2014, pp. 18–20 and 39–40, accessed 29
October 2015.
[63]. For
example: ANAO, Administration
of the agreements for the management, operation and funding of the Mersey
Community Hospital: Department of Health and Ageing, Department of Health and
Human Services, Tasmania, Tasmanian Health Organisation - North West, Audit
report, 2, 2013–14, ANAO, Barton, ACT, 2013; ANAO, The Australian Government performance measurement and reporting
framework: pilot project to audit key performance indicators,
Audit report, 28, 2012–13, ANAO, Barton, ACT, 2013; and ANAO, Pilot project to audit key performance indicators, Audit
report, 21, 2013–14, ANAO, Barton, ACT, 2014, accessed 29 October 2015.
[64]. Auditor-General/Australian
National Audit Office, Annual
report 2013‒14, ANAO, Barton, ACT, 2014, p. 5,
accessed 29 October 2015.
[65]. Department
of Finance, ‘PGPA legislation and associated instruments’,
Department website, last updated 20 August 2015, accessed 29 October 2015.
[66]. J Halton, ‘Reforming
the Public Sector’, Australian Senate Occasional Lecture Series, Australian
Parliament House, Canberra, 14 August 2015, accessed 29 October 2015.
[67]. Department
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Agenda,’ Department website, accessed 29 October 2015.
[68]. Australian
National Audit Office, Submission
to Joint Committee of Public Accounts and Audit, [submission 7], Inquiry
into development of the Commonwealth Performance Framework, 19 March 2015, pp.
2–4, accessed 29 October 2015.
[69]. Joint
Committee of Public Accounts and Audit, Inquiry
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[70]. Public Governance,
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