Chapter overview
4.1
Section 8 of the Public Accounts and Audit Committee Act 1951 (PAAC Act) specifies the duties of the Committee, including in relation to the work of the Auditor-General and the Australian National Audit Office (ANAO). This chapter considers the relationship between the JCPAA and the ANAO, and outlines some areas for improvement.
4.2
The Committee believes that the work of both the ANAO and the JCPAA would be enhanced by clarifying some ambiguities in the two Acts, including by:
Better defining the role of the JCPAA in considering the work of the ANAO;
Ensuring that the Audit Priorities of the Parliament, as determined by the JCPAA, are appropriately reflective of the Parliament’s interest in the ANAO’s work;
Formalising the role of the Independent Auditor of the ANAO’s obligations to the JCPAA; and
Clarifying the JCPAA’s role in the ANAO’s budget process.
Considering the operations of the ANAO
4.3
Section 8(g) of the PAAC Act requires the JCPAA to ‘consider the operations of the Audit Office’ and the ‘resources of the Audit Office, including funding, staff and information technology’, as well as the reports of the Independent Auditor.
4.4
The Auditor-General provided an outline of the relationship between the JCPAA and the ANAO:
I think the committee has a statutory role with respect to looking at our reports, providing the priorities of the parliament, informing us of the priorities of the parliament and examining the reports of our work by the independent auditor. I haven't got the legislation in front of me, but I think it also has a role in reporting more broadly on its perception of the performance of the ANAO to the parliament. Maybe one of my colleagues can check that. I think that's the broad perspective of oversight.
4.5
The Department of Prime Minister & Cabinet (PM&C), in explaining the relationship between that department and the ANAO, highlighted that the JCPAA has a much more important role:
Our view would be that the relationship between the ANAO and this committee is a much stronger relationship, and a more important relationship, than the role that the department plays in simply facilitating the administrative placement of that function.
4.6
The Auditor-General described this relationship as:
It's the role of the committee to keep the parliament informed about their view on our operations. So that's oversight. […] I hesitate a little bit because we're using the term 'oversight' without a definition in front of us. If you define 'oversight' as considering things and giving a report to parliament then that's what it is. It's certainly not a facilitation; it's forming a view and telling parliament of a view.
Audit Priorities of the Parliament
4.7
The PAAC Act requires the JCPAA to ‘determine the audit priorities of the Parliament and to advise the Auditor-General of these priorities’. This process occurs on an annual basis; the Auditor-General provides the JCPAA with a Draft Annual Audit Work Program and the JCPAA coordinates the responses from all parliamentary committees, along with the views of the JCPAA itself, to provide a single consolidated list of the Audit Priorities of the Parliament. Audit reports, when tabled in the Parliament, will note in the ‘Rationale for undertaking this audit’ section, in the report’s introduction, if the audit area had been identified as a priority area by the Parliament.
4.8
The ANAO argued that the current provisions in the PAAC Act and the Auditor-General Act 1997 (AG Act) ‘provide an appropriate mechanism, which allows the Parliament to determine its audit priorities whilst retaining the independence of the Auditor-General.’
4.9
The ANAO develops its annual work program based on:
It's predominantly driven by an internal process, where we look at risks, and then a consultation process, where we send a draft of the program out to every entity that's involved in it. We put it on our website and invite anyone to give us a view on it, and we do the consultation with the parliament through the JCPAA. As to the other contributions to it, when we're establishing what that program looks like, to go out and consult with people, part of the environmental scan that the teams do for their topic area will be: What has parliament been talking about over the last 12 months? What has been of interest to the parliamentary committee?
4.10
Formal input to the ANAO’s work program is through the Audit Priorities of the Parliament, as identified by the JCPAA. The ANAO also considers other signs of parliamentary interest including recommendations made by parliamentary committees in their reports, referrals from parliamentary committees, requests by individual members or senators and resolutions of the Senate.
4.11
The ANAO noted that the ANAO’s work program reflects the Audit Priorities of the Parliament as identified by the JCPAA:
The ANAO notes that of the 39 audit requests from the JCPAA for the 2017-18 annual audit work program, the ANAO put 30 of these (76.9%) into the 2017-18 annual audit work program and commenced 15 (50%) of these by the end of 2017-18. For the 2018-19 annual audit work program, the JCPAA requested 40 audits, 32 (80%) of which the ANAO had either already commenced, or included in the 2018-19 annual audit work program and 19 of these (59.4%) resulted in audits commencing by the end of 2018-19. For the 2010-20 annual audit work program, the JCPAA requested 43 audits, 40 (93%) of which the ANAO had either already commenced, were covered by the scope of existing underway audits or were included in the 2019-20 annual audit work program and 18 of these (45%) resulted in audits commencing by the end of 2019-20.
4.12
Ms Caroline Spencer, the Auditor-General for Western Australia and member of the Australasian Council of Auditors-General, addressed how parliaments in other jurisdictions have input into an auditor-general’s work program.
I have a sense that there’s very similar high regard for matters that are referred either directly from oversight committees or other committees of parliament, or from individual members, and certainly they are taken into account very seriously. And there’s a level of accountability with those regular hearings between the auditor-general and his or her oversight committees in particular. There’s a level of accountability in terms of reporting back why we did or did not proceed with a particular audit, and that’s a really important mechanism to make sure those audit priorities are given due regard.
4.13
The ANAO also receives requests for audits from individual members of parliament. Some members of the JCPAA queried if any request from any member of the Parliament may count as an audit priority and, given the resource impact each audit has, questioned if this was appropriate. Further, individual members of the Parliament did not necessarily know about or agree with the audit priorities of the Parliament, nor consult with the JCPAA prior to making such requests, which could potentially impact on the Committee’s legislative role in determining the ANAO’s audit priorities.
4.14
The Auditor-General explained that the number of audit requests from the general public outstripped the number of requests from Members and Senators. Mr Hehir told the Committee that he was ‘not aware of a fundamental problem at the moment with how things occur’.
4.15
Requests are typically responded to within a month. The Auditor-General described the approach taken by the ANAO of first looking into the issue with the audited entity, and then providing some information to the parliamentarian who put in the request:
When we get requests from parliamentarians, the first thing we do, in most cases, is talk to the entity involved and see (1) whether there's an audit in it, and (2) whether we can just give them some information and the issue goes away, and we do that quite regularly. We get some information from the entity, and give ourselves a little bit of assurance that it's okay, and write back and say, 'This might help you resolve your question.'
4.16
The Auditor-General agreed that an approach whereby the ANAO sought the JCPAA’s input regarding audit requests received from individual members of parliament could be useful. In doing so, however, the Auditor-General cautioned that any changes should not impede ANAO independence:
I don't have any particular concern with us, when we get requests, informing the committee that we've had it and to seek its view. My concerns would go to situations where there became an expectation that we wouldn't act to commence an audit until we received the committee's view, because that starts to impinge upon independence. Our standard operating procedure, our internal indicator is that we try to respond to any request within a month usually, but if we can do it quicker then we will.
As I said, I don't have a particular concern about, when we get a request, putting it on our website, sending a message to the committee and saying, 'Do you have a view about this?' I'd be a bit more concerned if we were talking (1) about a legislative framework to require that to happen and (2) some concept of 'batching up' and an expectation that we didn't do anything until we received a view. That starts to get to constraints upon the Auditor-General's ability to make a decision to do something in these areas.
Committee comment
4.17
‘Parliamentary interest’, as a rationale for undertaking an audit, can be confused with the audit priorities of the parliament. For greater transparency, the Committee considers that the ANAO should clearly differentiate between individual requests for audits, recommendations from or referrals by parliamentary committees for audits and the audit priorities as determined by the JCPAA in line with the PAAC Act.
4.18
The Committee recognises the measures already taken by the ANAO in considering the audit priorities of the parliament. However, the Committee believes that the primacy of the JCPAA’s role in determining the audit priorities of the parliament and advising the ANAO could be clarified, while not constraining the ability of other committees, Ministers, individual Members or Senators to raise issues with the Auditor-General.
4.19
The Committee is supportive of the suggestion of a line of communication being developed where the ANAO informs the JCPAA of audit requests received outside the formal Audit Priorities of the Parliament process.
4.20
The Committee also notes that while the PAAC Act outlines the duties of the JCPAA, including the ‘consideration of the operations’ of the ANAO, it is not clear what this consideration includes. The JCPAA has roles in advising the ANAO of the Audit Priorities of the Parliament, of considering the ANAO’s resourcing through the annual statement to the Parliament regarding the ANAO’s budget estimates and in considering the reports of the Independent Auditor of the Auditor-General.
4.21
The Committee believes that further clarity around the JCPAA’s duty to ‘consider the operations’ of the ANAO would benefit both the Committee itself and the ANAO. It could at least include a formal responsibility to periodically consider the ANAO’s Corporate Plan and Annual Report.
4.22
The Committee recommends that the Australian National Audit Office notify the Joint Committee of Public Accounts and Audit when audit requests are received from Members and Senators. The Australian National Audit Office need not wait for feedback from the Joint Committee of Public Accounts and Audit before forming its own view on requests or actioning any audit.
4.23
The Committee recommends that the Australian National Audit Office clearly distinguish between audits undertaken because they have been identified by the Joint Committee of Public Accounts and Audit as an Audit Priority of the Parliament and those undertaken in response to other approaches, including parliamentary committees, resolutions of the House of Representatives or the Senate, or following a request from an individual member or senator.
4.24
The Committee recommends that the Australian Government consider amending the Public Accounts and Audit Committee Act 1951 to clarify the Joint Committee of Public Accounts and Audit’s duty to ‘consider the operations’ of the Australian National Audit Office (ANAO), including reference to:
Its role in reviewing annual planning, performance and expenditure; and
Advising the ANAO of the Audit Priorities of the Parliament and considering the Annual Audit Work Program.
The role of the Independent Auditor
4.25
Like many SAIs, the ANAO is subject to audit by an independent auditor, whose role and appointment process are outlined in the Act. The Independent Auditor is responsible for auditing the financial statements of the Auditor-General, as well as conducting performance audits of the ANAO.
4.26
As the ANAO explained:
Functionally, the Independent Auditor performs a similar role for the ANAO as the Auditor-General performs for the executive government. That is the Independent Auditor conducts financial statement and performance audits of the ANAO.
4.27
Under section 43 of the AG Act, the Independent Auditor must have regard to the parliament’s prioritises for audits of the ANAO when conducting audits of the ANAO. However, the AG Act establishes no reporting requirements for the Independent Auditor in relation to the JCPAA.
4.28
Current Independent Auditor, Ms Eileen Hoggett, explained that most processes related to the role appeared to be working well. Nonetheless, she highlighted that there was a short time frame from her appointment to reporting and that there was scope to improve timing:
My appointment became effective in March 2019 to conduct an audit for 30 June 2019. That is very close to the reporting time frame and is not optimal in terms of the interactions with the previous Independent Auditor and also for the planning of the audit. So I think there is an opportunity in terms of the timing of the appointment of the Independent Auditor. The appointment of the Independent Auditor is, as I said, for a very defined time period. For me, it is an appointment of five years. So there is quite well-advanced notice of when I will finish my term. So I think there is the opportunity to bring forward the appointment process of the new incoming auditor, such that the transition can occur towards the end of my term. That's what we would see in normal processes for appointments for auditors in the corporate world, for instance. So I do think there is an opportunity to bring the timing forward for that.
4.29
Former Independent Auditor Ms Kristin Stubbs made a similar point, highlighting the transition process and how it could be improved:
Schedule 2 of the Act includes a detailed description of the Appointment, conditions of appointment etc. for the Independent Auditor for the ANAO. We believe there is sufficient coverage within this section of the Act around the appointment, remuneration and resignation (or removal) of the Independent Auditor, but we think there is room to improve the process around the transition between the existing and incoming Independent Auditor. Best practice in all sectors requires that there be an orderly transition between auditors to ensure an effective transfer of knowledge and documentation. Our recommendation is that there be a new protocol established to ensure that the incoming Independent Auditor’s appointment is confirmed at least six months ahead of the completion of any existing appointment and that a formal transition plan be implemented where practical.
4.30
The ANAO declined to comment on the independent auditor process.
Committee comment
4.31
The Committee considers that the reporting relationship between the Independent Auditor and the JCPAA warrants greater clarity and can be improved.
4.32
Whilst the Independent Auditor meets with members of the JCPAA from time-to-time, this is not specified in the AG Act. Proposed Independent Auditor reports are seen by the Auditor-General prior to completion. However, the JCPAA does not see completed Independent Auditor reports until they are tabled.
4.33
The Committee considers it may be appropriate to formalise communications between the Independent Auditor and the JCPAA. This could include an annual report and/or regular briefings to the JCPAA.
4.34
The Committee agrees that the transition between independent auditors can be improved by encouraging better communication between incoming and outgoing appointments. The Department of Prime Minister and Cabinet should consider adjusting the timing for the transition between independent auditors.
4.35
The Committee recommends that the Auditor-General Act 1997 be amended to clarify the role of the Independent Auditor, including formalising the Independent Auditor’s reporting requirements to the JCPAA.
4.36
The Committee recommends that the Department of Prime Minister and Cabinet develop new standards for the transition between independent auditors to ensure better communication between in going and outgoing roles and to ensure the incoming auditor has enough time to meet reporting deadlines.
Resourcing the ANAO
4.37
A key theme of this review was the need to clarify the process around resourcing of the ANAO. While specifics of ANAO resourcing are a non-legislated matter, decided annually as part of the Federal Budget, process questions could be usefully clarified in the Auditor-General Act.
4.38
This section considers a range of related matters, including:
The importance of secure and adequate funding for the independence of oversight and integrity bodies;
How the request for funds from the Auditor-General is evaluated and acted on when the executive sets budgets;
The role of the JCPAA in the funding process;
Resourcing and recruitment including:
The work demands of the ANAO in a changing auditing environment; and
The challenge of recruiting and retaining suitably qualified auditors;
Managing costs with increasing workloads including:
An increase in overall government spending;
The pressure of delivering mandated financial audits at the expense of performance audits; and
The potential to introduce annual performance statement audits in line with previous recommendations from the JCPAA;
Outcomes and outputs including:
Key Performance Indicators of the ANAO; and
Measuring outputs and impacts of the ANAO.
The ANAO’s Budget process
4.39
The ANAO’s budget process is specified across the AG Act and the PAAC Act. The AG Act states that:
The Joint Committee of Public Accounts and Audit may request the Auditor‑General to submit to the Committee draft estimates for the Audit Office for a financial year before the annual Commonwealth budget for that financial year.
The Auditor‑General must comply with the request in time to allow the Committee to consider the draft estimates and make recommendations on them before the budget.
4.40
The PAAC Act requires the JCPAA to:
to consider draft estimates for the Audit Office submitted under section 53 of the Auditor‑General Act 1997; and
[…] to make recommendations to both Houses of Parliament, and to the Minister who administers the Auditor‑General Act 1997, on draft estimates referred to in paragraph (j)
4.41
This process typically takes the form of the JCPAA considering the draft estimates document submitted by the Auditor-General, outlining its views to the responsible Minister (the Prime Minister) and making a statement to each House prior to the Federal Budget being delivered each year. That statement is subsequently published on the JCPAA’s website.
4.42
In the last two parliamentary terms, the JCPAA has passed standing resolutions requiring the Auditor-General to advise the Committee of any changes to any information supplied as soon as practicable after becoming aware of those changes, so that the Committee may provide accurate reports to the Parliament; and to advise the Committee at any time throughout the year if changes to the ANAO budget are proposed, sought, or required, including, but not limited to, the budget process and MYEFO.
4.43
Funding for the ANAO has declined in recent years, which has impacted the ability of the Auditor-General to deliver performance audits. The ANAO forecasted a reduction in performance audits from ’40 in 2021-22, falling to 36 by 2024-25’. Over the past two decades, the ANAO has worked to a Key Performance Indicator of an average of 48 performance audits per annum. However during the inquiry the 2020-21 Federal Budget allocated sufficient funds to address this issue following JCPAA feedback to the Government regarding the ANAO’s funding request.
4.44
The ANAO explained the target of an average of 48 performance audits per annum was to ensure most Commonwealth entities would be audited at least once per decade:
Often it is the prospect of an audit which is a driving factor in performance improvement. We see during performance audits the improvements occurring in process, controls and governance from the point in time when an audit is listed in our annual audit work program. With a reducing number of performance audits, many smaller agencies may not be audited for extended periods of time, potentially over 20 years. This reduces the pressure to maintain performance and compliance.
Committee comment
4.45
While the number of performance audits per annum is a critical method of assessing the ANAO’s effectiveness, the Committee considers that other methods of assessing the Office’s impact should be incorporated more broadly into its performance assessment scheme.
4.46
Other potential forms of performance assessment could include an assessment of the financial impact of the ANAO’s work, including savings resulting from changes to entity practices after audit recommendations are implemented; or other forms of qualitative measures.
4.47
The Committee also strongly urges the implementation of a range of Key Performance Indicators to be established, and the results of these to be published, to assess effectiveness and promote transparency.
4.48
The Committee also reiterates, to avoid confusion in the future, that the Auditor-General must update the Committee as soon as possible of any updates or information they become aware of relating to the ANAO’s budget situation. This includes changes to the ANAO’s budget estimates or other information that would impact the Committee’s role in advising Parliament about, and advocating to the responsible Minister regarding, the ANAO’s budget.
4.49
The Committee recommends that the Auditor-General Act 1997 be amended to include a clarification that the Auditor-General is required to provide to the JCPAA any relevant information or updates about the ANAO’s budget as soon as practical.
Financial autonomy
4.50
The eighth principle of the Mexico Declaration is the ‘financial and managerial/administrative autonomy and the availability of appropriate human, material, and monetary resources’.
4.51
Chartered Accountants Australia and New Zealand highlighted the risk of the funding decisions for the ANAO being made by the executive, whose work the ANAO may review in their audit investigations, stating:
An important element of the Auditor-General’s work is to present audit findings and provide recommendations which may be viewed as criticism of the Commonwealth and senior public servants. Transparent reporting of the findings and recommendations from previous or planned work of the Auditor-General could influence the decisions made by Government about the Auditor-General and ANAO’s budget and the Auditor-General’s remuneration. This risk is heightened where the Auditor-General decides to follow-up on previously made findings and recommendations to ascertain whether the identified matters have been appropriately resolved.
It is important that the Auditor-General and ANAO can perform their duties without fear of reprisals and remain safeguarded from any possible external influence. Through this review, JCPAA should consider whether the current process for setting up the Auditor-General and ANAO’s funding and budget is appropriate to mitigate possible threats to independence.
4.53
The Australasian Council of Auditors-General also commented on the risk of funding decisions being made by the executive, stating:
[…] the current approach to determining annual funding for the ANAO does not appear to sufficiently recognise that the roles and functions of the ANAO are different to other departments and agencies that form part of Executive Government.
This is because the current approach does not provide additional protection against the risk that funding decisions could be influenced by previous of planned investigations by the ANAO. This risk has the potential to limit the ability of the ANAO to fulfil its legislative mandate. A mechanism that addresses potential threats to independence whilst also ensuring accountability is recommended.
Committee comment
4.54
It is in the interest of government and the wider public service to have a well-resourced audit office. A strong and focused review process encourages more government departments and agencies to ensure their programs and processes are efficient and effective. The expectation that an audit can happen at any time, and the ability to learn from audits of other organisations can help foster a motivation for departments and agencies to continually improve.
4.55
The Committee recognises that budget restraints can impact the ANAO’s capacity to deliver audit outcomes. The Committee is satisfied that the goal of an average of 48 performance audits per annum is appropriate, in addition to mandatory financial statements audits and the ANAO’s staged implementation of performance statement auditing. This means most departments and agencies can expect to be audited at least once a decade. The ANAO should be funded to be able to deliver the outcome of 48 performance audits per annum.
4.56
The Committee recommends the Australian Government ensure that funding for the Australian National Audit Office is adequate to ensure the delivery of an average output of 48 performance audits per annum.
Resourcing and recruitment
4.57
Recruitment and retention of skilled people has remained a challenge for the ANAO. The Auditor-General noted that the ANAO has relatively high attrition rates, highlighting that: ‘We’re in the challenging situation where all of our staff sit in the entities who are most likely to want to attract them and work with them all of the time’.
4.58
Staff attrition rates are particularly of concern for the ANAO given the specialised nature of their work, compared to private sector auditing:
The standards we use are different, and the methodology is different. What we find is that it takes a year or so for us to get someone, even with that type of background, to be effective in their role. It’s not something you can just drag someone in and they can do it.
4.59
Data from the 2019-20 ACAG Macro Benchmarking Survey and the ANAO revealed the ANAO has higher than average staff attrition compared to all Australian jurisdictions (except the Northern Territory).
Table 4.1: Comparison of average staff attrition rate
|
|
|
|
|
|
|
All Australian jurisdictions (except NT)
|
19%
|
17%
|
17%
|
14%
|
|
ANAO
|
25.4%
|
23.3%
|
19.4%
|
22.8%
|
4.60
The ANAO further noted that the attrition rate for the year ended 30 June 2020 was 9.3% for the whole Australian Public Service, and 16% for technical agencies for the same period.
4.61
ACAG noted ‘audit offices compete with the rest of the public sector as well as well-paying private sector firms for highly qualified auditors’.
4.62
International consulting firm PriceWaterhouseCoopers explained the shortage of auditors was an industry wide problem:
Our experience in Australia, along with many other firms within our global network, is that there are challenges in the recruitment and retention of auditors. The Australian Auditing and Assurance Standards Board (AUASB) noted in its submission to the Parliamentary Joint Committee on Corporations and Financial Services inquiry into the regulation of Auditing in Australia that it was ‘aware of concerns that the attractiveness of the audit profession is declining, resulting in difficulties recruiting and retaining talented staff. The decline in the number of Registered Company Auditors and the potential reduction in the number of auditors being attracted to the profession has serious implications for the industry’. These types of recruitment and retention issues are likely to be similar in audit practices like the ANAO and as such, we believe any proposed revisions to the Act should be oriented to enabling the ANAO’s efforts to attract and retain audit talent.
4.63
The ANAO noted that the decline in funding in recent years resulted in a reduction of approximately twenty staff employed in the performance auditing section of the office.
4.64
Reflecting on resourcing and retaining qualified staff, Chartered Accountants Australia and New Zealand noted:
Public resources are more important than even in the current economic climate, and the conditions arising from the pandemic and other economic challenges exacerbate fraud risk and the risk of public funds being misused. Ensuring the Auditor-General’s office is appropriately funded to future proof their workforce by recruiting, training and retaining appropriate levels of staff with necessary experience and skills is critical at this time. Resourcing pressures could compromise the number of performance and other audits the Auditor-General could conduct especially considering ongoing complexity in the public sector.
4.65
The ANAO has taken pro-active measures to improve staff retention, including:
Attracting and employing the best suited people for roles;
Supporting their development through structured learning and development programs;
Secondment opportunities;
Recognising success through awards and a performance management scheme including bonuses; and
Creating a Development and High Performance strategy, a second year graduate development program.
Committee comment
4.66
The Committee recognises that there are increasing complexities with auditing. Recruiting and retaining appropriately trained staff, working with big data and an increase in the number of publicly funded entities impacts the ANAO work program. The Committee notes the ANAO has a target of reducing the staff attrition rate to 15 per cent, and encourages the ANAO to meet this target in the next 12 months.
4.67
The Committee recommends that the Australian National Audit Office set a target to reduce its staff attrition rate to 15 per cent and report back to the Committee within twelve (12) months on progress to achieving this target.
Outcomes versus outputs
4.68
The work of the ANAO can be measured in different ways. Of particular importance is the distinction between the outputs of the ANAO (the number of audits delivered) and outcomes (or impacts) of a particular audit, and the ANAO’s audit work overall. While funding is allocated in terms of outputs, as a qualitative measure of the ANAO’s work, the broader outcomes may more accurately reflect the ANAO’s value.
4.69
The Auditor-General told the Committee:
Outcomes are more important at the end of the day. We make those decisions regularly. When we're planning, we look at the resources that we have and work out how many audits we think we can fund. Then we do topic selection within that. In looking at topic selection, it became clear that we were better off delivering 41 audits rather than 42 because this particular group of audits is more important for impact than another selection.
4.70
The ANAO measures the impact of its work in a number of ways:
In addition to measuring effectiveness (number of audits completed), efficiency (cost and timeliness of the audits) and quality, the ANAO measures the impact of its work through the:
• percentage of JCPAA members surveyed who were satisfied that the ANAO improved public sector performance and supported accountability and transparency;
• percentage of recommendations (moderate and significant findings for financial audit) agreed by audited entities; and
• percentage of recommendations implemented by entities (percentage of moderate and significant findings addressed within one year for financial audit and the percentage of recommendations implemented within 24 months for performance audit).
In reporting against the latter two measures, for performance audits, the ANAO includes only recommendations ‘agreed’. Recommendations that are agreed in part, agreed in principle or noted are not included, as this indicates a lesser commitment by accountable authorities to make improvements to address the issues identified in the audit.
4.71
The prospect of an audit is often enough to encourage government agencies to improve, as the Auditor-General explained:
The impact of it isn’t simply the recommendations that are implemented. The simple fact that we’re there and that there’s the potential for people to be audited changes behaviour in organisations, and that’s an unmeasurable impact.
4.72
In reconciling the measurable and unmeasurable outcomes in the context of government spending, the Department of Finance noted that agencies:
[L]earn and apply those learnings, because there's a multiplier effect, as both the framework evolves and the audits are done, because, even if you're not directly audited, you're watching and learning from those audits.
4.73
Whilst noting that some outcomes will be difficult to measure, the Auditor-General suggested that the ANAO could perhaps better present some of the information relating to the impact of performance audits, saying:
…there might be something there where we can talk more about that impact in terms of reform in the sector through case studies and some data around entities' perceptions of the impact and the number of things changing the system, and build a performance indicator like that into our framework.
4.74
The ANAO conducts an annual survey to collect data on entity satisfaction with the overall value of performance audits. The most recent survey covering audits from 2019-20 ‘showed 83.1% of entities felt performance audits conducted added value’. Other findings included that:
I value the independent opinion expressed by the ANAO (98% in 2019-20);
The entity benefits from good practice lessons, and related issues, raised in other ANAO performance audit reports (94% in 2019-20);
The audit will help us improve the performance of the audited entity (92% in 2019-20); and
The audit made a valuable contribution by providing our organisation with a sense of assurance regarding the administration of the audited entity (84% in 2019-20).
4.75
The annual survey is currently unpublished. The ANAO noted:
To provide further transparency to the Parliament on the impact of performance audit activity, the ANAO could supplement the above ‘impact’ measure with an additional measure to determine the impact of performance audit. Such an additional measure would be included in the ANAO’s PBS and corporate plan, reported in its annual performance statement, audited by the Independent Auditor and included in the annual report.
4.76
The ANAO suggested that additional performance indicators could potentially be both quantitative and qualitative, elaborating that:
This approach to improved impact reporting would be auditable, measurable and consider not just the impact of audit findings, but the existence of an audit program and the process of conducting an audit.
Committee comment
4.77
While the goal of an average of 48 performance audits per annum remains an important output for the ANAO, the concept of outcomes needs further consideration. The audit of one entity does not simply benefit that entity. Rather, there are flow on effects across Commonwealth agencies. The Committee notes the challenges of tangibly measuring such benefits, however a robust audit process may offer cost savings to the Government as more agencies improve processes based on recommendations from audits of other entities. The Committee encourages the ANAO to consider new ways to measure and report on the impact of its work.
4.78
The Committee recommends that the Australian National Audit Office (ANAO) consider further ways of measuring the outcomes of their auditing work to provide assurance to the Parliament that their audit program is meeting Parliament’s needs and supporting an efficient and effective public sector. This could include reporting on feedback from audited entities, measuring the financial impact of the ANAO’s work, or other more qualitative measures.