1.1
The Joint Committee of Public Accounts and Audit (JCPAA) is the Parliament’s joint public administration committee. The Committee scrutinises the governance, performance and accountability of Commonwealth agencies, and has the power to inquire into all expenditure of Commonwealth money.
1.2
The Committee’s inquiry into the Commonwealth financial statements was based on Audit Report No. 33 (2016-17), Audits of the Financial Statements of Australian Government Entities for the Period Ended 30 June 2016. Audit Report No. 33 provides the results of the final audits of the Consolidated Financial Statements (CFS) and the financial statements of all Commonwealth entities.
1.3
The Auditor-General’s financial statement audits play a critical role in ensuring accountability to the Parliament and the Australian public for the expenditure of public funds. The audits provide independent assurance that this information is accurate and that the financial management of Commonwealth entities is effective.
1.4
The Committee commends the Australian National Audit Office (ANAO) for its work each year in auditing the CFS and Commonwealth entity financial statements, and also reviewing the progress of each entity in addressing any significant and moderate findings from the previous year’s audit. The Committee noted that the 2015-16 CFS, prepared in accordance with the Public Governance, Performance and Accountability Act 2013 (PGPA Act) and the requirements of Australian Accounting Standards, was signed by the Minister for Finance on 27 November 2016, and that an unmodified auditor’s report was issued on 28 November 2016.
1.5
The Committee emphasised that accounting standards, and the relevant legislative and reporting mechanisms, must ensure the accountability needs of the Parliament continue to be met—in particular, as regards reporting on contracts and consultancies. The Committee recommended the Department of Finance take any steps necessary to note that the JCPAA will propose reporting on contracts and consultancies under the annual report provisions of the PGPA Rule 2014 and the PGPA Financial Reporting Rule 2015 be considered as part of the independent review of the PGPA Act. The Committee will also propose two other matters be considered by the independent review—bringing forward the delivery of entity annual reports and further enhancing the effectiveness of entity audit committees.
1.6
The Committee also noted that the Auditor-General issued auditor’s reports on the 2015-16 financial statements of 246 Commonwealth entities, up until 9 December 2016, and that all auditor’s reports were unmodified. Some 245 findings were reported to entities as a result of the ANAO audits, comprising four significant, 32 moderate and 209 minor findings.
1.7
The National Disability Insurance Agency and the Department of Education and Training both had significant audit findings, and the Department of Defence and the Australian Taxation Office both had multiple moderate audit findings. The Committee recommended that, if next year’s financial statement audits for these agencies result in any significant or moderate findings, they should report back on their progress in responding to such findings. Noting the two significant legislative breaches reported to the Northern Land Council during 2015-16, the Committee also recommended that the Council report back on progress in responding to these breaches, and any such breaches reported next financial year.
1.8
The Committee acknowledged some moves to reinstate the previous practice of requiring all Commonwealth entities to disclose details of senior executive remuneration, which was discontinued as a result of aligning the new PGPA Financial Reporting Rule with international and Australian Accounting Standards. While acknowledging the need to comply with accounting standards (as set by an independent body), the Committee emphasised the need to ensure that the accountability needs of the Parliament and the Australian public continue to be met, and that additional requirements for disclosures may be warranted based on the practice adopted by and/or the requirements of the Australian Stock Exchange. The Committee further recommended that, consistent with previous practice, more transparent disclosure of senior executive remuneration (including by salary bands) should be a formal requirement, not optional by request—with this requirement duly reflected in the relevant legislation and guidance, and the relevant disclosure published in entity annual reports rather than on entity websites.
1.9
The Committee commended the ANAO for its work in developing financial sustainability benchmarks, and recommended that the Department of Finance, in consultation with the ANAO, work to develop benchmarks to enable entities to assess their own financial sustainability against agreed parameters over time and against like entities.