Introduction
1.1
This chapter provides an introduction to the Consolidated Financial Statements (the Financial Statements) and the work of the Australian National Audit Office (ANAO) in reviewing the Financial Statements each year. This chapter also provides a description of the ANAO’s twice-yearly reporting of its audits into the Financial Statements, including its areas of focus and the ANAO’s intent in examining the Financial Statements. It also contains information regarding the reporting periods covered by the two ANAO reports being examined in this report.
Overview of the Consolidated Financial Statements
1.2
The Financial Statements are the consolidation of the financial statements of all Australian Government-controlled entities, which also includes the entities’ audited accounts. The Financial Statements provide a detailed account of the Australian Government’s financial performance, including the net operating balance, income and expenses, assets and liabilities (including contingent liabilities and assets) and the Final Budget Outcome.
1.3
The Financial Statements are prepared in accordance with the Public Governance, Performance and Accountability Act 2013 (PGPA Act), the Public Governance, Performance and Accountability Rule 2014 (PGPA Rule) and the relevant requirements of the Australian Accounting Standards (AAS). They are also compliant with the Australian System of Government Finance Statistics The Department of Finance (Finance) provides assistance and guidance to entities in preparing their financial statements, and is responsible for consolidating the final CFS.
1.4
The PGPA Act and the PGPA Rule set out the mandatory ‘principles-based system of governance accountability, and a performance framework’ for Commonwealth entities. Given the framework’s nature as a devolved framework where entities can establish their own systems and processes, entities are responsible for meeting mandatory requirements and accountable for any legislative or other forms of breaches.
Review by the Australian National Audit Office
1.5
The ANAO publishes two reports annually in relation to the Financial Statements. These reports are intended to provide the Parliament with an independent examination of the financial accounting and reporting of Commonwealth entities, in addition to scrutinising other areas of public administration that may pose a risk to the ability of entities to produce accurate financial statements. The CFS comprises part of the ANAO’s overall Annual Audit Work Program (AAWP) in examining entities’ performance and administration via the means of financial and performance audits and other assurance activities. The ANAO explains:
The financial statements audit coverage, as outlined in the AAWP, includes presenting two reports to the Parliament addressing the outcomes of the financial statements audits of Australian Government entities and the Consolidated Financial Statements … of the Australian Government.
1.6
Figure 1.1 provides detail about the work process followed by the ANAO in conducting its CFS audits.
1.7
The ANAO’s reports examine the Financial Statements and the financial audits of Commonwealth entities. In undertaking the audits, the ANAO assesses whether key internal controls are effective and support the financial statements to ensure that they are free from material misstatement. It also examines other aspects of entities’ internal administration, such as:
The financial sustainability of entities, including information on funding streams and risk assessments of finances;
Compliance with legislative frameworks underpinning both Commonwealth entities at large and those supporting the specific functioning of entities; and
Risk and control systems, including analysis of risk assessment and response.
1.8
The ANAO also undertakes work in relation to other matters which relate to Commonwealth entities’ administration and governance, such as human resource management, IT controls and cyber security, and audit committee reporting compliance. These matters are addressed in detail in the reports as a means of highlighting particular issues or areas of concern.
Reports examined
1.9
The Joint Committee of Public Accounts and Audit (JCPAA, the Committee) has conducted two inquiries into the CFS during the 45th Parliament. These inquiries culminated in the following reports:
Report 463 Commonwealth Financial Statements, Inquiry based on Auditor-General’s report 33 (2016-17) (August 2017); and
Report 477 Commonwealth Financial Statements – Second Report, and Foreign Investment in Real Estate, Inquiries based on Auditor-General’s Reports 24 and 48 (2017-18) (March 2019).
1.10
This inquiry into the Financial Statements was based on two reports:
Auditor-General’s Report No. 24 (2020-21), Audits of the Financial Statements of Australian Government Entities for the Period Ending 30 June 2020 (the CFS); and
Auditor-General’s Report No. 40 (2020-21), Interim Report on Key Financial Controls of Major Entities (the Interim Report).
1.11
The CFS covers the final results of the financial statements of all Commonwealth entities and the Financial Statements for the 2019-20 financial year’s reporting period.
1.12
The Interim Report provides the results of the preliminary audit results of a small number of entities for the 2020-21 financial year’s reporting period, leading up to the publication of the final results in the next CFS.
1.13
The 2020-21 Financial Statements were prepared in accordance with the PGPA Act and the requirements of the Australian Accounting Standards, including AASB 1049 Whole of Government and General Government Sector Financial Reporting (AASB 1049). The 2020-21 Financial Statements were signed by the Minister for Finance on 24 November 2020, and an unmodified auditor’s report was issued on the same day.