Audit Report No. 24 (2017-18), Audits of the Financial Statements of Australian Government Entities for the Period Ended 30 June 2017
The primary purpose of financial statements is to provide relevant and reliable information to users about a reporting entity’s financial position. In the public sector, the users of financial statements include Ministers, the Parliament and the community. ‘The objectives of a financial statements audit in the public sector are often broader than expressing an opinion whether the financial statements have been prepared, in all material respects, in accordance with the applicable financial reporting framework. The audit mandate, or obligations for public sector entities, arising from legislation, regulation, ministerial directives, or government policy requirements may result in additional objectives’.
The ANAO applies these objectives in undertaking financial statements audits and considers areas that may give rise to risks of non-compliance with authorities or risks relating to effectiveness of internal control when planning and performing the audit.
The preparation of timely and accurate audited financial statements is also an important indicator of the effectiveness of an entity’s financial management, which fosters confidence in an entity on the part of users.
This report provides a summary of the results of the final audits of the financial statements of Australian Government entities and the Consolidated Financial Statements as at 30 November 2017. These audit results have been reported to the responsible Minister(s) and those charged with governance of each entity.
Consolidated Financial Statements
The Consolidated Financial Statements present the consolidated whole of government financial results inclusive of all Australian Government controlled entities, as well as the General Government Sector financial report. The 2016-17 Consolidated Financial Statements were signed by the Minister for Finance on 27 November 2017 and an unmodified auditor’s report was issued on the same day.
Financial Audit Results
The Auditor-General and senior staff under delegation also issued auditor’s reports on 233 entities’ 2016-17 financial statements up until 30 November 2017. All auditors’ reports were unmodified. Ninety-one per cent of entities required to table an annual report in Parliament were provided with the auditor’s report within three months of the financial year end. The average time taken for entities to table annual reports from the date the auditor’s report was issued was 47 days (Audit Report No. 24, p. 9)
Audit Report No. 48 (2017-18), Managing Compliance with Foreign Investment Obligations for Residential Real Estate
The ATO’s management of compliance with foreign investment obligations for residential real estate is becoming effective as it progressively implements more sophisticated approaches to encourage compliance and detect and address non-compliance.
The ATO has developed processes for compiling a land register of residential real estate but faces considerable challenges in populating the register with reliable data in coming years, which it needs to overcome in order to be effective.
The ATO has assessed and addressed compliance risks in relation to foreign investment obligations for residential real estate but has not yet compiled and implemented a compliance and enforcement strategy. To promote voluntary compliance with those obligations, the ATO has developed a series of communication strategies. The strategies, which have largely been implemented, incorporate a multi-platform communication approach targeting key audiences with priority messages.
The ATO has undertaken a significant amount of work to develop processes and systems to support the detection and investigation of non-compliance with foreign investment obligations for residential real estate. There are a number of minor enhancements the ATO could make to improve its largely effective investigation processes, with more substantial work required in its development of processes to actively detect non-compliance.
Monitoring and reporting on compliance activities for foreign investment in residential real estate has been expanded with the transfer of responsibilities from Treasury to the ATO. Many indicators have been developed to measure the success of compliance activities and external reporting established for compliance investigations, outcomes and penalties. The monitoring and reporting arrangements are largely effective, and could be strengthened by more broad coverage of effectiveness—of the ATO in managing the overall compliance risk and Treasury in meeting the policy intent for foreign investment in residential real estate. (Audit Report No. 48, p. 8)
Recommendation No. 1
The Australian Taxation Office compiles and implements a residential foreign investment compliance and enforcement strategy, which draws on existing risk assessment and treatment documentation and information about the results of prior compliance activities.
Australian Tax Office’s response: Agreed
Recommendation No. 2
The Australian Taxation Office prioritises developing and finalising data matching rules to address key compliance risks to foreign investment in residential real estate.
Australian Tax Office’s response: Agreed
(Audit Report No. 48, p. 11)