Review of Auditor-General’s Report No. 8 of 2009: … · Mr Brendan Smyth MLA Deputy Chair Ms Joy Burch MLA Member to 19 November 2009 Mr John Hargreaves MLA Member from 19 November

S T A N D I N G C O M M I T T E E O N P U B L I C A C C O U N T S

Review of Auditor-General’s Report No. 8 of 2009:

2008–09 Financial Audits

S E P T E M B E R 2 0 1 0

Report 11

R E V I E W O F A U D I T O R - G E N E R A L ’ S R E P O R T N O . 8 O F 2 0 0 9 : 2 0 0 8 – 0 9 F I N A N C I A L A U D I T S

Committee membership

Ms Caroline Le Couteur MLA Chair

Mr Brendan Smyth MLA Deputy Chair

Ms Joy Burch MLA Member to 19 November 2009

Mr John Hargreaves MLA Member from 19 November 2009

Secretariat

Secretary: Andréa Cullen

A/g Senior Research Officer: Samara Henriksen (2 November 2009 to

21 July 2010)

Administration: Lydia Chung

Contact information

Telephone: 02 6205 0142

Facsimile: 02 6205 0432

Email: [email protected]

Post: GPO Box 1020

Canberra ACT 2601

Website: www.parliament.act.gov.au

i

mailto:[email protected]

http://www.parliament.act.gov.au/


Resolution of appointment1

The ACT Legislative Assembly appointed the Standing Committee on Public

Accounts on 9 December 2008 to:

(1) examine:

a) the accounts of the receipts and expenditure of the Australian Capital

Territory and its authorities; and

b) all reports of the Auditor‐General which have been presented to the

Assembly;

(2) report to the Assembly any items or matters in those accounts, statements and

reports, or any circumstances connected with them, to which the Committee is

of the opinion that the attention of the Assembly should be directed;

(3) inquire into any question in connection with the public accounts which is

referred to it by the Assembly and to report to the Assembly on that question;

and

(4) examine matters relating to economic and business development, small

business, tourism, market and regulatory reform, public sector management,

taxation and revenue.

1 ACT Legislative Assembly, Minutes of Proceedings No. 2, Tuesday 9 December 2008, pp. 12–13.

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TABLE OF CONTENTS

Committee membership .......................................................................................... i

Resolution of appointment ...................................................................................... ii

R E C O M M E N D A T I O N S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V

1 I N T R O D U C T I O N . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Terms of reference..................................................................................................2

Conduct of inquiry ...................................................................................................2

Structure of the report .............................................................................................2

2 A U D I T F I N D I N G S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Audits of financial reports.....................................................................................3

Reviews of statements of performance ...............................................................4

Significant matters (audit findings) ..........................................................................7

Financial and performance reporting .....................................................................11

Budget management.............................................................................................15

Information systems..............................................................................................16

3 C O M M I T T E E C O M M E N T S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 9

The Territory’s financial report ...............................................................................19

Unfunded superannuation liability .........................................................................21

Financial and performance reporting .....................................................................24

Quality, timeliness and compliance .......................................................................24

Performance measurement...................................................................................26

4 C O N C L U S I O N . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 3

A P P E N D I X A : A U D I T S O F F I N A N C I A L R E P O R T S

I N C L U D E D I N T H E A U D I T R E P O R T . . . . . . . . . . . . . . . . . . . . . . . . . 3 5

A P P E N D I X B : R E V I E W S O F S T A T E M E N T S O F

P E R F O R M A N C E I N C L U D E D I N T H E A U D I T R E P O R T . . . . 3 9

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RECOMMENDATIONS

R E C O M M E N D A T I O N 1

2.11 The Committee recommends that Housing ACT and the Department of

Territory and Municipal Services take steps to ensure that all necessary

action is carried out to adequately measure and report against performance

measures, as specified in their respective statements of performance.


2.13 The Committee recommends that the Department of Territory and

Municipal Services review its processes for preparing its statement of

performance to ensure that the results obtained accurately reflect the

agency’s performance.


2.19 The Committee recommends that the ACT Government ensure that

appropriate personnel are aware of the legislative requirements that apply

directly to the preparation of financial reports and statements of

performance.


2.21 The Committee recommends that the ACT Government ensure that the

performance measures included in statements of performance for all its

reporting entities are: (i) clearly and concisely defined, (ii) accurately

reported, and (iii) supported by sufficient evidence and/or accompanied by

sufficient explanatory information to enable the performance of the

department or agency to be understood.


2.30 The Committee recommends that the ACT Government ensure that its

agencies are appropriately resourced to allow for the resolution of audit

findings, and implementation of agreed audit recommendations, within a

timely manner.


2.35 The Committee recommends that all ACT Government agencies

should continuously monitor their processes for addressing audit findings in

a timely manner.

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2.39 The Committee recommends that ACT Government agencies should

review their implementation processes for audit recommendations with the

aim of implementing a substantial majority of those recommendations

within twelve months from the date of being reported.


2.47 The Committee recommends that the ACT Government ensure that all

its reporting entities take the necessary steps to ensure financial reports are

provided in accordance with the Government’s reporting timetable.


3.18 The Committee recommends that the Treasurer provide the

Committee with an updated analysis of the unfunded superannuation

liability, including modelling incorporating a range of discount rates, to

demonstrate the potential changes that are possible in this liability, in

sufficient time for the 2009–10 annual report public hearings.

R E C O M M E N D A T I O N 1 0

3.43 The Committee recommends that, where applicable, ACT Government

agencies should review their capital works project management to identify

areas where improvements can made, in particular by: (i) enhancing the

overall management of projects by adopting a formalised project

management framework, (ii) providing training to staff in project

management, and (iii) allocating appropriate resources to projects.

R E C O M M E N D A T I O N 1 1

3.51 The Committee recommends that ACT Government agencies ensure

that their information systems operate as intended, are accurately and

appropriately used, and that the information contained within them is valid,

complete, and secure for the purpose of supporting agency operations and

requirements.


1

1 INTRODUCTION

1.1 Auditor‐General’s report No. 8 of 2009: 2008–09 Financial Audits (the Audit

report) was presented to the ACT Legislative Assembly on 18 December

2009.

1.2 In accordance with the Standing Committee on Public Accounts’ (the

Committee) resolution of appointment the Audit report was referred to the

Committee for examination.

1.3 The Committee resolved on 1 June 2010 to inquire further into the Audit

report.

1.4 It has been the annual practice of the ACT Auditor‐General to provide a

report, such as this one, containing independent written opinions on the

results of the:

audits of financial reports, and

reviews of statements of performance, covering the Territory and its

agencies.2

1.5 An independent opinion is essential to ensure an appropriate level of

accountability to the ACT Legislative Assembly and the ACT community for

public finances and performance.

1.6 The Audit report summarises the results of the ACT Audit Office’s audits of

2008–09 financial reports and reviews of statements of performance for the

Territory and its agencies.

1.7 The Audit report also provides an overview of the Audit Office’s assessment

of the quality and timeliness of reporting by agencies and the progress by

agencies in addressing previously reported findings.3

1.8 The Committee is of the view that independent audit opinions as provided in

the Auditor‐General’s annual report on financial audits form an integral part

of an effective system of accountability for the stewardship of public funds,

2 ACT Auditor‐General’s Report No. 8 of 2009: 2008–2009 Financial Audits, p. 3. 3 Ibid.


2

for how those funds are spent, and for the quality of the decision making that

underpins that spending.

Terms of reference

1.9 The Committee’s terms of reference were to examine the Audit report and

report to the ACT Legislative Assembly.

Conduct of inquiry

1.10 The Committee received a Government submission in relation to the findings

of the Audit report.4 The Committee also received a briefing from the ACT

Auditor‐General on the Audit report.5

1.11 The Committee met on 2 September 2010 to discuss the Chair’s draft report,

which was adopted on 2 September 2010.

Structure of the report

1.12 The Committee considered the matters of significance raised by the Audit

report. This report focuses on a selection of the significant issues raised and

also provides a summary of the Government’s response in relation to these

issues.

1.13 The Committee’s report is divided into two parts and covers the following

main topics:

Part 1—Background to inquiry

Chapter 1—Introduction and conduct of the inquiry

Chapter 2—Audit findings

Part 2—Committee findings

Chapter 4—Committee comments

Chapter 5—Conclusion

4 ACT Government submission, dated 16 April 2010. 5 9 March 2010.


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2 AUDIT F INDINGS

2.1 This chapter presents an overview of the key findings of the Audit in relation

to the audits of financial reports and the review of statements of

performance.

2.2 Overall, the findings of the Audit report, in relation to financial reporting

were generally favourable, although some reservations were expressed with

regard to accounting treatments and lack of, or incomplete, reporting

measures as identified in statements of performance.

Audits of financial reports

2.3 In accordance with the Financial Management Act 1996, the Audit office is

required to provide:

…independent opinions on the financial reports and statements of performance

of the Territory and its departments and authorities. The Office also conducts

audits of financial reports pursuant to other requirements, including those

contained within the Corporations Act 2001, land joint venture agreements, trust

fund deeds and agreements relating to funding provided by the

Commonwealth.6

2.4 The Audit office issued 71 audit reports—70 unqualified audit reports and

one qualified audit report. The qualified audit report was issued in relation

to the Nominal Defendant of the ACT7 on the basis that the Audit was

unable to independently verify information included in its financial report.8

2.5 The Committee notes that the proportion of qualified reports in relation to

the total number of audit reports issued was relatively small for the 2008–09

financial year and has been in continuous decline since 2005–06.9

6 ACT Auditor‐General’s Report No. 8 of 2009: 2008–2009 Financial Audits, p. 9. 7 The ACT Insurance Authority became the Nominal Defendant on 17 December 2008. On 1 January

2009, the assets and liabilities from the previous Nominal Defendant (Insurance Australia Limited)

were transferred to the Nominal Defendant of the ACT (ACT Auditor‐General’s Report No. 8 of

2009: 2008–2009 Financial Audits, p. 10).

8 ACT Auditor‐General’s Report No. 8 of 2009: 2008–2009 Financial Audits, p. 9. 9 Ibid., p. 10.


4

2.6 In summary, the Audit concluded that all other financial reports materially

complied with the relevant accounting standards and presented a true and

fair view of the financial position and performance of the reporting agencies

as required by those standards.10

Reviews of statements of performance

2.7 In accordance with the Financial Management Act 1996, the Audit office is

required to provide a:

…report of factual findings on the statements of performance prepared by

departments and authorities. This report includes the expression of an opinion

on whether any matters were identified during the review which indicated that

the reported performance measures are not fairly presented.11

2.8 Of the twenty‐eight reports of factual findings issued, the Audit Office issued

two qualified reports to agencies12 on the basis that these agencies did not

carry out the necessary action to measure some of their performance

indicators. The Committee notes this is a drop from the five qualified reports

issued regarding statements of performance in 2007–08.13 Further detail on

the two qualified reports is set out below.

Housing ACT

2.9 A qualified report of factual findings was issued on Housing ACT’s 2008–09

statement of performance. The qualification was on the basis that ‘Housing

ACT did not measure the results for two of its performance measures as

required by the Financial Management Act 1996’.14 The measurement deficit

was concerned with not performing the required surveys ‘to measure the

overall satisfaction of tenants with the provision of public and community

housing’.15

10 ACT Auditor‐General’s Report No. 8. of 2009: 2008‐2009 Financial Audits, p. 10. 11 Ibid., p. 11. 12 Housing ACT and Department of Territory and Municipal Services 13 ACT Auditor‐General’s Report No. 8 of 2009: 2008‐2009 Financial Audits, pp. 11–12. 14 Ibid. p. 92. 15 Ibid.


5

Department of Territory and Municipal Services

2.10 A qualified report of factual findings was also issued regarding the

Department of Territory and Municipal Services’ (TAMS) statement of

performance. The qualification was issued on the basis that ‘TAMS did not

measure the result for one of its performance measures as required by the

Financial Management Act 1996’.16



2.11 The Committee recommends that Housing ACT and the Department

of Territory and Municipal Services take steps to ensure that all

necessary action is carried out to adequately measure and report

against performance measures, as specified in their respective

statements of performance.

2.12 Further, the Audit noted that the processes used by TAMS for preparing its

statement of performance needed to be improved.17 For example, interim

audit work suggested:

…that the processes used by TAMS to measure the results for its performance

measures were often unreliable with results not always agreeing with the related

supporting records.18

2.13 The Committee recommends that the Department of Territory and

Municipal Services review its processes for preparing its statement

of performance to ensure that the results obtained accurately reflect

the agency’s performance.

2.14 Whilst the number of performance measures on which the two qualified

reports were based represented less than one per cent of the total number of

reported measures, the Committee notes that the Audit Office also found:

16 ACT Auditor‐General’s Report No. 8 of 2009: 2008–2009 Financial Audits, p. 125. 17 Ibid. 18 Ibid.


6

…many instances where the performance measures and associated targets

provided little or no meaningful information about the performance of the

reporting agency.19

2.15 Scope for improvement with regard to the preparation of statements of

performance is supported by the audit finding that the overall quality of the

statements of performance declined in 2008–09 as compared with 2007–08.20

In particular, the combined proportion of statements rated as ‘good’ and

‘satisfactory’ reduced from 74 per cent in 2007–08 to 64 per cent in 2008–09.

Further, whilst the proportion of statements rated as ‘unsatisfactory’

remained significant in 2008–09 they were slightly down from 22 per cent in

2007–08 to 18 per cent in 2008–09.21

2.16 As a non‐financial performance measure, a key purpose of a statement of

performance is to facilitate accountability by departments and agencies for

their performance. Poorly prepared statements hinder the effectiveness of

performance reporting and accountability for that performance.

2.17 The Audit findings suggest that many departments and agencies could

improve either the processes used for the preparation of statements of

performance and/or explain the performance of their entities more

meaningfully.

2.18 The Committee believes that it is incumbent upon respective departmental

and agency heads to ensure that their entity’s financial report and statement

of performance complies with the legislative provisions as set out in the

Financial Management Act 1996.



appropriate personnel are aware of the legislative requirements that

apply directly to the preparation of financial reports and statements

of performance.

19 ACT Auditor‐General’s Report No. 8 of 2009: 2008–2009 Financial Audits, p. 23. 20 Ibid., p. 22. 21 Ibid.


7

2.20 Furthermore, in addition to ensuring compliance with the applicable

legislation, based on the findings of the Audit, the Committee believes that

there is also scope for improvement with regards the usefulness or

meaningfulness of performance measures and related targets.



the performance measures included in statements of performance

for all its reporting entities are: (i) clearly and concisely defined, (ii)

accurately reported, and (iii) supported by sufficient evidence and/or

accompanied by sufficient explanatory information to enable the

performance of the department or agency to be understood.

Significant matters (audit findings)

2.22 Pursuant to the requirements of the Australian Auditing Standards, the

Audit Office is required to report any significant matters (audit findings) that

are identified during the course of a financial audit to those charged with

responsibility for the governance of applicable agencies.22

2.23 The Audit report may subsequently include a summary of these significant

matters as audit findings and frame recommendations accordingly.

2.24 Further, the Audit report also includes information on the progress

applicable departments and agencies have made in addressing previously

reported findings. Matters that are reported include: weaknesses in

governance arrangements, information technology and other control

weaknesses or breakdowns; legislative breaches; and errors and fraud.23

22 ACT Auditor‐General’s Report No. 8 of 2009: 2008–2009 Financial Audits, p. 16. 23 Ibid., p. 3.


8

2.25 The Committee notes that the Audit report departed from previous financial

audit reports in not framing recommendations. The Committee understands

that the Auditor‐General’s annual report on financial audits has framed

recommendations for the last three24 financial years.

Resolution of audit findings

2.26 The Audit Office considers that audit findings should be resolved within

twelve months of being reported although it appreciates that in certain

circumstances some matters may take longer.25

2.27 For the 2008–09 reporting period, the proportion of previously reported audit

findings resolved by agencies was 65 per cent, or 168 out of 260, which is

down from 68 per cent, or 244 out of 360, in 2007–08.26

2.28 Of the 440 audit findings applicable to the 2008–09 reporting period, 260 had

been previously reported or carried over as unresolved from 2007–08. 27

Further, notwithstanding the resolution of 168 previously reported audit

findings, at 18 December 2009, there still remained a balance of 272

unresolved whole or in part audit findings.28

2.29 The Committee acknowledges that there has been a 25 per cent increase in

new audit findings and appreciates that agencies may have limited capacity

to respond to such a substantial increase.29 However, a 25 per cent increase is

significant and further highlights the Committee’s concern that agencies

need to improve their processes for preparing financial reports and

statements of performance.

24 2005–06; 2006–07; and 2007–08. 25 ACT Auditor‐General’s Report No. 8 of 2009: 2008–2009 Financial Audits, p. 18. 26 Ibid. 27 Ibid. 28 Ibid. 29 Ibid.


9



its agencies are appropriately resourced to allow for the resolution

of audit findings, and implementation of agreed audit

recommendations, within a timely manner.

2.31 The Committee further notes that some of the 2008–09 audit findings refer to

matters raised and recommendations framed in the Auditor‐General’s 2007–

08, 2006–07, and 2005–06 financial audit reports.30 The prevalence of

recurring issues and findings suggests that, notwithstanding agreement to

address audit findings, either the measures implemented have not been

sustainable or there has been a delay in the implementation of corrective

measures.

2.32 Recommendation one of Auditor‐General’s Report No. 8 of 2008: 2007‐2008

stated:

Agencies should review and improve their processes for resolving audit findings

in a timely manner. This should involve assigning responsibility for resolving

audit findings and setting dates by which audit findings will be addressed.31

2.33 In response to that recommendation, the Government advised in its

submission to the Audit report, that those agencies singled out by the Audit,

as in need of improving their processes for the resolution of audit findings in

a timely manner, were:

…implementing strategies to improve resolution of audit findings, including the

establishment of registers to assign responsibility and timelines for resolution of

audit issues. Treasury will also remind agencies through Treasury memoranda

and/or other means to address outstanding audit issues to the extent possible

during the 2008–09 reporting period.32

2.34 The Committee reiterates comments it has previously made in its report,

Review of Auditor‐General’s Report No. 8 of 2008: 2007–08 Financial Audits, that

the resolution of audit findings in a timely manner is an essential aspect of

30 Auditor‐General’s Report No. 8 of 2007: 2006–07 Financial Audits; Auditor‐General’s Report No. 8 of 2008: 2007‐08 Financial Audits, p. 8.

31 Auditor‐General’s Report No. 8 of 2008: 2007–08 Financial Audits p. 8. 32 ACT Government submission to Auditor‐General’s Report No. 8 of 2008: 2007–08 Financial Audits, 27 March 2009, p. 4.


1 0

good governance and should be a matter for all agencies to continuously

monitor.



2.35 The Committee recommends that all ACT Government agencies

should continuously monitor their processes for addressing audit

findings in a timely manner.

2.36 The Committee notes that this recurring audit finding was not addressed in

the Government’s submission.

2.37 The Committee views the delayed resolution of audit findings as a lost

opportunity for departments and agencies to proactively improve

performance and to ensure that any risks associated with the systems and

processes underpinning that performance are mitigated.

2.38 As the Auditor‐General’s 2007–08 recommendation, and the Committee’s

subsequent recommendation has yielded limited improvement,33 the

Committee considers that a more definitive recommendation is required.

2.39 The Committee recommends that ACT Government agencies should

review their implementation processes for audit recommendations

with the aim of implementing a substantial majority of those

recommendations within twelve months from the date of being

reported.

2.40 The Committee also notes that the number of partially resolved audit

findings declined, from 37 in 2007–08 to 33 in 2008–09, and that many of

these related to internal control weaknesses in major revenue applications

reviewed during the audit process.34

33 ACT Auditor‐General’s Report No. 8 of 2009: 2008–2009 Financial Audits, p. 18. 34 Ibid. p. 4; 18.


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Financial and performance reporting

2.41 Each year the Audit Office produces independent opinions on the financial

reports and statements of performance prepared by ACT Government

agencies.35

Timeliness of financial reporting processes

2.42 The Department of Treasury issues a whole‐of‐government reporting

timetable, each year, which specifies the required timeframes for financial

reports of the Territory and its agencies. According to the ACT Auditor‐

General, agency compliance:

…with this timetable also provides the Territory and its agencies with assurance

that audited financial reports are made publicly available within the legislated

timeframes contained within the Annual Reports (Government Agencies) Act 2004,

Financial Management Act 1996 and Corporations Act 2001.36

2.43 The Committee notes the Auditor‐General’s finding that, consistent with the

trend of recent years, agency compliance with the financial reporting

timetable continued to improve in 2008–09.37

2.44 The proportion of agencies complying with the timetable has increased from

31 per cent in 2004–05 to 70 per cent in 2008–09. Where agencies did not

comply with the timetable, most provided their financial reports soon after

the due date.38

2.45 The most common issues identified by the Audit with regard to those

statements rated as ‘unsatisfactory’ included:

errors in results

inadequate explanations of the measures and/or how they were

measured or estimated, and

inclusion of insufficient information on the material variances from

the planned levels of performance.39

35 ACT Auditor‐General’s Report No. 8 of 2009: 2008–2009 Financial Audits, p. 16. 36 Ibid., p. 20. 37 Ibid., p. 21. 38 Ibid. 39 Ibid., p. 22.


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2.46 Whilst continued improvement is evident, the Committee still notes that

30 per cent of financial reporting entities are still not meeting the

Department of Treasury’s reporting timetable. This continues to suggest that

some agencies are not adequately planning, designing or resourcing their

reporting functions.



all its reporting entities take the necessary steps to ensure financial

reports are provided in accordance with the Government’s reporting

timetable.

Quality of financial reports

2.48 The combined proportion of financial reports rated as ‘good’ and

‘satisfactory’ was 70 per cent which was relatively unchanged from 69 per

cent in 2007–08. The combined proportion of financial reports rated as ‘fair’

and unsatisfactory’ was 30 per cent which was also relatively unchanged

from 31 per cent in 2007–08.

2.49 Whilst most of the agencies rated as ‘fair’ or ‘unsatisfactory’ were small to

medium sized agencies with limited internal accounting and financial

reporting capacity and expertise, the Committee agrees with the Audit

comments that the findings suggest that those agencies still have room for

improvement with regards their financial reporting processes.

2.50 Further, the Committee notes that the Audit Office had also drawn these

weaknesses in financial reporting to the attention of agencies in previous

years.40

2.51 The most common weaknesses in financial reports as identified by the Audit

included:

errors in current or prior year figures

failure to clearly and concisely explain the information being reported

40 ACT Auditor‐General’s Report No. 8 of 2009: 2008–2009 Financial Audits, p. 20.


1 3

the use of inconsistent, inaccurate or irrelevant information

the use of generic disclosures that were not tailored to the operations

and/or transactions of the individual agency, and

a lack of clear and concise explanatory information to assist readers to

understand the financial results.41

Quality of statements of performance

2.52 The Committee notes the Auditor‐General’s finding that the overall quality

of the statements of performance declined in 2008–09. The combined

proportion of statements rated by the Auditor‐General as ‘good’ and

‘satisfactory’ was down from 74 per cent in 2007–08 to 64 per cent in 2008–

09.42

2.53 The proportion of agencies that prepared ‘unsatisfactory’ statements of

performance fell slightly from 22 per cent in 2007–08 to 18 per cent in 2008–

09.43 The Audit Office issued two qualified reports of factual findings on

statements of performance, down from five issued in the 2007–08.44

Usefulness of performance measures included in statements of

performance

2.54 The Financial Management Act 1996 requires an agency’s annual statement of

performance to compare the performance of the agency in delivering its

outputs to its performance measures and targets.

2.55 The effectiveness of this reporting framework, that is, the usefulness of the

statement of performance, is to a large extent dependent upon the usefulness

or meaningfulness of the performance measures.45

41 ACT Auditor‐General’s Report No. 8 of 2009: 2008–2009 Financial Audits, p. 20. 42 Ibid., p. 22. 43 Ibid., p. 17. 44 Ibid., p. 12. 45 Ibid., p. 22.


1 4

2.56 As performance measure targets are determined through the budget

process, the ACT Audit Office does not provide an opinion on the relevance

or appropriateness of the targets. However, for the 2008–09 reporting

period, the Audit:

…found many instances where the performance measures and the associated

targets provided little or no meaningful information about the performance of

the reporting agency.46

2.57 In its submission to Auditor‐General’s Report No. 8 of 2008: 2007‐2008

Financial Audits, the Government stated that those agencies identified by the

Audit as providing insufficient information in their statements of

performance:

…have all undertaken to, or are currently, reviewing their statements of

performance to ensure that sufficient information is provided to explain their

performance.47

2.58 After reviewing Auditor‐General’s Report No. 8 of 2008: 2007‐2008 Financial

Audits, the Committee made the following recommendation in 2009:

Recommendation 8—The Committee recommends that ACT Government

agencies and authorities review the relevance, usefulness and appropriateness of

the performance measures reported in their statements of performance.48

2.59 The Government agreed with the Committee’s 2009 recommendation

commenting that:

Agencies review their performance measures annually through the Budget

process. This review includes an assessment of the relevance, usefulness and

appropriateness of the performance measures. This practice will continue

throughout future budget processes. The Accountability of Government

initiative, being led by the Chief Minister’s Department, is also examining ways

to strengthen the relevance and usefulness of performance indicators and

reporting. 49

46 ACT Auditor‐General’s Report No. 8 of 2009: 2008–2009 Financial Audits p. 23. 47 ACT Government submission, 27 March 2009, p. 6. 48 ACT Auditor‐General’s Report No. 8 of 2009: 2008–2009 Financial Audits, p. 22. 49 ACT Government response to Standing Committee on Public Accounts—Review of Auditor‐General’s Report No. 8 of 2008: 2007–08 Financial Audits, December 2009, p. 6.


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2.60 The Committee supports comments made by Audit, in that when

performance measures and the related targets are not useful or meaningful,

the significant costs associated with maintaining reporting systems for such

performance measures, and having them examined by the Audit Office,

cannot be reasonably justified.50

2.61 As mentioned previously, the Audit issued two qualified reports of factual

findings on statements of performance to Housing ACT51 and TAMS52. The

Chief Minister’s Department (CMD)53, the ACT Insurance Authority54 and

the Land Development Agency (LDA)55 were also found to have weaknesses

in their statements of performance.

Budget management

2.62 For the Territory to achieve its budgeted operating result, it goes without

saying that agencies need to meet their individual budgets. While most

agencies met their budgets during 2008–09 there were a few exceptions. The

following Territory entities did not meet their budgets during 2008–09:

ACT Health

ACTION

ACT Legislative Assembly Secretariat

Department of Disability, Housing and Community Services

Department of Justice and Community Safety

Exhibition Park Corporation

Land Development Agency, and

Superannuation Provision Account.56

50 ACT Auditor‐General’s Report No. 8 of 2009: 2008–2009 Financial Audits, p. 23. 51 Ibid., p. 92. 52 Ibid., p. 122. 53 Ibid., pp. 72–73. 54 Ibid., p. 96. 55 Ibid., p. 104. 56 Ibid., pp. 24–25.


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Information systems

2.63 As the reliability of financial reports and statements of performance depends

in a large part on the capacity of the internal controls agencies implement

over information systems and applications, as part of the audit process, the

adequacy of these controls is assessed.57

Controls implemented by the Shared Services Centre

2.64 Whilst the Audit found information controls implemented by the Shared

Services Centre in relation to Oracle Financials58 and Chris2159 were

generally satisfactory, since 2005–06, the Audit Office has advised Shared

Services:

…that the risk of undetected accidental or fraudulent changes to data in Chris21

could be reduced by the regular and scheduled monitoring of audit logs which

records changes made to this data and identifies who made those changes.60

2.65 Further, the Audit also found that Shared Services did not conduct regular

and scheduled testing of the restoration of backed up data and systems

increasing the risk that data may not be available and/or recoverable when

required.61

2.66 In its submission, the Government indicated that progress was being made

towards testing the restoration of backed up data and greater audit logging

capabilities.62

Controls for key revenue applications

2.67 The ACT Government uses four major applications to record information on

taxes, fees and fines, and rental revenue. These applications are the:

Homenet system

Territory Revenue system

57 ACT Auditor‐General’s Report No. 8 of 2009: 2008–2009 Financial Audits, p. 26. 58 Oracle Financials—a financial management information system 59 Chris21—an ACT Government human resource management system 60 ACT Auditor‐General’s Report No. 8 of 2009: 2008–2009 Financial Audits, pp. 27–28. 61 Ibid., pp. 27–28. 62 ACT Government submission, 16 April 2010, p. 4.


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rego.act system, and

Receipting Accounting and Payments system (RAPS).63

2.68 The Audit found that control weaknesses existed in some of the key revenue

systems that the Government uses to record information on taxes, fees and

fines, and rental revenue. The main areas identified as in need of

improvement included: password controls; reviewing user access;

monitoring of audit logs; and the restoration of backed up data.64

2.69 In 2007–08 the Audit Office made some recommendations regarding the

Homenet system used within Housing ACT. The 2008–09 Audit found that

these findings had not been fully resolved. However, Housing ACT had

advised that it planned to upgrade to Homenet Version 6 in the future.65

2.70 The findings reported in 2007–08 regarding the Territory Revenue System

have in the main been addressed although significant access control

weaknesses remain. The Department of Treasury advised that it had

implemented appropriate mitigation strategies to address the identified

weaknesses in the system. Further, the identified weaknesses will also be

addressed as part of a planned upgrade of the system.66

2.71 In its submission, the Government agreed with the Audit finding regarding

improving password and access controls to the rego.act system and has

implemented improved controls. Further, the Government advised that

stage 2 of the new RAPS had been completed in December 2009. The

upgraded application:

…will have greatly improved audit logging capabilities capturing any normal

practice modifications. These controls will minimise opportunities for fraud,

provide an appropriate audit trail and address the control weaknesses identified

in the current RAPS application.67

2.72 The Committee notes that agencies do not plan to address several control

weaknesses for key revenue systems until these systems have been upgraded

63 ACT Auditor‐General’s Report No. 8 of 2009: 2008–2009 Financial Audits, p. 28. 64 ACT Auditor‐General’s Report No. 8 of 2009: 2008‐2009 Financial Audits, pp. 28–31. 65 Ibid., p. 29. 66 Ibid., pp. 29–30. 67 ACT Government submission, 16 April 2010, p. 4.


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or replaced.68 These weaknesses expose the relevant agencies to higher risks

of errors, irregularities and fraud. Areas identified by the Audit in particular

need of improvement included: password controls, reviewing user access,

monitoring of audit logs and the restoration of backed up data.

68 ACT Auditor‐General (2009) Media release: ‘2008–09 Financial Audits’, 18 December.


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3 COMMITTEE COMMENTS

The Territory’s financial report

3.1 The 2008–09 Territory’s financial report was prepared in accordance with the

new Australian accounting standard—AASB 1049—Whole of Government

and General Government Sector Financial Reporting.69

3.2 In summary, regarding the Territory’s financial report, the Audit commented

that:

…

There is a continuing and significant risk that the Territory will incur large

operating deficits over the next few years, particularly if unfavourable conditions

persist in investment and property markets.

…

The Territory’s net asset position has improved because the increases in the

valuation of non‐financial assets and amounts spent on capital works have

outweighed a significant increase in the estimated unfunded superannuation

liability and borrowings.

…

The Territory is expected to retain a sufficient capacity to meet its short‐term

obligations. However, its capacity to do so is expected to diminish significantly

over the period covered by the budget forward estimates.

…

The Territory’s long‐term financial position has weakened significantly during

2008‐09 and was considerably weaker than anticipated in the budget due mainly

to the substantial growth in the unfunded superannuation liability.

Over the period of the budget forward estimates, the Territory’s long‐term

financial position is expected to continue to weaken significantly. The main

contributing factors are the growing unfunded superannuation liability and

planned increases in borrowings to fund major capitals work projects including

ACTEW water projects. 70

69 ACT Auditor‐General’s Report No. 8 of 2009: 2008‐2009 Financial Audits, p. 32. 70 Ibid., pp. 32–33.


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3.3 The Committee notes the Territory’s short and long‐term financial positions

had weakened during 2008–09, in particular, the long term financial position

was also markedly weaker than forecast in the budget.71

3.4 The main factors attributable to this situation were: (i) the growth in the

unfunded superannuation liability and (ii) planned increases in borrowings

to fund major capital works projects including ACTEW water projects.72

For 2008–09, unfunded liabilities ($2 452 million) exceeded the budgeted

position ($1 525 million) by $927 million (60.8 per cent).73

3.5 Whilst the outlook for the global financial system has improved in 2009–10,

which has led to economic growth in Australia and a reduction in the

downside risks for the ACT economy, the stability of global financial markets

still remains fragile.74

3.6 The International Monetary Fund’s 2010 Global Financial Stability Report

stated:

…that the targeted progress toward financial stability suffered a setback in late

April and May which resulted in an environment of uncertainty as “banks again

have become less willing to lend to one another, especially to banks in the euro

area countries perceived to be facing greater policy challenges”.75

3.7 The Committee notes that in addition to flow on effects of any adverse

economic changes in the global economy, the Territory’s economy and

budget is subject to a number of risks including:

the residual risk of the withdrawal of fiscal and monetary stimulus

policy measures which could slow economic growth

the Commonwealth Government’s restraint on spending to restore its

budget to surplus resulting in reduced outlays flowing to the ACT in

2010–11

71 ACT Auditor‐General’s Report No. 8 of 2009: 2008‐2009 Financial Audits, pp. 32–48. 72 Ibid., p. 33. 73 Ibid., p. 44. 74 IBTimes (2010) IMF lauds Australia’s solid growth prospects but warns of global risk due to weak markets, 8 July; Reserve Bank of New Zealand, Media release: Financial system outlook improved but fragile, 19 May 2010.

75 IBTimes (2010) IMF lauds Australia’s solid growth prospects but warns of global risk due to weak markets, 8 July.


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higher than expected interest rates resulting in a dampening effect on

consumption, in particular consumer spending and in the housing

market

adverse economic conditions that may result in a smaller pool of

Commonwealth Government funding distribution to the States with

the ACT’s share of the GST pool subsequently dependent on its

performance relative to other States and growth in population

the susceptibility of the budget, in terms of financial investments, to

risks associated with the performance of financial markets and interest

rates, and

superannuation liabilities—whereby any small changes in the

demographic and financial variables that underpin the calculation of

the liability can result in large impacts on the total liability estimate.76

3.8 Whilst the ACT Budget is expected to return to surplus in 2013–14, two years

ahead of time, the Committee notes that the Territory still faces a number of

risks to its economy and budget which could adversely impact on the plans

to return the budget to surplus as forecast.

Unfunded superannuation liability

3.9 The Territory’s growing unfunded superannuation liability continues to

impact on the Territory’s long‐term financial position. The Committee

understands that the liability at June 2010 was estimated to be approximately

52 per cent funded, below the 30 June 2008 level of 65 per cent.77

76 Select Committee on Estimates 2010–11, Transcript of evidence, 14 and 17 May 2010; ACT Government. (2010) 2010–11 Budget, Budget Paper No. 3, pp. 31–32.

77 ACT Government. (2010) 2010–11 Budget, Budget Paper No. 3, p. 215; ACT Government. (2008) 2008–09 Budget, Budget Paper No. 3, p. 134.


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3.10 However, the Committee notes that the superannuation liability at 30 June

2010 was reported as 43.8 per cent funded.78 The ACT Government’s June

Quarter 2010 Consolidated Financial report stated that:

Superannuation investments of $2,020.1 million existed at 30 June 2010,

providing funding for 43.8 per cent of the superannuation liability.79

3.11 As mentioned previously, the weakening in the Territory’s long‐term

financial position was mainly attributed to considerable growth in the

unfunded superannuation liability.80 This growth was due:

…to the combined effects of a large fall in the value of superannuation

investments and an increase in the estimated superannuation liability. A

reduction in the discount rate used to estimate the present value of the liability

and the accrual of an additional year’s benefit (liability) contributed to the

increased superannuation liability.81

3.12 An official from the Department of Treasury told the Select Committee on

Estimates 2010–11:

…following the big downturn in the markets, the investment portfolio in

particular suffered some big losses. Over two years it was a few hundred million

dollars. At the end of last year we ended up at a funding ratio of 45 per cent, and

that obviously gave us cause to have a look at things to see whether we needed

to change things. Over the course of this year, we have seen a very significant

turnaround in investment markets. The estimated outcome that we are looking at

for this year is about a 14½ per cent return as opposed to our budget for a return

of 7½ per cent. That is nominal, net of fees, so that has turned that funding ratio

around quite significantly from 45 to estimated to be about 52 per cent this year.

We have looked at that, and I guess the budget is based on, again, a forward‐

looking return of 7½ per cent across the forward years.82

3.13 The Government undertook a Funding Plan Review in 2009–10:

…to assess the magnitude and timing of further cash injections to achieve the

objective of fully funding the liability.83

78 ACT Government (2010) June Quarter 2010 Consolidated Financial Report, 13 August, p. 12. 79 Ibid. 80 ACT Auditor‐General’s Report No. 8 of 2009: 2008‐2009 Financial Audits, p. 33. 81 Ibid., p. 44. 82 Mr Patrick McAuliffe, Select Committee on Estimates 2010–11, Transcript of evidence, p. 257. 83 Ms Katy Gallagher MLA. (2009) ACT Government Response to the Select Committee on Estimates 2009–10—Tabling statement, June, p. 5.


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3.14 The Committee understands that the outcome of the Review was considered

in the development of the 2010–11 Budget.84 The Review:

…indicated that, based on current projections for both assets and liabilities,

further capital injections may be required at a future time to meet the target of

fully funding the liability by 2030.85

3.15 However, the Review also noted that, given that the financial crisis in the

global economy could be considered a rare event and that in 2009–10 the

superannuation portfolio had performed well relative to market sentiment,

this suggests that an immediate response may not be required.86

3.16 In relation to the funding plan for the liability, the Treasurer told the Select

Committee on Estimates 2010–11:

…the decision that we have taken in this budget is to wait until the triennial

review, which is done, as I understand, next year, around any potential for future

capital injections into the superannuation account in order to meet our target. So

we have not put anything additional in this year over and above our normal

provision. We have had two years of pretty volatile activity, one where we lost

money and one where we have made some significant improvements on that loss,

so I just think the triennial review would be a much more comprehensive review

around our future liabilities.87

3.17 Notwithstanding that the unfunded superannuation liability will not need to

be met for sometime, the Committee emphasises that finances will need to be

managed effectively to ensure that sufficient investments are set aside to

meet the target of fully funding the liability by 2030.


3.18 The Committee recommends that the Treasurer provide the

Committee with an updated analysis of the unfunded

superannuation liability, including modelling incorporating a range

of discount rates, to demonstrate the potential changes that are

possible in this liability, in sufficient time for the 2009–10 annual

report public hearings.

84 ACT Government (2009) Government response to the Standing Committee on Public Accounts—Review of Auditor‐General’s Report No. 8 of 2008: 2007–08 Financial Audits, 8 December, p. 5.

85 ACT Government. (2010) 2010–11 Budget, Budget Paper No. 3, p. 215. 86 Ibid. 87 Ms Katy Gallagher MLA, Select Committee on Estimates 2010–11, Transcript of evidence, p. 257.


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Financial and performance reporting

3.19 As noted previously, public accountability entails not only a calling to account

for the stewardship of funds but also includes a calling to account for

performance, that is for how public funds are spent and the quality of decision

making that underpins such spending.88

3.20 The Committee notes that financial performance measures have limitations, in

that:

they are often only expressed in monetary terms

historical terms can require additional information to explain them

monetary units are not stable over time

they provide only part of the information required for decision making,

and

they are only relevant at a point in time.

3.21 This highlights the importance of the relationship between financial and non‐

financial performance measures and the need for consistent and reliable data

collection, over comparable periods, to support performance reporting.

Quality, timeliness and compliance

3.22 The Committee notes that the quality and timeliness of financial reports

along with agency compliance with reporting requirements continues to be

an area where the Audit found room for improvement. In particular, the

Committee has decided to make comment in relation to the findings

concerning the provision of supporting documentation when making claims

in financial reports and statements of performance.

88 APSC. 2009, Contemporary Government Challenges: Delivering performance and accountability, 3 February.


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Evidentiary documentation

3.23 The Audit report highlighted some circumstances where errors were made,

or reporting results were distorted, due to the lack of sufficient supporting

evidence. For example, the Department of Education and Training (DET)

conducted reviews on the timeliness of home education registration, but did

not document the date of these reviews to support the recorded results.89

3.24 The Audit also found that the statements of performance for JACS and the

Shared Services Centre did not provide sufficient assurances that some of the

reported results were supported by sufficient and appropriate evidence.90

3.25 Further, TAMs’ financial report contained a number of material errors,

including the understatement of the valuation of its assets by $1 billion. This

was due to a lack of substantive evidence to support some of the key

estimates used in the valuation of these assets. This is an example of how

poor recordkeeping practices, i.e., the lack of supporting documentation can

affect reporting.91 This finding is concerning and suggests that greater

controls are needed in some agencies with regard to financial reporting

processes as well as good records management practices.

3.26 The Committee reminds agencies about the importance of good records

management as a fundamental element of good governance, in particular

with respect to transparency and accountability.

3.27 Further, good records management increases productivity in an agency by

making better decisions or by avoiding incorrect ones (informed by good

records).92

89 ACT Auditor‐General’s Report No. 8 of 2009: 2008‐2009 Financial Audits, p. 84. 90 Ibid., p. 100; 115. 91 Ibid., p. 124. 92 APSC. (2007) Note for file: A report on recordkeeping in the Australian Public Service, Commonwealth of Australia, Canberra.


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Performance measurement

3.28 In an address to the Certified Practicing Accountants (CPA) Australia ACT

Congress, the former Victorian Auditor‐General, Wayne Cameron

commented that:

Performance indicators are a fundamental element of performance measurement

and accountability in the public sector. The absence of good quality non‐

financial performance data denies any form of sensible assessment of whether

governmental programs or activities are achieving their aims. It is one thing to

spend money and consume resources in the pursuit of objectives, but in most

cases only the provision of meaningful performance data will enable assessment

of success or failure.93

3.29 As mentioned previously, the effectiveness of this reporting framework, that

is, the usefulness of the statement of performance, is to a large extent

dependent upon the usefulness or meaningfulness of the performance

measures.94

3.30 As found in 2007–0895, for the 2008–09 reporting period, the Audit Office

also found:

…many instances where the performance measures and the associated targets

provided little or no meaningful information about the performance of the

reporting agency.96

3.31 On the basis of this recurring audit finding, the Committee is of the view

that some agencies need to improve the usefulness or meaningfulness of

performance measures as specified in their statements of performance.97

3.32 The Committee also emphasises the Auditor‐General’s finding in relation to

meaningful performance measures, as part of a performance audit

examining the accuracy, reporting, relevancy and completeness of

performance reporting by selected public sector agencies to Government, the

ACT Legislative Assembly, and the ACT community that:

93 Cameron, W. (2006) ‘Public sector accounting and auditing—How well have we travelled thus far—and where to from here?’, Annual Research Lecture, CPA Australia, ACT Congress, 15 November, Canberra, p. 23.

94 ACT Auditor‐General’s Report No. 8 of 2009: 2008‐2009 Financial Audits, p. 22. 95 Ibid., pp. 25–26. 96 Ibid., p. 23. 97 Ibid., p. 23.


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Some agencies used performance indicators to monitor and improve their

performance. Others prepared performance indicators only to comply with

external reporting purposes, made little use of the reported information and,

hence missed opportunities to improve performance.98

Management of capital works

3.33 The Committee acknowledges that a number of factors, some beyond the

control of project managers, can contribute to delays in the delivery of capital

works projects.

3.34 The Committee notes the Auditor‐General’s finding that funding provided

for capital works in the 2008–09 Budget increased by $113 million, or

23.8 per cent, compared to the 2007–08 Budget. In the main this was

attributed to the construction/development of the Kingsford Smith (West

Belconnen) High School, schools infrastructure, health system infrastructure

and upgrades of roads and paths.99

3.35 As in previous years, however, this designated funding was underspent. The

underspending, as a proportion of the original budget, was 41.5 per cent,

compared to 31.2 per cent in 2007–08.100

3.36 The Audit report found that:

Most of the amount underspent in 2008‐09 resulted from delays in completing

infrastructure and building projects for ACT Health, the Department of

Education and Training and the Department of Territory and Municipal

Services.101

98 ACT Auditor‐General’s Report No. 1 of 2010: Performance Reporting, April 2010, p. 4. 99 ACT Auditor‐General’s Report No. 8 of 2009: 2008‐2009 Financial Audits, p. 48. 100 Ibid., p. 48. 101 Ibid., p. 48.


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3.37 The Department of Treasury provided the following comments in relation to

this Audit finding:

The ACT Government has commitment [sic] to significant investment in

infrastructure in the future, with the aim of expanding available infrastructure to

improve the productive capacity of the community, and provide certainty to

industry and support jobs.

As a result, the overall size of the capital program will increase substantially in

coming years.102

3.38 The Committee believes that effective project management is a key

contributor to the delivery of capital works projects on time and on budget.

3.39 The Committee notes the Auditor‐General’s finding in relation to the

delivery of capital works, as part of a performance audit examining the

delivery of selected budget initiatives, that:

…nine of a total of twenty capital works project reviewed (or 45 percent) were

not completed on time and/or within budget.103

3.40 Furthermore, in relation to the delivery of capital works, the performance

audit also found that, whilst the reasons for the delays were numerous, and

some were outside agency control, the:

…lack of effective planning and project management were the main reason [sic]

affecting the delivery of many projects.104

3.41 The Committee reiterates previous comments it has made in relation to the

delivery of capital works, in particular that it is incumbent upon respective

Ministers and departmental and agency heads to ensure the completion of

capital works projects on time and within budget.105

3.42 The Committee also emphasises the Auditor‐General’s finding, as part of the

performance audit examining the delivery of selected budget initiatives, that

those initiatives106 found to be successful:

102 ACT Auditor‐General’s Report No. 8 of 2009: 2008‐2009 Financial Audits, p. 48. 103 ACT Auditor‐General’s Report No. 3 of 2010: Delivery of Budget Initiatives, June 2010, p. 5. 104 Ibid., p. 5. 105 ACT Auditor‐General’s Report No. 8 of 2008: 2007‐08 Financial Audits, p. 36. 106 Initiatives received funding in 2007–08 and 2008–09 budgets.


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…reflected the importance of good planning, and dedicated resources (human

and financial) assigned to the projects.107


0

3.43 The Committee recommends that, where applicable, ACT

Government agencies should review their capital works project

management to identify areas where improvements can made, in

particular by: (i) enhancing the overall management of projects by

adopting a formalised project management framework, (ii)

providing training to staff in project management, and (iii)

allocating appropriate resources to projects.

Information technology governance

3.44 In the present era of e‐government, information systems and their

applications comprise a significant aspect of an agency’s internal control

structure.

3.45 Information technology (IT) governance practices, including the IT control

environment, are reviewed during the financial statement audit process.

3.46 This includes an assessment of internal controls over information systems

and applications because the reliability of the financial reports and

statements of performance depends significantly on the adequacy of these

controls.108

3.47 Whilst Shared Services had improved controls over its IT systems since the

2007–08 financial audit, there still remains room for improvement. The

Committee notes that the Audit Office has been advising Shared Services to

address issues concerning the lack of regular and scheduled monitoring of

audit logs to data in Chris21 since 2005–06.109

3.48 Whilst the Government has advised that the matter is being addressed, the

Committee remains concerned that four years have passed since this matter

was first raised by the Auditor‐General.

107 ACT Auditor‐General’s Report No. 3 of 2010: Delivery of Budget Initiatives, June 2010, p. 41. 108 ACT Auditor‐General’s Report No. 8 of 2009: 2008‐2009 Financial Audits, p. 26. 109 Ibid., p. 27.


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3.49 The Committee emphasises that the use of computer information systems

and applications can reduce the risk of errors, irregularities and fraud. Where

agencies take considerable time to address identified control weaknesses

these agencies are at a higher risk of exposure to errors, irregularities and

fraud.

3.50 The Committee reminds agencies and authorities of the Commissioner for

Public Administration’s comments for the period 2008–09, that:

Those agencies reporting a decrease in the occurrence of fraud and integrity

breaches have generally attributed this to improved identification of risks and

implementation of better auditing and risk mitigation processes.110


1

3.51 The Committee recommends that ACT Government agencies ensure

that their information systems operate as intended, are accurately

and appropriately used, and that the information contained within

them is valid, complete, and secure for the purpose of supporting

agency operations and requirements.

Governance arrangements relating to an organisation’s

financial management responsibilities

3.52 The Audit found that during 2008–09 the Board of Exhibition Park

Corporation (EPC) did not always have the minimum number of board

members required by the Exhibition Park Corporation Act 1976. This breach is

concerning as:

The failure to maintain adequate board numbers increases the risk that the board

will not collectively have an adequate mix of skills and experience as intended by

the Act and may diminish the board’s capacity to form the quorum needed to

make legally binding decisions.111

110 Commissioner for Public Administration. (2009) Annual Report of Commissioner for Public Administration 2008–09, p. 30.

111 ACT Auditor‐General’s Report No. 8 of 2009: 2008‐2009 Financial Audits, p. 88.


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3.53 The Committee is aware that a failure to maintain board numbers also

occurred in 2006–07 and that this would appear to suggest that oversight of

board arrangements is a recurring issue.112 The Government’s submission

advised that the failure to maintain adequate board numbers had been

addressed, with vacancies being filled, and maintained, since the Audit.113

3.54 In its submission, the Government stated:

Exhibition Park Corporation (EPC) moved under the Department of Territory

and Municipal Services (TAMS) in November 2008. Subsequently, TAMS took

steps to ensure that vacancies on the EPC governing board were formally filled.

Since then, the minimum number of board members has been maintained or

exceeded.114

3.55 The Committee also is aware that the Board of EPC exceeded its maximum

size during 2009–10. The Minister for Tourism, Sport and Recreation was

required to dismiss one Board member to bring the size of EPC’s Board into

line with the legal requirements.

3.56 The Committee takes this opportunity to remind all ACT Government

Boards of the importance of ensuring vigilant oversight of membership

requirements in accordance with their respective enabling legislation.

112 ACT Auditor‐General’s Report No. 8 of 2009: 2008‐2009 Financial Audits, p. 88. 113 ACT Government Submission, 16 April 2010, p. 5. 114 Ibid.


3 2


3 3

4 CONCLUSION

4.1 The Committee acknowledges the views presented and the findings made in

Auditor‐General’s Performance Audit report No. 8 of 2009: 2008–09 Financial

Audits.

4.2 On the basis that financial reports, statements of performance, governance

arrangements relating to an organisation’s financial management

responsibilities, and internal controls constitute essential elements of holding

an organisation to account, the Committee is disappointed that, for another

year, many of the audit findings had recurrent themes with the findings of

previous annual financial audit reports of the Auditor‐General.

4.3 The Committee has made 11 recommendations in relation to its inquiry into

Auditor‐General’s Performance Audit report No. 8 of 2009: 2008–09 Financial

Audits.

Caroline Le Couteur MLA

Chair

2 September 2010


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R E V I E W O F A U D I T O R - G E N E R A L ’ S R E P O R T N O . 8 O F 2 0 0 9 : 2 0 0 8 – 0 9 F I N A N C I A L A U D I T S 3 5

APPENDIX A: Audits of financial reports included in

the Audit report115

The Audit report summarised the results of the audits of the financial reports of the

Territory and its agencies in 2008–09. Seventy‐one audits of financial reports were

undertaken in 2008–09, comprising of:

1 Territory

16 Departments

15 Authorities

11 Territory‐owned corporations and other companies

10 Land joint ventures and partnerships

18 Other audits

Departments

ACT Health

ACT Planning and Land Authority

Chief Minister’s Department

Disability, Housing and Community Services

Education and Training

Environment, Climate Change, Energy and Water

Executive

Home Loan Portfolio

Housing ACT

Justice and Community Safety

Legislative Assembly Secretariat

Shared Services Centre

115 Auditor‐General’s Report No 8 of 2008: 2007–08 Financial Audits, pp. 15–17.

3 6 S T A N D I N G C O M M I T T E E O N P U B L I C A C C O U N T S

Departments (contd.)

Superannuation Provision Account

Territory and Municipal services

Territory Banking Account

Treasury

Authorities

ACTION

Building and Construction Industry Training Fund Authority

Canberra Institute of Technology

Canberra Public Cemeteries Authority

Cleaning Industry Long Service Leave Authority

Construction Industry Long Service Leave Authority

Cultural Facilities Corporation


Gambling and Racing Commission

Independent Competition and Regulatory Commission

Insurance Authority

Land Development Agency

Legal Aid Commission

Public Trustee for the ACT—Office Account

University of Canberra

Territory-owned Corporations and other companies

ACTEW Corporation Limited

ACTEW Distribution Limited

ACTEW Retail Limited

ACTTAB Limited

CIT Solutions Pty Limited


Territory-owned Corporations and other companies (contd.)

Community Housing Canberra Limited

ECOWISE Environmental Pty Limited

Rhodium Asset Solutions Limited

Totalcare Industries Limited

University of Canberra College Pty Limited

UCU Ltd

Land joint ventures and partnerships

ActewAGL Joint Venture Summary Financial Report

ActewAGL Joint Venture Special Purpose Financial Report

ActewAGL Distribution Partnership

ActewAGL Retail Partnership

Forde Joint Venture—December 2008

Forde Joint Venture—June 2009

Crace Joint Venture—December 2008’

Crace Joint Venture – June 2009

Kingston Stage 1A Joint Venture

Woden East Joint Venture

Other audits

Canberra Business Development Fund

Capital Region Community Foundation Open Fund

Capital Region Community Foundation Gift Fund

Commonwealth Funding under the Interstate Road Transport Act 1985—

Expenditure Statement

Commonwealth Funding under the Interstate Road Transport Act 1985—

Revenue Statement


Other audits (contd.)

Commonwealth Funding under the Auslink National Land Transport Act 2005—

Roads to Recovery Supplementary Funding


Auslink Black Spot Projects


Auslink National Projects

Default Insurance Fund

Final Certification for NSW Thoroughbred Race Field Information Use

(ACTTAB Limited)

Gungahlin Cemetery Perpetual Care Trust

Hall Cemetery Perpetual Care Trust

Commonwealth Annual Revenue and Expenditure Statement of the Legal Aid

Commission

Nicholls Primary School Joint Facilities

Nominal Defendant

Public Trustee for the ACT—Trust Account

University of Canberra Research Income Return

Woden Cemetery Perpetual Care Trust


APPENDIX B: Reviews of statements of performance

included in the Audit report116

The Audit report summarised the results of the reviews of statements of performance

completed during 2008–09, covering the Territory and its agencies. Twenty‐eight

reviews of statements of performance were completed in 2008–09, comprising of:

14 Departments

14 Authorities

Departments

ACT Health

ACT Planning and Land Authority

Chief Minister’s Department

Disability, Housing and Community Services

Education and Training

Environment, Climate Change, Energy and Water

Home Loan Portfolio

Housing ACT

Justice and Community Safety

Shared Services Centre

Superannuation Provision Account

Territory and Municipal services

Territory Banking Account

Treasury

116 Auditor‐General’s Report No. 8 of 2008: 2007–08 Financial Audits, pp. 15–17.


Authorities

ACTION

Building and Construction Industry Training Fund Authority

Canberra Institute of Technology

Canberra Public Cemeteries Authority

Cleaning Industry Long Service Leave Authority

Construction Industry Long Service Leave Authority

Cultural Facilities Corporation


Gambling and Racing Commission

Independent Competition and Regulatory Commission

Insurance Authority

Land Development Agency

Legal Aid Commission

Public Trustee for the ACT—Office Account

Documents

Review of Auditor-General’s Report No. 8 of 2009: … · Mr Brendan Smyth MLA Deputy Chair Ms Joy Burch MLA Member to 19 November 2009 Mr John Hargreaves MLA Member from 19 November