Julian Hill (Bruce, Australian Labor Party) Share this | Link to this | Hansard source

On behalf of the Joint Committee of Public Accounts and Audit, I present the committee's report entitled Report 499: Inquiry into the annual performance statements 2021-22.

Report made a parliamentary paper in accordance with standing order 39(e).

by leave—I'll readily admit that performance reporting is not the most exciting of topics.

Angus Taylor (Hume, Liberal Party, Shadow Treasurer) Share this | Link to this | Hansard source

No; it is!

Julian Hill (Bruce, Australian Labor Party) Share this | Link to this | Hansard source

We've done less exciting in the audit committee; I'll give you that! But for public sector agencies charged with serious responsibilities and entrusted with spending billions of dollars, it really, really matters. Unlike financial reporting, which has been subject to the Auditor-General's mandatory audits for decades, performance reporting has been underdeveloped and underresourced. As the old saying goes, 'What is measured matters.' How agencies assess and report on their performance impacts quite directly on what they then value and do for the public.

It's how you use it; that's right, Member for Fremantle! Plainly speaking, Australians can trust the accounts of government departments because they're thoroughly audited. There's no serious question in this country that, when a government department's put out a set of financial statements, we can have confidence in them. For too long, though, the parliament and the public have had no reliable way of knowing whether or not what agencies report in their annual performance statements is true. Do these often mind-numbing KPIs and measures fairly represent what an agency does? Are the data sources actually there to sit under all of those measures? Are they a fair measure of what's been achieved, or did someone fudge the books? The introduction of performance statement audits is therefore a big change for the Audit Office, and it's a change that the committee has, over multiple electoral terms, supported, and it continues to do so.

The ANAO's audits of the 2021-22 performance statements show both a clear improvement in the performance reporting of audited entities and increased engagement in the public sector more broadly. Sometimes it's important that entities know that someone might be checking their work because that engenders better performance and encourages them to check it themselves. Sunlight is the best form of disinfectant, and transparency breeds better behaviour in all organisations.

The committee examined the key issues raised in the Auditor-General's audit of the 2021-22 performance statements, including the impact of machinery-of-government changes, the lack of robust methodologies or supporting information for performance measures and non-compliance with the PGPA Act rule. The committee also examined how the Audit Office conducts its performance statement audits and the impact on the entities, including issues in relation to the audit methodology and timing. The committee's report makes four stunning, scintillating recommendations, which I'm sure the member for Hume will take some time to examine, including that the Auditor-General Act 1997 be amended to remove the requirement for the Minister for Finance to request the ANAO to conduct performance statement audits.

It is ridiculous when you think that there are now three broad functions of the Audit Office: financial statement auditing, which is mandatory and which they must do against the Australian accounting standards; performance audits, which are what most of the public attention is on and which are at the full discretion of the Auditor-General; and the government has now funded ongoing appropriation to the Audit Office to take a permanent role in auditing performance statements, the third limb of the auditing function. It's ridiculous that we have a requirement that the audit office has to keep seeking permission from the Minister for Finance to simply undertake that core appropriation function. This is not a new idea for the committee. In fact, we recommended that this requirement be removed twice before, but the previous government actually took no action. I don't think they even responded to the report. While we appreciate that it's not the highest priority change to pursue, we continue to see it as important to streamline the Auditor-General's work, and we hope the minister will now progress the change.

The committee's report makes three additional recommendations to improve the process and impact of performance statements audits, including that the ANAO share trends and lessons learnt in performance reporting with the sector, that the ANAO and Department of Finance develop and publish a schedule of performance statements audits and that the ANAO and Department of Finance update the committee on their work on the audit methodology and guidance on performance reporting requirements.

These audits, the 2021-22 performance statements, were the first iteration after the ANAO's pilot program, and both the Audit Office and the audited entities understand that this process will take time to mature. It is a whole new methodology being rolled out across the public sector, and all of the entities we engaged with were taking it seriously and trying to improve the way that they think about their performance and account for it to the parliament and the public. So this methodology will continue to develop as the rollout expands, and the committee will continue to keep an eye on it through our annual program.

I thank the deputy chair and the committee members who participated in this inquiry. It is dry stuff, but it really does matter, because it focuses the mind of all 200-and-something public sector agencies that spend hundreds of billions of dollars of taxpayer money every year to improve their performance collectively. So it's boring, nerdy and niche but it matters. The committee secretariat did a sterling job with this. The quality of the analysis and the reflections were absolutely fantastic, so I really thank them for it. And I think the committee secretary is very relieved that we didn't call the report 'performance anxiety', as we'd teased her and threatened to do, so that's a plus too! I commend the report to the House.