Dean Smith (WA, Liberal Party) Share this | Link to this | Hansard source

On behalf of the Joint Committee of Public Accounts and Audit, I present two reports of the committee, as listed at item 15 on today's Order of Business, as well as executive minutes on various reports. I move:

That the Senate take note of the reports.

The report of the Joint Standing Committee of Public Accounts and Audit titled Commonwealth financial statementssets out the findings of the committee's inquiry based on audit report No. 33 2016-17: Audits of the financial statements of Australian government entities for the period ended 30 June 2016.

The committee noted that the 2015-16 consolidated financial statements were prepared in accordance with the Public Governance, Performance and Accountability Act 2013 and the requirements of the Australian accounting standards, and that an unmodified auditor's report for the statements was issued on 28 November 2016.

The committee also noted that the Auditor-General had issued auditor reports on the 2015-16 financial statements of 246 Commonwealth entities up until 9 December 2016, and that all auditor reports were unmodified.

Some 245 findings were reported to entities as a result of the audits, comprising four significant, 32 moderate and 209 minor findings. 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 noted progress by these entities in responding to the audit findings. However, the committee recommended that, if next year's financial statement audits for these entities resulted in any significant or moderate findings, they should report back to the committee on their progress in responding to those 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.

During the course of the committee's inquiry, the Department of Finance took a number of steps to reinstate the previous practice for all Commonwealth entities, including government business enterprises, to disclose details of senior executive remuneration. This had been discontinued as a result of aligning the new PGPA financial reporting rule with international and Australian accounting standards. However, while acknowledging the importance of compliance with accounting standards, the committee emphasised that the accountability needs of the parliament and Australian public must continue to be met. The committee also had concerns about some of the mechanisms being used to reinstate remuneration disclosure.

The committee therefore recommended that, consistent with previous practice, more transparent disclosure of senior executive remuneration, including salary bands, should be a formal requirement, not by request. This requirement should be duly reflected in the relevant legislation and guidance, and the relevant disclosure published in entity annual reports rather than on entity websites. Finance should also report back to the committee on options for strengthening remuneration disclosure requirements, giving consideration to the requirements for the Australian Stock Exchange listed companies.

We further recommended that Finance develop benchmarks to enable entities to assess their financial sustainability against agreed parameters over time. Finance should also note the committee's proposal that more transparent reporting on contracts and consultancies, earlier delivery of annual reports and improved entity audit committees be considered as part of the independent review of the PGPA Act.

In conclusion, 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.

The committee commends the Auditor-General for his work each year in auditing the consolidated financial statements and Commonwealth entity financial statements. We also commend the Audit Office for its work in reviewing the progress of each entity in addressing any significant or moderate findings from the previous year's audit. I thank the committee members for their deliberations on these significant matters. I commend the report to the Senate.

I seek leave to incorporate the tabling statement for JCPAA report 464.

Leave granted.

The statement read as follows

JCPAA Report 464—Commonwealth Grants Administration: Inquiry based on Auditor-General's reports No. 25 (2015–16), No. 4 (2016–17), No. 12 (2016–17) and

No. 35 (2016–17)

[Mr] President, I present the report from the Joint Committee of Public Accounts and Audit, titled Commonwealth Grants Administration.

This Inquiry examined Commonwealth grants administration with a focus on the Auditor-General's findings and recommendations for the:

20 Million Trees Programme; Living Safe Together Grants Programme; and Indigenous Advancement Strategy.

Given the common approach of grant programmes to deliver government funding, the Committee was concerned that granting departments are not consistently applying the requirements of the Commonwealth grants framework.

The Committee was concerned that significant shortcomings remain in departments' processing of grant applications, as well as their assessment practices. Eligibility requirements were not clearly set-out in programme guidelines, applicants were treated inconsistently in relation to eligibility requirements and eligibility assessments were not conducted in a transparent or timely manner.

The Committee highlighted instances were ineligible applications proceeded through to merit assessment, and in some cases, were ultimately funded. The Committee viewed this as an important public administration issue. Grant applications that do not meet policy objectives, as expressed in eligibility criteria, should not receive funding.

The Committee acknowledged the importance of the two Grants Hubs— created as part of the whole-of-government Streamlining Grants Administration Initiative—in fostering consistency, thoroughness, and compliance with the Government's policy framework across these front- end processes. During this period of transition, newly shared arrangements may create risks where responsibilities are not clearly articulated or understood and intentions and outcomes may misalign.

The Committee recommended that the three programme departments establish formal partnership agreements with their respective Grants Hub (where they have not already done so), and ensure that new or existing arrangements:

The Committee also recognised the importance of accurate and complete advice for Ministers to make decisions to either approve or reject funding recommendations. The evidence presented revealed that the issues were not just system or process related, but also cultural. The

Committee considered the need for departments to instil cultural change, drawing attention to training as one of the fundamental features in influencing a department-wide cultural shift. The Committee recommended that the three programme departments measure the number of staff formally trained with regard to the Government's grants policy framework and quickly rectify gaps to retain sufficient expertise and ensure policy compliance.

Regarding written advice to decision-makers, the Inquiry pursued the ANAO's recurring audit finding of inadequate record keeping. The Committee highlighted that departments must maintain detailed, contemporaneous records to support funding recommendations to provide adequate assurance regarding those specific projects/activities that have been approved and the terms of that approval.

The Committee also examined departments' approaches to evaluating grants programmes—which is a key part to implementing effective granting processes. The Committee was concerned that departments are not taking a 'strong early focus' on formulating an evaluation strategy. In some cases evaluation frameworks are not formalised and/or implemented until years after a programme commences.

The Committee stressed the importance of departments actively collecting, sharing and acting upon lessons learned, encouraging 'communities of practice' as well as the development of model guidance documents. The Committee noted that while it is prudent to disseminate learnings from audits and other evaluation activities across a department, it is not simply enough to do so. Similar to many of the issues canvassed in this Inquiry, a supporting culture led by a

Department or Agency Executive team is required and should be supported as part of any training programs.

The Committee strongly supported the ANAO's recommendations (across the suite of reports) and recognised that full implementation is essential for continued shortcomings to be rectified. The Committee recommended that the three programme departments report on progress against the Auditor-General's respective recommendations, including clearly indicating whether full implementation has been achieved.

Grants continue to be used as a common approach to deliver government funding. Based on the Committee's findings in this Inquiry and given the new whole-of-government arrangements, the Committee flagged that future scrutiny of grants administration will pay attention to whether:

In conclusion, I would like to extend my thanks to all members of the Committee for their deliberations during this Inquiry.

I commend the report to the Senate.

Question agreed to.