Auditor-General’s foreword

The Australian National Audit Office (ANAO) Corporate Plan 2021–22 updates the previous corporate plan and outlines how we intend to deliver against our purpose over the next four years (2021–22 to 2024–25).

The corporate plan is the ANAO’s primary planning document – it outlines our purpose; the dynamic environment in which we operate; our commitment to building capability; and the priorities, activities and performance measures by which we will be held to account. The plan highlights our desire to engage positively and transparently in delivering audit and support services to the Parliament. In addition, the plan details our approach to risk management, which is critical to successfully meeting our responsibilities in providing professional and independent audits to the Parliament.

The corporate plan is part of our strategic planning process. This process allows us to continually improve organisational practices and capability, and demonstrate value in delivering our services to the Parliament. The corporate plan is complemented by the annual audit work program, which reflects the ANAO’s audit strategy for the coming year.

Statement of preparation

As the accountable authority of the Australian National Audit Office under the Auditor-General Act 1997, I am pleased to present the ANAO Corporate Plan 2021–22, which covers the period 2021–22 to 2024–25, as required under paragraph 35(1)(b) of the Public Governance, Performance and Accountability Act 2013.

Grant Hehir
Auditor-General
5 July 2021

A summary of the ANAO’s purpose, outcome and activities is shown in Figure 1.

Figure 1: ANAO’s purpose, outcome and activities
 

Our purpose

The purpose of the Australian National Audit Office is to support accountability and transparency in the Australian Government sector through independent reporting to the Parliament, and thereby contribute to improved public sector performance.

The ANAO delivers its purpose under the Auditor-General’s mandate in accordance with the Auditor-General Act 1997, the Public Governance, Performance and Accountability Act 2013 and the Public Service Act 1999.

The executive arm of government is accountable to the Parliament for its use of public resources and the administration of legislation passed by the Parliament. The Auditor-General scrutinises and provides independent assurance as to whether the executive is operating and accounting for its performance in accordance with the Parliament’s intent (Figure 2).

Figure 2: How the ANAO delivers its purpose
 

The Governor-General, on the recommendation of the Joint Committee of Public Accounts and Audit (JCPAA) and the Prime Minister, appoints the Auditor-General for a term of 10 years. As an independent officer of the Parliament, the Auditor-General has complete discretion in the performance or exercise of the functions or powers under the Auditor-General Act 1997 (the Act). In particular, the Auditor-General is not subject to direction in relation to:

• whether a particular audit is to be conducted;
• the way a particular audit is to be conducted; or
• the priority given to any particular matter.

In exercising the functions or powers under the Act, the Auditor-General must have regard to the audit priorities of the Parliament, as determined by the JCPAA and any reports made by the committee under the Public Accounts and Audit Committee Act 1951.

Under the Act, the Auditor-General’s functions include:

• auditing the annual financial statements of Commonwealth entities, Commonwealth companies and their subsidiaries, and the consolidated financial statements;
• conducting performance audits, assurance reviews, and audits of the annual performance statements and measures of Commonwealth entities and Commonwealth companies and their subsidiaries;
• conducting a performance audit of a Commonwealth partner as described in section 18B of the Act;
• providing other audit services as required by other legislation or allowed under section 20 of the Act; and,
• reporting directly to the Parliament on any matter or to a minister on any important matter.

As a key component of the accountability framework, the Auditor-General’s functions are part of the core business of Australian Public Sector entities with the Act setting out the requirements for entities to engage with the ANAO in carrying out the functions.

The ANAO supports the Auditor-General in this role.

ANAO values

The ANAO upholds the Australian Public Service (APS) values as set out in the Public Service Act 1999. In addition to the APS values, the ANAO places particular focus on respect, integrity and excellence – values that align with the APS values and address the unique aspects of the ANAO’s business and operating environment. The ANAO’s values guide the office in performing its role objectively, with impartiality and in a manner that supports the Parliament.

Corporate structure

The ANAO is organised into six functional areas:

• Assurance Audit Services Group provides independent assurance on the financial statements and financial administration of all Australian Government entities. It also conducts assurance reviews.
• Corporate Management Group leads corporate strategy and change for the ANAO. It provides services based on specialised knowledge, best practices and technology that enable the delivery of the ANAO’s purpose and audit outcomes.
• Performance Audit Services Group conducts performance audits and assurance reviews of Australian Government entities and their activities, and produces related publications and other information reports.
• Performance Statements Audit Services Group conducts audits of Australian Government entities performance statements and measures.
• Professional Services and Relationships Group provides technical accounting, audit and legal advice and support to the Auditor-General; establishes, manages and monitors the implementation of the quality assurance framework; and manages the ANAO’s external relations.
• Systems Assurance and Data Analytics Group provides IT audit and data analytics support to the ANAO’s assurance, performance and performance statements audit work and other information reports.

The ANAO website contains further information about the ANAO’s structure.

Key relationships

The ANAO’s primary relationship is with the Australian Parliament and the ANAO’s key interaction with the Parliament is through the JCPAA. Among its responsibilities, the JCPAA considers the operations and resources of the ANAO, including the ANAO draft budget estimates, about which it makes recommendations to both houses of Parliament. The JCPAA is also required to review all ANAO reports that are tabled in Parliament and to report the results of its deliberations to both houses of Parliament.

The ANAO supports the work of the Parliament more broadly by providing independent assurance and opinions, as well as submissions, information, assistance and briefings to parliamentarians and parliamentary committees. The Parliament and its committees also scrutinise the work and administration of the ANAO.

The ANAO’s relationships with the accountable authorities of Australian Government entities are important as the accountable authorities have primary responsibility for, and control over, the operations of their entities. The ANAO supports these relationships by regularly engaging with officials of audited entities and by attending audit committee meetings of Australian Government entities.

The ANAO invests in its external relationships to support learning through the two-way exchange and sharing of information and practices, and to support other nations through peer-to-peer institutional capacity development. The ANAO contributes to the Australasian auditing community as a member of the Australasian Council of Auditors-General. The ANAO also has close links with the international and regional auditing community through the International Organization of Supreme Audit Institutions and its regional working groups, and contributes to the delivery of the Australian Government’s aid program in the Indo-Pacific region. The ANAO values its relationships with the Australian Accounting Standards Board and the Auditing and Assurance Standards Board in their roles of setting and maintaining professional and ethical standards for the accounting and auditing professions, which underpin the delivery of quality audit services.

The ANAO website contains further information about the ANAO’s relationships.

Strategic planning framework

The ANAO’s governance and strategic direction are underpinned by a strategic planning framework (Figure 3). The corporate plan is the ANAO’s primary planning document and covers the next four-year period, 2021–22 to 2024–25. From this plan, the ANAO’s annual priorities flow into the annual audit work program, business plans, and then to individual performance agreements. The ANAO reports on its activities through its annual report.

Figure 3: ANAO’s strategic planning framework
 

This section sets out the nature of the ANAO’s operating environment over the four-year period of this corporate plan. It outlines how factors and changes in the environment may affect and influence the focus of the ANAO’s annual audit work program.  Understanding, adapting and responding to changes in our operating environment is critical to delivering on the ANAO’s purpose.

Supporting the Australian Parliament

The ANAO will seek to achieve its purpose by supporting the Auditor-General’s independent exercise of functions under the Auditor-General Act 1997. Key activities will include a program of audit and assurance engagements to provide assurance to the Australian Parliament on entities’ administration and financial statements, and the preparation of reports to inform the Parliament on aspects of Commonwealth administration.

The ANAO will further support the Parliament through ongoing assistance to parliamentarians and committees, particularly the Joint Committee of Public Accounts and Audit (JCPAA), which has statutory duties relating to the ANAO under the Public Accounts and Audit Committee Act 1951. These duties include examining all Auditor-General reports that are tabled in the Parliament.

In 2019 the then Minister for Finance, Senator the Hon Mathias Cormann, requested that the Auditor-General conduct a program of pilot assurance audits of annual performance statements of Commonwealth entities subject to the PGPA Act, in consultation with the JCPAA. The Auditor-General agreed to the request and a pilot audit of the 2019–20 performance statements was conducted throughout 2020. In 2020, the pilot had intended to look at three entities however the ANAO withdrew participation with one entity during the course of the audit. An audit opinion on two entities and a report on the outcomes of the pilot provided to the Minister for Finance and JCPAA on 2 December 2020. The Minister for Finance tabled the two audit opinions in the Parliament on 3 February 2021.

As part of the 2021-22 Budget, the ANAO received additional funding to deliver a staged program of performance statement audits – from three audits in 2021-22 increasing to 14 audits by 2024-25. Full implementation of mandatory auditing of entity performance statements would give the Parliament the same level of assurance over non-financial performance information that it currently receives for financial performance information. This should result in improvements in the quality of performance information provided to the Parliament.

In an environment where accountable authorities are charged with delivering the government’s agenda with little central public service oversight, the ANAO identifies delivery risks against the frameworks established by Parliament, government and by accountable authorities themselves. This can create tension when the principles and risk management approaches of recent reforms and regulatory frameworks do not deliver the level of compliance with mandatory requirements that the Parliament expects. Some evidence indicates that the Parliament is signalling a desire for more system-level assurance and transparency of the operation of public sector frameworks, such as the:

• performance reporting, corporate planning and risk management rules under the Public Governance, Performance and Accountability Act 2013;
• Protective Security Policy Framework, including cybersecurity rules;
• Commonwealth Procurement Rules; and
• Commonwealth Grant Rules and Guidelines.

Increasingly, the Parliament is also seeking insight from the ANAO on the relationship between compliance and organisational culture. The ANAO will continue to focus on providing transparency and accountability on regulatory frameworks through our audit work.

In supporting the Parliament, the ANAO also recognises the complexities of auditing in a contestable environment – specifically with the shift towards government and service provider information being held not only as commercial-in-confidence, but at increasingly higher levels of security classification. Access to information is critical to the audit process, providing the foundation for substantive, accurate, evidence-based conclusions. The role of the auditor will always be focused on driving transparency and unveiling the information necessary to assist the Parliament in holding executive government to account. The ANAO will continue to manage the complexities that such a shift creates in the conduct of our audit work.

Budget

As part of the 2021-22 Budget, the government announced an additional $12.2 million in 2021-22, increasing to $18.3 million by 2024-25. This funding was received to:

• support delivery of the ANAO’s mandatory financial statements audit program;
• re-build resources to enable the ANAO to target 48 performance audits by 2024-25;
• meet ongoing quality, data analysis, evidence extraction and data storage requirements; and
• deliver a staged program of performance statement audits, from three audits in 2021-22 increasing to 14 audits by 2024-25.

New models of government service delivery

The ANAO must maintain a contemporary understanding of the public sector. This understanding is critical in supporting the delivery of an integrated audit work program that provides assurance on public sector performance to the Parliament. Failure to adequately respond to changes in the government sector could negatively impact:

• confidence in the ANAO;
• our ability to contribute to improved performance and accountability in the public sector; and
• the effective and professional operation of the ANAO.

Changes to public sector service delivery are intended to deliver government services more effectively and efficiently. The ways in which the government seeks to deliver cost-effective services continue to evolve. This includes direct service delivery by government, joined-up service delivery within the sector and with private sector providers, contracted providers, and equity investment, grants and loans. New approaches and innovations in service delivery models and working arrangements create opportunities for the public sector to improve services in the longer term, but also create risks. In this environment, the ANAO must remain cognisant of new approaches and their associated risks in order to provide high-quality, insightful audits to the Parliament.

The ANAO will engage with the sector through our audit work to identify and report on advances that continue to emerge in the delivery of government services.

Technology and data analysis

Technological advances over the last decade have enabled the collection and analysis of large datasets to reveal trends, patterns and associations, and change the interface between citizens, businesses and government. In pursuing advances in technology and data analysis, government continues to improve how it delivers services online – an approach that has been readily adopted throughout the pandemic response. At the same time, the ongoing shift to digital services brings additional risks to stability and security of systems, management of data privacy and integrity, and business continuity. This is particularly evident in the shift towards using smartphone and web-based applications to support the delivery of government services. As such, technology and data analysis play an important role in the ANAO’s work.

Appropriate cybersecurity, driven by auditing against the mandatory Australian Government frameworks, remains a focus in our audit work. In both financial and performance auditing, the ANAO has consistently identified findings in entities’ information technology control and security environments. Adequate security and privacy measures are critical in managing the proliferation of data capture and storage.

At a global level, data breaches are illustrating the importance of maintaining personal privacy when managing large datasets. With growing cybersecurity threats, organisations need to understand their information and data risks and protect their critical information assets – including private, sensitive and security-classified data – from malicious actors. This is particularly relevant during the COVID-19 pandemic, where fast-paced program implementation has seen increased reliance on, and use of, online services to support government action. Appropriate security can only be maintained through a considered approach to cyber resilience, supported by effective cyber controls. For the ANAO, appropriate security remains a priority for entity data collected and stored during the audit process.

Data analytics can inform evidence-based policy, drive risk-based compliance and regulatory activities, and enable performance monitoring and measurement. Data analytics is also enabling the ANAO to better identify financial reporting, fraud and operational business risks, and tailor our approaches to deliver more targeted risk-based audits. We are able to improve audit outcomes by using a data-enabled approach that automates procedures and analysis of relationships between variables.

Our effective use of technology to support cooperation and communication with entities remains a key focus. The ANAO is working closely with public sector entities to increase opportunities for remote access to entity systems. We will continue to leverage technology to support the delivery of our work, maintain connection with entities, and increase the flexibility of our audit approach.

In delivering our work to the Parliament, it is critical that the ANAO remains responsive to technology and data changes, specifically in analysing how government is using technological advances to support program implementation and manage risk. The ANAO recognises that entities are continuously seeking opportunities to implement automated and standardised approaches to find efficiencies, manage risk and support sound decision-making.

Equally, building our capability in data analytics will enable the ANAO to better use data to strengthen audit outcomes and present data in a more accessible way to the Parliament. Investing in a capable workforce that is skilled in using data as part of auditing is a key priority.

Audit profession

The ANAO is a professional organisation with strong technical and specialist skills. It is through our high-quality, high-performing people that the ANAO produces quality audits and delivers on its purpose to the Parliament. As the external environment changes, the ANAO must ensure that it remains contemporary and effective.

The ANAO must continue to invest in our people to support audit now and into the future. Continuous improvement of staff skills will be a key requirement over the next four years, through the office’s ability to attract, retain and develop quality people.

Auditors will always need deep knowledge and experience in traditional areas such as auditing standards, financial accounting and reporting, internal controls, IT, managerial accounting, and taxation. ANAO auditors also need to have:

• good communication skills;
• deep industry expertise;
• strong digital skills;
• the ability to think critically and creatively; and
• the ability to use technology to collect and analyse audit data.

We are alert to changes in the auditing profession and their impact on the ANAO workforce. Globally, the importance of high-quality audit work is increasingly recognised due to the reliance placed on that work. Quality auditing is equally important in both the public and private sectors. The community’s expectations about the performance of public and private entities increasingly sees it turning to the audit profession to give independent and robust assurance.

Increased public interest in the ethics and integrity of government decision-making has seen a shift in the profession towards developing audit frameworks to highlight the fundamental requirements of good governance and public sector performance. In response to the community’s high expectations of the audit profession to perform its functions independently and professionally, integrity, ethics and quality in auditing will remain cornerstones of the ANAO’s work.

As previously noted, the ANAO upholds the Australian Public Service values, with a particular focus on integrity, respect and excellence. The ANAO stresses high standards to ensure independence and accountability across all levels of the organisation, which is essential in the ‘glasshouse’ context that the ANAO operates in.

Graduate recruitment is a critical area of focus for the ANAO in building our workforce capability. We recognise that the COVID-19 pandemic has posed significant challenges to the university sector, including current and prospective students. The ANAO will continue to monitor the trends emerging across the sector – specifically those that may have long-term impacts on the supply of appropriate graduate candidates, resulting in increased competition across the job market for skills that are essential to both financial and performance auditing.

The ANAO will continue to embed a culture of professionalism and quality, retaining a strong cohort of leaders who can effectively respond to current and emerging challenges. We will continue to build capability in the areas of data analytics, cybersecurity, digital communication, and risk identification and management. Failing to maintain and develop an appropriately skilled workforce would have a direct impact on the office’s risk management and ability to deliver its audit work.

The ongoing development of the ANAO’s capability ensures that we can continue to achieve our purpose. Investments in capability also support the ANAO to uphold public sector principles and values, while building sufficient flexibility and expertise to meet future needs.

The ANAO is developing a strategic organisational plan, Towards 2025, that captures the key investments we intend to make in our workforce – in our people, productivity and technology – to continue to effectively deliver quality audit services to the Parliament. Uplifting our enabling functions will be a critical focus of the plan, to ensure we maintain sufficient operational capability to build, grow and support our organisation.

In addition, Towards 2025 will capture the key investments we will make in our audit products. The ANAO will build capacity in existing programs – including assurance and performance audit – while also building capability in the area of performance statements audit. As always, quality will remain at the centre of our work

Workforce

Over recent years, the ANAO has implemented change programs to strengthen the capability of our workforce. We are starting to realise the benefits of our investments in an integrated and collaborative approach to audit, as well as productivity gains associated with flexible ways of working and the use of modern, secure and robust technology.

To support audit now and into the future, the ANAO will continue to identify strategic opportunities in the areas of people, productivity and technology.

People

The ANAO must continue to invest in the specialist and technical capability of our workforce to ensure we are suitably skilled to deliver on our purpose to the Parliament. We are committed to investing in our people, supporting their development as leading audit and public service professionals.

The ANAO recognises that by recruiting, developing and retaining our people, we are able to deliver more effectively on our purpose. Attrition in the profession, whether in public or private sector auditing, is typically high. For the ANAO, recruitment and retention will be a priority over the life of this plan. We remain focused on attracting the talented, skilled and professional people required to produce quality audits. As knowledge and expertise are critical to our work, we remain similarly focused on delivering the training required to develop efficient auditors across all our audit products. Over the next four years, to support the capability, skills and performance of our people, the ANAO will:

• enhance the ANAO’s workforce through a strategic recruitment strategy – driven by data forecasting, modern attraction techniques and customised recruitment methods;
• tailor our approach to workforce planning to effectively build, grow and support the specific resourcing needs of each service group;
• redesign and expand the ANAO graduate program;
• leverage the initiatives of the Australian Public Service Commission to improve the overall employability, capability and development of our people as high-performing APS employees;
• develop an integrated approach to learning and development across the organisation, with an aim to build both technical and non-technical skills required of our people.

Productivity

The ANAO maintains an ongoing focus on building productivity as a key capability. We recognise that improved productivity is critical to demonstrating the efficient use of taxpayer funds in the delivery of our work to the Parliament and the public. Improving operational processes and organisational design will ensure the ANAO keeps pace in a contestable environment with reliable, adaptive and professional business practices.

We will achieve productivity improvements by using resources strategically, streamlining our business practices and modernising our ways of working. These activities will become part of our business-as-usual processes, enabling continued improvement and enhanced capability.

Over the next four years, to support improvements in productivity, the ANAO will:

• review approaches to supporting entity engagement and cooperation;
• develop new resourcing models for assurance and performance audit;
• continue to embed ways of working that support mobility, collaboration and information sharing across the organisation;
• improve the functionality of our performance management system to support visibility of performance, talent and capability;
• transition to a learning management system that further supports the efficient and effective delivery of training across the organisation; and
• continue investments in our existing data analytics strategy.

Technology

The ANAO is focused on keeping pace with advances in technology. Our technology infrastructure enables the way we work, the outcomes we produce, how we connect to each other and how we engage the public sector.

From 2018, we have invested in and implemented several IT, data and security strategies that leverage technology to enable our staff to work with greater mobility and flexibility. These strategies have empowered our workforce to work remotely – anywhere, anytime. By using contemporary technology, the ANAO will continue to build efficiencies in the work we do and how we deliver it.

Over the next four years, the ANAO will make technology investments that:

• improve our connective technology to support increasingly flexible working patterns, stronger collaboration between staff and enhanced engagement with entities;
• develop modern, consumption-based cloud computing to enable a robust, flexible and cost-effective technology environment that can readily scale to support peak work patterns;
• build high-capacity data storage and computer platforms to support enhanced data analytics, modelling and automation;
• enhance the ANAO’s security environment, with a focus on maintaining strong organisational cyber resilience and streamlining secure data governance, collection and classification methods; and
• increase the technical confidence of our people through learning and development.

Performance statements audit

The ANAO is investing in an ongoing program of audits of the annual performance statements of Commonwealth entities. The purpose of these audits is to drive improvement in the quality of entities’ performance reporting against the requirements of the Commonwealth reporting framework. High-quality performance information will increase entities’ accountability to the Parliament and the public, and assist entities to develop a more systematic approach to performance monitoring and evaluation.

In 2019, the Minister for Finance requested that the ANAO conduct a pilot program of audits of annual performance statements of Commonwealth entities subject to the Public Governance, Performance and Accountability Act 2013 (PGPA Act), in consultation with the Joint Committee of Pubic Accounts and Audit. The Auditor-General accepted the request under section 40 of the PGPA Act as the mechanism by which these audits can be carried out under section 15 of the Auditor-General Act 1997. The pilot examined the 2019–20 performance statements of three entities: the Department of Veterans’ Affairs, the Attorney-General’s Department and the Department of Social Services. The pilot demonstrated that:

• the ANAO’s pilot methodology was appropriate and fit for purpose;
• the audit opinions that were presented to the Minister for Finance are accessible and understandable; and
• our quality framework can provide timely assurance to the Auditor-General, consistent with the auditing standards, that robust evidence has informed all opinions.

In 2021, the ANAO is conducting assurance audits of the 2020–21 annual performance statements of the same three Commonwealth entities, as a continuation of the Minister for Finance’s request. The 2020–21 audits are an opportunity for the ANAO to broaden its experience of performance statements audits by transferring audits to the financial statements and performance audit teams.

In the 2021–22 federal budget, the government announced additional funding of $12.2 million for assurance and performance audit services in 2021–22. This funding includes an increase in the scaling of performance statements audits: from three audits in 2021–22, to six in 2022–23, to 10 in 2023–24 and 14 audits in 2024–25.

Over the next four years, we will continue to invest in our capacity to conduct performance statements audits, and the sector’s capacity to prepare for, and engage with, these audits. We will:

• establish the Performance Statements Audit Services Group – responsible for the planning, delivery and monitoring of the implementation of performance statements auditing;
• develop and invest in the training and knowledge we require to support effective and quality performance statements auditing;
• leverage efficiencies from repeat-audited entities, with these entities likely to be better placed to provide timely and complete performance information and associated evidence;
• continue to ensure the methodology for performance statement audits is appropriate and fit for purpose; and
• work with the Department of Finance, audited entities and the sector as a whole to share insights and lessons learned to improve performance information.

Ethics and audit

The PGPA Act requires accountable authorities of Commonwealth entities to govern their entities in a way that promotes the proper use and management of public resources. The Act defines proper use as ‘efficient, effective, economical and ethical’. As outlined within the Auditor-General’s mid-term report, effectiveness is the most common of these objectives examined by the ANAO in its performance audits (84.7 per cent) . The ANAO assesses all aspects of the proper use of resources and has in recent years expanded its efforts towards conducting performance audits of efficiency.

The importance of ethics in government programs has been highlighted in several audits, particularly in procurement and grants administration. Over the next four years, the ANAO will design and implement an appropriate audit framework against which to test ethics.

A recurring problem noted across a number of audits is a lack of adequate documentation and records to support the rationale for decisions made and actions undertaken. Even where entities are technically compliant with the rules and policy framework, lack of proper documentation of decision-making processes makes it difficult for entities to be assured that the activity was undertaken with complete integrity and honesty, and without improper influence or consideration of inappropriate factors.

The ANAO’s audits, as well as external reviews such as the Independent Review of the Australian Public Service and the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, emphasise the importance of leadership in modelling ethical behaviour. Greater scrutiny in this area will help ensure that the public sector is looking beyond technical compliance and operating in line with community expectations of integrity and honesty. A culture of integrity in an organisation flows from the standards set by its leaders.

Quality

The ANAO quality framework is a core business investment. A sound quality framework supports high-quality audit work and enables the Auditor-General to have confidence in the opinions and conclusions in the reports prepared for the Parliament. This facilitates the Parliament’s confidence that the ANAO operates with independence, and that the audit approach meets the auditing standards set by the Auditor-General.

The ANAO quality framework meets the requirements of Auditing Standard ASQC 1 – Quality Control for Firms that Perform Audits and Reviews of Financial Reports and Other Financial Information, Other Assurance Engagements and Related Services Engagements. The framework encompasses key elements such as learning and development, delegations, methodology development and review, escalation of accounting policy and qualifications risk, supervisory and arm’s-length internal review, and external review. The ANAO is subject to external review, through peer review arrangements with international colleagues, a voluntary arrangement with the Australian Securities and Investments Commission (ASIC) and external audits by the Independent Auditor, appointed under section 41 of the Auditor-General Act 1997.

The ANAO publishes its quality assurance framework and plan annually. This document outlines the current quality framework and key activities that will be undertaken over the next 12 months. A report against this plan is published annually in August.

Over the next four years, the ANAO will continue its focus on the implementation of the quality assurance plan and further enhancements to the quality framework with particular emphasis on:

• expanding its root cause analysis program;
• refining the performance statements audit methodology and continuing to pilot various approaches to completing the performance statements audits;
• including good practice recommendations from external reviews and changes in auditing standards; and
• preparing for the implementation of ASQM 1 – Quality Management for Firms that Perform Audits or Reviews of Financial Reports and Other Financial Information, or Other Assurance or Related Services Engagements by December 2022.

The ANAO has one purpose: to support accountability and transparency in the Australian Government sector through independent reporting to the Parliament, and thereby contribute to improved public sector performance.

Performance measurement informs the Parliament about how well the ANAO is delivering its purpose, and provides accountability to the Parliament. Our performance framework also helps the ANAO's leadership and staff to understand the impact of their activities in delivering the ANAO's purpose.

The ANAO's performance measures provide information about what we expect to achieve in the next four years. We will report annually on our performance against the measures, and will review the measures each year to ensure they remain relevant and appropriate.

The performance measurement framework is based on measuring:

• what we did (output);
• how well we did it (quality and/or efficiency); and
• what the benefits were (impact).

Taken together, the performance measures tell a story of how well the ANAO is achieving its purpose. The output measures relay progress in the delivery of the ANAO's audit work. This audit work generates findings and recommendations for improvement that are directed at entities and tabled in the Parliament. The impact measures provide information on entities' implementation of audit findings and recommendations, and the extent to which the Parliament's engagement with our work leads to improvements in public sector administration.

The ANAO performance measures also include measures relating to quality and/or efficiency. The ANAO operates in a contestable environment and we are committed to demonstrating transparency in our operations. The quality and efficiency measures are intended to demonstrate efficient use of taxpayer resources and a commitment to quality in our work. We use information from public audit offices in other jurisdictions to benchmark much of our performance.

The ANAO's annual report contains our annual performance statements, which assess our performance against the performance measures and provide narrative and analysis.

The three broad activities that contribute to achieving our purpose are:

• assurance audit services ;
• performance audit services ; and
• relationships and corporate and professional services.

Measuring impact

The ANAO recognises that good performance information should provide insight into not only what we do, and the efficiency and quality of it, but also its impact. We measure the impact of our work through a number of key measures, including the percentage of:

• recommendations agreed by audited entities (moderate and significant findings for financial audit);
• recommendations implemented by entities (percentage of moderate and significant findings addressed within one year for financial audit, and percentage of recommendations implemented within 24 months for performance audit); and
• JCPAA members surveyed who were satisfied that the ANAO improved public sector performance and supported accountability and transparency.

The annual performance statements will also include a narrative on the impact of the ANAO's audits on public administration by:

• including analysis of key improvements made by entities during an ANAO audit process based on information included in tabled audit reports; and
• reporting on the results of surveys of audited entities.

Assurance audit services

Assurance audit services contribute to the ANAO achieving its purpose through:

• providing assurance on the fair presentation of financial statements of the Australian Government and its controlled entities by providing independent audit opinions for the Parliament, the executive and the public;
• presenting two reports annually addressing the outcomes of the financial statement audits of Australian Government entities and the consolidated financial statements of the Australian Government, to provide the Parliament with an independent examination of the financial accounting and reporting of public sector entities; and
• contributing to improvements in the financial administration of Australian Government entities.

The ANAO audits the annual financial statements of Australian Government entities and the consolidated financial statements of the Australian Government. The consolidated financial statements present the consolidated whole-of-government financial result inclusive of all Australian Government–controlled entities, including entities outside the general government sector. These audits are designed to give assurance to the Parliament that each entity's and the whole-of-government financial statements fairly represent their financial operations and positions at year end.

The ANAO also undertakes a range of assurance reviews by arrangement with entities, and in accordance with section 20 of the Auditor-General Act 1997. For example, the ANAO conducts an annual assurance review of defence major projects.

More detail on the ANAO's assurance audit services is contained in the annual audit work program.

To assess our performance against our purpose in relation to assurance audit activities, the ANAO assesses the following output, efficiency and impact measures.

Output

• percentage of mandated financial statements audit opinions issued;
• number of other assurance reports produced;
• number of financial statements–related reports produced;

To provide further context for the ANAO's outputs in relation to its assurance audit work, the annual performance statements will also provide a narrative that will discuss the number of financial statements that have not been presented to the ANAO for audit and details of any mandated non-financial statements audits completed.

Efficiency

• timeliness of issuing financial statements auditor's opinions;
• average cost of financial statement audits;

To provide further context for the ANAO's efficiency in relation to its assurance audit work, the annual performance statements will also provide a narrative that will consider the timeliness and quality of financial statements preparation by audited entities and the number of financial statements preparation findings reported by the ANAO.

Impact

• percentage of recommendations agreed; and
• percentage of recommendations implemented by audited entities.

To provide further context for the ANAO's impact in relation to its assurance audit work, the annual performance statements will also provide a narrative that will consider the results from the most recently completed annual survey of audited entities on the value of the ANAO's assurance audit services. The result reported would be the average rating for that twelve months for the "value" survey index, measured based on the entities that responded to the survey. The ANAO notes that there are limitations and potential biases in this data as it is self-reported by audited entities and not all entities complete the survey.

The performance measures and targets for assurance audit services from 2021–22 to 2024–25 are shown below.

Output

Efficiency

Impact

Performance audit services

Performance audit services contribute to the ANAO achieving its purpose through:

• audits of the performance of Australian Government programs and entities, including identifying opportunities for improvement and lessons for the sector;
• audits of annual performance statements of selected entities; and
• other assurance reviews and information reports to the Parliament.

The ANAO's performance audit activities involve the audit of all or part of an entity's operations to assess its economy, efficiency, effectiveness, ethics, and legislative and policy compliance. The ANAO identifies areas for improvement in aspects of public administration, and makes specific recommendations to assist public sector entities to improve their program management. Entities indicate their agreement to implement ANAO recommendations in the audit report, which is tabled in the Parliament. In this way, entities inform the Parliament of improvements they intend to make as a result of ANAO audits. More detail on the ANAO's performance audit services is contained in the annual audit work program.

The ANAO also undertakes audits of selected entities' annual performance statements. These audits are designed to give assurance to the Parliament that an entity's performance statements have been prepared, in all material respects, in accordance with the requirements of Division 3 of Part 2-3 of the Public Governance, Performance and Accountability Act 2013.

To assess our performance against our purpose in relation to performance audit activities, the ANAO assesses the following output, efficiency and impact measures.

Output

• number of performance audits presented to Parliament;

To provide further context for the ANAO's outputs in relation to its performance audit work, the annual performance statements will also provide a narrative that will discuss any work that performance audit staff have contributed to during the year, such as other reports presented to Parliament that are not considered performance audits (e.g. the Major Projects Report and Information Reports)

Efficiency

• average elapsed time for the conduct of performance audits;
• average cost of performance audits;

To provide further context for the ANAO's efficiency in relation to its performance audit work, the annual performance statements will also provide a narrative that will consider any drivers for movements in the average elapsed time for an audit or the average cost of an audit.

Impact

• percentage of recommendations agreed and implemented by audited entities; and

To provide further context for the ANAO's impact in relation to its performance audit work, the annual performance statements will also provide a narrative that will consider:

• analysis of key improvements made by entities during a performance audit process based on information included in tabled performance audit reports; and
• the results of a post-tabling survey of audited entities, conducted by an independent survey provider covering the most recent twelve months of completed surveys (i.e. the final quarter of the previous financial year (2020–21) and quarters one, two and three of the current financial year (2021–22)). The result reported would be the average rating for that twelve months for the "value" survey index, measured based on the entities that responded to the survey. The ANAO notes that there are limitations and potential biases in this data as it is self-reported by audited entities and not all entities complete the survey.

The performance measures and targets for performance audit services from 2021–22 to 2024–25 are shown below.

Output

Efficiency

Impact

Performance statements audit services

Performance statements audit services contribute to the ANAO achieving its purpose through the conduct of audits of annual performance statements of selected entities. Options to formalise arrangements for performance statements audits across a number of material entities are being developed following the 2021–22 Budget. In the meantime, to maintain the momentum and capability building from the 2019–20 pilot, the ANAO has commenced audits of the 2020–21 performance statements of three entities. These audits are being conducted as a continuation of the Finance Minister's 2019–20 request for the Auditor-General to conduct a pilot under section 40 of the PGPA Act, pursuant to section 15 of the Auditor-General Act 1997.

To assess our performance against our purpose in the area of performance statements audit services, the ANAO will assess the following output measure.

Output

• number of performance statements audits completed.

To provide further context for the ANAO's outputs in relation to its performance statements audit work, the ANAO's annual performance statements will also provide a narrative that will discuss the progress with developing and executive the plan to expand these audits across additional material entities.

Output

Relationships and corporate and professional services

Relationships and corporate and professional services are not a separate program in the ANAO's portfolio budget statements, and performance measures in this area are shared across the ANAO. This area of activity contributes to the ANAO achieving its purpose through:

• facilitating dissemination of the ANAO's findings to members of parliament, the executive and the public;
• providing organisation-wide support services for the ANAO, based on specialised knowledge, professional practice and technology; and
• ensuring ANAO audits are of high quality and compliant with auditing standards.

To assess our performance against our purpose in the area of relationships and corporate and professional services, the ANAO assesses the following output, quality/efficiency and impact measures.

Output

• number of appearances and submissions to parliamentary committees;
• percentage of private briefings undertaken at request of parliamentarians;
• number of published audit insights and key learnings from across ANAO activities;

To provide further context for the ANAO's outputs in relation to its relationships and corporate and professional services, the ANAO's annual performance statements will also provide a narrative that will discuss the types of engagement undertaken with Parliament and the topics of the Audit Insights published.

Quality/efficiency

• the ANAO quality assurance program indicates that audit opinions and conclusions are appropriate;
• percentage of inquiries and audit requests from parliamentarians finalised within 28 days; and

To provide further context for the ANAO's efficiency and quality in relation to its relationships and corporate and professional services, the ANAO's annual performance statements will also provide a narrative that will discuss the requests for audit received from Parliamentarians and the approach to assessing audit quality across the range of ANAO audits.

Impact

• percentage of Joint Committee of Public Accounts and Audit (JCPAA) members surveyed who were satisfied that the ANAO improved public sector performance and supported accountability and transparency.

To provide further context for the ANAO's impact in relation to its relationships and corporate and professional services, the ANAO's annual performance statements will also provide a narrative that will discuss the survey approach used to gather the JCPAA's views and the key outcomes of that survey.

The performance measures and targets for relationships and corporate and professional services from 2021–22 to 2024–25 are shown below.

Output

Quality/Efficiency

Impact

The effective management of risk is integral to achieving our objectives and supporting our purpose over the life of this plan. The ANAO’s management of risk is embedded into business-as-usual practices – we use consistent language, approaches and documentation, and adopt both qualitative and quantitative risk analysis tools across all operations and groups.

Operational risk management occurs in line with the defined roles and responsibilities in the ANAO’s risk management framework. The framework is consistent with the Commonwealth Risk Management Policy and the international standards set out in ISO 31000 – Risk Management. The Auditor-General, taking into account the advice of the Executive Board of Management and the Audit Committee, establishes the ANAO’s appetite and tolerance for risk and oversees the framework.

The risk management framework identifies specific responsibilities for key personnel across the ANAO, and the enterprise risk register assigns owners and tolerances for identified enterprise-level risk. In addition, all ANAO staff have a general responsibility to practise active risk management – a responsibility that staff are prepared for through ongoing mandatory training.

Risk management within the ANAO is one of our core strengths, supported by multi-level and independent review across all major audits, procurements and projects. Risk is integrated into our governance structure through all of our committees, and the chair of each committee ensures that risks are sufficiently managed, analysed, captured and reported, and efficiently escalated as required to the Auditor-General.

The Executive Board of Management continually monitors the environment in which the ANAO operates, adjusting the ANAO’s risk profile as necessary. The ANAO’s ongoing approach to monitoring risk enables the board to implement mitigation plans and introduce additional controls to bring enterprise risks rated above our tolerance levels back to an acceptable level.

The Audit Committee, supported by our internal audit function, receives all internal audit reports and directs senior leaders to provide information as necessary, to ensure that risk is being managed proactively. The committee provides advice, assurance and reports directly to the Auditor-General.

The ANAO defines strategic risks as those that can arise due to factors outside the ANAO’s control. We have identified two strategic risks, which are managed in line with the risk management framework and addressed in our performance measures. The strategic risks are:

• a reduction in the ANAO’s capacity for independent reporting; and
• a loss of confidence by the Parliament in the ANAO’s ability to execute the Auditor-General’s mandate.

The ANAO further recognises that the risk environment for Commonwealth entities is dynamic. As a result, the ANAO must continuously monitor the risk to entities’ ability to provide accurate evidence for audits. Where appropriate, the ANAO may adjust audit plans to ensure that quality is retained and auditing standards are not compromised. The ANAO maintains ongoing contact with contracted audit service providers to ensure consistent application of the auditing standards and the ANAO’s audit manual.