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Type: Performance statements audit
Report number: 25 of 2024-25
Portfolios: Across entities
Entities: Across entities
Date tabled:
Audit Summary : show
Executive summary
1. Performance information is important for public sector accountability and transparency as it shows how taxpayers’ money has been spent and what this spending has achieved. The development and use of performance information is integral to an entity’s strategic planning, budgeting, monitoring and evaluation processes.
2. Annual performance statements are expected to present a clear, balanced and meaningful account of how well an entity has performed against the expectations it set out in its corporate plan. They are an important way of showing the Parliament and the public how effectively Commonwealth entities have used public resources to achieve desired outcomes.
The needs of the Parliament
3. Section 5 of the Public Governance, Performance and Accountability Act 2013 (PGPA Act) sets out the objects of the Act, which include requiring Commonwealth entities to provide meaningful performance information to the Parliament and the public. The Replacement Explanatory Memorandum to the PGPA Bill 2013 stated that ‘The Parliament needs performance information that shows it how Commonwealth entities are performing.’1 The PGPA Act and the Public Governance, Performance and Accountability Rule 2014 (PGPA Rule) outline requirements for the quality of performance information, and for performance monitoring, evaluation and reporting.
4. The Parliament’s Joint Committee of Public Accounts and Audit (JCPAA) has a particular focus on improving the reporting of performance by entities. In September 2023, the JCPAA tabled its Report 499, Inquiry into the Annual Performance Statements 2021–22, stating:
As the old saying goes, ‘what is measured matters’, and how agencies assess and report on their performance impacts quite directly on what they value and do for the public. Performance reporting is also a key requirement of government entities to provide transparency and accountability to Parliament and the public.2
5. Without effective performance reporting, there is a risk that trust and confidence in government could be lost (see paragraphs 1.3 to 1.6).
Entities need meaningful performance information
6. Having access to performance information enables entities to understand what is working and what needs improvement, to make evidence-based decisions and promote better use of public resources. Meaningful performance information and reporting is essential to good management and the effective stewardship of public resources.
7. It is in the public interest for an entity to provide appropriate and meaningful information on the actual results it achieved and the impact of the programs and services it has delivered. Ultimately, performance information helps a Commonwealth entity to demonstrate accountability and transparency for its performance and achievements against its purposes and intended results (see paragraphs 1.7 to 1.13).
The 2023–24 performance statements audit program
8. In 2023–24, the ANAO conducted audits of annual performance statements of 14 Commonwealth entities. This is an increase from 10 entities audited in 2022–23.
9. Commonwealth entities continue to improve their strategic planning and performance reporting. There was general improvement across each of the five categories the ANAO considers when assessing the performance reporting maturity of entities: leadership and culture; governance; reporting and records; data and systems; and capability.
10. The ANAO’s performance statements audit program demonstrates that mandatory annual performance statements audits encourage entities to invest in the processes, systems and capability needed to develop, monitor and report high quality performance information (see paragraphs 1.18 to 1.27).
Audit conclusions and additional matters
11. Overall, the results from the 2023–24 performance statements audits are mixed. Nine of the 14 auditees received an auditor’s report with an unmodified conclusion.3 Five received a modified audit conclusion identifying material areas where users could not rely on the performance statements, but the effect was not pervasive to the performance statements as a whole.
12. The two broad reasons behind the modified audit conclusions were:
- completeness of performance information — the performance statements were not complete and did not present a full, balanced and accurate picture of the entity’s performance as important information had been omitted; and
- insufficient evidence — the ANAO was unable to obtain enough appropriate evidence to form a reasonable basis for the audit conclusion on the entity’s performance statements.
13. Where appropriate, an auditor’s report may separately include an Emphasis of Matter paragraph. An Emphasis of Matter paragraph draws a reader’s attention to a matter in the performance statements that, in the auditor’s judgement, is important for readers to consider when interpreting the performance statements. Eight of the 14 auditees received an auditor’s report containing an Emphasis of Matter paragraph. An Emphasis of Matter paragraph does not modify the auditor’s conclusion (see Appendix 1).
Audit findings
14. A total of 66 findings were reported to entities at the end of the final phase of the 2023–24 performance statements audits. These comprised 23 significant, 23 moderate and 20 minor findings.
15. The significant and moderate findings fall under five themes:
- Accuracy and reliability — entities could not provide appropriate evidence that the reported information is reliable, accurate and free from bias.
- Usefulness — performance measures were not relevant, clear, reliable or aligned to the entity’s purposes or key activities. Consequently, they may not present meaningful insights into the entity’s performance or form a basis to support entity decision making.
- Preparation — entity preparation processes and practices for performance statements were not effective, including timeliness, record keeping and availability of supporting documentation.
- Completeness — performance statements did not present a full, balanced and accurate picture of the entity’s performance, including all relevant data and contextual information.
- Data — inadequate assurance over the completeness, integrity and accuracy of data, reflecting a lack of controls over how data is managed across the data lifecycle, from data collection through to reporting.
16. These themes are generated from the ANAO’s analysis of the 2023–24 audit findings, and no theme is necessarily more significant than another (see paragraphs 2.12 to 2.17).
Measuring and assessing performance
17. The PGPA Rule requires entities to specify targets for each performance measure where it is reasonably practicable to set a target.4 Clear, measurable targets make it easier to track progress towards expected results and provide a benchmark for measuring and assessing performance.
18. Overall, the 14 entities audited in 2023–24 reported against 385 performance targets in their annual performance statements. Entities reported that 237 targets were achieved/met5, 24 were substantially achieved/met, 24 were partially achieved/met and 82 were not achieved/met.6 Eighteen performance targets had no definitive result.7
19. Assessing entity performance involves more than simply reporting how many performance targets were achieved. An entity’s performance analysis and narrative is important to properly inform stakeholder conclusions about the entity’s performance (see paragraphs 2.37 to 2.44).
Connection to broader government policy initiatives
20. Performance statements audits touch many government policies and frameworks designed to enhance government efficiency, effectiveness and impact, and strengthen accountability and transparency. This is consistent with the drive to improve coherence across the Commonwealth Government’s legislative and policy frameworks that led to the PGPA Act being established.8 The relationship between performance statements audits and existing government policies and frameworks is illustrated in Figure S.1.
Figure S.1. Relationship of performance statements audits to government policies and frameworks
Source: ANAO analysis.
The future direction of annual performance statements audits
21. Public expectations and attitudes about public services are changing.9 Citizens not only want to be informed, but also to have a say between elections about choices affecting their community10 and be involved in the decision-making process, characterised by, among other things, citizen-centric and place-based approaches that involve citizens and communities in policy design and implementation.11 There is increasing pressure on Commonwealth entities from the Parliament and citizens demanding more responsible and accountable spending of public revenues and improved transparency in the reporting of results and outcomes.
22. A specific challenge for the ANAO is to ensure that performance statements audits influence entities to embrace performance reporting and shift away from a compliance approach with a focus on complying with minimum reporting requirements or meeting the minimum standard they think will satisfy the auditor.12 A compliance approach misses the opportunity to use performance information to learn from experience and improve the delivery of government policies, programs and services.
23. Performance statements audits reflect that for many entities there is not a clear link between internal business plans and the entity’s corporate plan. There can be a misalignment between the information used for day-to-day management and governance of an entity and performance information presented in annual performance statements. Periodic monitoring of performance measures is also not an embedded practice in all Commonwealth entities. These observations indicate that some entities are reporting measures in their performance statements that may not represent the highest value metrics for running the business or for measuring and assessing the entity’s performance (see paragraphs 4.32 to 4.35).
Developments in the ANAO’s audit approach
24. Working with audited entities, the ANAO has progressively sought to strengthen sector understanding of the Commonwealth Performance Framework. This includes a focus on helping entities to apply general principles and guidance to their own circumstances and how entities can make incremental improvements to their performance reporting over time. For example:
- in 2021–22, the ANAO gave prominence to ensuring entities understood and complied with the technical requirements of the PGPA Act and the PGPA Rule;
- in 2022–23, there was an increased focus on supporting entities to establish materiality policies that help determine which performance information is significant enough to be reported in performance statements and to develop entity-wide performance frameworks; and
- in 2023–24, there was an increased focus on assessing the completeness of entity purposes, key activities and performance measures and whether the performance statements present fairly the performance of the entity (see paragraphs 4.36 to 4.38).
Appropriate and meaningful
25. For annual performance statements to achieve the objects of the PGPA Act, they must present performance information that is appropriate (accountable, reliable and aligned with an entity’s purposes and key activities) and meaningful (providing useful insights and analysis of results). They also need to be accessible (readily available and understandable).
26. For the 2024–25 audit program and beyond, the ANAO will continue to encourage Commonwealth entities to not only focus on technical matters (like selecting measures of output, efficiency and effectiveness and presenting numbers and data), but on how to best tell their performance story. This could include analysis and narrative in annual performance statements that explains the ‘why’ and ‘how’ behind the reported results and providing future plans and initiatives aligned to meeting expectations set out in the corporate plan.13
27. It is difficult to demonstrate effective stewardship of public resources without good performance information and reporting. Appropriate and meaningful performance information can show that the entity is thinking beyond the short-term. It can show that the entity is committed to long-term responsible use and management of public resources and effectively achieving results to create long lasting impacts for citizens (see paragraphs 4.39 to 4.45).
Linking financial and performance information
28. The ‘Independent Review into the operation of the PGPA Act’14 noted that there would be merit in better linking performance and financial results, so that there is a clear line of sight between an entity’s strategies and performance and its financial results.15
29. Improving links between financial and non-financial performance information is necessary for measuring and assessing public sector productivity. As a minimum, entities need to understand both the efficiency and effectiveness of how taxpayers’ funds are used if they are to deliver sustainable, value-for-money programs and services. There is currently limited reporting by entities of efficiency (inputs over outputs) and even less reporting of both efficiency and effectiveness for individual key activities.
30. Where entities can demonstrate that more is produced to the same or better quality using fewer resources, this reflects improved productivity.
31. The ANAO will seek to work with the Department of Finance and entities to identify opportunities for annual performance statements to better link information on entity strategies and performance to their financial results (see paragraphs 4.46 to 4.51).
Cross entity measures and reporting
32. ANAO audits are yet to see the systemic development of cross-sector performance measures as indicators where it has been recognised that organisational performance is partly reliant on the actions of other agencies. Although there are some emerging better practices16, the ANAO’s findings reveal that integrated reporting on cross-cutting initiatives and linked programs could provide Parliament, government and the public with a clearer, more unified view of performance on key government priorities such as:
- Closing the Gap;
- women’s safety;
- housing;
- whole-of-government national security initiatives; and
- cybersecurity.
33. Noting the interdependence, common objectives and shared responsibility across multiple government programs, there is an opportunity for Commonwealth entities to make appropriate reference to the remit and reporting of outcomes by other entities in annual performance statements. This may enable the Parliament, the government and the public to understand how the work of the reporting entity complements the work done by other parts of government.17
34. As the performance statements audit program continues to broaden in coverage, there will be opportunities for the ANAO to consider the merit of a common approach to measuring performance across entities with broadly similar functions, such as providing policy advice, processing claims or undertaking compliance and regulatory functions. A common basis for assessing these functions may enable the Parliament, the government and the public to compare entities’ results and consider which approaches are working more effectively and why (see paragraphs 4.52 to 4.56).
Type: Financial statement audit
Report number: 22 of 2024-25
Portfolios: Across Entities
Entities: Across Entities
Date tabled:
Audit Summary : show
Executive summary
The Australian National Audit Office (ANAO) publishes an annual audit work program (AAWP) which reflects the audit strategy and deliverables for the forward year. The purpose of the AAWP is to inform the Parliament, the public, and government sector entities of the planned audit coverage for the Australian Government sector by way of financial statements audits, performance audits, performance statements audits and other assurance activities. As set out in the AAWP, the ANAO prepares two reports annually that, drawing on information collected during financial statements audits, provide insights at a point in time of financial statements risks, governance arrangements and internal control frameworks of Commonwealth entities. These reports provide Parliament with an independent examination of the financial accounting and reporting of public sector entities.
These reports explain how entities’ internal control frameworks are critical to executing an efficient and effective audit and underpin an entity’s capacity to transparently discharge its duties and obligations under the Public Governance, Performance and Accountability Act 2013 (PGPA Act). Deficiencies identified during audits that pose either a significant or moderate risk to an entity’s ability to prepare financial statements free from material misstatement are reported.
This report presents the final results of the 2023–24 audits of the Australian Government’s Consolidated Financial Statements (CFS) and 245 Australian Government entities. The Auditor-General Report No. 42 2023–24 Interim Report on Key Financial Controls of Major Entities, focused on the interim results of the audits of 27 of these entities.
Consolidated financial statements
Audit results
1. The CFS presents the whole of government and the General Government Sector financial statements. The 2023–24 CFS were signed by the Minister for Finance on 28 November 2024 and an unmodified auditor’s report was issued on 2 December 2024.
2. There were no significant or moderate audit issues identified in the audit of the CFS in 2023–24 or 2022–23.
Australian Government financial position
3. The Australian Government reported a net operating balance of a surplus of $10.0 billion ($24.9 billion surplus in 2022–23). The Australian Government’s net worth deficiency decreased from $570.3 billion in 2022–23 to $567.5 billion in 2023–24 (see paragraphs 1.8 to 1.26).
Financial audit results and other matters
Quality and timeliness of financial statements preparation
4. The ANAO issued 240 unmodified auditor’s reports as at 9 December 2024. The financial statements were finalised and auditor’s reports issued for 79 per cent (2022–23: 91 per cent) of entities within three months of financial year-end. The decrease in timeliness of auditor’s reports reflects an increase in the number of audit findings and legislative breaches identified by the ANAO, as well as limitations on the available resources within the ANAO in order to undertake additional audit procedures in response to these findings
5. A quality financial statements preparation process will reduce the risk of inaccurate or unreliable reporting. Seventy-one per cent of entities delivered financial statements in line with an agreed timetable (2022–23: 72 per cent). The total number of adjusted and unadjusted audit differences decreased during 2023–24, although 38 per cent of audit differences remained unadjusted. The quantity and value of adjusted and unadjusted audit differences indicate there remains an opportunity for entities to improve quality assurance over financial statements preparation processes (see paragraphs 2.138 to 2.154).
Timeliness of financial reporting
6. Annual reports that are not tabled in a timely manner before budget supplementary estimates hearings decrease the opportunity for the Senate to scrutinise an entity’s performance. Timeliness of tabling of entity annual reports improved. Ninety-three per cent (2022–23: 66 per cent) of entities that are required to table an annual report in Parliament tabled prior to the date that the portfolio’s supplementary budget estimates hearing commenced. Supplementary estimates hearings were held one week later in 2023–24 than in 2022–23. Fifty-seven per cent of entities tabled annual reports one week or more before the hearing (2022–23: 12 per cent). Of the entities required to table an annual report, 4 per cent (2022–23: 6 per cent) had not tabled an annual report as at 9 December 2024 (see paragraphs 2.155 to 2.166).
Official hospitality
7. Eighty-one per cent of entities permit the provision of hospitality and the majority have policies, procedures or guidance in place. Expenditure on the provision of hospitality for the period 2020–21 to 2023–24 was $70.0 million. Official hospitality involves the provision of public resources to persons other than officials of an entity to achieve the entity’s objectives. Entities that provide official hospitality should have policies, and guidance in place which clearly set expectations for officials. There are no mandatory requirements for entities in managing the provision of hospitality, however, the Department of Finance (Finance) does provide some guidance to entities in model accountable authority instructions. Of those entities that permit hospitality 83 per cent have established formal policies, guidelines or processes.
8. Entities with higher levels of exposure to the provision of official hospitality could give further consideration to implementing or enhancing compliance and reporting arrangements. Seventy-four per cent of entities included compliance requirements in their policies, procedures or guidance which support entity’s obtaining assurance over the conduct of official hospitality. Compliance processes included acquittals, formal reporting, attestations from officials and/or periodic internal audits. Thirty-one per cent of entities had established formal reporting on provision of official hospitality within their entities (see paragraphs 2.36 to 2.56).
Artificial intelligence
9. Fifty-six entities used artificial intelligence (AI) in their operations during 2023–24 (2022–23: 27 entities). Most of these entities had adopted AI for research and development activities, IT systems administration and data and reporting.
10. During 2023–24, 64 per cent of entities that used AI had also established internal policies governing the use of AI (2022–23: 44 per cent). Twenty-seven per cent of entities had established internal policies regarding assurance over AI use. An absence of governance frameworks for managing the use of emerging technologies could increase the risk of unintended consequences. In September 2024, the Digital Transformation Agency (DTA) released the Policy for the responsible use of AI in government, which establishes requirements for accountability and transparency on the use of AI within entities (see paragraphs 2.67 to 2.71).
Cloud computing
11. Assurance over effectiveness of cloud computing arrangements (CCA) could be improved. During 2023–24, 89 per cent of entities used CCAs as part of the delivery model for the IT environment, primarily software-as-a-service (SaaS) arrangements. A Service Organisation Controls (SOC) certificate provides assurance over the implementation, design and operating effectiveness of controls included in contracts, including security, privacy, process integrity and availability. Eighty-two per cent of entities did not have in place a formal policy or procedure which would require the formal review and consideration of a SOC certificate.
12. In the absence of a formal process for obtaining and reviewing SOC certificates, there is a risk that deficiencies in controls at a service provider are not identified, mitigated or addressed in a timely manner (see paragraphs 2.57 to 2.66).
Audit committee member rotation
13. Audit committee member rotation considerations could be enhanced. The rotation of audit committee membership is not mandated, though guidance to the sector indicates that rotation of members allows for a flow of new skills and talent through committees, supporting objectivity. Forty-six per cent of entities did not have a policy requirement for audit committee member rotation.
14. Entities could enhance the effectiveness of their audit committees by adopting a formal process for rotation of audit committee membership, which balances the need for continuity and objectivity of membership (see paragraphs 2.16 to 2.21).
Fraud framework requirements
15. The Commonwealth Fraud Control Framework 2017 encourages entities to conduct fraud risk assessments at least every two years and entities responsible for activities with a high fraud risk may assess risk more frequently. All entities had in place a fraud control plan. Ninety-seven per cent of entities had conducted a fraud risk assessment within the last two years. Changes to the framework which occurred on 1 July 2024 requires entities to expand plans to take account of preventing, detecting and dealing with corruption, as well as periodically examining the effectiveness of internal controls (see paragraphs 2.16 to 2.21).
Summary of audit findings
16. Internal controls largely supported the preparation of financial statements free from material misstatement. However, the number of audit findings identified by the ANAO has increased from 2023–24. A total of 214 audit findings and legislative breaches were reported to entities as a result of the 2023–24 financial statements audits. These comprised six significant, 46 moderate, 147 minor audit findings and 15 legislative breaches. The highest number of findings are in the categories of:
- IT control environment, including security, change management and user access;
- compliance and quality assurance frameworks, including legal conformance; and
- accounting and control of non-financial assets.
17. IT controls remain a key issue. Forty-three per cent of all audit findings identified by the ANAO related to the IT control environment, particularly IT security. Weaknesses in controls in this area can expose entities to an increased risk of unauthorised access to systems and data, or data leakage. The number of IT findings identified by the ANAO indicate that there remains room for improvement across the sector to enhance governance processes supporting the design, implementation and operating effectiveness of controls.
18. These audits findings included four significant legislative breaches, one of which was first identified since 2012–13. The majority (53 per cent) of other legislative breaches relate to incorrect payments of remuneration to key management personnel and/or non-compliance with determinations made by the Remuneration Tribunal. Entities could take further steps to enhance governance supporting remuneration to prevent non-compliance or incorrect payments from occurring (see paragraphs 2.72 to 2.137).
Financial sustainability
19. An assessment of an entity’s financial sustainability can provide an indication of financial management issues or signal a risk that the entity will require additional or refocused funding. The ANAO’s analysis concluded that the financial sustainability of the majority of entities was not at risk (see paragraphs 2.167 to 2.196).
Reporting and auditing frameworks
Changes to the Australian public sector reporting framework
20. The development of a climate-related reporting framework and assurance regime in Australia continues to progress. ANAO consultation with Finance to establish an assurance and verification regime for the Commonwealth Climate Disclosure (CCD) reform is ongoing (see paragraphs 3.20 to 3.24).
21. Emerging technologies (including AI) present opportunities for innovation and efficiency in operations by entities. However, rapid developments and associated risks highlight the need for Accountable Authorities to implement effective governance arrangements when adopting these technologies. The ANAO is incorporating consideration of risks relating to the use of emerging technologies, including AI, into audit planning processes to provide Parliament with assurance regarding the use of AI by the Australian Government (see paragraphs 3.25 to 3.33).
22. The ANAO Audit Quality Report 2023–24 was published on 1 November 2024. The report demonstrates the evaluation of the design, implementation and operating effectiveness of the ANAO’s Quality Management Framework and achievement of ANAO quality objectives (see paragraphs 3.34 to 3.39).
23. The ANAO Integrity Report 2023–24 and the ANAO Integrity Framework 2024–25 were also published on 1 November 2024 to provide transparency of the measures undertaken to maintain a high integrity culture within the ANAO (see paragraphs 3.44 to 3.46).
Cost of this report
24. The cost to the ANAO of producing this report is approximately $445,000.
Type: Performance audit
Report number: 16 of 2024-25
Portfolios: Treasury; Climate Change, Energy, the Environment and Water
Entities: Department of the Treasury; Department of Climate Change, Energy, the Environment and Water
Date tabled:
Audit Summary : show
Summary and recommendations
Background
1. In September 2022 the Australian Energy Regulator reported that over the course of 2022, the war in Ukraine resulted in price volatility and price hikes for energy on international markets.1 Due to the links between domestic and export markets this affected domestic customers and the wider economy. Simultaneously, domestic factors contributed to wholesale energy price increases.
2. The Department of the Treasury (Treasury) and the Department of Climate Change, Energy, the Environment and Water (DCCEEW) were lead entities in the development of policy options to seek to address energy price increases. On 9 December 2022, the Prime Minister, the Treasurer, and the Minister for Climate Change and Energy announced the Energy Price Relief Plan (the plan) — a package of measures designed to ‘shield Australian families and businesses from the worst impacts of predicted energy price spikes.’
Rationale for undertaking the audit
3. The budget for the package of measures under the Energy Price Relief Plan was estimated between $3 billion and $3.5 billion over five years. The government sought urgent advice on options to seek to address energy price increases.
4. The audit provides assurance to Parliament on whether the Energy Price Relief Plan was effectively designed and the effectiveness of planned frameworks for implementation and evaluation.
Audit objective and criteria
5. The objective of this audit was to assess the effectiveness of the design process for the Energy Price Relief Plan.
6. To form a conclusion against the objective, the following criteria were adopted.
- Was the development of the plan informed by sound policy advice?
- Was implementation effectively planned?
- Are the arrangements to assess the achievement of outcomes of the plan effective?
7. The audit did not assess:
- the design or implementation of the Capacity Investment Scheme which was also included in the 9 December 2022 announcement;
- the design of the Australian Domestic Gas Security Mechanism reforms agreed to by government in September 2022; or
- the implementation of the extension of the energy bill rebates announced in May 2024.
Conclusion
8. The design process for the Energy Price Relief Plan was largely effective. The design process could have been improved with earlier engagement with delivery agencies. The Energy Price Relief Plan would benefit from a plan to assess the achievement of outcomes.
9. The development of the Energy Price Relief Plan was informed by sound policy advice. Roles and responsibilities, relevant guidance and risk management processes were in place to support the development of the Energy Price Relief Plan. Benefits of policy options were assessed and were supported by evidence. During the design process industry stakeholders were consulted on the gas market interventions. Stakeholders within the APS were consulted in the development of policy options, except for: Services Australia; the Department of Infrastructure, Transport, Regional Development, Communications and the Arts (DITRDCA); and the Department of Veterans’ Affairs (DVA). Earlier engagement with APS delivery agencies would have improved the consideration of implementation within the policy advice provided to government. Treasury and DCCEEW did not document risks associated with rapid policy development and risk mitigation strategies. Activities that can assist in reducing risks were undertaken, including seeking expert advice, engaging industry stakeholders, and establishing fit-for-purpose governance and coordination arrangements.
10. Arrangements established to support implementation of the Energy Price Relief Plan were largely effective. Policy advice to government identified risks for all measures. Risks related to the Australian Domestic Gas Security Mechanism reforms were considered when the reforms were initially developed in 2022, however risks specific to bringing forward the commencement of the reforms were not incorporated with other risks included in policy advice. Treasury and DCCEEW monitored risks for three of the five measures — targeted electricity bill rebate, mandatory gas code of conduct, and coal price cap. The department responsible for the implementation of the targeted electricity bill rebate was not identified in policy advice provided to government in December 2022 and was not confirmed by government until August 2023. Treasury had not established a risk assessment and an implementation plan for the targeted electricity bill rebate and the gas price cap. Treasury’s progress reports to government on the targeted electricity bill relief included elements of implementation planning.
11. Arrangements to assess the achievement of outcomes for the Energy Price Relief Plan were largely effective. While activities to assess the achievement of outcomes for individual measures have been planned or undertaken, plans to assess the collective impacts of the five measures under the Energy Price Relief Plan were not established. Monitoring arrangements have been established for four of five measures and implemented — the Australian Domestic Gas Security Mechanism has not been activated. Treasury and DCCEEW have produced reporting on the collective impacts of select measures. DCCEEW has conducted a review of the coal price cap. Planning has commenced for reviews of the targeted electricity bill rebate, mandatory gas code of conduct and Australian Domestic Gas Security Mechanism.
Supporting findings
Development of the plan
12. Roles and responsibilities were defined for the development of policy options. Treasury and DCCEEW have largely relevant guidance on developing policy advice available for staff. The departments did not document risks, and associated mitigation strategies, related to policy development. Activities that may reduce risks were undertaken: Treasury and DCCEEW sought expert advice; the Australian Competition and Consumer Commission (ACCC) engaged with select industry stakeholders; and the Department of the Prime Minister and Cabinet (PM&C) established fit-for-purpose governance and coordination arrangements. (See paragraphs 2.3 to 2.19)
13. During the development of policy advice, APS stakeholders — except for Services Australia, DITRDCA and DVA — were engaged in the design of all measures. Select industry stakeholders were engaged on the gas market interventions prior to policy advice being provided to government. (See paragraphs 2.20 to 2.81)
14. Market modelling and data and advice from relevant government entities was used to support advice to government on policy options. Potential impacts of the proposed policy options included in policy advice were supported by evidence. Treasury and DCCEEW’s impact analysis included an assessment of regulatory burden costs and benefits for three measures — gas price cap, mandatory gas code of conduct and bringing forward the commencement of the Australian Domestic Gas Security Mechanism reforms. While DCCEEW had undertaken a preliminary assessment, an impact analysis was not undertaken for the remaining two measures — targeted electricity bill rebate and coal price cap. (See paragraphs 2.82 to 2.94)
Planning for implementation
15. Advice to government identified risks for four of the five measures. Risks related to the Australian Domestic Gas Security Mechanism reforms were considered as part of an earlier impact assessment process and specific risks related to bringing forward the commencement of the reforms were not highlighted in policy advice. Advice did not document the risk that payments may be made to ineligible recipients under the targeted electricity bill rebate measure. DCCEEW undertook risk assessments for two of the five measures — the mandatory gas code of conduct and the coal price cap. Risks were monitored for three of the four measures led by Treasury and DCCEEW — the targeted electricity bill rebate, mandatory gas code of conduct, and coal price cap. Risk reporting was undertaken by Treasury for the targeted electricity bill rebate and by DCCEEW for the mandatory gas code of conduct. Risks related to the gas price cap and coal price cap measures were not reported. (See paragraphs 3.3 to 3.16)
16. Advice to government included information on implementation of all five measures under the plan. Policy advice on the targeted electricity bill rebate and the coal price cap measures did not identify which department would be responsible for implementation. Implementation plans were established for three measures — mandatory gas code of conduct, coal price cap and bringing forward the commencement of the Australian Domestic Gas Security Mechanism reforms. Implementation planning activities were undertaken for the remaining two measures. For the targeted electricity bill rebate, Treasury had not established an implementation plan. Elements of implementation planning were included within progress reports provided to government. Implementation planning was discussed in governance meetings co-chaired by Treasury and Services Australia. (See paragraphs 3.17 to 3.38)
Monitoring and assessing the achievement of outcomes
17. Subsequent to the announcement of the Energy Price Relief Plan in December 2022, oversight and monitoring frameworks have been established and implemented for four of five measures — the Australian Domestic Gas Security Mechanism has not been activated and therefore monitoring arrangements have not been implemented. Monitoring activities are being undertaken in accordance with the frameworks which have been established. (See paragraphs 4.3 to 4.29)
18. Treasury and DCCEEW outlined the objectives and estimated impacts of the Energy Price Relief Plan. Plans to assess the collective impacts of the five measures under the plan were not established. Entities have developed plans to assess the achievement of outcomes for the individual measures, except for the gas price cap. Treasury and DCCEEW have reported collective impacts of the Energy Price Relief Plan and DCCEEW has conducted a review of the New South Wales coal price cap. Statutory reviews of the mandatory gas code of conduct and the Australian Domestic Gas Security Mechanism reforms are due to be undertaken during 2025. (See paragraphs 4.30 to 4.70)
Recommendations
Recommendation no. 1
Paragraph 3.16
The Department of the Treasury develop risk management guidance for staff where Treasury is the lead agency for a policy, including for managing risks identified in policy advice.
Department of the Treasury response: Agreed.
Summary of entity responses
19. The proposed report was provided to the Department of the Treasury and the Department of Climate Change, Energy, the Environment and Water. Extracts of the proposed report were provided to the ACCC, AER, DVA, Services Australia, DITRDCA, DISR, and PM&C.
20. Treasury, DCCEEW, the AER and DISR provided summary responses and these are below. Full responses from these entities are included at Appendix 1.
Department of the Treasury
Treasury welcomes the report, in particular the reflection that the policy was based on sound advice and that both policy and implementation development were largely effective to achieve the desired policy outcomes. Treasury also welcomes the report’s key messages, especially regarding the need to adapt risk appetite to short timeframes and urgent delivery. This aligns with Treasury’s risk management policy, noting our higher appetite for risk in these circumstances while still balancing potential consequences.
Treasury agrees with the recommendation presented in the report. Treasury accepts the ANAO’s evidence regarding the risk assessments and implementation planning during the development of the Energy Price Relief Plan. Treasury considers the recommendation recognises the ANAO’s findings and Treasury acknowledges it could develop guidance on how the risk management framework should be applied in situations where timeframes are short and delivery is urgent.
Treasury has engaged an external review of the implementation of the first round of the Energy Bill Relief Fund and will leverage findings from this review in drafting further risk management guidance.
Department of Climate Change, Energy, the Environment and Water
The Department of Climate Change, Energy, the Environment and Water (the department) welcomes the ANAO report and the conclusion that the design process for the Energy Price Relief Plan was largely effective, with no recommendations made for the department.
The Government’s Energy Price Relief Plan was a package of measures developed to shield Australian families and businesses from the worst impacts of predicted energy price spikes. This rapid policy development occurred within complex electricity and gas markets and required engagement across multiple agencies and other parties during its development and implementation.
The ANAO’s observations including areas of improvement applicable in the unique setting of rapid policy development are valuable insights that will inform and influence the department’s continual improvement practices in stakeholder engagement and program governance.
Australian Energy Regulator
The AER was provided with extracts from the proposed report.
The AER notes that there are no findings or recommendations relating to the AER.
The AER notes the contents of the report, including the key messages. The key messages reflect the experience and approach of the AER.
Department of Industry, Science and Resources
The Department of Industry, Science, and Resources (the department) acknowledges the Australian National Audit Office’s proposed audit report on the Design of the Energy Price Relief Plan.
The department acknowledges the report’s key findings on policy design, governance and risk management. The department strives to achieve meaningful stakeholder engagement to ensure feedback is accounted for in policy design. In the design and implementation of the Australian Domestic Gas Security Mechanism (ADGSM) reforms, two public consultation processes were conducted – on the design of policy and on the draft guidelines – to inform the development of effective policy that contributes to the delivery of positive outcomes for our stakeholders.
The department is committed to establishing and improving robust governance and risk management practices, and notes these principles are particularly important when designing and implementing policy initiatives in constrained timeframes.
Key messages from this audit for all Australian Government entities
21. Below is a summary of key messages, including instances of good practice, which have been identified in this audit and may be relevant for the operations of other Australian Government entities.
Group title
Policy design
Key learning reference
Group title
Governance and risk management
Key learning reference
Type: Performance audit
Report number: 13 of 2024-25
Portfolios: Infrastructure, Transport, Regional Development, Communications and the Arts; Industry, Science and Resources
Entities: Department of Infrastructure, Transport, Regional Development, Communication and the Arts; Department of Industry, Science and Resources
Date tabled:
Audit Summary : show
Summary and recommendations
Background
1. The Growing Regions Program was announced in May 2023 as an open, competitive grants program that provides grants to local government entities and eligible incorporated not-for-profit organisations for capital works projects that aim to deliver community and economic benefits across regional and rural Australia.1 The Australian Government committed $600 million to the program over two rounds with $300 million available in each round.
2. Grants between $500,000 and $15 million were available to eligible applicants to deliver priority community and economic infrastructure projects. The objectives of Round 1 of the program are:
- constructing or upgrading community infrastructure that fills an identified gap or need for community infrastructure.
- contributing to achieving a wide range of community socio-economic outcomes; and
- is strategically aligned with regional priorities.
3. The Department of Infrastructure, Transport, Regional Development, Communications and the Arts (Infrastructure) is responsible for the Growing Regions Program. Infrastructure engaged the Department of Industry, Science and Resources, through the Business Grants Hub, to administer the program.
4. The program used a two-stage application process. Applicants were required to submit an Expression of Interest (EOI) application which would first be assessed by the Business Grants Hub to ensure projects met eligibility, project readiness and program suitability requirements before a multi-party parliamentary panel (the panel) assessed how closely all eligible projects aligned with regional priorities. The panel then recommended to Infrastructure which projects should be invited to submit a full application. EOI applications that were assessed as meeting requirements and approved to proceed were invited to submit a full application in stage two. Infrastructure made the final decision on which applicants would be invited to progress to stage two and submit a full application.
5. Round 1 of the Growing Regions Program opened on 5 July 2023 and received 650 EOI applications seeking a total of $2.7 billion in grant funding, of which 443 applications ($1.81 billion) were found suitable by the panel to progress to stage two.
6. Full applications opened on 27 November 2023 and closed on 15 January 2024. The Business Grants Hub assessed 311 projects for funding worth $1.5 billion. Of these projects, Infrastructure recommended 54 projects for funding up to the value of $300 million. On 16 May 2024 the Minister for Infrastructure, Transport, Regional Development and Local Government announced funding for 40 successful projects to the value of $207 million.2
7. This audit is the second of two reports on the effectiveness of the Growing Regions Program. The first audit, Auditor-General Report No. 31 2023–24 Design of the Growing Regions Program, was presented to the Parliament on 29 May 2024 and examined the effectiveness of Infrastructure’s design and planning for the Round 1 of the Growing Regions Program.
Rationale for undertaking the audit
8. The Growing Regions Program was a new grants program and one of the largest programs administered by Infrastructure. The program also contained a new design feature — a two-stage assessment process with an EOI stage assessed by a multi-party parliamentary panel.
9. Previous ANAO performance audits have identified deficiencies in Infrastructure’s implementation of regional grants programs including program design, providing information to the delegate, and transparency of decision-making.3
10. This audit provides assurance to the Parliament on the implementation and award of funding for Round 1 of the Growing Regions Program and whether Infrastructure implemented lessons learned from previous grants programs.
Audit objective and criteria
11. The objective of the audit was to assess the effectiveness of the implementation and award of funding for Round 1 of the Growing Regions Program.
12. To form a conclusion against the objective, the following high-level audit criteria were applied.
- Were applications assessed in accordance with the grant opportunity guidelines?
- Were funding recommendations and decisions made in accordance with the Commonwealth Grants Rules and Guidelines?
Conclusion
13. The implementation and award of funding for Round 1 of the Growing Regions Program was largely effective. Effectiveness was diminished by Infrastructure undertaking an additional assessment process which was not specified in the grant opportunity guidelines.
14. Assessment of applications for the Growing Regions Program was partly in accordance with the grant opportunity guidelines. The Business Grants Hub assessed EOI applications against the grant opportunity guidelines despite eligibility requirements for projects not being clearly defined in the guidelines. After the Business Grants Hub had completed its eligibility assessment, the minister through their office, advised Infrastructure of their preference for all 163 applicants found ineligible to be given the opportunity to correct any administrative errors or omissions with their applications. While the panel scored and ranked applications as required under the grant opportunity guidelines, panel members noted difficulty with the definition of what constituted ‘regional priorities’. Infrastructure did not consider in its development of the panel assessment process, the implications on a project’s average score by having a different number of panel members scoring applications.
15. Full applications were assessed partly in line with the grant opportunity guidelines. In its assessment of full applications, the Business Grants Hub correctly applied the three merit criteria from the grant opportunity guidelines. Infrastructure then completed a further geographical assessment of projects which was not set out in the grant opportunity guidelines. This resulted in Infrastructure removing three projects from the merit list and adding seven. By altering the results of the Business Grants Hub’s merit assessment, Infrastructure recommended projects to the minister which were not assessed as the most meritorious under the grant opportunity guidelines.
16. Infrastructure’s advice to the minister outlined the assessment process and risks relating to the approval of applications for the Growing Regions Program. The advice did not state how value for money was determined following Infrastructure’s additional analysis of the results of the Business Grants Hub’s merit assessment. Based on an initial, high-level assessment from the Australian Government Solicitor, Infrastructure advised that there was no lawful authority for the proposed expenditure under the program and proposed that to address that, funding could be awarded under a Federation Funding Agreement rather than as grants. Funding decisions were appropriately documented by the minister and the minister did not approve any projects that were not recommended by Infrastructure. The announcement of successful projects occurred two months after the original timeframes provided to applicants. As at 16 October 2024, the Growing Regions Program Federation Funding Agreement Schedule had been executed with the Western Australian, South Australian, Queensland, Tasmanian, New South Wales and Victorian governments.
Supporting findings
Assessment of applications
17. The Business Grants Hub assessed EOI applications against the grant opportunity guidelines despite eligibility requirements for projects not being clearly defined in the guidelines. After the Business Grants Hub had completed its eligibility assessment, the minister, through their office, advised Infrastructure of their preference for all 163 ineligible applicants to be given an opportunity to correct any administrative errors or omissions. The Business Grants Hub then completed another eligibility assessment on the 58 applications that had been resubmitted. Conflict of interest declarations were completed by all assessors undertaking the EOI assessment. Panel members received training from the Business Grants Hub and attended probity briefings delivered by an external probity advisor engaged by Infrastructure. (See paragraphs 2.3 to 2.33)
18. The panel scored and ranked applications as required under the grant opportunity guidelines, noting difficulty with the definition of what constituted ‘regional priorities’. Recommendations were made based on average scores and followed the requirements set out in the guidelines. Decisions were documented and probity requirements were followed. All panel members were originally required to score each application except where projects were in their electorate or jurisdiction. To assist in managing the panel’s workload, part-way through the assessment process there was a change in the scoring approach from having panel members score all applications, to a minimum of three scorers per application. Infrastructure did not consider in its design of the assessment process how different numbers of panel members scoring each application would impact on a project’s average score. (See paragraphs 2.34 to 2.66)
19. The Business Grants Hub assessed full applications against the three merit criteria as outlined in the grant opportunity guidelines and awarded each project a final score. The design of the eligibility requirements in the grant opportunity guidelines resulted in projects that potentially did not meet the program’s policy intent progressing through the assessment process. The minister did not fund 14 recommended projects which they identified as not suitable for funding as they would be better suited for funding under a different program. (See paragraphs 2.67 to 2.83)
20. Applications were ranked by the Business Grants Hub based on its assessment against the three criteria set out in the grant opportunity guidelines. The Business Grants Hub reported all highly suitable and suitable projects for funding. Following the Business Grants Hub’s merit assessment, Infrastructure completed further analysis and assessment of projects for geographical spread and socio-economic outcomes. This further assessment was not approved when the program was designed or set out in the grant opportunity guidelines. This resulted in Infrastructure removing three projects from the Business Grants Hub’s full assessment merit list and adding a further seven. (See paragraphs 2.84 to 2.101)
Award of funding
21. An initial high-level assessment by the Australian Government Solicitor obtained by Infrastructure prior to briefing the minister stated that lawful authority for proposed expenditure for the program was not in place. Infrastructure proposed an approach that sought to mitigate this risk. Infrastructure recommended that the minister approve 54 applications up to the limit of the available funding. The recommendation did not state how value for money was determined following an additional analysis of project applications and adjustment of results by Infrastructure. Funding recommendations for Round 1 of the Growing Regions Program did not meet the original timeframes as planned by Infrastructure primarily due to the need to seek legal advice on the lawful authority matter. (See paragraphs 3.1 to 3.22)
22. Reasons for all funding decisions were appropriately documented and informed by written recommendations from Infrastructure. The minister did not award funding to any projects that were not recommended by Infrastructure. All 40 applicants that the minister approved for funding were found to be highly suitable or suitable through the merit assessment process. The minister did not award funding to 14 projects that were recommended by Infrastructure. (See paragraphs 3.23 to 3.33)
Recommendations
Recommendation no. 1
Paragraph 2.82
The Department of Infrastructure, Transport, Regional Development, Communications and the Arts identifies in the program guidelines how to assess ineligible types of projects and expenditure for the Growing Regions Program to ensure that successful projects reflect the program’s policy intent and objectives.
Department of Infrastructure, Transport, Regional Development, Communications and the Arts response: Agreed.
Recommendation no. 2
Paragraph 2.100
The Department of Infrastructure, Transport, Regional Development, Communications and the Arts correctly applies the processes set out in the Growing Regions Program guidelines or updates the guidelines where significant changes to processes are required while the funding opportunity is open for applications.
Department of Infrastructure, Transport, Regional Development, Communications and the Arts response: Agreed.
Summary of entity response
23. The proposed report was provided to the Department of Infrastructure, Transport, Regional Development, Communications and the Arts, and the Department of Industry, Science and Resources. Extracts of the proposed report were provided to the Attorney-General’s Department. The summary responses are provided below and the full responses are at Appendix 1.
Department of Infrastructure, Transport, Regional Development, Communications and the Arts
The department welcomes the overall conclusion that the implementation and award of funding for Round 1 of the Growing Regions Program was largely effective. The department notes there have been some additional challenges in implementing the Growing Regions Program, including as a result of external factors.
While the department has asked the ANAO to consider the factual basis and emphasis given to some of the findings and commentary in the report, the department acknowledges that aspects of the program could have been improved.
The department agrees to both recommendations in the report and notes they are being implemented in the administration of Round 2 of the program.
Department of Industry, Science and Resources
The Department of Industry, Science and Resources acknowledges the Australian National Audit Office’s report on the implementation and award of funding for the Growing Regions Program.
The department notes this audit is the second of two reports on the effectiveness of the Growing Regions Program.
As a provider for Australian Government grants through the Business Grants Hub we will consider the key messages from the audit that are applicable for all Australian Government entities in the co-design and administration of future granting programs.
Attorney-General’s Department
The Attorney-General’s Department (“the department”) notes the extracts of Chapter 1 and Chapter 3 of the proposed ANAO report on the Implementation and award of funding for the Growing Regions Program.
The department has no comments on the audit findings in the extract it has viewed. Responsibility for administering the Growing Regions Program rests with the Department of Infrastructure, Transport, Regional Development, Communications and the Arts.
Key messages from this audit for all Australian Government entities
24. Below is a summary of key messages, including instances of good practice, which have been identified in this audit and may be relevant for the operations of other Australian Government entities.
Group title
Program design
Key learning reference