Education | Australian National Audit Office (ANAO)

Portfolio overview

The Education Portfolio is responsible for: contributing to Australia’s economic prosperity and social wellbeing by creating opportunities and driving better outcomes through access to quality education. The portfolio is comprised of six entities, including the Department of Education. The entities within the portfolio are responsible for policy, program and regulation responsibilities and delivering better outcomes for students, educators and teachers in early learning and care centres, schools and higher education providers. Further information is available from the department’s website.

In the 2024–25 Portfolio Budget Statements (PBS) for the Education portfolio, the aggregated budgeted expenses for 2024–25 total $63.5 billion. The PBS contain budgets for those entities in the general government sector (GGS) that receive appropriations directly or indirectly through annual appropriation Acts.

The level of budgeted departmental and administered expenses, and the average staffing level for entities in the GGS within this portfolio are shown in Figure 1. The Department of Education represents the largest proportion of the portfolio’s expenses, and administered expenses of the portfolio are the most material component, representing 99 per cent of the entire portfolio’s expense.

Figure 1: Education portfolio – total expenses and average staffing level by entity

Source: ANAO analysis of 2024–25 Portfolio Budget Statements.

Audit focus

In determining the 2024–25 audit work program, the ANAO considers prior-year audit and other review findings and what these indicate about portfolio risks and areas for improvement. The ANAO also considers emerging risks from new investments or changes in the operating environment.

The primary risks identified for the portfolio relate to the effective management of funding programs, including using performance measurement and monitoring to inform policy development and program management.

Specific risks in the Education portfolio relate to governance, policy development, regulation and financial management.

Governance

Past audits of the department have made recommendations to improve performance measurement and monitoring, including effective use of data . The department needs to effectively use performance measurement and monitoring to inform policy development and program management.

The department uses service delivery partners for activities including payments and information communications technology (ICT) infrastructure. The use of service delivery partners does not reduce accountability. The department needs to ensure that service and quality control expectations are agreed and maintained, shared risks are identified and effectively managed, and that its business is appropriately prioritised.

Policy development

The Department of Education (the department) is responsible for significant funding for early childhood education and care, schools, and higher education, and is involved in setting national education policies. The department needs to consult with states and territories to undertake effective policy development and program delivery.

Regulation

The department has specific risks in regulation relating to provider fraud and non-compliance in the Child Care Subsidy program. There are risks in relation to the Child Care Subsidy expenses due to reliance on information provided by payment recipients .

Portfolio entities involved in standard setting and regulation are the Tertiary Education Quality and Standards Agency (TEQSA), the Australian Institute for Teaching and School Leadership Limited (AITSL), and the Australian Curriculum, Assessment and Reporting Authority (ACARA). These entities need to ensure they prioritise compliance and assurance activities where appropriate . These activities should be risk based and data driven.

Financial management

The department has specific risks in financial management relating to the valuation of assets and liabilities of the Higher Education Loan Program receivable and the Higher Education Superannuation Program liability. These valuations require judgement to be applied in selecting appropriate underlying assumptions. This raises risks related to transparency, consistency and appropriateness of the valuations .

Previous performance audit coverage

The ANAO’s performance audit activities involve the independent and objective assessment of all or part of an entity’s operations and administrative support systems. Performance audits may involve multiple entities and examine common aspects of administration or the joint administration of a program or service.

During the performance audit process, the ANAO gathers and analyses the evidence necessary to draw a conclusion on the audit objective. Audit conclusions can be grouped into four categories:

unqualified;
qualified (largely positive);
qualified (partly positive); and
adverse.

In the period between 2019–20 to 2023–24 entities within the Education portfolio were included in tabled ANAO performance audits 12 times . The conclusions directed toward entities within this portfolio were as follows:

none were unqualified;
nine were qualified (largely positive);
three were qualified (partly positive); and
none were adverse.

Figure 2 shows the number of audit conclusions for entities within the Education portfolio that were included in ANAO performance audits between 2019–20 and 2023–24 compared with all audits tabled in this period.

Figure 2: Audit conclusions 2019–20 to 2023–24 : entities within the Education portfolio compared with all audits tabled

Source: ANAO data.

The ANAO’s annual audit work program is intended to deliver a mix of performance audits across seven audit activities: governance; service delivery; grants administration; procurement; policy development; regulation and asset management and sustainment. These activities are intended to cover the scope of activities undertaken by the public sector. Each performance audit considers a primary audit activity. Figure 3 shows audit conclusions by primary audit activity for audits involving entities in the Education portfolio.

Figure 3: Audit conclusions by activity for audits involving entities within the Education portfolio, 2019–20 to 2023–24

Source: ANAO data.

Performance statements audit

The audit of the 2023–24 Department of Education annual performance statements is being conducted following a request from the Minister for Finance on 18 July 2023, under section 40 of the Public Governance, Performance and Accountability Act 2013. The audit is conducted under section 15 of the Auditor-General Act 1997.

Education is in its third year of inclusion in the annual performance statements audit program. The ANAO considers the risk associated with the Education performance statements audit as moderate. This is due to Education having a significant and moderate finding in 2022–23 relating to meaningful analysis of performance, and new measures, which increase the risk of material misstatement.

Key risks for Education’s performance statements that the ANAO has highlighted include:

the extent of aggregation of performance information, which may not provide meaningful information to assist the user measure and assess the department’s performance in achieving its purposes;
whether the lysis presented in the performance statements is meaningful and enables the reader to form an informed view on the entity’s performance during the reporting period; and
use of preliminary Tertiary Collection of Student Information (TCSI) data for performance reporting, as using preliminary/unverified information increases the risk that the performance measure results included in the tabled annual report may be misstated.

Financial statements audits

Overview

Entities within the Education portfolio, and the risk profile of each entity, are shown in Table 1.

Table 1: Education portfolio entities and risk profile

	Type of entity	Engagement risk	Number of higher risks	Number of moderate risks
Material entities
Department of Education	Non-corporate	Moderate	4	2
Australian Research Council	Non-corporate	Low	1	1
Non-material entities
Australian Curriculum, Assessment and Reporting Authority	Corporate	Low
Australian Institute for Teaching and School Leadership Limited	Company	Low
Australian National University	Corporate	Moderate
Tertiary Education Quality and Standards Agency	Non-corporate	Low
Other audit engagements (including Auditor-General Act 1997 section 20 engagements)
Australian Children’s Education and Care Quality Authority – financial statements audit

Note a: Sourced from Public Governance, Performance and Accountability Act 2013 (Flipchart of PGPA Act) Commonwealth entities and companies (Department of Finance) as at 1 March 2024.

Material entities

Department of Education

The Department of Education is responsible for contributing to Australia’s economic prosperity and social wellbeing by creating opportunities and driving better outcomes through access to quality education. Investment in early childhood, schools, youth and higher education creates the foundation for a resilient and equitable society. The department aims to deliver an education system that is inclusive, accessible, and affordable for all Australians.

The Department of Education’s total budgeted expenses for 2024–25 are $62.3 billion, with grants and personal benefits representing 68 per cent and 23 per cent, respectively, as shown in Figure 4. Trade and other receivables represent 92 per cent of total budgeted assets, while grants provisions (encompassing the Higher Education Superannuation Provision) represent 79 per cent of total budgeted liabilities.

Figure 4: Department of Education’s total budgeted financial statements by category ($’000)

Source: ANAO analysis of 2024–25 Portfolio Budget Statements.

There are six key risks for the Department of Education’s 2023–24 financial statements that the ANAO has highlighted for specific audit coverage, including three risks that the ANAO considers potential key audit matters (KAMs).

The valuation of the Higher Education Loan Program (HELP) receivable balance, as the valuation involves significant and complex judgements about the timing and recoverability of HELP debts, discount factors, and future employment and salary rates, which contain a significant degree of uncertainty and are influenced by the economic environment. (KAM – Valuation of Higher Education Loan Program (HELP) receivable)
The valuation of the Higher Education Superannuation Provision liability balance due to the complexity of the actuarial estimation process. (KAM – Valuation of the Higher Education Superannuation Program (HESP) provision)
The accuracy of the child care personal benefit expense, due to reliance on information provided by payment recipients. (KAM – Accuracy and completeness of child care personal benefits expenses)
The governance of legal and other matters having implications on the financial statements. Weaknesses in the governance relating to the assessment and reporting of legal matters increases the risk that the financial statements are materially misstated.
The completeness and allocation of financial statement transactions and balances, due to the complexities associated with the machinery of government changes which occurred in 2022–23.
The completeness and accuracy of financial statement balances, as a result of the complexity and range of IT systems that are used to maintain information and process payments.

Australian Research Council

The Australian Research Council (ARC’s) is responsible for administering the National Competitive Grants Program (NCGP), assessing the quality, engagement and impact of research, and providing advice and support on research matters. The Amendment Bill to change the Australian Research Council Act 2001, which comes into effect from 1 July 2024, will see the accountable authority for the ARC become an independent ARC Board rather than the CEO.

ARC’s total budgeted expenses for 2024–25 are $1.1 billion, with 97 per cent of these expenses attributable to grants as shown in Figure 5.

Figure 5: Australian Research Council’s budgeted financial statements by category ($’000)

Source: ANAO analysis of 2024–25 Portfolio Budget Statements.

There are two key risks for the ARC’s 2023–24 financial statements that the ANAO has highlighted for specific audit coverage.

Grant expenditure due to the significance of the payments made and the self-assessment nature of the grants; and
Appropriation management - in 2022–23, the ANAO noted that certain ARC administered expenses were paid from departmental funds and periodically recovered from administered. The ARC made changes during 2023–24 to create a separate Administered Vendor list in the FMIS so that the payments could be directly linked to the relevant appropriation. The ANAO plans to test the implementation of the revised arrangements during the final audit phase.