Foreign Affairs and Trade portfolio

The Foreign Affairs and Trade Portfolio is responsible for: delivering a global network of embassies and missions and international affairs policy capability to support Australia’s interests and influence abroad. The Portfolio, which is comprised of five entities in addition to the Department of Foreign Affairs and Trade (DFAT), works in partnership across government to promote a stable and prosperous regional and global environment.

As the lead entity in the portfolio, DFAT has primary responsibility within government for providing foreign, trade and development policy advice and supporting Australians overseas in need of assistance. Further information is available from the department’s website.

In the 2024–25 Portfolio Budget Statements (PBS) for the Foreign Affairs and Trade portfolio, the aggregated budgeted expenses for 2024–25 total $9.9 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. DFAT represents the largest proportion of the portfolio’s expenses, and administered expenses of the portfolio are the most material component, representing 64 per cent of the entire portfolio’s expenses.

Figure 1: Foreign Affairs and Trade portfolio – total expenses and average staffing level by entity 

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

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 risk identified for the portfolio relates to the management and oversight of the distributed network of overseas posts. Coordinated operation is required for these posts to operate most effectively during international events.

Specific risks in the Foreign Affairs and Trade portfolio relate to governance, service delivery, grants administration and financial management.

Governance

DFAT’s highly decentralised operating model consists of a global network of overseas posts. Ensuring the consistent application of centralised departmental policies at each post is a key risk to the portfolio, including physical, personal and information security policies.

Recent audit activity has identified areas for DFAT to improve overall contract management, including providing clear guidance to those undertaking procurements and ensuring that risks have appropriately considered for contract arrangements .

Service delivery

The portfolio has important service delivery responsibilities including in relation to assisting Australians who are abroad and through processing of passport applications . The processing of passport applications also involves high value and volume procurement and contract management activity, with the Australian Passport Office managing over 350 contracts totalling $1.2 billion between July 2018 and September 2023.

Grants administration

Significant grants administration is undertaken within the portfolio, delivered in the form of international development assistance by the department and through various programs administered by Austrade. The Emerging Markets Impact Investment Fund and the Australian Infrastructure Investment Facility for the Pacific, which are able to provide assistance via grants or loans, also requires effective governance and risk management to achieve value for money. While official development assistance (ODA) is defined as not a grant for the purposes of the Commonwealth Grants Rules and Guidelines (CGRGs), DFAT applies the CGRGs to ODA in seeking to achieve value for money outcomes .

Financial management

DFAT’s risks are increased by the portfolio’s diverse operating environment and decentralised systems which affect its ability to manage and oversee operations across its network. This is evident in:

• processes for identifying and managing risks across the department which may be inconsistently applied;
• the need for strong financial management, particularly in relation to controls around payments of international development assistance, to address fraud risks and inconsistent processes across different locations; and
• the need for effective management of the Australian Government’s significant overseas property portfolio and the valuation of these assets is highly sensitive to changes in the underlying assumptions.

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 Foreign Affairs and Trade  portfolio were included in tabled ANAO performance audits eight times . The conclusions directed toward entities within this portfolio were as follows:

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

Figure 2 shows the number of audit conclusions for entities within the Foreign Affairs and Trade 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 Foreign Affairs and Trade 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 Foreign Affairs and Trade portfolio.

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

Source: ANAO data.

Department of Foreign Affairs and Trade

The Department of Foreign Affairs and Trade (DFAT) is responsible for the administration of Australia’s foreign, trade, international development and international security policies.

DFAT’s total budgeted assets for 202425 are $9.7 billion, with around 50 per cent of these assets attributable to land and buildings. Official development assistance is $3.9 billion, or 46 per cent of total budgeted expenses (Figure 4).

Figure 4: Department of Foreign Affairs and Trade’s total budgeted financial statements by category ($’000)

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

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

• Valuation of overseas property, which is subject to complex estimation, judgements and a range of valuation methodologies utilised in determining the fair value of the overseas property portfolio. (KAM – Valuation of overseas properties)
• International development assistance, as there are a broad range of agreements that cover a range of geographical areas with many third-party organisations. (KAM - Accuracy of international development assistance)
• Financial information associated with overseas posts, due to the decentralised operations across the international post network, which may have differing governing arrangements and financial processes across the international post network.

Export Finance Australia

Export Finance Australia provides financing solutions for Australian exporters and interests, including overseas infrastructure development that delivers benefits to Australia.

Export Finance Australia’s total actual assets for 202223 were $3.6 billion, with 32 per cent attributable to loans and receivables (excluding loans to the National Interest Account) and 22 per cent attributable to investment securities. Total revenue was $242.8 million, with interest income, representing 59 per cent and the fair value movement in third party loans and guarantees attributable to 19 per cent, as shown in Figure 5.

Figure 5: Export Finance Australia’s actual financial statements by category ($’000)

Source: ANAO analysis of Export Finance Australia’s 2022–23 Annual Report.

There are three key risks for the Export Finance Australia’s 2023–24 financial statements that the ANAO has highlighted for specific audit coverage:

• The valuation and classification of complex financial instruments involving loans provided, bonds, interest rate swaps and cross-currency swaps that are significant in value.
• The valuation and impairment of loans, guarantees, and other investments, due to the judgements and estimates applied to calculate the balances.
• The recognition of interest income earned on interest-bearing financial assets, due to the significant balance.