The past financial year was notable for the retirement of the fifteenth Auditor-General for Australia, Grant Hehir, in February 2024. Grant was steadfast in his commitment to the ANAO’s relationship with the Parliament of Australia and the transparency the ANAO brings to public sector performance. Through that commitment, he led the implementation of performance statements auditing in the Australian Government sector. This newest branch of auditing brings transparency to the Parliament in examining non-financial performance information of entities.

The Prime Minister has announced the appointment by the Governor-General of a new Auditor-General for Australia, Dr Caralee McLiesh PSM, from 4 November 2024. Dr McLiesh comes to us with strong leadership experience across government, international, not-for-profit and commercial sectors. Rona Mellor PSM will continue to act as Auditor-General until Dr McLiesh commences.

We’re looking forward to welcoming Dr McLiesh and helping her transition into her new role as the sixteenth Auditor-General for Australia.

We published our latest annual audit work program (AAWP) in early July. This is our annual plan for audit coverage for the Australian Government sector. The program outlines — portfolio by portfolio — where we intend to focus our attention across financial statements, performance and performance statements audit. It’s based on our environmental scan of issues facing the sector and our assessment of risk through previous audit work.

The focus of the AAWP continues to be on core public sector activities and includes a continuation of audits of compliance with essential frameworks and the proper use of resources within the public sector, with an ongoing focus on integrity, probity and ethics — more below. We’re also looking at how we can be ready for our role in the auditing of climate change disclosures and sustainability reporting.

With around 100 potential performance audits listed across the AAWP this year, and our target of 48 performance audit reports tabled for this financial year, it’s likely that about half of the potential audits listed in the AAWP will commence at some stage over the next 12 months. Those that don’t make it may be considered for rollover to the next AAWP, based on the continuous environmental scanning processes that we do.

We tabled 45 performance audit reports in 2023–24. You might have noticed that in 2023–24 we tabled more than half of the 45 performance audits for that year in the final quarter. We are working hard to smooth out the tabling in future years. A less ‘lumpy’ tabling approach will mean that the Parliament has more time to consider our work and we also hope it will smooth out the workload for audited entities and the ANAO.

A few years ago, in response to stakeholder feedback, we introduced the quick view of the AAWP. This is a single page list of all potential and in-progress performance audits and recently tabled reports, across every portfolio of government. We hope you find it useful — based on our website stats it seems that this has been a popular page.

Working in the public sector means we must all meet and, ideally, exceed public expectations of integrity, accountability, independence, transparency and professionalism. The efficient, effective, ethical and economical (i.e. proper) use of public resources is a foundation of the Public Governance, Performance and Accountability Act 2013 (PGPA Act). Performance in public sector ‘basics’ can be an indication of culture within entities and the sector.

Our audit work has shown that there is often a focus on compliance with the small number of mandatory requirements in the framework rather than the overarching principles. As the former Auditor-General, Grant Hehir, outlined in his foreword to our 2022–23 annual report:

Not consistently meeting requirements raises questions of whether compliance with them, and their intent, is embedded as part of public sector culture. This presents challenges for leaders to ensure that they set a tone which promotes compliance with both the letter and intent of the law, along with an expectation that results are achieved. At present there appears to be a relatively high risk-tolerance for non-compliance so long as results are achieved, rather than seeing compliance as a hallmark of integrity and essential to the craft of public administration.

In 2023–24 we commenced a program of audits focused on compliance with legislative and policy requirements. Some areas of audit focus include gifts and benefits, credit cards, protective security, risk, fraud and corruption, information management (including recordkeeping) and conflicts of interest. We’ll continue the focus this year.

We’ve recently tabled audits on compliance with gifts, benefits and hospitality in the Department of the Treasury and the Australian Communications and Media Authority, with a further audit, focused on the Murray–Darling Basin Authority, planned to table before the end of 2024. We also recently completed audits into the use of credit cards in a number of entities. We plan to publish Insights products on each soon. If you’d like to be notified when we release these (or any other) products, just go to the ANAO website where you can subscribe to the ANAO email list.

Continuing the theme, we have a number of conflicts of interest audits underway, covering public sector entities and boards across a range of portfolios, as well as a audits on fraud control arrangements. Keep an eye out for these audits, that we expect to table in September and October.

Issues with information management and recordkeeping in the APS have become a common and repeat finding of our audit work. Every single performance audit report that we tabled in 2023–24 had either a recommendation or a finding relating to poor recordkeeping.

Recordkeeping is the responsibility of every public servant and needs to be reinforced regularly by managers and leaders. Entities should also look for ways to test that the recordkeeping practices of their staff meet the rules that are set under the law. One area that all entities need to keep an eye on is how emails are used in entity business, and whether emails are being stored in recordkeeping systems under entity rules.

The JCPAA has released the report of its inquiry into probity and ethics in the APS — The never-ending quest for the golden thread. The report makes 11 recommendations — including recommending that the PGPA Act framework be amended to introduce a requirement for entities to develop, maintain and report on an overarching integrity framework. It’s worth a read if you haven’t yet had a chance.

In December last year we published, for the first time, our integrity framework as well as a report against it. The ANAO’s integrity framework provides structure to our integrity control system and helps us with ethical decision making and risk, fraud and misconduct management. The report identifies integrity-related matters and risks, as well as controls that have been implemented in the framework to manage potential integrity issues. While our integrity framework is focused on our purpose as the external auditor for the Commonwealth, those of you thinking about developing one might want to have a look at our framework, or talk to us about how we went about bringing ours together.

In November 2022, we finalised our methodology and framework for considering ethics as part of an audit. This methodology was used in the recently tabled audit of the APSC’s Administration of Integrity Functions, which looked at how integrity is being managed at the whole-of-APS level. We will be continuing our program of audits into the implementation of ethical frameworks by entities — we’ve recently commenced a performance audit of this topic in the Department of Employment and Workplace Relations.

Our audits continue to find evidence that public servants are falling short in areas related to integrity, probity and ethics. For example, our reports often show that public servants are running procurements that are not in accordance with the Commonwealth Procurement Rules (CPRs) and grant programs that are administered contrary to the Commonwealth Grants Framework. There have been changes to the CPRs that have been implemented from 1 July 2024 and changes to the grants framework will commence from 1 October 2024. These changes result largely from the JCPAA inquiry into Commonwealth procurement, the JCPAA inquiry into grants administration as well as relevant ANAO recommendations that were included in performance audit reports.

We rounded out our publishing for the last financial year with one more edition of Insights: Audit Lessons on Grants Administration.

In pulling together this Insights product we examined all 16 of the performance audit reports that we’ve tabled over the past five years examining grants administration. Conclusions in all 16 reports found that entities fell short in their effectiveness of grants administration in the audited programs.

Our focus on grants administration will continue because it is a significant activity of Australian Government entities. Information on GrantConnect indicates that — between 31 December 2017 and 7 June 2024 — 215,485 grants were awarded worth $118.1 billion (not including $36 billion in variations).

We will be keeping an eye on how entities implement the changes to the Commonwealth Grants Framework as the Commonwealth Grants Rules and Principles 2024 take effect from 1 October 2024, as mentioned above.

Annual report season is once again in full swing, and our financial statements and performance statements audit teams are no doubt visible in your entities.

A key issue identified in our end-of-year financial statements audit report to Parliament last year was a decline in timeliness of the tabling of entity annual reports. The report identified that 34% of annual reports were tabled on or after the date of the entity’s supplementary budget estimates hearings. Only 12% of entity annual reports had been tabled one week or more before their relevant estimates hearing — a significant decrease from 52% in the previous financial year.

Annual reports that are not tabled in a timely manner decrease the opportunity for the Senate to scrutinise entity performance. Making sure annual reports are tabled in a timely manner should be a key watchpoint for us all.

The annual performance statements are a feature of entity annual reports. Our performance statements audit program continues to expand, with seven new entities added to the program for 2024–25.

We are still seeing a lower maturity in the quality of performance measurement and reporting than is the case for financial reporting. Performance measurement and reporting has been a key feature of public sector accountability for decades. The current mandatory requirements have been in place for 10 years — since the enactment of the PGPA Act. Moving away from the idea that this is something new and towards a focus of it being a basic tenet of public administration (like financial statements preparation) should lead to better transparency and quality reporting for the Parliament and the public.

One area that we have looked at in preparing our own performance statements this year is trying to ‘declutter’ them. We’ve removed information that isn’t needed so that people reading our statements can better understand our performance against our purpose. This might be something you could look at for your own statements.

Through our audit work, we’ve seen that entities that use their performance statements as a key part of their internal management reporting are better placed to prepare their performance statements at the end of the year. These entities keep a close eye — throughout the year — on their key priorities and the things they want to achieve (per their corporate plan) that will be reported publicly and the evidence that supports these measures.

There is more information on performance measurement and reporting in our recent Audit Lessons product on Reporting Meaningful Performance Information and an Audit Opinion product on Using Performance Information to Drive Effectiveness.

We hosted two forums in July to share insights on emerging and topical audit issues and requirements affecting Australian Government entities: the audit committee chairs forum and the financial and performance reporting forum.

These forums are each hosted twice per year and provide us with the opportunity to share insights with these stakeholder groups. More information is available on our events and seminars page including how to sign up for the next events. I’d encourage audit committee chairs, or those charged with financial or performance reporting in their entity, to sign up for the next of these events which I expect will be run again towards the end of 2024.

We are always happy to share our insights and lessons to help to improve public administration and to educate entities about the ANAO’s audit processes. If you would like senior ANAO staff to come and speak to your executive board, SES cohort or other groups of staff, please discuss this with your ANAO audit contact or reach out to engagement@anao.gov.au.