Background

The Commonwealth State Housing Agreement (CSHA) is a joint Commonwealth-State arrangement that aims to assist both renters and purchasers obtain appropriate accommodation. The CSHA provides Australian Government grants to the States ¹ to assist those people whose housing needs cannot be met in the private sector to access appropriate and affordable housing. The grants are made in the form of a Specific Purpose Payment. The CSHA is authorised under the Housing Assistance Act 1996.

The current CSHA provides $4.75 billion for housing assistance across Australia from 1 July 2003 to 30 June 2008. The CSHA consists of a multilateral agreement and bilateral agreements between the Commonwealth, and each State and Territory. The multilateral agreement specifies an outcome measurement framework based on bilateral information, a core set of nationally consistent indicators, and data for benchmarking purposes.

The Department of Families, Community Services and Indigenous Affairs (FaCSIA) manages the CSHA on behalf of the Australian Government.

Audit objective

The objective of this follow-up audit was to review FaCSIA's progress in implementing the recommendations of Audit Report No.17 1999–2000.

The focus was whether FaCSIA had maintained or improved its oversight, coordination and administration of the CSHA for both the 1999 CSHA and the 2003 CSHA, in line with the recommendations and findings identified in the previous ANAO audit.

Overall audit conclusion

The ANAO concluded that FaCSIA, in partnership with the States and other key stakeholders, has improved the systems and processes associated with the performance information used in the 1999 and 2003 CSHAs. In particular, FaCSIA has fully implemented Recommendation No.s 1, 2 and 3 from the previous ANAO audit. This has resulted in considerable improvements to the quality and reliability of performance and financial information provided by the States and has addressed limitations to performance management identified in the previous report. The ANAO recognises that a majority of the work undertaken by FaCSIA to improve the performance management framework of the CSHA was begun and largely implemented under the 1999 CSHA, including the National Housing Data Agreement.

The performance management framework for the CSHA provides a sound basis for the effective monitoring of performance and for external accountability performance reporting. However, the ANAO identified that performance reporting could be improved, particularly the Housing Assistance Act Annual Report, by more timely reporting and by including analysis that demonstrates the level of performance that has been achieved against the objectives of the CSHA.

In respect of Commonwealth funding for housing assistance provided under the CSHA, FACSIA continues to improve its ability to monitor and manage financial risks through requiring the certification of the use of CSHA funds and independently audited financial returns. The substantial implementation of Recommendation No.4 of the previous ANAO audit has provided a risk-based approach to the management of the Commonwealth funding. The ANAO suggests that FaCSIA builds on this approach and involves all State Governments in a risk assessment at the beginning of each new CSHA. This will ensure that the risk assessment for each new CSHA is comprehensive and includes coverage of any risks associated with the delivery of housing assistance provided by the State Governments.

Previous ANAO audit

In 1999–2000, the Australian National Audit Office conducted an audit which assessed how effectively the then Department of Family and Community Services administered the 1996 CSHA (Audit Report No.17). The audit report made four recommendations and also made a number of findings relating to the financial management, performance monitoring and management procedures for the CSHA. The recommendations are outlined in Table 1.

The overall conclusion was that the 1996 CSHA reflected a shift towards a performance driven regime with an emphasis on the achievement of outcomes. This was supported by the development of a system of performance indicators to measure performance, and by improved financial accountability arrangements aimed at identifying the full costs of providing housing assistance under the CSHA and making the use of funding more transparent. This performance based framework was not in place under previous CSHAs and was, in itself, a significant improvement on prior agreements.

The audit did, however, identify deficiencies with the quality and reliability of performance and financial information provided by the States, which limited the usefulness of that information for measuring and/or assessing performance against required results. Consequently, the ANAO concluded that this information required considerable improvement before it could contribute more meaningfully to analysis of whether CSHA programme objectives have been met efficiently and effectively.

Key findings

Table 1 summarises the progress that FaCSIA has made in implementing the recommendations from the previous ANAO audit report with references to the paragraphs in this report that set out the ANAO's findings.

Table 1 FaCSIAʼs progress in implementing the previous ANAO audit reportʼs recommendations

Source: Australian National Audit Office, Commonwealth-State Housing Agreement, Audit Report No.17 1999–2000, ANAO, Canberra.

Performance information (Chapter 2)

The previous ANAO audit concluded that there were problems with the quality and reliability of performance and financial information provided by the States which limited the usefulness of that information for measuring and/or assessing performance against required results.

The ANAO found that the National Housing Data Agreement (NHDA) is a suitable plan that has progressed and coordinated performance information through Commonwealth-State bodies and was in place by the end of 1999. This has resulted in Recommendation No.1 from the previous ANAO audit report being fully implemented. In addition, the quality and reliability of the data available to measure CSHA performance information has been improved through the NHDA and its associated data dictionaries and processes that provide the basis for valid, complete, accurate, reliable and timely data.

However, the National Performance Information Framework could be improved by developing a specified outcome statement that draws together, clearly and succinctly, all the aspects of the CSHA that it is intended to measure. The ANAO suggests that FaCSIA pursues clarification of this issue through the appropriate CSHA working groups and in consultation with the States and other stakeholders such as the Australian Institute of Health and Welfare.

The ANAO found that FaCSIA has improved the processes for the consistency and comparability of financial information provided in State financial returns. A consolidated financial reporting framework was developed and implemented for the first returns under the 1999 CSHA. This has resulted in Recommendation No.2 from the previous ANAO audit being fully implemented. The information contained in the financial reporting framework provides FaCSIA with the basis to ensure that the States meet their accountability responsibilities under the CSHA In addition, the information in the financial reporting framework provides a sound basis for FaCSIA to undertake high-level financial analysis to assess if CSHA funding is being used efficiently and effectively.

The ANAO found that Recommendation No.3 from the previous ANAO audit has been fully implemented. The development of nationally consistent and comparable effectiveness indicators that measure the targeting of housing assistance under the CSHA to those most in need has enabled the relative effectiveness of different housing strategies to be measured and/or assessed. The indicators provide the flexibility for the States to adapt the targeting to meet local needs, while at the same time providing a national basis for measuring the extent to which targeting housing assistance contributes to the achievement of CSHA objectives.

Ongoing oversight of Commonwealth funding (Chapter 3)

FaCSIA has substantially implemented Recommendation No.4 from the previous ANAO audit, given that it undertook a comprehensive risk assessment of the CSHA, and implemented the majority of suggested management actions arising from that risk assessment. However, only one State Government stakeholder was consulted as a part of the development of the risk assessment. The ANAO suggests that, as part of the development and negotiations of future agreements, FaCSIA undertake a comprehensive risk assessment and that it broaden its consultation during the risk assessment process to encompass the full range of State and non–government stakeholders.

The ANAO found that the current governance structure for intergovernmental housing committees provides for clearer roles and responsibilities than previous arrangements and is a basis for effective communication between all jurisdictions. The adoption of a formal meeting structure has addressed the issues identified in the previous ANAO audit, and provides regular forums to discuss and progress housing policy.

Bilateral agreements were a new feature of the 1999 CSHA and have continued for the 2003 CSHA. The bilateral agreements with each State include performance indicators that measure how the delivery of housing assistance under the CSHA links with related programmes. The integration of performance indicators in the bilateral agreements has the potential to assist FaCSIA in further understanding the links between the delivery of housing assistance under the CSHA and other government programmes and to have a positive influence on the achievement of Whole-of-Government outcomes.

FaCSIA continues to provide and monitor funds as outlined in the CSHA. The 1999 CSHA introduced clauses that addressed the concerns raised in the previous report and these were maintained for the 2003 CSHA. This has led to improved processes for FaCSIA to effectively manage and monitor Commonwealth funding under the CSHA.

For example, States are now required to provide FaCSIA with Chief Executive Officer (CEO) certifications on the use of funds and independently audited financial returns within six months of the end of the reporting year. In addition, under changed clauses included in the 1999 and 2003 CSHAs, FaCSIA has increased the frequency of the payments it makes to the States. Under the 1996 CSHA these payments were made in equal instalments, monthly in advance. These payments are now made fortnightly in advance. The increase in the frequency of payments reduces the risk that FaCSIA could release CSHA funds earlier than necessary to meet the immediate funding needs of the States. The ANAO considers that this should reduce the risk identified in the previous audit of the States accumulating cash at a cost to the Commonwealth.

The 1999 and 2003 CSHA's each include clauses that provide the Commonwealth with the option to withhold a proportion financial assistance if the States do not comply with these reporting requirements. The ANAO found that, throughout the 1999 CSHA, despite the late submission by half of the States of their CEO certifications, independently audited financial statements and bilateral reports, the Commonwealth did not exercise its option to apply financial sanctions and withhold any portion of a State's funding.

The 2003 CSHA included further clauses stipulating that the failure to meet reporting requirements could result in a reduction to a State's annual funding of an amount up to five percent. Since the commencement of the 2003 CSHA, all States have submitted their CEO certification, independently audited financial statements and bilateral reports within six months of the end of the financial year. To date, no sanctions have been imposed on States for late submission of CSHA reporting requirements.

There is scope for improvement in the arrangements for analysing the States' financial returns. While some analysis of the States' financial returns was included in the 2003–04 Housing Assistance Act (HAA) Annual Report, this could be improved by FaCSIA indicating if results were above or below expectations and identifying any areas for concern. The results of this analysis could also be used to inform risk management and future decision making.

Reporting and analysis of performance of the CSHA (Chapter 4)

The ANAO found that the timeliness of performance reporting, particularly the HAA Annual Report could be improved. Throughout the 1999 CSHA, the HAA Annual report was tabled in Parliament between 16 and 32 months after the end of the associated reporting year. This improved slightly for the first report provided under the 2003 CSHA, which was tabled 15 months after the end of the associated reporting year² . FaCSIA advised the ANAO that it will endeavour to have the HAA Annual Report tabled by June of the year following the end of the grant reporting year. The ANAO supports FaCSIA's aim to table the HAA Annual Report by June of the year following the reporting year but considers that there would be benefit in the report being tabled earlier if possible. By tabling the report before the end of the next reporting period, FaCSIA would be providing timely performance reporting to Parliament and other stakeholders.

The ANAO notes that the first HAA Annual Report produced under the 2003 CSHA was an improvement on the reports published under the 1999 CSHA and includes some assessment of the extent to which the objectives of the CSHA are being achieved. However, the ANAO considers that there is further scope for improvement of the information on the CSHA contained in both the HAA Annual Report and FaCSIA's Annual Report.

In particular, readers of the HAA Annual Report would benefit from a more detailed analysis of whether the results of non-financial and financial performance information indicated if expectations are being met and whether trends over time suggest that housing assistance being delivered under the CSHA is being delivered effectively and efficiently.

In addition, the ANAO found that the FaCS Annual Report 2004–2005 did not provide effective reporting on the overall achievements of the CSHA. This could be improved by including commentary on whether the results of the performance indicators have met expectations and how the CSHA has contributed to the achievement of FaCSIA's outputs and outcomes.

The previous ANAO audit found that, due to the interim nature of the 1996 CSHA, no evaluation had been undertaken, despite it being a requirement of the Housing Assistance Act 1996. During this audit, the ANAO found that the 1999 CSHA was evaluated; however the timing of the completion of the evaluation was too late to inform the negotiation of the 2003 CSHA. This has been taken into account with the planning of the 2003 CSHA evaluation. FaCSIA is working with the States to ensure that the 2003 CSHA evaluation is completed in time to inform the negotiations for future housing assistance beyond the current CSHA.

Housing research mechanisms used by the Commonwealth and States have changed since the previous ANAO audit. From January 2000, the Australian Housing and Urban Research Institute (AHURI) became the major vehicle for housing research. The current AHURI funding agreement provides a mechanism for evaluating research arrangements to provide assurance to management and government that the research produced represents value for money and is policy relevant.

Recommendations

The ANAO made one recommendation to improve the usefulness to readers of the reporting provided by FaCSIA in the Housing Assistance Act Annual Report.

FaCSIA's Response

The Secretary of FaCSIA provided the following summary response to the audit findings and recommendations.

FaCSIA agrees with the recommendation and the overall assessment of the report.

FaCSIA agrees with the recommendation in the report as it confirms the overall direction of work being done by FaCSIA to continuously improve the level of reporting and analysis in the Housing Assistance Act Annual Report. This ongoing work is taking place as improved performance information becomes available through the national housing data collections and the State and Territory Bilateral reports.

Footnotes

1 In the context of the CSHA, ‘State' refers to both State Governments and Territory Governments. Accordingly, all references to State in this report includes the Territory Governments.

2 At the time of this audit report only one HAA Annual Report under the 2003 CSHA had been tabled in Parliament and this was the 2003-04 HAA Annual Report. The report for the 2004-05 reporting year is due by the end of June 2006.