Background

The Department of the Treasury (the Treasury) manages Australia's relations with the International Monetary Fund (IMF) and various development banks. As of 30 June 2006, the Treasury's administered assets in the IMF and other international financial institutions totalled A$7.1 billion. Liabilities totalled A$4.8 billion. In addition to the liabilities of A$4.8 billion, there were contingent liabilities of A$7.3 billion, comprising uncalled share capital subscriptions.

In October 2002 a performance audit of the Treasury's management of international financial commitments (ANAO Audit Report No.10 of 2002–03 Treasury's Management of International Financial Commitments) was tabled in the Parliament. This audit is a follow-up to that audit. The objective was to assess the progress made by the Treasury in addressing the four major audit findings and two recommendations of the 2002 audit report.

Overall Audit Conclusion

The Treasury's response to the findings and recommendations of the previous audit has been effective. The audit found that:

• both audit recommendations have been implemented; and
• the two major findings without recommendations have also been addressed. However, whilst Treasury provides a range of information to the Department of Finance and Administration (Finance) on its foreign exchange transactions, the Treasury reporting to Finance under the Government's Foreign Exchange Risk Management Policy should identify and provide an estimate of all foreign exchange gains, losses and exposures. ANAO has recommended accordingly.

Key Findings

The previous Australian National Audit Office (ANAO) audit included four major findings, with recommendations made in relation to two of these findings. ANAO's assessment of the Treasury's response on the key issues arising from the previous audit is summarised in the following table:

Agency Response

A copy of the proposed report for this audit was provided to the Treasury. Its overall response was as follows:

The Treasury welcomes this follow-up audit and the conclusion that its response to the findings and recommendations of the previous audit has been effective.

In relation to the recommendation, the Treasury notes that the ANAO found that foreign exchange gains or losses on Australia's investments in the international financial institutions are reported in its financial statements and that Treasury's procedures for the processing of foreign exchange transactions comply with the Department of Finance and Administration (Finance) requirements.
The Treasury currently provides a range of information to Finance for the purpose of complying with the Government's Revised Foreign Exchange Risk Management Policy.

The Treasury and Finance have agreed to work together to determine if there is a need for Treasury to amend its current reporting practices to meet the objectives of the Government's policy. If it is determined that changes are necessary, then the Treasury will introduce those changes.