Good morning everyone, it is a pleasure to be here in the Cook Islands for the PASAI Congress and to join my fellow panellists in discussing the role of SAIs in providing external scrutiny with parliaments to enable well-functioning public financial management systems.

Thank you Esther for the introduction and the opportunity to speak with you all. As mentioned… 

My name is Sally Ramsey. I am part of the ANAO’s Corporate Management Group. In my role as Executive Director Governance and Relationships, I support the ANAO’s relationship with the Parliament and our international partners, including PASAI.

As public sector auditors and representatives of Supreme Audit Institutions we understand the importance of strong public administration and financial management systems. Well functioning systems of government build public confidence and trust as there is transparency and accountability in how taxpayers funds are spent.

The PASAI strategy identifies that there are two things we want to achieve over the next ten years to strengthen public financial management systems across the Pacific: 

• We want to position SAIs to be in the best position to hold the system to account; and 
• We want to increase understanding about what good accountability and a strong system looks like. 

These aims align with the purpose of the ANAO which is to support accountability and transparency in the Australian Government sector through independent reporting to the Parliament, and thereby contribute to improved public sector performance.

I would like to talk through how the system helps the ANAO to be in the best position to hold the system to account. I would also like to talk about the some of the activities that we do to increase understanding of what good accountability and a strong system looks like. I am looking forward to hearing about other audit office’s experiences and activities as we are always on the look out for opportunities to do better.

Lets look at how does the system helps the ANAO to be in the best position to hold the system to account.

Positioning of an audit office in the system starts with legislation.

For those who are unfamiliar with the environment in which the Australian National Audit Office operates, the powers, mandates, and responsibilities of the Auditor-General for Australia are derived from the Auditor-General Act 1997. The Auditor-General is an independent officer of the Parliament.

The original Audit Act was passed in 1901. It was the fourth Act passed by the new Commonwealth Parliament of Australia at that time and established the Office of the Auditor-General as the first national statutory integrity entity.

With time, the functions of the Auditor-General have grown to include functions in addition to the audit of financial statements. Under the current Act, the Auditor-General for Australia’s functions include: 

• auditing the financial statements of Commonwealth entities, Commonwealth companies and their subsidiaries; 
• auditing annual performance statements of Commonwealth entities; 
• conducting performance audits, assurance reviews, and audits of the performance measures, of Commonwealth entities and Commonwealth companies and their subsidiaries; 
• conducting a performance audit of a Commonwealth partner;
• providing other audit services as required by other legislation or allowed under section 20 of the Act; and
• reporting directly to the Parliament on any matter or to a minister on any important matter.

The delivery of these functions is supported by a system of governance and accountability for public resources. This system is legislated through The Public Governance, Performance and Accountability Act 2013 (PGPA Act). Prior to the PGPA Act there has been other legislation that required the system to do similar things.

The PGPA Act emphasises planning, performance, risk management and reporting. It establishes responsibility for doing these activities well at the head of entity level. As auditors, you will recognise the importance of frameworks that you can tie your audit work too when you are trying to hold the system to account effectively. The PGPA Act creates a framework in the Australian national level public financial system that helps to reinforce the Auditor-General to hold the system to account.

For example, the Act establishes legal requirements that support the auditing of entities annual performance statements and annual financial statements. The Act requirements also form the basis for aspects of our performance audit and compliance audit work as the frameworks for grants management and procurement are instruments derived from the PGPA Act. 

As public sector auditors know well… the preparation of timely and accurate audited financial statements is an important indicator of the effectiveness of an entity’s financial management.

To drive this in the Australian public financial management system, the PGPA Act requires the timely preparation of financial statements. This is done through layers of requirements. For example, 

• section 42 sets out that the Accountable Authority of a Commonwealth entity must prepare annual financial statements for the entity as soon as practicable after the end of the reporting period for the entity. 
• To create urgency in the entities’ preparation of their statements, sub-section 46 (2) of the Act sets a date when the annual report of the entity is to be provided to their Minister. 
• The role of the Auditor-General is specifically considered under the legislation and there are rules that establish that the annual report must contain the audited financial statements.

The system requires that the Annual Reports presented to the Parliament by Ministers are reviewed through inquiry by Parliamentary Committee to raise the level of transparency and accountability of entities’ reporting to the Parliament.

Responsibilities and requirements for Australian Government financial reporting at a consolidated level are also set out in the Act. Again the system has layers: 

• Department of Finance must prepare the statements and the Auditor-General reviews the statements and must report to the Parliament. 
• The ANAO prepares a report that summarises the final results of the audits of the Consolidated Financial Statements for the Australian Government and the financial statements of 243 Australian Government entities for each period.

To help to reinforce the system, and inform the Parliament about the functioning of material entities in the public sector, the Auditor-General also tables an interim report in the Parliament (usually in late May which is prior to the end of our financial year). The interim report focuses on the results of the interim audits, and includes an assessment of entities’ key internal controls as they relate to the risk of misstatement in the financial statements.

We use this report to draw the Parliament’s attention, and by extension public sector entities’ attention, to themes across audit findings in addition to reporting results. Through this reporting we can also see where improvements have been made on a year-to-year basis and identify any ongoing areas of concern. Ultimately it provides a ‘heads up’ to entities with regards to the areas that they should pay particular attention to when they start to prepare their financial statements. 

A key element of the system that supports the Australian National Audit Office to hold the system to account is the establishment of our public accounts committee ➡ the Joint Committee on Public Accounts and Audit (JCPAA). The committee’s responsibilities are set out in the Public Accounts and Audit Committee Act 1951 with duties and powers also established through the Auditor-General Act, the PGPA Act and the Parliamentary Service Act 1999.

The specific duties of the committee include examining all reports of the Auditor-General and examining the accounts of the receipts and expenditure of the Commonwealth. That is, we have an audience for our work who has specific responsibilities for looking at it, ask more questions and powers to make their own recommendations based on our work.

The JCPAA undertakes inquiries based on the reports of the ANAO each year, including the Audits of the Financial Statements of Australian Government Entities at least once in the term of the Parliament. The ANAO has a role in assisting the JCPAA to identify themes across our work and provides submissions based on our findings across all forms of audit that we undertake. We are also asked to provide briefings and attend hearings. As a signal to the Parliament of how seriously we take our responsibilities in this space, we include measures of our performance of this work in our annual performance statement.

The Parliament also has other mechanisms for external scrutiny of government finances, namely through the Senate estimates process in which all government agencies are called to answer questions about the nature of their budgets, expenditure, and delivery of government programs. The work of the ANAO can inform an understanding among parliamentarians about public sector financial performance and highlight areas of further scrutiny. To assist committees to prepare, we provide briefing letters to each committee on recent relevant ANAO work prior to estimates hearings. 

So how do we increase understanding about what good accountability and what a well functioning system looks like?

First and foremost, we aim to increase understanding of what a good system looks like through the reports that we prepare for the Parliament. As well as the financial statement reports that I have spoken about, the Auditor-General for Australia tables over 40 performance audit reports each year and tables an annual performance statements report, the Major Projects Report, information reports and assurance reports as well.

I expect that performance audit reports and assurance audit reports are likely to be familiar, so I would like to talk about the annual performance statement report and information reports briefly.

The audit of performance statements is a growing element of the ANAO’s work with more entities having their statements audited each year. Performance reporting tells the Parliament whether the activities that entities consider to be material to achieving their purpose are being delivered. 

• To build the understanding of the system about the importance of good performance reporting, we started with performance audits of entities’ approach to corporate planning, performance measurement and reporting requirements and worked our way up to the audit of the statements themselves. At each step along the way we have advised the sector of what we have seen through reports and Insights products. 
• Through the year-on year analysis we can see change and maturing of the approaches taken by entities to prepare reporting on their performance.

We prepare information reports using publicly available information to provide show how parts of the system are working in practice.¹ For example, we have an upcoming report on Australian Government Budget Information which is to provide transparency and insights regarding the Australian Government’s budget position and its fiscal outcomes from 2003-04 to 2022-23. We have previously done reports on grants reporting and procurement contract reporting which have been well received.

To help the Parliament and the system to engage more easily with our performance audit reports, a number of modifications were made to the report look during the course of the previous Auditor-General’s term. For example: 

• performance audit reports were streamlined into a templated look so key bits of a report can be found in the same place every time. 
• Audit conclusions were sorted into four categories ➡ adverse, qualified (partially positive), qualified (largely positive) and unqualified. This has helped us to speak to the Parliament in a consistent way and to inform the Parliament of trends across audit themes. 
• Audit reports gained a one page ‘snapshot’ of the audit, key messages sorted around consistent themes and a standard appendix which sets out observed impacts of the audit occurring.

We aim to set the pace on reporting to the Parliament and model accountability and transparency in our actions. This includes, for example: 

• Tabling our Annual Report and releasing our Corporate Plan at the start of the reporting period. 
• Having our performance statements audited and including the audited report in our Annual Report before other public service entities will do so. 
• Publishing the Auditor-General’s expenses and our gift and benefit register. 
• Publishing reports on our implementation of our integrity framework. 
• Actively considering how best to support the Parliament, such as preparing briefs on our work that we send to committees to inform their estimate hearings. We also try to build parliamentarians understanding of what we do through steps such as: writing to new parliamentarians and offering briefings on what we do and on audits that we have tabled. 
• The previous Auditor-General released a mid-term report in October 2020 in which he reflected on his first five years in the role. The report presented a description and analysis of the role and impact of audit, as well as analysis of the financial audit and performance audit work of the Australian National Audit Office. In the report, the Auditor-General reflected on areas where he believed that the public sector could do better.

We have developed a series of engagement strategies to guide our engagement with the Parliament, our peers and the public sector. These are considered approaches to how we engage with our key relationships in line with our purpose. The strategies aim to amplify our findings and opinions to the Parliament and the sector and to ensure we invest our resources effectively to stay informed about public sector audit.

Closer to home, we aim to build the understanding of our auditors about the system and what the ANAO as a whole sees and thinks about the accountability and functioning of the system at a point in time. While their individual audits are important, we are very fortunate as audit offices to have a system level view across the public service. To help individuals to see a bigger picture, we build into our processes requirements for our auditors to be aware of what is happening in other parts of the audit business. For example: 

• Performance audit teams are required to consider the work of their colleagues and consult when planning and preparing audits. This extends to involving colleagues from the other three audit groups in key meetings with the Auditor-General and Deputy Auditor General. It can also extend to involving colleagues in fieldwork and meeting where appropriate.
•  Findings from our performance audits and performance statement audits are considered in the focus on key matters in financial statements audits.

We even considered how best to share information between audit teams when we designed the ANAO’s office space. The workspaces are designed in ‘neighbourhoods’. The idea is that auditors working across financial, performance, and performance statement audits, in similar areas of the sector sit together. This helps them to know their colleagues and to help network audit information.

Overall, the ANAO in part of the system of external scrutiny of Australia’s public financial management system. The system helps to reinforce the Auditor-General’s role.

It is important that audit offices think carefully about how they work with the Parliament and the public sector to achieve our goals of holding the system to account and increasing understanding of what a good system looks like and why it is important.

Thank you.