Supreme audit institutions (SAIs) play a critical role in promoting transparency, public integrity, and good governance in the public sector. These attributes can positively influence behaviour in the public sector and can act as a deterrent for corrupt activity. By providing independent and objective assurance and advice on the use of public resources, SAIs can help detect and deter fraud, waste, and abuse, as well as identify and recommend improvements in internal controls, risk management, and governance frameworks. In directly combatting corruption, the role of supreme audit institutions (SAIs) is dependent on the respective legislative and powers of its jurisdiction. Some SAIs have powers to conduct investigations and suspected instances of fraud and corruption, and make judicial style findings, whereas others can refer matters to the respective investigatory, anti-corruption, or judicial bodies.

The purpose of the Australian National Audit Office (ANAO) is to support accountability and transparency in the Australian Government sector through independent reporting to Parliament, and thereby contribute to improved public sector performance. It does not have powers to undertake investigatory or anti-corruption activities, but it does audit against public sector frameworks, related to matters of probity, ethics, and other matters such as fraud control arrangements to provide independent assurance to Parliament and assist it to hold the executive government to account.

This paper provides an overview of the accountability system in the Australian system, the role of the ANAO within this system, case studies of the ANAO’s audit work on probity, ethics, and fraud control, and describes the role of SAIs in leading by example with regard to transparency, public integrity, and good governance.

The Commonwealth of Australia is a constitutional monarchy with a federal system of government. It comprises six states and two territories, each with their own government and constitution. The Australian Constitution provides for the powers of three branches of government (executive, legislature and judiciary) within Australia and the responsibilities of the federal and state governments. There is also a third level of government, local government, which are managed and receive funding by state governments, but have their own elections and operating guidelines.

At the federal level, executive power is possessed by the Prime Minister and the Cabinet, who are responsible to the Parliament. The legislative power is vested in the Parliament, which consists of two chambers: the House of Representatives and the Senate. Judicial power is exercised by the High Court of Australia and other federal courts.

Australia has a strong accountability framework that ensures the transparency and integrity of the public sector. Matters relating to public integrity, criminal conduct, and corruption, are managed by the arrangements in each jurisdiction. For example, at a subnational level, all Australian states and territories have some form of independent integrity or anti-corruption body.

At the national (or federal) level of government, there are a number of bodies and legislative frameworks covering matters of integrity, criminal conduct, and corruption in the Australian public sector.

Commonwealth bodies

Two of the key entities involved in matters of integrity and corruption are the Australian Federal Police (AFP), the Commonwealth Ombudsman and the National Anti-Corruption Commission (NACC). The AFP is the primary law enforcement agency with responsibility for investigating serious or complex fraud against the Commonwealth and the Commonwealth Ombudsman provides assurance that Commonwealth agencies and prescribed private sector organisations act with integrity, treat people fairly, and promotes improvements in public administration.¹

On 1 July 2023, the NACC commenced its operations as an independent agency which detects, investigates, and reports on serious or systemic corruption in the Commonwealth public sector. The NACC has also established the ‘Integrity Maturity Framework’² which is a set of eight integrity principles derived from key Commonwealth integrity laws, policies and procedures. The principles are as follows:

1. Values and Code of Conduct.
2. Integrity knowledge and performance management.
3. Integrity policies, resources and systems.
4. Integrity risk management.
5. Prevent, detect and manage fraud and corruption.
6. Integrity in public resource management.
7. Protect people, information and assets.
8. Monitory and evaluate organisational integrity.

Legislative frameworks

For the Australian public service, there are two core pieces of legislation which guides its operations. These are the Public Governance, Performance and Accountability Act 2013 (PGPA Act) and the Public Service Act 1999 (Public Service Act). The PGPA Act sets out a system of governance and accountability for the use of public resources, including the responsibilities of accountable authorities, such as departmental secretaries, chief executives of noncorporate Commonwealth entities and boards of corporate Commonwealth entities and Commonwealth companies, and the requirements for planning, budgeting, and reporting of public money. The PGPA Act promotes the proper use and management of public resources, the achievement of objectives and outcomes, and the provision of meaningful information to the Parliament and the public. The PGPA Act contains ‘general duties of officials’ applying to both the accountable authority of the PGPA entity and entity officials. The general duties relate to: acting with care and diligence; acting honestly, in good faith and for a proper purpose; not misusing one’s position; the proper use of information; and disclosing interests. Taken together, the general duties establish an overarching framework for integrity, probity and ethical behaviour applying to the accountable authorities and officials of all PGPA Act entities, including all members of the Australian public service (APS).

The Public Service Act establishes the values, code of conduct principles, and employment framework of the APS. The Public Service Act defines the APS as a unified, impartial, and professional service that supports the Government of the day and serves the national interest. The Public Service Act also outlines the rights and responsibilities of APS employees, such as the obligations to act with honesty, integrity, respect, and accountability. One of the APS values is ‘ethical’ and it states that the ‘APS demonstrates leadership, is trustworthy, and acts with integrity’ in all that it does.

There are also a number of other policies and frameworks for the conduct of the APS, including for: grants administration; government procurement; government advertising; protective security; appearing before the Parliament; the caretaker period (this a period of time when there is a transition of government, the Parliament has been dissolved and elections occur, and a new government is yet to be sworn in by the Governor-General); liaising with lobbyists; conducting investigations; legal work; risk management; and fraud control.

The specific integrity, probity and ethical arrangements applying to public sector personnel will depend on the type of organisation that engages them and their engagement status. Within the sector, there is both collective and individual responsibility for maintaining integrity, probity and ethical conduct — shared by framework policy owners, the heads of public sector organisations, and their personnel. The approach taken to compliance by each of these actors is fundamental to integrity outcomes in the public sector context, as ‘compliance ensures standards for integrity are met’. Policy owners establish the rules of operation in key areas — including resource use and management, procurement, grants administration, cyber security, record-keeping, legal work, Freedom of Information and integrity — and then largely rely on PGPA accountable authorities and APS agency heads to be responsible for compliance.

This system is designed to ensure integrity and good governance in the public sector, ensure the proper use of Commonwealth resources, and act as a safeguard against dishonest and corrupt behaviour.

The role of the ANAO

The Auditor-General Act 1997 (AG Act) establishes the role and functions of the Auditor-General as an independent officer of the Parliament. The AG Act sets out the mandate, powers, and duties of the Auditor-General, as well as the relationship between the Auditor-General and the Parliament, the Executive Government, and the ANAO. It provides for the independence of the Auditor-General and gives the Auditor-General the powers to conduct audits of Commonwealth entities.

The ANAO is responsible for undertaking financial statements, performance, and performance statements audits of the federal executive government, and providing independent audit reports to the Parliament (as specified in the PGPA Act and AG Act). The ANAO’s audit reports are tabled in the Parliament and made publicly available. Audit reports include findings about the management of Commonwealth resources and performance measures, make recommendations where entities can improve practices, and provide external scrutiny to ensure entities are acting in accordance with the relevant legislation and guidelines, all of which drives improved public sector importance. While the ANAO does not have a direct role in combatting corruption, its mandate in undertaking audits, including against public sector frameworks relating to probity, ethics, and other matters such as fraud control arrangements, of the executive government drives good practices in transparency, public integrity, and governance within the public sector.

The ANAO can also refer matters to the NACC or other relevant law enforcement bodies. For example, during audit work, there may be instances where matters are identified/arise that may indicate potentially corrupt conduct. In these instances, the ANAO discusses the matter at an appropriately senior level in the organisation (or with the relevant Minister if the matter involves the accountable authority). It is for the entity to then determine the appropriate action to take on the matter. If the ANAO did not consider that appropriate action was being taken by an entity in response to the matter raised, it may consider referring the matter to an appropriate body, such as the NACC or the Australian Federal Police.

Probity management

There is no single definition of probity in the Australian public sector. However, the following definition in a procurement context describes the general expectation applying to Australian Government activity more broadly ‘Probity is the evidence of ethical behaviour, and can be defined as complete and confirmed integrity, uprightness and honesty in a particular process.’³ Probity can serve as a safeguard against corruption, ensuring that decision-making processes are fair, impartial, and in the public interest⁴. It encompasses a range of principles and practices aimed at promoting honesty, integrity and ethical behaviour within organisations and institutions.

The ANAO assesses the management of probity as part of its audits. Probity is routinely assessed in performance audits of procurement and grants administration. In June 2023, the Auditor-General presented a series of three performance audit reports that examined the effectiveness of probity management in financial regulators. From these audits, the ANAO developed seven elements from assessing the management of probity in Australian Government entities⁵, including:

1. Promote a culture that supports probity.
2. Identify the probity requirements that apply to your organisation and assess probity risks.
3. Develop policies and procedures to manage probity risks.
4. Inform personnel of probity requirements.
5. Check that internal controls for managing probity risk are effective.
6. Promote, check and follow up compliance with probity requirements.
7. Keep records to demonstrate probity.

Developing an organisational culture which supports probity and in which there are good governance arrangements ensures that not only are the requirements of the relevant legislative frameworks and guidelines are met but that public officials act ethically and with integrity and effectively managing Commonwealth resources for the benefit of the Australian public.

Ethics methodology

Recently the ANAO has developed an ethics methodology for its audit work program. The ethics methodology was developed following analysis of ANAO audit findings, from both performance and financial audits, that the public sector’s approach to procurement regularly fell short of expectations set out in regulatory frameworks, and other deficiencies in complying with mandatory requirements such as record keeping and compliance with grants rules and guidelines. In some audit reports, the ANAO has identified — through these deficiencies — a failure to meet ethical requirements.

Not consistently meeting requirements raises questions of whether compliance with them, and their intent, is embedded as part of public sector culture. Audit findings indicate that 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.

While most ANAO audit work done in the other three ‘E’ areas — effectiveness, economy and efficiency — could draw on performance against clearly defined objectives, frameworks, rules or standards, the area of ethical behaviour can be much more nuanced. It is clearly unethical to comply with the letter of a rule, but in a way which undermines its intent. For example, using the provision of ‘extreme urgency brought about by events unforeseen’ to grant an exemption from open competitive tendering, simply because the procurement process was left too late. While ANAO audits had outlined the facts of these situations, there was a reluctance to call out the ethics of this behaviour. On this basis, the development of an audit methodology to assess ethics became a priority for the ANAO and audits of the entities ethical management of public resources are now a regular feature of the ANAO’s Annual Audit Work Program.

Fraud control arrangements

In June 2020 the Auditor-General presented a series of performance audit reports that assessed the effectiveness of fraud control arrangements in three Australian Government departments. The audits focussed on compliance with mandatory requirements of the Commonwealth Fraud Control Framework 2017, the consistency of entity arrangements with the government’s better practice, and promotion of a fraud aware culture within entities. In the audits conducted, it was found that fraud control arrangements were largely effective and that the relatively small number of recommendations made to entities indicates a high level of compliance.

The case studies examine nine focus areas in developing sound fraud control arrangements including:

1. Risk assessment
2. Planning – strategically and operationally
3. Prevention, awareness and training
4. Third party arrangements
5. Detection
6. Investigations
7. Quality assurance and review
8. Reporting
9. Culture – promote a fraud aware culture

Further information about this series of audits is available on the ANAO’s website at https://www.anao.gov.au/work/insights/fraud-control-arrangements.

The role of SAIs to lead by example

SAIs have an important role in leading by example in their respective jurisdictions. This means acting in a manner that is transparent, acting with integrity, and ensuring that there are good internal governance arrangements. The ANAO is committed to transparency and welcomes and responds to external scrutiny as an opportunity to improve its performance, accountability, and transparency, and to demonstrate its commitment to public integrity and good governance.

The ANAO publishes a range of information about its operations on its website. All ANAO audit reports are made publicly available following tabling in the Parliament. The ANAO’s Corporate Plans and Annual Reports, Audit Manual, results of independent audits and reviews, and the records of corporate disclosures, including a gifts and benefits register and record of the Auditor-General’s expenses are made available on the ANAO’s website.

The ANAO also publishes its Integrity Framework⁶ which provides an overarching structure to the integrity control system and supports the ANAO’s integrity. The framework serves to assist in ethical decision making and risk, fraud, and misconduct management. In 2023, the ANAO published its Integrity report for the first time. This report includes an assessment of the ANAO against the Integrity Framework and includes details of integrity-related matters that occurred in the previous 12-month period.

SAIs working with Parliament

Another way in which SAIs can play role in integrity and good governance is through its work with the Parliament and respective public accounts committee (PAC). The Parliament and the PAC has a role to examine audit reports, further scrutinise the executive about the findings of audit reports and follow-up the implementation of audit recommendations.

The ANAO has developed a strong relationship with the Joint Committee of Public Accounts and Audit (JCPAA) and we are viewed as trusted advisor to the committee. This relationship enables the ANAO to work effectively with the JCPAA in the course of its inquiries, discuss its findings, and raise matters which might be of interest to the committee. The JCPAA has commenced an inquiry into probity and ethics in the Australian public sector⁷ which is examining a series of the ANAO’s audit reports on probity management and audits where ethical findings were made.

The nature of supreme audit institutions (SAIs) role in combatting corruption for the advancement of transparency, public integrity and good governance is dependent on legislative requirements and mandates. The ANAO contributes to the promotion of public sector values by auditing against the frameworks that have been established to support ethical conduct, accountability, and performance in the Australian Government entities. These audits help to identify areas for improvement and to share good practices across the public sector. By doing so, the ANAO helps to ensure good public sector management and to act as a safeguard against corruption.