Cross-portfolio Audits

Audits in progress at 1 July 2010

Direct Sourcing Procurement Processes

Australian Government organisations purchase around $30 billion worth of goods and services annually. When undertaking procurement, organisations are required to follow the principles and requirements set out in the Commonwealth Procurement Guidelines and in associated financial framework legislation.

The objective of this audit is to assess whether direct sourcing is conducted in accordance with the Commonwealth Procurement Guidelines and relevant legislation. The audit will also examine the implementation of relevant recommendations contained in ANAO Audit Report No.57 2004–05, Purchasing Procedures and Practices and ANAO Audit Report No.21 2006–07, Implementation of the Revised Commonwealth Procurement Guidelines.

The audit report is expected to be tabled in the Spring 2010 Parliamentary Sittings.

Capitalisation of Software

Management of software assets should be based on a life-cycle approach that involves critical decisions around acquisition, replacement, operation, enhancement and disposal. The Consolidated Australian Government Financial Statements for the year ending
30 June 2009 include computer software assets valued at $5.7 billion (up from $5.1 billion in 2008).

The objective of this audit is to examine the management of (and accounting for) computer software assets within selected Australian Government organisations. The audit would also assess the extent to which the recommendations contained in ANAO Audit Report No.54 2002‑03, Capitalisation of Software have been implemented.

The audit report is expected to be tabled in the Spring 2010 Parliamentary Sittings.

Senate Order for Departmental and Agency Contracts (Calendar Year 2009 Compliance)

The Senate Order for Departmental and Agency Contracts requires agencies operating under the Financial Management and Accountability Act 1997 to place lists of contracts valued at $100 000 or more on the Internet. These lists must, among other things, indicate whether each contract requires the parties to maintain the confidentiality of any of the contract’s provisions.

The objective of this audit is to assess the appropriateness of the use of confidentiality provisions in selected contracts reported in the 2009 listings and assess the effectiveness of the processes used by selected agencies for compiling contract listings.

The audit report is expected to be tabled in the Spring 2010 Parliamentary Sittings.

Certificate of Compliance

The Certificate of Compliance process contains reporting requirements relating to legal compliance and financial sustainability for Australian Government organisations. As well as improving the level of reporting relating to the Australian Government’s financial management arrangements, the Certificate of Compliance process is designed to help increase the understanding of the requirements of the financial framework among organisations. Three Certificate of Compliance cycles have now been completed (30 June 2007,
30 June 2008 and 30 June 2009). The 2009 reporting process identified around 15 000 individual instances of non-compliance (down from over 32 000 in 2008).

The objective of this audit is to assess organisations’ management of the implementation and ongoing use of the Certificate of Compliance process. The audit is also considering what action the Department of Finance and Deregulation has taken to support organisations to meet Certificate of Compliance-related requirements.

The audit report is expected to be tabled in the Spring 2010 Parliamentary Sittings.

Potential audits

Development of Key Performance Indicators to Support the Outcomes and Programs Framework

In preparation for the 2009–10 Commonwealth Budget, a number of revisions were made to the budget reporting framework. The most significant of these involved changes to the arrangements for outcomes to reflect an increased emphasis on programs. As part of the new framework, agencies were required to develop Key Performance Indicators (KPIs) to demonstrate the performance of programs in achieving objectives and contributing to Government outcomes. The KPIs were required to be included in the 2009–10 Portfolio Budget Statements (PBS).

An audit would examine the initial application of the Outcomes and Programs Framework in selected Australian Government agencies, particularly focusing on the KPI reporting requirements of the PBS and the role of the Department of Finance and Deregulation (Finance) in administering the framework.

Following completion of this audit, a second audit, Performance Reporting Against the New Financial Framework, is being planned, which proposes to examine the extent to which Australian Government agencies have fully implemented the arrangements, including how agencies have aligned their budget and annual reporting.

Performance Reporting Against the New Financial Framework

In the 2009–10 Commonwealth Budget a number of revisions were made to the budget reporting framework. The most significant of these involved changes to the arrangements for outcomes to reflect an increased emphasis on programs. Beginning in 2009–10, all General Government Sector agencies are required to report in accordance with an Outcomes and Programs Framework. Programs are the building blocks of government financial and non-financial reporting, management and analysis and should provide a tangible link between government decisions, government activities and the impacts of those actions.

An audit would build on the findings from the initial audit Development of Key Performance Indicators to Support the Outcomes and Programs Framework and examine the extent to which Australian Government agencies have fully implemented the arrangements, including how agencies have aligned their budget and annual reporting.

The ANAO would follow this audit with an update to its 2004 Better Practice Guide on Annual Performance Reporting to reflect changes in the guidance for annual performance reporting provided by the Department of the Prime Minister and Cabinet and relevant changes flowing from Operation Sunlight being administered by Finance.

Audit Committees and Internal Audit

Audit Committees and Internal Audit make a valuable contribution to public sector management by providing independent assurance and assistance in areas such as risk, control, compliance and financial reporting. Through their independent review role, Audit Committees are well placed to identify opportunities for performance improvement.

An audit would assess whether selected Australian Government organisations have used better practice principles when establishing and operating their Audit Committee and Internal Audit.  The audit would focus on implementation of the better practices contained in the ANAO’s Better Practice Guides Public Sector Audit Committees (2005) and Public Sector Internal Audit (2007). The audit would also assess whether the recommendations contained in Audit Report No.3 2004–05 Management of Internal Audit in Commonwealth Organisations have been implemented.

Developing and Managing Internal Budgets

Developing and managing internal budgets is central to organisations effectively managing their resources. Organisations use internal budgets to establish and communicate funding priorities, support financial planning and associated decision-making, set financial controls, support resource allocation, identify cost structures, determine prices and monitor financial performance.

An audit would assess the effectiveness of internal budget processes at selected Australian Government organisations. Specifically, it would examine whether internal budgeting is embedded into each organisation’s business planning processes, whether internal budget development processes are well designed, and whether financial performance is being actively monitored. The audit would focus on implementation of the better practices contained in the ANAO’s Better Practice Guide Developing and Managing Internal Budgets (2008).

Managing Employees with a Disability

Diversity in the workplace can benefit organisations in a number of ways. A diverse range of backgrounds and perspectives provides a broader range of ideas and insights for use in decision-making and policy development. Organisations that recognise and value diversity tend to be more productive workplaces, and are more likely to attract and retain employees. An integral part of workplace diversity is the employment of people with disabilities.

An audit would examine the effectiveness of Australian Government organisations’ practices associated with employing people with a disability, including recruitment processes, working conditions, workplace design and functionality and graduated return to work. The audit would also determine the adequacy of policies and procedures and assess compliance with relevant legislation, including the Public Service Act 1999 and the Disability Discrimination Act 1992.

Information and Communication Technology—Confidentiality of Client Information

The Privacy Act 1988, which applies to all Australian Government agencies, contains Information Privacy Principles providing for the security and storage of personal information. The Privacy Amendment (Private Sector) Act 2000 aims to provide privacy protection for personal records across the private sector, including those organisations providing outsourced services to the public sector. A Privacy Commissioner survey in 2009 found a high incidence of data, including client information, on agencies’ portable storage devices (such as flash drives) not being properly secured and some agencies did not have controls around the use of personal storage devices and loss or theft of such devices.

A series of ICT-focused audits would test the security of client information.

Information and Communication Technology—Protection of information

Australian Government organisations electronically create, collect, process, store and transmit large amounts of official information. All such information must be handled with due care. Additional layers of protection are required where official information is assessed as critical to the performance of government functions; or because its loss or misuse could harm Australia’s national security, or adversely impact on the operations of government, the interests of the community, or of any individual.

Australian Government organisations must manage information in accordance with a range of legislative requirements and policies. This includes the Protective Security Manual, the Information Security Manual, the Crimes Act 1914, the Public Service Act 1999 and the Privacy Act 1988. There are also a wide range of legislative obligations pertaining to the protection, use and disclosure of specific types of information.

An audit would assess whether selected Australian Government organisations have implemented effective ICT systems and practices to protect information in accordance with legislative requirements and government policies.

Implementation and Management of Electronic Document Records Management Systems

The decision to implement an Electronic Document Records Management System (EDRMS) to assist in the management of paper and electronic records and documents can be driven by a range of factors. These may include the need to improve efficiency, administration, customer service and compliance with standards or legislation.

An audit would assess EDRMS implementation and management in selected Australian Government organisations and whether the implemented systems meet the needs of these organisations.

Senate Order for Departmental and Agency Contracts

The Senate Order for Departmental and Agency Contracts requires agencies operating under the Financial Management and Accountability Act 1997 to place lists of contracts valued at
$100 000 or more on the Internet. These lists must indicate, among other things, whether each contract requires the parties to maintain the confidentiality of any of the contract’s provisions.

An audit would assess the appropriateness of the use of confidentiality provisions in selected contracts reported in the 2010 calendar year listings, and the processes used by selected agencies for compiling contract listings.

Procurement

Australian Government organisations purchased over $23 billion in property and services in 2009 through procurement processes. When undertaking procurement, organisations are required to follow the principles and requirements set out in the Commonwealth Procurement Guidelines and associated legislation.

As part of a continuing series of audits focusing on procurement, the ANAO is planning to examine specific procurement approaches, including different types of procurement. For example, an audit of procurement methods may focus on organisations’ use of standing offer arrangements, including coordinated and cooperative procurement arrangements.

Closing the Gap in Indigenous Disadvantage Initiative: Performance Information Reporting

In December 2007 the Council of Australian Governments (COAG) agreed to a series of six targets to address the gap between Indigenous and non-Indigenous Australians in a range of socio-economic indicators. In 2008 these targets were developed into the National Indigenous Reform Agreement (NIRA) which now provides the overarching framework for the delivery of the Closing the Gap strategy. The six targets are:

• to close the life-expectancy gap between Aboriginal and Torres Strait Islander people and other Australians within a generation;
• to halve the mortality gap between Aboriginal and Torres Strait Islander children and other children under age five within a decade;
• to halve the gap in literacy and numeracy achievement between Aboriginal and Torres Strait Islander students and other students within a decade;
• to halve the gap in employment outcomes for Aboriginal and Torres Strait Islander people within a decade;
• to at least halve the gap in attainment at Year 12 schooling (or equivalent level) by 2020; and
• to provide all Aboriginal and Torres Strait Islander four year-olds in remote communities with access to a quality preschool program within five years.

Underpinning these targets are the seven COAG-agreed Building Blocks (Early Childhood, Schooling, Health, Economic Participation, Healthy Homes, Safe Communities and Governance and Leadership) which form the strategic areas for action by governments.

An audit would examine the performance information architecture that has been developed to enable robust reporting against these targets and the extent to which agency-specific performance information and reporting systems have been adapted to be able to generate reliable information relating to these targets and progress within the seven Building Blocks. The COAG Reform Council’s 2010 National Indigenous Reform Agreement Baseline Performance Report, issued in May 2010, has highlighted a range of gaps in the existing performance framework and has recommended steps for improvement. There is also ongoing work being undertaken by a series of departmental committees and working groups. Timing of an audit would take the work of these groups and the recommendations of the COAG Reform Council into consideration.

Implementation of the COAG Service Delivery Principles for Programs and Services for Indigenous Australians

In 2004 COAG agreed on a National Framework of Principles for Government Service Delivery to Indigenous Australians. The principles covered the following areas: sharing responsibility; harnessing the mainstream; streamlining service delivery; establishing transparency and accountability; developing a learning framework; and focusing on priority areas. In 2008 COAG reached agreement on the National Indigenous Reform Agreement (NIRA). As part of the NIRA COAG reissued an expanded set of principles entitled the Service Delivery Principles for Programs and Services for Indigenous Australians. All governments were required to take these principles into account in designing policies and delivering services. The service delivery principles are intended to guide the design and delivery of Indigenous-specific and mainstream government programs and services provided to Indigenous people as well as guide the development and negotiation of National Partnership Agreements.

The 2008 service delivery principles are: the Priority Principle (programs and services  should contribute to Closing the Gap by meeting targets endorsed by COAG), Indigenous Engagement Principle (engagement should be central to the design and delivery of programs and services), Sustainability Principles (programs and services should be directed and resourced over an adequate period of time to meet the COAG targets), Access Principle (programs and services should be physically and culturally accessible to Indigenous people), Integration Principle (there should be collaboration between and within governments at all levels and their agencies to effectively coordinate programs and services) and the Accountability Principle (programs and services should have regular and transparent performance monitoring, review and evaluation).

An audit would examine the organisational initiatives undertaken to date by Australian Government agencies to put these principles into operation and ensure that they are being adhered to.  The audit would also consider what overarching arrangements exist to monitor adherence to the principles across governments.

ICT Reform Program

In April 2008 the Australian Government engaged Sir Peter Gershon to lead an independent review of the Government's use and management of information and communication technology (ICT). The review was undertaken to identify ways in which the Government could strengthen the whole-of-government management of ICT and maximise the benefits from ICT to drive greater efficiency and deliver better services.  The review made recommendations directed at improving ICT governance, capability and skills; better managing business-as-usual ICT operations, relationships with industry and data centre requirements; and ensuring that the Government’s ICT operations are sustainable. In November 2008 the Government endorsed the recommendations of the review and initiated the ICT Reform Program to implement the Government's directions regarding the recommendations.

An audit would examine how selected Australian Government organisations have implemented new arrangements in response to the ICT Reform Program. 

Record Keeping

Record keeping is a key element of sound public administration and accountability for all Australian Government entities. As part of a continuing series of audits focusing on record keeping, an audit would examine the extent to which entities meet their record keeping responsibilities. For example, the audit may examine how effectively entities manage records created and stored electronically in corporate record keeping systems and in other electronic systems in accordance with record keeping requirements including the Archive Act 1983.

Freedom of Information

The Commonwealth Freedom of Information Act 1982 (the Act) creates a legally enforceable right of access to documents in the possession of Commonwealth Ministers and agencies. The Act was introduced in order to improve accountability of government for administrative decision making. The Act does not require a person to establish a special interest or ‘need to know’ before he or she is entitled to seek to have access granted.  It also details the circumstances under which access to information can be denied. 

The Freedom of Information Amendment (Reform) Bill 2009 and the Information Commissioner Bill 2009 introduce major reforms to the Freedom of Information Act 1982 to promote a pro-disclosure culture across government and to build a stronger foundation for more openness in government. These Bills are not yet legislated but have been endorsed by the Senate Committee on Finance and Public Administration.

An audit would assess the appropriateness of agencies’ policies and processes for dealing with requests for information in accordance with the Act; agencies’ compliance with the provisions of the Act and their preparedness for any impending changes to the FOI legislation. An audit would also assess whether the recommendations contained in Audit Report No.57 2003–04 Administration of Freedom of Information Requests have been implemented. 

Capacity Development for Indigenous Service Delivery

Australian Government agencies rely on Indigenous organisations and provide significant annual funding to the delivery of programs and services. The ability or capacity of these organisations to deliver the program and services for which they are funded has a strong influence on the delivery of the service and on the ultimate achievement of outcomes sought by government.

The audit objective is to assess the extent to which key Australian Government agencies recognise and seek to reduce service delivery risks posed by capacity constraints in Indigenous organisations.

The audit report is expected to be tabled in the autumn 2011 Parliamentary Sittings.

 

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