Finance and Deregulation

Audit strategy overview

The Finance and Deregulation portfolio is diverse and provides a broad array of support and services to Government. This includes the provision of budget and financial management services and advice; electoral services and support; non-defence asset management; the administration of the Government’s general insurance fund, investment funds and superannuation schemes; and the administration of Parliamentarians’ entitlements.

ANAO’s planned performance audit strategy reflects the central position in government occupied by the Department of Finance and Deregulation (Finance) and the broad range of functions undertaken. Through its role in providing budget and financial management services and advice the department is often involved in audits for which it is not the primary agency being audited. In addition, ANAO has a strategy of auditing the delivery of key central agency functions. Of particular note in this respect are the planned audits of the costing (together with Treasury) of election commitments under the Charter of Budget Honesty and the department’s central agency role in administering Gateway Reviews.

ANAO’s planned performance audit strategy also reflects the diverse nature of the portfolio. In this respect, ANAO recently completed an audit of the AEC’s conduct of the 2007 Federal Election, and proposes to examine the AEC’s administration of disclosure obligations in relation to political donations. A potential audit of the Future Fund Management Agency is also planned.

Potential audits

Administration of Government Advertising Arrangements

Governments use advertising to inform the public about taxpayer-funded programs, to promote government policies and to support the establishment and delivery of services. Australian Government departments and agencies subject to the Financial Management and Accountability Act 1997 (the FMA Act) are required to: buy the media space for their advertising through the Central Advertising System; comply with the Guidelines on Information and Advertising Campaigns by Australian Government Departments and Agencies (March 2010); use the Communications Multi-Use List to select consultants for campaigns with expenditure over $250 000; and comply with their own department’s procurement policies for campaigns with expenditure under $250 000.

An audit would examine the administration of the government advertising framework by Finance. The audit would also examine several government advertising campaigns in selected portfolios to assess their compliance with the Guidelines on Information and Advertising Campaigns by Australian Government Departments and Agencies (March 2010), and appropriate procurement practices in accordance with the Communications Multi-Use List or agencies’ procurement policies.

The ANAO previously examined aspects of government advertising in Audit Report No.24 of 2008–09 and provided Ministers with assurance review reports on proposed government advertising campaigns from June 2008 to 31 March 2010. Audit Report No. 38 of 2009–10 provides a summary of the ANAO’s work in this area.

Implementation of Key Aspects of the Commonwealth Grant Guidelines

Conditional grants have been used increasingly in recent years as a mechanism for transferring funding to external parties for the purpose of achieving particular Australian Government policy objectives. With effect from 1 July 2009, the legislative and policy framework applying to the assessment and approval of grants has been significantly enhanced. A key aspect of the new framework is the promulgation under the Financial Management and Accountability Regulations 1997 of the Commonwealth Grant Guidelines (CGGs). The CGGs identify a number of mandatory process, decision-making and reporting requirements for both Ministers and officials involved in grants administration. The CGGs also include guidance on sound practice in grants administration that agencies should have regard to in implementing grant programs.

The introduction of a statutory basis for the issuing of grant guidelines placed the administration of grant programs on the same footing as procurement activities, which are subject to the requirements of the Commonwealth Procurement Guidelines (CPGs).

Similar to audit work ANAO undertook to examine how well agencies had implemented the most recent major changes to the CPGs, ANAO proposes to undertake separate but contemporaneous audits of the development and approval of grant guidelines and the administration of key grant reporting requirements.

Implementation of Improvements to the Administration of Parliamentarians’ Entitlements

Audit Report No.3 2009–10 examined the administration of Parliamentarians’ entitlements by Finance. A positive outcome of that audit was that, in July 2009, the Government initiated a ‘root and branch’ review of the entitlements framework. The Government further agreed to provide significant additional funding for Finance to improve the administration of entitlements as well as for publishing, online, details of the entitlements framework and expanding the current reporting regime to table and publish on the Finance internet site all entitlements expenditure administered by Finance.

Against this background, and given the significant public interest in the administration of Parliamentarians’ entitlements, the ANAO has included in its plan an audit that would examine the implementation of improvements to the entitlements framework and its administration.

Administration of the Costing of Election Commitments

The Charter of Budget Honesty Act 1998 (the Charter) outlines arrangements under which the Secretaries of the Department of the Treasury and Finance (the Secretaries) may be asked to cost Government and Opposition election commitments during the caretaker period before a general election. Under the Charter, the Secretary to the Treasury is responsible for costing aspects of policies affecting revenue, while the Secretary of Finance is responsible for costing aspects of policies that affect government outlays and expenses. The Secretaries have, in accordance with the Charter, issued guidelines for the methodology to be used in the preparation of policy costings (the guidelines). The guidelines outline the principles and processes to be followed by the Treasury and Finance, with the aim of achieving consistent and transparent policy costings.

In the lead-up to the 2007 Federal Election, the then Government made 20 requests for costings of publicly announced policies. The then Opposition similarly made 10 requests for costings of its publicly announced policies. Clause 31 of the Charter outlines the requirements for the public release of policy costings. The guidelines state that, when a policy costing is published, the published report will include the request for the costing submitted in accordance with the Charter; any request for further information made by the Secretaries; and any further information forwarded to the Secretaries or obtained in discussions with parties.

An audit would assess the effectiveness of the costing of election commitments under the Charter of Budget Honesty, with particular reference to the caretaker period for the 2010 Federal Election.

Administration of the Financial Disclosure Provisions of the Commonwealth Electoral Act 1918

Part XX of the Commonwealth Electoral Act 1918 includes the requirements for, and administration of, the disclosure arrangements for selected revenue and expenditure items incurred by participants in the Federal electoral process.

In the report of its recent inquiry into the Commonwealth Electoral Amendment (Political Donations and Other Measures) Bill 2008, the Chair of the Joint Standing Committee on Electoral Matters commented that the guiding principle for a funding and disclosure regime is that there must be a complete and meaningful trail of disclosure back to the true source of funds received by, or of benefit to, political parties and other participants in the electoral process.

An audit would examine whether the Australian Electoral Commission has administered the financial disclosure provisions of the Commonwealth Electoral Act 1918 in a timely and effective way.

Establishment and Management of the Nation Building Funds: the Education Investment Fund

The ANAO’s Planned Work Program for 2008–09 outlined a series of audits that would be undertaken to examine the establishment and management of the Nation Building Funds. An audit of the Education Investment Fund (EIF) would be the first audit in a series of proposed audits.

The EIF was established to:

• make payments towards creating or developing education infrastructure in areas such as higher education, research and vocational education and training; and
• make transitional payments relating to the former Higher Education Endowment Fund, the balance of which was transferred into the EIF.

The Department of Education, Employment and Workplace Relations and the Department of Industry, Science and Research are responsible for project identification and evaluation criteria, with the Department of Finance and Deregulation being involved in the payment process once decisions are made about which projects to fund.

An audit would examine how candidate projects are identified, how evaluation criteria for the Fund are developed and applied, and how efficiently and effectively the funding for approved projects is administered and accounted for. The audit would also examine the investment by the Future Fund Board of Guardians and Future Fund Management Agency of the assets of the EIF (which stood at $5.99 billion as at 31 December 2009).

Administration of the Gateway Review Process

Gateway is a project assurance methodology that involves short, intensive reviews at critical points in a project’s lifecycle by a team of reviewers not associated with the project. The intention is to provide an arm’s-length assessment of the project against its specified objectives, and early identification of areas needing corrective action.

An audit would examine Finance’s administration and implementation of Gateway, as well as agencies that have had projects subject to one or more Gateway Reviews.

Consistent with a recommendation from the Joint Committee of Public Accounts and Audit, ANAO will consider following this audit of the Gateway Review Process with an audit of the two-stage Cabinet approval process for major projects.

 

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