Treasury

Audit strategy overview

The Treasury portfolio undertakes a range of activities aimed at achieving strong sustainable economic growth and the improved wellbeing of Australians. The portfolio comprises 15 agencies, including the Department of the Treasury (the Treasury).

In recent years, the Treasury has played a prominent role in many key reforms and initiatives. For example, as part of its role as a central policy agency, the Treasury is leading policy development and public engagement on a number of long-term, economy-wide reforms such as the review of the tax and transfer systems, and Australia’s transition to a less carbon-intensive economy. Past audit activity has examined administration of payment of Goods and Services Tax to the states and territories, and the calculation and reporting of tax expenditures. The audit strategy for the portfolio will maintain a strong focus on the Treasury.

The portfolio also includes various financial system regulators. Past ANAO audits have examined bank prudential supervision and aspects of the work of the Australian Securities and Investments Commission.

In light of the global financial crisis and significant government policy responses, such as the guarantees on bank deposits, the ANAO has commenced, or plans to commence, work on initiatives in this area. Audit activity is also planned into the costings (by Treasury and Finance) of election commitments under the Charter of Budget Honesty.

Potential audits

The Establishment, Implementation and Administration of the Jobs Fund

On 5 April 2009, the Government announced further stimulus initiatives as part of the Jobs and Training Compact, with the former Prime Minister stating that the Compact was with Australians affected by the global recession and was promising training, support and local initiatives to help them get back to work. The Jobs and Training Compact was to have three elements, the largest being a $650 million Jobs Fund to help support local jobs and training through community projects in regions hardest hit by the economic downturn.

Two audits of the Jobs Fund are planned. The first audit would relate to the establishment, implementation and administration of the Infrastructure Employment Projects stream. This stream has been announced as involving $150 million for the construction of local infrastructure that would create immediate jobs in communities affected by the global recession. It is administered by the Department of Infrastructure, Transport, Regional Development and Local Government. The Department of the Prime Minister and Cabinet also plays a role in the initiation of projects for funding through this stream of the Fund with the Department of the Treasury involved in the making of payments for approved projects. In addition, the published guidelines for the Infrastructure Employment Projects stream state that projects initiated by the Australian Government will be referred to a joint departmental committee.

The second audit would examine the establishment, implementation and administration of the Local Jobs stream of the Jobs Fund. Treasury is not involved in the administration of this stream and so is not involved in the audit.

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

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 a 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. It 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).

Development and Implementation of the Australian Government’s Guarantee of Large Deposits and Wholesale Funding

On 12 October 2008, the former Prime Minister announced deposit and wholesale funding guarantees that apply to authorised deposit-taking institutions incorporated in Australia. These institutions are, as a group, of systemic importance to the functioning of the financial system and the broader economy, and are subject to prudential regulation by the Australian Prudential Regulation Authority.

The guarantees were designed to help Australian banks, credit unions and building societies continue to access funding in domestic and international credit markets. The guarantees were also designed to ensure Australian institutions were not placed at a commercial disadvantage in relation to their international competitors that have received similar government guarantees on their bank debt.

The Reserve Bank of Australia, as agent for the Commonwealth, administers the guarantees. This role includes performing administrative tasks such as processing applications from institutions for coverage of liabilities and collecting fees. In addition, the legal framework for the scheme allows for information sharing between the Reserve Bank of Australia, the Australian Prudential Regulation Authority and other relevant agencies.

An audit would examine the Reserve Bank of Australia’s administration of the guarantees.

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.

 

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