The consolidated financial statements (CFS) of the Australian Government are required under section 48 of the Public Governance, Performance and Accountability Act 2013. The CFS are prepared in accordance with Australian accounting standard AASB 1049 Whole of Government and General Government Sector Financial Reporting. The CFS present whole-of-government financial results inclusive of all Australian Government–controlled entities.

Australian Government–controlled entities include departments of state, parliamentary departments, other non-corporate Commonwealth entities, corporate Commonwealth entities, and companies in which the Australian Government holds a controlling interest. Also presented are the financial statements of the general government sector (GGS) and disaggregated information on each of the sectors of government.

The Finance Minister is required to prepare and deliver the CFS to the Auditor-General by 30 November each year. The Department of Finance has operational responsibility for preparing the CFS for the Finance Minister.

To assist in the preparation of the CFS, the Department of Finance classifies entities as material or non-material, based on their contribution to the GGS. In aggregate, material entities comprise 99 per cent of revenues, expenses, assets and liabilities of the total GGS. All departments of state are considered material.

Budgeted expenditure for entities within the GGS is anticipated to total $833.262 billion for 2026–27, with the net worth deficiency budgeted to be $646.934 billion as at 30 June 2027.

Figure 1 shows the level of budgeted expenditure by portfolio for the May 2026–27 Budget. The size of each ‘bubble’ represents the level of expenditure relative to the total GGS. The placement of each bubble is dependent on the number of entities within the portfolio and the average staffing level of the respective portfolio.

Figure 1: Budgeted expenditure by portfolio, 2026–27

Source: ANAO analysis of 12 May 2026–27 Portfolio Budget Statements.

The financial statements audit planning process examines each entity’s environment and governance arrangements, its system of internal control, and prior-year financial, performance statements and performance audit findings. These planning processes are undertaken on a whole-of-organisation basis with the aim of identifying key risks that may significantly impact on the integrity of the financial statements.

When planning the audits of entities’ 2025–26 financial statements, the ANAO identified 198 financial statements risks for those Commonwealth entities classified as material. Of these risks, 88 were rated higher risks and 110 were rated moderate risks.

Figure 2 presents the total number of financial statement risks identified for the 2025–26 financial statements audits of material entities.

Figure 2: Risk profile by portfolio for 2025–26 material financial statements audits

Source: ANAO analysis of 2025–26 audit strategy documents.

Government accountability and transparency are supported by the preparation and audit of the Australian Government’s consolidated financial statements (CFS). The CFS and the associated financial analysis provide information to assist users in assessing the annual financial performance and position of the Australian Government. The ANAO has highlighted the following five key risks for the 2025–25 CFS for specific audit coverage, all of which the ANAO considers key audit matters (KAMs).

• Accuracy of taxation revenue, due to the estimation processes adopted by the Australian Government for financial reporting of taxation revenue, given the value of the transactions and the complexity and judgement involved in the estimation process and calculations. The reliable estimation of taxation revenue is complex due to uncertain timing of tax return assessments, payments and forecasting of likely taxation return outcomes.
• Valuation of superannuation liabilities, due to the measurement of the liabilities being complex and requiring significant judgement and estimation in the selection of long-term assumptions, including the salary growth and discount rates and actuarial factors such as mortality, life expectancy and disability, to which the valuation of the superannuation liability is highly sensitive.
• Valuation of Government Securities, due to the significance of the value of Government Securities to the Australian Government’s net worth, the range of Government Securities held and the different methodologies used to determine the fair value of Government Securities. These methodologies include assumptions about the expected return on securities which can extend for long periods into the future.
• Valuation of military compensation provision, due to the complexity and significant judgement associated with the unique compensation arrangements that are established in legislation. This estimate is dependent on a number of key assumptions and judgements, including the number of new claims not yet reported, the rates at which qualified veterans are expected to receive payments over their lifetime, future inflation in medical costs, the length of time payments are made to a veteran and the appropriate discount rate over the length of the scheme.
• Valuation of specialist military equipment and other plant, equipment and infrastructure, due to the inherent subjectivity and need for significant judgements in the valuation assessments, including challenges in determining the costs to be capitalised and allocated on large complex projects, the absence of active markets and selection of indices, the determination and assessment of useful lives, the identification of indicators of impairment and with respect to specialist military equipment, the complexity and high degree of judgement in the cost attribution model that allocates accumulated capitalised costs on large scale acquisition projects between individual platform assets, associated spares and inventory.