ANAO COVID-19 multi-year audit strategy

1. The COVID-19 pandemic and the Australian Government’s response to it significantly impact on the risk environment faced by the Australian public sector. This change in risk environment directly impacts on the work to be undertaken by the ANAO across its performance audit, financial audit and other assurance activities. The following sections set out how the ANAO is planning to respond in its audit program.

2. A variety of funding and delivery mechanisms are being employed by the government to address the immediate health and economic needs arising from the pandemic. These include income support payments, grants, procurements, loans and tax relief. Rapid policy design and implementation can present new and increased risks to sound public administration and the proper use of public resources, including the risk of:

  • fraud due to systems that are not adequately supported by appropriate controls;
  • reduced compliance and assurance of accurate payments due to systems not being configured to manage different payment or information collection arrangements;
  • poor implementation due to rapid decision-making which is based on limited evidence and data analysis;
  • reduced quality in business-as-usual activities due to governance and oversight arrangements that are redirected to emergency response activities;
  • inefficient, ineffective, uneconomical or unethical decision making and performance due to non-compliance with the requirements of the Commonwealth Resource Management Framework;
  • expenditure not supported by appropriate or timely legislation;
  • loss of corporate knowledge and an incomplete understanding of processes, due to a redirection of staff within and across entities without appropriate training or quality assurance; and
  • inadequate capture of lessons learned, poor performance and inability to defend decision making due to poor records management and/or accountability arrangements.

The ANAO audit insights, Rapid implementation of Australian Government initiatives, published on 16 April 2020, provides some key lessons from previous ANAO audits in dealing with these risks.

Performance audit

3. In line with the objectives of the ANAO’s 2020–21 Annual Audit Work Program (AAWP), the ANAO’s strategy for auditing COVID-19 related measures is designed to: respond to the interests and priorities of the Parliament of Australia; and provide a balanced program of activity that is informed by risk, and that promotes accountability, transparency and improvements to public administration. The ANAO’s strategy will be flexible and evolve over time as the government announces new initiatives or adjusts existing policies to address the changing pandemic situation and its impact on citizens and the Australian economy.

4. The ANAO’s multi-year strategy for performance audits will focus on the effective, efficient, economical and ethical delivery of the Australian Government’s response to the COVID-19 pandemic. This includes the economic stimulus and social support packages as well as the management of related risks, such as system and technology changes, fraud, information management, privacy, compliance and regulatory effectiveness. The strategy will be delivered in three key phases.

Phase 1 audits

5. Four COVID-19 specific audits are underway. The audits will examine how the audited entities: manage and respond to risks related to rapid development and implementation of COVID-19 measures and the impact on business as usual activities and controls; and communicate and implement revised risk tolerances across the business.

6. The audits will consider risks relating to the achievement of objectives, workforce redeployment, IT system development and data integrity, stakeholder engagement and coordination, reaching the targeted beneficiaries in a timely manner, high volume payments, potential internal and external fraud, and non-compliance with new and existing regulatory activities.

7. There is also an audit of the effectiveness of the approach taken to position the Australian Public Service to quickly and efficiently implement new response measures and deliver government policy, including coordination and communication across the public sector and the deployment and management of resources. The fourth potential audit would focus on the $1.1 billion allocated to supplement the National Medical Stockpile. The audit will review the procurement of health personal protective equipment, pharmaceuticals and medical devices to support the immediate response to the COVID-19 pandemic.

Phase 2 audits

8. This phase of the audit program will focus on the three main stages of program delivery: policy design; implementation; and performance assessment, evaluation and dissemination of lessons learnt. Along with an ongoing focus on risk management, areas of public administration that may be examined during this phase of the program are:

  • governance arrangements and coordination within and across entities;
  • preparedness and planning;
  • fraud, compliance and system controls in high volume processing programs;
  • cyber resilience and cyber security;
  • proper use of public resources, including value-for-money, in the procurement of goods and services to support the government’s response;
  • regulatory responses, such as in border protection and biosecurity;
  • information and communication services to citizens;
  • financial assistance to individuals and to support the economy;
  • grants to industry, communities and individuals;
  • performance measurement and progress towards achieving intended policy objectives; and
  • planning for and implementation of transition to business as usual.

9. The program of audits may also be categorised by target audience or delivery mechanism. For example, audits may examine: assistance to specific industry sectors, such as health (including tele-health), childcare, aviation, exports and financial institutions, and the effectiveness of these policy interventions; support for individuals and households, such as income support payments, domestic violence and mental health support; and financial support mechanisms such as early release of superannuation.

10. The selection of audits will be primarily informed by: an assessment of risk and system controls; materiality of funds allocated to entities; potential or actual impact of the response measure on the entity, individuals and/or industry; extent of policy or systems change in each portfolio; and parliamentary interest.

11. The ANAO plans to update the AAWP by the end of 2020, providing a list of potential audit topics that will be conducted during the second phase of the COVID-19 performance audit strategy.

Phase 3 audits

12. In the final phase of the audit program the ANAO will review the outcomes of the Australian Government’s COVID-19 response. Depending on the situation at the time, this may involve a post-pandemic assessment of the achievement of outcomes intended through the COVID-19 measures, recovery plans and programs, identification and dissemination of lessons learnt, and the readiness of government systems and processes to respond to future crises.

13. In addition to the three phases of specific COVID-19 performance audits, the performance audits described under each portfolio of this AAWP may examine aspects of the government’s response to COVID-19 where the response measures were considered to have impacted on the program being audited. For example, an audit that examines an entity’s approach to risk management would include a review of the entity’s management of risks emerging as a result of COVID-19, its development of revised risk tolerances given the need to reprioritise resources to COVID-19 related tasks and the impact of this on compliance or other activities related to the audited program.

Financial statements audit

14. The COVID-19 situation presents new key risk areas for the operations and financial statements preparation processes of the entities that ANAO audits. Given the evolving nature of the COVID-19 response the ANAO will reassess and revise audit plans throughout the remainder of the 2019–20 financial statements audit cycle and into 2020–21. Some key areas that may cause a change in the ANAO’s assessment of audit risk and consequential audit approach include:

  • changes to how audited entities’ systems of internal control operate because relevant processes and controls are inconsistent with social distancing principles;
  • entities reprioritising staff and resources to operational areas delivering the government’s response to COVID-19, thus affecting the skills and capacity available for key financial statements preparation, governance and monitoring processes;
  • significant new areas of estimation uncertainty arising because of the potential impact on interest rates, property and share markets and other aspects of global markets;
  • where the financial viability of entities is reliant upon significant non-government cash flows, the ability of those entities to operate as a going concern given the impacts on the national and global economy; and
  • challenges to the ability of the ANAO to comply with requirements of the auditing standards, either because audited entities are unable to take actions that are prerequisites for the completion of audit procedures or because ANAO audit teams are unable to perform appropriate work in the current working environment.

15. These potential risks may require audit teams to change their audit approach. For example, where an audit team would normally rely on key controls for obtaining audit evidence, it may no longer be efficient and effective to do so and instead an increased proportion of the audit evidence may need to be gathered from detailed testing of transactions. In some cases where the overall level of audit risk has increased due to COVID-19, that may require additional audit effort to obtain the sufficient appropriate audit evidence necessary for forming the audit opinion. ANAO Auditing Standards require us to modify our audit opinion where we are unable to gather sufficient appropriate audit evidence and the possible effects of undetected misstatements arising from the lack of evidence are material.

Assurance reviews – Advances to the Finance Minister

16. The Advance to the Minister for Finance (AFM) is a provision in the annual Appropriation Acts which enables the Minister for Finance (Finance Minister) to provide additional urgently needed appropriation to agencies for expenditure in the current year. The Finance Minister may only agree to issue an AFM if satisfied that there is an urgent need for expenditure that is either not provided for or has been insufficiently provided for in the existing appropriations of the agency.

17. The amounts that can be issued under the AFM provisions are limited to amounts identified in the Appropriation Acts. Advances under Appropriation Act No. 1 are limited to $295 million, whilst advances under Appropriation Act No. 2 are limited to $380 million. Where these limits are close to being exhausted, or are likely to be exhausted, provisions can be made in the Additional Estimates Appropriation Acts for these limits to be restored to the original amounts, irrespective of amounts that had been issued before the commencement of these Acts. In response to COVID-19, two additional AFM were enacted for Coronavirus Economic Response Packages — Appropriations Acts No. 1 and No 2 which were for $0.8 billion and $1.2 billion respectively. Further, Appropriation Supply Bills 1 and 2 including AFM for $16 billion and $24 billion respectively were passed by Parliament for the 2020–21 financial year. Subsequently, Appropriation Acts No. 5 and No. 6 were passed with the effect of making the AFM of $40 billion in the Supply Bills available to also be advanced in the 2019–20 financial year. Therefore the total AFM available in 2019–20 is $42.975 billion.

18. Between 1 July 2019 and 24 April 2020, advances totalling $1.974 billion were provided to the Department of Health and the Department of Industry, Science, Energy and Resources for the procurement of masks and other emergency medical or emergency health equipment and for the purchase of oil stocks and the leasing of storage capacity in the United States Strategic Petroleum Reserve.

19. The ANAO is undertaking monthly assurance reviews of the AFM, which will be tabled in Parliament. These reviews will be conducted in accordance with section 19A of the Auditor-General Act 1997. They will provide timely assurance to the Parliament about the AFM, which has significantly increased to support Australian Government activities during the COVID-19 pandemic.

Impact on the ANAO’s non-COVID-19 specific audit program

Performance audit

In addition to COVID-19 performance audits, other ANAO performance audits may examine aspects of the government’s response to COVID-19 where the response measures were considered to have impacted on the program being audited.

You can view the ANAO's potential and in-progress performance audits in the annual audit work program.

Financial statements audit

The COVID-19 situation presents new key risk areas for the operations and financial statements preparation processes of the entities that ANAO audits. Given the evolving nature of the COVID-19 response the ANAO will be reassessing risk in light of the new operating environment arising from responses to the COVID-19 pandemic and the associated stimulus measures.

Further detail on how the developing COVID-19 situation may result in additional financial statements preparation and audit risks for entities is included in chapter 4 of Auditor-General Report No. 38 of 2019-20 (starting at paragraph 4.0.5 of this report). The results of the ANAO’s 2019-20 financial statements audits will be reported in Audits of the Financial Statements of Australian Government Entities for the Period Ended 30 June 2020 which is expected to be tabled in December 2020.

Auditor-General performance audit reports covering related topics

In addition, Rapid implementation of Australian Government initiatives lists Auditor-General reports that have identified key learnings relating to rapid program design and implementation practices and/or responses to the Global Financial Crisis (GFC).

COVID-19 products

Performance audits

The ANAO’s multi-year strategy for performance audits will focus on the effective, efficient, economical and ethical delivery of the Australian Government’s response to the COVID-19 pandemic. The strategy will be delivered in three key phases.

Phase 1 audits:

Audit insights

The audit insights on Rapid implementation of Australian Government initiatives provides some key lessons from previous ANAO audits in dealing with risks arising from the rapid implementation on policy and program initiatives.

Advances to the Finance Minister

The Auditor-General is undertaking monthly limited assurance reviews of the Advances to the Finance Minister (AFM). The objective of these reviews is to provide Parliament with timely assurance on the AFM made under the Government’s stimulus package response to COVID-19.

These reports are tabled in the Parliament and then published on the ANAO website:

The assurance reviews cover the Department of Finance's reporting and administration of the AFM for the relevant period.