Portfolio overview

The Agriculture, Water and the Environment portfolio is responsible for advising the government and implementing programs with respect to the environment, meteorological services, and Australia’s agricultural, fisheries, food, forestry and water resources industries. The portfolio is also responsible for protecting matters of national environmental significance and protecting Australia’s animal and plant health status to maintain overseas markets and protect the economy and environment from the impact of exotic pests and diseases.

As a result of the Administrative Arrangement Order effective 1 February 2020, the Department of Agriculture, Water and the Environment was created from a merger of the Department of Agriculture and the environment functions from the Department of the Environment and Energy.

The Department of Agriculture, Water and the Environment is the lead entity in the portfolio, and is responsible for developing and implementing policies and programs to promote more sustainable, productive, internationally competitive and profitable Australian agricultural, food and fibre industries; safeguarding Australia’s animal and plant health; managing the conservation, protection and sustainability of Australia’s natural resources, biodiversity, ecosystems, environment and heritage; advancing Australia’s interests in the Antarctic; and improving the health of rivers and freshwater ecosystems and water use efficiency.

Further information is available from the department's website.

In addition to Department of Agriculture, Water and the Environment, there are 13 entities (excluding one subsidiary) within the portfolio that are responsible for statutory regulation of fisheries, agricultural and veterinary chemicals; water resource management; loan administration for farm businesses and water infrastructure investment; research and development entities for wine, cotton, fisheries, grains and rural industries; weather forecasting services; and conservation of national reserves and the Great Barrier Reef.

In the 2019–20 Portfolio Budget Statements (PBS) and Portfolio Additional Estimates Statements (PAES) for the Agriculture, Water and Environment portfolio, the aggregated budgeted expenses for 2019–20 total $4.96 billion. The PBS contain budgets for those entities in the general government sector (GGS) that receive appropriations directly or indirectly through the annual appropriation acts.

The level of budgeted departmental and administered expenses, and the average staffing level for entities in the GGS within this portfolio, are shown in Figure 1. The Department of Agriculture, Water and the Environment represents the largest proportion of the portfolio’s expenses, and departmental expenses are the most material component, representing 54 per cent of the entire portfolio’s expenses.

Figure 1: Agriculture, Water and the Environment portfolio — total expenses and average staffing level by entity

Source: ANAO analysis of 2019–20 PBS and PAES.

Audit focus

In determining the 2020–21 audit work program, ANAO considers prior-year audit and other review findings and what these indicate about portfolio risks and areas for improvement, and emerging risks from new investments, reforms or changes in the operating environment. A key area of risk for the public sector, including the Agriculture, Water and the Environment portfolio, is the impact of the COVID-19 pandemic, both on entity operations, and also through the rapid implementation of government policy responses.

Specific risks in the Agriculture, Water and the Environment portfolio relate to bushfire recovery, water management, planning and implementation of environmental regulation, environment restoration activities delivered by third parties, regulation and support for agricultural, fisheries and forestry industries, and additional support related to food supply and support for agriculture producers during the COVID-19 pandemic.

Governance

Previous audit work identified weakness in the department’s administrative arrangements with portfolio entities, reducing the efficiency and effectiveness of portfolio outcomes and impacting the assurance provided to portfolio entity boards.

Governance weaknesses within the department also led to poor implementation of parliamentary committee recommendations. Implementing agreed parliamentary recommendations is an important accountability measure, and also part of realising the full benefit of a parliamentary inquiry, as the recommendations identify risks to the successful delivery of program outcomes.

Grants administration

Previous audit work has identified weaknesses in the department’s encouragement of competition, establishment of clear performance targets, and the use of assessment criteria to support value for money for grants. Risks to effective grants management exist across other marine and biodiversity conservation programs administered by the department, including the $450 million Regional Land Partnerships Program and the $100 million Environment Restoration Fund.

Policy development

Drought and extreme weather events, including bushfires and floods in late 2019 and early 2020, have impacted parts of Australia. The Australian Government has announced a number of initiatives to support the recovery of the agricultural sector and the natural environment. The successful implementation of these initiatives, including the work of the National Bushfire Recovery Agency, located in the Department of the Prime Minister and Cabinet, will depend on input from entities within the Agriculture, Water and the Environment portfolio.

This includes the establishment of a clear rationale of where intervention is required, the use of the best available evidence, service delivery coordination, and the application of appropriate risk management and performance measurement frameworks.

Regulation

Growth in international trade, domestic economic development and pressures on threatened species have changed the profile of biosecurity and environmental risks. In this context, regulatory activities need to be informed by ongoing risk assessments undertaken in proportion to compliance risk. In addition, cost recovery activities through levies and fees are an important part of ensuring sufficient resources are available for programs without unduly impacting business interests. This is an area where previous audits have identified departmental failings, including noncompliance with key requirements of the Cost Recovery Guidelines.

Risk management is critical in a period of rapid response to policy changes and emergency situations, given the impacts on business-as-usual compliance controls and service delivery. If risk tolerances change during a pandemic or natural disaster period, these need to be documented and implemented consistently and the broader impacts considered.

The successful facilitation of trade while managing the risk of pests and diseases entering Australian territory relies on risk-based biosecurity enforcement by the Department of Agriculture, Water and the Environment. Previous audits have identified risks to the protection of matters of national environmental significance arising from the department’s use of compliance intelligence to support its regulatory activities under the Environment Protection and Biodiversity Conservation Act 1999.

Reviews of the Department of Agriculture, Water and the Environment’s regulation of live animal exports have identified a range of areas for improvement. These include strengthening compliance monitoring arrangements, improving regulatory oversight structures, investing in departmental capability and systems, and enhancing engagement with stakeholders.

Financial statements and other audit engagements

Overview

Entities within the Agriculture, Water and the Environment portfolio, and the risk profile of each entity, are shown in Table 1.

Table 1: Agriculture, Water and the Environment portfolio entities and risk profile

 

Type of entity

Risk of material misstatement

Number of higher risks

Number of moderate risks

Material entities 

Department of Agriculture, Water and the Environment

Non-corporate

Moderate

2

3

Bureau of Meteorology

Non-corporate

Low

0

3

Non-material entities 

Australian Fisheries Management Authority

Non-corporate

Low

 

Australian Pesticides and Veterinary Medicines Authority

Corporate

Low

Cotton Research and Development Corporation

Corporate

Low

Director of National Parks

Corporate

Low

Fisheries Research and Development Corporation

Corporate

Low

Grains Research and Development Corporation

Corporate

Low

Great Barrier Reef Marine Park Authority

Non-corporate

Low

Murray–Darling Basin Authority

Corporate

Low

Regional Investment Corporation

Corporate

Low

Rural Industries Research and Development Corporation

Corporate

Low

Sydney Harbour Federation Trust

Corporate

Low

Wine Australia

Corporate

Low

Other audit engagements (including Auditor-General Act 1997 section 20 engagements)

Commission for the Conservation of Antarctic Marine Living Resources

Natural Heritage Trust of Australia

     

Material entities

Department of Agriculture, Water and the Environment

The Department of Agriculture, Water and the Environment is responsible for developing and implementing policies and programs to promote more sustainable, productive, internationally competitive and profitable Australian agricultural, food and fibre industries; safeguarding Australia’s animal and plant health; managing the conservation, protection and sustainability of Australia’s natural resources, biodiversity, ecosystems, environment and heritage; advancing Australia’s interests in the Antarctic; and improving the health of rivers and freshwater ecosystems and water use efficiency.

The department’s total budgeted expenses for 2019–20 are just under $3.7 billion, with grants comprising 47 per cent of the total budgeted expenses, as shown in Figure 2.

Figure 2: Department of Agriculture, Water and the Environment’s total budgeted expenses by category ($’000)

 

Source: ANAO analysis of 2019–20 PAES.

The five key risks for the department’s financial statements that the ANAO has highlighted for specific audit coverage in 2019–20, all of which the ANAO considers potential key audit matters (KAMs), are the:

  • accuracy and completeness of revenue relating to import and export functions, due to the material dollar value of the revenue collections; the risk that the process results in the under-collection of import and export revenue; and the complex administrative and IT system arrangements that support the collection of import and export fees and charges. Fees and charges are collected on the basis of declarations by importers and exporters. A portion of the revenue is collected by Services Australia on behalf of the department (KAM – Accuracy and completeness of own-source revenue);
  • accuracy and completeness of primary industry levies and charges, due to the risk of under-collection arising from the submission of inaccurate levy returns and declarations; and the complex calculations used to derive the estimated collections based on agricultural production (KAM – Accuracy and completeness of the collection and distribution of primary industry levies and charges);
  • valuation of drought and farm finance assistance loans coordinated through the state and territory governments and, from 1 July 2018, through the Regional Investment Corporation, due to the significance of the balance to the department’s administered receivables balance; the significant judgement applied in assessing eligibility criteria, limits and lending terms; and the complexity of calculations in determining the valuation and impairment of the loans balance at year-end (KAM – Valuation of loans to the state and territory governments for drought and farm finance assistance);
  • calculation of the government’s liability to restore Antarctic bases to their original condition, given the significant judgements required in the selection of the assumptions used in the valuation model (KAM – Valuation of restoration obligations in Antarctica); and
  • valuation of the government’s water entitlement assets, due to the estimation and judgement involved in the valuation methodology, and given the trading of water assets is a relatively new and developing market (KAM – Valuation of water entitlements).

Bureau of Meteorology

The Bureau of Meteorology is responsible for gathering weather, water and atmospheric observations in order to provide forecasts, warnings and long-term weather and climatic outlooks.

The bureau’s total budgeted expenses for 2019–20 are just over $413 million, with 42 per cent of these expenses attributable to employee benefits, as shown in Figure 3.

Figure 3: Bureau of Meteorology’s total budgeted expenses by category ($’000)

 

Source: ANAO analysis of 2019–20 PAES.

The three key risks for the bureau’s 2019–20 financial statements are the:

  • valuation of specialised weather equipment, due to the complex valuation involving significant judgement and estimates;
  • valuation of computer software, due to the complexities involved in capturing costs and ensuring they are capitalised appropriately in accordance with Australian accounting standards, and significant judgement in relation to useful lives and impairment; and
  • completeness and accuracy of the bureau’s various revenue streams that are generated through multiple channels.