Portfolio overview

The Agriculture, Water and the Environment portfolio is responsible for advising the government and implementing programs on the environment, heritage, meteorological services, climate change adaptation strategy and science, water resources, rural adjustment and drought issues, plant and animal biosecurity, Antarctica, and Australia’s agricultural, fisheries, food and forestry industries.

The Department of Agriculture, Water and the Environment is the lead entity in the portfolio, and is responsible for conserving, protecting and sustainably managing Australia’s biodiversity, ecosystems, environment and heritage; advancing Australia’s interests in the Antarctic region; 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 status; and improving the health of rivers and freshwater ecosystems and water use efficiency.

Further information is available from the department’s website at awe.gov.au.

In addition to the Department of Agriculture, Water and the Environment, there are 13 entities (and one subsidiary) within the portfolio that are responsible for Commonwealth fisheries; regulating agricultural and veterinary chemicals; managing water resources in the Murray–Darling Basin; farm business loans; research and development for wine, cotton, fisheries, grains and rural industries; meteorological services; Commonwealth national parks; managing Commonwealth lands around Sydney Harbour; and the Great Barrier Reef Marine Park.

In the 2021–22 Portfolio Budget Statements (PBS), aggregated budgeted expenses for the Agriculture, Water and the Environment portfolio for 2021–22 total $6.42 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, 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 48 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 2021–22 PBS.

Audit focus

In determining the 2021–22 audit work program, the ANAO considers prior-year audit and other review findings and what these indicate about portfolio risks and areas for improvement. The ANAO also considers emerging risks from new investments, reforms or changes in the operating environment.

Specific risks in the Agriculture, Water and the Environment portfolio relate to measuring and demonstrating the achievement of intended goals; the achievement of value for money through grants and procurement, including in relation to water efficiency and water entitlements; implementation of new policies, including in relation to recycling and waste, bushfires, droughts, floods, COVID-19 and the current economic conditions; planning and implementation of environmental and agricultural regulation; and procurement and financial management.

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.

Measuring, evaluating and reporting on the contribution of activities to their intended outcomes has been identified as an area for improvement in a number of recent performance audits within the portfolio. Entities should have effective performance frameworks that demonstrate how the activities they are undertaking are contributing to the desired outcomes of that program or policy. This promotes accountability within the entity on achieving the desired outcomes, supports tracking progress towards meeting objectives so program adaptations can be made when required, and helps assure Parliament that taxpayer funds are being allocated towards those activities most effective at achieving program goals.

Incomplete implementation of reforms and recommendations has also been identified as a recurring issue in performance audits within the portfolio. Establishing appropriate oversight and accountability for the implementation of planned reforms and recommendations will be necessary to better realise intended improvements in future.

Grants administration

Previous audit work has identified weaknesses in the department’s encouragement of competition, establishment of clear performance targets, and use of assessment criteria to support value for money for grants. Risks to effective grants management exist across other grant programs administered by the department, including through the $100 million Environment Restoration Fund and the $1.3 billion allocated to the Sustainable Rural Water Use and Infrastructure Program from 2020–21 to 2023–24.

Policy development

A number of new initiatives in the Agriculture, Water and the Environment portfolio have been announced over recent years, including in response to drought and extreme weather events in 2019, 2020 and 2021. These initiatives include the $200 million Bushfire Recovery for Wildlife and Habitat program; the $269.7 million Murray–Darling Communities Investment Package; the $328 million Busting Congestion for Agricultural Exporters package; $400.1 million to strengthen biosecurity; $233.6 million to implement the National Soil Strategy and associated measures; $59.6 million to implement the National Waste Policy Action Plan; $233 million to improve infrastructure in Commonwealth national parks; and $225.6 million to ensure the financial sustainability of the Bureau of Meteorology.

Effective implementation of new policies will require establishment of a clear rationale of where intervention is required, use of the best available evidence, service delivery coordination, and application of appropriate risk management and performance measurement frameworks.

Regulation

Growth in international trade, pressures on domestic economic development and threats to native species have changed the profile of biosecurity and environmental risks. In this context, effective regulatory approaches will be required to achieve the desired outcomes of regulation. Past audits have identified issues with regulation in the portfolio, including the use of intelligence, establishment of a risk-based approach to regulation, implementation of effective regulatory plans and strategies, governance arrangements, compliance with procedural and legislative requirements, and performance measurement and evaluation.

Procurement

Previous performance audits have identified deficiencies in demonstrating value for money in the department’s procurement activities. Establishing effective arrangements to ensure value for money will remain important for procurement activities delivered by the department, such as the $450 million Regional Land Partnerships program.

Financial management

The Department of Agriculture, Water and the Environment and the Regional Investment Corporation provide and manage loans, primarily to farmers. This is a complex and growing area of operations, for which the Regional Investment Corporation received an additional $2 billion in funding in 2020–21. Of particular importance will be actions taken on any loan defaults, which significantly impact the expected credit loss calculations in the financial statements.

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

4

1

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

Moderate

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

Moderate

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 2021–22 are just under $5 billion, with grants comprising 52 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 2021–22 PBS.

There are five key risks for the department’s 2020–21 financial statements that the ANAO has highlighted for specific audit coverage, all of which the ANAO considers potential key audit matters (KAMs).

  • The accuracy and completeness of revenue relating to legislated fees and charges for import and export regulatory functions, due to the risk that the complex administrative arrangements and information technology systems that support the collection processes for a wide range of import and export fees and charges result in the undercollection of revenue. Fees and charges are collected on the basis of declarations by importers and exporters. (KAM – Accuracy and completeness of own-source revenue)
  • The accuracy and completeness of primary industry levies and charges, due to the complex calculations used to derive the estimated collections based on agricultural production and the risk of undercollection arising from the submission of inaccurate levy returns and declarations. (KAM – Accuracy and completeness of the collection and distribution of primary industry levies and charges)
  • The valuation of drought and farm finance assistance loans coordinated through the state and territory governments and, since 1 July 2018, through the Regional Investment Corporation, due to 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)
  • The 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)
  • The 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 2021–22 are $539.95 million, with 35 per cent of these expenses attributable to employee benefits (Figure 3).

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

Source: ANAO analysis of 2021–22 PBS.

There are three key risks for the bureau’s 2020–21 financial statements.

  • The valuation of specialised weather equipment, due to the complex valuation involving significant judgement and estimates.
  • The 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.
  • Accounting for the bureau’s leases in view of the large number of leases managed by the bureau and the complexity involved in calculating the value of leased assets and liabilities in accordance with Australian accounting standard AASB 16 Leases.

In progress audits

Performance audit (Open for contribution)
Activity