Audit focus

In determining the 2019–20 audit work program, the ANAO considers prior-year audit and other review findings and what these indicate about portfolio risks and areas for improvement, as well as emerging risks from new investments, reforms or operating environment changes. In the Attorney-General’s portfolio, considerations predominantly relate to the efficient and effective delivery of legislative, judicial and investigatory services. The portfolio also faces effectiveness and compliance risks for its whole-of-government regulatory frameworks and its administration of grants.

Service delivery

The department’s implementation and administration of business-as-usual processes is being impacted by the need to manage a number of significant ‘one-off’ activities such as royal commissions and the development of a proposal for a new Commonwealth integrity commission. Clarity and coherence in AGD’s governance arrangements and resource allocations are critical in managing related risks.

Audit work in portfolio entities — including audits of the operational efficiency of the Australian Commission for Law Enforcement Integrity and the administration of the Freedom of Information Act — has highlighted issues in measuring the efficiency of service and function delivery, and risks in relation to case management and the exercise of investigatory functions.

Regulation

The portfolio has carriage of a number of whole-of-government integrity and security frameworks, including the Protective Security Policy Framework, fraud, freedom of information and privacy. Audit work on the administration of the Freedom of Information Act and cyber resilience has highlighted that while policy frameworks have been established for these areas, there has not been effective compliance across entities, which raises questions about the effectiveness of the policy implementation.

Grants administration

Audit work in the three years to 2019 has shown that the department’s management of grant programs in areas such as telecommunications data retention and Living Safe Together has not been to an appropriate standard, having regard to the risks involved in compliance, value for money and the policy outcomes being sought.

The department also administers a number of grant programs that are managed by other entities (the Department of Social Services and the Department of Industry, Innovation and Science). Outsourcing the management of grant programs does not reduce accountability. The department needs to ensure that it is able to obtain assurance from these service providers that the grants have been processed accurately, completely, and in line with the department’s requirements.

Financial management

Comcare and the Coal Mining Industry (Long Service Leave Funding) Corporation respectively estimate the liabilities for workers compensation reported by participating portfolio entities and the reimbursements to employers for the long service leave entitlements of eligible employees in the black coal mining industry. The estimation of these liabilities are complex due to the significant level of judgement that needs to be applied in the selection of appropriate underlying assumptions. This raises risks regarding transparency, consistency and appropriateness of the valuations.

Portfolio overview

The Attorney-General’s portfolio covers a range of functions and policy areas, including family law and marriage; administrative and international law; protective security; privacy, and freedom of information; personal property securities; and native title. It also includes integrity oversight, international crime cooperation, criminal law policy, and support for Royal Commissions.

The Attorney-General’s Department (AGD) is the lead entity in the portfolio responsible for Australia’s law and justice framework. Through the Australian Government Solicitor, AGD also provides legal services to the Commonwealth. As a result of machinery-of-government changes announced by the Prime Minister in in May 2019, the portfolio gained responsibility for workplace relations and work health and safety, rehabilitation and compensation. Further information is available from the department’s website at www.ag.gov.au.

In addition to AGD, there are 21 entities within the portfolio that are responsible for delivering programs and initiatives in relation to law, justice, workplace relations and work health and safety. The material entities are the AGD, the High Court of Australia, the Coal Mining Industry (Long Service Leave Funding) Corporation, Comcare and the National Archives of Australia.

In the 2019–20 Portfolio Budget Statements (PBS) for the Attorney-General’s portfolio, the aggregated budgeted expenses for 2019–20 total $2.37 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. AGD represents the largest proportion of the portfolio’s expenses, and departmental expenses represent 76 per cent of total portfolio expenses.

Figure 1: Attorney-General’s portfolio — total expenses and average staffing level by entity

Source: ANAO analysis of PBS 2019–20 Budget related papers pre–machinery-of-government changes announced on 29 May 2019.

Financial statements and other audit engagements

Overview

Entities within the Attorney-General’s portfolio, and the risk profile of each entity, are shown in Table 1.

Table 1: Attorney-General’s portfolio entities and risk profile

 

Type of entity

Risk of material misstatement

Number of higher risks

Number of moderate risks

Material entities 

Attorney-General’s Department

Non-corporate

Moderate

0

2

High Court of Australia

Low

0

1

National Archives of Australia

Non-corporate

Low

0

1

Coal Mining Industry (Long Service Leave Funding) Corporation

Corporate

Moderate

2

1

Comcare

Corporate

Moderate

1

2

Non-material entities 

Administrative Appeals Tribunal

Non-corporate

Moderate

 

Asbestos Safety and Eradication Agency

Non-corporate

Low

Australian Building and Construction Commission

Non-corporate

Low

Australian Commission for Law Enforcement Integrity

Non-corporate

Low

Australian Financial Security Authority

Non-corporate

Moderate

Australian Human Rights Commission

Corporate

Moderate

Australian Law Reform Commission

Non-corporate

Low

Fair Work Commission

Non-corporate

Low

Fair Work Ombudsman and Registered Organisations Commission Entity

Non-corporate

Low

 

Federal Court of Australia

Non-corporate

Low

Office of the Australian Information Commissioner

Non-corporate

Low

Office of the Commonwealth Ombudsman

Non-corporate

Low

Office of the Inspector-General of Intelligence and Security

Non-corporate

Low

Office of Parliamentary Counsel

Non-corporate

Low

Office of the Director of Public Prosecutions

Non-corporate

Low

Safe Work Australia

Non-corporate

Low

Seafarers Safety, Rehabilitation and Compensation Authority

Non-corporate

Low

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

Australian Financial Security Authority (Bankruptcy Act)

         

Material entities

Attorney-General’s Department

The Attorney-General’s Department (AGD) supports the Attorney-General in achieving a just and secure society through the maintenance and improvement of Australia’s law, justice, security and integrity frameworks. AGD also has responsibility for workplace relations policy development, advocacy and implementation.

AGD’s total budgeted expenses for 2019–20 are just under $771 million, with 42 per cent of these expenses attributable to grants, as shown in Figure 2.

Figure 2: Attorney-General’s Department’s total budgeted expenses by category ($’000)

Source: ANAO analysis of PBS 2019–20 Budget related papers pre–machinery-of-government changes announced on 29 May 2019.

The two key risks for AGD’s 2018–19 financial statements that the ANAO has highlighted for specific audit coverage in 2019–20, including those that the ANAO considers potential Key Audit Matters (KAMs), are the:

  • accuracy of revenue, and the accuracy and completeness of trade receivables, from rendering of legal services by the Australian Government Solicitor (KAM – Completeness and accuracy of revenue from rendering of services); and
  • accuracy of material administered grants expenses, the administration of which is largely outsourced to the Department of Social Services and the Department of Industry, Innovation and Science.

High Court of Australia

The High Court of Australia is responsible for interpreting and applying the law of Australia; deciding on cases of special federal significance, including challenges to the constitutional validity of laws; and hearing appeals, by special leave, from federal, state and territory courts.

The High Court’s total budgeted expenses for 2019–20 are just over $26.5 million, with 73 per cent of these expenses attributable to employee benefits and supplier expenses, as shown in Figure 3.

Figure 3: High Court of Australia’s total budgeted expenses by category ($’000)

Source: ANAO analysis of PBS 2019–20 Budget related papers pre–machinery-of-government changes announced on 29 May 2019.

The High Court’s key risk in its financial statements is the accuracy of the fair value attributed to land and buildings, as these are special purpose assets with a number of unique features.

National Archives of Australia

The National Archives of Australia has four main roles under the Archives Act 1983: promote sound records management by Australian Government entities by providing and setting standards for the management of information and records; authorise the retention and disposal of records; preserve records of national archival value; and make material publicly available.

The National Archives’ total budgeted expenses for 2019–20 are just under $88 million, with supplier expenses representing 49 per cent of the total budgeted expenses, as shown in Figure 4.

Figure 4: National Archives of Australia’s total budgeted expenses by category ($’000)

Source: ANAO analysis of PBS 2019–20 Budget related papers pre–machinery-of-government changes announced on 29 May 2019.

The National Archives’ key financial statements risk is the valuation of the national archival collection, due to its complex and unique nature.

Coal Mining Industry (Long Service Leave Funding) Corporation

The Coal Mining Industry (Long Service Leave Funding) Corporation (Coal LSL) collects levies from employers to fund long service leave payments made to employees in the Australian black coal mining industry. The levies collected are invested until the employee takes long service leave, at which point the employer makes a payment to the employee and seeks reimbursement from Coal LSL in accordance with legislative arrangements.

Coal LSL’s total actual expenses for 2017–18 are $206.71 million, with 94 per cent of these expenses attributable to increases in provision for reimbursements.

Figure 3: Coal LSL’s total actual expenses by category ($’000)

Source: ANAO analysis of Coal LSL’s 2017–18 annual report.

Coal LSL’s three key risks for its financial statements are:

  • complex valuation processes used to determine the fair values attributed to unlisted trust investments;
  • significant management judgement required to estimate the value of the liability for reimbursement of employers’ long service leave obligations, due to a range of assumptions relied on to underpin the valuation methodology and estimation process; and
  • following the transition of a number of previously outsourced administrative processes and systems back in-house to Coal LSL, in conjunction with a new general ledger system for the agency during 2017–18, the agency is now transitioning the payroll function in-house during 2019. The in-sourcing of the payroll will require a focus on the accurate and complete migration of existing employee information, and corresponding changes to processing procedures and internal controls.

Comcare

Comcare is responsible for the administration of an integrated safety, rehabilitation and compensation scheme for federal employers, employees and their representatives. Comcare aims to support participation and productivity nationally, through healthy and safe workplaces that minimise harm in the workplace. This also includes the management of a comprehensive workers compensation liability scheme and the Commonwealth common law liabilities for asbestos compensation.

Comcare’s total budgeted expenses for 2019–20 are $267.52 million, 59 per cent of which relates to claims payments, as shown in Figure 3.

Figure 3: Comcare’s total budgeted expenses by category ($’000)

Source: ANAO analysis of PBS 2019–20 Budget related papers pre–machinery-of-government changes announced on 29 May 2019.

Comcare’s three key risks for its financial statements are the:

  • judgements required in selecting assumptions when calculating workers compensation and asbestos-related disease claim provisions and related expense accounts;
  • timing of revenue recognition relating to the collection of workers compensation and common law asbestos premiums involving complex calculations prescribed in legislation; and
  • the impact of agencies exiting the Comcare scheme on the valuation of the workers compensation claims provision, including accounting for asset decreases and offsetting reductions in claims.

Potential performance audits

In progress performance audits