The Education portfolio’s purpose is to contribute to Australia’s economic prosperity and social wellbeing by creating opportunities and driving better outcomes for people through education.
The Department of Education is the lead entity in the portfolio and is responsible for ensuring Australians can experience the social wellbeing and economic benefits that quality education provides. The department supports the provision of services, including early childhood education and care, schooling and high education. Further information is available from the .
In addition to the department, there are five entities in the portfolio that have responsibility for working with state and territory governments, and other Australian Government entities and service providers, to provide policy advice and services to contribute to the quality of education.
On 1 July 2022 an Administrative Arrangements Order took effect which changed some of the responsibilities of the Education portfolio (formerly the Education, Skills and Employment portfolio). The total expenses and average staffing level by entity for the Education portfolio will be updated in this overview following the Budget, expected in the third quarter of 2022, which will reflect these changes.
In determining the 2022–23 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 to the operating environment.
The primary risks identified for the portfolio relate to managing the legislative changes to child care subsidy and ensuring the affordability of child care services.
Specific risks in the Education portfolio relate to governance, service delivery and financial management.
The department needs to effectively utilise data to undertake rigorous analysis that informs performance and policy developmentso there can be transparent communication about the impact of the policy intentions and assurance that funding is achieving the agreed policy outcomes.
The department uses service delivery partners for various activities, including education policy related payment functions to service delivery entities. The use of service delivery partners does not reduce accountability and consequently the department needs to ensure that service and quality control expectations are agreed and maintained, and that its business is appropriately prioritised. These service delivery partner arrangements include:
- Services Australia for child care assessment eligibility and related payments;
- the Department of Finance’s Service Delivery Office for transactional processing of payroll, accounts payable, accounts receivable and travel; and
- the Australian Taxation Office for collecting compulsory repayment amounts of accumulated Higher Education Loan Program through the pay as you go (PAYG) system.
A high proportion of the IT systems supporting the department’s administered programs are customised. When legislative changes are passed relating to such programs, the systems require changes, often within compressed timeframes for implementation. It is important that the department has appropriate oversight of the changes to ensure the systems operate as intended.
The department has specific risks in financial management relating to the valuation of assets and liabilities of the Higher Education Loan Program receivable, the Higher Education Superannuation Program liability, and the child care personal benefit accrual and receivable. These valuations all require a significant level of judgement to be applied in selecting appropriate underlying assumptions. This raises risks related to transparency, consistency and appropriateness of the valuations.
The financial sustainability of the higher education funding model, and its reliance on international students, continues to present risks to the sector as it adjusts to the impacts of the COVID-19 pandemic and the post-COVID-19 market for international students.
During 2021, there were several legislative changes to the Child Care Subsidy providing increased benefits. The affordability of the subsidy is measured by a cost model administered by the department. Accuracy of the cost model, combined with effective compliance measures is required to ensure the scheme is, and remains affordable.
Performance statements audit
While the audit of the 2021–22 annual performance statements of the former Department of Education, Skills and Employment will be conducted following a request from the Minister for Finance on 9 December 2021, a decision on whether the Department of Education’s 2022–23 statements will be audited is subject to a request from the Minister for Finance under section 40 of the Public Governance, Performance and Accountability Act 2013. Performance statement audits are conducted under section 15 of the Auditor-General Act 1997.
Key risks for the department’s performance statements that the ANAO has highlighted include:
- maintaining adequate workpapers and documentary evidence to support the reported result and key disclosures in the annual performance statements; and
- maintaining adequate IT general controls for systems used to support the preparation of the annual performance statements.
Financial statements and other audit engagements
On 1 July 2022 an Administrative Arrangements Order (AAO) took effect which included changes to the responsibilities of the Education portfolio (formerly the Education, Skills and Employment portfolio). Entities which are now part of this portfolio are shown in Table 1. The risk profile for each entity is based on the 2021–22 financial statements which were prepared prior to the AAO on 1 July 2022 taking effect.
Type of entity
Risk of material misstatement
Number of higher risks
Number of moderate risks
Department of Education
Australian Research Council
Australian Curriculum, Assessment and Reporting Authority
Australian Institute for Teaching and School Leadership Limited
Australian National University
Tertiary Education Quality and Standards Agency
Other audit engagements (including Auditor-General Act 1997 section 20 engagements)
Australian Children’s Education and Care Quality Authority
Department of Education
The Department of Education works with state and territory governments, other government entities and a range of stakeholders to ensure Australians can experience the social wellbeing and economic benefits that quality education provides.
On 1 July 2022 an Administrative Arrangements Order (AAO) took effect which included changes to the responsibilities of the former Department of Education, Skills and Employment. The total budgeted financial statements by category for the new Department of Education will be updated in this overview following the Budget, expected in the third quarter of 2022, which will reflect these changes.
Financial statements audit
There are four key risks for Department of Education, Skills and Employment’s 2021–22 financial statements that the ANAO has highlighted for specific audit coverage that are relevant to the new Department of Education, including three risks that the ANAO considers potential key audit matters (KAMs).
- The valuation of the Higher Education Loan Program (HELP) receivable balance, as the valuation involves significant and complex judgements about the timing and recoverability of HELP debts, discount factors, and future employment and salary rates, which contain a significant degree of uncertainty and are influenced by the economic environment. (KAM – Valuation of HELP receivable and related fair value losses).
- The valuation of the Higher Education Superannuation Program liability balance, due to the complexity of the actuarial estimation process. (KAM – Valuation of Higher Education Superannuation Program provision).
- The valuation of the child care personal benefit accrual and receivable balances, due to the complex estimates and assumptions supporting the balances, as well as the implementation of the new child care subsidy legislation. (KAM – Accuracy and completeness of child care personal benefits and valuation of child care receivable)
- The completeness and accuracy of financial statement balances, as a result of the complexity and range of IT systems that are used to maintain information and process payments.
As a result of the Administrative Arrangements Order which took effect on 1 July 2022 the ANAO’s 2022–23 financial statement audit will also focus on risks arising from Machinery of Government changes. These risks relate mainly to the completeness and accuracy of assets and liabilities transferred to the department from the former Department of Educations, Skills and Employment. This is due to the materiality of the assets and liabilities transferred to the department and resultant increase in complexity of the process for preparation of the financial statements.
Australian Research Council
The Australian Research Council’s (ARC’s) purpose is to grow knowledge and innovation for the benefit of the Australian community through funding the highest quality research, assessing the quality, engagement and impact of research, and providing advice on research matters.
The ARC’s total budgeted expenses for 2022–23 are $887.3 million, with 96 per cent of these expenses attributable to grants (Figure 1). Intangibles are $6.0 million, representing just under 20 per cent of total budgeted assets.
Source: ANAO analysis of 29 March 2022–23 PBS.
There are three key risks for the ARC’s 2021–22 financial statements that the ANAO has highlighted for specific audit coverage.
- The adequacy of the ARC’s internal control framework used to manage grant payments, as these expenses are material to the financial statements.
- The valuation of intangibles, primarily due to the systems managing and reporting significant grants.
- Transition and implementation of new financial management system, TechOne, from 1 July 2022.