Education | Australian National Audit Office (ANAO)

Portfolio overview

The Education Portfolio is responsible for: contributing to Australia’s economic prosperity and social wellbeing by creating opportunities and driving better outcomes through access to quality education. The portfolio is comprised of six entities, including the Department of Education. The entities within the portfolio are responsible for policy, program and regulation responsibilities and delivering better outcomes for students, educators and teachers in early learning and care centres, schools and higher education providers. Further information is available from the department’s website.

In the 2023–24 Portfolio Budget Statements (PBS) for the Education portfolio, the aggregated budgeted expenses for 2023–24 total $57.0 billion. The PBS contain budgets for those entities in the general government sector (GGS) that receive appropriations directly or indirectly through 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 Education represents the largest proportion of the portfolio’s expenses, and administered expenses of the portfolio are the most material component, representing 99 per cent of the entire portfolio’s expense.

Figure 1: Education portfolio – total expenses and average staffing level by entity

Source: ANAO analysis of 9 May 2023–24 Portfolio Budget Statements.

Audit focus

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.

Governance

The department needs to effectively utilise data to undertake rigorous analysis that informs performance and policy development so there can be transparent communication about the impact of the policy intentions and assurance that funding is achieving the agreed policy outcomes.

Service delivery

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.

Financial management

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.

Previous performance audit coverage

The ANAO’s performance audit activities involve the independent and objective assessment of all or part of an entity’s operations and administrative support systems. Performance audits may involve multiple entities and examine common aspects of administration or the joint administration of a program or service.

During the performance audit process, the ANAO gathers and analyses the evidence necessary to draw a conclusion on the audit objective. Audit conclusions can be grouped into four categories:

unqualified;
qualified (largely positive);
qualified (partly positive); and
adverse.

In the period between 2018–19 to 2022–23 entities within the Education portfolio were included in tabled ANAO performance audits 11 times. The conclusions directed toward entities within this portfolio were as follows:

none were unqualified;
eight were qualified (largely positive);
three were qualified (partly positive); and
none were adverse.

Figure 2 shows the number of audit conclusions for entities within the Education portfolio that were included in ANAO performance audits between 2018–19 and 2022–23 compared with all audits tabled in this period.

Figure 2: Audit conclusions 2018–19 to 2022–23: entities within the Education portfolio compared with all audits tabled

Source: ANAO data.

The ANAO’s annual audit work program is intended to deliver a mix of performance audits across seven audit activities: governance; service delivery; grants administration; procurement; policy development; regulation and asset management and sustainment. These activities are intended to cover the scope of activities undertaken by the public sector. Each performance audit considers a primary audit activity. Figure 3 shows audit conclusions by primary audit activity for audits involving entities in the Education portfolio.

Figure 3: Audit conclusions by activity for audits involving entities within the Education portfolio, 2018–19 to 2022–23

Source: ANAO data.

Performance statements audit

The audit of the 2022–23 Department of Education annual performance statements is being conducted following a request from the Minister for Finance on 16 January 2023, under section 40 of the Public Governance, Performance and Accountability Act 2013. The audit is conducted under section 15 of the Auditor-General Act 1997.

The ANAO considers the risk associated with the Education performance statements audit as low.

This is due to Education having a reasonably developed performance framework that includes regular reporting and receiving an unqualified audit opinion following an audit of its 2021–22 annual performance statements.

Key risks for Education’s performance statements that the ANAO has highlighted include:

management and reporting of data supporting the performance measure result, especially data extraction processes and the quality assurance of these data extraction processes; and
completeness of performance measures and targets to cover all of Education’s objectives, functions or roles.

Financial statements audits

Overview

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

Table 1: Education portfolio entities and risk profile

	Type of entity	Engagement risk	Number of higher risks	Number of moderate risks
Material entities
Department of Education	Non-corporate	High	3	2
Australian Research Council	Non-corporate	Low	1	1
Non-material entities
Australian Curriculum, Assessment and Reporting Authority	Corporate	Low
Australian Institute for Teaching and School Leadership Limited	Corporate	Low
Australian National University	Corporate	Moderate
Tertiary Education Quality and Standards Agency	Non-corporate	Low
Other audit engagements (including *Auditor-General Act 1997* section 20 engagements)
Australian Children’s Education and Care Quality Authority – financial statements audit

Material entities

Department of Education

The Department of Education is responsible for contributing to Australia’s economic prosperity and social wellbeing by creating opportunities and driving better outcomes through access to quality education.

The Department of Education’s total budgeted expenses for 2023-24 are just under $56.0 billion, with grants and personal benefits representing 71 per cent and 23 per cent, respectively, as shown in Figure 4. Trade and other receivables represent 94 per cent of total budgeted assets, while grants provisions (encompassing the Higher Education Superannuation Provision) represent 83 per cent of total budgeted liabilities.

Figure 4: Department of Education’s total budgeted financial statements by category ($’000)

Source: ANAO analysis of 9 May 2023–24 Portfolio Budget Statements.

There are five key risks for the Department of Education’s 2022–23 financial statements that the ANAO has highlighted for specific audit coverage, including four risks that the ANAO considers potential key audit matters (KAMs).

The completeness and allocation of financial statement transactions and balances, due to the complexities in implementing machinery of government changes. (KAM – Completeness, allocation, rights and obligations and occurrence of transactions and balances resulting from machinery of government changes)
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 Higher Education Loan Program (HELP) receivable)
The valuation of the Higher Education Superannuation Provision liability balance due to the complexity of the actuarial estimation process. (KAM – Valuation of the Higher Education Superannuation Program (HESP) provision)
The accuracy of the child care personal benefit expense, due to reliance on information provided by payment recipients. (KAM – Accuracy and completeness of child care personal benefits expenses)
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.

Australian Research Council

The Australian Research Council (ARC’s) is responsible for administering the National Competitive Grants Program (NCGP), assessing the quality, engagement and impact of research, and providing advice and support on research matters.

ARC’s total budgeted expenses for 2023-24 are $934.6 million, with 96 per cent of these expenses attributable to grants as shown in Figure 5.

Figure 5: Australian Research Council’s budgeted financial statements by category ($’000)

Source: ANAO analysis of 9 May 2023–24 Portfolio Budget Statements.

There are two key risks for the ARC’s 2022–23 financial statements that the ANAO has highlighted for specific audit coverage.