Portfolio overview

The Education, Skills and Employment portfolio purpose is to contribute to Australia’s economic prosperity and social wellbeing by creating opportunities and driving better outcomes for people through education, skills and employment pathways.

The Department of Education, Skills and Employment (DESE) is the lead entity in the portfolio and is responsible for ensuring Australians can experience the social wellbeing and economic benefits that quality education, training and employment provide.

The department is delivering key elements of the government’s five-year JobMaker Plan, including supporting Australians back into jobs by investing in skills and higher education and helping jobseekers reconnect with employment. The department also continues to support the provision of essential services that Australians rely on, including child care, schooling, training, higher education, and employment services.

The Administrative Arrangements Order (AAO) of 18 March 2021, transferred responsibility for the coordination of youth affairs function from the Health portfolio to the Education Skills and Employment portfolio. Further information is available from the department’s website at dese.gov.au.

In addition to DESE, there are six entities in the portfolio that have responsibility for working with state and territory governments, other Australian Government entities and service providers to provide policy advice and services to benefit Australians.

In the 2021–22 Portfolio Budget Statements (PBS) for the Education, Skills and Employment portfolio, the aggregated budgeted expenses for 2021–22 total $55.22 billion. The PBS contain budgets for those entities in the general government sector (GGS) that receive appropriations directly or indirectly through the annual appropriations 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. DESE represents the largest proportion of the portfolio’s expenses, and administered expenses are the most material component, representing 98 per cent of the entire portfolio’s expenses.

Figure 1: Education, Skills and Employment 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 to the operating environment.

Portfolio risks include access to reliable evidence, stakeholder management, performance and impact measurement, and policy coordination. There are also service delivery risks in the portfolio that need to be managed to ensure that services delivered are timely and compliant.

Specific risks in the Education, Skills and Employment portfolio relate to governance, service delivery, regulation and financial management.

Governance

The department needs to effectively utilise data to undertake rigorous analysis that informs performance and policy development. Not effectively utilising available data risks undermining both the transparency of the impact of policy interventions and the ability to provide assurance that funding is achieving the agreed policy outcomes.

Risk management, records management and quality control are critical considerations in periods of rapid development and implementation of new policy measures. If risk tolerances change during an emergency response period, these changes need to be documented, implemented consistently, and the broader impacts considered.

The ANAO has observed during financial statement audits that the estimated payment error rates in child care (under the previous scheme) reduced over recent years as a result of the department’s focus on improving compliance activities. Similar risks around embedding compliance activities exist for the child care subsidy arrangements introduced in July 2018.

Service delivery

The department outsources a number of activities, including education policy–related payment functions, to service delivery entities. Outsourcing service delivery and use of information technology (IT) systems to another agency does not reduce accountability. Outsourcing arrangements include:

  • Services Australia for child care assessment eligibility and related payments, employment services payments made on behalf of the department, and assessing eligibility of participants for employment support;
  • 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 and vocational loan scheme debt through the pay as you go (PAYG) system.

The department needs to ensure that service and quality control expectations are agreed and maintained, and that its business is appropriately prioritised, to provide assurance that policy objectives are being met under outsourced arrangements.

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.

Regulation

The portfolio carries regulatory responsibilities for the higher education sector through the Tertiary Education Quality and Standards Agency (TEQSA), and for the vocational education and training sector through the Australian Skills Quality Authority.

The ANAO identified that TEQSA’s effectiveness in regulating the higher education sector was mixed, especially in relation to the timeliness and effectiveness of compliance activities.

The ANAO found that ASQA was not yet fully effective in planning and implementing the reform to the regulation of the VET sector, with strategic planning and governance arrangements still developing.

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 COVID-19 and the post-COVID-19 market for international students.

Financial statements and other audit engagements

Overview

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

Table 1: Education, Skills and Employment portfolio entities and risk profile

 

Type of entity

Risk of material misstatement

Number of higher risks

Number of moderate risks

Material entities 

Department of Education, Skills and Employment

Non-corporate

Moderate

2

2

Australian Research Council

Non-corporate

Low

0

2

Non-material entities 

Australian Curriculum, Assessment and Reporting Authority

Corporate

Low

 

 

 

Australian Institute for Teaching and School Leadership Limited

Company

Low

Australian National University

Corporate

High

Australian Skills Quality Authority

Non-corporate

Low

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

     

Material entities

Department of Education, Skills and Employment

The Department of Education, Skills and Employment (DESE) 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, skills and employment provide.

DESE’s total budgeted expenses for 2021–22 are just under $54.27 billion, with 66 per cent of these expenses attributable to grant payments (Figure 2).

Figure 2: Department of Education, Skills and Employment’s total budgeted expenses by category ($’000)

 

Source: ANAO analysis of 2021–22 PBS.

There are four key risks for DESE’s 2020–21 financial statements that the ANAO has highlighted for specific audit coverage, 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.

In addition, as a result of the COVID-19 pandemic, the financial statements audit will continue to focus on how DESE has managed and accounted for additional significant stimulus funding to support small businesses to retain their apprentices and trainees, and for measures to reduce the financial pressures facing the early childhood sector. The audit will also focus on how the department obtains assurance that the stimulus payments are accurate and are paid to the right recipients.

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 2021–22 are just under $845 million, with 97 per cent of these expenses attributable to grant payments and supplier expenses (Figure 3).

Figure 3: Australian Research Council’s total budgeted expenses by category ($’000)

 

Source: ANAO analysis of 2021–22 PBS.

There are two key risks for the ARC’s 2020–21 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.

Potential audits

In progress audits

Recently tabled