Read an overview of the Industry, Innovation and Science portfolio including details of key activities, expenses and staffing levels. The audit focus section outlines the influences on the ANAO’s allocation of financial audit resources and the selection of performance audit topics and other activities. Also included is a list of material and non-material entities within the portfolio with their corresponding risk profile and key risks. Any risks that are considered key audit matters (KAMs) by the ANAO are separately identified.

Portfolio overview

Industry, Innovation and Science became a component of the Jobs and Innovation portfolio in December 2017 to enable growth and productivity for globally competitive industries. The portfolio consists of the former portfolio of Employment, now Jobs and Small Business; and Industry, Innovation and Science. Audit considerations for the Jobs and Small Business component of the portfolio are discussed separately.

The Department of Industry, Innovation and Science is responsible for supporting science and commercialisation; growing business investment and improving business capability; developing northern Australia; and streamlining regulation. The department has recently established a grants hub to streamline the administration of government grants to business. Further information is available from the department’s website.

In addition to the department, there are seven entities within the Industry, Innovation and Science sub-portfolio (excluding subsidiaries), with responsibilities in relation to marine, nuclear and geological science, Australia’s intellectual property rights system, and offshore petroleum safety and environmental management.

In the 2018–19 Portfolio Budget Statements (PBS) for the Industry, Innovation and Science component of the portfolio, the aggregated budgeted expenses for 2018–19 total $4.96 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 sub-portfolio are shown in Figure 1. The Department of Industry, Innovation and Science represents the largest proportion of the sub-portfolio’s expenses, and departmental expenses are the most material component, representing 58 per cent of the entire sub-portfolio’s expenses.

Figure 1: Industry, Innovation and Science sub-portfolio — total expenses and average staffing level by entity

Bar chart showing the average staffing level and expenses for entities in the portfolio.

Source: ANAO analysis of 2018–19 PBS Budget related papers.

Audit focus

Specific characteristics and risks within the Industry, Innovation and Science component of the portfolio that influence the ANAO’s allocation of financial audit resources and the annual selection of performance audit topics and other activities include the:

  • growing digital economy and the evolution of new industries and the decline of others;
  • financial management and reporting arrangements for grant payments, as well as the implementation of arrangements to support provision of financial assistance for the economic growth of northern Australia;
  • supporting the efficient delivery of other government entities’ programs and services, including through the Department of Industry, Innovation and Science’s grants hub;
  • streamlining of regulation and reducing red tape for business in line with the Government’s deregulation agenda and the department’s role in providing an access point for businesses to government information, assistance and funding; and
  • accounting for investments within the portfolio, including unique Australian Nuclear Science and Technology Organisation assets, and business interactions with related entities.

Considering the identified risks, expenditure and diversity of the portfolio, the ANAO has planned three performance audits for 2018–19.

Financial statements audits and other audit engagements

Entities within the Industry, Innovation and Science sub-portfolio, and the risk profile of each entity, are shown in Table 1.

Table 1: Industry, Innovation and Science sub-portfolio entities and risk profile

 

Type of entity

Risk of material misstatement

Number of higher risks

Number of moderate risks

Material entities  

    

Department of Industry, Innovation and Science

Non-corporate

Moderate

3

1

Australian Nuclear Science and Technology Organisation

Corporate

Low

2

4

Commonwealth Scientific and Industrial Research Organisation

Corporate

Moderate

0

5

Non-material entities  

    

Australian Institute of Marine Science

Corporate

Low

 

 

Geoscience Australia

Non-corporate

Low

  

IP Australia

Non-corporate

Low

  

National Offshore Petroleum Safety and Environmental Management Authority

Corporate

Low

  

Northern Australia Infrastructure Facility

Corporate

Low

  
     

Material entities

Department of Industry, Innovation and Science

The Department of Industry, Innovation and Science is responsible for supporting science and commercialisation; growing business investment and improving business capability; developing northern Australia; and streamlining regulation.

The department’s total budgeted expenses for 2018–19 are just over $2.58 billion, with 44 per cent of these expenses attributable to payments to corporate Commonwealth entities, as shown in Figure 2.

Figure 2: Department of Industry, Innovation and Science’s total budgeted expenses by category ($’000)

Source: ANAO analysis of 2018–19 PBS Budget related papers.

The four key risks for the Department of Industry, Innovation and Science’s financial statements that have been highlighted for specific audit coverage, including those that are considered key audit matters (KAMs) by the ANAO, are the:

  • completeness and accuracy of the department’s offshore petroleum and uranium royalties revenue, due to the reliance on the data included in self-assessments provided by uranium and petroleum producers (KAM – Completeness and accuracy of royalty revenue);
  • valuation of concessional loans made under the Northern Australia Infrastructure Facility, due to the accounting treatment for these loans and the level of estimation required in the calculations supporting their valuation (KAM – Valuation of concessional loans);
  • completeness and accuracy of the department’s other revenue streams, which are diverse in nature, often rely on manual calculations to quantify the amount of revenue recognised, and/or are cash-based transactions; and
  • management of, and accounting for, the department’s grants programs, due to the size and diversity of these programs.

Australian Nuclear Science and Technology Organisation

The Australian Nuclear Science and Technology Organisation (ANSTO) is Australia’s national nuclear research and development organisation. ANSTO operates Australia’s only nuclear research reactor and the Australian Synchrotron, contributes to radiopharmaceutical production and supply, and conducts research into areas of national priority, including human health, the environment and the nuclear fuel cycle. ANSTO also provides advice to government and other stakeholders on matters relating to nuclear science, technology and engineering.

ANSTO’s total budgeted expenses for 2018–19 are just under $373 million, with 42 per cent of these expenses attributable to employee benefits, as shown in Figure 3.

Figure 3: Australian Nuclear Science and Technology Organisation’s total budgeted expenses by category ($’000)

Source: ANAO analysis of 2018–19 PBS Budget related papers.

The six key risks for ANSTO’s financial statements are the:

  • calculation of the decommissioning provision, due to the complexity of the calculation and reliance on the exercise of significant judgement;
  • the implementation of a new financial management information system;
  • accounting for the potential sale of PETTECH operations;
  • complex accounting treatments from the commencement of operations for ANSTO Nuclear Medicine;
  • valuation and subsequent depreciation of assets, due to their unique nature and materiality; and
  • completeness and accuracy of material streams of commercial revenue, due to the number of revenue streams from both commercial and government sources.

Commonwealth Scientific and Industrial Research Organisation

The primary functions of the Commonwealth Scientific and Industrial Research Organisation (CSIRO), as set out in the Science and Industry Research Act 1949, are to carry out scientific research and facilitate the application or utilisation of the results of such research. CSIRO is responsible for delivering science and innovative solutions for industry, society and the environment.

CSIRO’s total budgeted expenses for 2018–19 are just under $1.44 billion, with 52 per cent of these expenses attributable to employee benefits, as shown in Figure 4.

Figure 4: CSIRO’s total budgeted expenses by category ($’000)

Source: ANAO analysis of 2018–19 PBS Budget related papers.

The five key risks for CSIRO’s financial statements are the:

  • capturing of actual costs of various projects and their accounting treatments in accordance with the relevant accounting standards;
  • completeness and accuracy of project revenue, due to the number of revenue streams from a variety of sources and funding models;
  • ongoing management of CSIRO innovation funds, due to the diverse nature and funding arrangements for investments in the early stages of technological opportunities;
  • calculation of waste remediation liabilities, due to the significant judgements required in the selection of the model’s assumptions; and
  • valuation of CSIRO’s land and buildings, plant and equipment, and properties held for investment or sale. These are material balances sensitive to movements in assumptions adopted in the underlying valuation models.