Industry, Science and Resources | Australian National Audit Office (ANAO)

Portfolio overview

The Industry, Science and Resources portfolio is responsible for supporting science and its commercialisation; growing business investment and improving business capability; and streamlining regulation.

The department operates a Business Grants Hub and a shared services hub, which provide other Commonwealth entities with administrative support, including grants administration and payments processing; human resources and financial transactions processing; and the management information systems to support these processes. Further information is available from the department’s website at industry.gov.au.

In addition to the Department of Industry, Science and Resources, there are 5 entities within the portfolio (excluding subsidiaries), with responsibilities for nuclear and geological science, Australia’s intellectual property rights system and offshore petroleum safety and environmental management.

On 1 July 2022 an Administrative Arrangements Order took effect which changed some of the responsibilities of the Industry, Science and Resources portfolio, (formerly the Industry, Science Energy and Resources portfolio). In the October 2022–23 Portfolio Budget Statements (PBS) for the Industry, Science and Resources portfolio, the aggregated budgeted expenses for 2022–23 total $6.7 billion. The October PBS contains budgets for those entities in the general government sector (GGS) that receive appropriation 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 Industry, Science and Resources represents the largest proportion of the portfolio’s expenses, and departmental expenses of the portfolio are the most material component, representing 51 per cent of the entire portfolio’s expenses.

Figure 1: Industry, Science and Resource’s – total expenses and average staffing level by entity

A stacked bar chart representing departmental and administered expenses. There is also a single dot representing average staff level.

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 in the operating environment.

The primary risks identified for the portfolio relate to the management of physical assets and the department’s responsibilities for the Business Grants Hub delivering grant program outcomes in a manner consistent with the Commonwealth Grants Rules and Guidelines (CGRGs), in order to ensure that the resources allocated achieve the outcomes that the government is seeking.

Specific risks in the Industry, Science and Resources portfolio relate to grants administration, and asset management and sustainment.

Grants administration

The delivery of end-to-end grants management services through the Business Grants Hub provides a potentially efficient mechanism to ensure grants are delivered in accordance with the CGRGs and effectively achieve the purposes of the grant program. The department needs to ensure that service, quality control expectations and reporting are agreed and maintained, and that priorities accord with policy entity expectations, to provide assurance that policy objectives are being met.

Asset management and sustainment

The portfolio carries a large number of physical assets, including nuclear and related scientific assets. These assets require specific maintenance and sustainability planning unique to the nature and use of the asset. The asset portfolio needs to adapt to changing needs and scientific advancements over time. It is also important that targets are set in asset management strategies, and that tracking and reporting against targets is undertaken, to provide a clear focus for performance and accountability for delivering on objectives.

Financial statements and other audit engagements

Overview

On 1 July 2022 an Administrative Arrangements Order (AAO) took effect which included changes to the responsibilities of the Industry, Science and Resources portfolio, (formerly the Industry, Science, Energy and Resources 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.

Table 1: Industry, Science and Resources 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, Science and Resources	Non-corporate	Moderate	3	2
Australian Nuclear Science and Technology Organisation	Corporate	Moderate	1	2
Commonwealth Scientific and Industrial Research Organisation	Corporate	Moderate	2	2
Geoscience Australia	Non-corporate	Low	0	2
Non-material entities
IP Australia	Non-corporate	Low
National Offshore Petroleum Safety and Environmental Management Authority	Corporate	Low

Material entities

Department of Industry, Science and Resources

The Department of Industry, Science, and Resources is responsible for supporting economic recovery, productivity and growth, and job creation by supporting manufacturing, business capability, technology, science and innovation and the development of mineral and energy resources.

On 1 July 2022 an Administrative Arrangements Order (AAO) took effect which included changes to the responsibilities of the former Department of Industry, Science, Energy and Resources. The department’s total budgeted revenues for 2022–23 are just over $2.3 billion, with royalties representing 67 per cent, as shown in Figure 2. The rehabilitation provision represents 78 per cent of total budgeted liabilities, while grants and subsidies expenses represent 39 per cent of total budgeted expenses.

Figure 2: Department of Industry, Science and Resources’ total budgeted financial statements by category ($’000)

Source: ANAO analysis of 25 October 2022–23 PBS.

Financial Statements Audit

There are four key risks for the former Department of Industry, Science, Energy and Resources 2021–22 financial statements that the ANAO has highlighted for specific audit coverage that the new Department of Industry, Science and Resources will have responsibility for from 2022–23, including one risk that the ANAO considers a potential key audit matter (KAM).

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).
The 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.
The valuation of the security for the Ranger uranium mine rehabilitation and accuracy of the cost of rehabilitation works, due to the complexity of the valuation and judgement involved in the valuation, and reliance on the data provided by third parties.
The management of, and accounting for, the department’s grant programs, due to the size and diversity of these programs.

In addition, the valuation of the Australian Government’s investment in Snowy Hydro Limited, was considered a risk for the former 2021–22 Department of Industry, Science, Energy and Resources financial statements. This was due to the materiality of the investment and complexities associated with the choice of assumptions and judgements applied in the valuation model. (KAM – Valuation of Snowy Hydro Limited administered investment). This will now be considered as part of the 2022–23 financial statements for the Department of Climate Change, Energy, the Environment and Water.

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 liabilities for 2022–23 are just under $909.8 million, with 88 per cent of these liabilities attributable to other provisions, as shown in Figure 1 budgeted property, plant and equipment and land and buildings are $929.0 million and $419.1 million, respectively, with budgeted depreciation expense attributable to 22 per cent of total budgeted expenses.

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

Source: ANAO analysis of 29 March 2022–23 PBS .

There are three key risks for ANSTO’s 2021–22 financial statements.

The cash flow and going concern considerations in relation to the financial position of the ANSTO Nuclear Medicine Pty Ltd subsidiary.
The valuation of the decommissioning and waste management provisions, due to the complexity of the calculation, reliance on the exercise of significant judgement to determine key inputs into the valuation and the unique nature of the operations to which the provisions relate.
The valuation and subsequent depreciation of non-financial assets, due to the unique nature of property, plant and equipment held by ANSTO, materiality of the balances and the exercise of significant judgement to determine the key inputs into the estimation of fair value.

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 assets for 2022–23 are just over $3.2 billion, with 66 per cent of these assets attributable to: land and buildings; and property, plant and equipment, as shown in Figure 2. Sales of goods and services contribute to just over 28 per cent of total budgeted revenue, with other revenue streams contributing to 8 per cent. Total budgeted liabilities are just under $613.4 million, with other provisions contributing to 9 per cent.

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

Source: ANAO analysis of 29 March 2022–23 PBS.

There are four key risks for CSIRO’s 2021–22 financial statements.

The completeness and accuracy of research project revenue, due to the degree of judgement involved across a number of revenue streams from a variety of sources and funding models.
The valuation of unlisted companies, including within the CSIRO innovation funds, due to their diverse nature, early-stage development and funding arrangements.
The calculation of waste remediation liabilities, due to the significant judgements required in the selection of the model’s assumptions.
The 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 and are subject to possible impairment.

Geoscience Australia

Geoscience Australia delivers information and advice on Australia’s geology and geography to support faster and smarter decision-making. The agency develops applications and solutions in response to Australia’s challenges by bringing together observations, data and knowledge from across geoscience disciplines.

Geoscience Australia’s total budgeted revenue for 2022–23 are just under $416.9 million, with the sales of goods and rendering of services contributing to 16 per cent. Total budgeted assets are $503.8 million, with 11 per cent of these assets attributable to property, plant and equipment, as shown in Figure 3.

Figure 5: Geoscience Australia’s total budgeted financial statements by category ($’000)

Source: ANAO analysis of 29 March 2022–23 PBS.

There are two key risks for Geoscience Australia’s 2021–22 financial statements.

The recognition of revenue related to long-term contracts and the relevant deferred revenue at year end, as it is a complex process that involves judgement.
The valuation of the mineral and fossil collections and other assets, including plant and equipment, as this process involves estimation and judgement.