Portfolio overview

The Infrastructure, Transport, Regional Development and Communications portfolio covers a number of policy areas, including safety across the civil aviation, maritime and transport sectors; air navigation services; developing and administering the national capital; road, rail and freight transport systems; communication services; digital technologies; and public access to the arts and culture.

The Department of Infrastructure, Transport, Regional Development and Communications is the lead entity in the portfolio and supports the Australian Government’s policies on cities, regions and connecting Australians, and also supports an environment in which all Australians can access and benefit from communication services, creative experiences and culture.

The department was renamed by the Administrative Arrangements Order of 5 December 2019, with effect from 1 February 2020. The department combines the functions of the previous Department of Communications and the Arts and the previous Department of Infrastructure, Transport, Cities and Regional Development. Further information is available from the department’s website.

In addition to the department, there are 28 entities within the portfolio with responsibility for matters such as maritime, transport and civil aviation safety; infrastructure planning and delivery, including development of the Western Sydney Airport and Inland Rail project; postal services; public broadcasting; national broadband infrastructure delivery; access to cultural activities and the arts; and strategic planning for the national capital.

In the 2019–20 Portfolio Budget Statements (PBS) for the Infrastructure, Transport, Regional Development and Communications portfolio, after taking into account the Portfolio Additional Estimates Statements (PAES), the aggregated budgeted expenses for 2019–20 total $10.13 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 portfolio are shown in Figure 1. The Department of Infrastructure, Transport, Regional Development and Communications represents the largest proportion of the portfolio’s expenses, and administered expenses are the most material component, representing 69 per cent of the entire portfolio’s expenses.

Figure 1: Infrastructure, Transport, Regional Development and Communications portfolio — total expenses and average staffing level by entity

Source: ANAO analysis of 2019–20 PBS and 2019–20 PAES.

Audit focus

In determining the 2020–21 audit work program, the ANAO considers prior-year audit and other review findings and what these indicate about portfolio risks and areas for improvement, and emerging risks from new investments, reforms or changes in the operating environment. In the Infrastructure, Transport, Regional Development and Communications portfolio, these considerations predominantly relate to governance, specifically the need for effective oversight of the 29 highly diverse companies and other entities in the portfolio. Audit considerations also relate to procurement, given the significant extent of infrastructure asset procurement by portfolio entities, bringing both procurement and asset valuation risks, and grants, given the diverse nature of the programs administered in the portfolio. The portfolio also delivers regulatory functions, presenting quality and compliance risks.

Governance

Government outcomes in this portfolio are largely delivered through non-departmental entities, such as corporate Commonwealth entities and government business enterprises. This presents a variety of governance and oversight risks, particularly as not all of these entities are subject to the policies and guidelines applicable to non-corporate Commonwealth entities.

Risk management in the context of COVID-19, and its impact on the operations of the department and its portfolio entities, requires close attention by entities’ governance structures. A number of entities will need to manage risks due to COVID-19, including Airservices Australia and the Civil Aviation Safety Authority, given the pandemic’s impacts on air travel, and Australia Post, given the significant increased demand for parcel delivery services.

From 2020, NBN Co Limited will transition from building to operating the national broadband network. This transition will require clarity and coherence in governance structures and change management processes, particularly given the scale and distribution of NBN Co staff and infrastructure, together with the decentralised nature of operations.

Grants administration

Some portfolio entities administer significant amounts of grant funding, mainly in areas such as regional development, infrastructure and the arts. The Department of Infrastructure, Transport, Regional Development and Communications predominantly manages these grants through the Department of Industry, Science, Energy and Resources’ grants hub. Outsourcing the administration and processing of grants presents risks relating to assurance of quality, compliance and accountability, particularly when the arrangement being outsourced is small compared to the broader business of the delivery entity. Audit activity has also highlighted risks where assessment of grant applications does not verify the claims of applicants or ensure the assessment criteria are applied in full.

Procurement

A number of portfolio entities, particularly government business enterprises, are engaged in major procurement activities to deliver significant infrastructure assets, but are often not required to apply the Commonwealth Procurement Rules. Audits have drawn attention to the benefits of using competitive procurement processes to demonstrably obtain value for money, as well as the importance of managing probity and other risks.

Regulation

A number of portfolio entities have regulatory responsibilities, predominantly in air, land and sea transport safety; and media and communications. In circumstances where demands on available regulatory resources are increasing, audit work has highlighted risks in not ensuring an appropriate focus on organisational efficiency, including through the use of benchmarking with other entities to assess performance and identify opportunities for improvement.

Asset management

Issues in valuations and oversight arrangements arise when the government decides to achieve policy objectives through equity and debt investments in government business enterprises, which are established to operate under commercial principles. The issues are around the transparency of the expenditure decisions, specifically the proportion that can be seen as being for commercial purposes (the asset component), as opposed to that provided as a social benefit to the community (the expense).

Australia’s $10.5 billion national collection is managed by a number of national cultural institutions within the portfolio. The audit of the management of the national collections audit examined national cultural institutions and highlighted risks in strategic collections planning and acquisition, conservation and asset management, and financial management.

The portfolio manages radio communications spectrum, a major resource that will help facilitate accessible and sustainable communications infrastructure into the future. There are risks in achieving value for money, competition and access objectives in the management of this resource.

Financial management

The portfolio is exposed to risks regarding the transparency, consistency and appropriateness of the valuation of key assets. Complex valuation methods and models are used to derive the value of Commonwealth investments in government business enterprises (such as NBN Co Limited, the Australian Rail Track Corporation, Moorebank Intermodal Company Limited, WSA Co Limited and the Australian Postal Corporation). There are also challenges with valuation where there are significant non-commercial public policy elements of investment, such as with concessional loans.

Valuations often require a significant level of judgement to be applied in the selection of appropriate underlying assumptions. Focus is also required on the completeness and accuracy of revenue streams, such as customer access charges, for certain portfolio bodies. Valuations are also an important element in determining ongoing maintenance and sustainment investments required and the cost of future asset replacement.

Risk in the valuation of assets also arises for heritage and cultural assets within the portfolio, such as those held by the National Gallery of Australia and the National Library of Australia, as this involves a significant level of expertise and judgement in the selection of appropriate underlying assumptions due to the unique nature of these items.

Financial statements audits and other audit engagements

Overview

Entities within the Infrastructure, Transport, Regional Development and Communications portfolio, and the risk profile of each entity, are shown in Table 1.

Table 1: Infrastructure, Transport, Regional Development and Communications portfolio entities and risk profile

 

Type of entity

Risk of material misstatement

Number of higher risks

Number of moderate risks

Material entities 

Department of Infrastructure, Transport, Regional Development and Communications

Non-corporate

Moderate

2

5

Airservices Australia

Corporate

Moderate

2

4

Australian Broadcasting Corporation

Corporate

Moderate

2

0

Australian Communications and Media Authority

Non-corporate

Low

1

0

Australian Postal Corporation

Corporate

Moderate

2

2

Australian Rail Track Corporation Limited

Company

High

3

3

Moorebank Intermodal Company Limited

Company

High

1

3

National Capital Authority

Non-corporate

Low

0

2

National Gallery of Australia

Corporate

Moderate

2

0

National Library of Australia

Corporate

Low

1

0

NBN Co Limited

Company

High

4

0

WSA Co Limited

Company

Moderate

1

2

Non-material entities 

Australia Business Arts Foundation Ltd (Creative Partnerships Australia)

Company

Low

 

Australia Council

Corporate

Low

Australian Film, Television and Radio School

Corporate

Low

Australian Maritime Safety Authority

Corporate

Low

Australian National Maritime Museum

Corporate

Low

Australian Transport Safety Bureau

Non-corporate

Low

Bundanon Trust

Company

Low

Civil Aviation Safety Authority

Corporate

Low

Infrastructure Australia

Corporate

Low

National Faster Rail Agency

Non-corporate

Low

National Film and Sound Archive of Australia

Corporate

Low

National Museum of Australia

Corporate

Low

National Portrait Gallery of Australia

Corporate

Low

National Transport Commission

Corporate

Low

North Queensland Water Infrastructure Authority

Non-corporate

Low

Screen Australia

Corporate

Low

Special Broadcasting Service Corporation

Corporate

Low

Other audit engagements (including Auditor-General Act 1997 section 20 engagements)

Australia Post Services Pty Ltd (Australian financial services licence compliance)

Australian Postal Corporation (half-year review)

Australian Postal Corporation (performance standards)

Australian Postal Corporation (remuneration report — agreed-upon procedures)

Australian Rail Track Corporation (grant compliance audit)

NBN Co Limited (half-year review)

National DAB Licence Company Limited

Norfolk Island Health and Residential Aged Care Service (financial statements audit)

     

Material entities

Department of Infrastructure, Transport, Regional Development and Communications

The Department of Infrastructure, Transport, Regional Development and Communications is responsible for improving infrastructure across Australia through funding coordination of transport and other infrastructure; providing an efficient, sustainable, competitive and safe transport system for all transport users; strengthening the sustainability, capacity and diversity of regional economies; providing advice on population policy; implementing the national policy on cities; promoting an innovative and competitive communications sector; participation in and access to Australia’s arts and culture through developing and supporting cultural expression; and supporting governance arrangements in the Australian territories. In addition to these ongoing responsibilities, in 2020–21, the department will continue to deliver economic stimulus to the aviation and creative arts sectors and to regional Australian communities as a result of the COVID-19 pandemic.

The department’s total budgeted expenses for 2019–20 are just over $7.2 billion, with 54 per cent of these expenses attributable to grant expenses, as shown in Figure 2.

Figure 2: Department of Infrastructure, Transport, Regional Development and Communications’ total budgeted expenses by category ($’000)

 

Source: ANAO analysis of 2019–20 PAES.

The seven key risks for the department’s 2019–20 financial statements that the ANAO has highlighted for specific audit coverage in 2019–20, including those that the ANAO considers potential key audit matters (KAMs), are the:

  • valuation of the Commonwealth’s investments in NBN Co, due to the complexity of determining the appropriate valuation method to be adopted, the judgements applied to key inputs in the valuation process, the high degree of judgement and complexity in the estimation of the significant costs of network construction and software development, the impact of changing economic conditions as a result of the COVID-19 pandemic, and the significance of the investments to the financial statements (KAM – Valuation of administered investments);
  • valuation of the Commonwealth’s investments in corporate Commonwealth entities and companies, particularly the Australian Postal Corporation, Australian Rail Track Corporation and Airservices Australia, due to the complexity of determining the appropriate valuation method to be adopted, the judgements applied to key inputs in the valuation process, the impact of changing economic conditions as a result of the COVID-19 pandemic, and the significance of the investments to the financial statements (KAM – Valuation of administered investments);
  • valuation of advances and loans, due to the judgements required in managing impairment and expected credit loss risks associated with loans and when selecting the assumptions used in the valuation models used for concessional loans, with particular emphasis of the selection of the market interest rate (KAM – Valuation of advances and loans);
  • management of, and accounting for, the department’s grant programs, due to the value, scale and diversity of these programs and their mode of delivery. Complexity of these programs has increased given the department’s role in delivering economic stimulus (mainly in the form of grant payments);
  • management of National Partnership payments, as the programs are complex and financially significant and subject to detailed legislative conditions, and a level of subjectivity and judgement are applied in determining whether a recipient meets eligibility and funding milestone requirements;
  • accuracy, completeness and validity of data in the financial management information system implemented by the former Department of Communications and the Arts on 1 July 2019, due to the complexity of the processes involved in implementing a new system; and
  • impacts of the machinery-of-government changes, due to the significance of the transfer of assets, liabilities, revenue and expenses to the new department and the timely recognition and alignment of accounting policies, which will increase the complexity of the financial statements preparation process.

Airservices Australia

Airservices Australia is responsible for the provision of air navigation services across Australian and oceanic airspace, and the provision of aviation rescue firefighting services at major Australian airports. Supported by a national network of communications, surveillance and navigation facilities and infrastructure, Airservices Australia is funded through domestic charges levied on its customers and borrowings from debt markets. Due to the COVID-19-related downturn in aviation traffic, Airservices Australia has received funding from government in lieu of charges from external customers to cover the reduction in revenues for 2020.

Airservices Australia’s total actual expenses for 2018–19 were just over $1.0 billion, with 62 per cent of these expenses attributable to employee benefits, as shown in Figure 3.

Figure 3: Airservices Australia’s total actual expenses by category ($’000)

 

Source: ANAO analysis of Airservices Australia’s 2018–19 annual report.

Airservices Australia’s six key risks for its 2019–20 financial statements are the:

  • completeness and accuracy of airways revenue, given the complexity of the flight traffic data and dependence on multiple IT systems when generating customer invoices;
  • management of, and accounting for, assets under construction and existing, completed property, plant and equipment and intangibles. Capturing costs related to assets under construction and determining their appropriate treatment under relevant accounting standards is complex, due to the technical nature of those assets and the judgements involved in assessing whether costs can be capitalised. Valuation of completed asset infrastructure, which is a material balance, is sensitive to changes in the assumptions used in the valuation models;
  • calculation of provisions for legal obligations and related contingencies, due to the complexity of the underlying event that gave rise to a potential legal obligation, in addition to the significant judgements required in valuing the liability;
  • management of, and accounting for, a large number of diverse, material contracts, which are complex in nature;
  • valuation of the Airservices Australia’s defined benefit superannuation scheme liability, including the sensitivity of the liability to changes in the economic and demographic assumptions supporting the calculation; and
  • management of, and accounting for, a range of financial instruments, including interest rate swaps and forward exchange contracts, which are complex in nature.

Australian Broadcasting Corporation

The Australian Broadcasting Corporation (ABC) is responsible for informing and educating, facilitating public debate and fostering the performing arts by providing innovative and comprehensive broadcasting services of a high standard to the nation.

The ABC’s total budgeted expenses for 2019–20 are just over $1.13 billion, with 92 per cent of these expenses attributable to employee benefits and supplier expenses, as shown in Figure 4.

Figure 4: Australian Broadcasting Corporation’s total budgeted expenses by category ($’000)

 

Source: ANAO analysis of 2019–20 PBS.

The ABC’s two key risks for its 2019–20 financial statements are the accuracy and valuation of:

  • land and buildings, as the valuations are sensitive to changes in the assumptions used in the valuation models, and contain highly specialised components; and
  • program inventory, which can be externally acquired or internally developed. Complexities can arise from capturing the actual costs of various internally developed programs. The assessment of whether program inventories are impaired is also subject to judgement.

Australian Communications and Media Authority

The Australian Communications and Media Authority (ACMA) is responsible for the regulation of broadcasting, radio communications (spectrum management), telecommunications and online content.

ACMA’s total budgeted expenses for 2019–20 are just under $132 million, with 47 per cent of these expenses attributable to employee benefits, as shown in Figure 5.

Figure 5: Australian Communications and Media Authority’s total budgeted expenses by category ($’000)

 

Source: ANAO analysis of 2019–20 PBS.

ACMA’s key risk for its 2019–20 financial statements relates to the accounting for licensing revenue. This involves the application of professional judgement in determining when to recognise revenue, as spectrum management is technically complex and involves licensing, auctions and trading.

Australian Postal Corporation

The Australian Postal Corporation (Australia Post) is a government business enterprise responsible for supplying postal services to Australia, including the distribution of letters and parcels in Australia and internationally.

Australia Post’s total actual expenses for 2018–19 are just over $6.916 billion, with 95 per cent of these attributable to employee and supplier expenses, as shown in Figure 6. Australia Post’s total actual revenue for 2018–19 is $6.990 billion, with 98 per cent of this attributable to sales of goods and services.

Figure 6: Australian Postal Corporation’s total actual expenses by category ($’000)

 

Source: ANAO analysis of Australia Post’s 2018–19 annual report.

The four key risks for Australia Post’s 2019–20 financial statements that the ANAO has highlighted for specific audit coverage in 2020–21, all of which the ANAO considers potential key audit matters (KAMs), are the:

  • significant judgements required for the assessment of assumptions supporting the calculation of deferred revenue and the impact of the Australian accounting standard AASB 15 Revenue from Contracts with Customers (effective 1 July 2018). The standard required Australia Post to change the timing of revenue recognition for delivery-related products from recognition at the point of delivery to recognising revenue as deliveries progress over time. There is also complexity associated with contracts and arrangements entered into, with multiple diverse performance obligations and volume targets that can affect the contracted price (KAM – Revenue recognition);
  • complexity of the valuation of the Australia Post Superannuation Scheme, which manages the investment of fund contributions and the obligation of future superannuation payments, and which, consistent with previous years, has maintained a significant surplus and remains a material asset on the Australia Post balance sheet. The estimation supporting the calculation of the obligation liability is subject to sensitivity of the scheme’s economic and demographic assumptions and its returns on investment assets, which are affected by fair value fluctuations of markets (KAM – Accounting and valuation of Australia Post Superannuation Scheme);
  • significant judgement required for the assessment of assumptions supporting the model used for the valuation of goodwill and the evaluation of useful life associated with other intangible assets (KAM – Valuation of goodwill and indefinite-life intangible assets); and
  • significant judgement to assess the nature of Australia Post’s complex contracts in order to apply the first-time adoption of AASB 16 Leases, resulting in the recognition of material right-of-use asset and lease liability, together with the corresponding deferred tax impact on the balance sheet (KAM – First-time adoption of new accounting standard for leases).

Australian Rail Track Corporation Limited

The Australian Rail Track Corporation (ARTC) is responsible for the development, maintenance, management and delivery of some of Australia’s major rail networks, including the national interstate rail network, the Hunter Valley coal rail network, and the construction of the Inland Rail network. In May 2017, the Australian Government announced it would invest up to $8.4 billion in equity funding into ARTC in order for the company to deliver the Inland Rail network. Inland Rail is a 1,700-kilometer rail line that will link Brisbane and Melbourne through regional Australia, and will be completed in 2024–25. Inland Rail is the largest rail freight infrastructure project ever undertaken in Australia.

ARTC’s total actual expenses for 2018–19 were just over $1.2 billion, with 36 per cent of these expenses attributable to asset impairment expenses, as shown in Figure 7. ARTC’s total actual revenue for 2018–19 was just over $847.7 million, with 85 per cent of this revenue attributable to rail access charges.

Figure 7: Australian Rail Track Corporation Limited’s total actual expenses by category ($’000)

 

Source: ANAO analysis of Australian Rail Track Corporation’s 2018–19 annual report.

ARTC’s six key risks for its 2019–20 financial statements are the:

  • valuation of the Hunter Valley and interstate rail network assets. This is a material balance for ARTC, is sensitive to changes in the assumptions used in the valuation models adopted, and involves highly specialised components and forecasts;
  • recognition of capital costs of expenditure on the Inland Rail network (under construction), given the scale of construction, complexity, and sensitivity of the judgments applied in the model used to determine impairment and capitalisation of assets;
  • taxation-related balances, as there is complexity and judgement involved in accounting for deferred tax assets;
  • recognition of revenue for a number of income streams, as there are significant judgements exercised by management in estimating the amount of revenue to be recognised;
  • management of, and accounting for, grants, particularly recognition and calculation of deferred grant income, as this relies heavily on management’s assessments; and
  • IT environment, given complexity of ARTC’s IT applications that have input into the preparation of the financial report.

Moorebank Intermodal Company Limited

The Moorebank Intermodal Company Limited (MIC) was established to oversee the development and future operation of the Moorebank intermodal terminal in Sydney’s south-west. It is designed to enable more freight to be moved by rail both locally and nationally. The Moorebank terminal will have an import and export facility with a direct link to Port Botany, and also an interstate and regional facility to connect to the national rail freight network. The terminal will be developed and operated by co-investor Sydney Intermodal Terminal Alliance.

MIC’s total actual expenses for 2018–19 were just under $113.2 million, with 93 per cent of these expenses attributable to land and site costs, as shown in Figure 8.

Figure 8: Moorebank Intermodal Company Limited’s total actual expenses by category ($’000)

 

Source: ANAO analysis of Moorebank Intermodal Company Limited’s 2018–19 annual report.

MIC’s four key risks for its 2019–20 financial statements are the:

  • valuation of provisions related to Moorebank Avenue works and land remediation obligations, due to the judgements and estimates involved in capturing remediation and site preparation costs, including assessing the level of work required for the completion of these projects;
  • valuation of equity-accounted investments (trusts), due to increasing development activity and the technical nature of the transactions between MIC and the trusts;
  • recognition of capital costs in relation to construction of the MIC rail line and Moorebank Avenue works; and
  • valuation of deferred tax assets, due to judgements involved in the assessment of recoverability of deferred tax assets against future forecast profits, and judgements involved in the apportionment of deductible costs for the derivation of the valuation.

National Capital Authority

The National Capital Authority (NCA) is responsible for managing the strategic planning, promotion and enhancement of Canberra as the national capital for all Australians through the development and administration of the National Capital Plan, the operation of the National Capital Exhibition, delivery of education and awareness programs, and works to enhance the character of the national capital.

The NCA’s total budgeted expenses for 2019–20 are just under $59 million, with 48 per cent of these expenses attributable to depreciation and amortisation, finance costs and impairment of assets, as shown in Figure 9.

Figure 9: National Capital Authority’s total budgeted expenses by category ($’000)

 

Source: ANAO analysis of 2019–20 PAES.

The NCA’s two key risks for its 2019–20 financial statements are the:

  • valuation of land and buildings, which is a material balance and sensitive to changes in the assumptions used in the valuation models; and
  • financial reporting of the NCA’s construction activities, requiring judgement to determine the status of projects at the end of the financial year.

National Gallery of Australia

The National Gallery of Australia (NGA) is responsible for developing and maintaining a national collection of works of art to exhibit or to make available for others to exhibit, and making the most advantageous use of the national collection in the national interest.

The NGA’s total budgeted expenses for 2019–20 are just over $84 million, with 38 per cent of these expenses attributable to supplier and other expenses, as shown in Figure 10.

Figure 10: National Gallery of Australia’s total budgeted expenses by category ($’000)

 

Source: ANAO analysis of 2019–20 PBS.

The NGA’s two key risks for its 2019–20 financial statements are the:

  • the valuation of the heritage and cultural collection, which involves significant judgement and expertise due to the unique nature of these items; and
  • the valuation of the NGA building, as this is a special-purpose asset with a number of unique features, and is of a restricted-use nature.

National Library of Australia

The National Library of Australia (NLA) is responsible for developing and maintaining a national collection of library material, including a comprehensive collection of material relating to Australia and the Australian people, and for making this material available to the public.

The NLA’s total budgeted expenses for 2019–20 are just under $78 million, with 44 per cent of these expenses attributable to employee benefits, as shown in Figure 11.

Figure 11: National Library of Australia’s total budgeted expenses by category ($’000)

 

Source: ANAO analysis of 2019–20 PBS.

The NLA’s key risk for its 2019–20 financial statements is the valuation of the national collection, due to the materiality of the balance and the judgement required in selecting the assumptions used in determining the fair value of cultural and heritage assets.

NBN Co Limited

The primary objective of NBN Co Limited is to provide wholesale services to internet service providers. NBN Co is a government business enterprise incorporated under the Corporations Act 2001.

NBN Co’s total actual expenses for 2018–19 were $7.7 billion, with 34 per cent of these expenses attributable to depreciation and amortisation, as shown in Figure 12.

Figure 12: NBN Co Limited’s total actual expenses by category ($’000)

 

Source: ANAO analysis of NBN Co Limited’s 2018–19 annual report.

The four key risks for NBN Co’s 2019–20 financial statements that the ANAO has highlighted for specific audit coverage in 2020–21, including those that the ANAO considers potential key audit matters (KAMs), are the:

  • valuation of network assets that are subject to a high degree of judgement and complexities arising in capturing the significant costs of network construction and software development, and assessing the impairment, which requires judgement in forecasting financial performance and the recovery of the network spend (KAM – Valuation of property, plant and equipment, and intangible assets – impairment; and Accuracy and completeness of depreciation and amortisation expense);
  • management of, and accounting for, complex multi-year, high-value contractual and project management arrangements with multiple suppliers, including Telstra (KAM – Accounting treatment of rights and obligations under significant contractual arrangements);
  • valuation of construction liabilities, due to the involvement of multiple delivery partners and the capitalisation of associated network assets based on their respective stage of completion at reporting date (KAM – Valuation of construction liabilities estimates); and
  • management of, and accounting for, telecommunications revenue that is growing exponentially, coupled with new pricing initiatives and development of new business products and associated pricing models.

WSA Co Limited

WSA Co Limited was established to construct and operate Western Sydney International (Nancy-Bird Walton) Airport in Badgerys Creek, in south-western Sydney, to the functional specifications determined by the Australian Government. WSA Co is a government business enterprise wholly owned by the Australian Government, represented by the Minister for Finance and the Minister for Population, Cities and Urban Infrastructure as shareholder ministers.

The Australian Government plans to invest up to $5.3 billion into WSA Co to build Western Sydney Airport. This investment covers WSA Co’s work on the earthworks and construction of the airport (runway and terminal infrastructure) in accordance with the conditions of the project deed agreed by the Australian Government and WSA Co. Earthworks to prepare the airport site for construction of airside works and tarmacs commenced in early 2020.

WSA Co’s total actual expenses for 2018–19 were just under $253 million, with 68 per cent of these expenses attributable to site preparation costs, as shown in Figure 13.

Figure 13: WSA Co Limited’s total actual expenses by category ($’000)

 

Source: ANAO analysis of WSA Co’s 2018–19 annual report.

WSA Co’s three key risks for its 2019–20 financial statements are the:

  • recognition and measurement of capital expenditure that will be incurred in developing the airport, particularly the valuation of work in progress recognised during airport construction activities;
  • effectiveness of policies and processes for procurement, particularly relating to management of contracts for the delivery and cost management of major earthwork and construction activities, given the material values of construction contracts and complexity of services delivered; and
  • calculation of provisions for land remediation activities (for soil contamination on the airport site) that will need to be undertaken to enable construction on the airport site.

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