Audit focus

In determining the 2019–20 audit work program, the ANAO considers prior-year audit and other review findings and what these indicate about portfolio risks and areas for improvement, as well as emerging risks from new investments, reforms or operating environment changes. In the Prime Minister and Cabinet portfolio, considerations predominantly relate to its responsibilities to deliver timely and targeted services to Aboriginal and Torres Strait Islander peoples and ensure it can articulate the performance and impact against policy objectives for the programs and activities it funds. The portfolio also carries governance risk through the delivery of activities by its many corporate entities, and ensuring transparency and effectiveness of these entities. PM&C is the primary coordination point for policy development and as such influences the risks and expectations for evidence-based policy development across the public sector.

Service delivery

Recent audit work has identified areas for improvement in the department’s ability to demonstrate value for money and impact of programs for the benefit of Aboriginal and Torres Strait Islander people. This risk is evidenced through issues in program implementation oversight, in establishing clear performance targets, and in the management and measurement of outcomes for Aboriginal and Torres Strait Islander grants and programs.

There are risks with grants management with regard to the justification for the selection of grant recipients and the extent to which existing experience and knowledge is leveraged from the regional network of PM&C staff.

Governance

The portfolio includes 10 entities that have been established as either corporate Commonwealth entities or Commonwealth companies limited by guarantee, to serve the interests of Aboriginal and Torres Strait Islander people. This creates heightened governance risks, given the remoteness and size of some of these entities, and transparency risks for the performance of their activities and expenditures.

Policy development

To support the implementation of the Australian Government’s reform agenda, the department needs to ensure the provision of effective advice when coordinating the development of policy in areas of significance. This requires clear articulation to government of the evidence base and likely impacts of proposals, including through use of relevant data.

Portfolio overview

The Prime Minister and Cabinet portfolio is responsible for providing support and policy advice to the Prime Minister, the Cabinet and ministers on public and government administration matters, including policy development and whole-of-government coordination.

The Department of the Prime Minister and Cabinet (PM&C) is the lead entity in the portfolio. The department’s three key purposes are to support the Prime Minister as the head of the Australian Government and the Cabinet; provide advice on major domestic policy and international national security matters; and improve the lives of Aboriginal and Torres Strait Islander peoples. Further information is available from the department’s website at www.pmc.gov.au.

In addition to PM&C, there are 19 entities within the portfolio (excluding subsidiaries), which cover a broad range of functions and policy areas.

In the 2019–20 Portfolio Budget Statements (PBS) for the Prime Minister and Cabinet portfolio, the aggregated budgeted expenses for 2019–20 total $2.86 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. PM&C represents the largest proportion of the portfolio’s expenses, and administered expenses are the most material component, representing 61 per cent of the entire portfolio’s expenses.

Figure 1: Prime Minister and Cabinet portfolio — total expenses and average staffing level by entity

Source: ANAO analysis of PBS 2019–20 Budget related papers pre–machinery-of-government changes announced on 29 May 2019.

The Prime Minister and Cabinet portfolio coordinates policy development across government in economic, domestic and international affairs, public service stewardship, and Aboriginal and Torres Strait Islander policies and programs. The strategic purposes of the department are supporting the Prime Minister in his role as head of the Australian Government and the Cabinet; providing advice on how to make Australia more prosperous and to improve its security on a global scale; enhancing the ability of Aboriginal and Torres Strait Islander people to improve their lives; and working with government entities to build a more diverse public service.

Financial statements and other audit engagements

Overview

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

Table 1: Prime Minister and Cabinet portfolio entities and risk profile

 

Type of entity

Risk of material misstatement

Number of higher risks

Number of moderate risks

Material entities 

Department of the Prime Minister and Cabinet

Non-corporate

Moderate

1

3

Indigenous Business Australia

Corporate

Moderate

0

3

Indigenous Land and Sea Corporation

Corporate

Low

1

4

North Queensland Livestock Industry Recovery Agency

Non-corporate

Non-material entities 

Australian Institute of Aboriginal and Torres Strait Islander Studies

Corporate

Low

 

 

 

 

 

 

 

 

 

Aboriginal Hostels Limited

Company

Moderate

Anindilyakwa Land Council

Corporate

Low

Australian Public Service Commission

Non-corporate

Low

Central Land Council

Corporate

Low

National Australia Day Council Limited

Company

Low

Northern Land Council

Corporate

Moderate

Office of National Intelligence

Non-corporate

Low

Office of the Official Secretary to the Governor-General

Non-corporate

Low

Outback Stores Pty Ltd

Company

Moderate

Tiwi Land Council

Corporate

Low

Torres Strait Regional Authority

Corporate

Low

Workplace Gender Equality Agency

Non-corporate

Low

Wreck Bay Aboriginal Community Council

Corporate

Low

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

Aboriginals Benefit Account

Central Land Council Native Title Representative Body

Northern Land Council Native Title Representative Body

     

Material entities

Department of the Prime Minister and Cabinet

The Department of the Prime Minister and Cabinet (PM&C) is responsible for coordinating policy development across government in economic, domestic and international affairs, and Aboriginal and Torres Strait Islander advancement.

PM&C’s total budgeted expenses for 2019–20 are just over $2.1 billion, with 61 per cent of these expenses attributable to grants, as shown in Figure 2.

Figure 2: Department of the Prime Minister and Cabinet’s total budgeted expenses by category ($’000)

 

Source: ANAO analysis of PBS 2019–20 Budget related papers pre–machinery-of-government changes announced on 29 May 2019.

The four key risks for PM&C’s 2018–19 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:

  • effectiveness of internal control activities and financial reporting arrangements for Aboriginal and Torres Strait Islander affairs functions and administered grant programs (KAM – Occurrence of grant expenses);
  • valuation and reporting of PM&C’s employee provisions and expenses, due to the significance of the balance in the statement of financial position and the complexity of the calculations;
  • valuation of land and building, and infrastructure, plant and equipment assets, due to the location of assets in remote and regional Australia where market data on comparable assets is limited; and
  • valuation of PM&C’s administered investments, which are significant in size, unique in nature and require the exercise of management judgement by the portfolio entities.

Indigenous Business Australia

Under its enabling legislation, the Aboriginal and Torres Strait Islander Act 2005, Indigenous Business Australia’s (IBA’s) purposes are to assist and enhance Aboriginal and Torres Strait Islander self-management and economic self-sufficiency, and to advance the commercial and economic interests of Aboriginal and Torres Strait Islander peoples by accumulating and using a substantial capital base for their benefit. IBA has 22 actively trading subsidiaries, which are audited by the ANAO.

IBA’s total budgeted expenses for 2019–20 are just under $236 million, with 34 per cent of these expenses attributable to supplier expenses, as shown in Figure 3.

Figure 3: Indigenous Business Australia’s total budgeted expenses by category ($’000)

 

Source: ANAO analysis of PBS 2019–20 Budget related papers pre–machinery-of-government changes announced on 29 May 2019.

IBA’s three key risks for its financial statements are the:

  • valuation of loan receivables due to changes in the classification and accounting treatment of loans as a consequence of the introduction of AASB 9 Financial Instruments;
  • impairment of loan receivables associated with significant judgements involving the calculation of expected credit losses; and
  • valuation of loan receivables following the reassessment of inputs to the valuation methodology which requires significant judgements.

Indigenous Land and Sea Corporation

The purpose of the Indigenous Land and Sea Corporation (ILSC) is to assist Aboriginal and Torres Strait Islander people to acquire, manage and invest in land and water so as to provide economic, environmental, social and cultural benefits, and to provide land and water management assistance to support the delivery of sustainable benefits from land and water rights acquisition.

ILSC’s total budgeted expenses for 2019–20 are just over $71 million, with 58 per cent of these expenses attributable to supplier expenses, as shown in Figure 4.

Figure 4: Indigenous Land and Sea Corporation’s total budgeted expenses by category ($’000)

 

Source: ANAO analysis of PBS 2019–20 Budget related papers pre–machinery-of-government changes announced on 29 May 2019.

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

  • valuation and management of property, plant and equipment, and intangibles held by the ILSC’s subsidiary, Voyages Indigenous Tourism Australia Pty Ltd, in relation to the Ayres Rock Resort. This is due to the judgements and assumptions involved in the valuation of these assets;
  • valuation of property, plant and equipment and livestock of the ILSC and its subsidiary, Australian Indigenous Agribusiness Company Pty Ltd. Valuation of biological assets involves complex judgements and assumptions;
  • transfer of commercial property back to the ILSC from Australian Indigenous Agribusiness Company Pty Ltd, in view of the tax implications, which include the complex calculation of tax balances and asset valuations on transfer;
  • valuation of the concessional loan liability and associated asset between the ILSC and the Department of the Prime Minister and Cabinet; and
  • recognition and reporting of revenue and expenses by the ILSC subsidiary, Voyages Indigenous Tourism Australia Pty Ltd, due to the varying revenue and purchasing streams and the decentralised nature of the entity’s operations.

North Queensland Livestock Industry Recovery Agency

The North Queensland Livestock Industry Recovery Agency (NQLIRA) was announced on 1 March 2019 in response to a monsoons trough event in January and February 2019, which caused widespread flooding across northern and western Queensland. These floodwaters had a catastrophic impact on the pastoral zone of North West Queensland, impacting severely on grazing properties and causing extensive damage to related infrastructure such as fences, dams and other watering infrastructure. The NQLIRA’s purpose is to coordinate the immediate response, recovery and reconstruction efforts, and produce a strategy for long-term recovery in support of North, Far North and Western Queensland communities affected by the heavy rainfall and widespread flooding in early 2019.

The NQLIRA’s total budgeted expenses for 2019–20 are just over $28 million, with 69 per cent of these expenses attributable to other expenses, as shown in Figure 5.

Figure 5: North Queensland Livestock Industry Recovery Agency’s total budgeted expenses by category ($’000)

 

Source: ANAO analysis of PBS 2019–20 Budget related papers pre–machinery-of-government changes announced on 29 May 2019.

At the time of publication, the key risks for the North Queensland Livestock Industry Recovery Agency had not been identified.