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 Services Australia, delivery depends to a significant extent on effective governance and oversight processes, managing current information and communications technology (ICT) assets while developing new systems, and implementing services on behalf of other agencies.

Governance

The delivery of significant public funds to individuals, for multiple programs, requires Services Australia to maintain high levels of quality, integrity, security, assurance and management oversight of its activities. Without these elements, the risk of fraud and inaccurate payments increases.

Services Australia must also ensure the adequacy of performance information. Collecting, analysing and reporting program data and performance information to management, client departments, the parliament and the public is necessary for Services Australia to deliver initiatives effectively and retain accountability.

The delivery of services on behalf of other entities places a responsibility on Services Australia to provide adequate assurance to the accountable authority of other entities of payment accuracy and timeliness to meet the accountable authority’s responsibilities under the Public Governance, Performance and Accountability Act 2013.

Asset management

Services Australia faces challenges around the effective implementation of new ICT systems while also maintaining the department’s current ICT infrastructure. Not all planned elements of recent ICT redevelopment projects have been delivered and significant further investment is planned to design, build and transition to a new integrated welfare payment platform. Under-delivery or overspending in this area will put pressure on planned expenditures or delivery in other areas. The ANAO’s audit work will therefore focus on Services Australia’s ICT general control environment, financial expenditure, and the performance of ICT project management and delivery.

Service delivery

Services Australia delivers a range of services on behalf of policy agencies. While some of these programs may be small in comparison to others, their priority and associated risk and compliance management approach should be developed with the policy department so that other departments’ views of appropriate compliance management can be balanced with Services Australia’s view. Audits have highlighted the need for a comprehensive set of performance measures that tell an accurate performance story, including with regards to efficiency and cost-effectiveness.

Portfolio overview

Services Australia and Australian Hearing Services (Australian Hearing) are part of the Social Services portfolio. Services Australia has responsibility for delivering a range of payments and services to support individuals, families and communities, as well as providers and businesses. These include income support payments and services, aged care payments, Medicare payments and services, and child support services. Further information is available from the department’s website at www.servicesaustralia.gov.au.

Services Australia’s role is to support individuals, families and communities to achieve greater self-sufficiency through the delivery of policy advice and high-quality, accessible social, health and child support services and other payments; and to support providers and businesses through convenient and efficient service delivery.

In the 2019–20 Portfolio Budget Statements (PBS), the aggregated budgeted expenses for Services Australia and Australian Hearing for 2019–20 total $6.545 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. Services Australia represents the largest proportion of the portfolio’s expenses, and of this, departmental expenses are the most material component, representing 74 per cent of the total budgeted expenses.

Figure 1: Services Australia — total expenses and average staffing level

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

Financial statements and other audit engagements

Overview

Entities within the Services Australia portfolio, and the risk profile of each entity, are shown in Table 1.

Table 1: Services Australia entities and risk profile

 

Type of entity

Risk of material misstatement

Number of higher risks

Number of moderate risks

Material entities 

Services Australia

Non-corporate

Moderate

0

2

Australian Hearing Services

Corporate

Low

1

2

Non-material entities 

Digital Transformation Agency

Non-corporate

Low

 

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

Nil

         

Material entities

Services Australia

Services Australia is responsible for delivering a range of payments and services to support individuals, families and communities, as well as providers and businesses. These include income support payments and services; aged care payments; Medicare payments and services; and child support services. Social and health-related payments and services delivered by Services Australia on behalf of other entities in 2018–19 are forecast to be $183.6 billion. These expenses are recognised within each of the individual policy agencies’ financial statements.

Services Australia’s total budgeted expenses for 2019–20 are just over $6.5 billion, with 44 per cent of these expenses attributable to employee benefits, as shown in Figure 2.

Figure 2: Services 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.

The two key risks for Services Australia’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:

  • value of child support payments yet to be paid by non-custodial parents at the end of each financial year, which involves an actuarial estimation process and requires significant judgement and assumptions (KAM – Valuation of receivables related to the Child Support Scheme); and
  • complexities in capturing the actual costs of various internally developed software applications and their accounting treatment in accordance with relevant accounting standards (KAM – Valuation of intangible assets).

Australian Hearing Services

Australian Hearing Services (Australian Hearing) is responsible for the provision of government-funded hearing services through a national network of hearing centres to eligible clients under the Australian Government’s Hearing Services Program. Australian Hearing is managed by a board of directors appointed by the Minister for Government Services and is constituted under the Australian Hearing Services Act 1991.

Australian Hearing’s total actual expenses for 2017–18 were just over $223 million, with 52 per cent of these expenses attributable to employee expenses, as shown in Figure 3.

Figure 3: Australian Hearing Services’ total actual expenses by category ($’000)

Source: ANAO analysis of Australian Hearing Services’ 2017–18 annual report.

The three key risks for Australian Hearing’s financial statements are the:

  • estimates of deferred revenue, provision for make good, employee provisions and accruals, due to the application of significant judgement by management in determining these balances;
  • accounting for the recognition and valuation of property, plant and equipment and intangibles, which include internally generated software, as these balances involve the application of judgement by management to determine the amount that can be appropriately capitalised; and
  • recognition of revenue, due to the complexity and timing of the recording of revenue.

In progress performance audits

Performance audit (Open for contribution)
Performance audit (Open for contribution)

Recently tabled