The ANAO is responsible for the audits of the financial statements of all Australian Government entities. This report provides a summary of the final audit results of these entities, including the Consolidated Financial Statements for the Australian Government.



1. The Auditor‐General Act 1997 establishes the mandate for the Auditor‐General to undertake financial statement audits of all Australian Government entities including those of government agencies, statutory authorities and government business enterprises.

2. The preparation of audited financial statements in compliance with the Finance Minister’s Orders1 (FMOs) is a key element of the financial management and accountability regime applicable to Australian Government entities. It is generally accepted in both the private and public sectors that a good indicator of the effectiveness of an entity’s financial management is the timely finalisation of its annual financial statements, accompanied by an unmodified audit opinion. Australian Government entities, in cooperation with the Australian National Audit Office (ANAO), devote considerable effort to achieving timeliness in financial reporting.

3. ANAO financial statement audits are an independent examination of the financial accounting and reporting of public sector entities. The results of the examination are presented in an auditor’s report, which expresses the auditor’s opinion on whether the financial statements as a whole and the information contained therein fairly present each entity’s financial position and the results of its operations and cash flows. The accounting treatments and disclosures reflected in the financial statements by the entity are assessed against relevant Accounting Standards and legislative reporting requirements.

4. In addition to undertaking financial statement audits, the ANAO tables two reports annually addressing the outcomes of the financial statement audits of public sector entities. The first of these, Audit Report No 51 2011–12 Interim Phase of the Audit of Financial Statements of Major General Government Sector Agencies for the Year Ending 30 June 2012, outlined the ANAOʹs assessment of audit findings relating to the internal controls of major agencies, including governance arrangements, information systems and control procedures. The findings summarised in that report are the results of the interim phase of the financial statement audits of major General Government Sector agencies.

5. This report complements the interim phase report referred to above, and provides a summary of the final audit results of the audits of the financial statements of all Australian Government entities, including the Consolidated Financial Statements for the Australian Government.

6. The audit findings in this report have been reported to the management of each entity, and to the responsible Minister(s).

Accounting and auditing framework developments

7. There were few changes to Australian Accounting Standards in 2011–12. One noteworthy change was the release of a new standard on fair value measurements. The AASB has also foreshadowed proposals yet to be incorporated in Australian Accounting Standards, that would provide temporary relief from the requirement to value defence weapons platforms at fair value, and see not‐for‐profit public sector entities providing the same level of disclosure of the remuneration of key management personnel as occurs in the private and for‐profit sectors.

8. Changes to Australian Accounting Standards will continue to be mainly driven by major developments in accounting standards internationally, the Australian Accounting Standards Board (AASB) has also initiated a number of domestic projects. These include requiring notfor‐ profit public sector entities to report transactions with related parties, budget information, and new rules for superannuation entities and publicprivate partnerships.

9. At the international level, significant changes to accounting standards are well progressed, potentially changing reporting requirements in important areas such as financial instruments, revenue, and leases. During 2011–12, the International Public Sector Accounting Standards Board (IPSASB) continued to develop its conceptual framework for public sector financial reporting.

10. There are a number of important developments in auditing standards with one of the most significant being an international project to enhance the value of auditors’ reports on financial statements.

Summary of audit findings

11. The ANAO is responsible for the audits of the financial statements of all Australian Government entities. For the 2011–12 financial year, the Auditor‐General and senior staff, delegated to issue audit reports, issued 254 unmodified audit reports; and no modified audit reports. Of the unmodified reports, six reports included an emphasis of matter2; and 21 reports3 contained a reference to other legal and regulatory requirements.4

12. These latter reports referred to actual or potential breaches of section 83 of the Constitution. A breach of section 83 of the Constitution occurs if payments are not made in accordance with conditions required by law. Where potential breaches have been reported, relevant agencies have indicated that the circumstances giving rise to this issue will continue to be investigated and legislative amendments developed where appropriate.

13. In addition, the auditor’s reports on the Consolidated Financial Statements and the financial statements of the Department of Education, Employment and Workplace Relations referred to a contravention of section 61 of the Constitution as payments made were beyond the Executive powers of the Commonwealth.

Consolidated Financial Statements

14. The Consolidated Financial Statements that present the consolidated whole‐of‐government financial results inclusive of all Australian Government controlled entities, as well as the General Government Sector financial report, were signed by the Minister for Finance and Deregulation (Finance Minister) on 21 November 2012.

15. The operating result attributable to the Australian Government disclosed in the 2011–12 Consolidated Financial Statements was a deficit of $68.6 billion (2010–11: deficit of $51.5 billion). At 30 June 2012, the reported fiscal balance was a deficit of $46.2 billion (2010–11: deficit of $52.4 billion) and the reported negative net worth position was $256.3 billion (2010–11: negative $103.1 billion).

16. The Consolidated Financial Statements provide explanations of variances between the original budget and 2011–12 actuals as part of the audited set of Australian Government financial statements. Commentary on these variances is provided in Chapter 3 of this report. The Consolidated Financial Statements continue the prior year approach of incorporating aggregate disclosure of ministerial remuneration.

17. The auditor’s report on the 2011–12 Consolidated Financial Statements was issued on 21 November 2012 and expressed the opinion that the statements give a true and fair view of the Australian Government’s and the General Government Sector’s financial position as at 30 June 2012 and their financial performance and cash flows for the year then ended. As mentioned above, the auditor’s report included a reference to the aggregate position relating to actual and potential breaches of section 83 of the Constitution and to a contravention of section 61 of the Constitution.

Entity financial statements

18. As indicated above, no audit reports were modified in 2011–12. This is a good result and reflects well on the integrity of financial reporting by all Australian Government entities.

19. There was also a reduction in the number and significance of issues arising from the final phase of the 2011–12 financial statement audits of individual material entities. The number of significant and moderate audit findings decreased from 36 in 2010–11 to 31 in 2011–12, a reduction of 14 per cent. This is consistent with the trend in recent years, which has seen a significant reduction in the number of significant and moderate audit issues. Issues that are common across a number of entities that were identified in the final audit phase that required attention by entities were in respect of: controls in entities’ IT environments, such as user access and the segregation of duties; asset management including the valuation of assets and the reporting of inventory; business system processing controls; and estimation processes. These issues are generally consistent with our audit findings in previous years.

20. Our audits also found that entities have made generally good progress in addressing and resolving issues identified during the 2011–12 interim audit phase.

21. The ANAO continues to include an assessment of compliance in relation to annual appropriations, special appropriations, special accounts and the investment of public moneys in its financial statement audits. There continues to be a high level of compliance in most of these areas. However, as mentioned above, the audit report on the financial statements of a number of agencies mentioned actual or potential breaches of section 83 of the Constitution.

Commentary on financial statement related matters

22. An analysis of material entities’ operating results by the ANAO identified that: the majority of entities had made small surpluses or deficits in the period 2009–10 to 2011–12; and only three entities had incurred a deficit over these three years and had incurred at least two annual deficits over this period that were greater than five per cent of total expenses. Fifteen entities had an average annual surplus over this period that was greater than five per cent of total expenses. This suggests that, overall, entities have been appropriately managing their finances for the period under analysis. An analysis of the balance sheet positions of material entities as at 30 June 2012 identified that material entities’ financial assets were 98 per cent of the value of liabilities and equity was 50 per cent of the value of total assets. This was broadly comparable to the situation at 30 June 2011 and suggests that, overall, the balance sheet position of material entities is satisfactory.

23. The Consolidated Financial Statements and the financial statements of individual entities include a number of balances that need to be determined based on estimates. Of the total liabilities balance of $646.8 billion in the CFS, in excess of $280 billion was based on estimates. In addition, of the total assets balance of $390.6 billion, in excess of $170 billion was derived from estimates. The factors that entities need to take into account, and which affect the value of individual balances vary depending on the nature of the balance. However, in 2011–12, the decrease in the discount rate, reflecting movements in the long term government bond rate, was the primary factor that resulted in movements in many balances during 2011–12. The most significant movement occurred in the Australian Government superannuation liability that increased by $90.6 billion or 62 per cent.

Financial statements preparation

24. Consistent with previous years, the large majority of entities’ financial statements were completed within three months of the end of the financial year. This reflects positively on the priority entities give to meeting their financial reporting responsibilities and on the financial stewardship of the public sector generally.

25. There has also been a small increase in the number of entities that met the deadlines for the submission of audit cleared financial information to the Department of Finance and Deregulation.

Future audit coverage

26. The ANAO will continue to work closely with entity audit committees and management with the aim of assisting entities to continue to meet their financial management responsibilities including addressing areas where improvements are warranted.


[1]    The Finance Minister’s Orders (FMOs) made by the Minister for Finance and Deregulation set out the requirements for the preparation of financial statements of all reporting entities covered by the Financial Management and Accountability Act 1997 and the Commonwealth Authorities and Companies Act 1997.

[2]    An emphasis of matter is included in the auditor’s report to draw the user’s attention to a matter that is of such importance that it is fundamental to the users’ understanding of the financial statements.

[3]    Includes the auditor’s report on 16 material entities, four non-material entities and the Consolidated Financial Statements of the Australian Government.

[4]    All numbers are as at 30 November 2012.