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This edition of Audit Insights is targeted at Australian Government officials who have responsibility for the management and reporting of executive remuneration. The aim of Audit Insights is to communicate lessons from our audit work to make it easier for people working within the Australian public sector to apply those lessons.  It is drawn from audit reports tabled between 2019–20 and 2022–23.


The 2019 Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (also known as the Hayne Royal Commission) highlighted the importance of governance boards focusing on the remuneration policies of entities. The Hayne Royal Commission stated that ‘the remuneration arrangements of an entity show what the entity values’ and that the ‘culture, governance and remuneration march together’.

As identified in the 2018 Independent Review into the operation of the Public Governance, Performance and Accountability (PGPA) Act 2013 and Rule (the 2018 review), ‘the Parliament and citizens have a strong interest in the proper use and management of public resources, from which Commonwealth executive remuneration is funded’. Entity reporting in annual reports on executive remuneration provides information to the Parliament and the Australian public. This information can be used to assess whether an entity’s executive remuneration practices support the appropriate achievement of an entity’s outcomes and promote the proper use and management of public resources.

The 2018 review found that arrangements for reporting executive remuneration across Commonwealth entities did not provide sufficient transparency and accountability for the use of public resources for this purpose. Following the completion of the 2018 review, the Public Governance, Performance and Accountability Rule 2014 (PGPA Rule) was amended in 2018–19 to require disclosure in Australian Government entity annual reports of:

  • remuneration paid to key management personnel (KMP), senior executives and other highly paid staff; and
  • governance arrangements that support the operation of an entity’s remuneration policy.

ANAO financial statements audits and performance audits have identified weaknesses in policies, procedures and payroll controls. Since 2018–19, ANAO financial statements audits have identified findings related to executive remuneration, particularly overpayments and non-compliance with Remuneration Tribunal determinations. The ANAO has also identified instances where disclosure of executive remuneration in entity annual reports has not been consistent with requirements.

The nature of the ANAO’s audit findings highlight the importance of entities establishing appropriate policies, procedures and payroll controls that prevent overpayments from occurring and promote compliance with the relevant legislative requirements.

Four key lessons have been identified from ANAO audits for effectively managing and reporting executive remuneration for Australian Government entities.

  1. Regularly assess and provide information on the performance of the governance framework.
  2. Align payroll process with policy, legal and contractual requirements.
  3. Regularly consider and challenge which executives comprise KMP.
  4. Stand back and consider the comprehensiveness of executive remuneration disclosures in annual reports.

1. Regularly assess and provide information on the performance of the governance framework

Requirements for determining executive remuneration are generally established by the Remuneration Tribunal, entity enabling legislation, or policies and procedures established by accountable authorities. Accountable authorities may establish committees to assist them to provide advice on appropriate remuneration arrangements, policies and performance frameworks for executives.

  • Develop specific policies for executive remuneration — A distinct executive remuneration policy which covers all senior executives contributes to the management of probity within an entity by introducing transparency in the remuneration setting process.
  • Accountable authority endorsement — Accountable authority approval of remuneration policies is an opportunity to influence behaviours and can be an important mechanism in communicating the desired culture within an entity.
  • Regular reporting — For entities with remuneration committees, these committees should report regularly to the accountable authority to confirm that committee charter requirements have been satisfied.
  • Performance frameworks for the payment of bonuses — Entities that pay performance bonuses to executives should have in place a governance framework that clearly identifies the applicable performance policies, including the measures and targets against which performance is assessed for the award of a bonus.

Case study: remuneration committees

The Australian National University (ANU) Council (accountable authority) has established a remuneration committee. The responsibilities of this committee include monitoring, reviewing and where appropriate making recommendations on the remuneration and conditions of employment of the ANU’s senior management. The remuneration committee endorses the executive remuneration report for approval by the council and its inclusion in the ANU’s annual report following the end of each financial year.

2. Align payroll process with policy, legal and contractual requirements

Executives are remunerated in accordance with a range of instruments, conditions and policies such as individual contracts or determinations of the Remuneration Tribunal. The range of policies which must be considered for executives can increase the complexity of the payroll process. It is important that entities have a robust framework in place to govern payments made to executives to ensure that they are consistent with policy or legal requirements. ANAO audits in this area have identified gaps in some entities’ payroll processes and the operating effectiveness of payroll controls.

  • Empower officials to seek advice — For executives whose conditions are established by the Remuneration Tribunal, the determinations are legal instruments which impose limits on, and specify the types of payments that form part of, the executive’s total remuneration. A governance framework that empowers and encourages officials to seek advice on interpreting conditions and entitlements reduces the risk of error in payments.
  • Design and implement fit for purpose payroll controls — Some executive remuneration may have increased complexity. The tailoring of payroll processes to the specific requirements of the underlying instrument, contract or determination reduces the risk of error in payments. The ANAO’s financial statements audits have identified a range of circumstances which resulted in entities making overpayments to executives, including against the requirements of Remuneration Tribunal determinations. Examples include:
    • incorrect rates of superannuation or incorrect calculation of base salary for superannuation being factored into total remuneration;
    • allowances and other payments paid to executives not provided for in contracts or a Remuneration Tribunal determination;
    • value of reportable fringe benefits that were provided by an entity were not included in the calculation of remuneration (reportable fringe benefits are identified in determinations as being a component of remuneration);
    • remuneration was paid to executives or board members for acting arrangements despite no remuneration being provided for this circumstance in the determination of the Remuneration Tribunal;
    • full time public office holders who were also remunerated for other part time appointments despite full time public office holders not being entitled to be paid any remuneration for part-time public office roles; and
    • bonus payments made to executives that were not provided for in the relevant determination or contract, or allowed for the total remuneration cap to be exceeded.
  • Regularly test the operating effectiveness of payroll processes — Entities and their audit and risk committees could consider whether periodic internal or other compliance audits are performed to provide assurance over the payroll process for executives.

Case study: seeking advice on complex entitlements

The Australian Securities and Investment Commission (ASIC) made payments to certain executive office holders which appeared to fall outside of the applicable Remuneration Tribunal determination. There were gaps in ASIC’s payroll framework as controls were not established that would have triggered the need to seek advice on whether payments made were consistent with the requirements and remuneration limits of the determination.

3. Regularly consider and challenge which executives comprise key management personnel

The PGPA Financial Reporting Rule 2015 requires entities include information on KMP remuneration in their annual financial statements. Entities are required to make further disaggregated disclosures on the components of and governance supporting the remuneration paid to KMP in annual reports.

The determination of KMP requires the application of judgement that takes into account the organisational structure and activities of each entity. The following figure shows the average number and range of KMP by type of Australian Government entity in 2021–22.

Average number and range of KMP per entity in 2021–22


Source: ANAO analysis of entity 2021–22 financial statements.

As part of a financial statements audit, the ANAO audits all KMP remuneration disclosures. Common observations made in our audits relate to reassessment of KMP positions, disclosure of changes in KMP positions and inconsistency with other remuneration disclosures in annual reports.

  • Update KMP assessments — Entities should update their assessment of KMP as part of the annual financial statements preparation process. This reassessment should include consideration of governance changes, including restructures or periods of long acting within the entity which may trigger inclusion of additional officers in this category. Entities should document their rationale and assessment. Advice from audit and risk committees of the appropriateness of entity judgements in preparing these disclosures will provide additional assurance.
  • Disclose changes in KMP — Entity disclosure of changes in KMP composition would enhance understanding of changes in KMP responsibilities and allows comparability of remuneration disclosures between years.
  • Be consistent — Remuneration of KMP included in the annual report should be consistent with that in the audited financial statements. The PGPA Rule requires the same basis of calculation. Differences between disclosures reduces the credibility of entity reporting. Entities should have appropriate control and reconciliation practices in place to prevent inconsistencies from arising.

4. Stand back and consider the comprehensiveness of executive remuneration disclosures in annual reports

The transparency provided by accurate and comprehensive disclosure of executive remuneration allows the Parliament and Australian public to form a view on the appropriateness of remuneration practices and governance arrangements, performance management and incentivisation.

Entities are required to include, in the tabular format prescribed by the PGPA Rule, information about payments made to executives in their annual reports. The PGPA Rule also contains specific requirements for reporting on an entity’s remuneration framework, including:

  • governance arrangements under which remuneration policies and practices operate; and
  • the basis on which the remuneration of the KMP, senior executives and other highly paid staff of the entity has been determined.

To support compliance with the PGPA Rule, the Department of Finance has issued two resource management guides that provide additional guidance for entities in preparing their annual reports. The Australian Public Service Commission (APSC) has also released guidance on the reporting of performance bonuses.

The ANAO reviewed the 2021–22 annual reports of all Australian Government entities and found that determination and disclosure of executive remuneration was not always consistent with the requirements of the PGPA Rule. Appropriately disaggregated information provides transparency over the operation of the remuneration framework, governance and performance policies.

  • Disaggregate appropriately — Consider whether an appropriate level of disaggregation has been provided in the annual report relating to the governance and policies supporting remuneration of executives. Information included by an entity in an annual report should enable the user to understand:
    • governance arrangements for remuneration, for example, which person or committee sets and monitors remuneration for executives; and
    • how remuneration is determined, including policies on fixed and performance based remuneration and how this links to the achievement of an entity’s outcomes.
  • Develop processes to ensure that all aspects of annual reporting requirements are met — Appropriately designed checklists, compliance processes and reviews would provide comfort that all aspects of the PGPA Rule and APSC guidance on the reporting of performance bonuses are considered when preparing executive remuneration disclosures.