The objective of this audit was to assess the extent to which the recommendations and major findings of the ANAO's 1999 audit of Commonwealth Debt Management have been addressed, and the impact of any changes.



The Australian Office of Financial Management (AOFM) was established on 1 July 1999.1 The AOFM is responsible for the administration, financial and operational risk management, and financial reporting of the Australian Government's portfolio of Commonwealth Government Securities and associated financial assets. The AOFM issues Treasury bonds and Treasury notes, invests in term deposits with the Reserve Bank of Australia, manages the Government's cash and conducts interest rate swaps.

Australian National Audit Office (ANAO) Audit Report No.14 of 1999–2000, tabled in October 1999, examined Commonwealth Debt Management. The report made six recommendations, all of which were agreed to by the AOFM and the Department of the Treasury (Treasury).

The Joint Committee of Public Accounts and Audit (JCPAA) conducted an inquiry into Commonwealth Debt Management. The Committee released its report in early November 2000.2 The JCPAA noted the AOFM's progress to date and made three recommendations. One of these was that the AOFM move as quickly as possible to implement all of the recommendations made in the ANAO's 1999 audit report.

A number of other reviews in relation to the management of the Commonwealth debt have also been undertaken since the 1999 audit. In September 2001, the Treasurer agreed to the gradual elimination of all foreign currency exposure from the Commonwealth debt portfolio following an internal AOFM review. Around February 2002, there was considerable media and Parliamentary attention, particularly in Senate Estimates hearings, surrounding the performance of the cross currency swaps component of the Commonwealth debt portfolio. In addition, in 2002–03, the Government reviewed the future of the Commonwealth Government Securities market. In the 2003–04 Budget, the Government announced its decision that, in the future, it would issue sufficient Treasury bonds to support the bond futures market.

Audit Conclusion

Overall, the ANAO found that the majority of the recommendations from the ANAO's 1999 audit report had been implemented or satisfactory progress has been made on their implementation. Table 2 of the report includes the ANAO's assessment of progress made on implementation of each recommendation from the ANAO's 1999 audit report.

Recommendations and AOFM response

The ANAO has made two recommendations to improve the management of the Commonwealth debt. Where further action is required in relation to previous recommendations, the ANAO has not made a further recommendation, but reiterates the importance of the earlier recommendations being fully implemented.

The following was the AOFM's summary response:

The AOFM notes that the Report indicates that the ANAO considers that most of the recommendations in the 1999 performance audit have been implemented, or satisfactory progress made. The AOFM broadly accepts the two new recommendations. The AOFM has differences of view on various aspects of the Report. Some of these are indicated at the relevant points in the Report; others may be found in the AOFM comments (at Appendix 2 of the report).


1 Up to 30 June 1999, Commonwealth debt management functions were performed by the Debt Management Office in the Department of the Treasury.

2 JCPAA Report No.378, Debt Management, Review of Auditor-General's Reports 1999–2000 Second Quarter, October 2000, p.18.