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Environmental Audit: a Commonwealth Perspective
Grant Hehir, Auditor-General for Australia, attended the XXIII Commonwealth Auditors-General Conference in New Delhi, India, and presented a keynote speech on 22 March 2017 titled Environmental Audit: A Commonwealth Perspective.
The Australian National Audit Office’s (ANAO’s) coverage of environmental matters reflects the responsibilities of the Australian Government and the Auditor-General’s mandate for conducting performance audits. The approach adopted by the ANAO to auditing environment programs and activities is similar in manner to other programs and activities subject to audit coverage.
The ANAO seeks to share its experiences and knowledge in environmental auditing and learn from other audit offices both nationally and internationally. Over many years, the office has been an active participant in a range of regional and international audit fora, including Supreme Audit Institution’s working groups on environmental audit. The ANAO is committed to strengthening its national and international engagement over the coming years.
This paper aims to provide insights into the shared arrangements for managing Australia’s environment, how environmental matters are examined through the ANAO’s performance audit program and some of the recurring themes and issues arising from the examination of environment-related programs and activities in Australia. Arrangements for sharing knowledge, experiences and for learning from other Supreme Audit Institutions are also outlined.
A shared responsibility
Australia’s environment is a shared responsibility across governments
Australia is a federation of six self-governing states and two self-governing mainland territories, with responsibility for the protection and conservation of the environment shared across governments. Under the existing shared arrangements, the Commonwealth Government is primarily responsible for the protection of matters of national environmental significance and for implementing Australia’s obligations under international environmental treaties and conventions. The states and territories are responsible for a broad range of environmental matters, including the: regulation of pollution; approval of certain types of development activity; and regulating natural resources management.
To manage the shared and overlapping responsibility for Australia’s environment in a nationally consistent and coordinated manner the Commonwealth and state/territory governments have, over time, developed a number of intergovernmental agreements. For example, the 1990 Intergovernmental Agreement on the Environment established: a cooperative national approach to the environment; a better definition of the roles of the respective governments; and an improved definition of what constitutes environmental protection. The subsequent 1997 Heads of Agreement on Commonwealth/State Roles and Responsibilities for the Environment sought to develop a more effective framework for intergovernmental cooperation on the management and protection of Australia’s environment. Key areas of reform under the agreement related to: matters of national environmental significance; environmental assessment and approval processes; listing, protection and management of heritage places; compliance with state/territory environmental and planning legislation; and improved delivery of national environmental programs.
The primary legislation of the Commonwealth or ‘Australian’ Government to protect biodiversity and environment is the Environment Protection and Biodiversity Conservation Act 1999. This legislation implements a number of key aspects of the Heads of Agreement. The objectives of the Environment Protection and Biodiversity Conservation Act are broad and include the protection of matters of national environmental significance, the promotion of ecologically sustainable development, the conservation of biodiversity, and cooperative approaches to the protection and management of the environment.
Australian Government responsibility for environmental matters
The power of the Australian Government to intervene in environmental matters has evolved over time. In line with the increase in global activities relating to the environment in the early 1970s, the Australian Government established an Office of the Environment within the Prime Minister’s Department in 1970. The remit of this office was to ‘recommend and advise in relation to actions for the prevention or reduction of pollution arising out of the activities of Commonwealth Departments and Authorities’ and to discuss with the states the formation of a National Advisory Council ‘to advise State and Commonwealth Governments in areas where co-ordination could properly be achieved’. Further to the introduction of the Office of the Environment, the first iteration of a Department of State with responsibilities for the Environment was established in 1971—the Department of the Environment, Aborigines and the Arts. Today, the Environment and Energy Portfolio is responsible for a range of activities that broadly cover sustainable management of Australia’s environment, adapting to the impacts of climate change, and improving the health of ecosystems.
The Department of the Environment and Energy is the lead entity in the portfolio and is responsible for advising the Australian Government on environmental policy and for the management of a range of programs designed to achieve a healthy environment, as well as regulatory and operational functions. In addition to its responsibility for administering the Environment Protection and Biodiversity Conservation Act, the department is also responsible for managing the conservation, protection and sustainability of Australia’s natural resources, biodiversity, ecosystems, environment and heritage requirements, and contributes to the national response to climate change. Other areas of departmental responsibility include Australia’s interests in the Antarctic and managing environmental water use.
There are a further eight entities within the Environment and Energy Portfolio that are responsible for related functions, including renewable energy regulation, weather forecasting services, financing the clean energy sector, advice on climate change mitigation, and conservation of national reserves and the Great Barrier Reef.
The responsibility for certain environmental related matters has been assigned to the Australian Government Agriculture and Water Resources Portfolio, which is responsible for supporting the sustainability, profitability and competitiveness of Australia’s agriculture, fisheries and forestry industries and the sustainable and productive management and use of rivers and water resources. Within the portfolio, the Department of Agriculture and Water Resources is responsible for developing and implementing policies and programs that: advance the prosperity of Australia’s agricultural, fisheries, food and forestry industries; safeguard Australia against animal and plant pests and diseases; and improve water use efficiency and the health of rivers, communities, environmental assets and production systems.
In addition to the department, the portfolio also includes statutory regulators for fisheries and agricultural and veterinary chemicals, research and development entities for wine, cotton, fisheries, grains and rural industries, and water resource management for the Murray-Darling Basin.
Together, the Environment and Energy Portfolio and the Agriculture and Water Resources Portfolio have been provided with aggregated budgeted expenses for 2016–17 totaling $5.7 billion (approximately 1.5 per cent of the total General Government Sector1 budget).
The ANAO approach
Auditing environmental matters
The ANAO’s approach to auditing environmental matters is shaped by the Auditor-General’s performance audit mandate. Performance auditing within the ANAO had a tentative start, with the tabling of the first efficiency audits in 1980 following amendments to the Audit Act 1901 (the preceding legislation to the current Auditor-General Act 1997) in 1979 to give the Auditor-General the authority to conduct efficiency audits. The first audit of an Australian Government environment-related program or activity was conducted by the Auditor-General in 1985. The audit examined the then Department of Primary Industries’ Administration of Commonwealth Fisheries Legislation, including: management planning; biological, economic and legal aspects of administering fisheries; data processing; licensing; surveillance; liaison with industry; and research. To date, the ANAO has undertaken around 80 performance audits of environment-related programs or activities.
Currently, the ANAO conducts between two and four performance audits each year that are focused on environmental matters—from a total of 48 performance audits delivered across the breadth of the Australian Government’s activities. These audits are complemented by the performance audits delivered by state and territory Auditors-General. For example, Western Australia’s Office of the Auditor-General recently reported on the Western Australian Waste Strategy.2 As part of their 2016–17 performance audit programs, the:
- Victorian Auditor-General’s Office is examining the rigor of the Effectiveness of the Environmental Effects Statement assessment process, including: the quality of information for decision-making; the monitoring of conditions imposed through the process; the extent to which previously recommended reforms have been implemented and whether the process is well equipped to deal with issues such as climate change impacts; and
- Audit Office of New South Wales is examining the extent to which the Planning Assessment Commission’s decisions on major development applications are made in a consistent and transparent manner.
The scope of the ANAO’s audit coverage of environmental matters is strongly influenced by the roles and responsibilities across governments in Australia. In the context of the Australian Government’s responsibilities—including responsibility for the regulation of risks to matters of national environmental significance, the management of Australia’s national parks and presence in Antarctica, and its role in providing direct funding to support environmental protection—the ANAO has focused its audit coverage on program design, program delivery, regulatory functions, asset management and service delivery. In particular, this focus has allowed the ANAO to examine: the basis on which new environmental policies have been developed; the extent of compliance with legislative requirements designed to protect the environment; the equity and efficiency of environmental funding activities; and whether the objectives for which funding has been provided for environmental programs and activities are being, or have been met. The resulting coverage has included examining a broad range of environmentally-focused programs and activities, such as the:
- management of assets and staff located at Australia’s Antarctic bases;
- delivery of regulatory functions relating to the protection of the Great Barrier Reef;
- design of programs established to deliver innovative, targeted investment that is focused on improving water quality, restoring coastal ecosystem health and enhancing species protection in the Great Barrier Reef region;
- operation of funding arrangements adopted by the Australian Government to reduce Australia’s greenhouse gas emissions;
- administration of grant funding for the achievement of the Australian Government’s target of planting 20 million trees by 2020; and
- management of risks posed to matters of national environmental significant within Australia by development activity.
The number of environmentally-focused performance audits conducted by the ANAO has increased in line with the expansion of government budgets attributed to environmental matters as well as emphasis on the significance and risk of government and private sector initiatives relating to the environment. Heightened public concern about environmental health, climate change, international interest and the effect of government policy on land and water assets has also contributed towards the expansion of the ANAO’s audit coverage of environmental matters over time.
The ANAO has also adopted a strategic approach to guide its audit coverage of environmental matters, with a series of performance audits covering key environmental programs and activities. For example, the ANAO has conducted multiple audits over several years covering the delivery of water reforms, with audits examining programs established to: purchase water entitlements for use in improving the health of rivers, floodplains and wetlands; obtain water entitlements through the funding of more efficient irrigation practices; and manage water that has been obtained for environmental purposes. The ANAO has adopted a similar strategic approach to examine the role of environmental regulators. This strategic approach has also involved the expansion of the ANAO’s exercise of the Auditor-General’s mandate, with an increased focus on assessing the efficiency of programs and activities established by the Australian Government to improve environmental outcomes. Most recently, the ANAO’s report on the Award of Funding under the 20 Million Trees Program (Audit Report No.4, 2016–17) included an assessment of the efficiency of grant assessments processes, with the ANAO’s analysis quantifying the number of additional trees that could have been funded if more efficient practices were adopted.
The frequent review of the ANAO’s environmental audits by parliamentary committees reflects the significance of these audits to members of parliament and the level of interest in the programs being audited. For example, the Australian Parliament’s Joint Committee of Public Accounts and Audit is currently conducting an inquiry into the Commonwealth grants administration based on a number of the Auditor-General’s reports, including the Award of Funding under the 20 Million Trees Program (Audit Report No.4, 2016–17). This interest, and the support the committees give to the ANAO’s recommendations, has helped to strengthen the position of the ANAO’s environmental performance auditing program over time.
Identifying potential environmental audit topics
The ANAO delivers a program of financial and performance audits each year that examine areas of key risks relating to the delivery of Australian Government services. Key risks are identified across the public sector through the ANAO’s strategic planning processes, with these risks informing both the financial statements audit planning and potential performance audit coverage. Risks are identified through audit work conducted by financial, performance and IT auditors across environment programs; scans of environment related activities, key documents and media; consideration of new policy directions; and awareness of issues raised in comparable programs in audits conducted by other audit offices nationally and internationally. Audit coverage is also based on a consideration of potential audit benefits, parliamentary and public interest, and the timing and resource requirements of audits.
Those areas to be examined by the ANAO are foreshadowed in its , which is published on the ANAO’s website (). The work program reflects the ANAO’s strategy and deliverables for the coming year. It aims to inform the Australian Parliament, the public and government sector entities of the planned coverage for the Australian Government sector by way of financial statements audits, performance audits and other assurance activities. The status of audits as well as the audit’s objective and criteria are made available on the ANAO’s website. Those interested in the ANAO’s performance audit work can subscribe for updates on specific audit topics, receive advice regarding the audit’s status and contribute thoughts, views and ideas via email during the fieldwork stage of the audit.
The Annual Audit Work Program is part of the ANAO’s strategic planning framework. The composition of the program is guided by the ANAO’s commitments to the Parliament and its Corporate Plan that outlines how the ANAO will deliver on its purpose. In recent years, the ANAO’s performance audits of environmental matters have had a strong focus on Environmental Protection and Biodiversity Conservation Act–related environmental responsibilities, the management of water resources and the implementation of regulatory frameworks. Into the future, the ANAO, along with Supreme Audit Institution’s around the globe, will further explore options to examine governments’ preparedness for, and progress against, the 2030 Agenda, in particular the achievement of the 17 Sustainable Development Goals.
Examples of audit coverage of the Australian Government’s environmental responsibilities
The administration of the Government’s responsibilities under the Environmental Protection and Biodiversity Conservation Act as well as its responsibilities arising from the intergovernmental agreements with states and territories to manage shared responsibilities for the environment, water in particular, continues to be a key focus of the ANAO’s environmental audit coverage.
Coverage of Environmental Protection and Biodiversity Conservation Act-related environmental responsibilities
Given the Australian Government’s responsibility for the administration of the Environmental Protection and Biodiversity Conservation Act and the broad environmental management and protection objectives of the Act, the ANAO has conducted a number of performance audits examining the Government’s regulatory responsibilities. These audits have included coverage of the Australian Government’s management of proponents’ compliance with conditions of approval3 relating to actions, such as land clearing and mining, that are likely to have a significant impact on matters of national environmental significance—for example, national threatened species and ecological communities.
The ANAO’s audit of Managing Compliance with Environment Protection and Biodiversity Conservation Act 1999 Conditions of Approval (Audit Report No. 43, 2013–14) found that there was limited assurance that proponents had complied with conditions attached to Australian Government approvals for proponents to proceed with environmentally sensitive projects. Five recommendations were made to improve the compliance management framework. Progress made by the department to implement these recommendations was subsequently examined in Monitoring Compliance with Environment Protection and Biodiversity Conservation Act 1999 Conditions of Approval: Follow-on (Audit Report No.36, 2016–17).
The Environmental Protection and Biodiversity Conservation Act (Part 13A) also regulates the international movement of wildlife and wildlife specimens that encompasses Australia’s obligations under the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES). Audit Report No.7, 2015–16 (Managing Compliance with the Wildlife Trade Provisions of the Environment Protection and Biodiversity Conservation Act 1999) found that there was not appropriate guidance, functional IT support systems or a riskbased approach to compliance monitoring, which undermined the achievement of regulatory objectives. The ANAO made four recommendations aimed at improving regulation, including enhancing voluntary compliance through education and strengthening performance monitoring and reporting.
Coverage of related environmental activities—management of water resources
Australia is generally recognised as a very dry continent. Droughts are not uncommon events and have spanned many years, affecting the agricultural industry, the community and the environment. The 2004 National Water Initiative represents a shared commitment by governments to increase the efficiency of Australia’s water use to deliver greater certainty for investment and productivity, for rural and urban communities and for the environment.
The Water Act 2007 provides the legislative framework for the Australian Government to manage water resources in the national interest. The Act establishes the role of the Commonwealth Environmental Water Holder to manage water to protect and restore areas of environmental significance within the Murray-Darling Basin4 (including water courses, wetlands and floodplains) to give effect to relevant international agreements. The ANAO has examined the operations of the Commonwealth Environmental Water Holder across two audits. In:
- Restoring the Balance in the Murray-Darling Basin Program (Audit Report No.27, 2010–11) the ANAO found that adequate arrangements had been established to administer the program and to support timely and effective decisions; and
- Commonwealth Environment Watering Activities (Audit Report No.36, 2012–13), the ANAO found that arrangements to support the effective administration of the Commonwealth Environmental Water Holder’s environmental watering function had been developed and were improving progressively over time.
Recurring themes from the ANAO’s audit coverage of environmental matters
The ANAO’s coverage of environmental matters as part of its performance audit program has highlighted a number of recurring themes across the Australian Government’s delivery of programs and regulatory functions. Over recent years, the ANAO’s performance audits have identified:
- weaknesses in the arrangements for the provision of Australian Government funding for environmental purposes;
- variability in the maturity of risk-based frameworks for the delivery of regulatory functions; and
- weaknesses in performance measurement frameworks that are to be used to determine the impact and effectiveness of the Government’s environmental programs and regulatory functions.
Providing funding for environmental purposes
Across a number of performance audits, the ANAO has identified weaknesses in the Australian Government Department of the Environment and Energy’s processes for assessing applications for grant funding to deliver environment-related projects. In the following three performance audits—Audit Report No.10 2014–15 Administration of the Biodiversity Fund Program; Audit Report No.17 2013–14 Administration of the Strengthening Basin Communities Program; and Audit Report No.16 2013–14 Administration of the Smart Grid, Smart City Program, the ANAO made a series of recommendations to the department to strengthen its assessment and selection processes used to determine recipients of Australian Government funding for environmental purposes. Among other things, the ANAO recommended that the department: design clear eligibility criteria; improve the clarity of grant guidelines; assess all eligibility criteria in all grants rounds conducted; retain sufficient documentation to evidence eligibility and merit assessments; and implement appropriate probity arrangements.
The ANAO’s most recent performance audit that examined the department’s grant assessment and selection processes—Audit Report No.4 2016–17 Award of Funding under the 20 Million Trees Programme—found that limited progress had been made by the department to respond to earlier ANAO findings. In particular, this audit concluded that the effectiveness of the award of funding under the programme was undermined by widespread weaknesses in administrative practices. In particular: published assessment processes were not followed; conflicts of interest were not appropriately recorded and managed; eligibility assessments were not conducted in a transparent or timely manner; assessment practices were not efficient; and key issues relating to the conduct of the assessment and selection process were not sufficiently drawn to the Minister of the Environment’s attention to inform funding decisions.
The ANAO’s examination of the 20 Million Trees Programme (Audit Report No.4, 2016–17) also highlighted the impact of competing objectives that are present within some environment related programs and activities—in this case the tension between achieving value-for-money outcomes for taxpayers and gaining community engagement. The department’s two programme delivery options were: to procure service providers to deliver large-scale tree plantings; or to deliver through a combination of small competitive grants and the procurement of service providers. The department recommended the lower-cost option of delivering the programme solely through service providers. The Government decided to pursue the alternative option, which was more costly, but was considered to better support the programme objective related to community engagement. The ANAO concluded that the department provided appropriate advice to government in the context of the objectives established for the programme
The achievement of environmental outcomes is more likely where funding is directed to those applicants that clearly demonstrate merit against established funding criteria. The establishment of robust assessment and selection processes for programs and activities helps to ensure that this occurs. Further, in the design of funding programs and activities, administering entities should keep a close eye on the efficiency of their assessment processes to ensure that administration costs are kept to a minimum, thus maximising the funding available to achieve desired environmental outcomes.
Delivery of environmental regulation
As outlined earlier, the Australian Government Department of the Environment and Energy is responsible for a range of environmental regulation, primarily relating to its administration of the Environment Protection and Biodiversity Conservation Act. In addition to the department’s regulatory functions, other entities within the Environment and Energy Portfolio also have regulatory responsibilities, for example the Australian Government’s Great Barrier Reef Marine Park Authority and Clean Energy Regulator. Over recent years, the ANAO has focused its environmental audit coverage on the delivery of these regulatory functions, with audits examining regulation of activities likely to have a significant impact on matters of national environmental significance, the trade in wildlife, the protection and conservation of the Great Barrier Reef and the operation of the Emissions Reduction Fund.5 This audit coverage has identified variability in the maturity of risk-based approaches to the delivery of regulatory functions.
The audits of the Department of the Environment and Energy’s environmental regulatory functions that the ANAO has undertaken—including Audit Report No.43, 2013–14, Managing Compliance with Environment Protection and Biodiversity Conservation Act 1999 Conditions of Approval and Audit Report No.7, 2015–16, Managing Compliance with Wildlife Trade Provisions of the Environment Protection and Biodiversity Conservation Act 1999—found that riskbased compliance arrangements lacked maturity, with significant shortcomings identified relating to the collection of regulatory intelligence and the targeting of limited resources to those areas of greatest risk. The ANAO recently conducted a follow-up audit of Audit Report No.43, 2013–14 and identified that, while the department has implemented a risk-based approach to manage aspects of its regulatory activities, limited progress had been made in relation to the implementation of broader initiatives to strengthen the department’s approach to regulation.
The ANAO’s recent audit of Regulation of Great Barrier Reef Marine Park Permits and Approvals (Audit Report No.3, 2015–16) also commented on the maturity of risk-based approaches to environmental regulation. In this audit, the ANAO concluded that, in relation to the regulation of permits, there were shortcomings in the Authority’s regulatory processes and, more particularly, its regulatory practices. These shortcomings had undermined the effectiveness of the permitting system as a means of managing risks to the Marine Park.
In comparison, the ANAO’s recent audit of the Abatement Crediting and Purchasing under the Emissions Reduction Fund (Audit Report No.14 2016–17) concluded that, overall, the Clean Energy Regulator had established sound arrangements to manage the crediting and selection of carbon abatement for purchase under the Emissions Reduction Fund. Specifically, the audit found that the regulator had a well-established and integrated risk management framework to guide the development and implementation of risk management plans for the fund. Under this framework, the regulator had established sound processes to identify, assess and treat risks to the effective implementation of the fund.
A riskbased approach to regulation enables regulators to effectively and efficiently target limited resources to manage areas of high compliance risk. This approach helps to ensure that compliant entities are freed from unnecessary regulatory intervention, while additional regulatory effort is directed at those entities that are less likely to meet their compliance obligations. A sound understanding of risk also allows regulators to frame their risk tolerance and appetite, which should be used to inform all aspects of regulatory activity.
Measuring the impact and effectiveness of environmental programs and regulatory functions
There have been a number of initiatives focused on improving public sector performance measurement and reporting in Australia over many years, but there is general agreement that this aspect of public administration continues to require considerable improvement. In December 2010, a multi-phased reform program commenced—the Public Management Reform Agenda—which was intended to improve performance, accountability and risk management across the Australian public sector. In line with the importance of sound performance measurement and reporting, and the roll-out of the reform agenda, the ANAO has directed its audit coverage to examine the extent to which public sector entities are improving their performance measurement and reporting practices. This work has involved general coverage across the ANAO’s performance audit program, including its examination of environmental matters, along with targeted audits examining specific aspects of the reform agenda. These targeted audits have included an assessment of how entities’ are managing new requirements for the development of corporate plans and performance statements.
The importance of Australian Government entities developing robust performance measurement frameworks for environmental programs and activities that provide meaningful information about the achievement of environment programs’ objectives has been a consistent theme in the ANAO’s audits for over a decade.6 Common issues that have reduced the usefulness of performance measurement frameworks for environmental programs and activities include the:
- heavy reliance on activity-based performance information, which does not provide sufficient insights into progress or impact of programs and activities; and
- changes to measures used to report publicly on performance results year-on-year or consolidating performance information across several programs.
Ultimately, measuring whether programs and activities have had the intended impact requires entities to plan for performance measurement and evaluation early, particularly where baselines are required against which progress can be determined. Given the nature of environmental programs, particularly the length of time required to achieve some environmental outcomes, early consideration of performance measurement allows entities to give sufficient consideration to the establishment of interim or proxy measures to inform implementation over time.
Delays in settling approaches for the evaluation of environmental programs and activities have been noted by the ANAO in relation to a number of programs and activities subject to audit coverage. For example, the ANAO’s audit of the Reef Trust–Design and Implementation7 (Audit Report No.27, 2016–17) found that reporting arrangements established by the Department of the Environment and Energy provided external stakeholders with information on reef conservation initiatives, but reported information was predominantly at the activity level and did not provide information on program achievements or impact. The department informed the ANAO that it was continuing to explore options to measure and report on the impact of the Reef Trust while implementing the program. Further, the ANAO’s performance audit of Administration of the Strengthening Basin Communities Program (Audit Report No.17, 2013–14) identified that the department had not planned to evaluate outcomes when the program commenced.
The absence of meaningful performance information makes it more difficult for entities responsible for the delivery of environmental programs and activities to effectively manage delivery and for stakeholders to judge the impact and effectiveness of the public funding. In particular, the absence of early consideration of measurement approaches means that entities are not well placed to establish relevant baselines and collect fit-for-purpose data to inform monitoring activity over the course of implementation. It also results in a limited evidence base on which the development of new policies can be based.
Sharing and partnerships
Sharing knowledge and learning from the experiences of others through participation in environmental auditing working groups
The ANAO is a member of three working groups on environmental auditing, including the International Organisation of Supreme Audit Institutions Working Group on Environmental Auditing and has a strong involvement in following two of International Organisation of Supreme Audit Institutions’ six regional working groups on environmental auditing:
- Australasian Council of Auditors-General (ACAG8)/ Pacific Association of Supreme Audit Institutions Regional Working Group on Environmental Auditing; and
- Asian Organisation of Supreme Audit Institutions Working Group on Environmental Auditing.
The ANAO’s attendance at working group meetings has provided important insights into alternative auditing methodologies, tools and approaches and their application in differing contexts. In particular, presentations on specific audit work, including successful strategies adopted and important lessons learned, has informed the ANAO’s delivery of its audit coverage. The attendance of government representatives, international speakers and specialist performance auditing bodies also provides important insights into key areas of focus across member countries and international developments that are of relevance to the delivery of the ANAO’s audit program.
International Organisation of Supreme Audit Institutions Working Group on Environmental Auditing
The International Organisation of Supreme Audit Institutions’ Working Group on Environmental Auditing was established in 1992. The working group aims to improve the use of audit mandate and audit instruments with a particular focus on auditing environmental protection policies, crossborder environmental issues and policies and international environmental accords.
At the 2016 International Organisation of Supreme Audit Institutions working group meeting, the ANAO presented on its performance audit of the regulation of permits and approvals relating to activities conducted in the Great Barrier Reef Marine Park (Audit Report No.3 2015–16). The environment, biodiversity and heritage values of approximately 344 000 square kilometres of the Great Barrier Reef region is protected by Australian Government legislation, the Great Barrier Reef Marine Park Act 1975.
The lessons learned from the audit that were shared, included the: value of observations to provide insights into the environment in which regulators operate and their stakeholders; and benefits of establishing an open approach to auditee engagement over the course of the audit.
Australasian Council of Auditors-General / Pacific Association of Supreme Audit Institutions (PASAI) Regional Working Group on Environmental Auditing
Pacific Association of Supreme Audit Institutions’ Working Group Environmental Audit was formed in 2001 and seeks to develop the capability of participating offices to carry out audits on environmental topics in the Pacific region. In this context, the ANAO hosted the 2014 Australasian Council of Auditors-General / Pacific Association of Supreme Audit Institutions working group meeting. The meeting focused the following three themes—water management, climate change adaptation and waste management.
At the most recent meeting (in 2016), the ANAO: outlined the environmental auditing activities over the past two years; provided a detailed presentation on recent audits of Commonwealth environmental regulatory activities; and chaired a discussion on audit impact. The following insights were shared based on the ANAO’s work across four regulatory audits9:
- fit-for-purpose management information systems underpin effective and efficient regulation;
- consistent regulation relies on: appropriate guidance material; sound documentation of decisions and their reason; and robust quality assurance processes;
- an effective compliance intelligence capability allows regulators to respond early to emerging risks of non-compliance;
- compliance monitoring activities should address significant risks; and
- measuring all facets of regulatory performance is important to be able to determine the impact and effectiveness of the regulatory regime.
Asian Organisation of Supreme Audit Institutions Working Group on Environmental Auditing
Australia is an observer to the Asian Organisation of Supreme Audit Institutions Working Group on Environmental Audit. This regional working group was formed in 2000 and comprises 45 Supreme Audit Institutions from the Asian and Oceanic countries of the Asian region.
The ANAO’s submission to the 2016 Asian Organisation of Supreme Audit Institutions working group meeting discussed the implementation of environmental policy in Australia with regards to the performance audit Abatement Crediting and Purchasing under the Emissions Reduction Fund (Audit Report No.14, 201617). As outlined earlier, the fund is one of the primary mechanisms that Australia is using to achieve its greenhouse gas emissions reduction targets, with AUD2.55 billion having been allocated by the Government for the purchase of carbon credit units. This audit examined the effectiveness of arrangements:
- to recognise the carbon abated by projects when applying approved methods; and
- for the Government to purchase the projects’ carbon abatement at least cost as a contribution towards Australia’s greenhouse gas emissions reduction targets.
The ANAO shared lessons learned in relation to challenges experienced in conducting this audit including the: gaining of an appropriate understanding of the technical nature of the subject matter; sampling methodology used to examine the respective populations of registration, crediting and auction applications; and the communication of complex technical concepts underpinning the audit results accurately and succinctly.
Partnering with Supreme Audit Institutions
In addition to the working groups on environmental audit, the ANAO also has fostered key partnerships with Supreme Audit Institutions in Papua New Guinea and Indonesia over the past ten years. These arrangements provide ANAO officers with a unique perspective on auditing in differing contexts.
Twinning program—Papua New Guinea Auditor–General’s Office
The ANAO and the Papua New Guinea Auditor-General’s Office have worked together on the development of auditing practices since 2004. Currently, the ANAO manages three twinning programs to place staff members from the Auditor-General’s Office into Australian audit offices for individual capacity building. These programs are coordinated by the ANAO and delivered in partnership with the Australian state audit offices of New South Wales, Queensland and more recently Victoria. These twinning arrangements provide selected Auditor-General’s Office officers with opportunities to develop themselves through exposure to the culture and technical expertise available in Australia. At the same time, the ANAO and state-based audit offices in Australia benefit from a greater understanding of challenges faced by auditors in Papua New Guinea and the approaches and practices employed by the Auditor-General’s Office in the delivery of its audit program.
To support the broader development of auditing practices in Auditor-General’s Office, the program also includes the placement of two ANAO staff members in the Auditor-General’s Office’s to provide on-going technical support for performance and financial audit and to support twinning activities.
Government Partnership Fund program—Audit Board of the Republic of Indonesia
Since 2006, the ANAO has also been working with the Audit Board of the Republic of Indonesia under the Government Partnership Fund Program. Under this program, the ANAO provides assistance to contribute to the strengthening the Republic of Indonesia’s performance and financial statement audit capacity through the delivery of a number of planned activities based on three streams (technical support, institutional leadership engagement and senior management engagement). Arrangements under the Government Partnership Fund Program have included: hosting secondees from Republic of Indonesia; delivering training courses to Republic of Indonesia officers; placement of a senior ANAO officer with Republic of Indonesia; and regular dialogue between senior ANAO and Republic of Indonesia officers. These arrangements have been supported by the ANAO’s relationships with Australian state Auditors-General through which the ANAO is able to draw on relevant knowledge from other Australian jurisdictions.
On the basis of the Australian community’s continuing interest in the preservation and enhancement of Australia’s environmental assets and the substantial investment by the Australian Government in environmental-related activities, the ANAO will maintain its scrutiny of environmental matters in the context of its broader performance audit program. This work is designed to provide both assurance to the Australian Parliament regarding the extent to which environmental objectives are being achieved and also to highlight to administering entities opportunities for improvements in their delivery of environmental programs and activities. In line with this commitment, the ANAO is currently conducting a performance audit examining the effectiveness of the arrangements for the preparation and reporting of Australia’s greenhouse gas emissions estimates and projections, and has included on its forward work program a potential audit of investments by the Australian Government’s Clean Energy Finance Corporation.
As has been the case over many years, the ANAO’s continued scrutiny of environmental matters will be informed by the important lessons learned from our peer SAI’s experience in conducting environmental audits in particular, our engagement with various SAI working groups on environmental auditing and the work of state and territory audit offices in Australia.
1 The General Government Sector refers to entities that receive appropriations directly or indirectly through the annual appropriation acts of the Australian Parliament.
2 Western Australia Auditor General’s Report, Western Australian Waste Strategy: Rethinking Waste, Report No.23, October 2016.
3 Applied by the Australian Government Minister for the Environment.
4 Of Australia’s key interjurisdictional water resources, the Murray-Darling Basin is the largest system of waterways in the country. The Basin covers one seventh of Australia’s land mass, includes nationally and internationally significant wetlands, billabongs and floodplains, is a source of water for agricultural domestic purposes and extends across five Australian states and territories.
5 The Emissions Reduction Fund is a voluntary scheme that was established by the Australian Government to provide incentives for Australian farmers and land holders to adopt new practises and technologies to reduce Australia’s greenhouse gas emissions.
6 For example, Commonwealth Natural Resource Management and Environment Programs (Report No.36, 1996–97) and Regional Delivery Model for the Natural Heritage Trust and the National Action Plan for Salinity and Water Quality (Report No.21, 2007–08).
7 The Reef Trust commenced on 1 July 2014 with the objective of providing cost-effective, strategic investment that goes above and beyond existing programmes to address key threats to the Great Barrier Reef and catchments for the long-term protection and conservation of the outstanding universal value of the Great Barrier Reef.
8 ACAG includes Auditors-General of all audit jurisdictions within Australia, New Zealand, Fiji and Papua New Guinea.
9 The audits were: Establishment and Administration of the National Offshore Petroleum Safety and Environmental Management Authority (Report No.38, 2013–14); Managing Compliance with Environment Protection and Biodiversity Conservation Act 1999 Conditions of Approval (Report No.43, 2013–14); Regulation of Great Barrier Reef Marine Park Permits and Approvals (Report No.3, 2015–16) and Managing Compliance with the Wildlife Trade Provisions of the Environment Protection and Biodiversity Conservation Act 1999 (Report No.7, 2015–16).