The Auditor-General for Australia, Grant Hehir, presented at a panel session on Theme 1 for the SAI 20 Summit 2023. The Theme 1 topic was the blue economy and the Auditor-General spoke about capacity building within significant audit institutions (SAIs) for the blue economy. The SAI 20 Summit 2023 was hosted in Goa, India from 12 June 2023 to 14 June 2023.


Distinguished Comptroller and Auditor-General of SAI India, delegates from the member and guest SAIs and other participants.

SAI Australia recognises the importance and challenges presented by the Blue Economy. As an island continent, Australia’s coasts, oceans and water resources hold enormous economic, cultural, social and environmental significance. The ocean and all of our water systems are a vital part of the global climate, social and economic systems, and Australia recognises the need to build their health and resilience in the face of climate change and unsustainable economic practices.

The ANAO sees the first capability it must develop in auditing the blue economy is having a strong understanding of the framework by which the government attempts to impact it.

Under the Australian constitutional framework, the role of the Commonwealth Government in coastal planning and management is through financial and funding powers and leading national policy-making. In terms of the Blue Economy, this includes: the regulation of economic activity, including fisheries; the management of marine national parks, including the Great Barrier Reef marine park; supporting scientific research into the blue economy, including the significant investment in the Antarctic region; and improving the health of rivers and freshwater ecosystems.

The Commonwealth Government’s focus in terms of the Blue Economy tends to be on delivering programs through third parties (largely non-government organisations established to achieve specific environmental outcomes) and regulating private enterprise. As a result, ANAO audits of the Blue Economy focus on the primary risk areas of the oversight of government delivery of outcomes through third parties, with a focus on activities such as grants and procurements administration and the effective implementation of risk based regulatory frameworks. In addition, ANAO audits of the Blue Economy also consider organisational governance (including monitoring performance).

The ANAO does not consider its audit mandate extending to the promotion of or commenting on the merits of government policy or international environmental and development practice, such as the United Nations Sustainable Development Goals.

This means that capacity building in the ANAO focuses on auditing these activities rather than commenting on the appropriateness of government policy. Therefore, capability building is about strategic audit selection, performance audit skills and the development of subject matter expertise, rather than the science of the Blue Economy, which is the responsibility of experts in advising the government. Although we do consider the quality of evidence base supporting the policy decision.

To highlight our approach, I would like to provide an overview of some examples of ANAO audits of the Blue Economy in recent years.

Delivery of outcomes through third parties

Award of a $443.3 Million Grant to the Great Barrier Reef Foundation (January 2019). This audit considered a $443.3 million partnership grant to the Great Barrier Reef Foundation (a not for profit environmental organisation) to accelerate the delivery of activities set out in the Reef 2050 Plan, following back-to-back coral bleaching events and a tropical cyclone. This audit considered the decision-making processes for the award of the grant to the Foundation and compliance with the grants administration framework. It was undertaken in light of parliamentary and public interest in the processes that led to the decision to offer the grant to the Foundation and the grant being awarded through a non-competitive process. As such, auditors needed to have capability in assessing the appropriateness of departmental advice provided to ministers, particularly with regard to the Foundation’s capabilities, and compliance with the Commonwealth Grants Rules and Guidelines.

A second audit of this partnership was the Implementation of the Great Barrier Reef Foundation Partnership (May 2021). The grant funding of $443.3 million was to be allocated to six components: administration of the partnership by the foundation; water quality improvement; crown-of-thorns starfish control; reef restoration and adaptation science; Indigenous and community engagement; and integrated monitoring and reporting. In addition, the foundation would earn interest on the grant funds and leverage the funds to raise a further $350 million by way of in-kind contributions from delivery partners and cash fundraising. Given the strong parliamentary and public interest in the partnership, this audit was undertaken to examine the implementation of the partnership, including whether the non-government foundation had appropriately invested the grant funding prior to its use in delivering programs, the attraction of co-investment from philanthropic organisations, the delivery of the partnership, including through subcontractors, and the spending on administration and fundraising costs. This audit required special capabilities as we went beyond the public sector into directly auditing a nongovernmental organisation.

Risk based regulatory frameworks

Another audit related to the Great Barrier Reef Marine Park was Regulation of Great Barrier Reef Marine Park Permits and Approvals — Follow-up audit in June 2021. This audit and the initial August 2015 regulation audit is discussed in the Blue Economy compendium. The Great Barrier Reef Marine Park Authority has primary responsibility for applying the Great Barrier Reef Marine Park regulatory framework. This framework includes a permit system for particular economic activities to be undertaken within the Marine Park. Permits must be obtained prior to commencement of these activities. Effective regulation of permits and compliance in the Marine Park is critical to provide for the long-term protection and conservation of the environment, biodiversity and heritage values of the Great Barrier Reef Region.

The August 2015 audit identified shortcomings in the Authority’s regulatory processes and practices, which undermine the effectiveness of the permit system as a means of managing risks to the Marine Park. In its inquiry into the ANAO report, the Joint Committee of Public Accounts and Audit noted the shortcomings and recommended the Authority accelerate its implementation of the recommendations. The June 2021 follow-up audit examined the effectiveness of the Authority’s regulation of permits and approvals, including its implementation of recommendations from the 2015 audit. This considered the appropriateness of arrangements for processing, assessing and approving permit applications and managing and monitoring permissions; as well as the appropriateness of the non-compliance framework and systems to manage risk and preserve the environmental, social and economic significance of the Marine Park and its World Heritage listing.

Another regulatory audit, the Management of Commonwealth Fisheries audit (June 2021), considered the management of 16 fisheries, located between three and 200 nautical miles from the Australian coast, by the Australian Government. Nine fisheries are managed solely by the Australian Fisheries Management Authority (AFMA) on behalf of the Australian Government. Seven fisheries are managed jointly by AFMA and regional or international partners.

AFMA’s legislated functions and objectives require the pursuit of efficient and cost-effective fisheries management, balancing the principles of ecologically sustainable development with maximising net economic returns. Changing environmental conditions and fishing methods can affect fish stocks and the broader environment. The objective of the audit was to assess the effectiveness of AFMA’s management of Commonwealth fisheries, including through the COVID-19 pandemic and in planning for the future.

The audit’s findings emphasised the importance of developing strong evidence based models to appropriately manage natural resources.

The audit team required capabilities to assess the appropriateness of governance arrangements in informing planning and management; the effectiveness of individual fisheries management arrangements; and the effectiveness of compliance and enforcement processes.

Organisational governance

An audit with a governance focus is the Coordination Arrangements of Australian Government Entities Operating in Torres Strait (May 2019). Torres Strait is located between the tip of Cape York in northern Australia and Papua New Guinea. It contains over one hundred islands and reefs, 17 of which are inhabited. The population consists of approximately 4,500 people, over 90 per cent of whom are of Torres Strait Islander and/or Aboriginal background.

The region is characterised by the operation of the Torres Strait Treaty, which defines the border between Australia and Papua New Guinea and provides a framework for the management of the common border area. The Treaty prescribes a set of principles to protect the fisheries and sea environment of Torres Strait, including that commercial fisheries should be administered in the Protected Zone so as not to prejudice traditional fishing. The Australian Fisheries Management Authority (AFMA) is responsible for the management and sustainable use of Commonwealth fish resources.

The objective of the audit was to assess the effectiveness of the coordination arrangements of key Australian Government entities operating in Torres Strait. The audit team considered whether Australian Government entities operating in Torres Strait have appropriate governance arrangements to support the coordination of their activities and whether the coordination arrangements are effective in supporting Australian Government activities in Torres Strait.

This audit required the team to have strong capabilities in working with the local communities and understanding the complexities with that.

Procurement of Strategic Water Entitlements (July 2020). The Murray-Darling Basin is a major water catchment area that includes parts of Queensland, New South Wales, Victoria, South Australia and the Australian Capital Territory. The Basin is of major social, economic and environmental significance. There are approximately 2.6 million Australians living within the Murray-Darling Basin and it supports the production of $22 billion worth of food and fibre per year. The Murray-Darling Basin Plan sets limits on the amount of water available for urban, industrial and agricultural use to ensure the ongoing health and resilience of the environment.

In recent years, the Australian Government has purchased water entitlements for environmental purposes. Water for the environment is used to improve the health of rivers, wetlands and floodplains.

Water regulation is a topic of parliamentary and public interest. The audit examined $190 million of strategic water procurements through limited tender arrangements, to provide assurance to the Parliament and the public that these procurements were planned for and executed appropriately and achieved value for money. This involved consideration of whether the department had appropriate governance, including program design, planning and guidance, in place to support strategic water procurements; whether the department executed the program consistent with approved policy, planning and guidance and whether the department achieved value for money.

Maximising audit impact

As you can see from these examples, the focus of ANAO Blue Economy audits over the past 5 years has been on delivering outcomes through third parties, regulation, and organisational governance. The findings from these audits have highlighted several themes across the Australian Government’s delivery of programs and regulatory functions, including variability in the maturity of risk-based frameworks for the delivery of regulatory functions; and scope to improve performance measurement frameworks to determine the impact and effectiveness of the Australian Government’s environmental activities.

The ANAO has capacity to conduct four to five performance audits per year that relate to climate change and the environment. As you can see from the above discussion, the significance of the Blue Economy means that programs and activities in this area make up an important proportion of that work.

However, we still need to ensure that we maximise the impact of our audits. We do this by:

  • Sharing the themes generated in our audits broadly across the sector;
  • Supporting parliamentary review of our audits; and
  • Following up our audits to ensure progress in implementing our recommendations.

The area of the environment and climate change is one where the subject matter can be sensitive and / or contentious given the divergence of political positions and contested science. This can increase the risks inherent in performing these audits. Therefore clear medium term strategic planning for audits is important.

In March 2023, the ANAO established a working group to develop a multi-year Climate Change and Environment Audit Strategy. The ANAO intends to build consideration of climate risks into its audit planning process across all audit products. The strategy will allow the ANAO to produce a coordinated body of work to assess progress towards Australia’s commitment to address climate change risk. The strategy will consider risks to the Australian government in achieving its international obligations, inward looking risk to entities and lessons from international supreme audit institutions.

In terms of future audits related to the Blue Economy, potential audits identified in the consultation draft of the 2023-24 Annual Audit Work Program would consider:

  • Australian Antarctic program – management of Australia’s Antarctic presence, including arrangements to support Australia fulfilling its environmental responsibilities – this is a follow on from an audit conducted in 2016
  • Implementation and management of strategic water purchasing – this would be a follow up audit of the 2020-21 procurement of strategic water entitlements audit I mentioned earlier.

The Australian Government makes substantial investments in environment-related activities. ANAO performance audits target specific programs, rather than the breadth of the environmental strategy. This enables insights into patterns of strengths and weaknesses. Implementing an targeted strategy for climate change and environment audits, including those of the Blue Economy will ensure the ANAO has coverage over the breadth of relevant programs.

Thank you