The Local Government Amendment (Auditing) Act 2017 was proclaimed, giving us the mandate to start local government auditing. We began an active engagement campaign, getting to know our new clients, and tabled our first local government focus area audit reports into Controls Over Corporate Credit Cards and Timely Payment of Suppliers.
We launched a concerted effort to identify quality, regionally-based firms that may be interested in performing audit work for the OAG. Not only will this assist with our new local government audit program, but importantly, it will also build capacity in the regions and contribute to the economic wellbeing of regional communities.
The Special Inquiry into Government Programs and Projects found the Auditor General’s performance audit reports to be a consistently valuable source of information and highlighted the importance of the public sector embracing OAG recommendations. The special inquiry report is available at www.publicsector.wa.gov.au.
The results of our 2017-18 survey of financial audit entities were again very positive overall – more so than last year – due to increases in ratings relating to audit reporting and the value of the financial statement audit.
We were pleased to host international delegations from the Audit Board for the Republic of Indonesia and from Landgate’s fellowship program for land administration professionals from Argentina and Paraguay.
Significant issues 2018-19
As per the Local Government Amendment (Auditing) Act 2017, the Office has taken on 46 local government financial audits for 2017-18. We will then incrementally take on the financial audits of the 102 remaining local governments by 2020-21. This represents approximately 80% increase in the number of entities we audit and is the biggest change implemented by the OAG since the introduction of performance audits in 1985.
We have also expanded our performance audit program to include local government performance audits. As evidenced by the passage of the relevant Bill through Parliament and the associated speeches, there is substantial expectation of what can be achieved through performance auditing of local governments. This is a challenge we are prepared to rise to, acknowledging however that the extent of our performance audit program is determined by the appropriation we receive to do this work, which is growing from $1 million in 2017-18 to $2 million in 2020-21.
Our publicly stated objective for some time has been to expand the performance audit component of our work to above 30% of the cost of our total audit effort. This recognises the parliamentary and community interest in performance audits and the value these audits can deliver to government, particularly in identifying opportunities for efficiency savings. However, our annual net appropriation for state sector performance audits and related business support services will progressively decrease from $7.044 million in 2015-16 to $6.310 million for 2020-21. This is mainly due to government initiatives to reduce spending to address the state government budget deficit.
The Machinery of Government changes continue to be implemented by agencies. As a result, our financial audit effort increased to evaluate the controls and key performance indicators of the new agencies and to verify the transfer of assets and liabilities account balances.
Government confirmed in its response to the Special Inquiry into Government Programs and Projects (February 2018), that it will ‘extend the powers of the Auditor General to enable access to cabinet documents and documents subject to legal professional privilege’. Over recent years, we have been unable to access some documentation required to form an opinion on notifications, which in worst case scenarios can prevent the issuing of an audit opinion. We are continuing to work with the Department of Treasury to address these issues as part of the current review of the AG Act.
Responding to notifications from a Minister under section 82 of the Financial Management Act 2006 is unplanned work that continues to draw resources away from our performance audit program. We are working with the Department of Treasury about options to have this cost reimbursed.