• We issued audit opinions for 137 State government entities by 5 November 2019 relating to the 2018-19 financial year, and 141 certification opinions.
• Three entities received qualified audit opinions.

Introduction

The Financial Management Act 2006 governs financial accountability of most State government entities while the Auditor General Act 2006 governs the activities and role of the Auditor General.

The Auditor General is required to issue an opinion to the responsible Minister for each State government entity audited. Entities include the audit opinion in their annual report.

The opinion relates to the financial statements and, depending on each entity’s enabling legislation, may also relate to controls and key performance indicators (KPIs):

• financial statements – assurance that the financial statements and supporting notes are materially complete, accurate, reliable and comply with relevant legislation and applicable accounting standards
• controls – assurance that the internal control systems and procedures are adequate, and ensure that financial transactions comply with legislative requirements
• KPIs – assurance that the KPIs are relevant, appropriate, based on reliable data, and fairly present the performance of the entity in achieving its desired outcomes.

It should be noted that the audit opinions relate to historical information reported in the financial statements and KPIs and are not predictive of future expectations.

Summary of audit opinions

At 5 November 2019, we had issued audit opinions for 137 State government entities, primarily with financial periods ending on 30 June 2019. Appendix 1, commencing on page 44, is a table of all the audit opinions issued since 8 May 2019.

Audit opinion issued on	Type of entity	Number
Financial statements, controls and KPIs	Departments Statutory authorities	32 80
Financial statements only	Annual Report on State Finances Corporatised entities Subsidiary entities Request audits	1 12 10 2
TOTAL NUMBER OF AUDIT OPINIONS ISSUED		137

Table 1: Number and type of audit opinions issued between 8 May 2019 and 5 November 2019

Other audit services

In addition to entity opinions, we also issued 141 certifications.

Appendix 2 details the 20 certifications we issued on the financial and statistical information produced by entities to discharge reporting obligations for Commonwealth grants or under other legislation. The certifications for 121 Royalties for Regions program grants issued up to 5 November 2019 are listed in Appendix 3.

Qualified opinions

We issue a qualified opinion on an entity’s audited financial statements or KPIs if we consider it is necessary to alert readers to inaccuracies or limitations. If we issue a qualified opinion on controls, it is because we consider a financial control deficiency makes the entity non-compliant with legislation.

Three entities received qualified opinions:

Department of Local Government, Sport and Cultural Industries
Qualified opinion on controls

We identified significant weaknesses in the Department’s general computer controls which could result in inappropriate and unauthorised access to their financial system. This access could be used to override management controls preventing fictitious or fraudulent transactions and could undermine the integrity of data. However, our audit testing did not detect any inappropriate or fraudulent transactions.

Rottnest Island Authority
Qualified opinion on controls

During 2018-19 the Authority implemented controls to address the system weaknesses that led to a controls qualification in 2017-18. However, key controls over the review of audit logs for changes to hire and accommodation rates were not implemented until February 2019. We also found that until April 2019, discounts could be made to accommodation, bike and equipment hire and other miscellaneous revenue without detection. While our testing did not identify any inappropriate changes to rates or discounts, relevant controls over rate changes and discounts were not adequate throughout 2018-19.

Western Australian Greyhound Racing Association
Qualified opinions on financial statements and KPIs

In prior years, grants the Association received from Racing and Wagering Western Australia to fund construction costs for the new Cannington track were not recognised as revenue in accordance with Australian Accounting Standard AASB 1004 – Contributions. Instead, these grants were recorded as ‘Non-Current Liabilities – Payables’, with revenue being recorded progressively over the life of the asset.

As a result, for the year ended 31 July 2019, ‘Non-Current Liabilities – Payables’ are overstated by $14,837,879 in 2019 and $15,356,037 in 2018. Retained Earnings are understated by the same amount for each respective year. In addition, ‘Grants and subsidies received from State Government’ in the Statement of Comprehensive Income is overstated by $518,158 for 2019 and $671,311 for 2018. We therefore issued a qualified opinion on the financial statements.

In addition, the Association did not report the key effectiveness indicator ‘Attendance at Race Meetings’. We therefore issued a qualified opinion as the Association did not report results for all KPIs approved by the Under Treasurer.

Matters of Significance in auditor’s reports

Where a matter in relation to the financial statements or KPIs is undisclosed or not apparent in the financial statements or KPIs, we may include a Matter of Significance paragraph in our auditor’s report.

Entity	Details of Matter of Significance
Child and Adolescent Health Service, East Metropolitan Health Service, North Metropolitan Health Service, South Metropolitan Health Service WA Country Health Service	Our audit reports highlighted that the 4 metropolitan health services and WA Country Health Service have approval to not report emergency waiting times as an audited KPI. The Under Treasurer granted approval to not report as an audited KPI ‘Percentage of Emergency Department patients seen within recommended time’. The approval was conditional on unaudited KPIs being included in annual reports until implementation of a new Emergency Department data collection system. There is currently no set timeframe for implementation of a new system. The existing systems are designed to assist with prompt and effective treatment of patients, but not necessarily for accurate recording of waiting time data.
Department of Primary Industries and Regional Development	The Biosecurity and Agriculture Management Act 2007 requires the Western Australian Agriculture Authority’s (WAAA) activities to be regarded as services under the control of the Department. Consequently, the Department has included WAAA’s income, expenses, assets and liabilities in its financial statements. We have highlighted this in the auditor’s report so that readers are aware of this arrangement, as the Department’s financial statements do not separately identify WAAA’s transactions.

Table 2: Matter of Significance comments included in auditor’s reports

Emphasis of Matter paragraphs in auditor’s reports

If a matter is appropriately presented or disclosed in the financial report but, in our judgement, is of such importance that it should be drawn to the attention of Parliament, we may include an Emphasis of Matter paragraph in our auditor’s report. The following list describes the more noteworthy matters that we highlighted through Emphasis of Matter paragraphs.

Entity	Description of Emphasis of Matter paragraphs
Electricity Generation and Retail Corporation (Synergy)	Impairment loss and onerous contract The financial report disclosed that the Group has recognised an impairment loss of $428.9 million against the electricity cash generating unit. Also, the notes disclosed that the Group has recognised a provision for an onerous contract of $152.4 million. Contingent liability The financial report described the status of the investigation by the Economic Regulation Authority into the Corporation’s pricing in balancing submissions made in the Western Australian Wholesale Electricity Market.
Pilbara Ports Authority	Prior period error The financial statements stated that the fair value of the Port Hedland channel at 1 July 2017 was understated by $419.7 million. Consequently, the depreciation has also been understated since 2017. This prior period error has been corrected by restating each of the affected financial statement line items for prior periods.

Table 3: Selected Emphasis of Matter paragraphs in auditor’s reports

Prior year qualified opinions removed in 2018-19

The following qualifications were removed:

Commissioner for Children and Young People – qualified opinion on a KPI

The 2017-18 opinion was qualified as attendance numbers at events used in 1 KPI could not be verified. The Under Treasurer granted approval for the Commissioner to not report this KPI for 2018-19. The qualification was therefore removed.

Department of Justice – qualified opinion on a KPI

From March 2018 and for the full 2018-19 year appropriate records at all relevant correctional facilities supported the Department’s key effectiveness indicator ‘Average Out of Cell Hours – Adult’. Narrative to the KPI detailed the limitation on comparability with prior years’ results, and we have removed the qualification on KPIs.

Department of Local Government, Sport and Cultural Industries – qualified opinion on KPIs

The Department has received the Under Treasurer’s approval to remove the outcome, service and associated indicators relating to the State Information Management and Archival Service. Consequently, the 2017-18 qualified opinion for not reporting the related KPI has been removed.

Department of Water and Environmental Regulation – qualified opinion on controls

During 2018-19 the Department sufficiently addressed the significant weaknesses in general computer controls we identified last year. As the risks associated with these control weaknesses have been significantly reduced, we have removed the qualification on controls.

2018-19 financial statement audits not undertaken

Three entities were not audited for the 2018-19 year.

We dispensed with these audits under section 14 of the AG Act because the operations of the entities have ceased or there was insufficient activity to justify undertaking an audit. We dispensed with the audits after consultation with the Treasurer.

Entity	Reason why audits dispensed
Landcare Trust (inactive since 2004)	The Trust ceased to operate in 2004 and holds no funds. Legislation to repeal Part VA of the Soil and Land Conservation Act 1945, which created the Trust, is required. The Department of Primary Industries and Regional Development now administers this legislation.
State Supply Commission         (inactive since 2009)	The Commission’s functions and records were transferred in June 2009 to the Department of Finance. The State Supply Commission Act 1991 has not been repealed.
Western Australian Building Management Authority               (inactive since 2009)	The Authority ceased to operate in 2009 and is awaiting repeal of its legislation, Part IA of the Public Works Act 1902.  The Department of Finance holds its records.

Table 4: 2018-19 audits dispensed under section 14 of the AG Act

Since the entities ceased operation, we have completed audits every 3 years. The latest audit was for the 2017-18 financial year. If these entities are not abolished in the next 2 years, we will next perform an audit for 2020-21, as required by section 14(5) of the AG Act.