I am enormously proud of the efforts of my staff and contract auditors to deliver this year’s June State government sector financial audits, with almost all finalised on time, and positioning us to sign off the Annual Report on State Finances before its statutory deadline at the end of September.
This is an extraordinary achievement in a year that was disrupted like few others. It is a testament to the Department of Treasury’s central leadership role, their determination and planning, as well as the dedication of finance and leadership teams across the sector.
Good governance is foundational to a safe and prosperous society, and is critical to directly raising affordable capital, attracting on-shore investment and providing confidence in the supply reliability of our exports, all of which support West Australians’ standard of living. I am proud and ever more convinced of the critical role the OAG plays in supporting the good public governance of this State; formally through our audits, and in the countless informal conversations and engagement across the sector each day.
This report summarises for Parliament the results of our annual audits of 143 State government entities mainly for the year ended 30 June 2020 – the final quarter of which saw the COVID-19 viral pandemic and various responses affect communities globally.
The number of entities with serious deficiencies requiring a qualified opinion on financial statements, controls or key performance indicators, increased from 3 last year to 7 this year. The control deficiencies reported were identified earlier in the financial year or were ongoing from prior years and did not result from pandemic measures implemented under pressure. However, our audits identified over 100 more financial management and control weaknesses than last year, including an increase of almost 60 significant findings.
It is difficult to precisely identify the number of findings attributable to COVID-19 disruption, although we recognise the change in operational focus of entities did delay activities to address some previous audit findings and the implementation of new processes required to address changes in Treasurer’s instruction 304. The swift roll-out of technology to support working from home in an environment where hardware was not readily available revealed some weaknesses in systems and remote access arrangements. The audit results require close attention by entities and monitoring by audit committees to ensure identified shortcomings are promptly addressed.
This year’s report contains a number of as yet not widely recognised insights into various impacts of the COVID-19 pandemic response on the Western Australian government sector. Given our role overseeing the entire public sector – where we may have audit teams working at or in contact with up to a quarter of public sector entities in any given week – we are uniquely placed to look across the sector in a timely, measured and consistent way. Impacts reported include entities’ service disruptions, additional expenses incurred and stimulus initiatives administered by entities, as well as how our engagement and auditing approach was adapted for the 2019-20 audit period.
During 2019-20, entities were also required to adopt new accounting standards for reporting of leases and revenue. There were varied degrees of readiness and preparedness in entities, with some additional audit work required. Reporting the valuation of land transfers between entities also received increased audit attention to ensure that fair and consistent values were used to account for the transfers by all reporting entities involved. This is an area we suggest the Parliament maintain a watchful eye in coming years.
This report also provides information on other selected significant financial transactions and matters that we noted during our audits. It includes key financial ratios and information commonly used for assessing financial performance. Pleasingly, we also saw most entities had appointed independent chairs to their audit committees by the time our audits were concluded, following amendments to the requirements in the Treasurer’s instructions in late 2019. Audit committees are an important cost-effective contributor to good public governance, and some independence from management is essential. We report this information to provide insight to some of the important matters considered during the audits.
An additional tool used by my Office for some financial audits this year was the capability of our bourgeoning Forensic Audit business unit. Some of their early work is outlined in this report. Overall, the team provided valuable additional comfort over very large financial datasets of Health entities to provide insights as to the extent to which their operations were disrupted in the last part of the year, as well as examining some matters in further detail that were referred in-flight by financial audit teams.
I wish to thank my incredibly hardworking staff, our contract audit firm partners and staff in the audited entities who contributed to this year’s audit process for their adaptability, professionalism, skill and cooperation in working through uncommon challenges. Much has been learned, beyond just the public health response. I expect that this period will strengthen broader appreciation of the enduring importance of accountability and sound management of public resources, and provide further clarity and purpose in those charged with public governance, of just what it is that is being safeguarded for the benefit of the community we are so privileged to serve.