This Audit Results Report contains the findings primarily from the annual financial audits of State government entities with a 30 June 2020 reporting date.

At 4 November 2020, we had completed audits and issued audit opinions for 33 departments, 82 statutory authorities, 12 corporations and 16 other audits, and also many certifications (including grant acquittals) for those entities.

The Auditor General Act 2006 (AG Act) requires the Auditor General to audit the financial statements, controls and key performance indicators (KPIs) of all State government entities annually. A clear (unqualified) audit opinion indicates satisfactory financial controls and KPIs, and that the financial statements are materially complete, accurate, comply with relevant legislation and applicable accounting standards, and fairly represent performance during the year and the financial position at year end.

Key findings

Audit opinions  

• We issued 143 audit opinions for State government entities by 4 November 2020 relating to the 2019-20 financial year, and 85 certification opinions.
• We issued qualified audit opinions to 7 entities for reasons of inaccuracies or deficiencies in their financial statements or KPIs or due to control weaknesses, an increase from 3 in the prior year.
  • These entities were:
  • Department of Communities
  • Department of Local Government, Sport and Cultural Industries
  • Department of Primary Industries and Regional Development
  • Health Support Services
  • Housing Authority
  • Office of the Parliamentary Inspector of the Corruption and Crime Commission
  • Western Australian Greyhound Racing Association.
• We have highlighted, through Matter of Significance paragraphs, that the Under Treasurer continued to grant 5 health services approval to not report an audited KPI for emergency department waiting times. 
• Nineteen entities applied to Treasury for an exemption from reporting selected KPIs at year end. A Matter of Significance paragraph was included in the audit opinion to inform readers of the reason, most related to the COVID-19 pandemic response and conduct of client surveys. 
• Details of the final 3 auditor’s reports for local government entities are noted in Appendix 4. This completes our reporting on the local government sector audits for the 2018‑19 financial year. The 2019-20 audits are currently in progress. 

Financial reporting, accountability and audit issues 

• Our Forensic Audit business unit commenced targeted forensic audits of State government entities’ accounts and matters relating to public money. They used advanced data analytics to target entity disbursements in support of financial audit work. (page 36)
• Entities’ operations and our 2019-20 audits were significantly impacted by the COVID‑19 pandemic. We engaged with major stakeholders, including central entities and audit committee chairs, and briefed the Treasurer and parliamentary committees, to implement a flexible but practical audit approach for the 2019-20 audits. (page 26)
• Our COVID-19 audit findings are reported under the headings:
  • information security exposures when working remotely
  • controls over urgent procurement of personal protective equipment 
  • impact on entities where services were disrupted 
  • entities’ expenses for directly managing the impact of COVID-19 
  • administering distribution of stimulus funding or initiatives 
  • ongoing or future potential effect of COVID-19. 
• We reviewed the valuation of land assets transferred between several entities to determine whether the transactions were recorded at a consistent and fair value. After consultation and corrections, transfers at fair value complying with the Australian Accounting Standards and Treasurer’s instructions were reported at year end. 
• Revision of Treasurer’s instruction 1201 Internal Audit in December 2019 resulted in most entities’ improving the role and quality of their internal audit committees and appointing an independent audit committee chair. 
• Of the 21 entities required to prepare a 2020-21 Statements of Corporate Intent, only 1 was tabled before the 2020-21 State Budget in October 2020. 
• Changes to the accounting standards for reporting of leases and also for revenue and income, including revenue from contracts, applied from 1 July 2019. Most entities made the adjustments required to ensure their financial statements for the 2019-20 year complied with the accounting standards. 

Annual Report on State Finances 

• The Treasurer released the Annual Report on State Finances (ARSF) on 25 September 2020. In this Audit Results Report, we have supplemented the information contained in the ARSF with related information that some readers may find useful.

Selected significant financial transactions and financial ratios                              

• We have summarised significant financial transactions that we noted during our audits and key financial ratios and information that are commonly used for assessing financial performance. (page 48)

Management issues  

• We identified and reported 430 financial management control weaknesses to entities in 2019-20, an increase from 323 in the previous year. The number of significant issues increased from 36 to 95, and the proportion of unresolved issues increased from 20% to 26%. 
• 423 information system control weaknesses were identified and reported to entities in 2019-20 of which 41% were unresolved issues from the previous year. The majority of issues are simple to fix but if not resolved will leave entities vulnerable to security incidents and disruption to systems. 
• We reported 26 KPI weaknesses to entities in 2019-20 and identified data integrity and collection processes as the main areas for improvement. 

Quality and timeliness of reporting

• Sixty-five percent of State government entities were ready for their audit within 20 days of year end. This was a commendable achievement for 2019-20. 
• Our engagement with audit clients and flexible audit plans enabled 93% of our financial statement and KPI audits to be completed within the 90 day Financial Management Act 2006 tabling timeframe.
• We have acknowledged the top 40 best practice entities for timeliness in their financial reporting, good financial controls and reporting practices.

Recommendations

1. All entities should ensure they maintain the integrity of their financial control environment by:
   1. periodically reviewing and updating all financial, asset, human resources, governance, information systems and other management policies and procedures and communicating these to relevant staff
   2. conducting ongoing reviews and improvement of internal control systems in response to regular risk assessments
   3. regularly monitoring compliance with relevant legislation
   4. promptly addressing control weaknesses brought to their attention by OAG audits
2. Entities should periodically review their KPIs to ensure that:
   1. they are calculated from reliable and complete data
   2. they remain relevant, appropriate and fairly present performance against realistic targets
   3. the KPI instructions are periodically updated and approved so that KPIs are consistently reported and comparable.
3. The Office of Digital Government should use information about the strengths and weaknesses identified during the pandemic, in relation to working from home and other remote system access arrangements, as part of their ongoing support and guidance to entities.
4. Entities and Treasury should continue to facilitate timely tabling of Statements of Corporate Intent to ensure compliance with legislation.
5. Treasury should continue to provide guidance to assist entities with the adoption of new accounting standards. Entities should continue to make timely preparations for implementation of these new standards.