Audit Results Report – Annual 2017-18 Financial Audits of State Government Entities

Audit opinions

  • We issued audit opinions for 146 state government entities by 31 October 2018 relating to the 2017‑18 financial year, and 136 certification opinions.
  • Six entities received qualified audit opinions and 6 entities had Matter of Significance paragraphs included in their audit opinions.


The Financial Management Act 2006 (FM Act) governs financial accountability of most state government entities while the Auditor General Act 2006 (AG Act) 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 31 October 2018, we had issued audit opinions for 146 state government entities, primarily with financial periods ending on 30 June 2018. Appendix 1, commencing on page 50, is a table of all the audit opinions issued since 1 May 2018.

Table 1 - Number and type of audit opinions

Entities subject to the FM Act are required to table their annual reports, including our audit opinions, within 90 days of financial year end. For most entities this is by 28 September each year. This year however, annual reports needed to be tabled by 19 September, the last tabling date before an earlier than usual parliamentary recess. Working with entities, we issued 108 audit opinions for FM Act entities (93%) by 19 September, compared to 110 (85%) by the same date last year, thereby helping them to meet the tighter tabling deadline.

For entities unable to achieve the earlier tabling deadline, their Ministers informed Parliament that the FM Act did not accommodate tabling of annual reports during parliamentary recess, and that those annual reports would be tabled after Parliament resumed in October. To minimise similar tabling delays in future, Treasury is considering recommending an amendment of the FM Act to enable deemed tabling of annual reports when Parliament is not sitting.

Other audit services

In addition to entity opinions, we also issued 136 certifications.

Appendix 2 (page 55) details the 17 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 119 Royalties for Regions program grants issued up to 31 October 2018 are listed in Appendix 3 (page 57).

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.

Six entities received qualified opinions:

Commissioner for Children and Young People
Qualified opinion on KPIs

We issued a qualified audit opinion for the key effectiveness indicator ‘Number of people attending events’. During 2017-18 the numbers were mainly based on observations by management attending events and could not be verified. We were therefore unable to obtain sufficient appropriate audit evidence about whether this measure was fairly presented.

Department of Justice
Qualified opinion on KPIs

We issued a qualified opinion on the key effectiveness indicator ‘Average Out of Cell Hours – Adult’. For the period July 2017 to February 2018, the Department did not consistently, across all correctional facilities, adjust default or standard out of cell hours to recognise actual time spent by prisoners outside their cell. We were therefore unable to obtain sufficient appropriate audit evidence to support the hours used to calculate the KPI. From March 2018 however, necessary adjustments were made to out of cell hours at all relevant correctional facilities.

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

We qualified our opinion on KPIs as the Department did not comply with the requirement to report results for all KPIs approved by the Under Treasurer.

The Department was not able to reliably measure a key efficiency indicator for the State Information Management and Archival Service, Cost Per Access Service, and elected not to report it.

Department of Water and Environmental Regulation
Qualified opinion on controls

We identified significant weaknesses in general computer controls, which could result in inappropriate and unauthorised access to the Department’s financial system. The Department was created on 1 July 2017 as a merger of smaller entities to now be larger in size and complexity. We were unable to assess if users’ system access was consistent with management approved delegations or with their duties. The access could potentially be used to override management controls that prevent errors or fraudulent transactions.

Rottnest Island Authority
Qualified opinion on controls

We qualified our opinion on controls as the Authority’s information technology and financial controls for the systems used to record accommodation, bike and equipment hire and other miscellaneous revenue were inadequate. These weaknesses could result in inappropriate changes to prices, and in some cases, invalid refunds. Our sample testing did not identify any inappropriate changes to prices.

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

The Association’s grants from Racing and Wagering Western Australia in prior years to fund construction costs of the new Cannington track were not recognised as revenue when received. These grants were recorded as ‘Non-Current Liabilities – Payables’, with the Association recording the revenue progressively over the period the new track is operational. However, this is inconsistent with the requirements of Australian Accounting Standard AASB 1004 ‘Contributions’ which requires public sector entities to recognise grant revenue on receipt.

As a result, for the year ended 31 July 2018, ‘Non-Current Liabilities – Payables’ are overstated by $15,356,037 in 2018, $16,027,348 in 2017 and $15,143,290 in 2016. Retained Earnings are understated by the same amount for each respective year. 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.

Table 2 - Matter of Significance comments

Prior year qualified opinions removed in 2017-18

The following qualifications were removed:

Animal Resources Authority – qualified opinion on controls

In 2016-17, we issued the Authority with a qualified opinion on controls over employee salary payments, because supervisors approving timesheets could modify the employee’s pay by changing the hours worked, or the rates that applied. In addition, there was no independent review of these changes and no other monitoring procedures were performed by the Authority’s management.

In 2017-18, management improved controls so that supervisors could not modify timesheets, and we therefore issued an unqualified opinion.

Child and Adolescent Health Service (CAHS) – qualified opinion on controls

In 2016-17, controls over billing for medical practitioners’ treatment of private and overseas patients were deficient. This meant that CAHS could not be assured that all revenue from medical practitioners’ treatment of private and overseas patients was billed and brought to account.

In 2017-18, we found these controls had improved so that uncollected revenue was minimised. These improvements enabled the issuing of an unqualified opinion for 2017-18.

Department of Environment Regulation – qualified opinion on KPIs

The opinion on KPIs for 2016-17 was qualified, as effectiveness measures for the outcome ‘Emissions, discharges and clearing of native vegetation are effectively regulated to avoid unacceptable risks to public health and the environment’ did not adequately measure the extent to which the outcome was achieved. On 1 July 2017, the department was amalgamated into the Department of Water and Environmental Regulation (DWER) and these inadequate effectiveness measures are no longer reported under the new Outcomes Based Management framework of DWER.

Department of Fire and Emergency Services – qualified opinion on KPIs

In 2016-17 the Department received a qualified opinion on its KPIs as it was still developing a system to capture data for one of its key efficiency indicators and did not report this KPI as required.

In January 2018 the Under Treasurer approved the Department’s revised outcome based management framework and the Department has reported all required KPIs, which we consider fairly present performance. We therefore issued an unqualified opinion for 2017-18.

Department of Lands – qualified opinions on controls and KPIs

In 2016-17, we issued a qualified opinion because controls over expenditure payments were inadequate. Payee and payment details could be modified without detection, there was no segregation of duties between officers processing and approving payments, and changes to supplier details in the finance system were not monitored. On 1 July 2017, the department was amalgamated into the Department of Planning, Lands and Heritage (DPLH) and during 2017-18, management improved these controls.

The 2016-17 KPI opinion was qualified because a key effectiveness indicator was not relevant, and an approved key efficiency indicator ‘State-owned Land Sold Against the Cost of Sale Preparation’ was not reported. Following implementation of a new Output Based Management framework for DPLH, these KPIs are no longer reported.

Fire and Emergency Services Superannuation Board – compliance with relevant legislation

In 2016-17, we issued a qualified opinion on the Fire and Emergency Services Superannuation Fund’s compliance with the Corporations Act 2001 and Corporations Regulations 2001 because the Fund did not comply with the requirement to disclose the following information to members annually:

  • a description of the Fund’s reserves management strategy
  • details of movements in the Fund’s reserves for the past 3 years.

These requirements were appropriately addressed during 2017-18 and we have removed this qualified opinion.

Health Support Services (HSS) – qualified opinion on controls

In 2016-17, we issued a qualified opinion because there were weaknesses in the general computer controls which could result in inappropriate and unauthorised access to HSS’s financial systems. These control weaknesses were adequately addressed by HSS in 2017‑18 and we removed the qualification.

2017-18 financial statement audits of inactive entities

In the previous 2 years we dispensed with the audits of entities whose operations had ceased or there was insufficient activity to justify the undertaking of an audit.

However, we performed audits of 3 entities for 2017-18 as section 14 of the AG Act requires audits of the financial statements of such entities to occur at least once every 3 years, even though there are minimal or no operations. KPIs were not prepared as there was no activity during the financial year.

Table 3 - 2017-18 audits dispensed in prior years

We will perform a final audit of these entities as and when they are abolished. If they are still in existence in 2020-21, then an audit will again be required in that year.










Page last updated: November 8, 2018

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