Background

State government entities are often required to hold monies used for specific purposes. These are held in special purpose accounts. Common examples are government and private sector grants, donations and funding specified by legislation. How these funds are to be used is usually specified through a legal instrument such as a contract or legislation. Effective management and processes are required to ensure that the funds are used for their intended purposes.

We previously performed this audit in 2013 and found that while restricted funds were being used for their intended purpose, policies, procedures, and accounting practices relating to their management could be improved.

Conclusion

We found entities generally had adequate controls in place to support the control of monies held for specific purposes. Our testing did however identify a few instances of payroll costs incorrectly funded from specific purpose accounts. There is also a need to improve reconciliation of special purpose accounts and recordkeeping. Further, policies and procedures to assist in the control of these monies require improvement at 6 of the 8 entities.

What we did

The focus of this audit was to determine if entities are properly managing their funds held for specific purposes and in particular, if these restricted funds are being used for their intended purpose.

We assessed the policies, procedures, practices and transactions at 8 entities, of varying size and location, using the following criteria:

• Are sound policies and documented procedures in place for managing the funds?
• Was expenditure in accordance with the intended purpose?

The audit examined whether controls were in place to support effective management of funds, and whether adequate records were maintained to ensure that funds were being used for their intended purpose.

Detailed findings have been reported to the individual entities as part of this audit. The audit committees of these entities should follow up to ensure audit findings and recommendations are appropriately addressed by management in a timely manner. 

We tested a sample of 787 payment transactions totalling $2.4 billion, out of expenditure totalling $4.5 billion from 56 specific purpose accounts. The audit covered the period from 1 July 2018 to 30 April 2019.

We conducted this audit under section 18 of the Auditor General Act 2006 and in accordance with Australian Auditing and Assurance Standards. The approximate cost of undertaking the audit and reporting is $236,500.

Entities included in our audit

Focus area audits assess entities against common business practices to identify good practices, and control weaknesses and exposures so that all entities, including those not audited, can evaluate their own performance.

We selected a sample of 8 entities for this focus audit. When selecting the entities to be included, we considered the size of the entities and the nature of restricted monies to ensure we were covering a wide variety in our sample.

The following 8 entities were included in this audit:

Entities	Number of restricted fund accounts selected in our sample	Total expenditure of these accounts 1 July 2018 – 30 April 2019
Child and Adolescent Health Services	10	$54.9 m
Department of Biodiversity, Conservation and Attractions	10	$8.5 m
Department of Communities	4	$24.8 m
Department of Jobs, Tourism, Science and Innovation	4	$37.8 m
Department of the Premier and Cabinet	3	$0.7 m
Department of Treasury	13	$4,034.5 m
Mental Health Commission	1	$223.5 m
Western Australia Police Force	10	$89.9 m
Total	55	$4,474.6 m

Source: OAG

Table 1: Entities included in our sample