APPENDIX 4

MAIN ISSUES RAISED IN PERFORMANCE AUDIT, BUSINESS SUPPORT PROCESS (BSP) AUDIT AND PROTECTIVE SECURITY AUDIT REPORTS TABLED IN 2005–2006

The ANAO’s Outcomes are improvement in public administration and assurance. These mean a more efficient Commonwealth public sector implementing better practices in public administration, and independent assurance of Commonwealth public sector financial reporting, administration, control and accountability.

The main ANAO outputs are performance audit services and assurance audit services. The ANAO aims to achieve these by focusing on four key result areas: our clients; our products and services; our people; and our business performance. Strategies for achieving results are set out in the ANAO’s Business Plan 2005–2006.

This appendix indicates the main issues raised in performance audit, BSP audit and protective security audit reports tabled during the year.1 The summaries are grouped according to the audit theme.

ANAO REPORTS EXAMINING SECURITY

Audit Report No.12 2005–2006 Review of the Evaluation Methods and Continuous Improvement Processes for Australia’s National Counter–Terrorism Coordination Arrangements. The audit assessed the effectiveness of the key evaluation methods used to review the efficacy of the Australian Government’s national counter–terrorism coordination arrangements. It also examined the effectiveness of the links between the key evaluation methods and how those methods contribute to continuous improvement. It concluded that, overall, a range of strategies and processes were in place to evaluate the national counter–terrorism coordination arrangements and to ensure that the arrangements were subject to regular evaluation and continuous improvement. The ANAO identified aspects of the evaluation strategy and continuous improvement cycle that require strengthening, better coordination and greater transparency.

Audit Report No.18 2005–2006 Customs Compliance Assurance Strategy for International Cargo. In an environment that is largely self–regulated, Customs Compliance Assurance Strategy aims to provide the Government and the community with confidence that industry and the international trading community are complying with legislative requirements. The audit found that Customs adopts an appropriate risk management approach and has developed and implemented systems and processes to risk assess and target high–risk consignments and non–compliant behaviour. However, the audit highlighted significant data capture and data integrity problems, a lack of systematic analysis of risks and emerging trends and a lack of readily available data to evaluate the effectiveness of compliance activities.

Audit Report No.19 2005–2006 Managing for Quarantine Effectiveness—Follow–up. The audit assessed the effectiveness of the actions taken by the Australian Quarantine and Inspection Service (AQIS) and Biosecurity Australia (BA) to strengthen the administration of quarantine, and to address recommendations from Audit Report No.47 2000–2001 Managing for Quarantine Effectiveness and JCPAA Report 394 Review of Australia’s Quarantine Function. The audit found that AQIS and BA have made substantial progress in implementing the recommendations and taking other action to better protect Australia from exotic pests and diseases. In addition, AQIS has performed effectively, overall, in meeting intervention and effectiveness targets set by the Government in 2001–2002. However, management of quarantine risks posed by commercial cargo remains a key area for improvement, especially in respect to the effective targeting of risk items.

ANAO AUDITS EXAMINING ECONOMIC MANAGEMENT

Audit Report No.2 2005–2006 Bank Prudential Supervision Follow–up Audit. This follow–up audit assessed progress by the Australian Prudential Regulation Authority (APRA) in implementing recommendations in Audit Report No.42 2000–2001 Bank Prudential Supervision. It found that APRA had implemented recommendations directed towards improving its supervisory framework. Although progress has been made towards implementing recommendations seeking to improve supervision of cross–border banking, the ANAO considered that further progress was required in relation to:

  • completing implementation of the structured offshore review program that was finalised in April 2005;
  • pursuing formal information sharing arrangements with overseas supervisors; and
  • APRA supervisors being aware of any issues of concern relating to parents of foreign banks and overseas operations of Australian banks.

Audit Report No.4 2005–2006 Post Sale Management of Privatised Rail Business Contractual Rights and Obligations. The audit focused on Commonwealth administration of purchasers’ rights and obligations in the agreements for the sale of the former Australian National Railways Commission. It found that the Department of Family and Community Services did not comply with the Commonwealth’s financial framework when entering into contracts with the new rail provider. The Department did not adequately assess whether value for money was being achieved, in the context of increasing costs and decreasing usage. Also, the Department consistently overestimated the amount of funding it has required in respect of rail concessions, even where contracts have provided a cap on total payment. It was also found that the Department of Transport and Regional Services did not develop and document procedures for assessing purchaser capital expenditure commitments, which compromised its ability to assess purchasers’ achievement of their capital expenditure obligations.

Audit Report No.9 2005–2006 Provision of Export Assistance to Rural and Regional Australia through the TradeStart Program. The objective of this audit was to assess the provision of export assistance and support to new and irregular exporters in rural and regional Australia through the TradeStart program. TradeStart aims to assist small–to–medium enterprises (SMEs) to begin exporting on a sustainable basis and to convert irregular exporters to regular sustained exporting; it also considers the particular needs of regional Australia. The audit examined the program’s contractual and high–level management arrangements; arrangements for managing and overseeing the TradeStart network of export advisers; processes under TradeStart for identifying and recruiting potential exporters; processes for assisting clients to export; and assessment of TradeStart performance.

Audit Report No.15 2005–2006 Administration of the R&D Start Program. The audit assessed the administration of the grants component of the R&D Start program by the Department of Industry, Tourism and Resources and the Industry Research and Development Board. It concluded that program delivery is generally well managed. Program governance arrangements were sound. Procedures for appraising applications generally followed grant administration better practice. The contractual arrangement between the Commonwealth and the grant recipient provides sound accountability for management of grants. Applicants to the program and grant recipients, generally, were satisfied with program administration. Recommendations were made to strengthen the program’s performance management and evaluation framework, improve transparency and accountability of the process to select applications for financial support, strengthen quality assurance of the grant assessment process, and improve compliance management.

Audit Report No.22 2005–2006 Cross Portfolio Audit of Green Office Procurement. The audit examined the value–for–money decisions agencies make in their procurement process, with a particular focus on whole–of–life costing and environmental impacts. It concluded that there had been some better practice examples of green office procurement. However, overall there were significant shortcomings in applying whole–of–life costing and managing environmental impacts of procurement decisions. The ANAO found that agency compliance with policy requirements had improved over time in areas such as energy efficiency in buildings but agency performance in managing motor vehicle emissions, reducing and recycling waste and conserving water was variable and, in most agencies, poor. A key barrier to green procurement identified by 25 per cent of surveyed agencies was that budgetary constraints (or processes) ‘do not allow green office procurement even though this might produce longer term savings’.

Audit Report No.25 2005–2006 ASIC’s Implementation of Financial Services Licences. A single licence regime is now in place for the financial services sector. Two–thirds of all the 3738 licences granted during the two–year transition period (that ended on 10 March 2004) were granted during the last six months. ASIC successfully dealt with the late influx, and the generally poor standard of applications by reallocating resources from other activities, such as the surveillance of licensees, and by curtailing analysts’ scrutiny of applications. Overall, important regulatory risks were not systematically addressed until after the end of the transition period. Recommendations primarily focused on improving: ASIC’s processes for identifying and managing regulatory risks; documentation of licence processing; useability of ASIC’s public licensee database; and reporting of ASIC’s compliance performance.

Audit Report No.30 2005–2006 The ATO’s Strategies to Address the Cash Economy. The ANAO noted that, although the cash economy is difficult to quantify, it places billions of dollars in revenue at risk. Managing cash economy compliance is challenging and it is unlikely that there are strategies and a set of compliance activities that will entirely remove it. The ANAO found that the ATO has appropriate strategies, sound governance arrangements, well–developed project management processes and diverse compliance activities to target cash economy activities. The ATO had made good progress in implementing the previous ANAO Report’s recommendations. Key issues for ongoing ATO attention are how to secure better compliance in business–to–consumer cash dealings and how to show the impact, over time, of compliance activities in targeted cash economy industries.

ANAO AUDITS EXAMINING SERVICE DELIVERY AND WHOLE OF GOVERNMENT APPROACH

Audit Report No.6 2005–2006 Implementation of Job Network Employment Services Contract 3. The audit examined implementation of the third Job Network employment services contract, ESC3. Implementation was challenging, involving new policy, simultaneous procurement and a new IT system built on a new technology to a deadline. The IT system was unreliable for several months, detracting from service delivery. Low job seeker attendance at Job Network appointments also impeded implementation, causing Job Network cash flow problems. DEWR set four implementation objectives but did not monitor and report against them. The ANAO concluded that DEWR largely did not meet them. During the audit, DEWR undertook to consider improving its performance reporting.

Audit Report No.26 2005–2006 Forms for Individual Service Delivery. The audit examined selected agencies’ management of design and review of forms that are fundamental in delivering services to individuals. The audit distilled agency practices which contributed to better form design and communication, and provided feedback to the agencies about the useability, delivery and receipt of selected forms. Forms tested included those with high volume usage, those used by young people and specialised customer groups, those for on–line reporting or completed through an interactive voice recognition telephone facility and those designed to be completed over the telephone with the assistance of a Customer Service Officer. The ANAO subsequently published a Better Practice Guide on forms design.

Audit Report No.31 2005–2006 Roads to Recovery. This audit examined the initial Roads to Recovery Program that provided a total of $1.2 billion between March 2001 and June 2005 to local government for expenditure on the construction, upgrade and/or maintenance of roads. The audit demonstrated the importance of program management and accountability mechanisms giving reasonable assurance that road projects are undertaken in accordance with the scope and timelines proposed by Local Government Authorities (LGAs). Further, effective management and monitoring of program implementation is critical to achieving the outcomes expected by the Government and the community. During the course of the audit a number of issues were addressed by Department of Transport and Regional Services (DOTARS) in developing the Auslink Roads to Recovery governance arrangements. In addition, DOTARS advised the ANAO that better processes are to be adopted for Auslink Roads to Recovery.

Audit Report No.33 2005–2006 Administration of Petroleum and Tobacco Excise Collections: Follow‑up Audit. The Australian Taxation Office (ATO) has implemented most of the 20 recommendations in Audit Report No.17 2001–2002 Administration of Petroleum Excise Collections and Audit Report No.55 2001–2002 Administration of Tobacco Excise. Seventeen recommendations have been fully implemented; the remaining three, substantially. In respect of these three, the ATO is completing their implementation. The audit identified several areas where the ATO’s administration of excise could be strengthened. There are reasonable grounds to conclude that each year substantial quantities of tobacco continue to be diverted into the illegal market from Australia’s tobacco plantations. During the audit the ATO initiated multi–agency approaches, involving state and federal agencies, focusing strategically on the whole of the illegal production and distribution chains.

Audit Report No.46 2005–2006 Commonwealth State Housing Agreement Follow–up Audit. The audit followed up Audit Report No.17 1999–2000 Commonwealth State Housing Agreement, which made four recommendations on financial management, performance monitoring and management procedures for the then Commonwealth State Housing Agreement. The ANAO concluded that three recommendations had been implemented and that the fourth had been substantially implemented. This had resulted in improved systems and processes associated with the performance information and financial information used in the 1999 and 2003 Agreements. However, it was found that performance reporting could be improved by more timely reporting that demonstrates performance achieved against the objectives of the Agreement.

Audit Report No.49 2005–2006 Job Placement Matching Services. The audit found that DEWR effectively managed implementation of Job Placement and matching services but that ongoing management and oversight would be strengthened by: better monitoring of the quality of services provided by Job Placement Organisations against the Job Placement services Code of Practice; clarifying delivery requirements for new referral interview services with Job Network Members; improving the quality of vacancy data on JobSearch, the government–owned on–line vacancy listing enterprise; following up the government’s intention to review the costs and benefits of maintaining a national vacancy database, such as JobSearch; and more open reporting of overall service performance, especially Job Placement outcomes that are comparable over time.

Audit Report No.51 2005–2006 Implementation of the Parliamentary Resolutions Arising from the Review by the Parliamentary Service Commissioner of Aspects of the Administration of the Parliament. The audit arose from advice by the Joint Committee on Public Accounts and Audit in 2003 that administration of the parliamentary departments represented an audit priority of the Parliament. The audit objectives were to report on implementation of parliamentary resolutions and other actions arising from recommendations made in the Review by the Parliamentary Service Commissioner of Aspects of the Administration of the Parliament. The audit also broadly examined the impact of the parliamentary resolutions on aspects of the level of services provided to the Parliament generally following amalgamation of the three former parliamentary departments into the Department of Parliamentary Services, and on accommodation space in Parliament House.

ANAO AUDITS EXAMINING HEALTH AND AGEING

Audit Report No.14 2005–2006 Administration of the Commonwealth State Territory Disability Agreement. The audit assessed whether the Department of Families, Community Services and Indigenous Affairs (FaCSIA) effectively undertakes its coordination, monitoring and other roles according to the Commonwealth State Territory Disability Agreement. Although finding that FaCSIA generally fulfilled the requirements of its roles over the first two years of the Agreement, the audit identified opportunities for FaCSIA to contribute to better administration of disability services for which the States and Territories are primarily responsible. The report made recommendations focused mainly on enhancing FaCSIA’s contributions to: performance monitoring and reporting; whole of government coordination of disability and related services; and quality assurance processes.

Audit Report No.41 2005–2006 Administration of Primary Care Funding Agreements. The audit sought to assess the Department of Health and Ageing’s administration of primary care funding. It concluded that the Department was well advanced in guiding officers who administer funding agreements. The Department was strengthening its approaches by developing an information system to support agreement administration. The system will complement existing contract registers used to monitor agreement activity and to inform internal/external reporting. Aspects of day–to–day administration, such as payments, were also generally consistent with agreement requirements. Some aspects of agreement administration require strengthening in order for the Department to demonstrate that ‘it gets what it pays for’ and to improve administrative efficiency.

Audit Report No.42 2005–2006 Administration of the 30 Per Cent Private Health Insurance Rebate Follow–up Audit. The follow–up audit assessed the extent to which the Australian Taxation Office (ATO), Department of Health and Ageing, and Medicare Australia had implemented the six recommendations from Audit Report No.47 2001–2002 Administration of the 30 Per Cent Private Health Insurance Rebate. It found that agencies have fully implemented three of the recommendations and are continuing to work towards full implementation of the other three recommendations, which have been substantially completed. There are further opportunities for improving agencies’ administration of the 30 per cent Private Health Insurance Rebate. The ANAO made recommendations for improving the ATO’s and Medicare Australia’s data exchange arrangements; and Medicare Australia’s risk management and audit program for the Rebate.

Audit Report No.44 2005–2006 Selected Measures for Managing Subsidised Drug Use in the Pharmaceutical Benefits Scheme. The Pharmaceutical Benefits Scheme, administered by the Department of Health and Ageing (Health), provides Australians with timely, reliable and affordable access to necessary and cost–effective drugs. The audit examined how effectively Health managed the risk of PBS–subsidised drugs being used outside PBS subsidy conditions. The audit concluded that Health’s management of the risk was reasonable but there was scope to strengthen the arrangements. The ANAO made two recommendations focussing on Health’s selection of measures to control the use of drugs, reviewing the success of these measures, and maximising the value of an analysis of predicted and actual drug usage after listing.

ANAO AUDITS EXAMINING IT AND ITS USE ACROSS AGENCIES

Audit Report No.17 2005–2006 Administration of the Superannuation Lost Members Register. The audit found that the Australian Taxation Office (ATO) has systems and controls to capture lost member data received from providers but there are shortcomings with the Superannuation Lost Members Register (LMR) system control framework and the ATO’s approach to identity matching lost member data stored on the LMR. The ATO has established some compliance strategies for its larger providers and has implemented strategies and mechanisms to promote awareness of, and enable access to, the LMR. Two separate tools, SuperMatch and SuperSeeker, allow providers and members access to lost member data. Overall we found that the ATO has significantly restructured its governance arrangements for the delivery of superannuation products over the last 12 months.

Audit Report No.23 2005–2006 IT Security Management (protective security audit report). The audit assessed the management of IT security in eight Australian Government entities. Audit criteria were based on Australian Standards2 and Australian Government expectations.3 Overall, the ANAO concluded that the audited agencies had identified relevant Australian Government policies, practices and procedures for the protection of information. However, most agencies had not implemented structured processes to ensure the effective alignment of their IT security policy objectives with organisational risk management processes and Australian Government policy, practices and standards for safeguarding information resources. The audit identified opportunities for improving agencies’ policies and procedures on IT security management practices, risk assessment processes, identification of physical and environmental controls for managing IT equipment and reporting of network security practices.

Audit Report No.29 2005–2006 Integrity of Electronic Customer Records. This audit looked at a range of issues associated with Centrelink’s electronic customer records. It provided an assurance that Centrelink’s electronic customer records are, generally, sufficiently accurate and complete to support the effective administration of the social security programs for which Centrelink is responsible. However, the audit found that Centrelink could significantly improve the accuracy and integrity of customer information held in its customer records. It also found that Centrelink could improve the integrity of the primary key of its database, the Centrelink Reference Number, and, by doing so, decrease the risk associated with fragmenting customer data. Further improvements could be made by removing training records and obsolete customer records from the production database and improving the data integrity checking system.

Audit Report No.34 2005–2006 Advance Passenger Processing. The audit assessed the Department of Immigration and Multicultural Affairs’ (DIMA’s) information systems and business processes that assist mandatory Advance Passenger Processing (APP) meet its border security and streamlined clearance objectives. It found that DIMA could improve its performance measures on the impact of APP on border security. The audit also found inadequacies in DIMA’s arrangements with its contractor regarding APP.

Audit Report No.35 2005–2006 The Australian Taxation Office’s Administration of Activity Statement High Risk Refunds. Identification and resolution of activity statement high–risk refunds (HRRs) are key management issues for the ATO. In 2004‑05 the ATO processed 2.1 million activity statement refunds. Of these, 82 000 were identified as HRRs, worth $12.6 billion. The ATO has a well established governance framework to manage HRRs and is working to identify and address risks to identification and resolution of HRRs. However, these risks were not clearly documented or consistently reported. The ATO uses a broad range of compliance products to identify and resolve high–risk refunds but it is difficult to determine their overall effectiveness. One of two key IT systems to identify and process HRRs had system documentation and testing that provided assurance that it was operating as specified. The other IT system lacked documentation in a number of areas and system testing was therefore limited.

Audit Report No.45 2005–2006 Internet Security in Australian Government Agencies. It is Australian Government policy that agencies use the Internet to deliver all appropriate programs and services. The objective of the audit was to form an opinion on the adequacy of six Australian Government agencies’ management of Internet security. It concluded that, generally, the current level of Internet security was insufficient. The ANAO noted that a number of agencies could improve performance in some key areas, particularly email filtering, and all agencies audited could improve performance in one or more aspects of managing Internet security, such as the development of system security plans. The ANAO made five recommendations based on the audit findings.

ANAO AUDITS EXAMINING GOVERNANCE ARRANGEMENTS

Audit Report No.5 2005–2006 A Financial Management Framework to Support Managers in the Department of Health and Ageing. The audit examined whether the Department’s financial management framework and processes adequately support its Secretary, Executive and managers to make informed decisions on the use of Commonwealth resources. The ANAO found that the Department’s financial management systems and reports, internal control and strategic financial management had improved significantly in recent years. The support provided to managers by the financial management framework gave a sound basis for good financial management. However, there was a requirement for ongoing consideration of governance arrangements, coupled with managerial analysis of results, variations and other performance information to inform decisions in relation to programs administered by the Department. The audit included a recommendation to establish a clearly expressed link between the Department’s Control Self–Assessment and risk assessment processes.

Audit Report No.7 2005–2006 Regulation by the Office of the Gene Technology Regulator. As part of the Therapeutic Goods Administration, in the Department of Health and Ageing, the Office of the Gene Technology Regulator (OGTR) administers a licensing regime regulating the use of certain gene technologies not already regulated by other agencies. The audit found that the OGTR has developed and implemented policies and procedures for efficient and effective discharge of statutory functions. The OGTR has processed applications in required timeframes and exceeded targets for annual monitoring of field trial sites. It has good information on its costs and resource requirements, although close monitoring of staffing levels is necessary. Audit recommendations, when implemented, will lead to improvements in public administration and confidence in the OGTR’s performance.

Audit Report No.11 2005–2006 An audit of compliance with the Senate Order for Departmental and Agency Contracts (BSP audit report). Conducted in seven agencies, this was the seventh audit of compliance with the Senate Order that requires agencies to place on the Internet a list of contracts valued at $100 000 or more that include confidential provisions. The audit examined processes and controls for compiling and publishing the Internet listing and reviewed a sample of procurements for compliance with the Department of Finance and Administration guidelines on confidentiality provisions in contracts. The audit found that agencies had included clauses in contract and request for tender templates that appropriately address the Government’s accountability framework. However, a number of agencies needed to improve processes and controls to ensure their listings are complete and accurate.

Audit Report No.13 2005–2006 Administration of Goods and Services Tax Compliance in the Large Business Market Segment. The audit of Goods and Services Tax (GST) compliance in the large business market segment provided assurance on the administrative effectiveness of the Australian Taxation Office’s (ATO’s) approach to managing GST compliance in that segment. The ATO has developed and implemented governance and risk management processes that support the management of GST compliance in the large business market segment and implemented a compliance program to treat identified GST compliance risks. During the audit, the ATO began a number of initiatives to improve its systems and processes that support the management of GST compliance.

Audit Report No.16 2005–2006 Management and Processing of Leave (BSP audit report). The audit found that leave arrangements in the respective certified agreements of the five audited entities enable, to varying degrees, the entities to manage their leave liabilities but that the entities were not managing leave entitlements in accordance with those arrangements. This situation contributed to annual leave liabilities increasing by about 18 per cent over the last three years and meant that leave liabilities generally were higher than if the leave arrangements had been fully implemented. The audit also identified that, generally, entities’ practices for managing and processing leave were adequate. Improvements could be made by adopting a proactive approach to managing leave for staff with high leave balances; more actively managing unactioned leave applications recorded in their Employee Self–Service systems; and improved reporting and monitoring of leave information to senior management.

Audit Report No.20 2005–2006 Regulation of Private Health Insurance by the Private Health Insurance Administration Council. The audit concluded that the Private Health Insurance Administration Council’s governance and organisation support the performance of its legislative functions and that, consequently, its administrative effectiveness as a regulator of private health insurance was sound. However, it could improve the planning process by reviewing risk profiles and risk ratings yearly to ensure they remained valid over time, and extend the risk management plan to incorporate all significant risks to ensure their impact on the Council’s operations was understood, monitored and acted on as necessary. More measurable performance indicators should be developed and aligned with performance information in the Portfolio Budget Statements to better demonstrate the extent to which the Council achieves its stated outcome.

Audit Report No.27 2005–2006 Reporting of Expenditure on Consultants. Agency reporting of expenditure on consultants is one of many accountability obligations. The audit focused on reporting of this expenditure in accordance with annual report requirements. Analysis of this reporting as well as reporting in the Gazette Publishing System (GaPS) and Senate Order listings, revealed that agencies should take greater care in reporting expenditure on consultants. The key audit recommendation was that relevant central agencies, in consultation with key Parliamentary Committees, affected agencies and other stakeholders, examine options for improving the accuracy of reporting of Government procurement. This includes examining the merits of rationalising the number of reporting regimes.

Audit Report No.28 2005–2006 Management of Net Appropriation Agreements. The audit examined agencies’ financial management of, and accountability for, the use of net appropriation agreements to increase available appropriations. Overall, the audit revealed widespread shortcomings in the administration of net appropriation arrangements. In particular, there has been inadequate attention by a number of agencies to have in place effective arrangements under section 31 of the Financial Management and Accountability Act 1997 that record additions made to annual appropriations and the subsequent expenditure of those amounts. Further, the ANAO found that agency financial statements have not accurately reflected the use of section 31 arrangements. The ANAO made five recommendations. The first three were aimed at improving administration of net appropriation arrangements within the current financial framework. The final two recommendations identified opportunities for Finance to examine possible improvements to the framework.

Audit Report No.37 2005–2006 Management of Infrastructure, Plant and Equipment Assets. (BSP audit report). The audit assessed whether selected Australian Government entities were effectively supporting their business requirements through planning for, and management of, their Infrastructure, Plant and Equipment (IPE) assets. Four entities participated in the audit. Entities generally had sound processes to identify, assess and approve asset acquisition needs and had formal and well–managed preventative maintenance programs for their significant IPE assets. However, asset–related policy and procedural material generally only covered operational requirements and most entities had not addressed the more strategic issues associated with asset management. None of the entities had specified standards for financial performance of assets or used, in a comprehensive manner, financial and non–financial performance information about their IPE assets.

Audit Report No.39 2005–2006 Artbank. Artbank is an Australian Government arts support program in the Department of Communications, Information Technology and the Arts. The audit found that Artbank was meeting its Charter by acquiring art by contemporary artists and placing them for rental and display in public places. The audit identified opportunities for improving Artbank’s governance arrangements and operational matters. Accountability arrangements need to be brought into line with legislative requirements and the Department’s chief executive’s instructions. There was also a need to review certain operational matters including the approach to acquiring artworks and related documentation, accessibility to the collection, and the framework for de–accessioning significant cultural assets.

Audit Report No.50 2005–2006 Arrangements to Manage and Account for Aid Funds Provided under the Australia–Indonesia Partnership for Reconstruction and Development. The audit examined the framework being put in place to manage and account for aid funds under the Australia–Indonesia Partnership for Reconstruction and Development (AIPRD). In particular, it addressed: structures for oversighting development and delivery of AIPRD; planning and risk management (including those relating to fraud and corruption); financial management; and arrangements for ongoing monitoring and reporting. The partnership nature of the program, relatively short timeframe, and use of loans for half of the program, present substantial administrative challenges. Notwithstanding these challenges, AusAID has made progress in important areas. However, the ANAO identified areas that require strengthening, including: more timely and systematic risk management (including monitoring the effectiveness of proposed fraud mitigation measures); stronger management of procurement and contractual arrangements; and strengthened management and public accountability reporting.

ANAO AUDITS EXAMINING PROJECT MANAGEMENT

Audit Report No.1 2005–2006 Management of the Detention Centre Contracts–Part B. This was the second of three consecutive audits on the management of detention centre contracts. The audit found that the Department had more than six years’ experience in contracting out detention services when the contract was signed, but lessons learned from the previous arrangements, had not provided the expected benefits. In particular, the contract did not establish clear expectations for the level and quality of services to be delivered; mechanisms to protect the Commonwealth’s interests were unclear; and there was insufficient information about the quality of services being delivered and their costs to assess value for money.

Audit Report No.3 2005–2006 Management of the M113 Armoured Personnel Carrier Upgrade Project. The audit examined management of the upgrade of the M113 fleet for the Australian Defence Force (ADF) and focused on development and management of the project and contracts. The M113 family of vehicles was originally to undergo a minimum upgrade to improve 537 vehicles later reduced to 350 vehicles, at a cost of $552 million (June 2002 prices). The Minimum Upgrade Phase of the Project suffered from poor project management practices; ineffective project planning; inadequately defined project objectives; and technical problems with the T50 turret. The new Major Upgrade Contract (July 2002) has provided an improved framework for Defence to advance the Project. The System Program Office is taking an active role in managing the Project but there is doubt as to whether the upgraded vehicles will meet their in–service date of late 2006.

Audit Report No.8 2005–2006 Management of the Personnel Management Key Solution (PMKeyS) Implementation Project. The audit reviewed Defence’s management of the PMKeyS Project. It addressed the scope of the delivered system, particularly its ability to meet end–user capability requirements. PMKeyS has become Defence’s core management information system for personnel management but has suffered from extensive schedule slippage. When the Project closed in December 2002 major outcomes under Phases 3 and 4 had not been delivered. Furthermore it was not approved in accordance with Government requirements and it exceeded its notional budget of $25.0 million by $38.4 million. Defence reportedly incurred additional costs for Infrastructure ($26.3 million) and Production Support ($41.2 million). The total cost to Defence to bring PMKeyS into service is estimated to be at least $131 million. The audit found that Defence did not have effective contractual control over Project costs and outcomes, also delays and underestimation of training requirements resulted in higher training costs.

Audit Report No.10 2005–2006 Upgrade of the Orion Maritime Patrol Aircraft Fleet. The audit examined management of this upgrade project. It was undertaken towards the conclusion of major project elements, when more than 90 per cent of estimated project costs were expended. Project elements examined were initiated in the early 1990s. The audit found that delays in the project (some four years in delivery of upgraded aircraft) meant that, although equipment met contractual requirements, some equipment was obsolete when installed in the aircraft. It was also found that Defence and contractors underestimated unique features of design and production work and complications in integrating new systems. Complexities were difficult to manage without a fully developed software testing facility, which had been a pivotal part in project planning. Nevertheless, the project met its performance objectives and the upgraded aircraft now play a significant role in Australian border protection and other Defence operations.

Audit Report No.24 2005–2006 Acceptance, Maintenance and Support Management of the JORN System. The audit examined the key lessons learnt from Defence’s Jindalee Operational Radar Network (JORN) Project’s acquisition and acceptance phase, and JORN and Jindalee Facility Alice Springs maintenance and support. It was undertaken as part of a broader ANAO audit strategy to examine the effectiveness of Defence’s programs that manage and upgrade Australian Defence Force’s weapon systems and associated equipment. The audit found that the JORN Project successfully transitioned from its acquisition to in service support phase and experience to date indicates the Project has achieved its major objectives.

Audit Report No.32 2005–2006 Management of the Tender Process for the Detention Services Contract. The audit sought to assess departmental management of tender, evaluation and contract negotiation processes for the contract for detention services at mainland immigration detention facilities. It considered processes for assessing value for money based on the department’s evaluation of the request for tender. It found that the department had an appropriate plan to evaluate costs and benefits of tenderers’ competing solutions but it failed to implement the plan effectively. Shortcomings included:

  • ambiguity in departmental management of the roles and responsibilities of key advisors and personnel;
  • deficient recordkeeping, affecting the ability to demonstrate accountability and transparency in the procurement;
  • weaknesses in contract negotiations; and
  • deficiencies in assessing tender bids against value–for–money criteria.

Audit Report No.36 2005–2006 Management of the Tiger Armed Reconnaissance Helicopter Project – Air 87. The audit examined Defence’s management of Tiger Armed Reconnaissance Helicopter Project Air 87, which was approved to provide for a new all–weather reconnaissance and fire support capability for the Australian Defence Force. The Project contracted for the delivery of 22 aircraft, with supporting stores, facilities, ammunition and training equipment. The first four aircraft are being manufactured in, and delivered from, France; the remaining 18 aircraft are being manufactured in France and assembled in Brisbane. ‘Australianisation’ of the weapons and communications systems differentiates the Australian aircraft from the French variant. The audit found that the project encountered difficulties delivering the required capability for the specified price and within the required time.

Audit Report No.38 2005–2006 The Australian Research Council’s Management of Research Grants. The audit provided assurance that, although there are areas where the Australian Research Council could improve its administration, it was taking positive steps to improve its grants administration and performance of its statutory functions. The ANAO made nine recommendations and a number of suggestions to strengthen the Council’s management of grants, with particular emphasis on improving the effectiveness, transparency and accountability of grants administration. When implemented, the recommendations will lead to improvements in public administration and confidence in the Council’s performance. These recommendations are particularly important in light of changes to the Council’s governance announced by the then Minister following the Uhrig Review.

Audit Report No.40 2005–2006 Procurement of Explosive Ordnance for the Australian Defence Force (Army). The audit examined processes to procure explosive ordnance for the ADF, with an emphasis on Army requirements. It reviewed translation of ADF explosive ordnance requirements into procurement and through–life support arrangements. Procurement of explosive ordnance involves significant levels of expenditure and has implications for the overall preparedness of the ADF. The ANAO considers that extensive improvements are required to better align explosive ordnance procurement with ADF preparedness requirements. The audit identified that management action is required in respect of procurement planning, financial management, inventory management, safety and suitability for service assessments and contract management.

Audit Report No.47 2005–2006 Funding for Communities and Community Organisations. In 2004–2005 the Department of Families, Community Services and Indigenous Affairs (FaCSIA) provided over $1 billion in funding for family and community services, delivered by almost 16 000 service providers. FaCSIA administers this funding through grants and related arrangements. The audit assessed whether FaCSIA administers its community grants effectively, according to better practice guidelines, and consistently across geographic areas. More specifically, the audit examined FaCSIA’s funding agreements and their financial management and FaCSIA’s monitoring of service provider progress in fulfilling the requirements of funding agreements. It also examined internal and external performance reporting mechanisms for programs that have substantial funding agreements. A separate audit is examining FaCSIA’s processes to promote grant programs, manage applications and appraise, select and notify recipients of grants.

Audit Report No.52 2005–2006 Management of Selected Telstra Social Bonus 2 and Telecommunications Service Inquiry Response Programs. The Government’s Telstra Social Bonus 2 and Telecommunications Service Inquiry Response funding packages, totalling over $830 million, are to enhance telecommunications infrastructure development and service availability across Australia and address associated inequities in rural and remote areas. These grant programs are administered by the Department of Communications, Information Technology and the Arts (DCITA). The audit examined whether selected programs are achieving or had achieved their objectives and had been administered effectively according to better practice principles. It found that the selected programs, except one, the Intelligent Island Program, are effectively achieving their stated objectives. DCITA’s management of the selected programs demonstrated a high level of compliance with the better practice principles of grant management.

  • 1 All reports referred to in this appendix are performance audit reports except those identified as BSP or protective security audit reports.
  • 2 Principally the AS/NZS ISO/IEC 17799:2001 Information Technology – Code of practice for information security management, Standards Australia & Standards New Zealand, 2001.
  • 3 The Commonwealth Protective Security Manual 2005, Attorney–General’s Department, 2005 and Australian Government Information and Communications Technology Security Manual (ACSI 33), Defence Signals Directorate, 2005.