Audit Committee concludes Commonwealth Financial Statements inquiry

The Joint Committee of Public Accounts and Audit (JCPAA) has tabled its report on the 2021–22 Commonwealth Financial Statements audits by the Australian National Audit Office (ANAO), a key transparency and accountability measure for the Commonwealth. The Committee’s inquiry focused its examination on the financial sustainability of Home Affairs, Agriculture and the NDIA, Defence’s use of appropriations, and cyber security issues. The Chair of the JCPAA, Mr Julian Hill MP, said that “this inquiry found an unusual range of concerns regarding financial sustainability of key Departments, cyber security and a surprising albeit arcane question regarding the legality of Defence’s payment of compensation for the Attack Class Submarines. “The Committee was concerned by evidence that the Department of Home Affairs’ budget was fundamentally misaligned with the core activities of the Department for years under the previous Government. This was made worse because evidence revealed it was forced to cop $180 million of further cuts due to the Liberals’ failed $92 million visa privatisation.” “Agriculture has been facing an underlying structural cash deficit for many years, driven by the cost recovery of biosecurity functions. Given the critical importance of biosecurity activities and the economic and environmental costs of breaches, the Committee is of the view that the situation was fundamentally unsustainable and the Government and Department must respond.” “The Committee has welcomed the current review of the NDIS given the evidence that the scheme costs have been growing faster than anticipated for many years, posing risks to the long term sustainability of critical supports to the disability sector.” The Committee was also concerned that Defence’s problematic use of non-operational (‘equity’) expenditure from Appropriation Act (No. 2) 2020–21 to fund the termination payment for the French Attack Class Submarine project, an operational expense. Mr Hill said “the Committee’s strong view that this payment should not have happened in this way and should not be allowed to happen again. Defence clearly understood this was a potential Constitutional issue and sought legal advice. The JCPAA’s view is that this is not really a matter for the courts, it is a question of Parliamentary control over the Executive as Parliament’s intent should not be subverted in the name of quick action.” The Committee has recommended that the Minister for Finance review this matter and accept the JCPAA’s conclusion, and that future Appropriation Bills clarify that an ‘equity injection’ or ‘equity funding’ is non-operating expenditure. The report also examined cyber security issues under the Protective Security Policy Framework (PSPF), which continue to represent the majority of ANAO’s adverse findings in Financial Statement’s audits. Mr Hill said “the Auditor-General has identified a persistent optimism bias in how agencies self-report their cyber security compliance. This issue has gone on for too long, and it’s time government consider implementing an assurance regime on agencies’ self-reporting on cyber security compliance. Agencies should not be able to disguise the true situation from the Government in relation to public sector cyber security vulnerabilities.” The report makes six recommendations related to the financial sustainability of Home Affairs and NDIA, the proper use of appropriated expenditure, and processes for providing greater assurance and transparency on cyber security compliance under the PSPF. The Committee’s report is available on the Committee website.