“Vouched for and Carried to Account”

A History of the Western
Australian Audit Office 1829-2004

SPOTLIGHT ON ACCOUNTABILITY SINCE 1829

Keeping Account of a Colony 

The origins of the Office of the Auditor General of Western Australia herald back to the first months of settlement of the Swan River colony in 1829.

Captain Stirling, who was to become Lieutenant Governor of the colony, was aboard the ship Parmelia with the first load of colonists who sailed from England in February of that year to make the west coast of New Holland their home. 

During the latter half of the journey, Stirling made all the necessary arrangements for the administration and control of the settlement, knowing that these would be important to the success of his mission. He also knew that he could not afford to waste time upon arrival in the organisation of government and so wanted to be prepared when his party stepped ashore. 

Stirling had his Colonial Secretary, Peter Broun, issue instructions on 16 May to the civil officers chosen to manage departments that Stirling as Governor saw as critical to the success of the colony.

The document issued constituted ‘a Board of Counsel and Audit in the management of the property of the Crown, and of public property within the settlement’. 

It was addressed to the Harbour Master, Mark J Currie, the Surveyor General, John Septimus Roe, and the Registrar, William Stirling, and read: 

'The Lieutenant Governor having decided on the formation of a Board of Counsel and Audit in the management of property of the Crown and of the Public Property with the Settlement, I am commanded to acquaint you that he has nominated you to act as Commissioners of the said Board until the pleasure of His Majesty’s Government be known – your number being hereafter to be increased as circumstances may render it necessary.

The duties of this office created by the appointment will be fully made known to you hereafter by the Instructions and References which you will occasionally receive. In the meantime I am to acquaint you that his Excellency expects from your zeal the performance of the service required of you without reward of remuneration beyond the satisfaction you will derive from the fulfilment of a duty of this confidential nature'.

On 31 May, land was sighted and the following day the Parmelia tried to anchor in Cockburn Sound. However, she was grounded on a bank between Carnac Island and the mainland. After much difficulty, the Parmelia was freed by the crew of HMS Challenger, which had arrived earlier under Captain Fremantle, who had taken formal possession of the west coast of New Holland in the name of the King on the morning of 2 May, 1829.  

Stirling decided to land on Garden Island and set up a camp to protect the stores while waiting for better weather to reach the mainland. This they did on 18 June and when Stirling and his party arrived at Rous Head, he issued a Proclamation effecting the settlement of Western Australia. 

Stirling decided the settlement needed two towns – one at Fremantle at the mouth of the river to serve as seaport and the other further inland on the Swan River as the seat of government.  He wasted no time in getting things underway to establish the settlement, commanding that the offices of the Secretary to the Governor, the Surveyor of the Territory, the Harbour Master, the Civil Engineer, and of the Commissioners of the Board of Counsel and Audit, be opened ‘for the despatch of business’ on 12 August. [Audit Fact]

But they were very humble beginnings. Stirling ordered that a tent be set up on the site chosen for the Town of Perth out of which the departments would initially operate. 

He also issued instructions through Broun on 20 November to the three men chosen to be the colony’s first auditors, setting out their duties: 

'I am directed to transmit herewith for your examination the accounts kept in the several Departments named in the margin – (Acting Treasurer. Storekeeper. Harbour Master.) for the period commencing at the formation of settlement and concluding on the 30th September, the last day of the quarter.  The accounts now referred to you will not be found strictly according to the rules which are to be followed in all future cases; with reference to these therefore the Lieutenant Governor requires to imply that you shall certify that you have examined them and found them correct, or in what parts deficient, and that the Head of each Department has exhibited to you a proper warrant for every issue or expenditure and a receipt from the Parties to whom issues are stated to have been made, and that in case of stores purchased they have been duly vouched for and carried to account. You shall have appended a certificate to this effect together with the receipts required, and you are to transmit the account so made up to the Lieutenant Governor.'

It seems the colony’s transactions proceed satisfactorily under this arrangement for several years until their volume and complexity made it necessary to implement more formal accounting practices. 

On 28 November, 1830, the secretary to the Governor issued new orders to the Board of Counsel and Audit: 

'On the 16th Instant I transmitted to you copies of the forms in which the several Departments under Government were called upon to keep their respective accounts. I am now directed to acquaint you that abstracts in duplicate of these accounts will be forwarded from this office to you for examination at the end of each quarter, when you will call up the Head of each Department for such vouchers as you may deem necessary for paying each respective account.  In your examination of these quarterly accounts you are to refuse all such as are not made out in accordance with the forms above alluded to, and you are to report according to Form No. 4 herewith transmitted on the last day of the month in each quarter – such accounts as have been passed, such as may be found deficient in necessary vouchers, and such as have not been presented for audit previous to the report being made – you will also make mention of any accounts which may remain in arrears belonging to any former quarters.  Whenever accounts shall be found by you in every respect correct and properly supported, you are to attaché a certificate to them to that effect, and to lodge one copy with its proper vouchers in the Registrars office taking his acknowledgement for its reception, and the other copy and vouchers you will forward to me.'

The three auditors were still unpaid for their services at this time, though government officials and heads of departments received 200 pounds per annum. [Audit Fact]

Three weeks prior to this direction, an Order in Council had been issued constituting the Governor, the Senior Military Officer, the Surveyor General and the Advocate General to be a Legislative Council to discharge the functions of government. The Audit Office was conducting its business watching over the colony’s business transactions in a manner best described by the following communications to Governor Stirling:                       

A receipt wanting for one hand cart forwarded to Perth.
- MJCurrie, W. Stirling, H. Byrne, Commissioners.

Stirling’s Colonial Secretary wrote back to the Commissioners for Counsel and Audit on 9 May, 1831: 

This was typical of the type of auditing and correspondence that was occurring during those early years of settlement. However, by the end of June 1831, the volume or work and responsibility was too onerous on this dual system of control and led to the appointment of Captain Mark John Currie as the first Colonial Auditor on 1 July. 1 [Audit Fact]

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Taking Account:
Stirling Appoints First Auditor

The Swan River Colony’s first Auditor, Captain Mark Currie [appointed 1 July 1831], was paid 300 pounds per annum and was responsible to the Colonial Office through the Governor. 

His appointment came in the usual form of a letter from the Colonial Secretary, Peter Broun: 

The new Auditor General received his instructions in a rather complicated letter from Peter Broun as well. The letter outlined his salary and the auditing procedures he was to follow: 

Peter Broun also instructed Captain Currie that it was the intention of government that all future purchases be made ‘in the usual way of tender and contract’. As Auditor he must require of departments all original notices, agreements, tenders and contracts and lodge them with the Registrar. 

His role would also involve land applications. Broun advised the Auditor that in these matters ‘his guidance with reference thereto he is to adopt the course of Proceeding directed in the letter to the Secretary to Government addressed on 2nd April, 1829’. 

As was the case with the Commissioners, the Auditor was still required to make his return on the last day of the first month of each quarter, and to make mention of any accounts which remained in arrears. 

This was the first communication recorded as to the Auditor’s new duties, dated 27 July, 1831 from the Colonial Secretary: 

Just a year later though, Captain Currie wrote to Peter Broun requesting the Governor grant him leave of absence ‘to proceed thither’ to England because of ‘urgent private affairs’. This was granted on 26 June, 1832. However, Captain Currie was not to return to the colony and was subsequently appointed Rear Admiral Currie in the British Navy.

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From Colony to Responsible Government 1832 –1891 

Western Australia had five Colonial Auditors in this period before the second Audit Act was passed by the Parliament in 1891. 

Following Captain Currie, the Deputy Assistant Commissary General, John Lewis, was appointed Auditor. He would serve in the position for 12 years until 1844. 

During that time there were sweeping changes to the accounting procedures in Perth that involved expanding the role of the Auditor and introducing more explicit methods to record the colony’s transactions. [Audit Fact]

Lewis was also informed that the Governor had approved his drawing 500 pounds per annum as an additional allowance for the extra responsibility of paying the colonial accounts. 

Lewis’s appointment was interesting in hindsight because at this time the Treasury Department was set up and Lewis was its Acting Treasurer. Today, it would not be feasible that the Treasurer could also be the Auditor General and audit his own accounts. 

It is difficult to determine what staff the Audit Office had in those times. However, a ‘Blue Book’ from 1837 notes that the Chief Clerk in Mr Broun’s office was William Knight who was appointed in June 1831, and later went on to become the second longest serving Auditor. 

The Government Gazette – which was first published in 1836 – announced the appointment of the third Auditor on 26 January, 1844. The former Colonial Secretary, Peter Broun, who had a reputation for working hard in the interests of the Colony, was appointed Colonial Auditor.  [Audit Fact]

However, his term was cut short when he died in 1846. William Knight replaced him and from that moment on the office was never to again be part of another department. 

[In 1854, FD. Wittenoom was appointed Acting Auditor General when William Knight was absent in England.] 

In 1870, the colony saw the first early form of representative government when it was agreed that 12 members of the Legislative Council would be elected to join six others nominated by the Governor. The Council then was responsible for enacting all the colony’s laws. 

However, the Governor could still veto the Council’s decisions, which left many colonists dissatisfied and wanting a fully-elected parliament.

It would take another 20 years before ‘responsible’ government [with a fully-elected Legislative Assembly] was achieved.

During this evolutionary period in Western Australia, the British system of government, the Westminster system, also was developing. The franchise was being expanded as the notion of government representing all the people, not just certain classes of people, was gaining acceptance. 

When Western Australia was granted self government in 1890, the system established was based on the Westminster tradition. However, unlike the Westminster system where the members of the Upper House [the House of Lords] were not elected by appointed by hereditary right, the Upper House in WA was, from 1893, elected. ³

The formation of a new partially-elected Legislative Council in 1870 was a reflection of the colonists’ desire to have more parliamentary sway and accountability. They also wanted the colony’s public finances to come under broader and more effective auditing practices.  

In 1872, a former officer of the Audit Office, Edward Lane Courthope was appointed the colony’s fifth Auditor General.

Eight years later, with further pressure from some councillors, the Council set up a committee to inquire into and recommend measures to improve auditing of the public accounts.

The following year, in 1881, the colony’s first Audit Act was passed which put in place tighter controls including requirements for double entry accounts; publication of audited Treasury quarterly statements in the Government Gazette; half-yearly balance sheets to be audited by the Auditor General and published in the Gazette, and for the Auditor General’s report to be laid before the Legislative Council by the government.

The Act also required the Council to elect four members to advise the Governor on questions of public expenditure, as well as promulgating regulations on the receipts and payment of government moneys. It provided for reports on audits to be sent direct to the Governor and copies to the Colonial Secretary. Audited Treasurer’s quarterly statements and half yearly balance sheets were to be published in the Gazette.

The Auditor General’s report on the Treasurer’s statement of receipts and expenditure in accordance with the Estimates would be sent to the Treasurer and the Governor who then would lay a copy before the Legislative Council. In addition, a separate report of the Auditor General would be required to be laid before the Council by the government of the day.

The Audit Act received broad support but there were some colonists who did not think it went far enough in controlling how public moneys were spent. One of those, Mr Steere, raised his concerns at the time and they were reported in Hansard:

Interestingly, it was this Act that also legislated that the Colonial Treasurer, not the Auditor General, be held responsible for the proper keeping of accounts and preparing financial records. 

At the time – and for the next eight years – prominent colonists led by John Forrest began to push for the British government to allow the colony to govern itself. Success was achieved in 1890 when the British finally agreed to passing the colony’s first Constitution that allowed for ‘responsible government’. The Constitution was proclaimed on 21 October 1890, by the then Governor Sir William Robinson. 

Newspapers at the time boasted that Western Australia had finally ‘come of age’ and predicted that self-government would lead to progress and prosperity for all. 

At 1pm, on 22 December 1890, Governor Robinson sent for the Surveyor-General, John Forrest, and asked him to be the first Premier of Western Australia.  

The new Constitution provided for a Cabinet of five and those Forrest invited to join him were Septimus Burt, George Shenton, W E Marmion and H W Venn, all of whom had served in the old Legislative Council. 

Edward Courthhope retired as Auditor General nine months later and was replaced by Fred Spencer who would hold the office for the next 12 years. Courthope’s retirement coincided with the passing by Parliament of the second Audit Act passed in 1891 and was based on the new Constitution Act of 1890. 

The granting of self government to WA in 1890 necessitated the repeal of the 1881 Act and so the new Act was passed. It set down the conditions of appointment and conduct for the Auditor General, while importantly, at the same time, increased his independence and authority. 

The new Auditor General’s reports are the first that appear in bound volumes, and in the inaugural volume he stated that the new Act was assented to on 26 February 1891, and that ‘the Regulations required to be framed under it were only laid before Parliament on 7 December’. 

The new Act set the framework for all future auditing laws of the State’s public finances. It was more comprehensive than the first Audit Act in that it outlined the conditions, appointment and behaviour of the Auditor General. It also provided for the Auditor General to countersign all warrants for expenditure of public moneys. [This was dropped in the Audit Act of 1904 but still remains in the Audit Acts of some other States today.] 

The new Act contained 44 provisions. It required the Auditor General to fully and officially report to Parliament on the annual statement from the Colonial Treasurer. This was to become the Auditor General’s annual report and remains in place today. 

Fred Spencer served in the position for 12 1/2 years; the first Auditor General, he wrote in his final report before retiring in 1904, ‘to hold office ‘under Responsible Government of this highly important and prosperous State’. 

His resignation also coincided with Parliament’s passing of the third Audit Act in 1904. 

This Act was required because with the establishment of the Commonwealth of the States – and as certain State functions were taken over by the Commonwealth – the 1891 Act became unworkable. To accommodate this, the 1891 Act was repealed and re-enacted in 1904, based on the Commonwealth Audit Act. 

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Protecting the Public Purse 1904 - 2004

Charles Samuel Toppin became WA’s seventh, and longest serving Auditor General the same year, holding the position for a remarkable 32 years. 

In his first annual report of 1903-1904, he noted that with the new Audit Act just being proclaimed, ‘a certain amount of latitude be allowed, in order that departments may become acquainted with its provisions, more particularly as the Regulations under that Act for the guidance and instruction of officers were not published until July 1904’.  [Audit Fact]

He added: ‘Up to that time the Regulations under the Audit Act 1891were still in force, but which to a great extent had become obsolete, and were, therefore, of no practical value.’ 

Toppin found that the new Act considerably increased the workload of his office. He wrote in his report that because it was imperative that all accounts be audited at least once a year, he would have to find ways for his staff to manage this effectively. One of these was a scheme to train his staff in accountancy so that he could draw on them as audit inspectors.  

He put the scheme to the Colonial Treasurer and hoped that most officers would ‘in time’ qualify under the exams of the WA Institute of Accountants and Auditors. ‘Too much stress,’ he said, ‘cannot be attached to only appointing fully qualified men as Inspectors.’ 

Victoria already had such a scheme in place, and Toppin hoped WA would follow suit. 

By the time of Toppin’s appointment, the Audit Office had expanded to a staff of 39, with eight inspectors and 31 clerks.  

Sydney Arnold Taylor was the State’s next Auditor General, taking over from Charles Toppin on 31 December, 1935. The Audit Office still had a staff of 39; J G Jeffery was appointed Chief Inspector, and there were 4 senior inspectors, 17 inspectors, 8 clerks, 1 junior clerk and 2 machinists. 

Both men were to retire within months of each other in 1945. William Nicholas took over with a staff of 45 as demands of auditing the government’s departments and agencies continued to grow. He retired nine years later and was replaced by Constantine Mathea, the State’s tenth Auditor General.  

During the period from 1904 to 1945, audit officers had been encouraged to pursue their studies in accountancy and auditing. By the early 1950s, the possession of a final accountancy qualification of a recognised institute of accountants was made an essential requirement for promotion to senior positions within the Auditor’s department. 

By 1952, the number of audit staff had risen to 62 from 32 in 1905 and 40 in 1922. [Audit Fact]

Fundamentally there had been little change since 1904 to the 1950s in the form in which the statements comprising the Public Accounts were presented to Parliament. ⁵ They mainly dealt with transactions on consolidated revenue fund, general loan fund, the public debt and trust moneys held. Expenditure from the revenue fund had increased from approximately 3,700,000 pounds in 1903-4 to 34,500,000 pounds in 1951-52, and the public debt of the State from 16,400,000 to 138,000,000 pounds. 

However, the duties of the Audit Office grew as a consequence to changes to the financial relationship with the Commonwealth and the States, and as well, the development of the State’s agricultural and industrial resources. 

The State had branched into many activities which were not thought of in 1904, and under agreements made with the Commonwealth, it had also for many years ‘expended on the Government’s behalf huge sums on social welfare, roads, land settlement, housing, etc.’ ⁶  

These had, in effect, added responsibilities and duties to the Audit Office.

Of course, the Office had to adapt and expand to cope with the increased responsibility. This meant keeping abreast of developments in modern accounting procedures and the form of presentation of accounts. To this end, the Office pursued a consistent policy hand-in-hand with Treasury aimed at improving the methods of account keeping and the establishment of internal checks and audit in departments.

Following the retirement of Constantine Mathea in 1962, Clifford Press was appointed Auditor General. He served in the office until 1967. Ormond Boyer took over on 1 January 1968 but was only in the job for one year. Will Adams was then appointed in 1969 and served until 11 February 1975, followed by Alan Tonks who was Auditor General until 1982. [Audit Fact]

'The State Auditor was one of our first administrative technicians'. ⁸
Clifford Press served as Auditor General from 1962 to 1967

William Rolston took the reins on 8 June, 1982 and held the position until 1987, when Alan Smith was appointed. Alan Smith resigned in October 1990 and Neville Smith acted in the position until the appointment of Des Pearson in 1991. Des Pearson is currently the Auditor General.

In 1965, a number of important amendments to the Audit Act were made. The then Assistant Auditor General, Ormond Boyer, in his 1966 history ‘The Audit Department: Its Origin and History, documented these as including: 

• alterations to surcharge provisions,
• the authority to utilise unexpended balances of the Parliamentary Vote to meet accrued unpaid commitments,
• the charging of fees for audits of other than Revenue Fund audits, and,
• the power to make regulations relating to stores. 

Prior to 1985 the Audit Act dealt with the operation of the Consolidated Revenue Fund, as well as providing the authority for the formation and operation of the General Loan Fund and the Trust Fund. The Audit Act then set out provisions regarding: 

• Auditor General – Sections 5 to 16
• Accounting Officers – Section 17 to 20
• Collection of Moneys – Sections 21 to 29
• Payment of Moneys – Sections 30 to 36
• Audit and Inspection – Sections 37 to 48
• Statements and Audit Thereof – Sections 49 to 55
• General Loan Fund – Sections 61 and 6
• Moneys Outside State – Section 63
• Penalties – Sections 64 to 70
• Regulations – Section 71

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Where does the Audit Office fit in? 

The Auditor General is established like all independent officers under special legislation.

This legislation means that independent officers may or may not report to Parliament in fulfilling their legislated function and/or conduct quasi-judicial functions independently of Ministerial control. 

As well as the Auditor General, other independent officers include the Parliamentary Commissioner for Administrative Investigations [Ombudsman], the Information Commissioner, the Director of Public Prosecutions and the Solicitor General.

The Auditor General is required to audit accounts for the Treasurer and most government agencies. In addition, the Auditor General carries out inspections and reports to Parliament on the efficiency and effectiveness of those agencies.

The Audit Office File Room in 1965

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A Matter of Accountability

The legal requirements of the government in relation to finance are set down in: 

• the Constitution Acts
• the Constitution Acts Amendment Act
• the Audit Act
• the Treasury Regulations 

The office of the Auditor General is one of the most critical links in the accountability chain between the Parliament, the public sector and the community. 

The first reference to the office was contained in the colony’s Audit Act of 1881. 

This Act provided for ‘the more effective keeping and auditing of the Public Accounts’.

Eight years later, the importance of the function of auditing these accounts was given constitutional recognition in section 65 of the Constitution Act of Western Australia. This section provided that the ‘Consolidated Fund shall be subject to being reviewed and audited in such a manner as directed by any Act of the Legislature’. 

Today, the Constitution of Western Australia says in Section 59 that: 

'The Consolidated Fund shall be permanently charged with all the costs, charges, and expenses incident to the collection, management, and receipt thereof; such costs, charges, and expenses being subject nevertheless to be reviewed and audited in such a manner as is directed by the Financial Administration and Audit Act of 1985, or as may from time to time be directed by any Act of the Legislature.' 

In the early days of the colony, these constitutional and legislative provisions were in keeping with the values attributed to the traditional role of the Auditor General to ensure compliance with, and discover deficiencies in, government financial management. 

In the decades that followed, the role of the Auditor General grew as the needs of the State expanded with the parallel increase in government activity.

For example in the late 1960s, the then Auditor General, Will Adams, wrote to the Public Service Commissioner outlining his concerns about the need for better standards in the Audit Office due to the changes that were rapidly occurring in accounting methods and procedures. [Audit Fact]

‘Government action,’ he said, had ‘extended beyond basic public services into industrial, commercial and other forms of enterprise, and upon the staff of the Audit Office devolves a wide and diversified range of audit responsibility, extending from the requirements of public administration on the one side to business enterprise on the other. In many aspects the objectives and methods of each are quite different.’ 

To cope with the increasing expansion in State activities administered by government departments, and of activities controlled by all other public authorities whose accounts were subject to examination by the Auditor General, it became a policy for the Auditor General to encourage departments and agencies to set up their own internal control and internal audit. This meant that audit officers were now ‘relinquishing detailed checking in favour of appraising, by observation and tests, the efficiency of internal systems, audit and control’. ¹⁰ 

It also meant that audit officers were ‘as a result of this change’ having to be trained ‘in their duties and responsibilities over a wider field than before, in a much shorter time than was possible previously’. ¹¹

By the 1980s, there was also an overlapping area of responsibility on the Office of the Auditor General as the community and Parliament became increasingly reliant on its reports to validate and justify actions taken by the government of the day in terms of the operations of its departments and agencies. [Audit Fact]

This has continued to grow increasingly in the past decade to the point where the Office of the Auditor General has “had to redefine itself, broaden its vision and scope of its corporate goals beyond simply being leaders in performance auditing and give greater focus to our role of providing independent information to Parliament and the community’. ^11a

This led to the introduction in Parliament in 1985 of the Financial Administration and Audit Act.  [Audit Fact]

Audit Office staff in 1930

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Under the FAAA

In 1985, the Financial Administration and Audit Act was passed by the State Parliament. This Act requires that the Auditor General annually audit the accounts of the Treasury and most government agencies. He or she may also carry out examinations into the efficiency and effectiveness of those agencies.  

The Financial Administration Audit Act 1985 has an industry nickname – the ‘F-Triple-A’. Under the new Act, the performance of each organisation must be evaluated as well as its financial status. The new Act also placed stricter time limits on the completion of audits and the submission of annual reports. 

The extension of the role of the office of the Auditor General into examining ‘efficiency and effectiveness’ has at times since 1985 been contentious.

To fulfil the important roles to audit and examine, the Auditor General is entitled under the F-Triple-A to:

• unhindered access to all accounts, records and documents of the public service departments and statutory authorities.
• require banks and other financial institutions to provide statements and certificates of information regarding accounts in which public moneys have been deposited.  

The Auditor General has the power, for the purpose of an audit and assessment, to also require officers’ information, explanations and relevant documents. 

In 1985, the office of the Auditor General had grown to include about 80 auditors in a total staff of 105. 

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To Audit or not to Audit: That is the Question? 

There are more than 200 government agencies, comprising departments, statutory authorities and other bodies. 

These agencies vary in size from those employing a few people to others that employ many thousands. Together these agencies employ nearly 100,000 people and generate a combined revenue and expenditure in excess of $28 billion annually in providing a range of services to the citizens of Western Australia. 

They are also all required to set up effective performance indicators and this is an important part of the financial accountability chain. 

Since the Financial Administration and Audit Act 1985, the role of the Office of the Auditor General has expanded and changed. A major development has been the decision of the Auditor General to undertake selected performance examinations into departments and statutory authorities. 

Some political analysts have described this as one of the ‘most significant sea changes in Western Australian government’. ¹² 

They maintain that these examinations are one ‘of the key exercises’ which have ‘impacted across the whole public sector’. ¹³

In its widest context, the Office of the Auditor General serves the public interest since the Auditor General is the key provider of independent and impartial information on public sector accountability and performance to Parliament. 

The Auditor General has a responsibility to the community as its ‘watchdog’.

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An Ally of the People and the Parliament

The Auditor General scrutinises the public sector to make sure there has not been a waste of taxpayers’ resources and that the government agencies deliver services in an equitable, efficient and effective manner to the benefit of all Western Australians. 

It could be said that the Auditor General is therefore an ‘ally of the people and the Parliament’. ²⁰ 

The AG must act – and be seen to be acting – independently in carrying out the powers and duties of the Office. This independence is the cornerstone of public sector audit. It is essential that for the AG to carry out his or her duties properly, they must be free of from pressure, influence or interference from any source that may erode that independence. 

The Parliament of Western Australia

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About this History

This history is, then, an initial piece of work undertaken to commemorate our 175th anniversary, and a base-line for further research and enhancement. It is a dynamic document. It is our desire that those interested in the workings of the Audit Office, past employees, history students, and historians will add to this history, with both words and pictures. As such, we would welcome comment, additional information, photographs or any suggested corrections. In this way we hope to, over time, ‘grow’ this history to show precisely how well the Western Australian Audit Office served the public interest since 1829.

CHANGE IN THE WIND: FROM THE FAAA TO AUDIT LEADERS 

Dr Gordon Robertson, former Deputy Auditor General

The introduction of the FAAA under the Labor Government of Brian Burke has been described as the single biggest change to the auditing process in decades. 

Former deputy Auditor General, Dr Gordon Robertson, says the Act completely changed the role of the OAG: “The old statute meant the Auditor General really just ticked the books and made sure everybody filled the forms out properly. 

“The FAAA gave the AG the power to do things and it meant the scope and power of his position became quite colossal. When the Act came into being, Alan Smith was the AG and he had to initiate some fairly significant changes to the way the office behaved. This included experimenting with contracting out an entire division to Coopers and Lybrand for about three years. He also initiated a corporate executive and a different management style.” 

The Auditor General’s traditional role had been expressing an opinion on the financial statements and monitoring compliance with legislative requirements. The challenge for Alan Smith was how to meet the new requirements of the FAAA that contained two major innovations to the audit function: 

• That the AG may carry out examinations of the efficiency and effectiveness of departments, statutory authorities or parts of departments or statutory authorities [Section 80], and
• A requirement for agencies to report key performance indicators of efficiency and effectiveness that had to be submitted and audited by the AG. These had to be clearly identified in annual reports as audited performance indicators. 

This led to Alan Smith setting up the Accountability Audit Division and recruiting a Canadian, Peter Willey, to head it up. The Canadians were then thought to be the world leaders in the development of Value for Money – or comprehensive or operational auditing, as it was variously called. 

The new Section 80 of the Act had expanded the AG’s role of undertaking independent professional assessments of public sector accountability for performance. The view was that financial statement opinions and legislative compliance checks were fundamentally about financial accountability. 

The new division needed new expertise if it was to perform its role effectively. This led to Alan Smith making changes to recruitment into the division, bringing in people with diverse skills and financial management backgrounds. 

“It was a profound change but there was a slow start to producing results from that division. No progress was made on auditing performance indicators because agencies had no idea then how to report on performance.” 

Following Alan Smith’s retirement, Neville Smith, was appointed acting Auditor General. He “did a lot of preparatory work involving performance indicators but again there were difficulties in making things happen”. 

“The big change – the new broom so to speak - came when Des Pearson was appointed AG. He decided that he wanted meaningful performance indicators and the capacity to audit the performance of agencies on a much larger scale. He established a task force which became a branch of the office, with staff who had wider skills than just financial backgrounds. 

“They went out and actively assisted agencies to develop performance indicators.

“The other major change was that Des Pearson restructured the Office into three divisions that covered the nature of government agencies audited. For instance, one division covered agencies with community aspects, another for Western Power and businesses, etcetera. The idea was that he wanted to develop some degree of specialisation in these areas. 

“A second restructure then took place that saw two groups put in place with deputies – one for performance and the other for financial attest which was later changed to assurance work. Both divisions were still under tight central control and they still exist today.” 

Gordon Robertson says one of the other major transformations was that Des Pearson wanted his reports to be constructive, so that they were “crafted to give credit where credit was due and offered suggestions where things could be improved. There was a very big change in the language used. We wanted the audit reports to be more user-friendly and more positive. The strategy behind it was to not alienate the agencies but to work with them”. 

“Des Pearson introduced a huge cultural shift in the organisation that meant more modern auditing techniques, and improved efficiency and expertise. 

“It was not an easy transition but after four or five years our performance and reputation went through the roof and people from all over the world – including the United States, Canada and China came to see how we were doing things. By the mid-90s we became widely recognized as the Australian leader in public sector auditing practices.”²¹

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FITTING THE BILL - THE LAST 10 YEARS 

INTERVIEW WITH THE AUDITOR GENERAL, DES PEARSON.

Des Pearson

Des Pearson was appointed Auditor General in July 1991.

Prior to coming to Western Australia he had worked in Canberra in the Commonwealth Audit Office where he had his initial training in auditing before moving to management roles in Darwin and Canberra. Later he moved to the Department of Primary and Industry and then to TAFE where he worked in administration. His experience in both auditing and management, he says, meant he had a background in audit training coupled with mainstream program-delivery experience. 

This background meant that when he took up his appointment as the new Western Australian Auditor General he looked at the audit task in terms of ‘how to add value’ to it. 

‘The basic audit task of providing assurance is fundamentally important, but without much extra effort you can make it very constructive – by value adding – and that was what I was looking to. 

“When I came here, I was very impressed with the talent within the Office, and the circumstantial advantage where both the Office’s and the State’s public sector size was manageable. This was against the backdrop of the Royal Commission where some fundamental flaws in the operation of the public sector were identified. Out of all those factors I could see a more purposeful role for audit. 

“Sometimes it is handy being fresh, not having the baggage, or inhibitions, of the traditional culture and modus operandi – so I came in with a fresh approach to an office that was a little startled, but receptive! 

“We went through a process of where for about a year I watched and assessed what was happening as against, what I saw, were the opportunities. One basic assessment I made was that we were putting about 90 per cent of our resources into the annual attest function. That was very important. However, we were working quite hard at doing efficiency and effectiveness reviews with limited success, and we were really struggling with performance indicators.

“I see public sector auditing as distinctly different from the traditional view of audit. In the commercial world, the traditional audit – providing assurance regarding financial reports – answers the 'how much and the how well' question because it operates in a commercial environment where the financial result is a pretty reliable indicator of operational success. But in the public sector, the assurance audit basically only answers the “how much” question – the “how well” dimension is a much harder question to answer given the nature and circumstance of  public sector operations.  

“So, I think that whoever decided to put 'performance indicators' into the FAAA had great foresight, and we were delighted to capitalise on it.  

“The nature of the public sector is that most programs are basically single providers and there’s usually excess demand – you don’t have the normal marketplace pressures to keep people focused on the outcome sought. That is where I also saw an opportunity for more focussed efficiency and effectiveness – examinations providing feedback to program managers on how well they were performing”. 

To achieve this Des Pearson decided to restructure the Office to shift resources. 

“I still wanted to do a professional job on the annual financial statement audit but  also wanted to divert resources to address performance indicators, and expand the efficiency and effectiveness examinations. 

‘There were two restructures over the first three to five years – the first to refocus the Office to an audit client focus; one group looked after community-type agencies, another infrastructure-related agencies, and one for central government-type agencies. 

“Until then, the primary focus had been on doing financial statements, but my goal was not only to do those in a financial sense, but also to put them in the context of their purpose.

“The second facilitated a reconcentration of effort on the types of audit activities, attest and direct examinations. 

“When we were doing the financial statements we were 'ticking and flicking' the statements were right, but that wasn’t telling the Parliament and community how well the sector was operating. The people doing the financial statements were doing a great technical job but I was trying to expand their focus to go beyond making sure that two and two equals four, into what does four achieve – and what does four mean? 

“The first phase of this was to get a better understanding of the business of the agencies to increase our awareness and knowledge of what our clients were doing. In my mind, that gave us a stepping stone to working on the performance indicators and to better focus our performance examinations. It meant broadening the interests of the financial auditors to those wider issues, and complementing the skill base by introducing multi-disciplinary teams”.

The move also meant the Office began to look at more relevant but less conventional issues. 

“Some controversy has come. But I would claim the areas that we have got into are very much areas to do with broader resource management – it now addresses ‘soft’ resources, where the traditional perception is that resources involve only hard dollars. But generally speaking, in the public sector two thirds of outlays go on staff, salaries and related expenses. 

“To me, the real test is how well you use that manpower. That is a very important dimension and it’s why I have tried to shift the focus. It’s not just making sure you pay everyone the right amount every fortnight, but how well you use those people to deliver the programs for the benefit of the community. 

“That’s where some people have seen us as being controversial”. 

One of the more recent reviews to make headlines was the performance examination of the Rottnest Island, Turning the Tide: The Business Sustainability of the Rottnest Island Authority. [November 2003] 

This report found the RIA’s financial performance was ‘not sustainable’ and was ‘adversely affecting economic, social and environmental performance. Without urgent attention, the RIA will be left with little choice but to reconsider public access and use of the Island’. 

“These issues, once aired, can be problematic for the government of the day as it works through the policy and budgetary implications. Ultimately though, this work stops sending good dollars after bad in the longer run. 

“We see ourselves as the eyes and ears of Parliament. We approach issues from the perspective of what’s the real purpose and what’s the best value for the taxpayer. At the end of the day, that’s the driving force.’ 

Mr Pearson sees two main areas where the Office has been highly successful during his 13-year tenure.

“They have to do with two visions we have had in my time. The first one was leading in performance auditing. To me that had a double motivator, or driver, in it – that is, that public sector audit has a place in the scheme of things and we should be proud and taking the lead in demonstrating that; and that performance auditing was reinforcing the broader view of auditing. We defined performance auditing as extending beyond the traditional financial statement audit ‘snapshot’ of performance, to embrace reviews of controls, accountability and legal compliance, and to providing Parliament with information and analysis of the operational efficiency and effectiveness of programs and agencies. 

“That served to motivate us to broaden our outlook and to be less restrictive about how we approached the audit task. As well, the leadership element was to motivate ourselves to do audits innovatively and well.  That vision served us well in the first phase of change. 

“It took about five to seven years to do the first phase. Now, we are emphasising ‘in the public interest’ to remind us of the purpose behind the public sector audit task. We cannot rest on our laurels in terms of our achievements. 

“In the public interest, to me is the ultimate test.  Because we are giving an assurance to the Parliament and community that things are operating as they should. In the public sector, there are always compromises and there will never be enough money to do everything you’d like to do, but I feel we have a role to provide assurances that the balance is reasonably appropriate in all the circumstances”.

The areas that come under review by the Office are chosen with a view to ‘get a balance in coverage and significance across the public sector’. 

“That means we are auditing areas having regard to their size and contribution, but we also have regard to Parliamentary debate as an indicator of what  Parliamentarians are interested in, with a view of 'have we looked at it, and if we haven’t, can we look at it to better inform the debate?' Similarly, we keep an eye on what’s topical in the community. 

“That is often represented by the media – what’s occupying space in the media that the community seems to be reacting to. We take that on board also.  

“You can, for instance, look at the example of Rottnest. It only has outlays of $25 million-a-year, which is the bottom end of our financial considerations.  But when you look at Parliamentary and community debate, and the history of five loss-making years, those things come together to make it appropriate for us to look at it. 

“A team of two or three people then set about to review the operation during a six-to-nine month period. 

“Other areas recently looked at by the office have been Call Centres and the Delivery of Customer Benefits [April 2003] which examined six call centres including the Water Corporation and the Department for Planning and Infrastructure Licensing Centres because they interface with the public. Another area we looked at was Complaints Management [October 2001], which involved looking at that element across six agencies including Western Power”. 

The Audit Office can comment on the implementation of government policy but it cannot challenge government policy.

“We look at areas where we think there is scope to be a catalyst for improved performance. Or where there is a lot of community debate and there might be a benefit in us having a look at it and putting more objective facts on the table to better inform the debate”. 

Another change within the office was the delivery of reports. 

“I feel we have to deliver our reports in a form that is suitable to the recipients and that’s the busy Member of Parliament, and the community. So, we have had a real push for plain English, user-friendly and focused reports to get the essence of the message across. 

“Audit has a role to play and it can be a very positive and constructive role. Often there’s some temporary discomfort but we are not out to destroy anybody. We try to depersonalise issues and be objective in our reporting. We try to get a middle ground where people might say, 'This is a wakeup call and let’s try do things better' ”. 

Mr Pearson believes it is critical that the role is independent. The work of the Office has moved from the ‘old days in public sector auditing which was called 'exposing waste' to today where now we are more refined and call it efficiency and effectiveness’. 

In the past decade or so, the Auditor General says public sector agencies have improved in this regard:  “I think today the public sector is more focused on what it is supposed to be achieving and the work of the Office has been a major contributor to that”. 

In 2003,  the Report on Ministerial Portfolios [November 25, 2003] noted that over the years, ‘a number of agencies have developed the commendable practice of submitting their finalised, but sometimes uncertified, financial statements and performance indicators well in advance of the statutory deadline. This enables earlier commencement of the audit process and provides the Accountable Officer or Authority with added confidence when subsequently certifying the financial statements and performance indicators’. 

Some of the agencies named in that report for ‘exemplar better practice’ included: 

• Department of Conservation and Land Management
• Office of the Inspector of Custodial Services
• Police Service
• Department of the Registrar; Western Australian Industrial Relations Commission
• Disability Services Commission
• Fremantle Port Authority
• Metropolitan Cemeteries Board
• Water Corporation
• Western Australian Treasury Corporation
• Lotteries Commission 

The same report found that the asset management of computer hardware, furniture, plant and equipment was ‘generally satisfactory, though a range of issues for attention were identified at most of the agencies in the audit sample’. 

The audit testing at eight agencies resulted in positive assurance that: 

As well, the audit disclosed good asset management at three agencies: 

• Department of Agriculture
• Police Service
• State Housing Commission 

The report also found that there were a range of deficiencies, however, in five other agencies reviewed. 

“As auditors we are not going to find everything that’s wrong, but I would hope we find the big things relatively early.

“We have got to be smarter too. Generally, the system is quite good but the bar’s being raised all the time to a higher level and we have to leverage that for the benefit of the taxpayer.’²² 

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REFERENCES:

Please note: Click on the links below to return to the body text where the references are contained.

General References: Historical documents provided by the Office of the Auditor General; A Fine Country to Starve In, G. C. Bolton, University of Western Australia Press; Big John Forrest 1847-1918, A Founding Father of Commonwealth of Australia, Frank Crowley, University of Western Australia Press; The Wester Australian Constitution, Wayne Martin QC, The Constitutional Centre of Western Australia; ‘Proclamation Day’, Jolly Read, The Constitutional Centre of Western Australia. Annual Reports, Office of the Auditor General, 1999-2000, 2000-2001, 2001-2002, 2002-2003.

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