Report on Ministerial Portfolios at November 29 2002
Report No. 9 - December 2002
This Report provides:
- a summary of the results of financial statement and performance indicator
audits completed to November 29, 2002, including specific references
to qualifications of financial statements and performance indicator
opinions;
- an overview of public sector audit issues; and
- commentary on specific control issues and accounting and contemporary
issues.
To November 29, 2002, 183 financial statement and controls audits and
140 performance indicator audits have been completed as part of the 2002
audit cycle. These audits were completed using the Office.s internationally
recognised audit methodology adapted to the public sector business environment.
In addition to delivering more efficient and effective audits, the methodology
fosters clearer and more frequent communication with agency management
in relation to their financial operations and provides management with
meaningful business advice.
Summary of Results - Financial Statements and Controls Audits
Of the 183 financial statement and controls audits completed, the opinions
of 15 agencies were qualified in relation to their financial statements,
controls or compliance with relevant laws. The more significant of these
were:
- Department of Industry and Technology: Legal advice indicated that
the Department did not have authority to charge and collect fees from
suppliers to government agencies under common use contracts. The fees
for the financial year were based on the value of sales to agencies
and totalled $1.9 million. The Department also did not have authority
to retain the fees which were used to partially offset the cost of managing
the common use contracts subject to an earlier report.
- Department of Planning and Infrastructure: The Department utilised
both its own bank account and that of the Department of Transport for
the receipt and payment of moneys without effecting appropriate transfers
between the bank accounts. Numerous reconciling items accumulated throughout
the financial year and as there remained a balance of $3.086 million
in outstanding unreconciling items at reporting date, an opinion could
not be formed on whether Cash Assets of $36.158 million in the Statement
of Financial Position and Cash of $2.255 million in the Schedule of
Administered Items were fairly presented.
- Department of Transport (abolished 30/06/02): Monthly reconciliations
of the Department.s bank accounts included unexplained reconciling items
that varied in amount from month to month. As the combined reconciliation
had not been finalised and there was a balance of $5.038 million in
outstanding reconciling items at reporting date, an opinion could not
be formed on whether Cash Assets of $17.974 million in the Statement
of Financial Position and Cash of $133 000 in the Schedule of Administered
Items were fairly presented.
- Development Commissions: Legal advice is that Development Commissions
did not have the power under their enabling legislation to make grants.
All nine Development Commissions had made grants during the 2001-02
financial year and consequently the opinions of all nine were qualified.
- Government Employees Superannuation Board: The Board received into
and paid out of the Government Employees Superannuation Fund moneys
collected on behalf of the Department of Treasury and Finance. The Crown
Solicitor.s Office advised that moneys of this nature were not permitted
by legislation to be paid into or out of the Fund.
- Rottnest Island Authority: The Authority did not have adequate controls
in place to ensure the accuracy and completeness of the information
provided by third parties which is used to determine the landing revenue
due. An opinion could not be formed on whether the $3.3 million included
as Admission Fees in Revenue from Goods and Services was fairly presented.
- The Board of the Art Gallery of Western Australia: Controls exercised
over the collection, banking and reconciliation of exhibition revenue
were inadequate and an opinion could not be given on the completeness
and reliability of $2.696 million of exhibition revenue. Further, controls
over the recording of revaluations of art works were inadequate and
an opinion could not be given on the increase in the valuation of art
works of $8.222 million.
During the audit cycle, a range of audit findings was reported through
management letters to individual agencies. Two specific agency issues
identified were:
- Department of Fisheries: Negotiations involving the Departments of
Fisheries, Industry and Planning, and Treasury and Finance for the replacement
of a sea going patrol vessel for Fisheries took place from 2000 through
to 2002. Analysis of the lease versus purchase 10 year costings were
reviewed by the above departments at various times. Just prior to signing
the lease agreement, analysis showed the cost of leasing was $210 000
more expensive than purchasing.
- Agents' Trust Account Interest Revenue: Monitoring and audit processes
at the Real Estate and Business Agents Supervisory Board and the Settlement
Agents Supervisory Board revealed that significant 'back interest' on
members' trust accounts was received late by the Boards, being $202
000 and $68 000 respectively, for the 2001-02 financial year. These
errors occurred where agents opened normal accounts rather than trust
accounts with banks or changed banks but did not inform the Board.
Common control issues identified across agencies were:
- Information Technology Controls: There has been no significant improvement
since last year in relation to: password and computer access and security
controls; and approval and review of system modifications. Inadequate
monitoring and review of the results of computer processing increases
risks of erroneous processing.
- Disaster Recovery Plans: Uncertainty continues over the effectiveness
of arrangements to ensure ongoing availability of critical information
systems in agencies.
- Asset Registers: Asset management systems which involve maintaining
asset registers, periodic checking of assets held and investigating
any variances are in need of review.
- Accounting Manuals: A significant number of agencies need to review
their documentation of practices and procedures to assist employees
to perform their required duties effectively and consistently.
Summary of Results - Performance Indicators
This year agencies were required to certify that their performance indicators
were relevant to their outcomes and appropriate for users. To November
29, 2002, 135 unqualified opinions on the performance indicators of 140
agencies were issued. Ten agencies did not submit indicators as required
by the FAAA, including four agencies that did not operate for the full
financial year and one agency that did not have data on which to base
their performance indicators. Forty-two health sector agencies submitted
their performance indicators on November 29, 2002.
Five qualified opinions on performance indicators were issued. The Department
of Industry and Technology and Midland Redevelopment Authority did not
have sufficiently comprehensive, reliable or verifiable information on
which to base their performance indicators.
The Department of Land Administration's reported effectiveness indicator
on 'extent to which the Business Plan is achieved' was not relevant to
the outcome it was measuring and as data collection systems were not in
place, the indicator was not verifiable. The Commissioner of Workplace
Agreements did not report any effectiveness indicators.
The Department of Health's performance indicators were qualified as the
Department's effectiveness indicators were not comprehensive and did not
address all of the Department's outcomes. In addition, the efficiency
indicators did not include approximately $250 million of the Department.s
total expenditure of $521 million.
Control Issues
In addition to the annual audit of all agencies, further complementary
reviews of the reliability of the operations of systems and procedures
were undertaken in selected agencies. Controls at most agencies were generally
found to be operating effectively. However, the following issues were
reported:
- Assets within Metropolitan Public Hospitals: Management needs to improve
control over assets including: updating asset policies and procedures
documentation; creating a register of portable and attractive items;
reviewing inconsistencies in capitalisation and expensing of asset purchases;
reviewing depreciation rates; and increasing staff awareness of the
importance of keeping all asset registers up to date, including the
current location of assets.
- Expenditure: Management needs to ensure that users of credit cards
are properly authorised and that the cards are only used for agency
business. Inadequate support or explanations for credit card transactions
made it difficult for agencies to demonstrate that expenses were for
official purposes.
Accounting and Contemporary Issues
The report also includes commentary on the following significant issues
which occurred during the year, including:
- Accrual appropriations from the Consolidated Fund and the need for
agencies to account for non-cash items such as accruing employee leave
entitlements and depreciation of assets
- Agencies whose assets are currently measured on a revaluation basis
need to ensure that revaluations undertaken during any reporting period
beginning after June 30, 2002 are on the fair value basis.
- Corporate governance issues in relation to inconsistencies in disclosure
requirements of public sector corporatised entities and accountability
requirements for approval of their Statement of Corporate Intent and
statements of corporate intent.
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