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					OPINIONS                           WINTER 2011

ANAO Opinions is published to provide our clients
with information on developments in financial reporting                                      INSIDE THIS
and disclosure, together with details of recently                                            EDITION
completed performance audits and better practice                                             ANAO Audit Reports
guides. This edition of Opinions provides updated                                            •	 Recently tabled reports
information since the Autumn 2011 edition and lists                                          •	 Reports scheduled to be tabled
                                                                                                – July to September 2011
those audits scheduled for completion in the July to
September 2011 period.                                                                       ANAO Better Practice Guides
                                                                                             •	 Guides Scheduled to
                                                                                                be Published July to
ANAO AUDIT REPORTS                                                                              September 2011
RECENTLY TABLED AUDIT REPORTS                                                                Australian Accounting
The following section contains the objectives of ANAO audit reports tabled between           Standards Board (AASB)
April to June 2011. To view an electronic copy of the full audit report left click the       Developments
symbol ( ) next to the relevant title. A complete copy of all ANAO reports can be            •	 New, revised and amending
obtained from the ANAO website at: For further details phone the               Accounting Standards and
Publications Officer on (02) 6203 7505.                                                         Interpretations
                                                                                             Department of Finance and
Audit Report No. 36: Service                   Audit Report No. 37: Management               Deregulation
Delivery in CRS Australia                      of Explosive Ordnance Held by the
                                                                                             •	 Finance Circulars
                                               Air Force, Army and Navy
The audit objective was to assess the                                                        •	 Accounting Guidance Notes
effectiveness of CRS Australia’s delivery      The objective of this audit was to
                                                                                             •	 Finance Briefs
of Disability Management Services. In          examine the effectiveness of Defence’s
assessing CRS Australia’s performance,         management of explosive ordnance
the ANAO examined whether:                     by the end users of this materiel in the
•	 services are delivered in accordance with   Air Force, Army and Navy. In particular,
   CRS Australia’s operating procedures,       the focus was on the effectiveness of
   which incorporate the Disability Services   arrangements for the oversight and
   Standards and the requirements of the       physical control of explosive ordnance
   Department of Education, Employment         once it is issued to Service units.
   and Workplace Relations memorandum
   of understanding;                           Audit Report No. 38: Management
•	 CRS Australia has an effective client       of the Certificate of Compliance
   feedback (including complaints) system,     Process in FMA Act Agencies
   which is used to identify and address
                                               The objective of the audit was to assess
   business risks and areas for improving
                                               the effectiveness of annual Certificate
   service delivery; and
                                               of Compliance processes for FMA Act
•	 sound governance arrangements               agencies. To form a conclusion against
   (including performance monitoring           the audit objective, the audit considered:
   and reporting) are in place to monitor      Finance’s administration of the Certificate
   service delivery.                           process at a whole-of-Government level;
      selected agencies’ annual Certificate        the contract and the extent to which the     Audit Report No. 43:
      processes; and the design and impact         revised contract provides an assurance of    Australian Federal Police
      of the Certificate.                          better value for money when compared to      Protection Service
                                                   the original contract.
                                                                                                The objective of the audit was to examine
      Audit Report No. 39: Management                                                           whether the Uniform Protection (UP) and
      of the Aviation and Maritime                 Audit Report No. 41:                         Close Personal Protection (CPP) services
      Security Identification Card                 Maintenance of Defence Estate                provided by the Australian Federal Police
      Schemes                                                                                   Protection Service are being managed
                                                   The objective of the audit was to examine
      The objective of the audit was to assess     the effectiveness of the management          effectively. In particular, the audit examined:
      the effectiveness of the Department of       of maintenance of the Defence estate,        •	 whether the protection function has been
      Infrastructure and Transport’s (DIT’s) and   taking particular account of planning and       effectively integrated into the Australian
      Attorney General’s Department (AGD’s)        delivery aspects.                               Federal Police, and sound arrangements
      management of the Aviation and Maritime                                                      are in place to strategically plan
                                                   The audit examined: Defence’s policies,         protection services and manage risks;
      Security Identification Card schemes.
                                                   procedures, processes and supporting
      In assessing the performance of DIT          tools related to the planning and delivery   •	 whether protection staff have access to
      and AGD, the ANAO examined the               of the maintenance of the estate; and           appropriate training and guidance; and
      effectiveness of the: governance             services provided to Defence by private      •	 the management arrangements for UP
      arrangements supporting the schemes;         sector firms in relation to maintenance         and CPP services.
      process for issuing cards; information       activities.
      technology environment supporting the                                                     Audit Report No. 44: AusAID’s
      schemes; and compliance activities                                                        Management of Tertiary Training
                                                   Audit Report No. 42: The
      surrounding the schemes.                                                                  Assistance
                                                   Establishment, Implementation
                                                   and Administration of the Council            The objective of the audit was to assess
      Audit Report No. 40: Management              Allocation Component of the                  the effectiveness of the Australian Agency
      of Explosive Ordnance Services               Regional and Local Community                 for International Development’s (AusAID’s)
      Contract                                     Infrastructure Program                       management of tertiary training assistance.
      The objective of the audit was to assess     The objective of the audit was to            Particular emphasis was given to:
      whether Defence is effectively managing      assess whether the Council Allocation        •	 planning of tertiary training assistance;
      the Explosive Ordnance Services              component of the Regional and Local          •	 management of in-Australia scholarship
      Contract.                                    Community Infrastructure Program has            programs;
                                                   been effectively designed, implemented
      The audit focused mainly on Defence’s                                                     •	 management of other forms of tertiary
                                                   and administered.
      contract management framework,                                                               training assistance, including support
      including the arrangements to monitor                                                        for overseas tertiary training institutions,
      the contractor’s performance in delivering                                                   and direct provision of tertiary training
      services under the contract. The audit                                                       overseas;
      also examined the processes used by                                                       •	 devolved management of tertiary training
      Defence to develop the current version of                                                    assistance; and
                                                                                                •	 monitoring, evaluation, and reporting.

Audit Report No. 45: Administration          •	 governance arrangements for Flagships     Audit Report No. 49:
of Luxury Car Tax                               incorporated sound oversight, planning    Fuel Tax Credit Scheme
                                                and reporting arrangements; and
The objective of the audit was to assess                                                  The objective of the audit was to assess
the effectiveness of the Australian Tax      •	 periodic review activities were used to   the effectiveness of the Australian
Office’s (ATO’s) administration of the          assess and improve the operation of       Taxation Office’s administration of the
Luxury Car Tax, including aspects of the        the Flagships.                            Fuel Tax Credits Scheme. Particular
tax administered by Customs on behalf                                                     emphasis was given to the Fuel
of the ATO.                                  Audit Report No. 48: Monitoring              Scheme’s governance and reporting
                                             and Compliance Arrangements                  arrangements, risk management
                                             Supporting Quality of Care                   strategies and compliance management
Audit Report No. 46: Management
of Student Visas                             The audit objective was to assess the
The objective of the audit was to assess     effectiveness of monitoring arrangements
                                             by the Aged Care Standards and               Audit Report No. 50:
the effectiveness of the Department of
                                             Accreditation Agency Ltd and compliance      Administration of Tax
Immigration and Citizenship’s (DIAC’s)
                                             activities by the Department of Health       Office Shopfronts
management of the student visa program.
Three key areas were examined in the         and Ageing, put in place to achieve          The objective of the audit was to
audit: the processing of student visa        residential aged care homes’ compliance      assess the effectiveness of the services
applications; ensuring compliance with       with the Accreditation Standards and their   delivered through Australian Taxation
student visa conditions; and cooperation     other, related, responsibilities under the   Office shopfronts to individual and micro
between DIAC and the Department of           Aged Care Act 1997 and its associated        enterprise tax clients. Particular emphasis
Education, Employment and Workplace          instruments.                                 was given to the delivery of services
Relations.                                   The ANAO’s assessment considered             to clients and planning and reporting
                                             whether:                                     processes for shopfront services.
Audit Report No. 47: The                     •	 a sector-wide compliance strategy
Development and Administration                  was in place and aligned with effective   Audit Report No. 51:
of National Research Flagships                  monitoring and compliance activities at   Administration of the Access
                                                the operational level;                    to Allied Psychological Services
The objective of the audit was to assess
                                             •	 there was a clear articulation of the     Program
the effectiveness of the Commonwealth
Scientific and Industrial Research              separate but complementary roles          The objective of the audit was to examine
Organisation’s (CSIRO’s) development            and responsibilities of the Department    the effectiveness of the Department of
and administration of selected National         of Health and Ageing and the Aged         Health and Ageing’s administration of the
Research Flagships. In assessing CSIRO’s        Care Standards and Accreditation          Access to Allied Psychological Services
performance, the ANAO examined                  Agency Ltd; and                           Program.
whether:                                     •	 performance information gathered
                                                                                          The ANAO’s assessment considered
•	 mechanisms were in place to develop          by both agencies to support public
                                                                                          systems and processes that the
   and implement the Flagships, within the      reporting and business improvements
                                                                                          department employs to: guide its
   context of the broader CSIRO change          was useful and enabled comparison of
                                                                                          administrative efforts; manage
   program;                                     performance over time.

                                                                                                        OPINIONS WINTER 2011            3

      day-to-day delivery of the program           Audit Report No. 53:                          financial reporting responsibilities, and an
      through a large number of third-party        Drought Assistance                            examination of relevant internal controls,
      providers; plan and administer program                                                     including information technology system
                                                   The objective of the audit was to
      initiatives; monitor compliance with                                                       controls. The ANAO’s examination of
                                                   assess the effectiveness of the
      program requirements; and report on the                                                    these areas is designed to assess the
                                                   Department of Agriculture, Fisheries and
      extent to which the program is achieving                                                   reliance that can be placed on agencies’
                                                   Forestry’s administration of Exceptional
      the objectives set by Government.                                                          internal controls to produce complete and
                                                   Circumstances (EC) measures and
                                                                                                 accurate information for financial reporting
                                                   the implementation of the pilot of new
      Audit Report No. 52:                         drought reform measures.
      Administration of Deductible Gift
                                                   Particular emphasis was given to the:         Audit Report No. 55:
      Recipients (Non-profit Sector)
                                                   •	 processes for approving and reviewing      Administering the Character
      The objective of the audit was to assess        EC declarations;                           Requirements of the Migration
      the effectiveness of the Australian Tax
                                                   •	 arrangements for the delivery of           Act 1958
      Office’s administration of Deductible
                                                      drought assistance by state/territory      The objective of this audit was to assess
      Gift Recipient (DGR) endorsements and
                                                      governments;                               the effectiveness of the Department
      associated arrangements.
                                                   •	 arrangements for the delivery of drought   of Immigration and Citizenship’s
      Particular emphasis was given to the:           assistance by Centrelink;                  administration of the character
      •	 governance arrangements supporting        •	 monitoring and reporting on                requirements of the Migration Act 1958.
         the management of DGR processes;             performance; and                           Particular emphasis was given to the
      •	 DGR endorsement assessment process        •	 management of the pilot for new            following areas:
         to achieve consistent outcomes that are      drought reform measures.
         timely and in line with legislation;                                                    •	 policies, guidance and training for staff
                                                                                                    to support the administration of section
      •	 communication and co-ordination
                                                   Audit Report No. 54: Interim                     501 of the Act;
         of DGR application requirements to
                                                   Phase of the Audit of Financial               •	 processes to identify visa applicants and
         assist applicants to achieve DGR
                                                   Statements of Major General                      holders of character concern, administer
         endorsement and minimise unnecessary
                                                   Government Sector Agencies for                   cases and make decisions; and
         administrative requirements for
                                                   the year ending 30 June 2011                  •	 management arrangements supporting
         applicants; and
      •	 compliance approach, which provides       The Auditor-General Act 1997 establishes         section 501 processing.
         assurance that fundraising entities       the mandate for the Auditor-General to
         comply with DGR endorsement               undertake financial statement audits of all   Audit Report No. 56:
         requirements.                             Australian Government entities including      Administering the Character
                                                   those of Government agencies, statutory       Requirements of the Australian
                                                   authorities and Government business           Citizenship Act 2007
                                                                                                 The objective of this audit was to assess
                                                   Our interim financial audits of agencies      the effectiveness of the Department
                                                   encompass a review of governance              of Immigration and Citizenship’s
                                                   arrangements related to agencies’
(CONTINUED)                                                                                 ANAO BETTER
                                                                                            PRACTICE GUIDES
                                                                                            Better Practice Guides are
administration of the character                 Audit Report No. 57: Acceptance
                                                                                            produced by the ANAO to assist
requirements of the Citizenship Act 2007.       into Service of Navy Capability
                                                                                            public sector managers in the
Particular emphasis was given to the            The objective of the audit was to report    performance of their responsibilities.
following areas:                                on the effectiveness of Defence’s           A complete copy of all ANAO
•	 policies, guidance and training for staff    approach to the acceptance into service     Better Practice Guides can be
   to support the administration of the         of Navy capability, and to identify where   obtained from the ANAO website at
   character requirements;                      better practice may be used by Capability
                                                Development Group, Defence Materiel
•	 processes to identify clients of character                                               For further details phone the
                                                Organisation and Navy.
   concern, administer cases and make                                                       Publications Officer on
   decisions; and                                                                           (02) 6203 7505.
•	 management arrangements supporting
   citizenship processing.                                                                  GUIDES
                                                                                            SCHEDULED TO
                                                                                            BE PUBLISHED
  ANAO AUDIT REPORTS SCHEDULED TO                                                           JULY TO
  BE TABLED JULY TO SEPTEMBER 2011                                                          SEPTEMBER 2011
  •	 Australian Defence Force’s mechanisms for capturing lessons from operations
                                                                                            •	 Public sector audit committees
  •	 Therapeutic goods administration
                                                                                            •	 Environmental sustainability in
  •	 Indigenous economic participation                                                         Australian Government operations
  •	 Development of key performance indicators                                              •	 Developing and managing
  •	 Fair work education and information program                                               contracts
  •	 National Blood Authority’s management of Australia’s blood and blood
     product supply
  •	 Confidentiality in Government contracts - Senate order for departmental
     and agency contracts (calendar year 2010 compliance)
  •	 Administration of grant reporting obligations to the Finance Minister
  •	 Indigenous protected areas
  •	 Establishment, implementation and administration of the infrastructure
     employment projects stream of the jobs fund

                                                                                                         OPINIONS WINTER 2011        5
      Copies of Australian Accounting Standards and Interpretations are available from the AASB web site at
      or by clicking on the links below. Early adoption of new standards and interpretations by Australian Government agencies and
      authorities requires the approval of the Chief Executive of the Department of Finance and Deregulation.

      AASB 2011-1 Amendments to                     formed under the Corporations Act 2001      This Standard is applicable to reporting
      Australian Accounting Standards               from accessing the override.                periods beginning on or after 1 July 2013.
      arising from the Trans-Tasman                                                             Note that the FMOs restrict the capacity of
                                                    In addition to the above amendments,
      Convergence Project                                                                       Australian Government entities to apply the
                                                    AASB 2011-1 makes minor amendments
                                                                                                Reduced Disclosure Requirements.
      AASB 2011-1 amends a range of                 to other Australian Accounting Standards
      Australian Accounting Standards and           and relocates a number of Australian-
      Interpretations to complete the first phase   specific definitions and disclosures to a   AASB 2011-3 Orderly Adoption of
      of harmonisation between Australian and       new Australian standard: AASB 1054          Changes to the ABS GFS Manual
      New Zealand Standards.                        Australian Additional Disclosures.          and Related Amendments
      One of the major changes under AASB           This Standard is applicable to              AASB 2011-3 amends AASB 1049
      2011-1 is the removal from AASB 101           reporting periods beginning on or           Whole of Government and General
      Presentation of Financial Statements of       after 1 July 2011.                          Government Sector Financial Reporting
      paragraph Aus 138.6, which requires                                                       to specify which versions of the Australian
      entities to disclose capital and other                                                    Bureau of Statistics (ABS) Government
                                                    AASB 2011-2 Amendments to
      expenditure commitments. However,                                                         Finance Statistics Manual (GFSM) may
                                                    Australian Accounting Standards
      other Australian Accounting Standards                                                     be applied to Whole of Government
                                                    arising from the Trans-Tasman
      will continue to require disclosure of some                                               (WofG) and General Government Sector
                                                    Convergence Project – Reduced
      capital and leasing commitments.                                                          (GGS) financial statements.
                                                    Disclosure Requirements
      AASB 2011-1 also introduces the                                                           AASB 2011-3 requires both WofG and
                                                    AASB 2011-2 amends AASB 1054
      true and fair override principle, which                                                   GGS financial statements to apply the
                                                    Australian Additional Disclosures to
      permits an entity to depart from the                                                      version of the GFSM effective at the
                                                    provide relief to entities preparing
      Australian Accounting Standards where                                                     beginning of the previous annual reporting
                                                    financial statements under the Reduced
      management concludes that compliance                                                      period or any version effective at a later
                                                    Disclosure Requirements of the Australian
      with a requirement in an Australian                                                       date. Additional disclosures are required
                                                    Accounting Standards.
      Accounting Standard would be so                                                           where the version of the GFSM applied is
      misleading that it would conflict with the    Entities applying Reduced Disclosure        not the most recent version.
      objective of financial statements set out     Requirements are no longer required
                                                                                                AASB 2011-3 also revises the definition of
      in the Framework. However, AASB 2011-         to present disclosures relating to audit
                                                                                                the GFSM to include the ABS document
      1 also prohibits not-for-profit entities,     fees, imputation credits and cash flow
                                                                                                Amendments to Australian System of
      reduced disclosure entities and entities      reconciliations.


Government Finance Statistics 2005           Australian-specific disclosures, AASB
(ABS Catalogue No.5514.0).                   1054 also removes certain disclosure
                                             requirements for audit fees and imputation
This Standard is applicable to
reporting periods beginning on or
after 1 July 2012.                           Under AASB 1054, entities are only
                                             required to disclose the total audit fees
                                             in two line items: total for audit or review
AASB 1054 Australian Additional
                                             of the financial statements; and total for
                                             all other services provided for non-audit
Certain Australian-specifc disclosure        services during the reporting period.
requirements have been relocated to          Previously AASB 101 Presentation of
a new Australian Accounting Standard,        Financial Statements required separate
AASB 1054 Australian Additional              disclosure of each non-audit service
Disclosures.                                 provided.
The main disclosure requirements             This Standard is applicable to
relocated to AASB 1054 relate to audit       reporting periods beginning on or
fees, imputation credits and cash flow       after 1 July 2011.
reconciliations. In addition to relocating

  Exposure Drafts, Invitations to Comment and Consultation Papers mentioned below can be downloaded from
  the AASB website at or by clicking on the links below.
  There were no Exposure Drafts issued by the Australian Accounting Standards Board for the period April
  to June 2011.

                                                                                                   OPINIONS WINTER 2011   7

      Copies of Finance Minister’s Orders,
      Finance Circulars, FinanceBriefs and
                                                Finance Circular 2011/03 National
                                                Standard Chart of Accounts
      Accounting Guidance Notes are             for reporting by not-for-profit              BRIEFS
      available from the Department of          organisations
      Finance and Deregulation website at                                                    FinanceBrief 37 Timing of
                                                Finance Circular 2011/03 explains the        changes in Agency assets and or by clicking on
                                                National Standard Chart of Accounts          liabilities arising from Machinery
      the links below.
                                                (SCOA) for reporting by not-for-profit       of Government Changes
                                                entities. The SCOA is an agreed list of
                                                                                             FinanceBrief 37 sets out, in the context
      FINANCE                                   account categories and data dictionary
                                                                                             of machinery of Government changes,
                                                for Australian governments to use when
      CIRCULARS                                 requesting financial information from not-   how to determine the time at which
      Finance Circular No. 2011/01 –            for-profit organisations.                    responsibility for assets, liabilities, income,
      Commitments to Spend Public                                                            expenses and appropriations transfers
                                                Adoption of the SCOA by not-for-profit       from one Australian Government entity
      Money                                     organisations is voluntary. The SCOA         to another. It does not address the
      This circular provides guidance on the    does not apply to reporting by FMA           special considerations that arise from
      interpretation and operation of section   Act agencies, and is not related to the      the abolition of agencies.
      44 of the Financial Management and        Australian Government’s accounts.
      Accountability Act 1997 and Financial                                                  FinanceBrief 38 Reporting of pre-
      Management and Accountability                                                          2009 loans to other government
      Regulations 7-12, the core legislative    ACCOUNTING                                   bodies
      requirements that apply to commitments    GUIDANCE NOTES                               FinanceBrief 38 requires loans to
      to spend public money.
                                                Accounting Guidance Note No.                 Commonwealth bodies, made prior to
      Finance Circular No. 2011/02 –                                                         2009 from the Official Public Account, to
                                                2011/02 - Accounting for Leases
      Commonwealth Procurement                                                               be reported as administered items in the
                                                with a Land Component
      Guidelines Exemption for                                                               financial statements of the responsible
      Indigenous Businesses                     Accounting Guidance Note No.2011/02          portfolio department.
                                                explains amendments to AASB 117
      This circular advises all departments,
                                                Leases arising from AASB 2009-5 Further
      agencies and relevant CAC Act
                                                Amendments to Australian Accounting
      bodies subject to the Commonwealth
                                                Standards arising from the Annual
      Procurement Guidelines (CPGs) of the
                                                Improvements Project and provides
      introduction of an exemption to the
                                                guidance to assist entities in accounting
      Mandatory Procurement Procedures
                                                for leases with a land component.
      of the CPGs for Indigenous Small or
      Medium Enterprises.                       AASB 117 now requires entities to
                                                reassess the classification of land
                                                elements of all property leases to
                                                determine whether they are in the
                                                nature of operating or finance leases.

Opinions is published by:
The Australian National Audit Office
GPO Box 707
Canberra ACT 2601
and is available on our website at:
Please contact:
ANAO signing officers and audit managers are your first point of contact
for technical accounting matters. The Professional Services Branch in the
ANAO provides technical and policy advice to financial and performance
auditors and also conducts yearly client seminars.

This publication has been prepared by the Australian National Audit Office. While
every effort has been made to ensure its accuracy, neither the Australian National
Audit Office nor any of its employees shall be liable on any ground whatsoever to any
party in respect of decisions or actions they may take as a result of using this Bulletin.
                                                                                                                    Z00 45775

The information in this publication is of a general nature only and is not intended to
be relied upon as, or as a substitute for, specific professional advice.
                                                                                             OPINIONS WINTER 2011    9