ENHANCING PUBLIC SECTOR GOVERNANCE Andrew Morris Senior Director Australian National Audit Office
Introduction • My presentation will: • outline the role of the ANAO especially to enhance public sector governance; • discuss the key elements of the ANAO’s Better Practice Guide on Public Sector Governance; • provide examples of how we have audited against the better practice guide; • consider the future of auditing governance.
Defining Governance Public sector governance has a very broad coverage, including how an organisation is managed, its corporate and other structures, its culture, its policies and strategies and the way it deals with its various stakeholders. The concept encompasses the manner in which public sector organisations acquit their responsibilities of stewardship by being open, accountable and prudent in decision-making, in providing policy advice, and managing and delivering programmes.
Defining Governance • ‘pure governance’—involves the interactions between Minister(s), the board, the CEO, and audit. • ‘organisational governance’—management and administration.
The Role of the ANAO • Our integrated auditing framework comprises: • financial audits; • performance audits; and • other information support services, including the development of better practice guides.
Performance Audits • ANAO audits covering agency-wide assessments of governance arrangements include : • ANAO Audit Report No. 29 of 2003-04, Governance of the National Health and Medical Research Council; • ANAO Audit Report No. 40 2001-02, Corporate Governance in the Australian Broadcasting Commission; and • ANAO Audit Report No.1, 1998-99, Corporate Governance Framework, Australian Electoral Commission.
Better Practice Guides • Recent BPGs include: • Public Sector Governance (Volumes 1 and 2) (July 2003); • Fraud Control in Australian Govt Agencies (August 2004); • AMODEL Non-Commercial Authority Illustrative Financial Statements for the Year Ended 30 June 2004 (May 2004); • Administration of Grants (May 2002); and • Business Continuity Management (January 2000).
Principles of public sector governance • Accountability • Transparency • Integrity • Stewardship • Leadership • Efficiency.
Legal elements affecting governance in the Commonwealth Australian Constitution eg, ss.51, 53, 54, 61, 64, 67, 81, 83 Parliament, its Separation of Powers Financial committees, privilege and Public Management & conventions Service Accountabi lity Annual and specific Workplace Remuneration Appropriations by Act 1999 Act 1997 Relations on Tribunal Parliament Act 1996 Act 1973 Agency Commonwealth Charter of Budget Specific Honesty Authorities & State/Territory Corporations Acts associations& partnerships Companies Act 2001 law Act 1997 Contract, i nsurance, Administrative trust, principal/agent, Arrangements Orders confidentiality, intellectual Responsible & representative government t property law Auditor - GeneralAct1997 Accountability: Ombudsman, FOI, AAT, ADJR, Archives & Judiciary Acts, Acts Interpretation, Trade Practices, Privacy, OH&S and Crimes Acts + specific secrecy
Key governance processes • Effective corporate and business planning • Structured and regular performance monitoring • Clear and robust budgeting and financial planning • Integrated risk management • Whole-of-Government approach
Risk Management • Prominent issues when auditing risk management: • clarity or roles and responsibilities for managing risk; • whether risk management is appropriately monitored, and aligned to the performance measurement framework; • whether identified risks are appropriately controlled; • whether strategic risks are aligned to the business risks; • consistency of risk management practices and processes.
ANAO Audits of Board Issues • Three recent ANAO audits have examined board issues: • ANAO Audit Report No. 29 of 2003-04, Governance of the National Health and Medical Research Council • ANAO Audit Report No. 26 of 2003-04, Supporting Managers—Financial Management in the Health Insurance Commission • ANAO Audit Report No. 51 of 2002-03, Defence Housing and Relocation Services
National Health and Medical Research Council • Recommendation No.1 included: • assess the appropriateness of existing governance arrangements, particularly links between the Council, the Principal Committees, the Management Committee and the CEO, and amend as necessary; • document and endorse a governance charter; and • delegate powers where necessary and implement appropriate reporting against delegated powers.
Financial Management in the Health Insurance Commission • Findings: • improve financial reporting to the Board. • better combine financial and non-financial reporting to the Board for major projects.
Defence Housing The ANAO recommended that: Defence consider reviewing, and providing advice to the Government on, the provision in the Defence Housing Authority Act 1987 for Defence officers to be appointed to the DHA board, in view of the potential conflict of interest that such appointments create for those officers.
MRI probity audit • Findings: • Could not determine whether there were inappropriate disclosures; however • probity arrangements not adequate for the circumstances; • conflict of interest arrangements did not work properly in all instances.
Control Structures Report • The Control Structures Report found that: • internal controls are improving slightly; • scope for continued improvement, eg. for reconciliations, use of delegations, monitoring of grant and funding agreements, timeliness of recording asset movements; • one entity with A category issues, 20 entities with B category issues.
Concluding Remarks • ANAO encourages better governance mainly through performance audits, financial audits and BPGs; • ANAO audits have shown some improvement in public sector governance but core issues remain; • could increase ‘pure governance’ audits and coverage of governance principles, but will still focus on core organisational governance issues .
ANAO’s ROLE IN INCOURAGING BETTER PUBLIC SECTOR GOVERNANCE Andrew Morris Senior Director Australian National Audit Office