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Audit Mandate Report No. 5, September 2010 Inquiry into an Evaluation of the Effectiveness of the Performance Management Systems (PMS) audit mandate Legislative Assembly of Queensland Public Accounts and Public Works Committee Inquiry into an Evaluation of the Effectiveness of the Performance Management Systems (PMS) audit mandate September 2010 Report No. 5 PUBLIC ACCOUNTS COMMITTEE nd 52 Parliament Chair Mr Ken Hayward MP Member for Kallangur Deputy Chair Mr Vaughan Johnson MP Member for Gregory Members Mr John English MP Member for Redlands Mr David Gibson MP Member for Gympie Ms Grace Grace MP Member for Brisbane Central (from 30 October 2007) Mr John-Paul Langbroek MP Member for Surfers Paradise Ms Carolyn Male MP Member for Glass House (to 30 October 2007) Mr Peter Lawlor MP Member for Southport PUBLIC ACCOUNTS AND PUBLIC WORKS COMMITTEE rd 53 Parliament Chair Mr Wayne Wendt MP Member for Ipswich West Deputy Chair Mr Ian Rickuss MP Member for Lockyer Members Mr Michael Crandon MP Member for Coomera Ms Dianne Farmer MP Member for Bulimba Mr Ray Hopper MP Member Condamine Ms Mary-Anne O’Neill MP Member for Kallangur Mrs Christine Smith MP Member for Burleigh Secretariat Research Director Ms Deborah Jeffrey Principal Research Officer Mrs Helen Bogiatzis Executive Assistant Mrs Marilyn Freeman Contacting the committee Copies of this report and other committee publications are available on the Internet via the Queensland Parliament home page www.parliament.qld.gov.au or by contacting the secretariat at: Public Accounts and Public Works Committee Telephone: 07 3406 7576 Parliament House Fax: 07 3406 7500 George Street Email: [email protected] Brisbane Q 4000 Contents Glossary of terms and abbreviations .....................................................................................iv Role of the Public Accounts and Public Works Committee .....................................................v Chair’s foreword ................................................................................................................... vii 1. Introduction...................................................................................................................... 1 1.1 Recommendations in this report ............................................................................................ 1 1.2 2004 Strategic review of QAO................................................................................................ 1 1.3 Use of PMS audit mandate by QAO ...................................................................................... 2 1.4 Committee’s actions since last strategic review..................................................................... 4 1.5 Conduct of the inquiry ............................................................................................................ 5 1.6 2010 Strategic review of QAO................................................................................................ 5 2. Role of PMS audit mandate............................................................................................. 6 2.1 What is a Performance Management Systems audit?........................................................... 6 2.2 Does the PMS audit mandate fulfil its function in the overall accountability process for the Parliament? ............................................................................................................................ 8 2.3 What improvements has the mandate brought to the accountability systems?................... 10 2.4 Disadvantages of the PMS audit mandate........................................................................... 12 Committee comments ..................................................................................................................... 13 3. Is the concept of PMS auditing understood by both auditor and auditee?.......................14 Committee comments ..................................................................................................................... 17 Recommendation 1......................................................................................................................... 17 4. Is the PMS audit mandate being used effectively by QAO? ............................................17 Committee comments ..................................................................................................................... 19 5. How does QAO assess if individual PMS audits have been effective?............................19 6. How could the effectiveness of the PMS audit mandate be improved? ...........................21 Committee comments ..................................................................................................................... 25 Recommendation 2......................................................................................................................... 26 7. Should the Auditor-General’s mandate be extended to include Performance Audits?.....26 7.1 What is a performance audit? .............................................................................................. 26 7.2 How do performance audits differ from PMS audits? .......................................................... 27 7.3 Previous consideration of extension of the Auditor-General’s mandate to include performance audit ................................................................................................................ 28 7.4 Arguments in favour of extension of the Auditor-General’s mandate .................................. 34 7.5 Arguments against extension of the Auditor-General’s mandate ........................................ 37 7.6 Resource implications .......................................................................................................... 39 7.7 2010 Strategic Review recommendations – performance audit mandate ........................... 40 i Committee comments ..................................................................................................................... 42 Recommendation 3......................................................................................................................... 43 Recommendation 4......................................................................................................................... 44 7.8 2010 Strategic Review recommendations – Strategic Audit Plan........................................ 44 Committee comments ..................................................................................................................... 45 Recommendation 5......................................................................................................................... 46 Recommendation 6......................................................................................................................... 46 Appendix 1 – PMS audit reports tabled by QAO during the review period ............................47 Appendix 2 – Copy of Terms of Reference...........................................................................50 Appendix 3 – Submissions received.....................................................................................51 Appendix 4 – Public hearing held 18 September 2009 .........................................................52 Appendix 5 – Comparison of Auditor-General’s mandate in Australian jurisdictions .............53 ii iii Glossary of terms and abbreviations AAASB Australian Auditing and Assurance Standards Board ACAG Australasian Council of Auditors-General ANAO Australian National Audit Office DETA Former Department of Education, Training and the Arts DEIR Former Department of Employment and Industrial Relations DES Former Department of Emergency Services DIP Department of Infrastructure and Planning DLGSR Former Department of Local Government, Sport and Recreation DoCS Former Department of Child Safety DPIF Former Department of Primary Industries and Fisheries DPW Department of Public Works DTRDI Former Department of Tourism, Regional Development and Industry EARC Electoral and Administrative Review Commission EPA Former Environmental Protection Agency FA&A Act Financial Administration and Audit Act 1977 . This act was replaced by the Financial Accountability Act 2009 and the Auditor-General Act 2009 which commenced on 1 July 2009. GBE Government Business Enterprise GOC Government Owned Corporation ICAA Institute of Chartered Accountants in Australia MOG Machinery of government NSWAGO New South Wales Auditor-General’s Office NZ New Zealand PAC Public Accounts Committee (52 nd Parliament) PCEAR Parliamentary Committee for Electoral and Administrative Review PAPWC Public Accounts and Public Works Committee (53 rd Parliament) PMS Performance management systems PSC Public Service Commission PWC Public Works Committee QAO Queensland Audit Office SDPC Service Delivery and Performance Commission. The SDPC was abolished, as of 1 July 2008, with its role included within the Public Service Commission. The committee Public Accounts Committee/Public Accounts and Public Works Committee UK United Kingdom VAGO Victorian Auditor-General’s Office iv Role of the Public Accounts and Public Works Committee The Public Accounts and Public Works Committee is a statutory committee of the Queensland Parliament, established by the Parliament of Queensland Act 2001. The committee’s area of responsibility as described in section 95 of the Act is: (a) the assessment of the integrity, economy, efficiency and effectiveness of government financial management by (i) examining government
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