Since commencing as Auditor-General, I have had ongoing positive discussions with the Department of the Premier and Cabinet (DPC) about the types of information that my staff need to help me perform my statutory audit role. We now have an agreed process to address the requests we make under Premier and Cabinet Circular PC 047 Disclosure of Cabinet documents to investigative agencies.

Timely access to agency information is important to support the audit process 

My predecessor also commented on accessing information more generally as part of the audit process. We have generally been given access to the information we needed to conduct our 2023-24 audit work.  There have, however, been occasions this year when my staff were initially denied access to the agency information they needed to conduct their audits. In most cases, these matters can be worked through with the agency concerned relatively quickly, but occasionally there are more substantial delays. 

Most of the information that my Office collects is routine and relates directly to the normal operations of the agencies we audit. Each year, we communicate to agencies that we will need information from them to inform our audit process and we advise them that there are powers under the PFAA that relate to the Auditor-General’s ability to access information. 

As far as possible we work with agencies to communicate our audit information requirements early in the audit cycle so that the audit process can proceed in a timely way for both agencies and my staff. Early access to this information enables us to do most of our  reviews before the peak period for financial statement audits, which is from mid-August until the delivery of my annual report on 30 September each year. 

In a practical sense, given that we perform agency audits every year, most agency staff we interact with and request information from are familiar with the process, understanding and cooperative. 

Where there are exceptions to the normal practice and agencies excessively question the need, or ability, for my staff to access information required for the audit process, this takes additional time. Delays in getting access to information mean additional communication with senior agency management is needed. In some cases, further discussions are required, and in others it may be necessary to send further correspondence explaining what we need. 

Wherever possible, delays in giving us access to the information we need to conduct an audit should be minimised and agencies should have internal processes to support the PFAA’s intention that information is provided as needed to support the statutory audit function. Agencies should ensure their staff are aware of the audit process, understand the types of information that are likely to be sought and have a good understanding of internal processes to use where they have questions about any requests we make. 

We try to conduct our audits as efficiently as possible and delays, which in rare cases can stretch to months, impact on our ability to conclude and report in a timely way to agencies and, again in rare cases, the Parliament.  

My Office will continue to work with agencies in the coming year to improve their understanding of our processes and our key timelines, to further improve information flows and the timeliness of our audit communications. 

The new disclosure reports on the spending split between South Australian and non-South Australian businesses. It was necessary to modify the audit opinions for a significant number of agencies in relation to this new disclosure. We found issues with the approach taken sufficient significance that we did not consider the information disclosed was materially correct for those agencies. 

The new requirement presents challenges for agencies 

The new financial reporting requirement builds on the rules established under Treasurer’s Instruction 18 Procurement for procurements from February 2023.  

While new requirements are always challenging to respond to, the fact that around half of the agencies required to report this information were not able to do so in a way that was materially correct for 2023-24, despite putting in a significant amount of effort, indicates the complexity of this particular requirement. 

It is worth pointing out, however, that much of the work done in 2023-24 has the potential to benefit agencies in future as decisions made for ongoing contracts will not need to be reassessed, and processes undertaken for the first time this year will inform approaches within agencies for new arrangements they enter into. 

While agency approaches to the new requirement have differed, in general we have seen that an approach that is well structured, considers all the categories of agency expenditure that could possibly be captured by this requirement and then systematically works through these categories considering the population, types of spending, vendors and nature and value of the underlying arrangements, has been the most successful.

The nature of the disclosure requirement captures a very wide range of spending for potential inclusion. Starting with a process that considers the broadest possible population and then systematically working through it has been the most successful approach from our experience this year. 

Keeping a central record of all key decisions was also beneficial to the process this year, as it made updating information or responding to queries easier. Where documentation of the arrangements and conclusions made is clear and centrally held, it also has the potential to help in future years by removing the need to perform some of the same work again. 

The Department of Treasury and Finance has advised my Office that it plans to review the outcomes of this process for 2023-24 to inform the process in future. It has also advised us that it plans to help the agencies that will apply the new requirement for the first time in 2024-25 be well prepared for meeting the new requirement in 2024-25, noting that it will be able to use the experience from 
2023-24 to better inform the process.  

• examine the contracts 
• report on the probity of the process leading up to the awarding of the contracts.  

In October 2023, the SA Government commenced a competitive, single-phase procurement process for passenger transport in five regional contract areas. Consistent with the requirements of the PTA, we expect to report on this procurement in 2025.  

My predecessor reported in 2023 that the statutory threshold in the PTA to audit and report on the probity of the processes leading to contracts being awarded for passenger services is too low, and results in the inefficient use of audit resources. I share his view that the threshold should be markedly increased to be relative to other major government contracts. This will reduce the risk that matters warranting audit attention are displaced by outdated statutory limits. 

SAHMRI 2 proton therapy unit

The SAHMRI 2 project is a collaboration between the public and private sectors to establish Australia’s first proton therapy unit. The SAHMRI 2 project involves:

• developing a building that will house the proton therapy system, provide dry lab research and clinical trial facilities for the South Australian Health and Medical Research Institute (SAHMRI) and other A Grade commercial space for dry lab, clinical or office use
• purchasing a proton therapy system
• developing and operating a proton therapy unit.

SAHMRI is a not-for-profit health and medical research institute. It is not a public authority and I do not audit its accounts. Notwithstanding this, I consider the arrangements comprising the SAHMRI 2 project and the State’s involvement to be of public interest.

In 2018 the Commonwealth and SA Governments entered into an agreement under which the Commonwealth agreed to provide $68 million to the State to fund the purchase of a proton therapy system. The agreement requires the State to bear the risk if costs exceed $68 million (excluding exchange rate risk). The Commonwealth Government has paid the State the $68 million. 

The SA Government entered into a grant funding agreement with SAHMRI to transfer the $68 million of Commonwealth funding to SAHMRI to use to pay for a proton therapy system. The State has paid $45.8 million under this agreement. The State has also made other contributions to the project.

I intend to provide a status update on the SAHMRI 2 project in a separate report to Parliament this year that will include: 

• a summary of the project arrangements and the amounts the State has spent and committed to the project
• information on the financial, legal, commercial and operational exposures to the State from the project 
• how the SA Government is managing its exposures. 

Local government contract management review

We are currently progressing a review of contract management with two councils, focusing on areas such as risk management, performance management, contract variations, and contract extensions and renewals.

Wellbeing, LHNs have different dates which have been advised by their Principal Audit Manager.

For further detail on these requirements, talk to your audit manager or refer to information that we have sent to chief executives.

More on preparing for the audit process

In our experience, the critical things that help agencies prepare quality, readily auditable financial statements are:

• having a planned and structured approach to preparing financial statements
• the people who prepare them having appropriate experience and a good understanding of the agency
• key people being available at the time of the audit
• supporting documentation being prepared and checked, including reconciliations and explanations for major variances.

 Some recurring factors have caused difficulty for agencies and my staff, including:

• some draft financial statements are incomplete or unreliable and require significant audit amendments
• information supporting the financial statements and needed for the audit, including reconciliations, is not prepared or finalised before the audit
• some draft financial statements are not quality reviewed to identify errors or misstatements before they are submitted for audit.

In the past, where one or more of these factors occurred, the financial statement audit was not always completed in time for them to be included in our annual report.

We found the following gaps in key areas:

• Strategic planning for specialist homelessness services does not reflect the current operating environment or targets for measuring success.
• No analysis being performed on current services to identify service gaps and determine funding required to support people experiencing or at risk of homelessness.
• A lack of direction on how services are to be prioritised during periods of high demand.
• Limited oversight of how service providers plan to achieve intended outcomes.
• Service contract design does not enable effective performance monitoring.
• Limited oversight and reporting on system and service outcomes and performance.

These gaps increase the risk that South Australians experiencing or at risk of homelessness will not receive the support they need to obtain or maintain sustainable housing and may experience housing insecurity for longer.

Steps are being taken to improve the management of homelessness services including implementing an outcomes measurement framework, improved governance and a new sector governance group to oversee the specialist homelessness services system.

• maximising our value by engaging effectively to deliver relevant and impactful independent audits
• retaining and recruiting great people
• investing in new ways to do our work efficiently and effectively.

Why the name change?

This new name is very important to us as it supports our strategic objectives and recruitment strategies. Being identified as a modern, contemporary audit office is an important tool in attracting the talent we need in a highly competitive recruitment market. Our name will now align with those of our peers around Australia. It identifies us as South Australian and clearly distinguishes us from Ministerially controlled departments. It also distinguishes us from the Attorney-General’s Department, which has caused some confusion over many years.

While this change is very exciting for us, it does not impact our structure, operations or services.

Our new plan for 2024–2027 will be available on our website later in the year.