Paul C.

Financial statements are a key accountability document for public sector entities. They provide parliament and members of the public with important information about the operations and financial performance of public sector entities. For the statements to be useful and valuable to readers, they must be complete, accurate, and prepared in accordance with legislative and accounting requirements.  

Entities should also be open and transparent in the way they disclose key transactions and events in their statements. In recent years, QAO has noticed an increasing trend where entities are seeking to rely on confidentiality clauses in contracts and other agreements to limit the information they disclose about key transactions.  

Use of confidentiality provisions and non-disclosure agreements 

A public sector entity may include confidentiality provisions in commercial contracts it enters into, where the contract contains information that a supplier considers sensitive, for example, trade secrets or detailed internal costing information. These confidentiality provisions may seek to prevent or limit the public disclosure of key contractual details. Types of agreements where we often see this include: 

  • major supply/purchase agreements 

  • construction contracts for infrastructure assets 

  • lease or other tenancy agreements 

  • contracts for the provision of services such as consultancies. 

The other common example QAO encounters are non-disclosure agreements (NDAs). These are legal agreements between 2 or more parties requiring certain information to be kept secret. Public sector entities may enter NDAs in relation to: 

  • legal settlements  

  • payments made on termination or separation of staff 

  • forgiving or waiving of amounts owed to the public sector entity. 

Other parties to the NDAs can include suppliers, members of the public, current or former employees, related parties of key management personnel, or other public sector entities. The NDAs may prevent the disclosure of: 

  • the circumstances in which the amounts were paid or forgiven 

  • the terms and conditions on which amounts were paid or forgiven 

  • the amounts paid or forgiven. 

Professor Coaldrake in his 2022 report, Let the sunshine in, and the Crime and Corruption Commission in its document Use of non-disclosure agreements – what are the corruption risks?, both identify concerns on the use of NDAs, particularly in employee separation settlements.  

While the use of NDAs may be legitimate in some circumstances, they may also be used to conceal suspected wrongdoing or payments that are unjustified or excessive.  

Do confidentiality provisions or NDAs restrict disclosure of information in financial statements? 

In preparing your financial statements, you cannot exclude information required by accounting standards or other prescribed reporting requirements because of a confidentiality provision or an NDA.  

This is because public sector entities need to prepare their financial statements in accordance with legislative requirements, which would override any contractual requirement to keep information secret. This applies to the extent there is an inconsistency between the confidentiality requirements and the legal reporting requirements. 

Applicable legislative requirements for financial reporting by public sector entities include: 

  • Financial Accountability Act 2009 and Financial and Performance Management Standard 2019 for departments and statutory bodies 

  • Local Government Act 2009 and Local Government Regulation 2012 for local governments 

  • Government Owned Corporations Act 1993 and Corporations Act 2001 for government owned corporations. 

Under the above legislation, public sector entities are required to prepare their financial statements in compliance with applicable accounting standards. They may also be required to comply with other prescribed requirements such as the Financial Reporting Requirements for Queensland Government Agencies (FRRs) issued each year by Queensland Treasury.  

This may require entities to disclose information on transactions subject to confidentiality provisions where they: 

  • represent specific transaction types that require disclosure under applicable accounting standards, such as, leases and related party transactions 

  • are required to be disclosed under other prescribed reporting requirements, for example special payments 

  • are significant to potential users of the financial statements due to the value or nature of the transaction, for example significant liabilities or contracts. 

What information needs to be disclosed? 

Public sector entities need to disclose sufficient information to meet their reporting obligations. However, they do not need to disclose contract details beyond those required by standards or other legislation.   

For example, if we assume that: 

  1. an accountable officer of a department enters into separation agreements with several employees of the department 

  1. as part of the terms of the separation agreements, the accountable officer agrees to pay each employee an amount on top of their legal entitlements 

  1. the accountable officer and the employees agree to execute NDAs on the terms of the separation and the amounts paid to the employees 

  1. the additional amounts paid to the employees meet the definition of ‘special payments’ under s.72 of the Financial Accountability Act 2009. 

To discharge its legislative responsibilities under the FRRs, the department would need to disclose in its financial statements the following information: 

  • the total amount for each class of special payment 

  • a description of the nature of all special payments greater than $5,000 

  • a note that explains the recording and reporting arrangements for special payments. 

The department would not, however, need to disclose the specific details of the payments made and who they were paid to. If the payments were made to key management personnel (KMP), however, some additional information would need to be disclosed as part of the KMP disclosures required by the FRRs. 

What happens if I don’t disclose the required information? 

In auditing the financial statements of public sector entities, including local governments, we are required to form an opinion on whether the statements are complete, accurate and presented in accordance with the accounting standards and other relevant reporting requirements. 

If we believe that information required to be disclosed in the financial statements has not been included or is not fully and accurately reflected in the statements, this may impact our opinion. This will depend on how significant we assess the information to be to potential users or readers of the statements. We will form our opinion irrespective of whether the missing information is subject to confidentiality provisions or NDAs. 

Should I seek further advice? 

Each case needs to be considered on its own merits and will need to reflect the nature of the transaction, the wording of the confidentiality provisions and the applicable disclosure requirements. In limited circumstances it may be appropriate for agencies to seek legal advice on the extent of the disclosures they need to make to meet their reporting obligations without breaching any legal requirement to maintain confidentiality. The nature and extent of the disclosures required should also be discussed with QAO. 

In our recent report, Queensland Regional Accommodation Centre (Wellcamp) (Report 18: 2022–23) we recommended that the Department of Energy and Public Works updates the Use and disclosure of confidentiality provisions in government contracts guidelines. We recommended the guidelines include advice on when information that is subject to confidentiality provisions can be released, and where disclosure is necessary to meet transparency and accountability requirements including disclosure as part of an entity’s annual financial statements. The department accepted this recommendation. 


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