David H.

Each year, the Queensland Audit Office (QAO) holds an in-person and live-streamed event for all its clients’ chief finance officers and financial managers. We share and discuss emerging issues and opportunities from our audit work across entities, upcoming changes to financial reporting requirements and other technical matters, and updates on our audit program.

We recently held our 2023 update, and highlight the main takeaways on what we covered below. We continue to appreciate the Queensland Treasury presenters’ valuable involvement in our event, who provided an overview of climate risk and sustainability reporting, and what to look for in this year’s financial reporting requirements (FRRs).

Technical and accounting standards update

There are no new material accounting standard and policy changes expected this financial year. Nor do we expect major changes will be made to the FRRs.

A minor change to the Sunshine Department illustrative financial statements is the removal of the COVID-19 disclosures. Entities will need to assess whether COVID-19 has had a material impact on their financial statements for the 2022–23 reporting year. No disclosures are required if there isn’t a material impact.

Accounting standard changes for future financial years include:

  • AASB 2022-10 Amendments to Australian Accounting Standards – Fair Value Measurement of Non-Financial Assets of Not-for-Profit Public Sector Entities, which commences financial years beginning on or after 1 January 2024 (that is, 1 July 2024 for 30 June year ends)
  • AASB 2022-9 Amendments to Australian Accounting Standards – Insurance Contracts in the Public Sector, which commences financial years beginning on or after 1 July 2026.

Sustainability reporting update (including climate-related risk disclosures)

Queensland Treasury gave an update on climate-related risk disclosures and sustainability reporting developments applicable for departments and statutory bodies. It emphasised that public sector reporting in these areas involves different objectives and considerations to the private sector, and that individual agency disclosures require a whole-of-government context for users to make a fully informed and complete assessment.

Other messages and discussion included:

  • An overview of the 2022 Queensland Sustainability Report
  • No specific sustainability standards have yet been issued in Australia
  • Queensland Treasury is still determining how to apply the expected new frameworks to the public sector
  • Agencies shouldn’t panic and don’t be overwhelmed!
  • Queensland Treasury will provide a transitional roadmap and policies/guidelines as the sustainability reporting framework becomes more certain and policies are finalised.

Strengthening internal controls in a changing environment

Internal controls are the people, systems, and processes that ensure an entity can achieve its objectives, prepare reliable financial reports, and comply with applicable laws. There are key themes we have drawn from our work that all entities can consider to strengthen their internal controls in the current changing environment:

  • Most weaknesses in information systems occur because entities don’t have well-established processes to promptly update their systems. This has been exacerbated recently due to changes in how staff perform internal controls, and who performs controls. These changes have been caused by issues such as higher levels of staff taking sick leave, higher staff turnover, or staff taking leave that had built up due to the COVID-19 pandemic.

The consequences have been that the new staff don’t understand the processes, or do not appreciate the importance of their role in the processes. This leaves entities more exposed to the risk of fraud and error.

  • Cyber security is one of the largest threats to state and local government public sector entities. Protecting important information assets with secure systems is critical. We note that following recent, well-published cyber breaches and ransomware attacks on Australian organisations, entities are better focusing on:
    • what information they collect
    • when they can dispose of it
    • how they can do so safely.
  • Other challenges for entities are higher inflation, higher interest rates, and supply chain delays – these do not just create financial pressure and logistical difficulties for an entity, they put pressure on individuals to meet previous internal or external expectations and create an incentive for them to circumvent internal controls.

We summarise our advice and provide links to a range of resources in our blogs, such as:

Internal controls assessment model

We have changed the way we make and report assessments of internal controls, though there hasn’t been a change to the requirement for us to assess internal controls relevant to the audit and to report any deficiencies to management.

We now report against 4 levels of maturity (developing, established, integrated, and optimised) across 10 elements.

We observed that departments are continuing to improve their current state and move towards their desired maturity – a level that does not have to be the highest level of ‘optimised’, but one that management sets based on an assessment of risk, cost, and value. Of the 10 elements, those with the lowest current average maturity across departments were ‘records management’ and ‘information systems’.

Find out more in our related fact sheet: Internal control assessments. See our maturity model here.

Documentation considerations to support current replacement cost valuations

At our event, we provided a reminder of what documentation entities should compile over their valuation processes for audit purposes. Some documentation can be prepared in advance, and updated yearly; whereas other documentation will require a significant refresh to ensure it is complete and accurate. Entities need to ensure enough time is allowed for management to review the documentation, including the valuation outcomes, before submitting it to their audit team.

We gave a reminder that although Queensland Treasury’s Non-Current Asset Policies for the Queensland Public Sector (NCAPs) was updated last year to permit the use of indexes in the current environment of high price increases, this does still require an assessment of whether specific appraisals (comprehensive valuations) are required. Entities also need to justify the applicability of their selected indices and that the underlying information is accurate.

Key learnings from recent reports to parliament

In November last year, we tabled our report 2022 status of Auditor-General’s recommendations (Report 4: 2022–23) and published an updated dashboard. This was our second annual report that captures entities’ self-assessed progress in implementing our performance and assurance audit recommendations. It shares insights on common challenges and opportunities facing the public sector and where entities can improve their systems and practices.

The common trends relate to:

  • strengthening governance and oversight
  • using information technology and data better
  • managing contracts and projects effectively
  • understanding the impact of government restructuring (machinery of government changes).

Status of Auditor-General’s recommendations dashboard

Our Status of Auditor-General’s recommendations dashboard allows users to explore entities’ self-assessments of their progress in implementing our recommendations. They can search by year, report, entity, parliamentary committee, and recommendation implementation status. Currently, the dashboard includes recommendations from our 2015–16 to 2019–20 reports, and this will be expanded to include our 2021–22 reports when we table our 2023 report later this year.

View our Status of Auditor-General's recommendations dashboard

Further resources

The 2023 Technical audit update presentation is available on our website.

    QAO resources