Our annual report summarises our performance, operations and business highlights for 2018-19. It contains our financial statements, including the opinion of the independent external auditor. It complies with the Financial Accountability Act 2009, Financial and Performance Management Standard 2019, and the detailed requirements set out in the Annual report requirements for Queensland Government agencies.
Report on a page—2018–19 highlights
About the Queensland Audit Office
The Queensland Audit Office (QAO) is parliament’s independent auditor of Queensland’s state and local government public sector entities, as established under the Auditor-General Act 2009.
The Auditor-General is fully independent, appointed by the Queensland Governor in Council for a seven-year term.
The parliamentary Economics and Governance Committee provides oversight of the Auditor-General and the office.
Our vision is for better public services. To achieve this, we:
- provide professional audit services, which include our audit opinions on the accuracy and reliability of the financial statements of public sector entities and local governments
- provide entities with insights on their financial performance, risk, and internal controls; and on the efficiency, effectiveness, and legislative compliance of public service delivery
- produce reports to parliament on the results of our audit work, our insights and advice, and recommendations for improvement
- conduct investigations about financial waste and mismanagement raised by elected members, public service employees, and the public
- share information about best practice and wider learnings across the public sector and local government.
The outcomes from our work include:
- improved public sector and local government financial management and reporting
- maintaining confidence in financial accountability, transparency, and reporting
- supporting Queenslanders by providing recommendations to our clients on how they can improve their delivery of better public services
- providing parliament with independent assurance over the performance of the public sector.
I would like to thank our workforce, clients, stakeholders, and audit service providers for a great year.
QAO is undergoing significant change as we position our business positively for the future and harness the opportunities and challenges facing us.
We have recently conducted strategic workforce planning and developed a blueprint for how we will achieve our objectives—and desired end state—over the next five years.
The plan anticipates the transformations we expect will occur in our internal and external operating environments. We have identified key risks and developed strategies to proactively address them. Our audit service providers also feature in our planning, and we will continue to develop these relationships for the benefit of our clients.
A key focus going forward is to Think and Act One QAO. This means our services are fully integrated, as we give our clients insights from across our business. Working together means we can give our clients more consistent experiences, and it enhances our operational efficiencies. Importantly, staff and our audit service providers feel like they belong to one organisation. They work as a team towards shared goals, and they support each other.
This year, we successfully refurbished our accommodation and moved to activity-based working, which gives staff a choice of work settings as per intended work outcomes and engagement approaches. The new way of working is already enhancing our collaboration and our staff and client experiences. I would like to thank staff for their enthusiasm and tenacity. Their willingness to try new things means we are already benefiting from the change. In the coming months, we will use staff feedback to make improvements.
We provided insights for our clients on the challenges, issues, and opportunities about performance we see arising. To achieve our vision of better public services, we must communicate the learnings and insights from our audit work across the wider public sector and local governments, as well as to individual clients. To make change happen at the service level for Queenslanders, we need to urge and support agencies to act on our advice. We also value the important role parliament has in effecting change and accountability.
Following on from last year, I continued to travel throughout Queensland to meet with clients and stakeholders—to understand what they need from us—including trips to more remote parts of Queensland to see councils, health and hospital services, water boards, and our audit service providers. I attended around 95 meetings.
I am committed to listening to any concerns our clients and stakeholders may have and finding ways for us to achieve more mutually beneficial outcomes. I appreciate seeing firsthand how our clients work and sharing their feedback with staff. Our auditors also continued to work alongside their clients to complete important audit milestones.
While we reflect on our performance and achievements in this annual report, we also take the opportunity to mention shortfalls. We can improve, particularly our client engagement. We must connect with our clients and build trust over the long term. We must help our clients to trust us, so they are more willing to listen to our advice, and we need to bring them on the journey with us.
I am proud to be Queensland’s Auditor-General and to lead an organisation with the vision of better public services. I look forward to seeing you in 2019–20.
Think and Act One QAO
Our aim is to deliver more integrated services and flexibility for our clients, multi-skill our staff, and ensure they, and our audit service providers, feel like they belong to one organisation.
Who we are
Our people are the key to our service delivery and to achieving our vision of better public services. They are dedicated, engaged, and highly skilled.
Our workforce is made up of 196 active employees (185 full-time equivalents), who are a mix of audit professionals, specialists, and support team members.
This year we engaged 20 audit service providers to perform 46 per cent of our financial audits. Audit service providers are an essential extension of our workforce, providing support across our large and diverse client base.
Twenty-six per cent of our staff come from non-English speaking backgrounds. Fifty-three per cent are women—including 36 per cent of our senior officers and half of our executive management group. We represent all age demographics. We are proud of these statistics.
Our culture and values
Our culture reflects who we are. Our system of shared attitudes, behaviours, and values defines our workplace environment.
We aim to have a ‘relationship-focused culture’ where we deliver our services as one QAO, and a ‘people-focused culture’ where we empower our staff to work together and be the best in their field.
At the heart of our culture are our values. As we transform to one QAO, we will revisit our values and the ways that we recognise and reward staff for:
- being frank, fair, and honest
- setting and managing to agreed expectations
- listening to learn and communicating clearly to inform
- questioning the status quo
- seeking new knowledge and applying new ideas
- taking measured risks when trying new things
- taking responsibility and holding ourselves accountable
- doing the right things and doing things right
- understanding then acting
- respecting others for who they are and their contribution
- considering how our actions affect others
- sharing our knowledge and skills freely
- celebrating success and supporting each other.
Integrity in all that we do
With the gravity of our role comes the need for the highest levels of integrity.
All members of our workforce are held to the most exacting standards for honesty, transparency, and independence. We provide staff with formal training, and all auditors fulfil the requirements of the Code of Ethics for Professional Accountants (APES110). We routinely discuss matters of ethics and integrity.
Learning, developing, and growing
To achieve our vision, we are committed to developing our organisational capability.
Our learning and development program not only gives our staff the skills they need to do a great job, but also supports them in meeting their future career goals.
This year, we provided our audit workforce with an average of 61 hours of professional development per person. Along with technical training, we gave staff opportunities to develop higher capability in client engagement, leadership, and people management.
QAO is now a formally recognised CPA Australia employer. This means we provide an optimal learning environment and give our staff opportunities to attain professional development hours that are recognised by CPA.
This year, QAO redeveloped how it assesses staff performance and develops their skills. Our new approach is goal-focused, reflects our values, and encourages more frequent conversations between staff.
We are working on a one QAO competency framework, which will underpin the capabilities QAO needs in order to continue improving our services in the future, and to help our staff make the most of their career and development opportunities.
|Recognised as a top graduate employer|
QAO’s graduate program develops well-rounded professionals who have the capability they need to work across the different aspects of our business.
In 2018–19, QAO received 272 applications from graduates, and 73 per cent of potential candidates nominated QAO as their preferred choice. A final 12 accepted offers from QAO following the selection process.
In February 2019, the Australian Association of Graduate Employers recognised QAO as a Top Graduate Employer for 2019. We ranked sixth out of 75 public and private sector organisations, based on feedback from our graduates on induction, training and development, quality of work, culture, career progression, and more. We were the top Queensland graduate employer of participating organisations.
‘QAO offers so much guidance, support and mentoring from so many wonderful and amazing people, who have a wealth of knowledge, that you have everything you need to kick-start your career.’—Stacey Fahey, Graduate Auditor, June 2019.
A productive and nice place to be
We believe that if our staff are healthy; feel connected, competent, and appreciated; and enjoy their work, they deliver better results.
This year, we offered flu vaccinations, ran healthy eating promotions, and got behind ‘RU OK?’ day. We encourage staff to access an Employee Assistance Program whenever they need it.
QAO provides flexible working arrangements for those who need to balance work and home commitments. We are even better placed to do this since updating our technology.
Our wellbeing initiatives include supporting staff in sporting and community events. In May 2019, 45 staff participated in the 2019 Queensland Corporate Games. (QAO finished top of its division.) In June 2019, QAO hosted its yearly teambuilding games day. It gave hardworking staff a chance to socialise, enjoy some fresh air and have a laugh together.
QAO teambuilding ‘Olympics’ June 2019.
The annual Working for Queensland survey determines how engaged employees feel, gathers their thoughts on public service leadership, and measures their satisfaction with their job.
80 per cent of QAO’s staff participated in the 2018 survey, giving us valuable feedback.
QAO scored 67 per cent for agency engagement. This measure indicates employee sentiment towards their employer—whether our staff would recommend QAO to others, are proud to say they work here, and feel attached and inspired to do their job. This year’s score is seven points above the public service office average. It is equal to our highest score, which we achieved previously in 2013.
Workload and health, and organisational fairness, continue to be areas for improvement. We recognise we need to do more to improve our peoples’ experience. We are implementing new approaches to staff resourcing, will leverage the benefits of activity-based working, and will keep improving how we manage performance and development. This will help us to continue improving the efficiency and effectiveness of the services we provide.
We are conducting regular staff surveys to check that we are going in the right direction in addressing staff concerns, and to gather more information on what our staff like about working at QAO. This feedback will also help us as we become one QAO.
This year, QAO refurbished its accommodation, delivering more modern facilities for a more productive working environment. We have provided flexibility for business change, investing in more efficient operations that will realise cost and effectiveness benefits for years to come.
A major part of the refurbishment was a move to activity-based working. This allows individuals to select from a variety of settings to suit working styles. While it was a big change for staff, we are now working more collaboratively—truly supporting our desire to be one QAO. There is also less physical hierarchy, with senior leaders moving out of traditional offices to work among their teams.
In a health check survey, 98 per cent of staff said the change is good for QAO, and 94 per cent agreed they have the ability to adopt the new way of working.
‘The new work set up is fantastic. I have a decluttered workspace, I feel more productive, I’m seeing more of my colleagues. The technology is seamless.’—QAO staff member, August 2019.
Activity-based working aligns with QAO’s desire for more face-to-face engagement. Clients and stakeholders are benefiting from more meeting spaces, a venue for events, and state‑of-the-art video conferencing. A successful replacement of our technology means our teams are collaborating with ease and are more mobile.
Activity-based working also aligns with the whole-of-government strategy to maintain existing long‑term leases, while increasing the number of people who can work here and reducing costs. QAO’s original space had an overall footprint of 2,632 square meters and allowed for growth of up to 187 people. The new space has a reduced overall footprint (2,278 square meters) and provides space for up to 230 people.
Moving forward, we are inducting new staff to activity-based working and are capturing feedback from all staff to ensure they feel supported. We have technology in place that provides data about how staff are working, and we will use this in making improvements in the future.
Audit planning, level 14 ‘scrum room’, QAO, Brisbane.
Leadership and governance
QAO’s leadership and governance is integral to achieving our organisational objectives.
Our office has a simple accountability structure. We run some of our operations by division, but our services are aligned and integrated. We are working towards becoming one QAO and do not see ourselves—or present ourselves to our clients—as separate groups.
Our executive management group has a shared responsibility for audit excellence and operational performance. They lead change, set the tone for integrity, and model good governance within QAO. Our executive leaders are:
- Brendan Worrall, Auditor-General
- Daniele Bird, Deputy Auditor-General
- Poopalasingam Brahman, Assistant Auditor-General
- Karen Johnson, Assistant Auditor-General.
L–R: B. Worrall, P. Brahman, D. Bird, K. Johnson.
We endeavour to work together to deliver dynamic and timely client services. Sector directors lead our audit services, providing technical expertise and in-depth knowledge of clients’ portfolios. In 2018–19, our sector directors were:
- Central agencies and financial services—Paul Christensen
- Community services—John Welsh
- Education and housing—Michelle Reardon
- Energy and natural resources—Damon Olive
- Health—Charles Strickland
- Local government—Patrick Flemming
- Specialised audits and financial services—Rachel Vagg
- Water and infrastructure—Vaughan Stemmett.
Our governance bodies have an important role in monitoring and assessing our performance.
Executive Management Group
This group includes all executive leaders. It determines strategy and budget, and regularly reviews QAO’s strategic and operating risks.
Senior Management Group
This group provides leadership for achieving the strategies outlined in QAO’s operational plans. Daniele Bird, the Deputy Auditor-General, is the chair and the Auditor-General is a member by observation. The other members include senior representatives from across the organisation. The group meets every eight weeks.
This year, the group focused on relationship management with our clients, major QAO projects, emerging operational risks, and performance management of staff.
Audit and Risk Management Committee
The Audit and Risk Management Committee provides independent advice and support to the Auditor-General in discharging their responsibilities, along with recommendations on improvement. It has oversight of risk, compliance frameworks and fiscal responsibilities underpinning our corporate governance. The committee has three external independent members and meets four times each year. Membership details are at Appendix B.
This year, the committee focused on QAO’s risk management, quality assurance, and data governance and security. In 2019–20, we will establish a quality assurance review subcommittee, with independent members reporting to QAO’s Audit and Risk Management Committee.
Internal audit conducts independent, objective, and risk-based assurance activities over our operations. Its charter aligns with the International Standards for the Professional Practice of Internal Auditing.
Kaylene Cossart, Senior Audit Manager, is the head of internal audit. Each year, the head develops an internal audit program and submits it to the Audit and Risk Management Committee for endorsement prior to Auditor-General’s approval. Three audits were finalised in 2018–19.
Our legislative framework
The Auditor-General Act 2009 (the Act) governs the powers and functions of the Auditor-General. It provides the legal basis for QAO’s access to information, and the freedom to report the findings from our audits. The Act promotes the independence of the Auditor-General and authorised auditors.
The Act also requires QAO to table in parliament the standards by which we perform our audits—the Auditor-General of Queensland Auditing Standards. Our audits must be (and are) conducted by authorised auditors with appropriate technical qualifications, skills, and proficiency.
Amendments to legislation
On 17 June 2019, Queensland Treasury put forward amendments to the Act, which received assent from the Governor in Council. The amendments allow Treasury to request QAO’s client general ledger data to inform government budgeting processes. Treasury can also request this data directly from departments. As of 30 June 2019, QAO and Treasury are liaising closely and confirming the next steps. QAO is meeting with involved clients.
Our approach to risk management
This year, QAO advanced its risk management framework. The framework now more clearly delineates staff accountabilities for managing strategic and operational risks. It is integrated across our business through our policies, procedures, management information systems, and performance reporting. The final framework will give us a very high level of assurance over how we manage our data operations.
We also agreed on our risk appetite and tolerances, and reviewed our fraud and corruption control plan and risk registers.
We continued to enhance and align our cyber security governance in line with the Queensland Government’s updated information security policy (IS18:2018). We also further developed our information security management system.
At QAO, all staff are expected to identify, assess, and manage risk within their respective areas of responsibility. Every risk conversation we have with our staff strengthens QAO’s risk management culture and improves our ability to respond to any issues.
Our strategic plan outlines our objectives, risks, organisational strategies, and indicators of achievement, and ensures they align to our vision and purpose.
Better public services.
Independent, valued assurance and insights.
Who we serve
Queenslanders, through parliament, public sector entities, and local governments.
|Objectives||Strategic risks||Strategies||Indicators of achievement|
|We support and challenge our people to best serve parliament and our clients.||We do not uphold our values or professional, ethical and quality standards.||Supporting the one QAO workforce to meet parliament and our clients’ service needs.||Our people are engaged, professional and capable.|
|Those we serve trust and value our services and insights.||We do not adapt our services in response to changing needs.||Enhancing relationships.||Our relationships are valued.|
|Our financial and performance assurance services and insights are used to improve accountability and performance.||We do not sufficiently understand our clients’ organisations and context to deliver valuable services.||Adapting our assurance services to provide greater value.||Parliament and our clients benefit from the assurance services and insights we provide.|
This year, we continued using the term ‘relationship-centric’ engagement, which means we are looking at how we can create more positive experiences for our clients.
We know we need to listen to our clients and identify any issues they may have as soon as they occur. Better understanding how we can help them, at both the individual audit level and across sectors, will enable us to deliver greater insights and better focus our audit services.
Our service delivery
Throughout our audit program, we formed 396 audit opinions about the reliability of financial statements of public sector and local government entities. We examined the efficiency, effectiveness, and economy of a range of important aspects of public services.
We tabled 21 reports to parliament. Seven of these were on the combined results of individual financial audits, and 14 contained the findings, conclusions, and recommendations from our performance audits. Included in this year’s audit program were four follow-up reports on entities’ progress in implementing the recommendations QAO had made in earlier reports.
We endeavour to operate as efficiently and effectively as possible. One way we measure efficiency is by tracking the full life cycle cost of each of our reports to parliament, and the time we take to produce them.
This year, the average time to deliver our reports to parliament on the results of our financial audits was 6.5 months—slightly longer than our target of six months. We delivered our performance audit reports on average in 8.9 months—not far over our target of eight months. Timing was affected by machinery of government changes to our clients, and increased complexity in some audits. Despite time delays, our audit quality was high and we effectively managed costs.
The cost of our reports includes internal staff costs and overheads, consultant costs, and other direct costs. Overall this year, we delivered our financial audit reports at an average of $142,804 per report, which was within two per cent of our target. We delivered our performance audit reports marginally under budget at an average of $317,880 per report.
Making valuable recommendations
We make recommendations on performance improvement directly to individual clients and via our reports to parliament.
In our reports to parliament, we make recommendations on how entities can improve their effectiveness, efficiency, economy, governance, or financial reporting. This year’s reports included 81 recommendations, which clients accepted.
The main themes of the recommendations from our financial audit work related to planning and governance, information systems, and expenditure and asset management. Some of the themes of recommendations from our performance audit work were about governance, monitoring projects/programs, collaborating across agencies, managing contracts, understanding costs, realising benefits, and measuring strategy and performance.
During our audits, we made over 1,000 recommendations across our client base for improving internal controls. Around 300 of these recommendations were significant (high-risk matters), meaning clients acted on them immediately. These internal controls-related recommendations covered management oversight and culture; clients’ structure, policies, and values; and the systems and processes they use for reliable financial reporting.
Our unique position as the auditor of all public sector entities means we can, and do, use our breadth of knowledge about internal controls. We give our clients wide-ranging public sector‑focused insights. As one example, we update our clients when we become aware of new methods for fraud attempts that are targeting the public sector.
‘QAO’s observations and advice in relation to internal controls is valuable to our organisation. The engagement with the audit team on matters requiring attention, for example, on position papers, was appreciated and assists the process for all parties.’—Audit client, April 2019.
|Focused effort—Working to improve financial sustainability in local governments|
Queensland has many regional and remote communities with low populations, which contributes to long-term financial sustainability risks for local governments.
Our audit teams work with councils, the Department of Local Government, Racing and Multicultural Affairs, the Queensland Treasury Corporation, and interested stakeholders to understand councils’ operations and the service delivery challenges they face. This helps us identify if councils are developing long-term financial difficulties.
We continue to highlight which councils are at risk of not being financially sustainable, according to measures set by the state government. Our reports analyse the reasons for increased risk, including assessing whether councils are appropriately responding to reduced or variable revenue, and the effect of severe weather events on the communities and their assets.
Every year, we look closely at specific areas of sustainability, including long-term forecasting, collecting revenue, managing services, and managing assets.
Each report gives local councils and the state government recommendations for improving operations, policies, and processes. Our recommendations are practical and focus on developing financially sustainable local governments. We also make recommendations for broadening and improving sustainability measures to ensure that they are appropriate for each council.
All our recommendations provide entities with a critical checkpoint for improving their performance. We work with management before finalising our recommendations to ensure they are practical to implement, appropriate to the size and complexity of the entity, and provide the most value. To realise the full benefits of our audits, entities need to implement our recommendations in an appropriate and timely manner.
Reporting on the long-term impacts of our audit work remains challenging, but we have made good headway in recent years. We apply rigour in selecting audit topics to ensure we focus on what is important. We emphasise the building of effective relationships with clients, so they are more likely to listen to our advice and apply our recommendations. And we raise awareness of our reports to parliament as soon as they are tabled in parliament.
|Impact of our audit work—Follow-up on Managing water quality in Great Barrier Reef catchments (Report 16: 2017–18)|
In February 2019, the Minister for Environment and the Great Barrier Reef, Minister for Science and Minister for the Arts introduced the Environmental protection (Great Barrier Reef Protection Measures) and other legislation amendment Bill.
Some of the amendments in the Bill related directly to our report to parliament: Follow-up on Managing water quality in Great Barrier Reef catchments (Report 16: 2017–18). Our follow-up report examined whether departments have effectively implemented the recommendations we made in our initial report, tabled in 2014–15. The objective of the initial audit was to determine whether the adverse impact of broad scale land use on the quality of water entering the Great Barrier Reef was declining.
The explanatory notes to the Bill amendments reflected some insights and advice QAO presented throughout its report. One of our recommendations—which related to the need for more industry information for government—was also directly referenced in parliament’s transcript of proceedings (Page 437, 27 February 2019).
The opportunity for legislative change resulting from our audit work, and in particular from our recommendations, is one of the ways in which QAO provides value. It means our work is fostering positive change in the delivery of public services.
|Impact from our audit work—Delivering forensic services (Report 21: 2018–19)|
On 27 June 2019, QAO tabled Delivering forensic services (Report 21: 2018–19) in parliament. The audit’s objective was to assess whether agencies deliver forensic services efficiently and effectively in order to investigate crime and prosecute offenders.
On 28 June 2019, the Minister for Health and Minister for Ambulance Services released a statement saying reforms were underway in response to QAO’s report.
In response to one of our recommendations, Queensland Health confirmed it is planning a new process to better serve and protect victims of assault, specifically around forensic medical examinations and reporting incidents to police. In response to another recommendation, Queensland Health stated that it will be training more health staff to conduct forensic examinations.
The director who led the audit reflected:
'I am privileged to have a job that allows me and the teams I lead to play an important part in improving public services. In this instance, especially services to support victims of crime.’—June 2019.
This year, we shared more insights and specialist advice with our clients.
We hosted workshops, events and webinars, and gave numerous presentations about the systemic challenges or issues we see facing the public sector. We helped our clients make the transition to new accounting standards by promoting our recommendations and building our clients' trust in our advice.
In response to topics that clients need help on, we launched a blog to replace our quarterly Insights newsletter. The new blog format is searchable and shareable. It has given QAO a contemporary channel to instantly share its insights. As of 30 June 2019, we had published 42 posts, which were visited 17,471 times.
This year, we continued to work with our clients on simplifying their financial statements and their early preparation of financial statements. Starting our work earlier means we can produce higher quality reports. Financial reporting and valuation matters can be resolved in a timely manner, and workloads are better managed.
Overall, we ensured our advice was consistent for all clients but also tailored to the varying levels of government, whether it be chief executives, audit committees, or finance managers.
New financial statement preparation maturity model
Based on discussions with public sector chief financial officers, QAO has started changing its approach to assessing clients’ financial statement preparation.
We have prepared a maturity model, which includes better practice in financial reporting. Our model retains some key elements of QAO’s traffic lights—red, amber, green—approach but allows for scalable assessments of our clients, reflecting their different sizes and maturity. We recognise that one size does not fit all when it comes to assessing our clients’ maturity. Importantly, the model will help QAO identify practical areas for improvement—something our clients have asked for and value greatly.
We are also reviewing our approach to reporting our internal control findings. Reporting using a broader scale will allow us to incorporate the reasons for internal control deficiencies, the possible impact for our clients, and the actions taken by management.
We are currently circulating the new model with clients for their thoughts and feedback. We are also developing a self-assessment tool that clients can use to check the levels of maturity we expect to see.
|Focused effort—Working with audit committees|
This year, we have been particularly focused on sharing our insights and advice with the audit committees of public sector entities. Effective audit committees are integral to good governance, and they are mandatory for all departments (though unfortunately not for local governments). They have a large part to play in entities improving their financial reporting and performance.
Our staff not only attended hundreds of formal audit committee meetings across our client base but also met regularly with chairs of audit committees throughout the year. The Auditor-General and various QAO experts briefed them via two dedicated QAO events, to which 50 audit committee chairs attended in person, and 30 joined via live streaming.
We are running a series of blog posts covering how audit committees can be more effective and what we see their role to be in financial reporting. Collectively, the first two blog posts have been viewed 405 times as of 30 June 2019.
Our audit program for 2019–22 includes a topic on the effectiveness of audit committees in state entities and local governments.
‘I gain an immense amount of knowledge of the ‘bigger picture’ of audit within entities and whole of government via the blog and face-to-face (twice yearly) gatherings in Brisbane.’—Audit committee chair, Orima Survey, June 2019.
Putting a face to a name
Our audit teams and audit service providers travel across Queensland to complete our clients’ audits and learn more about their work. This year, our staff travelled as far west as Burketown, as far north as Bamaga, south to Goondiwindi, and east around Brisbane and coastal areas.
The Auditor-General is committed to meeting with our clients and stakeholders face-to-face to understand the context they operate in, hear any concerns they may have and to identify opportunities to improve QAO’s service delivery.
This year, the Auditor-General attended around 95 meetings with clients and stakeholders. He travelled throughout metro and regional Queensland to see a wide range of client entities in terms of type and size, including Indigenous and rural shire councils.
Of a QAO visit in May 2019, a client said:
‘We were very pleased to have the opportunity to show Brendan Worrall and the audit team around our site. It’s great that the QAO teams take a genuine interest in the assets and the people, rather than simply the numbers!’
Brendan Worrall, Noreen Romero, Damon Olive, QAO, Kogan Creek, April 2019.
|Client engagement—a note from Nicholas Dow, Graduate Auditor|
‘Travelling with my team to Wujal Wujal Aboriginal Shire Council in October was the best experience of my year. It was well outside of what I had been exposed to as an auditor up to that point, and I had never been that far north before. When our team arrived,we were honoured when the community Elders performed a Welcome to Country. It was a completely unique experience and one I will never forget.
I learnt so much during my two weeks at Wujal Wujal on this audit. Councils are ever-changing and must adapt to events in their area. From an audit perspective, this makes it a really interesting area to work on and a great hands-on experience.’
Delivering more engaging, accessible reports
Over the past five years, QAO has embarked on a continuous improvement program around the readability of its reports to parliament. We need to make our reports easier to read and cater for a wide range of readers. We also need to prepare the reports more efficiently so that we deliver them to parliament sooner.
We are currently restructuring our reports so they provide the main information up front, and we remain committed to plain language in our writing. We will continue to gather feedback from clients on what they would like to see.
We are now including an ‘actions for entities’ section in each financial audit report. This section provides focus areas for entities, specifically those charged with governance. These recommended actions reflect the themes we identify across the sector and suggest what entities can do to improve performance.
We are also doing more in digital delivery, with a new Adobe summary presentation of each report that is mobile-friendly, and we have continued with our audio overviews so users can listen on the go. We also worked on HTML reports for our website for 2019–20.
Providing advice and support for parliament
Through the parliamentary process, each of our reports to parliament is referred to the appropriate committee for consideration and response.
We ensure we are available to assist the committees and provide additional briefings on our report findings, opinions, and recommendations. This year, we provided 17 in-depth briefs to parliamentary committees.
QAO also held other meetings on request with members of parliament. In February 2019, QAO met with the Shadow Minister for Health and Ambulance Services and Shadow Minister for Women on our report Digitising public hospitals (Report 10: 2018–19). QAO also met with the Office of the Leader of the Opposition for a briefing on Integrated transport planning (Report 4: 2017–18) in June 2019.
In June 2019, the Economics and Governance Committee visited QAO to see our new workplace and activity-based working.
We invite elected members, the public sector, and the public to raise issues about known or suspected incidents of financial waste or mismanagement.
This year, we received 70 referrals, compared to 58 in 2017–18. This year’s referrals came from other integrity offices, elected members, management of public sector entities or local governments, the general public, and some people or organisations who chose to remain anonymous. Most referrals came from the general public. Forty-three percent of referrals related to the local government sector.
If within our mandate, we investigated the raised issues and made recommendations to the audited entity’s management. Some of the referrals resulted in reports to parliament.
In May 2018, the chair of the Health, Communities, Disability Services and Domestic and Family Violence Prevention Committee wrote to the Auditor-General to request an audit of how the Department of Health assesses transfers of pharmacy ownership. The Auditor-General agreed to conduct an audit as per the Australian Auditing and Assurance Standards. Our resultant report Managing transfers in pharmacy ownership (Report 4: 2018–19) was tabled in parliament on 28 September 2018.
On 25 March 2019, the Under Treasurer referred concerns to the Auditor-General about the delivery of the State Penalties Enforcement Registry (SPER) information and communication technology (ICT) project. On 26 March 2019, the Treasurer also stated in parliament that the project had been referred. QAO has agreed to conduct a performance audit focused on the effectiveness of governance for delivery of this project. The report will be tabled in parliament in 2019–20.
Planning our annual program of audits
We collaborate with our clients to develop audit products and timetables that meet their needs and the needs of the wider audiences reading our clients’ financial statements or reports to parliament.
Our main focus continues to be on the timely identification and resolution of accounting matters and the earlier preparation of financial statements. We provide support to our clients one-on-one as well as via communication tools—such as fact sheets on how to prepare accounting position papers.
We identify common risks and issues from our audit work across our client base, and we incorporate the learnings into our forward audit program. We share our program at QAO’s briefings for clients and audit committees, and in our blog articles.
Each year, we publish a three-year plan of the performance audits we are planning to undertake. On 20 May 2019 we published Strategic Audit Plan 2019–22. Our strategic audit plan reflects the challenges facing public sector entities and local governments across a wide range of sectors. We focus on the public services that matter to Queenslanders.
In developing this year’s strategic audit plan, we sent consultation letters to over 170 entities and held in-person meetings with many. The plan describes the proposed audit topics, the rationale for each topic and the planned objectives for the audit.
We now publish our strategic audit plan on our website via a new interactive table that allows our audiences to easily see who we might audit, to track status updates, and to contribute to audits in progress.
Getting better at what we do
Audit quality is the cornerstone of QAO’s work, and we take upholding audit quality standards very seriously. We ensure our audit opinions comply with Australian auditing and assurance standards, and with relevant ethical, legal, and regulatory requirements.
QAO’s audit quality assurance program is renowned for its rigour. Quality improvement is integrated and pervasive across our business, and we assess it at multiple layers of the organisation. Our staff welcome quality assurance reviews and respond well to them.
The results of this year’s quality assurance reviews demonstrated that QAO is consistently meeting quality expectations. We will, however, continue to revise how we do business and improve our guidance materials.
Enhancing our capability
This year, we implemented more efficient and contemporary people management practices using a new resource management tool. We now ‘share’ audit staff across all QAO business services, instead of more permanently assigning them to a specific division or sector.
By giving staff exposure to a range of sectors and clients, we give them the chance to develop broad knowledge of public services, which is quite unique in the audit industry. More staff are skilled in more services, which enhances our overall capability.
As an organisation, we are now more agile, meaning we can deliver timelier services. And the tool enables us to plan and monitor the continuity of audit services by better tracking which auditors are working for which clients and when. Shared resourcing encourages us to have more conversations with our clients, and within our own business, about what clients need from us.
While it has been a big change for QAO, it has enabled fairer and more consistent work allocation for staff. In an internal staff survey in April 2019, 92 per cent of staff said the new tool has improved the visibility of staff use and availability.
Next steps include implementing more reporting and analytics functions that the tool offers, and using all of its benefits to support our one QAO culture.
Next-level audit analytics
We live in a world of digital transformation, meaning organisations are integrating digital technology into all areas of their businesses, fundamentally changing how they operate and deliver value.
QAO’s analytics services help our auditors deliver more effective and insightful audits. The tools and techniques enable speed, accuracy, and unique insights.
This year, we built several new dashboards for our auditors to identify and respond to risk, and we tested new software that supports more effective self-service by our auditors.
|Collaboration and insights—audit analytics|
In early 2019, we worked with a major client to create a sophisticated payroll analysis dashboard that profiles employee overtime and allowances at a range of levels within the entity. This dashboard incorporated data from the Bureau of Meteorology to validate weather-related allowance claims and provide context for overtime events.
The dashboard helped the audit team better understand the risk profile of employee overtime and allowance claims, with the context of materiality.
Collaborative development between QAO and the client allowed us to build trust, and helped our auditors better understand the client’s business. The sentiment from all meetings throughout the process was that QAO’s work provided immense value.
‘I have never seen such excitement from management about an audit report/deliverable before, noting that they were fighting each other to get access to the tool’—Audit committee member, June 2019.
We made presentations to clients, stakeholders and industry about our analytics capabilities and helped clients on their own analytics journeys. And we participated on a number of panels. We also worked with the Australian Auditing and Assurance Standards Board on incorporating analytics into auditing standards.
Liaising with other experts around Australia is also an important part of our analytics journey. In late 2018, QAO hosted a conference for Australian and New Zealand audit offices to exchange know-how on methodology, standards, tools, and techniques.
QAO uses a platform called Qlik to deliver its analytics capability. This year, QAO won the 2019 Qlik Excellence Award in Public Sector at the ANZ Health and Public Sector Analytics Summit. The awards recognise Qlik’s most groundbreaking users—those who reimagine processes, balance risks and rewards, and leverage personalised intelligence to create customer value.
Our audit analytics journey is not without its challenges. We need more seamless integration of analytics into our audit methodologies. And we need to better link our analytics capability to audit goals and outcomes.
We will enhance our insights into risk profiling, expand our dashboards for asset management and revenue, and augment our reporting tools for clients.
Chris Sharrock, Rob Kilbride, Nathan Wright, QAO, Qlik Analytics Summit 2019.
New audit tool set
This year, QAO neared completion of phase one of implementing its new audit software to replace its current tool (IPSAM), which has reached end of life.
The new software contains a suite of electronic programs, checklists, and work papers designed specifically for audit practitioners. It is a cloud-based program, that is configurable to specific audit office needs. We will be able to share it with our audit service providers, in line with our transformation to operating as one QAO.
The new software will allow QAO to promote effective and efficient documentation of audit work. We will be able to tailor our work to the specific needs of the audit. We expect our clients will benefit from more standardised audit practices, including improved consistency in audit documentation.
Selecting and implementing a new audit tool set is a large and complex project. In 2018–19, we reviewed, designed, and tested the relevant software products that QAO will configure. We also developed governance and reporting routines to steer project execution.
Next steps are applying the learnings coming from users currently testing the tool. We will enhance the audit content to enable deeper pilot work during the upcoming audit cycle. We are also developing a change management plan to ready our staff for the transition.
Another way we are creating efficiencies for our clients is by electronically signing our independent auditor opinions on our clients’ financial statements.
Electronic signing provides a faster work turnaround time for clients—particularly those located outside of South East Queensland—as it means there is no need to post or scan signed documents. It also reduces paper consumption, which provides cost savings and lessens environmental impact.
Next year, we will continue to work with our clients on how to use the electronic signing process and reap its benefits.
Client satisfaction with our services
We seek feedback from our clients during our day-to-day engagement and via an annual, independently managed survey. In this survey, we ask our audit clients, audit committees, and members of parliament to rate our services and provide comment on their experiences. The results are reported as index points (ip), which are the average responses for questions, across respondents, using a numerical score.
We would like to improve our clients’ level of comfort with giving us direct feedback about our service delivery and our relationships. It is important that we know how our clients really feel. If they are not happy, we need to think about how we engage with them and deliver our services.
This year, we surveyed 315 clients and received a rating of 75–80 ip across all our services. Overall, clients were positive about QAO’s performance.
While our results are strong, we are considering how we can better meet and exceed our clients’ expectations. We want to improve, and these survey results—along with ongoing feedback—highlight opportunities to do so. We are conducting a follow-up survey with clients who indicated concerns to help us better understand more about their feedback.
We received good ratings for this year’s audit processes, with an index score of 77–78 ip across our services (similar to 75–78 ip in 2017–18).
‘I have noticed a continuous improvement in the audit process by QAO—from engagement, to reporting and value add. Also, the capability of team members in understanding our business’.—Audit client, Orima Survey, September 2018.
For audit reporting, our index score was 79–80 ip, notably up from last year’s 71–79 ip. Clients were more likely to agree that our reports to parliament were clear in communicating findings and issues, were factually accurate, and were balanced and fair. That said, there are still areas for improvement, mostly related to the audit documents and letters we send our clients.
Regarding the value of our audits, our rating was 72–83 ip, slightly down from 72–86 ip in 2017–18. Clients indicated that they value the assurance they obtain, but they would like more recommendations on how to improve their financial management and internal controls.
‘QAO’s communication was of a high level, as was their candour. It never felt like an ‘inquisition’. They were accessible and listened to all points of view. The final product has been very useful in dealing with chronic and systematic underperformance.’—Audit client, Orima Survey, February 2019.
Approximately every two years, we also survey the chairs of our clients’ audit committees. They are an important group for advocating our insights, advice, and recommendations, and for monitoring entities’ progress in implementation. Overall, the chairs were positive about QAO’s performance, providing a rating of 82 ip, but they identified more opportunities for engagement and in terms of the findings in our reports to parliament.
‘I have been involved with QAO over many years. I believe they are ‘moving with the times’ and very committed to business improvement within their processes. The current Auditor‑General has a very approachable and realistic manner. The staff I have intersected with are consistently very approachable, positive, knowledgeable and helpful.’—Audit committee chair, Orima Survey, June 2019.
Members of parliament
We survey members of parliament (MPs) at least once during their term. Our last survey was in 2016.
47 per cent of MPs responded to this year’s survey, slightly up from 42 per cent in 2015–16, but still not as high as we would like. For the next survey, we will engage earlier to encourage more participation.
In an overall great result, MPs were happier about our performance this year. Our index score rose to 89 per cent, notably up from 81 per cent in 2016.
Collaborating with other important stakeholders
Our relationships with our stakeholders are important to us and have a big effect on our ability to deliver on our strategy.
Central agencies for QAO include the Department of the Premier and Cabinet, the Public Service Commission, and Queensland Treasury.
QAO’s work identifies important areas for change, but we need these agencies to bring the right people together to make the change happen. They often provide the perspective we need to implement the right solution and help our clients hear our messages.
QAO holds regular liaison meetings and ad hoc discussions with Queensland Treasury on accounting and financial reporting issues. Each year, Queensland Treasury participates in our client technical update event for 300 finance managers to explain changes in their financial reporting requirements.
Specifically, this year, we worked with Queensland Treasury and the Department of Housing and Public Works on applying a new leasing accounting standard. We reached an ‘in-principle’ agreement based on objectives that suit the centralised nature of managing whole‑of‑government office accommodation.
Integrity agencies have powers to investigate matters relevant to their role. Members of the public may raise matters with them, or the agencies may identify matters when delivering their services.
We work with other integrity agencies to collaborate and promote integrity in financial management. As an example, this year QAO worked closely with the Crime and Corruption Commission Queensland on incidents of fraud and corruption in local government.
Industry and community groups
A variety of industry and community groups have an interest in public sector services. We engage with different ones at different times based on the work we are doing. For example, this year we met with the Local Government Association of Queensland on our report Managing consumer food safety in Queensland (Report 17: 2018–19) and are doing so again on our current audit into the cost of local government services.
For our in-progress audit on coal seam gas activities, we engaged with landholders, the Queensland Farmers Federation, the Queensland Resources Council, interest and conservation groups, the Australian Petroleum Production & Exploration Association (APPEA) and more. In our tabled report on Conserving threatened species (Report 7: 2018–19), we engaged with landholders, researchers, scientists, academics, and conservationists.
For many of this year’s audits, we also received submissions or contributions via our website during the audit planning and conduct stages. We welcome contributions from all stakeholders, but the website forms provide a particularly accessible avenue for members of the public. This year, we received 48 contributions to our audits.
The Australian Council of Auditors-General (ACAG) is an association that shares information and intelligence between auditors-general. We collaborate through ACAG to respond to proposed standards changes, benchmark our performance, and share expertise. Members include all Australian and some Asia Pacific audit offices.
This year, QAO participated in 12 ACAG meetings across the various committees. ACAG also often engages with international offices to share best practice and training.
ACAG partnered with the Canadian Audit and Accountability Foundation (CAAF) to deliver innovative, intensive audit training. In February 2019, QAO and other Australian audit offices attended two weeks of ‘one-of-a-kind’ courses on performance audit.
QAO is also working with the Office of the Auditor-General Ontario, Canada, to introduce an employee exchange program. The six-month exchanges will give auditors the opportunity to broaden their technical skills and develop on a personal level. The first exchange is due to begin in January 2020.
Closer to home, QAO participates in a ‘twinning’ arrangement with the Vanuatu National Audit Office. This year, we met with the Auditor-General of Vanuatu to discuss their support needs and how we can help.
Each year, we support the Australian National Audit Office in delivering a partnership program with the Auditor-General’s Office of Papua New Guinea. In 2018–19, we hosted one secondee (a second needed to withdraw).
QAO is continuing to engage collaboratively with other Australian audit offices on public sector specific issues, and audit-related content, in developing its new audit tool kit and software. This collaboration will help us deliver a fit-for purpose product for QAO, that can also be tailored to suit the unique audit requirements each jurisdiction may have.
In November 2019, QAO also hosted a week of introductory training for ACAG performance auditors from across the country. In QAO’s newly refurbished training and event rooms, 22 auditors learnt about audit process, methodology, engagement, and best practice.
Professional accounting and auditing bodies, and standard-setting boards, are an important part of advancing our profession. Their work can have a significant impact on us and on our audit clients.
Via ACAG, and sometimes as an individual office, we contribute to the work of the various bodies that set accounting and auditing standards. We present our views on proposed changes to standards, reflecting our clients’ needs and the uniqueness of the public sector audit environment. This year, we liaised with the Australian Accounting Standards Board, the International Accounting Standards Board, the International Public Sector Accounting Standards Board and the Australian Auditing Standards Board.
QAO staff participated on a number of panels and contributed to the advocacy work CPA Australia and Chartered Accountants Australia and New Zealand (CA ANZ) are doing on financial reporting and auditing. The Auditor-General also met with CPA and CA ANZ representatives, facilitated a public sector briefing, and presented awards to staff throughout the year.
QAO’s leadership and technical experts presented at numerous CPA congresses, as well as other industry events such as the Interdepartmental Accounting Group and the Healthcare Financial Management Association.
CA ANZ provides QAO’s professional scepticism program, and CPA provides us with ethics and governance training. Further, QAO hosted two in-house presentations by CA ANZ on the future of audit, and the value of trust. QAO also utilises professional development programs by the Institute of Chartered Accountants of England and Wales (ICAEW).
QAO’s study assistance scheme helps our staff achieve membership of CPA Australia and CA ANZ, and our procedures are aligned with our professional standards. We provide study leave and financial support. We also encourage candidates to network with others who have completed the program for support and guidance. This year two staff achieved CA ANZ, and one CPA, qualifications.
In March 2019, QAO’s James Simmons and Hayden Grant were awarded a certificate of merit by CA ANZ for being in the top five per cent of their CA qualification modules. James was awarded for Management Accounting and Applied Finance, and Hayden for Audit and Assurance.
James Simmons and Hayden, QAO, CA ANZ awards ceremony, March 2019.
Priorities for next year
2019–20 will be a year of consolidation, innovation, and collaboration.
We will continue with our current strategic initiatives, aimed at improving our client services and how we run our business. Our focus on integration and outcomes will drive all aspects of our work.
We will continue planning for, and implementing, a new operating model that will deliver on QAO’s promise for more integrated, consistent, quality and timely services for our clients. We will work on building the trust of our clients, so they are more likely to listen to our advice and implement our recommendations. We will embed organising ourselves around our client groups: parliament, entities and internal. We want our clients to value us and our services.
For our people, we will transform our business strategy and workforce planning, which will influence our structure, our skills and systems, and our leadership styles. We will continue to make the most of activity-based working and our new ICT assets.
We take data governance and cyber security seriously and will continue to ensure our controls reflect a high level of maturity. We will fully embed our revised risk management framework in 2019–20.
We will continue to use audit analytics to transform our services. We will integrate them into our audit methodologies and tools and use them to share valuable insights with clients.
In particular, we will help our clients to improve their internal controls. Many agencies have specifically asked for help with this, and we will prepare targeted reporting for clients and parliament about it. We will continue to work with our clients on how we assess financial statement preparation.
We will continue to improve our collaboration and communication. As an example, we will start publishing our program of performance audits earlier (by December each year), starting with Strategic Audit Plan 2020–23, to give entities more time to prepare for their audits. We will meet and interact with our clients in a way and at a pace that works for them.
We will also aim to increase the reach and readership of our insights by making sure our reports to parliament (including their new digital delivery platforms) meet user needs. As always, we will take opportunities to ensure our messages are clear and consistent.
Overall, in 2019–20 QAO will listen and respond to the needs of our workforce and our clients. We will better understand what they need, so Queenslanders can benefit from better public services.
We will engage with purpose, challenge ourselves, deliver on our commitments, and care about our people.
Financial statements and independent auditor’s reports
QAO funds the costs of its operations from the financial audit fees we charge our clients and from parliamentary appropriation. Our funding from parliament for 2018–19 was $6.835 million, which we allocated to reporting to parliament, delivering performance audit services, preparing the strategic audit plan, investigating referrals, and renumerating the Auditor-General.
We are sustainable as a contemporary public sector audit practice. We are in a good position to deliver our planned audit programs using efficient and effective technology and practices.
We earned slightly more revenue than anticipated due to the impact machinery of government changes had on our clients following the 2017 Queensland state election. And our response to increased governance risks in the local government sector. Both of which meant we delivered more audit services. We also brought more audit work forward into this financial year, with clients successfully undertaking early year end close processes.
The majority of our surplus, $1.596 million, resulted from the decrease in provisions with QAO’s signing of a new lease, which provided significant savings, and a no ‘make good’ clause resulting in the releasing of the leasehold restoration.
We also paid our staff less than anticipated due to a number of vacant positions within our audit service lines, for which active recruitment has now filled.
QAO’s total expenses were $43.134 million, slightly more than half of which are staff costs at $21.068 million. Our next largest expense was for audit service providers at $13.833 million. Our other expenses were conservative, covering expenses such as rent, information technology licensing and corporate travel.
This year, QAO refurbished its office premises and relocated one level within its existing building. The majority of the broader accommodation refurbishment project was funded by Department of Housing and Public Works, which holds the head lease. The total costs for QAO were $1.45 million, which included a major technology refresh, and the implementation of activity-based working. QAO planned to incur a future technology refresh cost of $700,000 in 2019–20 (due to aging equipment and systems) but brought it forward in line with the accommodation refurbishment and relocation project.
The pages in the appendices below contain:
- the Queensland Audit Office’s financial statements
- the Queensland Audit Office’s performance statement
- independent auditor report from Hall Chadwick.