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Go to secondary navigation. CPAs working in the public sector face unprecedented change amidst a backdrop of tightening revenues, increasing demand for services and an expectation to "do more with less". They have a critical role to play in developing and implementing strategy based on financial rigour and strategic insight to improve community service delivery. Annual research lectures CPA Australia partners with various organisations to support series of annual research lectures. Find out more. This includes consideration of less tangible elements such as client satisfaction, the public interest, honesty, justice, privacy and equity.

In meeting the challenge of obtaining value for money in a climate of sectoral convergence, it is imperative that public sector agencies entering into partnerships with the private sector have a full appreciation of risks to the public resources with which they have been entrusted. Such risks include taking advantage of opportunities as well as avoiding, for example, degradation, inefficiency and loss of resources and of performance.

As one commentator posits:. The convergence of the public and private sectors has occurred largely as a consequence of demands for more responsive service delivery and for improved efficiency in both sectors, for example, as part of the National Competition Policy, impacting on all levels of government and private sector firms. It provides the opportunity for public sector agencies to gain from specialist expertise and international better practice in complex and dynamic areas such as information technology and communications.

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However, convergence also brings into sharp focus the differences between the two sectors, which need to be managed responsively on a case-by-case basis. Together, the Parliament and the ANAO have a very important role to play in terms of defining and strengthening acceptable accountability frameworks for the twenty-first century. Public and private sector agencies have very different legal and accountability requirements.

For the public sector, legal responsibilities are defined by specific functional statutes as well as general requirements outlined in legislation such as the Financial Management and Accountability Act and the Commonwealth Authorities and Companies Act The legislature has further contributed to strengthening private sector accountability.

For example, the amendments to the Privacy Act , which came into effect on 21 December , have exposed the private sector to similar privacy obligations to those that already existed in the public sector. Commonwealth agencies have their primary accountability to the Executive and the Parliament. Private sector companies, however, have as their primary responsibility the provision of shareholder value.

While there are obvious potential tensions when the two sectors work together, there are also opportunities for both parties to benefit. To be able to achieve this goal, we must continue to work in strong cooperation with the Parliament to ensure that the wide-ranging goals of the Parliament, and, beyond it, of the Australian people, are being effectively achieved.

I noted a particular emerging problem in my Annual Report for with the increasing coverage of the private sector in performance audit reports. The situation seems to be accentuated where there is overseas ownership. In particular, the legal issue of defamation has been raised which can result in the use of language that may be counter to simple, clear, and straightforward explanations.

This is necessary for the credibility and acceptability of audit findings and recommendations. Conflicts of public and private interest are not new but their resolution in performance audits is a challenge for all parties without a genuine shared understanding of what constitutes public accountability.

In response to concerns expressed about accountability to the Senate in a recent Senate Finance and Public Administration References Committee report, the government indicated that it is supportive of making suppliers to government aware that contracts and contract-related material may be requested by, and provided to, Parliament and its committees, recognising, where appropriate, the application of public interest immunity. Agencies should include provisions in tender documentation and contracts that alert prospective providers to the public accountability requirements of the Commonwealth, including disclosure to Parliament and its Committees.

The main element of public sector accountability is openness or transparency. With the greater involvement of the private sector, concerns have been expressed about commercial considerations, particularly in maintaining competitive advantage. The requirements, if not the fact, in the public sector should be the reverse, except in special circumstances such as national interest considerations. The ANAO has found that value for money results from public-private sector partnerships can be particularly difficult to demonstrate where commercial-in-confidence provisions of contracts apply.

With the increased convergence of the public and private sectors, demonstrating transparency, accountability and the ethical use of resources has the potential to become clouded unless the Commonwealth takes a proactive and consistent stance to the scrutiny of contracts involving public funds.

As one commentator noted:. In general, the roles and responsibilities of both public and private sector partners in relation to commercial-in-confidence issues require clarification. All parties involved in service delivery must clearly understand their accountability requirements and their ultimate responsibility to the Parliament. The audit found a number of weaknesses in the ways in which agencies generally deal with the confidentiality provisions in contracts. This was threatening accountability and frustrating parliamentary committees and other forums of review. The Order requires that agencies indicate, amongst other things, whether contracts contain provisions requiring the parties to maintain confidentiality of any of their provisions or whether the parties regard any provisions of the contracts as confidential.

There were also positive indications that a number of agencies were developing, progressively, more detailed guidance to assist staff in determining aspects of contracts that might need to be protected as confidential. This is a step in the right direction, although agencies still have some way to go in applying guidance in a manner expected by Parliament.

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Nevertheless, the onus is now clearly on those wishing to maintain confidentiality to justify that position. Put another way, it has been suggested that business, commercial or financial information should generally be available in the public domain:. Resolution of this issue is just one of the problems facing agencies negotiating the converging governance landscape. Commercial-in-confidence issues have challenged both agencies and their auditors, in terms of our ability to provide assurance as to the efficient and effective administration of public resources.

In its response to this recommendation, the Government noted that it:. Any decision to withhold information on [commercial-in-confidence] grounds needs to be fully substantiated, fundamentally stating the reasons why such information should not be disclosed. A related issue is that of cabinet confidentiality and collective responsibility for administrative decisions.

In a recent audit of the Federation Fund program, [24] the ANAO found that reasons for ministers selecting, or not selecting, particular Federation Fund projects were generally not available. Successive governments have supported the conventions of cabinet confidentiality and collective responsibility by the practice of not disclosing the deliberations of, or reasons for, decisions by cabinet and its committees.

The lack of documentation surrounding the ministerial appraisal process and the lack of information on reasons for decisions highlights a tension between the standards expected for public administration and the normal cabinet conventions.

In the case of the Federation Fund, this precluded the ANAO from forming an opinion as to whether the proposals selected by the government were likely to represent best value for money in terms of the program objectives. This is a tension for government and the Parliament to resolve.

As public sector auditors, we will be guided by the accountability standards that Parliament indicates are appropriate. Canada has experimented with networked partnership arrangements to good effect. While there are potential benefits in this type of approach, there is also a need to clarify the governance arrangements that are intended to support the demonstration of accountability.

Traditional public sector accountability arrangements do not fit these diverse forms of partnerships. Consequently, there is a need for tailored, innovative approaches based on a full appreciation of the risks and benefits involved, if there is to be credible accountability to Parliament for both the results and the manner in which they are achieved. This is particularly the case where the public sector makes use of private sector financing to deliver public services. Private financing initiatives PFI have been used in areas such as infrastructure, property, defence and information technology, and have been explored in a number of countries in response to fiscal pressures.

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Private financing gives rise to additional challenges and demands for public accountability and transparency because of the substantial shifts in risk. The potential liabilities accruing to governments may be substantial.

The evaluation of the costs and benefits of private financing are not straightforward. This is because the government can usually borrow funds at a lower rate than most private organisations. Nevertheless, there is the concern that the ultimate risk always rests with the public sector to the extent that the public sector has over-arching and enduring accountability responsibilities, regardless of the commercial relationships it enters into, to achieve its objectives. This is particularly evident in the Defence area and raises issues about the nature of lease arrangements and their accounting treatment.

Victoria and New South Wales have already used private financing arrangements for road and associated infrastructure projects. State Audit Offices have noted difficulties in establishing clear financial benefits from the private financing approach and, in one case in NSW, Parliament was denied access to the contract deed between the public sector roads authority and its private sector partner. For agencies, private financing poses significant challenges in terms of accountability.

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Agencies need to demonstrate the net benefits from adopting private financing as well as the satisfactory management of risks. The net benefits may well involve intangible benefits that are not easily verified. In addition, risks need to be managed in a transparent way that enables full disclosure of the probity arrangements in place.

These elements of decision-making can be quite complex and are not without resource implications.


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As a result, we will be conducting audit reviews in the future on PFI arrangements. Greater flexibility in management, and corresponding increases in personal accountability, have become central features of the current administrative arrangements. For example, personal responsibility has been delegated to the heads of agencies, now known as CEOs.

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This approach reflects the private sector management model. It also creates new opportunities and risks that require effective and appropriate corporate governance frameworks if the public interest is to be protected without stifling the benefits offered by the new flexibilities. A real challenge for such frameworks is to strike an appropriate balance between conformance and performance.

I spoke earlier of the need to understand the legal construct and the compliance imperatives, for example in personal liability concerns by governing boards. However, there is also a need to both address such concerns and achieve required outcomes or results. While the devolution of responsibility for agency accountability to agency heads may create the conditions for more responsive tailored management approaches, it also brings some significant risks in terms of overall public sector governance.

Currently, it could be argued that we are determining accountability requirements by default as agencies are engaged in setting their own boundaries, which may or may not be acceptable to Parliament, in the absence of across the board guidance on these issues. However, there is also a strong need for widespread debate on this issue and for guidance from the government and the Parliament. Such guidance would be more helpful if it went beyond a general requirement for agencies to remain ultimately accountable, or that they cannot outsource accountability.