OFFICE OF THE AUDITOR
GENERAL — OUTSOURCING
1565. Hon COLIN TINCKNELL to the minister representing the
I refer to the Office of the Auditor
General's 2018–19 annual report and note that page 44 states
that the OAG currently outsources about 35 per cent of its financial audit work
for state government entities and approximately 90 per cent for local
(1) What is the
derived cost–benefit from outsourcing the financial audit work,
compared with utilising internal resources?
(2) Are there any plans to further
extend the use of outsourced auditing resources?
STEPHEN DAWSON replied:
I thank the honourable member for
some notice of the question.
(1) The Office of the Auditor General, like other
audit offices in all Australian jurisdictions, has been contracting out audits for many years. The cost–benefit
is largely around managing surge capacity and staff productivity rates during the peak audit delivery periods of
the annual audit cycles—that is, state, local government and
tertiary education sectors. It is also about ensuring the ability to attract
and retain qualified staff to work within
the demands of these cycles and fluctuating employment markets. The benefit is
not measureable in purely financial
terms, given the large number of qualitative factors that need to be taken into
account when considering the benefits of outsourcing, which include
opportunities for the OAG to access specialist skills or knowledge that is
difficult or costly to maintain, such as extensive actuarial or
industry-specific expertise; opportunities for the OAG to partner with, and
learn from, accredited audit firms to develop innovative audit practices, and
to improve audit quality and reporting; and providing a benchmarking mechanism against which the OAG can measure its
cost-effectiveness and its audit tools and methodologies.
In the context of the OAG's
new responsibility for the auditing of local governments, outsourcing enables
the office to benefit from local accounting and audit firms'
understanding of regional areas and the issues faced by particular local governments, while also building the
capability of these firms. The Auditor General considers these
arrangements have flow-on effects that can help contribute to the economic
wellbeing of regional communities.
(2) The executive
team within the OAG constantly reviews the appropriate balance of its audit
outsourcing arrangements as part of its consideration of ongoing operational
requirements. Current audit delivery planning is taking into account the
requirements of the office as it progresses towards assuming responsibility for
the financial audit of all 148 local government entities by 30 June 2021. This
is because the formerly non-peak time of October to December is now the peak
delivery period for local government financial audits. The office needs to balance
the mix of senior staff time between supervising junior audit staff, conducting
high-level entity engagement and delivering the focus audit component of the
work program. Further consideration of outsourcing requirements will also now
need to take into account any outcomes of the request from the Treasurer to
conduct targeted forensic audits of agencies' contract management
systems, supported by data analytics measures.