Auditor flags the ‘voluminous disclosure requirements’ for small public entities, and points to identified weaknesses not being addressed. 

The Western Australian Government should simplify financial reporting requirements to reduce the reporting burden on small public entities, says the state’s auditor-general Caroline Spencer.

Small-to-medium size agencies make up the majority of the state’s public sector entities yet they are required to prepare general purpose financial reports “with the same voluminous disclosure requirements as Australia’s largest not-for-profit government entities and listed companies,” the auditor says.

Her annual financial audits of state sector entities, tabled in state parliament today, said that the current requirement “places an avoidable reporting burden on small to medium sized entities.”

But financial reporting for public agencies more broadly could be streamlined if the auditor’s other recommendations are adopted.

Ms Spencer said that she has identified aspects of financial reporting that are “very time consuming” for agencies but “do not appear to provide any additional value to parliament.”

The auditor has asked her office’s technical and financial audit teams “to identify areas where reporting could be more efficient at an entity level,” she revealed.

“I anticipate my office’s findings may contribute to the Department of Treasury’s work in potentially streamlining the ongoing financial reporting requirements of state government entities,” she said.

Highlighted weaknesses not addressed

Elsewhere the report shows that a high proportion of management or system control “weaknesses” identified by the auditor last year has still not been addressed by the relevant agencies.

The auditor says that 30 per cent of the 300 financial management control weaknesses identified this year had already been flagged in her previous report.

Most of the weaknesses were in expenditure control, payroll and human resources, and asset management.

She said “it was disappointing to note that 90 control weaknesses at 28 entities were unresolved from the prior year.”

Similarly, she identified 438 information system control weaknesses of which 40 per cent were unresolved from last year.

Ms Spencer added:

“The majority of issues are simple to fix but if not resolved they will leave entities vulnerable to security incidents and disruption to systems.”

Agencies responded to changes

The audit found that public entities “are adapting quite well” to the state’s extensive machinery of government changes, which the auditor notes can lead to “increased risk” around governance and controls.

The report, containing the results of audits of 146 state government entities for the year ended 30 June 2018, found that fewer entities were audit ready – 63 per cent compared to last year’s 70 per cent.

But it also found that the vast majority received clear audit opinions, with just six receiving a qualified opinion, down on nine from last year.

The report notes that public sector annual and long service leave liability has increased.

The auditor recommended that, where appropriate, staff should receive a cash payout for part of their leave, rather than accumulating large balances.

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