Audit papers warn state of error, fraud risk

The state’s auditor general has warned failure to address auditing issues in the state sector could erode public confidence, revealing a record number of qualification matters reported in 2021-22.

Caroline Spencer today tabled to parliament the final results of the 2021-22 state sector audits, which were partially withdrawn in December due to a lack of preparedness from nine of the 132 audited state entities.

“During the 2021-22 state sector audits we took the unprecedented step of withdrawing the financial audits of some entities who were not audit ready,” Ms Spencer said.

“From these nine entities there were an additional qualification matters, 67 control weaknesses – with 23 rated as significant – and $614.9 million of adjusted and $16.65 million of unadjusted audit differences.

“This means that the final results for the state sector are stark, with 45 qualification matters identified at 25 entities, a record for the state.”

The auditor general’s report found 452 control weaknesses at 80 entities, with 114 rated significant – the highest number in six years.

Ms Spencer said the increase in audit qualification matters came in part because of failures by entities to resolve audit findings related to financial management and information system control weaknesses.

A number of flagged issues were unresolved from a year earlier.

“Across the public sector, entities will need determination and commitment of sufficient effort and resources to resolve their significant issues,” she said.

“Without such attention though, risks of error and fraud are high, and this may erode the public’s confidence in administration of public finances.”

Shadow treasurer Steve Thomas said the increase in audit delays was concerning.

“The auditor general was raising concerns about delays in departmental reporting two years ago, but the trend appears to be getting worse, not better,” he said.

Dr Thomas said the opposition was particularly concerned about the number of findings that were unresolved from a year earlier.

“The audit process is a critical part of the accountability and transparency. And while failing to meet both the timeframes and the standards required occasionally occurs, the obvious downward trend in these areas is not acceptable,” he said.

The auditor general also tabled 2022 financial audit results from WA’s four universities and five TAFEs for the year ending December 31.

The performance of the state’s tertiary institutions has been under the microscope in recent times, with an independent review into the structure of the universities ongoing.

The auditor general’s report found the institutions had been largely successful in managing the challenges faced by the sector due to the COVID-19 pandemic, but expressed concern over control weaknesses in expenditure, revenue and financial reporting.

Control issues relating to information systems was identified as a primary concern off the back of recent public data leaks.

The report found 134 IT control weaknesses across the institutions, up 10 from the previous year’s report, with 59 per cent unresolved from the previous year.

The universities mostly rated low-to-medium risk for their performance against financial indicators in 2022, though the report found ratios indicated slightly higher risk levels than a year prior.