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Thursday, 10 November 1983
Page: 2600

Ms MAYER —I present the 211th report of the Joint Committee of Public Accounts, relating to Finance Minute on Report 184-Internal Audit in the Australian Public Service, and I ask for leave of the House to make a short statement in connection with the report.

Leave granted.

Ms MAYER —The 211th report contains the Department of Finance minute on the Committee's 184th report which was a discussion paper on internal audit in the Australian Public Service. The Department of Finance minute is the formal documentation of the Government's response to the Committee's recommendations as contained in the 184th report which was tabled in the Parliament on 11 February 1981. The Committee regards internal audit as an essential tool through which management can monitor the effectiveness of its controls and keep informed about the reliability and suitabilility of the systems and procedures it employs. The inquiry did not result from a specific reference; rather it was a discussion paper arising from the Committee's long standing interest in management and the quality of administration within the Public Service. The discussion paper was based on the collective experience of the Committee over many years as well as discussions with government departments, academics, professional accounting and auditing bodies and leading organisations in the private sector.

The paper looked at some of the problems of internal audit, ranging from an historical perspective to the work being undertaken to increase the effectiveness of internal audit groups. The Committee hoped that the report would stimulate further consideration of the broader dimension of the problem and suggestions for the development of a balanced approach towards achieving a solution. Previous attempts to improve internal audit in the Australian Public Service had been generally unsuccessful. It is clear that those failures resulted from an insufficient interest on the part of permanent and statutory heads and a lack of support for internal audit by senior management; a situation exacerbated by the low standard of internal audit capability. The findings of the 1977 Public Service Board review of internal audit focused attention on the dismal state of internal audit in the Public Service and stimulated renewed efforts to bring about improvements.

The Public Service Board has now initiated action designed to upgrade internal audit. Its success will depend entirely on the support given by individual departments and authorities. The Committee regards it as essential that the heads of departments and authorities cultivate a genuine interest in internal audit and learn to use it effectively. The tendency for many permanent heads to concentrate on policy matters and ignore administrative and financial affairs cannot be condoned. In addition, the Committee believes that officers who are motivated, qualified, experienced and capable must be encouraged to enter internal audit so that it can attain its full potential.

The joint impact of the 1977 joint management review of internal audit and this Committee's report has now been observed within the public sector. This Finance minute details the main policy developments which have resulted. These are as follows:

Establishment of the Joint Implementation Committee on Internal Audit to assist the Public Service Board and departments in implementing the follow-up action arising from the joint management review;

establishment of the Interdepartmental Advisory Committee on Internal Audit;

20 departments or authorities now have internal audit committees consisting of Second Division officers and chaired by permanent heads, deputy secretaries or first assistant secretaries;

progress has been made in the area of automatic data processing auditing-this has been encouraged through an IDAC paper circulated in June 1981 and entitled ' The Development of Departmental Arrangements of ADP Auditing';

the Public Service Board has issued, in Volume 4 of its Personnel Management Manual, seven sets of guidelines for departments on different aspects of computer based systems-these provide a starting point for the planning of ADP audits;

classification of the chief internal auditor position has been raised in 24 organisations-in six departments this position is in the Second Division and in most others it is at the top of the Third Division;

most departments have reorganised their internal audit positions so that there has been an overall trend of upward movement in their classification; and

in all organisations surveyed in 1982 the control of the internal audit function had been centralised.

Nevertheless, the Public Accounts Committee is concerned that considerable effort is still necessary to ensure that internal audit capability in the Public Service is established and maintained at an appropriate level. The Committee is committed to ensuring the necessary improvements in internal audit are brought about. The Committee will therefore use every opportunity to check progress within departments and test the commitment of permanent and statutory heads and management towards effective internal audit. I commend this report to honourable members.