Barnett moves to put WA councils under auditor-general's watch

By Stephen Easton

August 26, 2016

Business background with graph, ruler, pen and calculator.

Western Australian councils can expect closer and more public oversight of their finances and performance in future with the state government finally moving to bring them into the auditor-general’s remit, 10 years after such a move was first proposed.

Announcing the introduction of amendments to state parliament yesterday, Local Government Minister Tony Simpson said:

“The Western Australian community has an expectation that all levels of government, including local governments, are open and accountable. This bill will provide an independent oversight of local governments, which will be scrutinised for potential instances of wastage, inefficiency or ineffectiveness.

“The state government is committed to ensuring that West Australians benefit from responsive and accountable local governments.”

The changes will bring WA broadly into line with all other states and territories bar New South Wales, where parliament is currently debating a similar legislative change that was introduced in June, but that comes as part of a wider and more controversial set of amendments that aim to deepen the state’s financial control over councils.

WA auditor-general Colin Murphy

According to Simpson, the amendments would require all audits to be done under the supervision of the auditor-general’s office, which will also be empowered to run its own performance audits of council operations. Councils would also be required by law to publish their annual reports and audited financial statements online for the first time.

The push to transfer responsibilities for the accountability and transparency of WA councils from the Department of Local Government and Communities to the independent audit office has been on the cards for at least a decade.

In 2006, the parliamentary Public Accounts Committee strongly recommended making the auditor-general the auditor for all WA councils and suggested his “full involvement” in auditing both finances and performance was the ideal model.

The Corruption and Crime Commission also lobbied for the amendments in a February 2015 report, and auditor-general Colin Murphy backed the proposal as well. The following months saw Minister Simpson ask the department to begin exploring options and Premier Colin Barnett indicate his intention to do something about it.

The PAC then followed up on its 2006 report with another last November, which among other things, criticised the department for “a lack of rigour and a seemingly inconsistent approach … in its monitoring and follow-up of local governments regarding compliance with statutory requirements”, as well as the lack of transparency of its findings.

The WA audit office currently has very limited powers to audit how local governments acquit special purpose grants from the state, which it has used on only two occasions. Local governments could also theoretically ask the auditor-general to run the ruler over something for them, but never have they done so.

“The bill responds to recommendations from the Corruption and Crime Commission and the Public Accounts Committee to raise the standard of accountability of local governments to a level consistent with state government authorities and public sector agencies,” said Simpson.

Another issue raised by the recent PAC report was inconsistency; when it looked at independent audit reports for 132 of the 140 WA councils, it found “11 different audit firms were engaged across the sector, each using a different format for presenting its findings” and recommended the department set up a standardised regime for all.

The committee reported that “a notable inconsistency in the level of detail and general quality of reporting from the various independent auditors engaged by local governments to conduct financial statement audits” still persisted despite being an issue raised in its report 10 years ago. In one example of lax oversight under the present system, the report states:

“The department is yet to receive the independent audit reports of four local governments relating to the 2013–2014 financial year despite the Local Government (Audit) Regulations 1996 stipulating that the auditor should provide a copy of their report to the minister (through the department) within 30 days of the audit being completed.”

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