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Internal controls and compliance

Internal audit

The internal audit function underpins and contributes to sound corporate governance across the department. It does this by examining and evaluating the adequacy, effectiveness and efficiency of governance assurance measures and the quality of management in an independent and professional manner. The function covers three distinct but related functions:

  • Internal audit: delivers a targeted and risk-based internal audit programme that seeks to improve policy, programme and administrative performance and promote better practices across the department.
  • Risk management: develops the department-wide risk management framework and oversees and improves risk management planning and monitoring across the department.
  • Fraud control: develops the department-wide Fraud Control Plan and oversees and improves fraud control planning and monitoring across the department.

The 2002-03 Internal Audit Programme increased the linkage between the audit programme and the risks identified in the divisions' business plans. During 2002-03 Internal Audit finalised 10 audits. A number of these audits had commenced in the previous year. The audits covered: the Remote Air Services Subsidy scheme; purchasing and procurement arrangements; indemnities; air passenger ticket levy; salaries and allowances; Australian Government Credit Card administration; SAP upgrade; management of funding for freight councils; Dairy Regional Assistance Programme; and the use of corporate travel and purchasing cards.

The audits have resulted in improvements in: compliance, governance and control arrangements; record keeping practices such as documentation to support decision making; and grant administration practices and funding arrangements.

Internal Audit also conducted follow-ups on implementation of ANAO and internal audit recommendations, focusing on those of highest risk.

Risk management

To manage risk, the department has continued to implement its risk management framework and promote a risk management culture. Business planning processes ensure each division addresses risk management as an inherent part of their planning regime. We have recently reviewed our risk management framework and are actively working to further improve it.

Certification of fraud measures

In accordance with the Commonwealth Fraud Control Guidelines, we have revised our fraud risk assessments and an updated Fraud Control Plan will be released in September 2003. We currently have in place appropriate fraud prevention, detection, investigation, reporting and data collection procedures and processes that meet the specific needs of the department and comply with the guidelines.

Provision of internal audit services

The department issued a Request for Tender (RFT), prior to expiration of the contract for the provision of internal audit services. In December 2002 the department changed its internal audit service provider. The new provider continues to conduct internal audits as well as providing the department an investigative capability, an advisory service, and training and awareness on internal audit, risk management and fraud control.

Assets management

The total book value of the departmental assets is approximately $250 million. The majority of this asset base is land, buildings and infrastructure located in the Indian Ocean Territories of Christmas Island and Cocos (Keeling) Islands. Information on specific asset management activities undertaken during 2002-03 can be found in Part 5: Financial performance report, on page 153.

Purchasing, contracting and consultancies

Purchasing arrangements

Each division is responsible for its own purchasing activities, which are subject to the provisions of the Chief Executive's Instructions (CEIs) on procurement and the Commonwealth Procurement Guidelines. CEIs ensure that our staff are able to follow a process that covers all core policies and principles.

The purchasing guidelines and procedures are available on our intranet. The intranet contains information on tender planning, developing specifications, advertising, evaluating tenders and contract preparation and monitoring. We are currently reviewing and updating this information to further improve the way we conduct our procurement activities.

The department encourages the participation of small to medium Australian and New Zealand enterprises (SMEs) in its purchasing activities. In December 1997 it became mandatory for Australian Government departments and agencies subject to the Financial Management and Accountability Act 1997 to source at least 10 per cent of their purchases from small to medium enterprises.

In 2001-02, a survey on SME participation showed that from the total number of contracts, the department achieved a 61.8 per cent SME participation rate. The Department of Finance and Administration provided these figures in mid 2003.

Competitive tendering and contracting

Requests for Tender for the provision of property, accommodation and security services, office services, human resources and finance services were released during 2001-02. All were select or restricted tenders.

On 11 December 2002 the department contracted with United KFPW Pty Ltd to provide property, accommodation and security services. On 4 April 2003 the department contracted with Pickfords Pty Ltd for the provision of office services. The initial term of each contract is five years with ongoing two-year options.

The value of the contract with United KFPW Pty Ltd is $3 515 000 and with Allied Pickfords Pty Ltd is $8 228 000 over the term of each contract.

These contracts provide for the Auditor-General to have access to the contractors' premises.

Although savings identified were modest, the department considered a change of the service delivery model would provide a range of benefits to the organisation. Benefits included improved practices, more strategic approach to services, broader breadth of experience in the industries and greater capability to value add because of market position and influence.

The secretary decided to retain the provision of human resources and finance services in-house. As reported in the 2001-02 Annual Report, it was decided to retain the department's legal services in-house. On 6 June 2003 a select tender was initiated to source a panel of legal providers as a means of providing additional capacity when required, with the panel arrangement to commence in late July 2003.

Consultancies

Consultants continued to provide a range of specialised skills not available within the department or where staff or other in-house resources were limited.

The procedures and guidelines for engaging consultants are also available to staff through the department's intranet and through the CEIs relating to procurement. Proposals for consultancies are required to specify the requirements of the project, clearly justify the use of a consultant, identify the expected costs, recommend a procurement method and explain how the consultant's performance will be evaluated and monitored.

During the year, the department engaged 62 new consultancies valued over $10 000. The total value of these is $3.82 million. Details are provided in Appendix 1. Total expenditure on consultancies during 2002-03 is $5.96 million.

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