AUDIT AMENDMENT BILL 2011

SERIAL NO. 157       

LEGISLATIVE ASSEMBLY OF THE 
NORTHERN TERRITORY

CHIEF MINISTER
EXPLANATORY STATEMENT
GENERAL OUTLINE
The Bill seeks to amend the Audit Act to modernise and align the Act with contemporary audit practices and principles.
Specifically, the Bill:
§	broadens the Auditor-General’s audit scope and coverage to enable the audit of the financial statements, compliance with statutory obligations and performance management systems of all Territory controlled entities regardless of the type;
§	allows the Auditor-General to audit the performance management systems of any recipient of public moneys at the request of the Minister, if the payment of public moneys is for the purpose delivering projects or undertaking significant service provision activities on behalf of an Agency;
§	asserts the Auditor-General’s independence;
§	changes the term of appointment of the Auditor-General from a fixed term of seven years to a period of five years with the option of a single reappointment for a maximum period of five years; and
§	makes minor amendments to modernise and align the Act with contemporary drafting practices.
CLAUSES

Clause 1	Short title

When enacted, the Bill will be cited as the Audit Amendment Act 2011.

Clause 2	Act amended

The purpose of the Act is to amend the Audit Act.

Clause 3	Long title amended

This clause omits the words ‘and agencies’ and inserts the words ‘, Agencies and Territory controlled entities’.

Clause 4	Section 3 amended

(1)	This sub clause omits the words ‘, unless the contrary intention appears’ in section 3(1) of the Act as part of modernising the language of the Act.

(2)	This sub clause inserts and defines the following terms:

§	by notice;
§	company;
§	executive officer;
§	organisation;
§	prescribed officer;
§	prescribed requirements; and
§	Territory controlled entity.

(3)	This clause inserts a note at the end of section 3(2). The purpose of the note is to assist the reader in relation to words and expressions used in the Act. Various terms such as Accountable Officer, accounts and Public Account used in the Act are specifically defined in the Financial Management Act. To understand the Act it is necessary to consider the Financial Management Act in the context of terms that are expressed in this Act.

Clause 5	Section 4 amended

(1)	This sub clause omits the word ‘shall’ and substitutes the words ‘is to’ in section 4(1) of the Act as part of modernising the language of the Act.
(2)	This sub clause omits section 4(2) the Act, relating to the appointment of the Auditor-General by an instrument in writing and 4(3) Act relating to the term of appointment of the Auditor-General and substitutes new sections 4(2) and (3).
New section 4(2) changes the term of appointment of the Auditor-General from a fixed-term of seven years to a term of up to five years and requires the Administrator appoint a person as Auditor-General by a written notice (an instrument).
New section 4(3) provides the option of a single reappointment to the term of an Auditor-General for a period not exceeding five years (a maximum total term of ten years). The reappointment must be made by written notice (an instrument) before the expiration of the Auditor-General’s first term.
(3)	This sub clause omits section 4(5) of the Act and substitutes a new provision which reflects contemporary drafting language as part of modernising the language of the Act.
(4)	This sub clause omits the words ‘instrument in writing’ and substitutes the word ‘notice’ in section 4(6) as part of modernising the language of the Act.
(5)	This sub clause omits the word ‘shall’ and substitutes the word ‘must’ in section 4(7) and (9) of the Act as part of modernising the language of the Act.
(6)	This sub clause omits section 4(8) of the Act and substitutes a new section 4(8) as part of modernising the language of the Act.

Clause 6	Section 9 replaced

This clause repeals the existing section 9 of the Act dealing with the exclusion of the Auditor-General from membership of certain bodies.

New section 9(1) provides that the Auditor-General cannot be a member of the Legislative Assembly, the Parliament or Executive Council of the Commonwealth, the Parliament of another State or Territory or a prescribed officer of a Territory controlled entity.
New section 9(2) provides that if the Auditor-General attains membership of a class specified in section 9(1), that the person’s appointment as the Auditor-General ceases.

Clause 7	New Sections 12A inserted

This clause inserts a new section 12A, in Part 2 of the Act to assert the Auditor-General’s independence, specifically, that the Auditor-General is not subject to direction by any person and must act independently and in the public interest.

It provides that in performing and exercising his or her functions and powers, the Auditor-General is not subject to direction about the type of audits conducted, how an audit is performed, the making of a report on an audit, what is and isn’t included in a report and the priority given to matters.

An exception to the Auditor-General’s discretion is a direction by the Minister for the Auditor-General to carry out an audit under section 14 (special audit), section 15(1A) (audit of the performance management systems of an organisation), or a request that an audit by arrangement is carried out under section 28 relating to the accounts of an organisation that is not an Agency or a Territory controlled entity.

Clause 8	Section 13 amended

(1)	This sub clause omits the word ‘shall audit the Public Account and other accounts’ and substitutes the words ‘must audit the Public Account and other accounts (including the accounts of a Territory controlled entity)’ in section 13(1) of the Act.
(2)	This sub clause omits current sections 13(2), (3) and (4) of the Act and substitutes new sections 13(2) and (3).
New section 13(2) provides that as part of his duties, the Auditor-General must audit the Public account and other accounts (including those of a Territory controlled entity) at least annually unless the Auditor-General thinks it appropriate to dispense with an audit.

New section 13(3) provides that the Auditor-General may choose to dispense with an audit of the accounts of an Agency or a Territory controlled entity in any year (note that the dispensation of accounts does not include the Public Account). If the Auditor-General dispenses with an audit of an account of an Agency or Territory controlled entity, he or she must give reasons for the dispensation in a report to the Legislative Assembly made under section 24 of the Act.

Clause 9	Section 15 amended

(1)	This sub clause inserts a new sub section (1A) after section 15(1) of the Act.
New sub section (1A) provides that the Auditor-General must conduct an audit of the performance management systems of an organisation to investigate the use of public moneys if requested in writing by the Minister, if the organisation has received public moneys from an Agency and the Minister believes that the payment of public moneys is for the purpose of delivering projects or undertaking significant service provision activities on behalf of an Agency.
(2)	This sub clause omits the word ‘shall’ and inserts the word ‘must’ in section 15(4) of the Act as part of modernising of the language of the Act.
(3)	This sub clause inserts the word ‘and’ at the end of section 15(5)(a) of the Act to make this section easier to read by contemporising this section.

Clause 10	Section 16 amended

This clause omits sections 16(2) and (3) of the Act and substitutes new sections 16(2), (3), (4) and (5) in relation to the preparation of Auditor-General’s reports under section 16 to clarify the giving of a report of an audit to a prescribed officer in relation to an Agency, Territory controlled entity or a non-government organisation.

New section 16(2) provides that if an audit relates to an audit of an Agency, the Auditor-General must give a copy of the report to the Accountable Officer of the Agency and may also give a copy of the report to the Minister responsible for the Agency and/or the Treasurer.

New section 16(3) provides that if an audit relates to an audit of a Territory controlled entity, the Auditor-General must give a copy of the report to the Accountable Officer of the Agency that has responsibility for the area of government relevant to the Territory controlled entity under column 4 of the Administrative Arrangements Order, and to the prescribed officer of the Territory controlled entity.

The Auditor-General may also give a copy of the report to either the Minister responsible for the Agency that has responsibility for the area of government relevant to the Territory controlled entity under column 4 of the Administrative Arrangements Order and/or the Treasurer.

New section 16(4) provides that if an audit relates to an audit of non-government organisation, the Auditor-General must give a copy of the report to the Accountable Officer of the Agency that has responsibility for the area of government relevant to the non-government organisation under column 4 of the Administrative Arrangements Order, and to the person in the organisation the Auditor-General believes has responsibility for the management of the non-government organisation.

The Auditor-General may also give a copy of the report to either the Minister responsible for the Agency that has responsibility for the area of government relevant to the non-government organisation under column 4 of the Administrative Arrangements Order and/or the Treasurer.

New section 16(5) recreates the old section 16(3) of the Act.

Clause 11	Section 21 amended

(1)	This sub clause omits the words an ‘Accountable Officer or other employee employed in an Agency’ and inserts the words ‘the prescribed officer of, or a person employed in, an Agency or Territory controlled entity’ in section 21(1) of the Act to extend the requirement to give information or an explanation to the Auditor-General or an authorised auditor as part of an audit, to a prescribed officer or an employee of a Territory controlled entity.

(2)	This sub clause omits the word ‘shall’ and substitutes the word ‘must’ in section 21(1) of the Act as part of modernising the language of the Act.
(3)	This sub clause inserts the words ‘ or Territory controlled entity’ after the word ‘Agency’ in section 21(2) of the Act.

Clause 12	Section 24 amended

(1)	This sub clause omits the word ‘shall’ and substitutes the word ‘must’ in section 24(1) and (4) as part of modernising the language of the Act.
(2)	This sub clause omits the words ‘to the Agency to which the report relates; and’ in section 24(4)(a)(i) of the Act and inserts:

‘to:

(A)	if the report relates to an Agency or Territory controlled entity – the prescribed officer of the Agency or Territory controlled entity; or

(B)	if the report relates to an organisation – a person (the manager) whom the Auditor-General considers is concerned with, or takes part in, the management of the organisation; and’

Section 24 extends right of reply provisions in relation to a report of an audit by the Auditor-General to a Territory controlled entity and a non-government organisation.

Section 24(4)(a)(i) provides that before making a report about an audit of an Agency, Territory controlled entity or a non-government organisation, the Auditor-General must give a copy of the report or a summary of findings or recommendations to the prescribed officer of an Agency or Territory controlled entity or a non-government organisation to which the report about an audit relates.
(3)	This sub clause omits all references of the word ‘Agency’ in section 24(4)(a)(ii) and (b) and inserts the words ‘prescribed officer or the manager’.
The Auditor-General is required to ask a prescribed officer of an Agency or Territory controlled entity or a non-government organisation in writing for their comments in relation to a report of an audit.
The date for the making of comments specified in the written request cannot be less than 7 days after a copy of the report is received by the prescribed officer, and the Auditor-General must include all comments received or a summary of comments received from a prescribed officer in his or her report of an audit.

Clause 13		Section 27 amended

(1)	This sub clause omits ‘&c.’ from the heading in section 27 of the Act and substitutes the words ‘other Agency or Territory controlled entity or other organisation’ to help a reader with the legislation.
(2)	This sub clause inserts the words ‘, Territory controlled entity or other organisation’ after the word ‘Agency’ in section 27(1)(b) of the Act. It is necessary to include a Territory controlled entity or a non-government organisation in this section for the purpose of a declared conflict of interest by the Auditor-General due to the broadening of the Auditor-General’s audit scope.
(3)	This clause omits the word ‘shall’ and substitutes the word ‘must’ in sections 27(2), (4) and (6) as part of modernising the language of the Act.

Clause 14		Section 28 amended

(1)	This sub clause omits the heading in section 28 of the Act ‘Audits, &c., by arrangement’ and inserts a new heading ‘Extension of function to audit accounts of organisation’ to help a reader with the legislation.
(2)	This sub clause omits the words ‘a body, not being an Agency, in which the Territory or an Agency’ and inserts the words ‘organisation in which the Territory, an Agency or a Territory controlled entity’, in section 28(1) of the Act for the purpose of applying internal consistency with section 15 of the Act.
Note: Although section 15(1A) and section 28 of the Act appear similar, section 15 is confined to audits of the performance management systems of an organisation that has received public moneys from an Agency, while section 28 relates to the audit of the accounts of an organisation.
(3)	This clause omits the words ‘the body’ in sections 28(1)(a), (2) and (3) and substitutes the words ‘the organisation’ for the purpose of applying internal consistency with section 15 of the Act.
(4)	This clause omits the words ‘a body’ in section 28(2) and substitutes the words ‘an organisation’ for the purpose of applying internal consistency with section 15 of the Act.

Clause 15		Section 29A inserted

This is a standard regulation clause providing that the Administrator may make Regulations.

This includes matters required or permitted to be prescribed by the Act or which are necessary or convenient to be prescribed for carrying out or giving effect to this Act, for example: prescribed record keeping requirements for audits, or a scale of fees.

Clause 16		Part 7 replaced

This clause repeals the former transitional and savings provisions in Part 7 as they are no longer required, and substitutes a new transitional provision to provide that the Auditor-General at the commencement of this section can be reappointed for a further term of not more than three years (taking his total term of appointment to ten years), consistent with the change to the term of appointment of the Auditor-General.

(1)	This clause provides that the transitional provision applies to the Auditor-General at the commencement of this section.
(2)	This clause provides that the appointment of the Auditor-General is not affected by the change to the term of appointment.
(3)	This clause provides that the Auditor-General is eligible for a single reappointment of not more than three years at the expiration of his current term.

Clause 17		Act further amended

The Schedule lists all provisions to be amended in the Act. These are minor amendments to update headings, clarify existing references and to modernise the language used in the Act to align it with contemporary drafting practices.