2.21 As mentioned above, the ANAO considered the financial control framework supporting DMO's project management in order to reassess the prior year qualification in relation to systems limitations and in particular, the accuracy of information provided in relation to prime contract price and expenditure. Key controls were identified, and the aim of each control noted, in addition to whether they were preventative or detective (and their frequency), the implication of failure, and as a consequence any significant control weaknesses.
2.22 The control environments differed in each of the projects examined due to the numerous corporate and project management IT applications being employed by different project offices. As a result, there was inconsistency between the information produced by each project's IT systems, and efficiencies could not be gained by adopting a consistent approach to developing and subsequently reviewing each PDSS.
2.23 Difficulties encountered by DMO in presenting this information included:
• projects where DMO is the systems integrator can involve many different contractors and FMS cases, often with different base dates, in addition to contract amendments at differing base dates to the original contracts;20
• legacy system issues, where the Defence Financial Management Information System (DEFMIS), the financial management information system utilised by DMO prior to the introduction of the Resource and Output Management and Accounting Network (ROMAN) in 2000, could not readily disaggregate progress payment information;21
• FMS cases, for which records are kept in then-year dollars (that is, including price escalation), rather than in base date terms, as a result of requirements of the US Government;22 and
• for some projects, transactions are not managed in a way that facilitates separation into base date dollars.23
2.24 As a result of the above issues, DMO did not populate the prime contract price for three projects and prime contract progress payments for 11 of the 15 projects included in the 2008-09 MPR. This follows the ANAO's review conclusion in the 2007-08 MPR, which was qualified. As DMO has continued to encounter difficulties in this area, the review conclusion has been qualified due to this departure from the Guidelines, with respect to project financial information for prime contract price and prime contract progress payments in the 2008-09 MPR.
2.25 As an alternative to overcoming the difficulties mentioned above in obtaining reliable base date dollar information for prime contract price and prime contract progress payments, DMO has proposed to replace the disclosures with alternate information provided by reconciliations prepared for the Assets Under Construction (AUC) balance, within the Department of Defence financial statements.
2.26 However, the accrual presentation provided by AUC data introduces complexities in accounting for and assuring other parts of project's budget and expenditure, particularly costs that have been expensed in prior periods rather than capitalised as part of the AUC balance. The impact of these complexities has not yet been fully investigated, however there will be similar difficulties to those noted above. As a result, JCPAA intends to give this matter further consideration over the next 12 months, given that the approach is yet to be evaluated in terms of its utility to users and compatibility with the assurance review task.
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20 Hornet Upgrade, Hornet Refurb and Collins RCS. In addition, the AWD Ships project also has similar attributes, and DMO was unable to reliably report progress payments in base date dollars for this project, despite it having a much more recent inception than others.
21 FFG Upgrade, Bushranger and HF Modernisation.
22 Super Hornet and C-17 Heavy Airlift.
23 ARH Tiger and Armidales.