Auditors-General are an essential element of the accountability process by providing that unique blend of independence, objectivity and professionalism to the work they do. Corresponding with the public sector changes over time, the role of Auditors-General and the place of auditing in democratic government have also changed. As the public and private sectors converge; as the management environment becomes inherently riskier; and as concerns for public accountability heighten; it is vital that Auditors-General have the professional and functional freedom required to fulfil, fearlessly and independently, the role demanded of them.
A particular risk for auditors in this new environment is the considerably increased complexity involved in arrangements such as PPPs. It is important that audit offices ensure they are in a position to fully understand the transactions being undertaken by agencies in order to be able to both review the value-for-money assessment, as well as the appropriateness of the accounting for the transaction. This raises issues of ensuring commonality of views across audit functions. These risks and implications for the public sector auditing process will continue to gain in prominence as we continue along the procurement continuum.
To ensure their effectiveness, ANAO privatisation audits are undertaken by a team of experienced officers who understand the commercial nature of the transactions and the overlaying public accountability issues. In addition, ANAO engages appropriately qualified professionals to provide specific technical, including commercial, advice for such audits.
That said, however, the essential management principles that underpin efficient and effective management are a constant. In any procurement project, important aspects of accountability relate to the capacity to demonstrate that the approach selected represents superior value for money when compared with other possible approaches and/or providers, and that the projected benefits and outcomes are achieved over the term of the project. This remains the case with the introduction of the concept of PPPs. In this regard, Professor Mervyn Lewis has said:
In structuring the most appropriate approach, the focus should be on the output specifications, the public interest, the capabilities of both government and the private sector, the optimal risk allocation environment and commercial viability. The objective remains one of achieving effective and efficient value for money outlay.81
In recent years, ANAO has undertaken performance audits of a range major Commonwealth asset sales and procurement activities. In addition to raising significant cash proceeds, asset sales provide an opportunity to transfer risks to the private sector and have been argued to offer the potential for improved business efficiency. In a number of instances, a common theme of these audit reports has been the deficiencies in the project management skills of agency decision makers. This is of concern given that some of these projects involve substantial resources and complexity. As well, reports have flagged a need for care in assessing value for money and negotiating, preparing, administering and amending major projects. These issues have significance for accountability to stakeholders and their confidence in the arrangements, not least the Parliament itself.
As noted earlier, in Australia, most of the activity in private financing initiatives has occurred at the State Government level. However, ANAO has observed lessons learnt from the increasing involvement at the federal level of the private sector in services traditionally delivered by the public sector which can be expected to also have considerable relevance in the implementation of PPPs, as identified in the following sections.