Budget cuts to audit office 'reduce pressure' on govt agencies

It was a routine financial audit by the Australian National Audit Office that discovered the Department of Infrastructure had paid $30 million for a $3 million piece of land beside the future Western Sydney Airport.

Following that discovery, Auditor-General Grant Hehir made the call to conduct a performance audit, which has since led to two internal inquiries and an investigation of possible criminality by the Australian Federal Police.

"Our ability to react quickly to those type of issues and start up an audit quickly would be challenged, if we were reduced by that much," Mr Hehir told the public accounts and audit committee, which is conducting a 10-yearly review of the Auditor-General's Act.

If proposed budget cuts for the agency were to continue, some government agencies could go as long as 20 years between audits, Mr Hehir said.

"This reduces the pressure to maintain performance and compliance," Mr Hehir said in a tabled opening statement.

Mr Hehir said the reduction in the program of audits meant agencies would also be less likely to do their own improvement work under threat of audit.

"The evidence that we find in auditing is when we put audits on the program, when we announce we're going to start them, entities actually start having a deep look themselves and start fixing up things," he said.

"If you reduce the program by 25 per cent, the likelihood that you're going to be audited drops and therefore the incentives in the system to to have a review of what's going on decline."

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Ongoing funding to the audit office was cut in the Coalition's October budget, with fears growing the independent watchdog would be hobbled by turning off the funding tap. Labor described the funding cuts as "revenge" for scandals such as sports rorts.

Mr Hehir said his office's output next year would be at its lowest in 20 years for performance audits.

"In effect, I am unable to provide the Parliament to the same extent with the evidence it has used to hold executive government to account thereby reducing accountability and transparency," he said.

The Australian National Audit Office missed its target of 48 performance audits for 2019-20, completing just 42, due to funding constraints. The Auditor-General has warned the targets would continue to be missed without more funding, which has been cut by $23.7 million since 2016-17.

This year that would reduce to 40 audits and by 2024-25 there would be just 36 performance audits.

"I anticipate that even with reduced numbers, the depth and breadth of audits within the performance audit program will also reduce," Mr Hehir said.

Mr Hehir also pointed out the cuts were happening while government spending overall was increasing, both reducing the proportion of spending that goes towards auditing, and the spending that is audited.

"As a percentage of general government expenditure, the ANAO appropriation has fallen by over 50 per cent over the last 10 years," he said.