The Howard Government was elected on 2 March, 1996.

The Terms of Reference for its National Commission of Audit into government finances were announced in that same month.

The final report was presented on 19 June, 1996.

National Commission of Audit

Dear Treasurer and Minister for Finance

Attached is the Report of the National Commission of Audit on aspects of the management and financial activities of the Commonwealth Government and how they are recorded.

In the three months available to prepare the Report, the Commission has not been able to comprehensively evaluate all areas where improvements might be made. Its approach has been to set out a framework of principles that can be used to assess particular government activities covered by the terms of reference, and then to illustrate how these principles might be applied using particular examples of current government activities. The Commission believes that the Government can use the proposed framework to evaluate public sector activities in its drive to improve the Commonwealth's finances in a medium and long term context.

The Commission considers that application of the proposed framework of principles and the recommended changes in accounting and fiscal reporting practices should lead to substantial improvements in the Commonwealth's financial management and in the performance of Australian governments. At the same time, the quality of government services should be improved.

Although operating as an independent entity, the Commission wishes to acknowledge the many submissions it received and, in particular, the submissions from the Departments of Finance and the Treasury. Above all, the Commission records its appreciation for the first class work of the Secretariat led by Oliver Winder and drawn mainly from the Department of Finance with Treasury representation. The Secretariat at all times carried out its task with skill and professionalism.

Finally, the Commissioners wish to acknowledge the considerable work of the Executive Officer, Geoff Carmody.

Yours sincerely

R.R. Officer E.A. Alexander J.A. Fraser M.L. Newman 
Chairman 
19 June 1996

• Letter of transmittal
• Members of Commission
• EXECUTIVE SUMMARY

1. FOCUS AND STRUCTURE OF THIS REPORT
2. PRINCIPLES GUIDING THE COMMISSION'S ANALYSIS
   • 2.1 When should governments get involved in the community's activities?
   • 2.2 Getting program objectives right: broad effectiveness principles
   • 2.3 Value for money in delivering programs: broad efficiency principles
   • 2.4 Accountability and performance monitoring framework
   • 2.5 Application of the principles
3. OBJECTIVES OF GOVERNMENT ACTIVITY: SHOULD THE GOVERNMENT BE INVOLVED?
   • 3.1 Reviewing the government's priorities
   • 3.2 Government assistance programs
   • 3.3 Government business enterprises
   • 3.4 Government service programs
4. WHICH LEVEL OF GOVERNMENT? INTERFACE BETWEEN THE STATES AND THE COMMONWEALTH
   • 4.1 Current arrangements
   • 4.2 Inefficiencies and costs of overlap and duplication
   • 4.3 Appropriate Commonwealth role
   • 4.4 Reducing duplication, overlap and cost shifting
   • 4.5 Application of the principles
   • 4.6 Health and health related services
   • 4.7 Education
   • 4.8 Service delivery to Aboriginals and Torres Strait Islanders
   • 4.9 Family services
   • 4.10 Housing
   • 4.11 Environment
   • 4.12 Regional development, urban management and local government
   • 4.13 Workers compensation
   • 4.14 Industrial relations
5. BEST PRACTICE IN GOVERNMENT ACTIVITIES
   • 5.1 Improving efficiency and effectiveness
   • 5.2 Empowering managers - the employment framework and human resource management
   • 5.3 Improving service delivery
   • 5.4 Contribution to potential savings targets
   • 5.5 Performance monitoring and accountability framework
6. DEMOGRAPHIC CHANGE AND COMMONWEALTH FINANCES
   • 6.1 Emerging trends in Australian demographics
   • 6.2 General effect of demographic change on Commonwealth finances
   • 6.3 Major areas of pressure on outlays
   • 6.4 Intergenerational equity
   • 6.5 Role of personal savings and superannuation
7. BENCHMARKING BENEFITS
   • 7.1 Benchmarks of adequacy
   • 7.2 Issues in the application of adequacy benchmarks
   • 7.3 An alternative benchmark approach
   • 7.4 Conclusions on adequacy benchmarks and adjustment of benefits
8. INFRASTRUCTURE
   • 8.1 Defining and measuring infrastructure
   • 8.2 Is Australia's infrastructure adequate?
   • 8.3 Public and private sector roles
   • 8.4 Is Australia's infrastructure being used efficiently?
9. ACCOUNTING FRAMEWORK OF THE COMMONWEALTH: CURRENT AND PROPOSED
   • 9.1 Accounting framework
   • 9.2 Present budgetary and accounting arrangements
   • 9.3 Appropriateness of current accounting arrangements
   • 9.4 A full accrual system
   • 9.5 Options for implementing accrual budgeting and accounting - the appropriation process
10. WHOLE OF GOVERNMENT FINANCIAL REPORTING
    • 10.1 Technical, conceptual and interpretative issues
    • 10.2 1994-95 whole of government statements
11. THE CHARTER OF BUDGET HONESTY
    • 11.1 Fiscal responsibility, fiscal reporting and fiscal strategy
    • 11.2 Towards an Australian Fiscal Reporting Act

• APPENDICES
  • A ADDITIONAL TERMS OF REFERENCE
  • B THE GOVERNMENT'S INSTITUTIONAL FRAMEWORK
  • C HEALTH AND HEALTH RELATED SERVICES
    • C.1 Overview
    • C.2 Financial outlook
    • C.3 Duplication, overlap and cost shifting
    • C.4 The COAG reform process
    • C.5 Alternative approaches for reform
    • C.6 Measures to promote more efficient service delivery
  • D AUSTRALIAN SUPERANNUATION: RECENT REFORMS
  • E FINANCIAL REPORTING OF THE COMMONWEALTH: CURRENT AND PROPOSED
    • E.1 Present financial reporting practices
    • E.2 Proposed accrual budgeting statements
  • F WHOLE OF GOVERNMENT FINANCIAL REPORTING
    • F.1 Whole of government financial statements
    • F.2 Notes to and forming part of the financial statements
    • F.3 List of Commonwealth entities by sector
  • G RECENT OVERSEAS AND AUSTRALIAN EXPERIENCE WITH FISCAL RESPONSIBILITY LEGISLATION, FISCAL REPORTING AND FISCAL TARGETS
    • G.1 Recent overseas experience
    • G.2 Recent Commonwealth experience
    • G.3 Recent Australian State and Territory experience
• ACRONYMS AND ABBREVIATIONS
• LIST OF SUBMISSIONS