Compliance with the Asset Management Accountability Framework

Tabled: 23 May 2019

4 Supporting implementation and compliance

DTF is responsible for supporting the implementation of the AMAF and overseeing compliance with the standing directions. We examined its approach to meeting these responsibilities and the extent to which it has addressed departments' needs for guidance and support.

4.1 Conclusion

DTF actively supports the departments to apply the AMAF and has met its responsibilities for this under the AMAF. Despite this, most departments find it challenging to understand how best to implement the AMAF and determine an appropriate approach to managing their assets. Departments also interpret requirements of the standing directions related to compliance differently. These issues are a risk to the AMAF's success and DTF's ability to understand and monitor departments' levels of compliance.

4.2 DTF's support for the AMAF

Current support actions

DTF has a role in supporting the AMAF. Under the AMAF, agencies' accountable officers are expected to drive implementation and are best placed to understand how to apply the AMAF for their assets and business operations.

DTF has fulfilled its responsibilities to support the AMAF, including by running regular asset management working group meetings for department representatives, producing the AMAF implementation guidance and reviewing agencies' implementation progress. DTF also released further guidance, covering:

  • managing intangible assets (publicly available)
  • determining the materiality of compliance deficiencies
  • applying 'real options' analysis to asset management.

Based on our findings, we consider there is benefit in DTF conducting an evidence-based evaluation of the effectiveness of the AMAF after a further period of implementation. This would identify whether the AMAF is driving stronger leadership, improving asset management and achieving its intended outcomes. It would also identify any need for changes to support effective implementation across public sector agencies. DTF will need to identify measures of success for the AMAF to evaluate its effectiveness.

Need for more support

There are inconsistencies and uncertainty in departments' understanding and application of the AMAF and their compliance obligations. While the onus is on departments to apply the AMAF, DTF can provide departments with more guidance, clarity and support for AMAF implementation, particularly related to:

  • the purpose and value of the AMAF for improving asset management practices, such as specific examples of the benefits an agency can realise through applying the framework
  • the number of mandatory AMAF requirements that must be assessed for compliance
  • how agencies can apply a risk-based approach to their AMAF compliance assurance activities
  • how to approach the 2020–21 maturity self-assessments—for example, how these relate to the AMAF's 41 mandatory requirements and 42 good practice guidance points.

The AMAF aims to drive improved asset management through increased accountability, but four of the seven departments focused on achieving levels of compliance rather than on what they needed to do to apply the AMAF and improve their asset management. While these departments have a clear responsibility to improve their asset management, there is an opportunity for DTF to reinforce the purpose and value of implementing the AMAF.

Departments have an inconsistent understanding of the number of mandatory requirements they need to meet. The AMAF names 41 specific requirements that agencies 'must meet to allow for full attestation of compliance with the framework' and lists them under 20 category headings. Some departments assessed compliance against the 20 headings and others against the 41 requirements. The AMAF should clarify whether compliance relates to the 20 category headings or the 41 requirements and clearly number the mandatory requirements.

Some departments also expressed uncertainty about when or whether DTF expects agencies to achieve full compliance with all mandatory requirements, and how full compliance relates to the separate maturity assessment.

The AMAF implementation guidance could better explain how agencies can apply a risk-based approach to both compliance and maturity assessments, the separate purposes of the two assessments and how they relate to the attestation.

The AMAF and its implementation guidance provide limited advice to agencies on how to approach the maturity self-assessments due from 2020–21. Given the inconsistencies and gaps we have identified with the use and approach for compliance assessments—an established practice—there is a risk that departments' approaches to the new maturity assessment are inconsistent and inadequate. Benefit would result from DTF providing more guidance and potentially a common template for this well ahead of the 2020–21 deadline as departments that have already begun assessing maturity have identified it can take time to develop and embed the process.

4.3 DTF's support for the standing directions

The standing directions commit DTF to establishing oversight arrangements over all the directions from 2016–17. DTF has some arrangements in place for this, for example, working with departments in a community of practice to improve compliance and support the attestation, and continuing its public reporting to summarise compliance across the state.

The oversight arrangements identify other ways DTF could monitor performance and identify improvements, including analysing relevant data to identify the need for any improvements and conducting an assurance program. DTF assessed agencies' approaches to the new standing directions when the directions were first introduced in 2016, but has not yet analysed data or assured compliance. The gaps and inconsistencies we saw in the approaches departments take to compliance and assurance with the AMAF suggest there would be benefit in DTF evaluating the standing directions to determine whether agencies are effectively improving financial management practices and compliance.

The significant issues we found with how departments interpret and apply the standing directions to the AMAF included:

  • not designing compliance assessment and assurance approaches based on the levels and criticality of assets
  • not identifying, documenting and verifying appropriate evidence to substantiate compliance
  • not documenting the rationale for key considerations and decisions, such as whether any compliance deficiencies are material
  • inconsistently interpreting the concepts of compliance, compliance deficiency, material compliance deficiency and remedial action
  • not valuing compliance assurance as an opportunity to assess progress, review priorities and drive continuous improvement.

The relationship between the AMAF compliance assessment and the attestation, and the different definitions of compliance applied through these two processes, is unclear. The departments' understanding and application of these processes would benefit from DTF clearly aligning and explaining:

  • the purpose of the attestation
  • the relationship between the attestation, the identification of material compliance deficiencies and the requirement to comply with all AMAF mandatory requirements.

Compliance reporting

The standing directions instructions require departments to report to DTF on their financial management compliance, in relation to:

  • the levels of compliance achieved
  • key areas of compliance deficiency, including planned and completed remedial actions and timeframes
  • an assessment of the significant compliance risks and key strategies to mitigate these risks.

DTF uses this information to report to the Assistant Treasurer on compliance trends and risks.

All departments identified compliance deficiencies in their 2017–18 reports to DTF on financial management compliance, either with the AMAF overall or with one or more of the AMAF's mandatory requirements. Four departments identified compliance with the AMAF as a significant risk in these reports.

DTF's review of the departments' reports found gaps in the quality and detail of some of the AMAF compliance reporting data provided by departments. It is hard for DTF to identify compliance trends and risks because of wide differences in the way departments report. For example:

  • some departments reported a single deficiency against the AMAF as a whole, some recorded deficiencies against the 41 mandatory requirements and others recorded deficiencies against a subset of these requirements
  • some departments aggregated deficiencies across all asset classes, while others recorded deficiencies for individual asset classes
  • the number of deficiencies that departments recorded in their compliance reports did not always tally with the number identified in departments' internal compliance assessments.

DTF updated its template for this reporting in 2017–18 following the trial attestation in 2016–17. The aim was to better support the AMAF compliance reporting, but these issues persist.

While Secretaries decide the content of these reports, DTF should review the compliance reporting requirements to ensure reporting is comparable across agencies and provides the value intended.

Clarity of the standing directions' requirements for audit committees

Our examination of how audit committees have addressed their responsibilities related to the AMAF found that two committees—DEDJTR's and DHHS's—had better practices than the other five. Their practices reflect their understanding of:

  • committees' responsibilities under the standing directions
  • the need to be accountable for their decisions.

Audit committees are responsible for understanding and fulfilling their responsibilities, but there would be benefit in DTF reinforcing audit committees' compliance and attestation responsibilities to ensure the critical role performed by committees is well understood.

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