An unidentified NT Government department violated national accounting standards by attempting to hide a $650,000 unpaid loan owed by an unnamed Territory council, the Auditor General has found.
According to the latest AG report, the department gave an advance of $1 million to a council in 2008, with the expectation it would be paid back. Five years later, in the 2013/14 financial year, the council paid back $333,000 of the advance with the expectation the rest would be paid back over the next two years. But that didn’t happen.
Instead, the unnamed council paid a further $6,666 in September 2018 and another $10,000 in January of this year. The $10,000 was listed as “other income”, sparking the Auditor General’s curiosity.
It was later discovered that in June 2019, the department hid the outstanding debt by reclassifying the advance from an “asset” to “grants and subsidies expenditure”.
By doing that, Auditor General Julie Crisp found the department violated accounting standards and Treasurer’s Directions, failed to assess the collectability of the debt and failed to seek appropriate approval for writing off the advance.
Ms Crisp said the debt is still outstanding.
“The Council achieved a financial benefit (through the debt being eliminated) notwithstanding that all documentary evidence supports the existence of a remaining outstanding debt of $650,001,” she wrote.
“Once [the advance was] identified as being impaired, an appropriate provision should have been provided. If then identified as unrecoverable, the advance could have been written off in accordance with the requisite Treasurer’s Directions and NTG policy.
“The reclassification of the outstanding balance … was erroneous.”
No register of loans kept by department that loans money
Ms Crisp also found the department did not keep a register of loans and advances, which it said wasn’t necessary because it didn’t have any. But the existence of the unpaid advance – despite departmental attempts to hide it – was proof it did, she concluded.
“Management has contravened both the Australian Accounting Standards and the requirements of the Treasurer’s Directions,” she wrote.
“The financial balances associated with assets and expenditure have been misstated in the financial year ending 30 June 2019 and, in the absence of the rectification of the accounting treatment, the Agency’s financial balances as they relate to assets and equity are misstated in the current financial year.”
Ms Crisp recommended the matter be raised with “the accountable officer for further investigation and that appropriate action be taken to address the cause and impacts”.
It’s unclear what steps the unnamed department took to rectify the situation.
That was one finding of a compliance audit by the Auditor General’s office of 20 NT Government departments and agencies including Department of Chief Minister; Department of Treasury and Finance; Department of Infrastructure, Planning and Logistics; Department of Local Government, Housing and Community Development and Department of Legislative Assembly.
Other departmental “issues” uncovered during the audit included:
- Lack of compliance with procurement rules;
- Inability of some departments to locate assets listed in registers and other deficiencies of controls;
- Overpayment of grant funding, in one instance resulting in $100,000 of taxpayer money paid out to a recipient instead of $10,000;
- Failure to release documents requested for auditing purposes;
- Repairs and maintenance expenditure being recorded as grants and subsidies;
- Incorrect expensing of capital purchases;
- Petty cash reconciliations not being performed at some offices;
- Weaknesses in internal audit functions and failures to comply with the Treasurer’s Directions.
A separate Government Accounting Systems (GAS) security review, run by the Auditor General through the Department of Corporate and Information Services (DCIS), found nine of eleven departments failed to respond to necessary emailed instructions, “resulting in an increased risk that unauthorised access to the Government Accounting Systems existed and had not been resolved”.