ENVIRONMENT PROTECTION AUTHORITY

 

 

FUNCTIONAL RESPONSIBILITY AND STRUCTURE

 

Establishment

 

The financial reporting entity, the Environment Protection Authority (EPA), includes the following:

 

·                     The Environment Protection Authority - an Administrative Unit established on 1 July 2002 pursuant to the Public Sector Management Act 1995 as part of a restructure of the Government’s environment protection functions.

·                     A Statutory Authority with an appointed Board also named the Environment Protection Authority established through amendments to the Environment Protection Act 1993 (the Act).

·                     The Environment Protection Fund as established under the Act.

 

Under the Act, the Office of the Chief Executive was established and was made subject to the control and direction of the Board.  The Act also permits the Statutory Authority, the Environment Protection Authority, to make use of the services of the Administrative Unit’s employees and of its facilities.

 

Functions

 

The functions of the EPA are to administer and enforce the Act, promoting principles of ecologically sustainable development.  These functions include:

 

·                     review, develop and draft environment protection policies and national environment protection measures;

·                     authorise activities of environmental significance through an authorisation system aimed at the control and minimisation of pollution and waste;

·                     conduct compliance investigations and institute environmental monitoring and evaluation programs;

·                     provide advice and assistance regarding best environmental management practice.

 

In administering these functions the EPA is also responsible for the Environment Protection Fund established under the Act.  The purpose of the Environment Protection Fund is to provide funds which may be applied to the costs of administering the Act, education, training, investigations, research, and pilot programs for the protection, restoration or enhancement of the environment and to facilitate assistance for an environment performance agreement.

 

Structure

 

The structure of the EPA is illustrated in the following organisation chart.

 

AUDIT MANDATE AND COVERAGE

 

Audit Authority

 

Audit of the Financial Report

 

Subsection 31(1)(b) of the Public Finance and Audit Act 1987 provides for the Auditor-General to audit the accounts of the EPA for each financial year.

 

Assessment of Controls

 

Subsection 36(1)(a)(iii) of the Public Finance and Audit Act 1987 provides for the Auditor-General to assess the controls exercised by the EPA in relation to the receipt, expenditure and investment of money, the acquisition and disposal of property and the incurring of liabilities.

 

This assessment also considers whether those controls are consistent with the prescribed elements of the Financial Management Framework as required by Treasurer’s Instruction 2 Financial Management Policies.

 

Scope of Audit

 

The audit program covered major financial systems and was directed primarily to obtaining sufficient evidence to enable an audit opinion to be formed on the financial statements and internal controls.

 

During 2005-06, specific areas of audit attention included:

 

·                     revenue raising

·                     environmental licensing

·                     waste depot levies

·                     expenditure

·                     payroll

·                     computing environment

·                     risk management.

 

 

AUDIT FINDINGS AND COMMENTS

 

Audit Opinions

 

Audit of the Financial Report

 

In my opinion, the financial report presents fairly in accordance with the Treasurer’s Instructions promulgated under the provisions of the Public Finance and Audit Act 1987, applicable Accounting Standards and other mandatory professional reporting requirements in Australia, the financial position of the Environment Protection Authority as at 30 June 2006, the results of its operations and its cash flows for the year then ended.

 

Assessment of Controls

 

In my opinion, the controls exercised by the EPA in relation to the receipt, expenditure and investment of money, the acquisition and disposal of property and the incurring of liabilities, except for the matters raised in relation to: Environment Protection Fund delegations of authority; and risk management as outlined under ‘Audit Communications to Management’, are sufficient to provide reasonable assurance that the financial transactions of the EPA have been conducted properly and in accordance with law.

 

Audit Communications to Management

 

Matters arising during the course of the audit were detailed in management letters to the Chief Executive.  Responses to the management letters were generally considered to be satisfactory.  Major matters raised with the Authority and the related responses are considered herein.

 

Environment Protection Fund Delegations of Authority

 

The Environment Protection fund is established under section 24(1) of the Act.  Section 24(4) of the Act provides for the Minister or the Authority (EPA), with the approval of the Minister, to make payments from the fund for specific purposes.

During the year the Authority advised Audit that they had identified that Environment Protection Fund (EPF) delegations existed, but had not been used when authorising EPF expenditure.  In lieu of the EPF delegations, the Authority had been using the expenditure delegations of the EPA.  Due to differences between the EPA and EPF delegations, a significant number of EPF transactions were not appropriately authorised.

 

Since identifying this matter, the Authority has taken appropriate steps to ensure future expenditure of EPF monies is authorised consistent with EPF delegations of authority.

 

Risk Management

 

Audit review of risk management within the EPA revealed that while it was clear that the Authority was committed to progressing risk management practices, a number of areas required timely action, being:

 

·                     creation and promulgation of an EPA Risk Management Policy;

·                     creation and implementation of a Risk Management Implementation Plan;

·                     creation and implementation of Key Performance Indicators for key risks.

 

The EPA responded, confirming the Authority’s commitment to progressing an EPA specific risk management framework during the 2006-07 year.

 

INTERPRETATION AND ANALYSIS OF FINANCIAL REPORT

 

Highlights of Financial Report

 

	2006	2005	Percentage
	$’million	$’million	Change
INCOME
Fees and charges	20.3	20.4	-
Other revenues	1.5	2.3	(34.8)
Total Operating Revenue	21.8	22.7	(4.0)
OPERATING EXPENDITURE
Employment benefits costs	16.2	16.0	1.3
Grants and contributions	6.2	6.0	3.3
Other expenses	8.6	8.2	4.9
Total Expenses	31.0	30.2	2.6
Net Cost of Providing Services	9.2	7.5	22.7
REVENUE FROM PAYMENTS TO SA GOVERNMENT
Revenues from SA Government	9.3	8.9	4.5
Payments to SA Government	0.3	2.1	85.7
Net Result	(0.2)	(0.7)	(71.4)
Net Cash provided by Operating Activities	1.5	(0.3)	n/a
ASSETS
Current assets	7.1	6.4	10.9
Non-current assets	3.8	4.1	(7.3)
Total Assets	10.9	10.5	3.8
LIABILITIES
Current liabilities	3.2	2.6	23.1
Non-current liabilities	3.3	3.3	-
Total Liabilities	6.5	5.9	10.2
EQUITY	4.4	4.6	(4.3)

 

Income Statement

 

Income

 

Income decreased by $0.9 million.  The major item affecting the movement was a decrease of $0.9 million in grants and contribution receipts, of which $0.6 million is due to no monies received from private industry or local government.

Expenses

 

Expenses increased by $0.8 million.  Major items affecting the movement were:

 

·                     Minor increases in salary and wage costs, grants and contributions expenditure and depreciation/amortisation expenses, offset by a decrease of $0.6 million in other expenses due to the write down during 2004-05 of asset values.

 

Cash Flow Statement

 

The following table summarises the net cash flows since 2003.

 

	2006	2005	2004	2003
	$’million	$’million	$’million	$’million
Net Cash Flows
Operations	1.5	(0.3)	(0.6)	3.5
Investing	(0.7)	(0.8)	(1.3)	(0.6)
Financing	-	-	(1.8)	7.1
Change in Cash	0.8	(1.1)	(3.7)	10.0
Cash at 30 June	6.0	5.2	6.3	10.0

 

Financing activities in 2002-03 and 2003-04 relate to administrative restructures.  In 2002-03 the EPA was established and in 2003-04 Zero Waste SA was established.

 

 

FURTHER COMMENTARY ON OPERATIONS

 

The Environment Protection Fund

 

The Fund’s operations are reflected in the Authority’s financial statements.  Note 32 discloses details of operations of the Fund.