Australia may not lose most public accountability for Defence acquisition spending after all. The Australian National Audit Office (ANAO) has quietly begun work on what looks very much like a replacement for the discontinued Major Projects Report (MPR), formerly the biggest window into how Defence spent A$20 billion a year.
Parliament’s Joint Committee of Public Accounts and Audit cancelled the MPR on 6 March, just as Defence’s next long-term funding plan was approaching and promising untold hundreds of billions for new capability.
Working up a replacement audit is a commendable move by the auditor-general, and the government should fund ANAO adequately to realise the full potential of the new effort.
ANAO revealed its initiative quietly in early April, saying it had initiated a performance audit of Defence’s management of capability investments. The audit, which will report in March 2027, ‘will include reviewing a selection of Defence major equipment acquisition projects with respect to agreed cost, scope and schedule.’ That is what the MPR did annually, from 2008.
The implications of a performance audit intending to do the same are worth spelling out.
First, the wording. ANAO provides notice of potential future performance audits, and an audit of Defence’s management of its capability spending has been a possibility since at least last December. But as recently as 9 March, the scope of this potential audit was confined to ‘Defence’s processes for managing its Integrated Investment Program [IIP] and its reported program and project costs’. This was the approach taken during the ANAO’s first audit of a Defence IIP, which considered the 2016 IIP and its 2020 update. The IIP is Defence’s spending plan.
The audit that ANAO has begun, however, isn’t solely concerned with how Defence manages and costs the IIP. It’s also concerned with ‘whether Defence is delivering on its capability investment priorities’. That objective has appeared only in the past few weeks. It’s difficult to see it as anything other than a direct response to the demise of the MPR.
Second, it’s significant that this will be a performance audit, which the MPR was not. This means it will involve a deeper and more rigorous investigation into Defence than the MPR did in terms of assessing project data. It also means that the auditor-general will make the final decision over what information is published in this audit’s report. Defence will surely inform the auditor-general of its security assessment, but it will not have the authority it had under the MPR guidelines to retract specific data as ‘not for publication’. These retractions happened frequently in the last few MPRs and appear to have precipitated its cancellation.
Third, this audit will be costly. Providing even limited assurance over data concerning 21 projects cost the ANAO $1.5 million in the 2024-25 MPR – three times the price of the average performance audit. And Defence acquisitions aren’t average. The Hunter-class frigate audit cost A$850,000, while the Land 400 audit cost more than A$1 million.
The technical complexity and amount of documentation involved in major acquisition projects are extraordinary, and the ANAO doesn’t usually audit more than one project at a time. Scoping an audit to provide a reasonable level of assurance about Defence’s delivery against its capability investment priorities (of which there are 11, including some project categories never covered by the MPR) will be a challenge.
As things stand, budget pressure will needlessly exacerbate that challenge. Cost growth in audit work is a mounting problem as the business of government becomes more complex. The MPR was one of the few products that the ANAO was able to deliver more cost-effectively over time: a decade ago it usually cost more than A$2 million, and the narrative in the last report indicated that the office was able to tackle Defence’s project-management systems much more efficiently. Hopefully those efficiencies are transferrable to the new audit process.
The long-term financial position of the ANAO, however, is unsustainable. In March 2025 it requested about A$100 million of additional funding for the coming four financial years, without which it couldn’t to deliver the full scope of its audit work program. The government’s 2025–26 budget didn’t provide that funding, and the audit work program has correspondingly shrunk from 48 audits to between 38 and 42.
Every dollar of public money spent must justify itself. But next to the Defence budget, the quantities at play here are almost comically small. The value of approved projects in the 2024 IIP is A$92 billion. If that sum is worth spending, it’s hard to see how a thousandth of it can’t be spared to give the ANAO breathing room to do its work, including and especially the work of assuring the public and parliament that the IIP is appropriately managed. The JCPAA have called for the government to increase the ANAO’s budget for years, and the cusp of immense new spending on acquisition is an opportunity to heed that call.
There is precedent for this. When the MPR was created in 2008, the government provided the ANAO with A$5.3 million over four years for the sole purpose of delivering the report. Even a sum as modest as that would be a welcome sight in the next budget.