The public sector's financial watchdog has found "significant weaknesses" in the Department of Communities' procurement and payroll processes less than a year after the state's biggest-ever corruption scandal was uncovered involving a former senior bureaucrat.
Auditor General Caroline Spencer said testing showed the department's controls were not adequate to prove that the ordering of goods or services was approved prior to their order, which increased the risk of "erroneous or fraudulent payments".
Ms Spencer also raised concerns about the potential for erroneous or fraudulent payments during procurement without a purchase order.
She said the person who made the purchase could also be the one receiving the goods or services, which was inadequate segregation of duties and contrary to instructions from Treasury around the authorisation of payments.
Holes in payroll controls could also result in overpayments or payments to the wrong person, Ms Spencer said.
The audit was performed between April and October and was published in the Department of Communities' 2019-20 annual report.
The Auditor General's findings come nearly a year after it was revealed former Communities and Housing Authority senior bureaucrat Paul Whyte had stolen millions in taxpayer money using a fake invoicing scheme from 2008 to 2019.
The Housing Authority was amalgamated into the Communities mega-department, along with Disability Services and Child Protection, during government changes in 2017.
Mr Whyte pleaded guilty to 530 charges relating to the theft of $22 million through the invoicing scheme in June this year.
Following the corruption revelations, the state government pledged to fix internal governance and audit arrangements and moved the Housing Authority's commercial functions from the Department of Communities to Development WA.
The corruption saga prompted a thorough audit of the department this year and, according to Ms Spencer, a "qualified opinion" on deficiencies in governance and financial management – as she has done for Communities this year – was only done in serious circumstances.
In 2018-19, the Auditor General's office reported 323 control weaknesses in government departments, with only three receiving qualified opinions.
"If we issue a qualified opinion on controls, it is because we consider a financial control deficiency so significant that it makes the entity materially non-compliant with legislation," Ms Spencer said.
Ms Spencer said it was always possible financial controls may not work as intended, even if they are suitably designed and implemented.
Despite the nature of the audit, Deputy Director General Governance, Integrity and Reform Samantha Palmer said the department had moved to strengthen controls since Mr Whyte's fraud was uncovered, and pointed to a range of initiatives including the creation of an independent financial oversight committee.
"After the fraud was identified the department made immediate changes to its procurement and payment processes, including vetting of all suppliers on the vendor master file, physical inspection of invoices prior to payment and engaging with third party providers to verify bank and payment details for suppliers," she said.
"The rationalisation of finance and HR systems will improve standardisation of processes and address issues identified by the Office of Auditor General during its audit of the department."
Ms Palmer said the department had also brought on independent accounting firms to review its procurement processes and recommend improvements, which had been implemented in the first quarter of this financial year, but did not reveal specific details of what had been implemented.
A review of the Housing Authority and Department of Communities' governance and financial management found the minimum behaviour and standards expected of staff were not adequately defined, and there was a lack of accountability in the 'disjointed' processes.
That review, commissioned by the Public Sector Commission and undertaken by accounting firm EY, made 56 recommendations including bolstering financial management and monitoring systems.
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