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Photo: Christopher Boulous

The Defence Department has emerged again as the sloppiest outfit in the government when it comes to managing taxpayers' money, the Finance Department says.

In the latest report card on breaches of public service financial rules, Finance found the Defence Department was responsible for more than 22 per cent of non-compliance in the entire service in 2012-13.

Foreign Affairs and Trade accounted for more than 12 per cent of reported non-compliance followed by 11.4 per cent in Health and Ageing, and 10.6 per cent in the former Education, Employment and Workplace Relations Department.

Overall, there were about 14,000 breaches reported in 2012-13, an increase of 10 per cent on the previous year. Finance Minister Mathias Cormann defended the performance of the public service, saying there were many millions of financial transactions each year and that the report should be taken in context.

Breaches of the Financial Management Act might involve an official failing to seek the required approval for expenditure or delays in banking money or reporting a transaction. The rules require every breach to be reported, no matter how minor.

Defence said its 3122 breaches were among 1.7 million financial transactions in 2012-13, while its Defence Materiel Organisation recorded more than 640,000 transactions worth $9.9 billion.

Defence's 2012-13 performance was an improvement on the previous year when it was responsible for nearly 30 per cent of the breaches.

Treasury accounted for less than 4 per cent of the recorded breaches in 2012-13, despite processing through its subsidiary the Tax Office about 13.7 million refunds valued at more than $95 billion.

Mr Cormann said the results were on par with previous years.

''For the 2012-13 reporting period, agencies reported an increase in non-compliance of about 10 per cent compared to last year,'' he said.

''That said, this result is still comparable to performance over the past four years. As in previous years when reported non-compliance has increased, this is strongly correlated to changed financial management framework requirements.''

Finance's report card, the Certificate of Compliance Report, has been produced annually for six years and has been credited with big improvements in the performance of the 110 departments and agencies subject to the Financial Management Act.

But the reporting system now faces an uncertain future after the introduction in July of the Public Governance, Performance and Accountability Act 2013.

Mr Cormann said the new rules would move away from compliance and enforcement to a ''principles-based approach'' to the management of taxpayers' money by public servants. ''The PGPA Act moves from a prescriptive compliance-based approach to financial management to a broader principles-based approach to performance and resource management,'' he said.

''Instead of legislative provisions that focus on process, the PGPA Act contains a stronger focus on duties, internal controls and risk.

''The new framework will continue to provide assurance to the public that an appropriate standard of accountability and assurance is in place and resources are being well managed.

''Any future compliance reporting will be considered in the context of the new framework.''