In a report, Australia's auditor-general has criticized poor accounting methods in the country's Defense Department for making it impossible to vouch for more than $4 billion in financial statements.

The auditor also asked the Australian Taxation Office to correct nearly $7 billion in financial statement mistakes for the 2004-05 fiscal year.

Auditor-General Ian McPhee issued his opinion at the close of 2005, highlighting 18 breaches of the country's constitution by various government departments and agencies, mostly relating to ineffective agreements to retain and spend revenue from independent sources.

The Australian National Audit Office has been monitoring the tax office's financial systems and reports following problems with previous financial statements. McPhee did note that the Defense Department was already working to improve its record-keeping practices.

McPhee's report also questioned the government's refusal to claim the country's goods and services tax as a federal tax. Because the GST is passed on to the states, the government does not accept the consumption tax as federal revenue. McPhee argued that failing to recognize the revenue resulted in the government understating its revenue by close to $36 billion. If the government has adopted improved accounting methods, and counted the GST, the report said Australia's net operating surplus would have been $1.1 billion greater.

The report also said income tax revenue grew by 15 percent in 2004-05 and total revenue received by the tax office increased by $24 billion, to $227 billion, from the previous year.

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