Ross Hart (Bass, Australian Labor Party) Share this | Hansard source

I speak in connection with the report of the Joint Committee of Public Accounts and Audit, Report 463: Commonwealth financial statements—inquiry based on Auditor-General's Report 33 (2016-17). The work of this committee, as people know, is to scrutinise the governance, performance and accountability of Commonwealth entities and companies. It reviews whether public money is expended in an appropriate manner. Public money ought to be used in an efficient, effective, economical and ethical manner. The function of the committee accordingly is to promote and support effective public administration.

The committee obtains its power from its own legislation, the Public Accounts and Audit Committee Act 1951. It has, as a consequence, a close relationship with the Auditor-General for the Commonwealth, and in particular it examines the reports prepared by the Auditor-General and determines, as the case may be, to conduct inquiries based upon the reports prepared by the Auditor-General. In the conduct of its inquiries, the committee will consider the public interest, the significance of the programs or issues raised in the report, and any response raised by the agencies that are the subject of the report.

The subject matter of this report is based upon the Auditor-General's Report 33, which, in turn, is the audit of the Commonwealth financial statements. As I indicated in my outline, the work of this committee is to support efficient and effective public administration. The Auditor-General's financial statements audits play a very important role in providing accountability both to the parliament and to the Australian public with respect to the expenditure of public money. Every Australian receives independent assurance that the information within the financial statements is accurate. That assurance extends to the financial management of Commonwealth entities. The work of the committee, particularly having regard to the important role of the committee in the maintenance of standards of effective and efficient public administration, has a long history of bipartisanship.

The Commonwealth financial statements report affects 246 Commonwealth entities. This resulted in 245 findings being reported to the entities as a result of the audits undertaken. There were 32 findings categorised as 'moderate' and 209 'minor' findings. The National Disability Insurance Agency and the Department of Education and Training both had 'significant' audit findings, and the Department of Defence and the Australian Taxation Office both had multiple 'moderate' audit findings.

The work of the committee in some respects is to amplify and support the work undertaken by the Australian National Audit Office in the reports issued by the Auditor-General. Thus any issues identified by the Auditor-General may be highlighted or further explored—teased out, as it were—in order to ensure that appropriate remedial action can be facilitated. Given that the statements relate to 246 entities, there are additional important opportunities for the sharing of information, modification of behaviour and, where appropriate, legislative reform.

I wish to speak today about a number of general issues of principle which have arisen in the context of the report, as well as a number of specific issues which relate to the findings as to particular Commonwealth entities. The first issue has been explored as a result of the inquiry undertaken by the committee, which the committee considered is a matter of vital public importance in the area of transparency. That is the issue of remuneration of executives within Commonwealth entities.

In my view, the committee's attention to this issue highlights the complementary but independent role of the committee and its function to amplify the material within the Auditor-General's report. In this particular instance, the previous practice required all Commonwealth entities to disclose details of senior executive remuneration. The practice was discontinued as a result of aligning the new Public Governance, Performance and Accountability Act 2013 financial reporting rule with international and Australian accounting standards.

The committee noted and acknowledged that the requirement is to comply with Australian accounting standards, as set by an independent body, but nevertheless considered that the accountability requirements of the parliament and the Australian public demanded that additional requirements and/or disclosures would be appropriate based upon the practice adopted and/or required by the Australian Securities Exchange.

The committee further recommended that, consistent with previous practice, there should be a formal requirement for more transparent disclosure of senior executive remuneration, including by salary bands, with this requirement reflected in relevant legislation and guidance and published in entity annual reports rather than on entity websites. In its report—in particular, paragraph 2.21—the committee expressed some concerns about the mechanisms used to reinstate the previous practice of disclosing senior executive remuneration.

The Minister for Finance wrote to the chairs of government business enterprises and the Future Fund Management Agency in February 2017 requesting that senior executive remuneration be disclosed in a manner consistent with that for listed companies. The committee notes that, as a result, the government business enterprise guidelines will be updated. Entities have been requested, both through secretary correspondence and guidance, to reinstate the previous practice. However, it is of concern to the committee that this is optional by request rather than a formal requirement in accordance with previous practice. The proposal was that this information was to be published on entity websites and updated annually but not published in entity annual reports, consistent with previous practice. There may have been issues with consistency across entities in terms of website publication of relevant information as well as transparency and accessibility issues.

The committee has not received details of how the PGPA rules and resource management guides will be amended to reflect the change. A fragmented response, which appears to have been characterised by resistance within the Australian Public Service, is in my view inappropriate. The public interest, which is sought to be maintained and promoted by the committee, should not be subverted by a misplaced sense that, in the pursuit of simplification of reporting requirements, the reporting of executive remuneration is somehow too onerous. In the strongest terms, the committee considers that, in the interest of maximum transparency and accountability, disclosure of senior executive remuneration should be a formal requirement. There is no warrant for it to be optional by request. This requirement should be the subject of legislation and guidance to ensure that it should not be relaxed without proper consideration.

Continuing the theme of public accountability, the committee considered that the parliament and the Australian public should be entitled to receive information about contracts, contractors and consultancies entered into by Commonwealth entities. This will be a matter for consideration as part of the independent review into the PGPA Act. In the committee's view, there are other matters for consideration in this review—in particular, the bringing forward of the delivery and publication of Commonwealth entity reports, the annual reports and the enhancement of the effectiveness of audit committees. As previously indicated, particular entities were the subject of significant audit findings. Following review of the evidence, including submissions and responses by those entities, it follows that particular attention would be given to monitoring any remedial action required by those entities.

Recommendations 1 and 2 within the report relate to the significant findings made with respect to the financial statements of the NDIA and the Department of Education and Training and the moderate audit findings made with respect to the Australian Taxation Office and the Department of Defence. The committee has recommended that these entities promptly report back to the committee on progress in responding to the findings should the ANAO audit to the present period result in any further significant audit findings and, in the case of the Department of Defence and the ATO, any significant or moderate audit findings. There is a similar recommendation with respect to the Northern Land Council regarding legislative breaches identified in the audit report. The committee wishes to receive positive confirmation from the entity on progress and response, including action taken by the audit committee of the entity.

In summary, this committee plays a very important public role in ensuring that the Australian parliament and the general Australian public receive positive assurance with respect to the performance and expenditure of public moneys by Commonwealth entities. The committee was very concerned to note that the intention of transparency with respect to the reporting of financial remuneration of senior executives had been subverted. The committee was concerned that in its dealings with the Department of Finance there was a sense that this would not be the subject of formal compliance; it would not be the subject of reporting in annual reports. The committee has expressed its strongest views, in strongest terms, that this should be a formal requirement, not something that is optional. Every Australian, and indeed every member of this parliament, has the right to see in a transparent and open manner the reporting of executive remuneration.

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