Julian Hill (Bruce, Australian Labor Party) Share this | Link to this | Hansard source

Thank you, Deputy Speaker. I seek indulgence to make a personal explanation. Pursuant to my statement by leave to the House on budget day, 8 May 2018, in my capacity as deputy chair of the Joint Committee of Public Accounts and Audit concerning the draft budget estimates for 2018-19 for the Australian National Audit Office. Since that statement, I've been made aware of further information. I consider that I am obliged to update the House at the first available opportunity and supplement my advice of 8 May to clarify any possible misunderstanding and pre-empt any accusation that I may have inadvertently misled the House. It is also important that this occurs now as it relates to the consideration of the appropriation bills about to be debated by the House.

I will precis the summary of my statement on 8 May. On advice, I stated:

The committee has been informed that the ANAO is not seeking supplementation in the 2018-19 budget. The Auditor-General has advised the committee that the ANAO's estimated expenses can be met within existing resources and that he anticipates completing approximately 48 performance audits over the period.

I went on to say:

In that light, the committee endorses the proposed budget for the ANAO in 2018-19 …

The proposed budget the committee considered included a funding reduction in the form of an efficiency dividend. The Auditor-General indicated he was not seeking supplementary funding and, on that basis, the committee endorsed the proposed budget, and I made my statement to the House. However, unbeknownst to the committee or to me at that time, the government, as part of the budget process, had decided to further reduce the funding available to the ANAO. Thus, the committee did not consider or endorse the proposed budget for the Auditor-General as set out in the appropriations bill now before the House. I'm concerned that as my statement to the House did not advise the House of the amount that the ANAO expected to receive from government, as has been the general practice in previous years, this omission may provide the basis for members to misunderstand the situation.

The government's imposed savings measures mean that appropriations to the ANAO will reduce by $0.69 million in 2018-19 and $0.92 million per annum over the forward estimates. This is a significant sum for a small agency already required to absorb the efficiency dividend. In terms of the practical impact of this, I am advised that, due to statutory obligations to prioritise financial audits and certain mandatory functions, in effect, this means a cut of funding available for performance audits. The Auditor-General advised parliament that he anticipates undertaking approximately 48 performance audits this financial year, and I'm sure he will endeavour to do so within the resources available.

However, contrary to the impression that members may have been given by my statement on 8 May, the committee has not considered if the ANAO's estimated expenses can be met within the resources proposed to be allocated by the appropriation bills. The ANAO has since advised that, in the event of the costs exceeding existing resources and funding, the Auditor-General will seek the finance minister's approval for an operating loss and to use accumulated reserves to fund the shortfall.

This is an extraordinary situation. I'm not aware of any precedent and it requires explanation. In saying so, I remind the House of two important matters. Firstly, the Auditor-General is an officer of this parliament, not the executive, appointed by the parliament on the advice of the presiding officers for a 10-year term and, hence, is accountable to this parliament. This is an absolutely critical distinction. The Auditor-General has no minister and reports to the parliament via the JCPAA. Secondly, the Public Accounts and Audit Committee Act 1951 and the Auditor-General Act 1997 together provide a legislative mechanism whereby the Auditor-General's budget and resourcing are formally considered by the committee on behalf of the parliament. The JCPAA did not receive an accurate figure as to the expected funding of the ANAO for the financial year 2018-19, and I am advised that this appears contrary to the intended purpose of the transparency framework established by legislative obligations.

The JCPAA considered the intended purpose of this process in 2010 when reviewing the Auditor-General Act 1997. I'll read the three key paragraphs from that report, which summarised the situation:

In support of this process the Auditor-General Act 1997 empowers the Auditor-General to disclose to the JCPAA, before the federal budget, the draft estimates for the Audit Office (effectively the ANAO's budget submission). The Committee then has the information it requires to make formal representations to Government on behalf of the ANAO if necessary.

Immediately before the federal budget is delivered to the Parliament, the ANAO briefs the Committee on its funding allocation for that year. The Committee Chair then makes a statement to the Parliament—

as do I, as deputy chair—

on budget day, on whether the Committee believes the ANAO has been given sufficient funding to carry out its functions.

This power is intended to discourage governments from trying to influence the Auditor-General by unduly restricting his/her funding, and is reinforced by the Committee having the information needed to make representations to the Executive Government on behalf of the ANAO if necessary.

Members may reasonably ask why the committee did not fulfil this responsibility as intended. I understand that the Auditor-General sought permission of the Department of Finance and Treasury to brief the committee about the changes to his budget, noting that the Auditor-General has no minister to brief or advocate on his behalf. He was denied permission due to the budget secrecy rules and was advised that only the Treasurer could give permission. I understand that the Auditor-General approached the Treasurer to seek permission to brief the committee, but the Treasurer refused him permission to brief the committee. As an officer of this parliament, section 8(4) of the Auditor-General Act provides that the Auditor-General 'has complete discretion in the performance or exercise of his or her functions or powers'. Yet he was prevented by the Treasurer from exercising his office as he requested for the stated reason of the budget operating rules. The advice I have received is that it is unclear whether he is legally bound by those secret rules. It could be argued that, as a non-corporate Commonwealth entity, he is so bound by the PGPA Act. Suggestions for strengthening the process of resourcing the ANAO were considered by the JCPAA in 2010. The situation appears then to have not been thought possible.

Members may feel aggrieved to hear that the Auditor-General as an officer of the parliament felt obliged to follow the Treasurer's direction rather than meet what I see as the spirit and intent of the transparency framework in relation to the ANAO's resourcing. I am in no way critical of the Auditor-General's judgement, as he was placed in a terribly difficult—impossible—position, and it is important to record that. I've been advised that, as the Auditor-General was not able to inform the committee of the change in budget, the ANAO sought access to and reviewed the draft statement that was then provided to the chair and me to make to parliament on budget day. The amount of funding was omitted from the draft statement I was provided which I made in the House. While that may have been the best that could be done in the circumstances, I feel aggrieved that I was not informed of the true situation and may have inadvertently misled the House or, at the best, provided the basis for a misunderstanding. Again, I am in no way being critical of the Auditor-General's judgement in making this statement, as his actions were reasonable. The chair drew my attention to this situation last Thursday—and I thank him for doing so—as soon as he became aware of it. The Senate is not sitting, so the chair is not able to advise the Senate this week of the difference between the budget proposals considered by the committee and those proposed in the appropriation bills. The Auditor-General has not asked me to make this statement or in any way lobbied for additional funding. I'm making this statement in order to correct the record and fully inform members.

So, in closing, I draw the House's attention to this matter, as members may wish to consider this in speaking to the appropriation bills. I also advise the House that, as the committee is not due to meet until 20 June, I have asked the chair to seek a more timely meeting of the committee to consider the matters raised. This includes the immediate budget issue, the process that has occurred and the possibility of a formal inquiry into the process and whether legislative changes are required to prevent this situation from arising in the future. I will seek leave to update the House in due course when required.