Mark Bishop (WA, Australian Labor Party) Share this | Hansard source

The Auditor-General Amendment Bill 2011 implements various recommendations contained in report 419 of the Joint Committee of Public Accounts and Audit. The recommendations follow an extensive inquiry into the Auditor-General Act 1997. The bill to implement the recommendations from the report was originally introduced into the House by the member for Lyne and chair of the committee, Mr Rob Oakeshott, on 28 February 2011. On 12 September 2011, the member for Petrie and the deputy chair of the committee, Ms Yvette D'Ath, moved amendments to the bill that were agreed to be the House of Representatives.

The amendments to the act that would be made by this bill will ensure that the Auditor-General has the tools to respond to today's auditing challenges. The most important change to flow from the implementation of the JCPAA recommendations will result in the Auditor-General having the power to follow the money. That is, in certain circumstances the Auditor-General would be able to undertake audits of Commonwealth partners, private sector and state and/or territory entities that receive Australian government funds to implement an Australian government program. These amendments will address the glaring gap in accountability identified by the JCPAA. The Auditor-General's powers are limited at present to an assessment of the way that Australian government bodies implement government programs. This means that the Auditor-General is unable to express the extent to which individuals or entities that receive Australian government funds to implement programs or deliver services on behalf of the government achieve the purpose for which funds were provided. The amendments implement the unanimous recommendation of the JCPAA report that the Auditor-General be given the authority to undertake audits of Commonwealth partners whether they are state or territory entities or other individuals, or indeed other bodies. The bill contains appropriate restrictions on the extent of these powers, particularly in relation to state and territory entities. For example, the Auditor-General will be able to assess the operations of a state or territory entity only after a request by the JCPAA or the responsible minister. The assessment will be only to the extent that they relate to achieving the purpose for which funds were provided. The government therefore anticipates that the Auditor-General's new powers will be used quite sparingly.

With one exception, the bill implements the recommendations of the JCPAA report as intended by the JCPAA. That exception relates to the performance-auditing arrangements for government business enterprises. The Auditor-General Act currently provides that GBEs can be audited by the Auditor-General only at the request of the JCPAA, the minister responsible for the GBE or the finance minister. The JCPAA report recommends that the act should be amended to give the Auditor-General the authority to initiate audits of GBEs. Successive governments have taken the view that the Auditor-General should not have the ability to audit GBEs of his own motion. GBEs, as we all know, are subject to competitive pressure and disciplines that do not apply to other Commonwealth bodies. For that reason, to the greatest extent possible they should be subject to the same audit arrangements as their competitors. The government considers that audits of GBEs should be requested by the parliament in response to genuine public interest concerns about aspects of their operations. They should not be an incidental part of an annual work program. The JCPAA, which comprises members from across the political spectrum and can and does conduct hearings in private, is the appropriate body to consider whether a particular GBE should be audited. Accordingly, the bill would allow the JCPAA alone to request an audit of a GBE by the Auditor-General. As is currently the case, the Auditor-General could ask the JCPAA to request an audit of a particular GBE.

The remaining amendments would make relatively minor changes to clarify the way that the act operates. They would, for example, provide clear authority for the Auditor-General to undertake assurance reviews and audits of performance indicators. These are currently carried out as audits by agreement under section 20 of the act. The amendments will also clarify the Auditor-General's powers to require the production of documents that are the subject of legal professional privilege.

Before making a few supplementary remarks, I would like to thank members of the JCPAA for their report. I would also like to thank the member for Lyne, who originally introduced the bill, for his cooperation in the development of the government amendments. These amendments will ensure that the changes to the Auditor-General Act 1997 contained in this bill will operate as intended.

Just to bring those few remarks together, the Joint Committee of Public Accounts and Audit has conducted a full inquiry into aspects to modernise the Auditor-General Act. There has been a full and open report of that committee. Normally when committees make recommendations to government the government considers those within the time frame permitted and publishes a document tabled in both houses as to the government's attitudes to a particular set of recommendations. In this case the chair of the committee, consistent with the recommendations of that committee, introduced a bill into the House. The government worked with the sponsor, Mr Oakeshott, in the House to clarify the drafting and to make the drafting technically correct and consistent internally with the policy concepts that can be found in the particular act.

As I said, there are clear, major and substantive changes to the act concerning auditing of government business enterprises. The principal change is that the Auditor-General would have the power, on his own motion, to audit GBEs. The Auditor-General will no longer be required to consult with the minister or the JCPAA; he simply needs the approval of the JCPAA. Hence this maintains and increases the role of the JCPAA as the principal committee that regulates the behaviour of the Auditor-General and, indeed, from time to time is charged with the responsibility of updating and modernising that act.

As I said in my introductory report, government business enterprises are quite different from line departments of either a state or a territory or, indeed, a Commonwealth portfolio. You have only to look at the nature of GBEs—Medibank or the Rail Track Corporation or Australia Post. They themselves, of course, operate in the commercial sphere. They operate in a market economy. They have competitive pressures. But, most importantly, if one examines each of the acts that establish those bodies and regulate them, there are internal mechanisms for regular accounting provisions and, more importantly, regular auditing requirements in the act. In addition, each of those GBEs that I mentioned and the others that are pertinent to this debate are required regularly to report on their activity, behaviour and deliberations to the responsible minister.

In that context, the most important change in the bill before the chair flows from the implementation of the JCPAA recommendation that the Auditor-General will now have the power to follow the money trail. In certain circumstances, the Auditor-General would be able to undertake audits of Commonwealth partners—private sector and state and territory entities that receive Australian government funds to implement an Australian government program.

There are two final minor amendments that are worthy of note and that are addressed in the EM attached to this bill. Firstly, clear authority is provided for the Auditor-General to undertake assurance reviews and audits of performance indicators. That of course is a critical part of his work and on a regular basis both assurance reviews and audits are tabled in both houses of the parliament. Secondly, whilst I refer to the second amendment as minor it is an amendment of note because it clarifies that the Auditor-General's powers to require the production of documents that are the subject of legal professional privilege will not apply in this case. When line departments of the Commonwealth allocate, arguably, hundreds of millions of dollars, or indeed billions of dollars for, say, the construction of roads or bridges, or those sorts of massive infrastructure works that are increasingly undertaken in our major cities and regions, a lot of those funds are allocated to what are colloquially known as the prime contractors. They in turn subcontract a lot of the work down the line and, indeed, subcontractors establish a range of legal entities that receive funds for different aspects of the work and do the job. So the other provision contained in the bill as to legal professional privilege will, under appropriate circumstances, allow the Auditor-General to follow the money trail of those entities that are created as subsets of other corporate bodies to ensure that funds are properly expended for the purpose originally intended by the Commonwealth. I commend the bill to the chamber.