Alex Gallacher (SA, Australian Labor Party) Share this | Hansard source

At the outset I want to place on the record once again my appreciation of the extraordinary good work done by the Australian National Audit Office. It is an invaluable resource and it allows all senators the tools to scrutinise the appropriations and expenditure that pass through the Senate.

I want to talk about the Australian National Audit Office report Defence's management of credit and other transaction cards. At the outset the statement in the Australian National Audit Office says:

Defence does not have a complete and effective set of controls to manage the use of credit and other transaction cards. An active management process and use of IT-based analytical techniques would help Defence to develop its control framework and provide better assurance over the use of these cards to purchase goods and services.

That is quite a telling statement, but what does it mean? What does the person who pays his taxes out there in worker-land understand from a statement like that?

What it means is that Defence does not have appropriate systems in place to protect the 57,718 Defence personnel and the 18,787 Public Servants it employs in the event of an allegation of fraud or misuse of a travel card or a purchase card. Proper governance and the appropriate spending of taxpayers' funds is clearly deficient, according to the ANAO report. In fact, it appears as if management has completely abrogated its responsibility to diligently control expenditure to the value of $548,474,723 of taxpayers' money in 2014-15. That is the value of the transactions which have gone through the various types of cards on issue. It says:

Credit cards offer an efficient means to pay for goods and services purchased for official purposes, and their reporting arrangements provide a basis for managing risks of misuse and fraud.

In 2015 Defence had over 100,000 credit and other transaction cards on issue: the Defence Travel Card, the Defence Purchasing Card, Cabcharge ‘eTickets’ and Cabcharge cards. Defence also use fuel cards for their 'white' and 'green' fleets. The sums that have been expended cumulatively are more than half a billion dollars. We realise that that is quite a significant amount of money in anyone's language in a very large department in a very large budget.

But this report looks at the controls. What are the controls? One of the things it says is that credit cards are for 'low-value low-risk purchases'. Most punters out there would understand low-value low-risk. But, when we have a look at the approved limits, they range from $500 to $2 million dollars—one card; three cards with a million dollar credit limit; a further 107 cards with $250,000 or more; and over 900 cards with a limit of $100,000. I do not know where low-value low-risk transactions come into a credit card with a $2 million or a $100,000 limit, or certainly a $250,000 limit.

These questions are not answered by the audit report; they are simply identified. I would like to see or meet the person that has the $2 million credit card in Defence. I would like to see their monthly statement. I would like to see how they spend two million bucks in credit on low-value low-risk transactions. Anyway, let's not get too detailed about that. Those questions will be answered. We have got estimates coming up. Estimates is on its way, and I am sure we will get some answers. I am sure we will meet the people with these $2 million and $1 million credit cards. I would even like to meet a hundred of the $100,000 credit card holders.

These are the audit report's selected quotes:

Defence has identified a range of controls for the use of its Travel and Purchasing cards, but implementation of these controls has been variable. This limits the assurance that Defence, at an enterprise-level, can take from its control framework. In particular:

…   …   …

The suite of preventative controls used by Defence to control spending on credit cards is not complete and has limited effectiveness: it has not used blocking in any substantial way; access to cash advances for purchasing was not properly authorised until after this audit commenced; a 2009 plan to lower default limits on available credit was not implemented until January 2016; and Defence has issued thousands of credit cards that have never been used.

They have simply never been used.

I am going to run out of time so I am going to skip a little bit ahead and go right to some of the more interesting aspects of cash withdrawals:

… multiple withdrawals of substantial amounts of cash, with a transaction description indicating that the cash was to be used to pay merchants for goods and services. In one case, audit analysis identified three cash withdrawals of $99 999 by the same Defence official on the same day, on the face of it, to pay the same supplier. These were part of a succession of cash withdrawals over a period of ten days from the Defence Purchasing Card by the same official totalling over $879 000. In October 2015, Defence informed the ANAO that it was examining the cardholder’s purchasing activities and that the CFO Group 'will be developing clear policy—

A clear policy after 300 grand was taken out in cash advances! The cost of this person's transactions because they were deemed to be cash advances was a further $18,278 to Defence. This audit report is verging on unbelievable! It is a complete nightmare in terms of an ordinary soldier going about their business and having a proper acquittal process. There is so much in this audit report that it is going to take months to get to the bottom of it. What I will be doing in the short time I have tonight is highlighting a couple of these issues. This particular person withdrew $1.147 million to pay suppliers. The report states:

Defence subsequently informed the ANAO that these transactions were, in fact, electronic funds transfers rather than physical cash withdrawals—

I was going to ask whether he took a wheelbarrow to the bank to get the cash!

Nevertheless, transactions were identified and treated as cash withdrawals.

Some $50 million has been withdrawn in cash in one year at a cost of over $800,000 to the Department of Defence because they are cash advances. They may all be cogent and they may all be kosher, but the audit report does not tell us that. When I asked in estimates, 'How does a credit card transaction get approved?' I was told a supervisor does the approval. Well, that is a little bit clever because an ordinary person would think a supervisor was someone who is superior to the person who made the transaction. In Defence, a supervisor is someone who is parked over there to supervise credit card transactions and who may do between 100 and 300 transaction verifications in a day with little or no documentation to support them. An enormous number of these transactions are self-validated. There is no other check and balance than the person saying, 'I incurred this expense.' This is an absolute disgrace. I will be seeking answers in estimates and I will be bringing a reference to this chamber and seeking the unanimous support of every senator in this place to fully examine what has gone on in the expenditure of over half a billion dollars in one year. The audit office is saying very, very clearly that it is substandard, it is deficient and it is worthy of a complete reference to the Foreign Affairs, Defence and Trade References Committee. (Time expired)