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

I seek leave to return to a previous Auditor-General report, tabled on 30 August 2016, to allow me to take note of Audit report No. 33 2015-16: Performance Audit: Defence's management of credit and other transaction cards: Department of Defence.

Leave granted

I move:

That the Senate take note of the document.

I will start my contribution by referring to a letter of transmittal that is addressed:

Senator the Hon Marise Payne

Minister for Defence

Parliament House

Canberra ACT 2600

It reads:

Dear Minister

We present the Defence Annual Report 2014–15 for the year ended 30 June 2015. The report has been prepared in accordance with section 63 of the Public Service Act 1999. Subsection 63(1) of the Act requires that our report to you be tabled in Parliament.

Here is the punchline:

Consistent with section 10 of the Public Governance, Performance and Accountability Rule 2014, we certify that we are satisfied that Defence has prepared fraud risk assessments and fraud control plans and has in place appropriate fraud prevention, detection, investigation, recording and reporting mechanisms that meet the specific needs of the department, and that Defence has taken all reasonable measures to appropriately deal with fraud relating to the department.

Yours sincerely

Dennis Richardson

Secretary

Mark Binskin, AC

Air Chief Marshal

The minister has been given an assurance that all of the probity requirements have been met, but that assurance is contradicted by Audit report No. 33. The audit report is scathing. I will refer to just one particular section:

Defence has not exercised adequate central control over the issuing or use of Fastcards or eTickets. Defence has no system in place and little capacity to routinely monitor and manage the risks it has identified in its use of Cabcharge eTickets. Defence could have used an available IT system to help it manage risks but did not do so.

  …   …   …

Defence advised the ANAO that it proposes to begin using an appropriate system.

Despite the fact that they have assured the minister that they were using a system, that clearly has not been the case. The report continues:

4.6 On 9 July 2015, in the course of the audit—

after having given the minister assurances—

Defence cancelled 31 of the 34 Fastcards mentioned above but left active each of those it had provided to the then Minister for Defence, Assistant Minister for Defence and Parliamentary Secretary to the Minister for Defence. Defence had previously advised Parliament in February 2015 that it ‘does not issue corporate credit cards to the Minister or ministerial office staff'. Defence informed the ANAO that it was in the process of correcting this statement.

  …   …   …

The ANAO identified records of 261,158 taxi trips paid by eTicket at a total cost of over $16.28 million—

over the course of three years. It is a big department. We understand that it is a huge department. We are talking about $548 million of taxpayers expenditure, about which they assured the minister and assured the parliament they had appropriate governance and probity controls in place. The Audit Office has found the reverse. Section 4.27 of the audit report reads:

Some 17 905 different taxis (by recorded taxi number) were involved in making 261 158 trips over the period January 2012 to July 2015, a mean of just under 15 trips per taxi—

However—

Some taxis were much more fortunate than others in winning Defence eTicket business. Whereas 16 800 taxis each undertook 50 or fewer of these trips for Defence, some 12 taxis each took 500 or more such trips, with three of these taxis each taking more than 1000 trips. One particular taxi took 2160 trips using eTickets, an average of over 4.5 trips a day, at a total cost of $174 621. On its busiest day, it did 15 trips, costing $1162 in fares. The same taxi earned fares of over $1000 on each of seven separate days. Three taxis each earned over $100 000 in fares … in the period.

When you scrutinise this paperwork, it appears exceedingly strange that Defence, with its claim of proper control mechanisms in place, would accept items like 'City to Pinkenba'. One can only assume that it is the good city of Brisbane. I am not sure that it would be another city if it was going from the city to Pinkenba. So it is the city of Brisbane. The distance from the city to Pinkenba is 14.8 kilometres via Kingsford Smith Drive, State Route 25 and the M3. It would take 24 minutes to travel that 14.8 kilometres. The Defence bill for that trip was $585.20. That does not sound to me like they have appropriate mechanisms in place and used the appropriate technology to identify misuse—dare I say fraud—and the assurances given to the minister clearly have not been honoured.

The next section is entitled 'Small hours’ travel by eTicket'. We know that Defence is a very vital, busy organisation, but the ANAO analysis also identified:

… taxi trips paid for by eTicket and timed between 1.00am and 4.00am. This is a period when little work-related travel might be expected to take place, with the possible exception of trips to or from an airport or shift work. After excluding airport-related trips, the analysis indicated there had been 1263 such taxi trips—

in the wee small hours. Clearly the assurances given to the minister have not been honoured.

Now, the other simple problem with all of the efforts of Defence is that they have fundamentally failed to have a second person tick off on the transactions. Some 37 per cent of all transactions have been validated by a person junior to the cardholder and, in a lot of cases, by the person who incurred the expenditure. Clearly, Defence is deficient and proven to be deficient by this analysis of, I think, some seven million transactions. The Audit Office has gone to the extent of analysing an extraordinary number of transactions and has come up with an extraordinary amount of evidence pointing to a failure of Defence to do precisely what the two gentlemen responsible have said they would do.

I suppose this issue—that there would be limitations in governance, due diligence and probity—is not uncommon. Now, Defence is a vital sector of the Australian economy; they move around a lot and they have to do it efficiently. No-one is arguing about that. But when you talk, in your financial governance statements, about low-value, low-risk transactions and you issue one credit card with a $2 million credit limit, three credit cards with a million-dollar credit limit, a hundred-odd credit cards with a $250,000 credit limit and some 900 credit cards with a $100,000 credit limit—when you have that expenditure signed off by a person junior to the person holding the credit card and you have a very high proportion of self-validation, the whole reputation of Defence is impugned. My view is that this needs to be diligently worked through and the respectable people in the Defence Force need to be protected by proper probity and governance. I seek leave to continue my remarks.

Leave is granted.