Andrew Murray (WA, Australian Democrats) Share this | Link to this | Hansard source

I seek leave to incorporate my remarks.

Leave granted.

The speech read as follows—

The aim of this Bill is to improve the corporate governance of three statutory authorities in the Treasury portfolio —ASIC, the Corporations and Markets Advisory Committee (CAMAC) and APRA. The Bill is part of a broader suite of Bills which the Coalition Government has introduced since the Uhrig Report in 2004 to improve the transparency and consistency of governance arrangements for statutory authorities and office holders.

In response to the Uhrig report the Government agreed that the Financial Management and Accountability Act 1997 (the FMA Act), should be applied to statutory authorities which did not need to own assets and where it was appropriate they be legally and financially part of the Commonwealth. This Bill transfers ASIC, CAMAC and APRA from the Commonwealth Authorities and Companies Act 1997 (the CAC Act) to the FMA Act.

Under the new regime, the three agencies will hold money and property on behalf of the Commonwealth, rather than in their own right. This reflects their status as agencies that are largely budget-funded, in contrast to agencies that raise funds from commercial activities.

The agencies will have the power to enter into contracts on behalf of the Commonwealth. ASIC and APRA will retain the power to enter into contracts on their own behalf, however the intention is that this power will only be used for regulatory purposes (for example, regulatory agreements).

A number of provisions in the Corporations Act 2001 (Corporations Act) and the Australian Securities and Investments Commission Act 2001 (ASIC Act) will be amended to reflect that ASIC will now be acting as a trustee on behalf of the Commonwealth in relation to moneys and properties held on trust.

The Bill also defines the reporting requirements of ASIC, CAMAC and APRA under the FMA Act and the responsibilities of the Chief Executives of the agencies. The changes to the governance structures of these agencies do not impact adversely on the operational capabilities or the independence of the statutory bodies.

The Uhrig Review was established to identify issues concerning governance arrangements in relation to statutory bodies which impacted on the business community and to provide policy options for the Government to obtain the best from statutory authorities and office holders through the accountability framework.

I have spoken several times on the Uhrig Review, and have said I do not support its approach in all circumstances. Increased centralised ministerial or chief executive power and discretion, and decreased independent oversight and advice might inappropriately result in some situations.

However in relation to these bodies, ASIC, APRA and CAMAC, these amendments will increase the transparency in the way these entities deal with public monies and improve the consistency in their governance arrangements.

The focus of this Bill on how officials handle public money, public property and other resources of the Commonwealth, as well as the obligations and responsibilities of the CEO are all matters which the Australian Democrats support.

In passing I would like to point out that the handling of public money was an area which the Australian National Audit Office had concerns in its 2005 Report. As it pointed out, as at June 2004 investments held by Commonwealth entities were $20,20$ billion.

In its report, the ANAO found that there were several entities which held investments which were not authorised by the relevant legislation. It was conceded that although they were non-compliant with the relevant legislation, many of the investments were considered of low risk.

However, it must be of concern that even though there were legislated provisions as to how public money could be invested, departments and statutory authorities did not always comply with those provisions. It is hoped that since the ANAO’s report, statutory entities are aware that legislative provisions setting out how and where public money can be invested, are not merely ‘suggestive’, they are obligatory.

It is hoped with this change in legislation, bringing more entities—especially those reporting to Treasury – within the purview of the FMA Act that there will be less non-compliance with the legislation. Given that the money will now revert to the Consolidated Revenue Fund, (CRF) rather than be held or invested by the statutory authorities themselves, the Bill does appear to ensure that public monies are treated the same, regardless of the entity which receives it. That is as it should be.

Statutory authorities are still responsible to the Australian people and the Australian parliament. If they receive taxpayer’s money then it should be used in compliance with its governing legislation and not at the whim of the CEO, the Minister or the Board. It should not be put into investments which do not fully comply with the terms set out in the governing legislation.

I realise that changing these entities from being governed by the CAC Act, is helpful, However, I do note that the ANAO looked at entities which were regulated by both the CAC Act and the FMA Act and it found ‘that, for a number of entities, there had been shortcomings in the management of the investment of public funds.’

Simply changing the Act under which the entities deal with funds is not sufficient. As the ANAO pointed out:

“Entities require strategies and procedures that both comply with the investment parameters provided by the Parliament and optimise risk-adjusted returns.”

It is hoped that in the intervening years since the ANAO Report, that such procedures and strategies have been put in place in all the statutory authorities.

The JCPAA has reviewed a number of ANAO reports regarding financial management and reporting in government agencies and has noted a general decline in standards.

In light of that general decline, I would like to refer to the March 2007 report of the Senate Finance and Public Administration Committee on Transparency and Accountability of Commonwealth Public Funding and Expenditure.

The Committee made 19 Recommendations regarding appropriations and expenditure, all of which would help statutory authorities as well as government departments in providing information to the Parliament regarding appropriations and the use of public moneys.

I think that, although ALL the recommendations are relevant to the discussion here today, Recommendation 2 is particularly apt.

Recommendation 2

The Committee recommends that the Government implement a system of review for standing appropriations to ensure that access to the CRF is withdrawn when no longer required and to ensure that standing appropriations are subject to periodic government and parliamentary review.

With regard to standing appropriations in this bill, on an initial examination, the Special Accounts for ASIC (Schedule 1, Items 12) and APRA (Schedule 1, Items 63) do not appear to raise particular concerns. Without seeing them in operation it is difficult to determine whether they would raise the same concerns identified in the committee’s Transparency and Accountability report regarding the transparency of intra-departmental transfers.

In conclusion, Parliamentary oversight is essential in relation to the use of public moneys by any department or statutory entity.

This Bill is a step in the right direction, but it is essential that the Government respond positively to the unanimous recommendations of the Finance and Public Administration Committee on transparency and accountability as soon as possible.

Ruth Webber (WA, Australian Labor Party) Share this | Link to this | Hansard source

I seek to leave to incorporate Senator Bishop’s speech.

Leave granted.

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

The incorporated speech read as follows—

This Bill sets up a new policy on the governance of government agencies. That’s recommended in the 2003 Uhrig Report.

It’s not controversial and the Labor Party supports it in principle. But there’s a contradiction in the introduction of this legislation. This legislation tries to tighten-up accountability of government agencies. That’s fine – but the bill’s drafted by a Government that refuses to account for anything. In other words, do as we say, not as we do. I’ll return to that theme shortly. There’s currently a plethora of agencies. In fact, it’s not clear how many there actually are. In 2003, for example, the Finance Department recorded 955 agencies. Just a year later that number had grown to 1153. I suppose the difference is explained by the fact the Department kept finding more! Which shows how poorly understood is the extent of this Government’s bureaucracy. And so the poor state of accountability. Whatever the number, it’s an enormous bureaucracy, with an enormous array of governance arrangements.

Such an array begs several questions. What do they all do and are they all relevant? More important, how are they accountable to the government and taxpayers? So the review undertaken by Uhrig is vital. In adopting the Uhrig recommendations, the Government’s imposed a new template. In this, all agencies should fit with respect to their legal status and accountability. The basic principle is, any agency dependent on the Budget should be accountable for its funds under the Financial Management and Accountability Act (FMA Act). Such agencies must employ staff under the Public Service Act. They should also be headed by a CEO accountable to a minister. CEOs should be issued with an annual letter from the minister. This should contain a “statement of expectations”. It’s against this which the CEO must regularly respond and report. It’s a step down from a similar charter issued by the PM to his ministers. But this is the new chain of accountability; in theory at least. I assume failure to deliver is entered on a scorecard for future appraisal purposes. But of course such failures will go unchallenged, as we’ve seen.

In this model, there’re no executive boards with decision-making powers. The CEO’s solely accountable to the minister. He or she: dominates the structure. sets strategic direction, hires and fires, and determines all budgetary allocations. So the CEO is the new supremo. Boards, councils and commissions—however titled—are only advisory, even though their powers may be statutory. This is a pragmatic model. Lines of responsibility are clear, as are roles and processes for work planning and reporting. Many board and council jobs entailing status, power and influence have been transformed. Independent boards or councils have been converted to advisory status. The CEO has become all powerful.

It’s an onerous position for him or her. In fact it’s revolutionary for those more used to consensus and consultation. With that accountability goes control. And that’s something with which the Howard Government is obsessed. Control. It means broader views can be excluded and ideology enforced. An independent bureaucracy has long been a hallmark of the Westminster system. As Sir Humphrey Appleby put it: “Governments may come and go, but we go on forever.” That was certainly the Australian way until the 1970s: a cosy relationship between a lazy conservative government and the public service. Fortunately, that’s broken down. Since 1972, there’s been a more balanced relationship between Government and bureaucracy.

The Uhrig principles of themselves don’t change the status quo. But they do allow an ideological bent to gain a foothold. The line of accountability between a minister and his CEO is now very direct. While a CEO may ignore his advisory board or council, he dare not ignore his minister. That should cause great concern with this current Government. The National Health and Medical Research Council was “Uhrigged”, as the vernacular now has it. There, research supremos lost control of the budget. To be replaced by the ideological influence of Health Minister Tony Abbott. That is one real risk of the Uhrig model. The other model of government agencies are those not budget-dependent, but commercial in their operation. These are legally and financially separate from the Government. They fall under the Commonwealth Authorities and Companies Act (CAC Act). Control depends on the legislation and so is varying. They’re governed by boards in general, and operate as corporate bodies. They’re also accountable to the minister. They’re not covered by the Public Service Act. But they have full reporting obligations. It’s these two templates that are being applied to government agencies.

This bill deals with three agencies within the Treasury portfolio:

• The Australian Securities and Investments Commission (ASIC),
• The Corporations and Markets Advisory Committee (CAMAC), and
• The Australian Prudential Regulation Authority (APRA)

These agencies are budget-dependent, so they’re now covered by the FMA Act alone—and the Public Service Act. They can’t hold money in their own right. Generally, they must comply with the provisions of the FMA Act, as with all other FMA agencies. The CAC Act is no longer applicable. But there’re unique circumstances to be recognised. ASIC, for example, is the public watchdog which protects investors and enforces Commonwealth securities law. Those roles and responsibilities remain clear and unchanged. Likewise, CAMA’s role—to advise on regulatory action under corporation legislation or within the financial services industry—isn’t changed. Nor will the functions of APRA be altered. It’ll continue to regulate banks, credit unions and other financial and insurance industries. We can expect better accountability and performance. Being covered by the FMA Act doesn’t automatically improve accountability or performance. It simply makes it easier to achieve, if the Government is so motivated.

But accountability of government agencies doesn’t stop with ministers of the day. That’s supposed to be the Senate’s role—in theory at least. That’s why we have Estimates committees. And that’s why we take our responsibility so seriously. We must critically examine legislation and cut through the spin and propaganda for the public’s good.  This legislation’s far more important than the Minister would have us understand. It’s about accountability of appointed agencies; to the government, not to the people and the Parliament. That’s where accountability stops. And accountability—and the truth—is hard to come by under this Government. That’s certainly the case with Defence, where the culture of protecting information in peace time is treated the same as in war time. Defence is aptly named! Indeed, accountability is not a word in the lexicon of the current Defence Minister.  So while the legislation’s good in theory, it’s limited in practice. As I’ve mentioned, there’s another theme behind these bills.  Control.

The management paradigm over the past decade or so says “let the managers manage”. Enterprise management became the new management theme. Devolution became fashionable. In many cases, government activities were put at an arm’s length. The Finance Department was pushed aside by this government. The reason for that is political. If an agency is seen to be independent of government, then ministers aren’t accountable. There’s no political fly paper. But as we’ve seen under this Government, such operational freedom can have disastrous consequences. The scandal of the Australian Wheat Board is still before us. Here was a statutory marketing organisation set up to operate commercially, as with other government business enterprises. The sense of having it at arm’s length politically is now abundantly obvious. Not one government Minister was ever brought to account. That’s in spite of the corrupt and incompetent behaviour of the AWB, to our national shame and embarrassment. This is the risk with all government business undertakings. It’s why so many have been privatised. So it’s no surprise to see centralisation returning to the bureaucracy.

The Finance Department is resuming its controls over expenditure. The Minister and the Expenditure Review Committee are re-exerting themselves. That is, of course, with the exception of the authoritarian behaviour of the Prime Minister. In such regimes control is power. This is all relevant for the legislation we have before us today. The principles it will enact for the three agencies are valid. But they beg the question about their full implementation to other sacred cows. Where accountability remains as remote as ever, there’ll be more AWB scandals.

Good governance receives lip service, but political motive renders it ineffective. There’s more to accountability for this Government than that set out in this Bill. This is mere housekeeping and a flash of managing a large bureaucracy. It gets nowhere near the issues of

• Accountability for ministerial negligence
• Waste of taxpayers’ money and
• Outright deceit

Just remember the appalling record of children overboard. And the decision to go to war in Iraq. The dishonesty was palpable and never brought to account. Ministerial accountability is a joke. Freedom of Information is almost a dead letter. And as Labor knows, answers to questions on notice are treated with contempt. To that extent this bill is window dressing. But it’s better than an empty window. We support the Bill.

Question agreed to.

Bill read a second time.