Bills Digest 104 1996-97
Auditor-General Bill 1996
WARNING:
This Digest was prepared for debate. It reflects the legislation as introduced
and does not canvass subsequent amendments. This Digest does not have
any official legal status. Other sources should be consulted to determine
the subsequent official status of the Bill.
CONTENTS
Auditor-General Bill 1996
Date Introduced: 12 December 1996
House: House of Representatives
Portfolio: Finance
Commencement: On the same day as the Financial Management and Accountability
Act 1996 which is to commence on a date set by Proclamation.
The Auditor-General Bill 1996 (the Auditor-General Bill) forms part of
a package of four Bills and associated measures designed to modernise
controls on Commonwealth finances and over businesses owned or operated
by the Commonwealth.
The other Bills in the package are:
- the Audit (Transitional and Miscellaneous) Amendment Bill 1996 (the
Transitional Provisions Bill);
- the Commonwealth Authorities and Companies Bill 1996 (the CAC Bill);
and
- the Financial Management and Accountability Bill 1996 (the FMA Bill).
The Transitional Provisions Bill formally repeals the Audit Act 1901,
proposes consequential changes to enabling legislation affecting Commonwealth
Authorities so as to link those bodies to the CAC Bill, and provides for
the Auditor-General in office at 30 June 1997 to see out the remainder
of their 10 year term. The Public Accounts Committee Act 1951 is
to be amended to enlarge the powers and functions of the Parliamentary
Joint Committee of Public Accounts (JCPA).
The CAC Bill contains financial reporting, ethical and auditing provisions
relating to corporate public authorities whose enabling legislation gives
them 'ownership' of their operating funds and assets. It also extends
to companies where the Commonwealth has a direct controlling interest
and makes special provision for 100 percent Commonwealth owned companies.
The CAC Bill replaces Part XI of the Audit Act 1901 which currently
provides standard financial, reporting and auditing provisions for about
two–thirds of Commonwealth authorities.
The FMA Bill seeks to establish a regulatory framework for Commonwealth
instrumentalities which financially are agents of the Commonwealth, that
is, those bodies which do not 'own' their funds but operate squarely within
the provisions of sections 81 and 83 of the Commonwealth Constitution.
Such bodies include the Departments of State, the Parliamentary Departments
and many Statutory Authorities and government agencies which manage public
money or property on behalf of the Commonwealth. The Bill also specifies
the powers and responsibilities of the Minister for Finance with regard
to their duties as custodian of the Treasury of the Commonwealth under
the Constitution.
The Auditor-General Bill:
- provides for the re-establishment of the Office of Auditor-General
under the proposed new financial accountability regime replacing the
Audit Act 1901;
- styles the Auditor-General as an 'independent officer of the Parliament'
with a more clearly defined role and powers;
- provides for a range of statutory safeguards insulating the Office
from inappropriate interference by either the Executive or the Parliament;
- re-creates the Australian National Audit Office (ANAO) as an independent
statutory body employing staff under the Public Service Act 1922
but with a capacity to contract out work where considered appropriate
by the Auditor-General;
- together with the Transitional Provisions Bill, makes provision for
a wider role for Parliament (through what will be the Joint Committee
of Public Accounts and Audit) in selecting the Auditor-General and in
monitoring the performance of that Office and the ANAO; and
- re-establishes the Office of Independent Auditor who is the Parliament's
auditor of the ANAO.
Previous Bills
The present Bill and the associated measures are similar but not identical
to a package of Bills introduced by the previous Government in June and
December 1994.(1) The earlier Bills were debated in both Chambers but
were not passed before the Parliament was prorogued on 29 January 1996
for the General Election of 2 March 1996.
Consideration of the 1994 Bills was extensive with the Auditor-General,
FMA and CAC Bills being the subject of a JCPA Report.(2)
The Keating Government accepted the majority of the recommendations
made by the JCPA but rejected others. This attracted further criticism
from, amongst others, the former Auditor-General, John Taylor.(3) During
the debate on the 1994 Bills, the then Opposition argued for further amendments
to the Bills in line with recommendations made in JCPA Report No. 331,
including that:
- the Auditor-General should have unilateral power to conduct a performance
audit of any government business enterprise (GBE) at any time (initially
the Keating Government was prepared to allow such audits only where
requested by either the responsible Minister or by both Houses of Parliament);
- the Auditor-General's staff not be engaged under the Public Service
Act but that the Auditor-General have the power to negotiate the terms
and conditions under which staff are hired;(4)
- the approval of both the Leader of the Opposition and the JCPA and
the Audit Committee must be secured in relation to the appointment of
the Auditor-General; and
- the JCPA be given an expanded role in relation to the auditing of
Commonwealth accounts (the Keating Government had supported the creation
of a separate Audit Committee of the Parliament).
Subsequently the majority of the Opposition's amendments (principally
to the Auditor-General Bill) were passed by the Senate(5) but rejected
by the House of Representatives.
The main Senate amendments would have:
- allowed Parliament a greater say in the appointment of future Auditors-General;(6)
- allowed the Auditor-General to conduct performance audits of GBEs;(7)
and
- allowed the Joint Committee of Public Accounts to act also as an audit
committee of Parliament.(8)
The present proposals and the 1994 package have been shaped by two forces.
First, a general desire to streamline and modernise the financial control
and reporting arrangements within the Commonwealth public sector. Hence,
the majority of the proposed measures are seen as both a timely and appropriate
means for improving government operations and enhancing accountability.
In the broad, they have enjoyed cross-party support. Secondly, however,
there have been other concerns centring principally on the role and status
the Auditor-General and on the level of resources available to the ANAO.
These specific concerns dominated debate on the previous Bills and are
reflected in three substantial JPCA reports issued between 1989 and 1996.
Concerns over the independence of the Office of Auditor-General were also
evident in, but not confined to, some vigorous public exchanges involving
the former Auditor-General, John Taylor, and Ministers of the previous
Government.
The three JCPA Reports in question are The Auditor General: Ally
of the People and The Parliament (1989)(9), An Advisory Report
on the Financial Management and Accountability Bill 1994, the Commonwealth
Authorities and Companies Bill 1994 and the Auditor-General Bill 1994
(1994),(10) and Guarding the Independence of the Auditor-General
(1996).(11) Taken together they are excellent source documents for testing
the basis of the present Bills in greater depth than is possible here.
Regarding the public controversy involving Auditor-General Taylor and
the previous Government, the friction appears to be an amalgam of agency
specific and service–wide factors.(12) As a key accountability mechanism,
the ANAO was not unnaturally a major pressure point for tensions in the
the APS as managers attempted to marry the new 'results' orientated management
style of the 1980s and 1990s with a more traditional emphasis on process
and proper procedures. At the same time, the level of resources provided
to the ANAO was an underlying source of friction. What had been a fairly
long-standing concern over the provision of resources to the ANAO, (13)
probably inflamed several unrelated differences between the Government
and the ANAO including over:
- the leasing arrangements for the ANAO's accommodation in Centenary
House;(14)
- the ANAO's powers to conduct an efficiency audit of the then National
Media Liaison Service (aNiMaLS);(15) and
- the role played by the ANAO in bringing undone Minister Ros Kelly
in the so-called 'Sports Rorts Affair'.(16)
Perhaps reflecting the politicisation of some of the ANAOs role, in
1995 the then Opposition committed itself to establishing a 'completely
independent Auditor-General' who '[u]nder the Coalition [would] be an
officer of the Parliament'.(17)
Status of the Auditor-General and the ANAO
Presently the ANAO has the equivalent of 377 full-time staff and a budget
in excess of $38.6 million.(18)
The Auditor-General is responsible for the audit of financial statements
prepared by Commonwealth departments, departmental commercial activities,
statutory authorities, and most Commonwealth–owned or Commonwealth–controlled
companies.(19) The Auditor-General, in the words of the JCPA, may also
be viewed as 'the external auditor of the Executive Government and has
a duty to report to the Parliament on the integrity, economy and efficiency
of the financial operations of government.'(20)
Under the present Administrative Arrangements, the Auditor-General and
the ANAO are located within the Executive arm of Government and report
to Ministers of State:
- the Auditor-General is appointed by the Governor-General on the advice
of the Prime Minister;
- the staff of the ANAO are employed under the Public Service Act as
part of the Department of Prime Minister and Cabinet (although the Auditor-General
exercises the powers of Secretary in relation to the ANAO); and
- funds for the ANAO are included in appropriations for the Department
of Finance.(21)
The constitutional status of the Auditor-General, and the degree of independence
to be afforded that office, has become a vexed matter with the present
proposal to designate the office an 'officer of the Parliament' the product
of considerable soul-searching.(22)
The JCPA has concluded that on the balance of evidence presented to
it that 'the Auditor-General works first and foremost for the Parliament'
and that '(the Auditor-General's ultimate client is the Parliament.'(23)
Other commentators and interested parties have different views. For example,
and as noted by the JCPA:
- Mr Tony Harris, representing the Australasian Council of Auditors-General,
recalled that the WA Royal Commission into the Commercial Activities
of Government and Other Matters had concluded that the Auditor-General
was a 'constitutional orphan';(24)
- Dr Warwick Funnell, of the Department of Accounting and Finance of
Wollongong University, argued to the JCPA that, 'since the threat of
exposure to public criticism is the final discipline on the actions
of the Executive, then, in reality, the Auditor-General works for the
wider community, not just its representatives who sit in Parliament';(25)
and
- In its submission to the JCPA, the Attorney-General's Department best
summarised the legal and constitutional position as follows:
The Constitution provides for three arms of government - the Parliament,
the Executive and the Judicature. In very basic terms, the role
of the Auditor-General is to report to one arm of government, the
Parliament, in relation to specified activities of another arm of
government, the Executive (
Having regard to the Constitution, the ANAO's functions do not
sit directly with either the Parliament or the Executive. Under
the Constitution, Parliament's primary function is to make the laws
of the Commonwealth (s.1). On the other hand, the executive power
of the Commonwealth 'extends to the execution and maintenance of
[the] Constitution and the laws of the Commonwealth' (s.61). It
could be argued that the Auditor-General's functions are incidental
to Parliament's functions, especially those functions of Parliament
which relate to the Commonwealth's finances. Alternatively, it could
be argued that the functions are part of the Executive Government's
functions because they amount to the maintenance of the laws of
the Commonwealth. There does not appear to be convincing argument
either way.(26)
The Attorney-General's Department also provided useful advice in relation
as to the limitations on legislating to protect the independence of the
Auditor-General vis-a-vis the Executive. The thrust of that advice, largely
accepted by the JCPA, was that designating the Auditor-General an 'Officer
of the Parliament' would of itself be largely a symbolic gesture. Moreover,
it would open further questions as to how the ANAO would be staffed and
who, within the Parliament, would be responsible for the administration
of the ANAO.
As the Attorney-General's Department and the JCPA noted, the major impediment
to securing absolute independence for the Auditor-General is the requirement
embodied in section 56 of the Constitution to the effect that the funding
for the Office must be proposed to the Parliament by the Executive Government.
Hence, short of establishing the ANAO as a self-funded government business
enterprise,(27) the Office will always have its level of resources determined
by the Executive, i.e. the Government of the day formed by the majority
party(ies) in the House of Representatives.(28)
JCPA Concerns
The following summary of 'main provisions' quite deliberately departs
from the usual approach taken in Bills Digests. Instead of proceeding
in numerical sequence through the more significant clauses, the Digest
is organised around the recommendations made in JCPA Report No.346(29)
insofar as they relate to the Auditor-General Bill. This gives due prominence
to the work of the JCPA and its unanimous Report and recognises the interest
that some readers may have in any divergence between the Report's recommendations
and the legislation. In this regard, it may be noted that the JCPA was
not given access to the draft Bill and accordingly was 'not in a position
to suggest specific amendments or additions' to it.(30)
Recommendation No. 1
The Auditor-General Bill should state that:
- there is to be an Auditor-General for Australia, exercising the audit
functions described in this Act;
- the Auditor-General is an 'Independent Officer of the Parliament';
- the title 'Independent Officer of the Parliament' has the meaning
given to it in this Act and no other and, further, has the legal consequences
expressly provided for in this Act and no other; and
- the Parliament has no power to act in relation to the Auditor-General
except expressly provided in this Act.
The Bill provides for there to be an Auditor-General and the Auditor-General
is to be styled an 'independent officer of the Parliament'[clauses
7 and 8]. Subclause 8(3) states that the powers of the Parliament
to act in relation to the Auditor-General are contained in this Act and
in other laws of the Commonwealth. Subclause 8(3) also states that
'there are no implied powers of the Parliament arising from the Auditor-General
being an independent officer of the Parliament'. The Explanatory Memorandum
provides no further assistance in discovering the precise purpose or intended
effect of these provisions. It may be that it is intended that subclause
8(3) serve a number of purposes. First, it may reinforce the effect
of subclause 8(2) so as to make it plain that the change of style
to the Office of Auditor-General is largely symbolic. Secondly, the Auditor-General
is to be a creature of statute and does not acquire any special role or
powers by virtue of formally being restyled an 'Officer of the Parliament',
i.e. the office does not become part of the legislative arm of government.
Similarly, the Parliament does not acquire any executive authority by
virtue of having additional legislated powers in relations to the Auditor-General.
These proposals are largely in sympathy with JCPA Report No.346
which recognised constitutional concerns that might arise if the expression
'Officer of the Parliament' was not defined and its meaning confined.
The thrust of these and other related provisions [see subclause 8(4)]
is to give effect to the JCPA's broadly expressed view that '(the Auditor-General
needs not only to be functionally independent of the Executive but also
functionally independent of the Parliament.'(31)
It should be noted, however, that the Bill does not give effect to the
recommendation that the Parliament have no power to act in relation to
the Auditor-General except as expressly provided in the Auditor-General
Act. Such a broad provision might have the appearance of circumscribing
Parliament's own legislative powers and would therefore risk being held
unconstitutional. This is because no Commonwealth Parliament, short of
securing a constitutional amendment, can limit the substantive legislative
powers of its successors. Moreover, there would seem little sense in relation
to the Auditor-General in seeking to exclude the operation of all other
Commonwealth laws of general application (for example, the Acts Interpretation
Act 1901). Such an open-ended exclusory provision as (apparently)
was recommended by the JCPA would probably have had just such an unintended
effect.
Recommendation No. 2
The Auditor-General Bill should state that:
The Auditor-General shall have complete discretion in the discharge
of the audit functions set down in this Act, subject only to any duties
imposed by statute. In particular, the Auditor-General is not subject
to direction in relation to:
- whether or not an audit is to be conducted;
- the priority to be accorded to any particular matter; and
- the manner in which an audit is to be conducted.
The terms of the recommendation are replicated in subclause 8(4).
Recommendation No. 3
The Auditor-General Bill should also state that:
The staff of the Australian National Audit Office (ANAO):
- have a duty to assist the Auditor-General in the performance of the
Auditor-General's functions; and
- may be directed only by the Auditor-General in the performance of
audit duties.
Clause 29 provides that the Auditor-General may, by written instrument,
delegate any of their powers or functions under any Act to a person who
is an official within the meaning of the FMA Act, i.e. an official who
constitutes an agency or part of an agency.(32) Schedule 2, item 1043
of the Transitional Provisions Bill inserts a new subsection 8(1A)
into the Public Accounts Committee Act 1951. This new provision
states that none of the powers conferred on the proposed Joint Committee
of Public Accounts and Audit (JCPAA) authorise it to direct the activities
of the Auditor-General.
Recommendation No. 4
The Auditor-General and the Australian National Audit Office should
be the portfolio responsibility of the Prime Minister.
This is not a matter for legislation. The Minister's Second Reading
Speech, however, indicates that the Prime Minister will continue to be
the responsible Minister.(33)
Recommendation No. 5
The Audit Committee should be empowered to:
- approve by a majority of no less than three-quarters of the Committee
membership the Government's nomination for appointment to the position
of Auditor-General; and
- conduct a public confirmation hearing to take evidence from the person
nominated to the position of Auditor-General prior to giving approval
to the appointment.
Clause 2 of Schedule 1 provides that the nomination must be agreed
by the JCPAA. By what method the JCPAA chooses to indicate its view of
proposed appointments has been left to the Committee and the Parliament.
Similarly, the Bill makes no reference to the JCPA's proposal for public
confirmation hearings.
Recommendation No. 6
The Audit Committee should be empowered to:
- examine the budget estimates of the Australian National Audit Office
(ANAO);
- examine the levels of audit fees set by the Auditor-General under
the Auditor-General Act;
- seek evidence and advice on the estimates of the ANAO, including at
public hearings;
- make recommendations to Parliament and to the Prime Minister about
the appropriation for the ANAO; and
- monitor, over time, the adequacy of funding for the ANAO, with particular
attention to the ability of the office to attract staff and to maintain
and upgrade information technology as necessary.
Under clause 53, the JCPAA may ask the Auditor-General to submit
to it draft budget estimates for the ANAO. The Auditor-General must comply
with such a request in time for the JCPAA to consider the draft estimates
and make recommendations to be included in the Commonwealth Budget. Other
relevant amendments form part of the Transitional Provisions Bill. Schedule
2, item 1043 of that Bill amends the Public Accounts Committee
Act 1951 to provide for the creation of the Joint Committee of Public
Accounts and Audit:
- to consider the operations of the Audit Office, its resources and
funding, and the reports of the Independent Auditor on operations of
the Audit Office;
- to report to both Houses of the Parliament on any matter arising out
of the Committee's consideration of the above matters;
- to report to both Houses of the Parliament on the performance of the
Audit Office at any time;
- to consider draft estimates for the Audit Office;
- to consider the level of fees determined by the Auditor-General;
- to make recommendations to both Houses, and to the Minister who administers
the Auditor-General Act 1996, regarding the draft estimates of
the Audit Office;
- to determine the audit priorities of the Parliament and to advise
the Auditor-General of those priorities;
- to determine the audit priorities of the Parliament for audits of
the Audit Office and to advise the Independent Auditor of those priorities;
and
- to undertake any other duties given to the Committee under the legislation
or by Joint Standing Orders approved by both Houses of Parliament.
Recommendation No. 7
The appropriation for the Australian National Audit Office should appear
as a separate schedule in the Budget Papers.
This recommendation does not require enabling legislation.
Recommendation No. 8
The Auditor-General Bill should provide:
- that the Minister for Finance must issue drawing rights under the
relevant provision of the Financial Management and Accountability Act
to cover the full amounts that the Parliament appropriates for the purposes
of the Australian National Audit Office; and
- that the Auditor-General has authority to approve a proposal to spend
money under an appropriation for the ANAO.
The issuing of drawing rights is guaranteed under clause 50.
Clause 51 provides that the Auditor-General has authority to approve
a proposal to spend money under an appropriation for the Audit Office.
Recommendation No. 9
The Auditor-General Bill should provide that:
- the Executive may only direct the Auditor-General to exclude sensitive
audit information from a report to the Parliament where disclosure of
the information would be likely to prejudice national security;
- where the Executive orders the Auditor-General to suppress sensitive
audit information on the grounds of national security, the Audit Committee
should receive an unabridged copy of the audit report and/or a copy
of the suppressed information; and
- where sensitive information is excluded from an audit report, the
fact of the exclusion should be reported to the Parliament in the audit
report.
Clause 36 restricts the use and republication of information
obtained by persons exercising powers under the Act.
Contrary to recommendation 9, clause 37 places wide restrictions
on the capacity of the Auditor-General to include information in public
reports. Paragraph 37(1)(b) provides that where the Attorney-General
has issued a relevant certificate, the Auditor-General may not disclose
information which the Attorney believes would prejudice the public interest.
The Attorney-General may also issue a restrictive certificate for any
of the reasons stated in subclause 37(2). These reasons extend
beyond the ground of protecting national security. The capacity of Parliament
to seek from the Auditor-General access to such material is restricted
under subclause 37(3) and is commented on below.
Clause 56 provides for regulations to be made which exclude the
operation of the Act in relation to intelligence and security agencies
Recommendation No. 10
The Auditor-General Bill should require that:
If the Executive gives any direction to the Auditor-General, then:
- such direction should be in writing and should be reported to Parliament
by inclusion in a schedule in the Annual Report of the Auditor-General;
and
- the Executive should immediately report the substance of the direction,
and the reasons for the direction, to the Audit Committee of Parliament.
Clause 54 deals with directions to the Auditor-General given
by the Finance Minister under section 50 of the FMA Act. Such directions
must be in writing, communicated to the JCPAA and recorded in the Annual
Report of the of the ANAO. Otherwise, the Auditor-General Bill makes no
reference to ministerial directions save for subclause 8(4) which
gives the Auditor-General complete discretion in relation to the conduct
of particular audits.
Recommendation No. 11
The Audit Committee should be empowered to:
- approve the appointment of the Independent Auditor and advise the
Independent Auditor of the Parliament's audit priorities;
- seek advice from the Independent Auditor on the performance of the
Australian National Audit Office (ANAO) in the course of examining the
annual estimates of the ANAO (Recommendation 6 refers); and
- report to Parliament on the performance of the ANAO at any time as
appropriate.
Schedule 2, clause 2 provides that the appointment of the Independent
Auditor must be approved by the JCPAA. Clause 43 of the Bill provides
that the Independent Auditor must have regard to the audit priorities
of the Parliament as determined by the JCPAA. Further details on the relationship
between the JCPAA, the Parliament and the Auditor-General are detailed
in the Transitional Provisions Bill at Schedule 2, items 1043 and 1044.
These also include a power to report to both Houses on the performance
of the ANAO at any time.
Recommendation No. 12
The Public Accounts Committee Act 1951 should be amended to provide
for the Joint Committee of Public Accounts (JCPA) to assume the role and
functions set out in Recommendations 5, 6, 9, 10 and 11 above.
The relevant amendments are contained in the present Bill and in the
Transitional Provisions Bill.
Recommendation No. 13
The Auditor-General Bill should include specific provisions to the effect
that:
- the Auditor-General is to be appointed for a term of 10 years;
- the Auditor-General is to be ineligible for reappointment to the
office or appointment to any other Commonwealth public office within
3 years of stepping down as Auditor-General;
- the Auditor-General may be removed from office only by the Governor-General
acting on resolutions from both Houses of the Parliament in the same
session; and
- the remuneration of the Auditor-General is to be at the level of
remuneration for the first tier of Departmental Heads in the Australian
Public Service.
The appointment conditions of the Auditor-General are set out in Schedule
1 to the Bill.
Clause 1 of Schedule 1 provides that the Auditor-General is to
be appointed for a non- renewable term of 10 years. There is, however,
no further restriction on subsequent employment by the Commonwealth.
Subclause 6(1) of Schedule 1 provides for the removal from office
of the Auditor-General by the Governor-General where in the same session
of Parliament both Houses present an address to the Governor-General praying
for the removal of the Auditor-General on the ground of misbehaviour or
physical or mental incapacity. Subclause 6(2) of Schedule 1 provides
that the Governor-General must remove the Auditor-General from office
if the Auditor-General has become bankrupt.
Schedule 1, clause 3 provides that the remuneration of the Auditor-General
is to be determined by the Remuneration Tribunal. The legislation does
not link the salary and entitlements of the Auditor-General to that of
any other office.
Government Business Enterprises and Performance Audits
Recommendation No. 14
The Auditor-General Bill should provide that:
- the Auditor-General is to be appointed as the auditor of all Commonwealth
entities; and
- the Auditor-General has a general mandate to initiate the full range
of audits in relation to all Commonwealth entities (including performance
audits of Government Business Enterprises).
This recommendation relates to what has been one of the more controversial
aspects of the reform package, the capacity of the Auditor-General to
conduct performance audits of GBEs.
The Auditor-General has power to audit the financial statements of all
Commonwealth bodies. However, under the proposed legislation the conduct
of 'performance audits', which focus on cost effectiveness as well as
matters financial probity, is circumscribed. The principal restrictions
are to apply in relation to performance audits of GBEs.
One view is that as a long as any public money is tied up in any such
enterprise, the full range of accountability measures must apply. On this
view, the Auditor-General should have complete discretion to conduct performance
audits of all GBEs. An opposing view is that GBEs which face competitive
market pressures need only submit to financial audits, and not performance
audits. Supporters of this approach argue that market discipline provides
a sufficient check on the performance of GBEs which do not enjoy a monopoly
or near monopoly power. They also point to the added regulatory burden
and associated costs imposed on GBEs by performance audits and similar
administrative controls.
In many cases the argument will be more complicated. Some GBEs perform
mixed functions and have differing degrees of power in different markets.
Variations in the relative size of public and private holdings, legal
obligations to any minority (private) shareholders and the quasi-regulatory
role of some GBEs, however, serve to further complicate the debate.
Clauses 15–18 deal principally with the question of performance
audits.
Clause 15 provides for the Auditor-General to initiate and conduct
performance audits of any government 'agency', for example, Executive
Departments. Special rules are to apply, however, in relation to Commonwealth
authorities and their subsidiaries [clause 16] and Commonwealth
companies and their subsidiaries [clause 17]. In the case of both
clauses 16 and 17, the Auditor-General may conduct a performance audit
at any time of a Commonwealth authority or company which is not a GBE.
For GBEs (both authorities and companies), the Auditor-General may only
conduct a performance audit where:
- the Finance Minister; or
- the responsible Minister; or
- the JCPAA.
requests such an audit.
The following lists by portfolio the GBEs which appear likely to be
subject to the above controls:
Commonwealth Government Business Enterprises
Communications and the Arts
Australian Postal Commission (CA)
Telstra Corporation Ltd (CL)*
Defence
Defence Housing Authority (CA)
Australian Defence Industries Ltd (CL)
Industry, Science and Tourism
Australian Industry Development Corporation (CA)*
Export Finance and Insurance Corporation (CA)
Australian Technology Group Ltd (CL) (partially privatised)
Primary Industries and Energy
Snowy Mountains Hydro-Electric Authority (CA)
Transport and Regional Development
Airservices Australia (CA)
Federal Airports Corporation (CA)*
Australian National Railways Commission (CA)*
ANL Ltd (CL)*
Treasury
Housing Loans Insurance Corporation (CA)
'*' denotes marked for sale or partial sale; 'CA' denotes a Commonwealth
authority, and 'CL' denotes a company incorporated under the Corporations
Law.(34)
To bring together the legislative history of these provisions:
- the 1994 legislation as first presented provided the Auditor-General
with an unfettered mandate in relation to financial audits of GBEs but
confined performance audits to instances where ministerial approval
was obtained;
- the JCPA in Report No. 331 recommended that a GBE performance
audit could be initiated at the request of the Audit Committee of the
Parliament;
- the Keating Government initially rejected the JCPA recommendation;
- the Senate amended the 1994 legislation to permit the Auditor-General
to conduct a performance audit of any GBE at his or her discretion;
- in Report No. 346, the JCPA recommended (see above)
that the matter be left to the discretion of the Auditor-General; and
- the present Bill provides that such an audit may be requested by the
Executive or by the Parliament acting through the JCPAA [clauses
16 and 17].
Recommendation No. 15
The Auditor-General Bill should provide that:
- the Auditor-General is to be given wide powers of access to information
and premises in performance of audit functions; and
- the Auditor-General is to have the ability to engage professional
services on contract to assist in the performance of audit functions.
Part 5 of the Auditor-General Bill gives the Auditor-General
and the ANAO extensive powers in relation to the gathering of information.
Clause 33 deals specifically with access to premises.
Clause 27 specifically allows the Auditor-General to engage contract
staff.
Recommendation No. 16
The Auditor-General Bill should provide that:
The Auditor-General has the right to report to Parliament on any matter
at any time as the Auditor-General sees fit.
Clause 25 of the Auditor-General Bill provides that the Auditor-General
may report to either House at any time on any matter. Clause 26
similarly states that the Auditor-General may at any time report to any
Minister on any matter. There are, however, limitations on the types of
information that may be routinely released to the Parliament [clause
37]. This restriction on Parliament's powers is commented on below.
Other Provisions
The Senate Standing Committee for the Scrutiny of Bills (the Standing
Committee) has drawn attention(35) to several features of the Auditor-General
Bill which, in its opinion, give some cause for concern.
Clause 35 removes the right of a person to remain silent when
asked a question or ordered to produce a document by the Auditor-General.
The Committee concluded that this provision will not unduly trespass on
individual rights or freedoms as the information supplied may not be used
directly or indirectly in criminal proceedings - other than certain proceedings
under the Auditor-General Act [clauses 32 and 34].
Clause 37 seeks to restrict the Parliament's access to information
and documentation held by the Auditor-General where the Attorney-General
has issued a certificate stating that it would not be in the public interest
for the information to be disclosed to Parliament. In effect, the powers,
privileges and immunities of the Parliament, guaranteed by section 49
of the Constitution, are to be watered down in relation to this Bill.
The Standing Committee has concluded that this proposal 'impinges on the
rights of Australians to have the administration of the country by the
executive properly scrutinised by Parliament.'(36) The Standing Committee
also criticised the Government for proposing such a limitation on Parliament
in the very piece of legislation that provides for the Auditor-General
to be styled an 'independent officer of the Parliament'.(37) The Standing
Committee has therefore sought the Minister's 'advice' as to:
- whether subclause 37(4) ought to require the Auditor-General
to publish reasons where he or she decides not to include sensitive
information under subclause 37(1); and
- why if members of the executive, under subclause 37(5), may
be given the sensitive information, Parliament and its committees might
not be entrusted with access (suitably safeguarded) to the same information?(38)
Given the Bill's symbolic importance, both these questions should be
addressed.
Clause 37 could, of course, be subsequently overridden by both
Houses agreeing on amendments to the Auditor-General Act in respect of
particular matters or classes of matter. The difficulty is that the House
of Representatives' support for the waiving of clause 37 would
be seen as calling into question its confidence in a particular minister
or the government as a whole. The Senate may not be subject to Government
control and may want the embargo imposed by clause 37 waived in
particular cases. Hence one way of viewing clause 37 is as an effective
bar on the Senate gaining access to material held by the Auditor-General
and the Executive.
On the other hand, there may indeed be valid reasons for not entrusting
(in effect) potentially every Member and Senator with information of the
kind dealt with under clause 37. Moreover, the analogy drawn by
the Standing Committee comparing access rights enjoyed by the Executive
and the Parliament invites wider comparisons about the respective roles
of these two branches of government. It may be recalled that the Executive
and legislative arms of government operate under differing political and
legal constraints. For example, not all members of the Executive will
have access to sensitive information, nor will those that have such access
be free to do with it as they please. Public servants are not free to
use sensitive information in ways open to Members and Senators under Parliamentary
privilege. Moreover, the privilege enjoyed by Members and Senators is
absolute and their capacity to disseminate potentially harmful information
far greater than that of public servants bound by the provisions of the
Public Service Act and the Crimes Act and the dictates of responsible
government.
The Bill and its predecessor are of more than symbolic significance.
They provide an improved basis for safeguarding role of the Auditor-General
and create a range of formal mechanisms for insulating the ANAO from any
inappropriate influence exerted by the Executive. However, the proposed
reforms are not, nor could they be, a substitute for continuing Parliamentary
vigilance. Similarly, limitations imposed by the Constitution leave the
resource base of the ANAO very much in the hands of the Government. Accordingly,
the effectiveness of the Auditor-General will continue to depend on the
diligence of individual Members and Senators and their capacity to familiarise
themselves with the voluminous material which will come their way via
the processes established or refined under this Bill. On the other hand,
the objections implicit in the response of both the current and the previous
Government to some of the recommendations put forward by the JCPA and
those of like mind cannot be simply dismissed as Executive hubris. The
Bill gives Auditor-General both functional independence and considerable
power. It is one thing to style the Auditor-General as an 'Ally of the
People'; it is entirely another to create the circumstances where he or
she can style themselves as the permanent ally of the Opposition or as
a law unto themself. If the integrity of the office is to be maintained
then there will need to be some care and restraint on all sides and from
the Auditor-General and the staff of the ANAO. Extended tenure, a high
degree of operational independence and access to substantial investigative
powers are potentially a twin edged sword. They give the Auditor-General
the capacity to assist the Parliament in keeping a rein on Government
excess. If inappropriately applied, these powers could intrude on individual
rights and raise the same sorts of concern that are sometimes voiced about
alleged and actual abuses of Parliamentary privilege.
- The Auditor-General Bill 1994, the Commonwealth Authorities and Companies
Bill 1994, the Financial Management and Accountability Bill 1994 (introduced
June 1994) and the Audit (Transitional and Miscellaneous) Amendment
Bill 1994 (introduced December 1994).
- The Bills were referred to the JCPA by then Finance Minister, Kim
Beazley, on 29 June 1994.
- 'Five victims of the arrogant junta', Canberra Times, 2 April 1995.
- This proposal was also rejected by the Senate. Senate Hansard, 27
March 1995: 2182–3.
- Refer in particular Senate Hansard, 27 March 1995: 2157–2197.
- The Senate added the requirement that a nomination for the Office
of Auditor-General must be supported by a two thirds majority of the
audit committee.
- The JCPA's preference was for the Auditor-General to be able to conduct
a performance audit in a GBE at the request of the audit committee of
Parliament. The Senate's preference, at the time, was for allowing the
Auditor-General to exercise his or her discretion in relation to such
audits.
- Refer Media Release issued on behalf of the JCPA by its Chairman Les
Scott MP (ALP, Oxley) on 18 April 1995.
- JCPA Report No. 296.
- JCPA Report No. 331.
- JCPA Report No. 346.
- Refer Tom Burton, 'Hard Times visit the Auditor-General', Australian
Financial Review, 18 February 1994.
- These had also been highlighted by previous Auditors-General, indeed,
the first Commonwealth Auditor-General, Mr J W Israel, had reported
to Parliament in 1902 in his first annual report that the audit office
was not adequately resourced. (Refer JCPA Report No. 346: 5.).
- Report of Commissioner Morling, Royal Commission into the Leasing
by the Commonwealth of Accommodation in Centenary House (1994).
- The Auditor-General, Audit Report No. 17, 1994–95, 'National
Media Liaison Service: A Loophole in Accountability?'
- See The Auditor-General, Audit Report No. 9, 1993–94, Efficiency
Audit, 'Community Cultural, Recreational and Sporting Facilities Program.'
- Hon John Howard MP, The Role of Government: A Modern Liberal Approach,
1995 National Lecture Series, June 1995: 22–3.
- Department of Finance, Portfolio Budget Statements 1996–7: 44–5.
- The Auditor-General, ANAO Annual Report 1995–96: 19.
- JCPA Report No. 346: 11.
- ibid:41.
- Similar issues have been raised in the past in relation to the role
and status of the Commonwealth Ombudsman.
- JCPA Report No. 346: 35 and 37.
- ibid: 38.
- ibid: 37.
- Attorney-General's Department, Submission to Joint Committee on Public
Accounts, Inquiry into Guarding the Independence of the Auditor-General,
September 1996: 2–3.
- The very sort of entity which will be subject to the CAC Act 1996.
- Attorney-General's Department , op.cit.6–7.
- The Government has not formally responded to the Reportl.
- JCPA Report No. 346: xii; see also page 2.
- ibid: 51.
- See section 5 of the FMA Bill for an extended definition of 'agency'.
Basically the expression covers Departments and those bodies which,
although legally separate entities, are closely connected with particular
Departments.
- House of Reps Hansard, 12 December 1996: 7913.
- Information supplied by the Department of Finance.
- Alert Digest, No. 1 1997: 6–10.
- ibid: 9.
- ibid: 10.
- loc. cit.
Bob Bennett
17 February 1997
Bills Digest Service
Information and Research Services
This Digest does not have any official legal status. Other sources should
be consulted to determine whether the Bill has been enacted and, if so,
whether the subsequent Act reflects further amendments.
IRS staff are available to discuss the paper's contents with Senators
and Members and their staff but not with members of the public.
ISSN 1323-9031
Commonwealth of Australia 1996
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